Lee Ing Chee v. Choo Kim San and Others

HCA002459A/1976

IN THE SUPREME COURT OF HONG KONG

MISCELLANEOUS PROCEEDINGS NO. 540 OF 1977

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HIGH COURT

ACTION NO. 2459 OF 1976

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MISCELLANEOUS PROCEEDINGS NO. 155 OF 1977

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Coram: Yang, J., in Court.

Date of Judgment: 25 January, 1978.

Mr. Charles Ching, Q.C. with Mr. P. Fung (Descons) for Plaintiffs in Action No. 2459 of 1976 and Miscellaneous Proceedings No. 155 of 1977

Mr. Richard Yorke, Q.C. with Mr. Winston Poon (Johnson, Stokes & Master) for Plaintiff in Miscellaneous Proceedings No. 540 of 1977

Mr. Swaine, Q.C. with Mr. Robert Tang (Peter Mo) for 4th, 5th, 6th and 7th Defendants

Mr. Swaine, Q.C. with Mr. R. Tang (Philip K.H. Wong) for 10th Defendant

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JUDGMENT

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1. In these proceedings the plaintiffs seek to have made absolute certain charging orders nisi and garnishee orders nisi in relation to a substantial number of shares in the San Imperial Corporation, Ltd. (hereinafter referred to as San Imperial) alleged to be beneficially owned by the first defendant. The second to the tenth defendants were joined as defendants in Action 2459 of 1976 and in Miscellaneous Proceedings 155 of 1977 by a court order dated 20th August 1977. The same defendants were joined as defendants in Miscellaneous Proceedings 540 of 1977 by another order dated 23rd September 1977. Of the ten defendants, only the fourth, fifth, sixth, seventh and the tenth defendants have appeared and contested the plaintiffs' claims.

The Background

2. On 5th July 1977 in High Court Action 2459 of 1976 the plaintiff LEE Ing Chee obtained judgment against the defendant Choo Kim San (the first defendant in these proceedings, hereinafter referred to as C.K. San) in the sum of M$2,338,651.94 together with interest thereon at the rate of 15% per annum from the 1st April 1975 to 19th July 1976, and thereafter at the rate of 6% per annum from 19th July 1976 until payment, with HK$1,226 fixed costs.

3. In an action in the High Court of Kuala Lumpur in Malaysia entitled Civil Suit 2445 of 1976, Lee Kon Wah, the plaintiff in Miscellaneous Proceedings 155 of 1977, obtained judgment against C.K. San in the sum of M$1,354,037.35 with interest thereon at the rate of 12% per annum from 1st October 1976 until payment and M$120 costs. The Malaysian judgment has been duly registered in this Colony under the provisions of the Foreign Judgments (Reciprocal Enforcement) Ordinance, Cap. 319, by way of the said Miscellaneous Proceedings. The registration of the Malaysian judgment has never been set aside.

4. On 11th August 1977 the plaintiff Malaysia Borneo Finance Corporation (M) Berhad (hereinafter referred to as MBF) in an action in the High Court of Kuala Lumpur in Malaysia entitled Civil Suit 1631 of 1977 obtained judgment against C.K. San in the sum of M$9,036,831.58 with interest thereon at the rate of 15% per annum from 1st April 1976 until payment and M$120 costs.

5. On 19th August 1977 MBF (now the plaintiff in Miscellaneous Proceedings 540 of 1977) registered in this Colony the Malaysian judgment as a judgment in the High Court of Hong Kong, pursuant to the Foreign Judgments (Reciprocal Enforcement) Ordinance, Cap. 319. The registered judgment has never been set aside.

The Orders Nisi

6. On 15th July 1977 the plaintiffs Lee Ing Chee and Lee Kon Wah obtained charging orders nisi in respect of the following shares:

7. On the same day, the plaintiffs Lee Ing Chee and Lee Kon Wah obtained garnishee orders nisi against the fourth defendant David Ng (hereinafter referred to as Ng) the fifth defendant Melville E. Ives (hereinafter referred to as Ives) and the sixth defendant Ho Chapman (hereinafter referred to as Ho) in respect of the sum of $8.8 million allegedly due and owing from Ng, Ives and Ho to the eighth defendant Chow Chaw-I (hereinafter referred to as Chow) and the ninth defendant Hwang Shang Pai (hereinafter referred to as Hwang). The plaintiffs claim that this sum of money is in fact due and owing to C.K. San as consideration for the purported sale⁽¹⁾ of the 15 million shares now registered in the name of Fermay to Ng, Ives and Ho by Chow and Hwang.

8. On 7th September 1977 MBF obtained a charging order nisi in respect of -

9. On the same day the MBF also obtained a garnishee order nisi against Ng, Ives and Ho in respect of the same sum of $8.8 million for the same reasons referred to above.

10. On 14th September 1977 MBF obtained another garnishee order nisi against Ng, Ives and Ho in respect of the sum of $11,446,500 payable by one Mr. James Coe (hereinafter referred to as Coe) or his nominee company Rocky Enterprises Co., Ltd. (hereinafter referred to as Rocky) to Ng as consideration for the sale of 7,631,000 San Imperial shares (which formed part of a parcel of 8 million San Imperial shares) now registered in the name of IPC by Ng, Ives and Ho to Coe and/or Rocky. It is MBF's claim that this sum of money is in fact due from Ng, Ives and Ho to C.K. San. The $11,446,500 represents the purchase price for the 7,631,000 shares at $1.50 per share.

The Defendants' Case

11. Purely for the sake of convenience I shall give a summary of the defendants' case first. It is as follows -

12. C.K. San was arrested for fraud in Hong Kong in June 1976. He jumped bail and escaped from Hong Kong on or about 28th October 1976. In November Coe was desirous of acquiring a controlling interest in San Imperial. Ng, Ives and Ho then got together in December and formed themselves into a syndicate for the purpose of collecting into a parcel some 24 million shares (viz. half of the total issued share capital of 48.2 million San Imperial shares). They hoped to sell the parcel to Coe or some other person at a large profit.

13. Ng located C.K. San in Taipei on 31st December 1976. Through him he came into contact with Chow and Hwang who had purchased 15 million San Imperial shares from C.K. San in November 1976. After protracted negotiations Ng on 23rd March 1977 purchased those shares on behalf of the Syndicate at 60 cents per share. In the meantime Ng had also bought on his own account two lots totalling 2,164,200 San Imperial shares from a Mr. Lee and a Mr. Fong in Taipei at 20 cents each. These two lots of shares were to form part of the parcel of 24 million shares.

14. For the purpose of proving the authenticity of the 15 million shares, the details of which will be given elsewhere in this judgment, the shares were registered in the name of Fermay.

15. On 30th April 1977 the Syndicate entered into an agreement with Malaysian American Finance Corporation (Hong Kong) Ltd. (hereinafter referred to as MAF) whereby they were given the option to purchase up to 6 million San Imperial shares at $1.50 per share. In fact MAF had only 3,226,000 shares, so this was the amount which the Syndicate purchased. During this period the Syndicate also acquired further San Imperial shares on the local market at an average of 54 cents per share and from private sellers at $1 per share.

16. By 30th April 1977 the Syndicate was able to reach an agreement with Coe's nominee company Rocky for the sale of 23 million shares at $1.50 per share. The parcel of 23 million shares was made up of the 15 million acquired from Chow and Hwang in Taipei and the balance of 8 million. The balance of 8 million was made up of the 2,164,200 shares acquired by Ng on his own account in Taipei, the 3,226,000 shares acquired under the MAF option agreement, and the remainder acquired or to be acquired on the local market and from private sellers. Subsequently, in view of certain interlocutory proceedings brought by the plaintiffs charging or otherwise restraining C.K. San's San Imperial shares, the agreement was replaced by a new agreement dated 12th May 1977. Under the new agreement Rocky was given an option on the 15 million shares. The balance, which was to be not less than 7 million nor more than 8 million, remained an outright sale and purchase.

17. After the 8 million shares were acquired by Rocky, they were registered not in Rocky's name but in the name of IPC, Coe's other nominee company. It is Coe's case that the real purchaser was one of his companies called the Siu King Cheung Hing Yip Co., Ltd. (hereinafter referred to as SKC)

18. It is the defendants' case that all these transactions were genuine and bona fide. It is contended on behalf of the defendants that on the dates that the charging orders nisi were made C.K. San had already divested himself of his beneficial interests in his San Imperial shares and for that reason these orders nisi should not be made absolute.

The Plaintiffs' Case

19. The case for the plaintiffs Lee Ing Chee and Lee Kon Wah is that all the transactions in respect of these shares were sham transactions. That being so, the San Imperial shares in question were and still are beneficially owned by C.K. San. It was also originally their case that at all material times the defendants acted, held and are holding the above-mentioned San Imperial shares as C.K. San's nominees. However, whilst maintaining that Chow and Hwang are C.K. San's nominees, the two plaintiffs do not now maintain that Ng, Ho, Ives, Fermay and IPC are also C.K. San's nominees.

20. MBF's case is based on conspiracy. By para. 7 of their Statement of Claim they claim that for the purpose of avoiding and defeating the execution by MBF of their registered Malaysian judgment and to defraud C.K. San's creditors the defendants and each of them together with persons unknown from about October 1976 onwards conspired and combined amongst themselves in Hong Kong and elsewhere to sell or cause to be sold on behalf of C.K. San the 15 million shares in the name of Fermay and the 7,631,000 shares (being part of the 8 million shares) now registered in the name of IPC and to obtain on behalf and for the benefit of C.K. San the proceeds thereof.

21. MBF makes no allegation of conspiracy against Coe (see para. 7(A)(1)(f)(ii), at p. 7 of MBF's Statement of Claim).

22. MBF also concedes that the Syndicate collected the San Imperial shares into a parcel for the purpose of selling them to "some innocent persons" (see paras. 7(B)(3)(a)(v), and (b)(ii), at p. 18 of MBF's Statement of Claim). In the context of the present case the innocent persons could only be Coe and Rocky.

23. In the alternative, MBF claims that all the transactions in respect of the shares in question were not bona fide at arm's length and for full value without notice of any defect in the vendor's title. If the transactions were shams, then it follows that they were not bona fide at arm's length and for full value without notice.

The Issue

24. The parties will agree that the real and ultimate issues in this trial are (1) whether on the dates that the charging orders nisi were made C.K. San had already divested himself of his beneficial interests (if any) in any or all of the San Imperial shares referred to above, and (2) if so, whether the purchase prices for any of the shares were in fact payable to C.K. San. The burden is of course on the plaintiffs to prove their case.

Rulings

25. Before dealing with the facts of the case, it is necessary to refer to some of rulings made in the course of these proceedings.

1. Lee Ing Chee's claim (Action 2459 of 1976) and Lee Kon Wah's claim (MP 155 of 1977) were consolidated by an order dated 20th August 1977.

2. On 23rd September 1977 I ordered a joint trial of the consolidated action and MBF's claim (MP 540 of 1977).

3. On 14th October 1977 I ruled that the defendants were not permitted to go behind the judgments which the plaintiffs Lee Ing Chee, Lee Kon Wah and MBF had obtained against C.K. San.

4. On 15th October 1977 I ruled that the defendants in court, not being parties against whom the two registered Malaysian judgments might be enforced, did not come within Sec. 6 of the Foreign Judgments (Reciprocal Enforcement) Ordinance, Cap. 319. They were therefore not entitled to make an application to set aside the registration of the two Malaysian judgments.

5. On 25th October 1977 the Court made a ruling on the parties' Hearsay Notices. At the time of the ruling, I indicated that I would give my reasons more fully in my judgment. I now do so under a separate heading.

6. On the samd day I also ruled that there was no privilege attached to trust instruments drawn up by or held in the possession of Ives (a practising solicitor) or his firm on behalf of C.K. San.

7. In the course of final addresses, it was agreed by counsel for all parties that they should not be strictly bound by their respective pleadings. Mr. Swaine suggested that whilst the parties were not to be so bound, each party must not go beyond the broad concepts of his own pleadings. I accept this suggestion.

Ruling on Hearsay Notices

26. By R. 7 of the Evidence (Hearsay) Rules, Cap. 8 a person need not be called as a witness if (1) he is dead, or (2) beyond the seas, or (3) unfit by reason of his bodily or mental condition to attend as a witness, or (4) despite the exercise of reasonable diligence it has not been possible to identify or find him, or (5) that he cannot reasonably be expected to have any recollection of matters relevant to the accuracy or otherwise of the statement to which the hearsay notice relates. These Rules were made under Sec. 53 of the Evidence Ordinance, Cap. 8. Sec. 53(1) specifies that provision shall be made by rules as to the procedure which shall be followed "as well as other conditions" which shall be fulfilled before hearsay evidence may be given. Sec. 53(3)(a) clearly provides that Rules made in pursuance of Sec. 53(1) shall not confer on the court a discretion to exclude such hearsay evidence where the requirements of the rules affecting its admissibility have been complied with. The requirements are of course the procedure and "other conditions" referred to in Sec. 53(1). Accordingly, if one of the five reasons for not calling the person to be a witness is present, the court has no power to prevent a party from putting in the hearsay evidence. On an analysis of the Ordinance and the Rules, my view is that Rasool v. West Midlands P. T. B.⁽²⁾ was correctly decided.

27. The question then arises as to whether the court has a general power to exclude evidence at its discretion and inspite of the statutory provisions referred to above. At first view Sec. 68(5) seems to give the court this power. Phipson suggests that there is no exclusionary discretion (12th ed., para. 650, at p. 282). Halsbury too is of the same view (4th ed., vol. 17, para. 55, at p. 41). A similar observation is to be found in The Supreme Court Practice 1976 (38/22 - 25/4, at p. 591). And Cross seems to suggest that it is only in relation to claims to privilege from answering questions in cross-examination that the court's exclusionary discretion has been invoked in civil cases (4th ed., at p. 30). I adopt these observations as correct statements of the law.

The Defendants

The first defendant C.K. San

28. He was an astute business man and a major shareholder in San Imperial. In June 1976 he was arrested in Hong Kong on certain charges of fraud and granted bail. On or about 28th October 1976 he absconded from Hong Kong and was located by Ng in Taipei on 31st December 1976. It was known to Ng, Ives and Ho that C.K. San had defrauded a number of companies in the region of South East Asia.

The second defendant Asiatic

29. This is a nominee company holding a substantial number of San Imperial shares for C.K. San and also 2,150,000 San Imperial shares for MAF.

The third defendant Triumphant

30. This is also a nominee company holding San Imperial shares for C.K. San.

The fourth defendant Ng

31. He is a stockbroker. He was at one time a business associate of C.K. San. Ng, Ives and Ho formed a syndicate with a view to collecting 24 million San Imperial shares (about half of the total share capital) and selling them to Coe and/or Rocky. His chief role in the Syndicate was to acquire San Imperial shares.

The fifth defendant Ives

32. He is a practising solicitor and a senior partner of Messrs. Peter Mo and Company. He was at one time C.K. San's business associate. He has on a number of occasions acted for and against C.K. San in his capacity as a solicitor. His chief role in the Syndicate was to advise on legal matters and draft the necessary documents, e.g. agreements, minutes of board meetings, affidavits, etc. In the present proceedings, Ives is both a defendant and an instructing solicitor, representing his own interests and that of Ng, Ho and Fermay.

The sixth defendant Ho

33. He is a business man of considerable means. He was at one time a business associate of C.K. San. His chief role in the Syndicate was to find buyers for those San Imperial shares which the Syndicate was able to collect. It was he who was mainly responsible for the Syndicate's negotiations with Coe.

The seventh defendant Fermay

34. This is a shelf company formed for the sole purpose of holding and proving the authenticity of the 15 million San Imperial shares alleged to have been purchased by Ng on behalf of the Syndicate from Chow and Hwang in Taipei.

The eighth defendant Chow and ninth defendant Hwang

35. They are husband and wife. It is the defendants' case that Chow and Hwang had bought the 15 million shares from C.K. San in Taipei in November 1976 and in turn sold them to Ng in March 1977.

The tenth defendant IPC

36. This is Coe's nominee company which now holds 8 million San Imperial shares (including the 7,631,000 shares subject matter of the charging orders nisi). The defendants claim that Coe's nominee company Rocky had purchased these shares on behalf of SKC from the Syndicate, but the shares were eventually registered in the name of IPC.

Assessment of Witnesses

Plaintiff Lee Ing Chee

37. He was a close friend and business associate of C.K. San for a number of years. There is a warrant of arrest dated 22nd April 1977 issued against him in Thailand on an allegation of fraud. I have no hesitation in coming to the conclusion that he is a truthful witness.

38. Pursuant to the plaintiffs' Hearsay Notice, he gave evidence of a conversation he had had with Chow in Taipei about the 15 million San Imperial shares. He told the Court that Chow had in effect denied the purchase of those shares. In the light of all the evidence adduced at the trial, I am of the view that Chow did make the statements alleged in the Hearsay Notice but those statements were untrue, probably because Chow did not want to get himself involved, or because he did not want Lee to know he was C.K. San's nominee.

Mr. Christopher Wilson

39. He is a solicitor. As a witness for the plaintiffs, he spoke of his and Lee Ing Chee's visit to Taipei. I am convinced that he is an entirely honest and reliable witness.

Mr. U. A. McInnes

40. He is the Acting Commissioner for Securities. In his evidence given on behalf of the defendants, he referred to the meetings he had had with Coe. I accept all his evidence as representing the truth.

Mr. Y. S. Cheng

41. He is an accountant by occupation. His competency and integrity as an accountant and his veracity as a witness for the defendants are never in dispute. In his evidence he said that 2,150,000 San Imperial shares registered in the name of Asiatic were in fact held by Asiatic on behalf of MAF, and that those shares were, on his suggestion, later transferred to the name of MAF. He also said that MAF held in their own interest the 3,226,000 San Imperial shares subject matter of the option agreement between MAF and the Syndicate whereby the latter was able to exercise the option of purchasing up to 6 million shares from MAF. I accept this evidence as representing the truth.

Defendant Ng

42. From a humble beginning, Ng has risen to the top of the business world. In his earlier days he had worked as an accountant and a typist. He is now the Chairman of San Imperial and also a stockbroker, occupying a seat on the Far East Stock Exchange.

43. During his eight and a half days on the witness stand, I have had ample opportunity to observe him and to assess his evidence. He was vigorously cross-examined for many days. It is obvious that he is a highly intelligent and confident person. It is difficult to state precisely my reasons for not accepting him as a truthful witness but having considered his demeanour and the manner in which he answered questions, I have no doubt whatsoever that much of his evidence is untrue.

44. My general opinion of Ng's untruthfulness is fortified by numerous factors, in particular the following:

45. The list given above is by no means exhaustive but is sufficient for the purpose of illustrating Ng's untruthfulness.

Defendant Ives

46. He is a solicitor of some 30 years standing and a draftsman of some repute. I ought to say at the outset my comments about him as a witness are in no way a reflection on the integrity and standing of his firm or any other partner or member of his firm.

47. He was on the witness stand for just under five and a half days. I therefore have had ample opportunity to observe his demeanour and the way in which he answered questions. The cross-examinations of Ives were both long and searching. He too is highly intelligent and, as a very experienced solicitor, enjoys an advantage on the witness stand which laymen who are not used to court appearances do not have. He is in my view an evasive witness. Again, whilst it is difficult to pinpoint any reasons for not accepting him as a completely truthful witness, I have no doubt that much of his evidence is untrue. I am acutely and painfully mindful of the grave allegation I am making against a professional man and an officer of the Court. It is not the sort of criticism any judge would make lightly, or without having given the matter the most anxious and careful consideration. But regrettably, this is my firm opinion, and I feel duty bound to state it.

48. My general opinion of his untruthfulness is also supported by a number of factors. The following list is not exhaustive, but will suffice as illustrations.

Defendant Ho

49. He is a very successful business man and also highly intelligent.

50. In his affidavit of 29th June 1977, he also referred to the 30th April 1977 agreement without mentioning the new 12th May 1977 agreement. He said in evidence that it was his lawyer Ives who prepared this affidavit for him. In my view it is highly unlikely that the omission of any reference to such an important document was due to an honest mistake.

51. It is perhaps possible that Ho was misled by Ng and Ives, but as a member of the Syndicate the principle of imputed knowledge applies.

Coe

52. Coe did not know C.K. San.

53. He too is a very successful business man and a highly intelligent person. He was on the witness stand for three and half days and was subjected to lengthy and searching cross-examinations. Having observed him, I form the general view that he was not a completely truthful witness. My general view is strengthened by the following particulars:

54. The particulars listed above are not exhaustive, but will suffice as illustrations.

Conclusion

55. In the course of the hearing, Mr. Yorke requested from the defence certain bank accounts for the period commencing April 1977. No convincing reason has been advanced for the long delay before their production. San Imperial's register of shareholders (Ex. P. 14) was produced after a delay of three weeks. The probable reason in my view lies not in any difficulty in locating the documents but in the unwillingness of the defendants or some of them to disclose them. The blame in no way lies with defence counsel, or with Philip K.H. Wong & Company.

56. In my judgment Ng, Ives, and Coe were not truthful witnesses. Their oral evidence is unreliable in almost all material particulars. I shall therefore rely mainly on documentary or undisputed evidence.

The Law

57. A number of authorities have been cited by Mr. Swaine. It is not because they have not been helpful that I do not discuss them at length here. They all deal with general and well known principles. I need only refer to a few of them by their titles and state that I have perused and considered them with care. Amongst the cases cited are Onslow's Trusts⁽³⁾; Gill v. Continental Union Gas Co. Ltd.⁽⁴⁾; Re General Horticultural Co.⁽⁵⁾. In particular I rely on Hawks v. McArthur⁽⁶⁾. I also rely on an authority cited by Mr. Yorke, namely, Compania Naviera Martiartu v. Royal Exchange Assurance Corporation⁽⁷⁾.

58. I also referred to Palmer's Company Law, 22nd ed., vol. I, para. 40 - 38 at p. 413, which gives a useful explanation on charging orders.

The Facts

59. I do not propose to deal with all the details and improbabilities which have been disclosed, nor with all the issues which counsel have submitted on, particularly in their final addresses. Suffice it to say that I have given all these matters my careful consideration. I shall instead concentrate on what I consider to be the important features of the case.

60. It is impossible on the evidence to bring to light all the relevant facts, a substantial part of which being known only to the Syndicate, Coe, C.K. San and their friends. As Mr. Yorke has said, we shall never know what really happened, but the probabilities are that the profits on the transactions were to be split between the Syndicate and C.K. San.

The 422,560 San Imperial shares registered in the name of Asiatic

61. There is no dispute that at all material times Asiatic held these shares as C.K. San's nominee (Ex. P. 14, p. 6).

The 400,000 San Imperial shares registered in the name of Triumphant

62. There is no dispute that at all material times Triumphant held these shares as C.K. San's nominee (Ex. P. 14, p. 11).

The 57,600 San Imperial shares registered in the name of C.K. San

63. There is no dispute that at all material times these were C.K. San's shares (Ex. P. 14, p. 2).

The 15 million San Imperial shares registered in the name of Fermay

64. In my opinion most of the evidence of Ng, Ives and Ho on this aspect of the case is untrue. Ng however did make the admission that he knew he was purchasing shares from C.K. San's nominees. I accept this statement as representing the truth. And on the principle of imputed knowledge, since Ng knew, Ives and Ho also knew.

65. In June 1976 C.K. San was arrested on certain grave charges of fraud and was granted bail. He jumped bail and escaped from Hong Kong on or about 28th October 1976. It is common ground that when he left Hong Kong he brought with him some 200 share certificates representing 15 million San Imperial shares registered in the name of his nominee company Asiatic (Exs. P. 11A and 11B). In fact those shares were beneficially owned by C.K. San.

66. In November 1976 Coe approached Ives and Ho separately and expressed his desire to acquire a controlling interest in San Imperial. As a result, Ives, Ho and Ng (i.e. the Syndicate) met in December to discuss the possibility of acquiring, if possible, 24.2 million San Imperial shares (the total issued share capital being 48.2 million shares) and then selling those shares to Coe or some other person at a large profit. Prior to the meeting Ng had ascertained that the largest single shareholding was in the name of Asiatic, which the Syndicate knew to be C.K. San's nominee company. At none of the preliminary discussions was C.K. San's other nominee company Triumphant mentioned. It is not disputed that the Syndicate knew that C.K. San habitually used nominees to hold his shares for him.

67. In their evidence Ng, Ives and Ho claimed that the Syndicate, after discussions, decided that they had first to resolve three problems, namely, (1) Where could C.K. San be found? (2) Could the Syndicate properly deal with C.K. San, he being a fugitive from justice?, and (3) As the Syndicate suspected that C.K. San might have milked San Imperial before leaving Hong Kong, what was the true value of that company?

68. As to the first problem, according to the evidence, it was thought that C.K. San might be in Taiwan, Bangkok or Indonesia. Ng flew to Bangkok for the Christmas holidays and asked for C.K. San's whereabouts at one of the companies under C.K. San's control, but his search was fruitless. On 3rd January 1977 he flew to Taipei. Ng saw C.K. San the following morning in the coffee shop of the hotel at which Ng happened to be staying. The reason for this good fortune was, according to Ng, that he knew that most visitors from Hong Kong would stay at this particular hotel. I do not accept Ng's evidence that he had to search for C.K. San. One would have thought that, C.K. San, who was heavily in debt and a fugitive from justice, would avoid going to public places, particularly one frequented by visitors from Hong Kong. In my view the first problem did not exist.

69. As to the second problem, Ives sought legal advice from London. This was probably a matter of some urgency, or he would not have sent a telex. Instead of sending the telex in December, as a prudent man would have done, Ives waited till 4th January 1977 to do so. Ng was in Taipei from 30th December 1976 to 3rd January 1977. During this period, according to Ng, he made contact with C.K. San as well as Chow and Hwang, and he learned that C.K. San had sold the 15 million San Imperial shares to Chow and Hwang in November, and they were now willing to sell if the price was acceptable. Ng did not telephone either Ives or Ho from Taipei. But after his arrival in Hong Kong on 3rd January 1977, he telephoned Ives and said that he had located C.K. San and he thought "we were in business". There was no mention of Chow and Hwang. Being aware of the legal problem of purchasing shares directly from a fugitive, Ng must have known that the acquisition of the 15 million shares by Chow and Hwang would probably change the legal position. It is very unlikely that he would have omitted this most important information when he reported to Ives, whose duties it was to solve legal problems for the Syndicate. In my view Ng did not meet Chow and Hwang on his first visit to Taipei.

70. Ives said in evidence that after receiving Ng's telephone call, he dictated a telex seeking counsel's opinion in London regarding the purchase of shares directly from C.K. San (Yellow 2, p. 123). The telex referred to both Asiatic as well as Triumphant (which, according to the evidence, had not been mentioned even as late as 5th January 1977) as being C.K. San's nominee companies holding substantial shareholding in San Imperial. For undisclosed reasons, the telex also referred to C.K. San's shareholding in MAF Credit Ltd. It will be seen that the two lots of shares Ng was supposed to have purchased from Lee and Fong were registered in the names of Asiatic and Triumphant respectively (Yellow 2, Documents 128 and 129). Ives said that his secretary was unable to transmit on 3rd January. On the 4th, the Syndicate had a lunch meeting during which Ng reported on his conversations with C.K. San and with Chow Hwang. The telex was despatched at 4:44 p.m. the same day. It is highly unlikely that Ives' secretary would have failed to inform him of her inability to transmit the telex message. On the balance of probabilities, I find that at the time the telex was sent, the Syndicate knew of the two lots of shares registered in the names of Asiatic and Triumphant respectively as being C.K. San's shares. I also find that Chow and Hwang had not as yet come on to the scene at this stage. In my view, on credibility and on probability, the second problem still existed at the time the telex was sent, i.e. at 4:44 p.m. on 4th January, 1977.

71. The urgency of the matter was shown by the promptness of the reply to Ives' telex, which arrived on 5th January 1977 (Yellow 2, p. 124). It in effect advised against purchasing the shares from C.K. San. It is therefore likely that Chow and Hwang, Lee and Fong and Fermay were used in the light of this legal advice from London.

72. As to the third problem, my observations on Ives' evidence of the Syndicate's valuation of San Imperial, under the title of Assessment of Witnesses, apply, especially in the light of the Syndicate's suspicions that C.K. San might have milked the company. In my view, on credibility and on probability, the third problem did not exist.

73. I must now return to Ng's visit to Taipei on 30th December 1976. The evidence is that C.K. San had sold the 15 million San Imperial shares to Chow and Hwang in November. If C.K. San were to sell these shares in Taipei, he would not be able to get more than 10 to 20 cents per share. The market rate in Hong Kong at the time was just under 30 cents per share. As a controlling interest, the price was $1.50 to $1.70 per share. It is common ground that 15 million shares would give the holder effective if not absolute control of San Imperial. It is in my view unlikely that C.K. San, being an astute man, would have sold those shares at one-tenth their true value. The defence produced a testimonial from a certain Madam Lau of Taipei (Ex. D9) in which it was said that in November 1976 Mrs. C.K. San introduced her to C.K. San. C.K. San indicated to her that his business in Hong Kong was in some difficulties and he asked her to find a purchaser for his San Imperial shares. Through her introduction, Chow and Hwang purchased those shares from C.K. San. It is in my view unlikely that anyone would have bought shares privately from a total stranger who confessed to being in difficulties. Madam Lau was not called as a witness. There is no evidence as to who she was or what she did. The testimonial is not a document to which any weight could be given. It was more than a month after the alleged purchase that Ng met Chow and Hwang. They asked Ng if the San Imperial shares were "hotel shares". My comments about Ng's evidence in this respect (under the title of Assessment of Witnesses) are equally applicable here. Also, Chow and Hwang had done nothing to have the shares authenticated or registered in their own names. In my judgment, on credibility and on the balance of probabilities, C.K. San did not divest his interests in those shares to Chow and Hwang.

74. According to Ng, it was this same Madam Lau who, on the suggestion of Mrs. C.K. San, introduced him to Chow and Hwang.

75. On Ng's fourth visit to Taipei, between 9th and 13th February 1977, he brought with him a draft agreement prepared by Ives (Ex. p. 10). At the time, no agreement had been reached as to the 15 million shares. According to Ng, Chow wanted $1 per share but the Syndicate counter-offered 40 cents per share. On the third visit Chow had said he had friends with 515,000 San Imperial shares for sale together with the 15 million shares. The draft agreement referred to 15,515,000 San Imperial shares to be sold by Chow and Hwang at 60 cents per share, payment to be made by nine monthly instalments, the first on signing of the agreement and the last on 30th December 1977. This draft has in itself the elements of a sham. Firstly, if Ng was truthful, then the vendors would not be just Chow and Hwang but should include the names of the friends (i.e., Lee and Fong) who had the 515,000 shares. Secondly, the price was not agreed on at that stage. It will be seen from Ng's evidence that it was on a subsequent visit that the price was agreed at 60 cents per share for the 15 million shares and 20 cents per share for the 515,000 shares. Thirdly, there had been no mention of payment by instalments between Ng and Chow and Hwang. In any event, it is unlikely that any vendor would agree to sell shares in a Hong Kong company to a group of strangers from Hong Kong on instalments covering a period of some 10 1/2 months. Indeed Ng's own evidence was that Chow and Hwang objected to those terms.

76. Ng said in evidence that on 5th March 1977 Chow telephoned him from Taipei and said he would agree to sell the 15 million shares at 60 cents each. On 8th March the Syndicate formed a shelf company called Fermay for the purpose of authenticating and holding the 15 million shares. Chow and Hwang were then to request the Registrars of San Imperial to have the 15 million shares registered in the name of Fermay. The registration would be proof that those shares were authentic. Chow and Hwang would then be made the sole shareholders of Fermay, whose sole assets were to be the 15 million shares. Fermay would eventually transfer the shares to the Syndicate.

77. On 22nd March, Ng again flew to Taipei, and on the following day he signed the agreement with Chow and Hwang. This agreement (Yellow 1, Documents 16 and 16A) had a number of peculiar features. Firstly, the number and price of the shares sold were not mentioned. There were spaces left blank for these figures to be filled in later. The reason advanced by the defence, which I do not accept, is that these figures were to be inserted after the authenticity of the shares was established. Secondly the names of the vendors were also to be filled in later. Thirdly, Chow and Hwang (but not Ng) put their signatures against the blank spaces to authenticate the future insertions. It is not known what steps Chow and Hwang could take to prevent Ng from inserting a purchase price smaller than that agreed upon. Fourthly, clause 4 provides that delivery of the shares of Fermay (which would own the 15 million San Imperial shares) and transfers to the Syndicate by Chow and Hwang shall be proof of payment of the balance of the purchase price, and Chow and Hwang as vendors shall be estopped from denying payment after delivery. In my view it is highly unlikely that complete strangers would deal with $9 million worth of shares in this manner.

78. The agreement took three months to come into being. Undoubtedly there must have been protracted negotiations, probably because the Syndicate wanted to split the profits with C.K. San.

79. Ives conceded that there was another method of authenticating the shares. Chow and Hwang could have sent the share certificates together with the transfer forms to the Registrars of San Imperial together with a covering letter requesting them to issue new share certificates to the Syndicate's solicitors or to hold those shares to the orders of Chow and Hwang. This would in fact be a less cumbersome and cheaper way of achieving the Syndicate's purpose. The use of Fermay was therefore quite unnecessary, and in my view not for the alleged purpose of authenticating the 15 million shares. As Mr. Ching has observed, Fermay must have been used to get the shares out of C.K. San's name.

80. It is said that Chow and Hwang had been paid a deposit of $200,000 for the 15 million shares. However, stamp duties for the bought and sold notes for the shares totalling $72,000 and the fee of $72,000 for increasing Fermay's capital from $1 to $9 million were paid out of this sum. Chow and Hwang had therefore only $92,000 in their pockets. The balance still outstanding is therefore $8.8 million (subject matter of the garnishee orders nisi). No further sum has been paid, nor have they insisted on payment.

81. On the same day as the agreement was made, Chow and Hwang as first directors of Fermay (see Yellow 1, Document 10) purported to hold a board meeting and resolved that Ng, Ho and Ives be authorized signatories of Fermay for the purpose of entering into any contract or signing on behalf of Fermay any document, receipt, contract, bought and sold note, transfer or any other document of any nature whatsoever and the signature of any one of them was to be binding on Fermay (Yellow 1, Document 14). Thus, by this resolution, Chow and Hwang relinquished their control of Fermay. And by clause 4 of the agreement (supra), they were estopped from claiming the balance of the purchase price amounting to $8.8 million. There could be no acceptable reason for Chow and Hwang to repose such complete trust in the Syndicate.

82. There is an undated letter, said to be written after 20th May 1977, by which Chow and Hwang resigned as directors of Fermay (Yellow 3, p. 144). On the same day, Chow and Hwang passed a resolution appointing Ng the managing director of Fermay (Yellow 1, Document 62). By these gestures, Chow and Hwang voluntarily relinguished whatever power they might still retain in Fermay. The reason for this peculiar conduct on the part of Chow and Hwang was given by Ives. Ng, according to Ives, told Chow and Hwang that Fermay should be legally represented if sued. On Ng's suggestion, they made Ng the managing director to represent Fermay in any legal proceedings.

83. In my judgment the 23rd March 1977 agreement was, on credibility as well as probability, a complete sham and nullity. On the facts, I have also drawn the conclusions that (1) Chow and Hwang were acting as C.K. San's nominees at all material times, (2) the Syndicate must have known that Chow and Hwang were C.K. San's nominees, (3) all parties knew that the transaction between the Syndicate and Chow and Hwang were shams, and (4) accordingly, the beneficial interests in the shares still remain in C.K. San.

84. Chow and Hwang sent the share certificates and the share transfer forms to the Registrars of San Imperial some time near the end of March 1977. There is no evidence as to the precise manner in which this was done. On 28th March the 15 million San Imperial shares were registered in the name of Fermay (Exs. P. 11A and B, Yellow 3, pp. 140 and 141), only five days after the agreement was entered into. It may be noted that, according to Ng, he telephoned the Registrars of San Imperial on the 27th March and was told that the 15 million shares had not reached them yet. The transfer into Fermay therefore took only one day, which in itself causes suspicion.

85. On 30th April 1977 Ng on behalf of the Syndicate entered into an agreement with Rocky for the sale and purchase of 23 million San Imperial shares including the 15 million shares. On 12th May 1977 this agreement was replaced by a new agreement whereby Rocky was granted an option to purchase the whole of the issued and fully paid up shares of Fermay, which was of course by then the registered owner of the 15 million San Imperial shares (Clause 1, at Yellow 1, Document 54). Under the new agreement, Rocky had paid the Syndicate an option fee of $4 million. By Clause 13 of the new agreement, however, the option shall be "exercisable" by Rocky as soon as the injunctions affecting those shares "and/or any other restrictions on dealing with the shares are lifted and discharged".

86. Accordingly, if the new agreement was a sham agreement, then the 15 million shares are still beneficially owned by C.K. San. If the agreement be genuine, then clauses 13 and 16 operate to prevent Rocky from exercising the option. Rocky's equitable interest in those shares does not arise until the conditions in clauses 13 and 16 have been fulfilled. Though the agreement was entered into before the making of the charging orders nisi, no option had been exercised prior to those orders. The end result is that C.K. San will not be considered as having divested himself of his beneficial interests in the 15 million shares until after the restrictions placed on them have been removed. Mr. Swaine argues that once the plaintiffs have been paid their judgment debts then the shares are no longer under any restrictions, and Rocky will then be entitled to exercise the option. The true position however is that Rocky is under no obligation to pay for the shares until after they have exercised the option. Under the agreement they are not bound to exercise the option, and they are not able to exercise the option until the shares are free from restrictions.

87. Finally, I should add that unless otherwise indicated I have attached no weight to the conversations referred to in the defendants' Hearsay Notices in respect of the 15 million San Imperial shares. The statements alleged to have been made by C.K. San are self-serving and not worthy of credence. There are also statements alleged to have been made by Chow which were self-serving. No plausible reason or evidence has been advanced for his non-appearance as a party and non-attendance as a witness for the defence.

The 7,631,000 San Imperial shares registered in the name of IPC

88. This lot of shares form part of the 8 million shares sold by the Syndicate to Rocky under the new agreement of 12th May 1977 (Yellow 1, Document 54). By clause 2(b) of the agreement, the Syndicate, represented by Ng, was to transfer to Rocky not less than 7 million nor more than 8 million San Imperial shares. The agreement replaced the 30th April 1977 agreement (Yellow 1, Document 40) under which there was an outright sale and purchase of the whole of the 23 million shares.

89. Some 7,669,800 of those shares were first registered in the name of City Nominees, Ltd., a company under the control of Ives and his four partners in Peter Mo and Company. This company was used as a vehicle to lodge the shares pending the completion of the deal with Rocky (see e.g., Yellow 1, Documents 25 and 27). From City Nominees, Ltd., these shares went into IPC (Ex. D13: the first six items therein come to 7,631,000 shares). IPC then executed three declarations of trust in respect of the 8 million shares in favour of Rocky (Exs. P. 23A, B and C). There were however no declarations of trust in favour of SKC.

90. The 8 million shares were made up of:

91. Only 7,631,000 out of the 8 million shares form the subject matter of the charging orders nisi.

92. There is exhibited a most useful and helpful chart prepared by Mr. Yorke (Ex. P. 12) showing the movements of all the shares in question. Apart from showing that the 15 million shares came from Asiatic into Fermay, it also shows how approximately 8 million shares came from various sources through various companies into IPC. It will be noted that whilst Rocky was the purchaser, these shares were registered in the name of IPC which is also one of Coe's nominee companies.

93. I shall now deal with the five lots of San Imperial share comprising the 8 million shares.

(1) The 514,200 shares were allegedly acquired by Ng on his fourth visit to Taipei, which lasted from 9th to 13th February 1977. In my view, on credibility as well as on balance of probabilities there was either no actual acquisition or the purported acquisition was a sham and a nullity. I have already stated that Ng's evidence is not worthy of credence.

94. It will be recalled that Ng has admitted having purchased shares from C.K. San's nominees. The probabilities therefore are that Lee and Fong (if they did exist) were C.K. San's nominees.

95. According to Ng, on his third visit to Taipei in January 1977, Chow had informed him that he had friends who were willing to sell 515,000 San Imperial shares in addition to the 15 million shares held by Chow and Hwang. Chow had further said he wanted to sell the two lots together and asked for $1 per share. There was on that occasion no mention that Chow had obtained the friends' consent to have the two lots sold together, nor was there any mention of yet another lot of 1,650,000 shares which the same two friends had and were to sell to Ng on a subsequent visit. It is therefore significant that in Ives' telex to London, both Asiatic and Triumphant were mentioned as holding San Imperial shares as C.K. San's nominees. The 15 million shares and the 514,200 shares were registered in the name of Asiatic and the 1,650,000 shares in the name of Triumphant. The probabilities are therefore that the Syndicate knew that both the 514,200 shares and the 1,650,000 shares came into Ng's hands from C.K. San, with or without Lee and Fong as C.K. San's intermediaries or nominees.

96. On Ng's fourth visit, he should Chow the first draft agreement prepared by Ives (Ex. P. 10). It referred to 15,515,000 shares. The draft was not shown to Chow's friends who supposedly owned the 515,000 shares. After some discussion, the friends, Lee and Fong, were pursuaded to sell at 20 cents per share for cash, which was only one-fifth the asking price. Lee and Fong must have known that a much higher price could be fetched if the two lots were sold together. Again, it is not disputed that these shares were still registered in the name of Asiatic which was C.K. San's nominee company.

97. If Ng is to be believed, then the probability is that Lee and Fong acquired those shares from C.K. San. The price they would have had to pay C.K. San for them would have been 10 to 15 cents per share. Neither Lee or Fong was called as a witness. There is no evidence as to who Lee and Fong were and what their financial status was, but they would have had to pay C.K. San about $70,000 for those shares, probably without any assurance that the share certificates and transfer forms representing those shares were genuine. Having regard to the wording of Ives' telex, and on the balance of probabilities, my view is that there was no or no genuine acquisition of the shares by Lee and Fong from C.K. San, and the Syndicate knew that.

98. According to Ng, he had suspected that the share certificates might be false. When Lee and Fong wanted payment in cash, Ng allegedly said in reply, "If you want cash, let's not talk about it, because I would not be able to get my money back if the shares were forged or false. If you really want to sell your shares, please do it through Mr. Chow because in that case I would be in a position to get my money back." It is not entirely clear why Ng should feel safer to transact through Chow, who was also a stranger to him at that time. In spite of his suspicion he too did nothing to prove those shares. It was not till 29th March, 1977, and after he had paid Chow in cash, that he had them registered in the name of MAF Nominees Ltd. (Ex. P. 14, pp. 6, 14). Unlike the 15 million shares the purported agreement for the sale and purchase of this lot was not reduced into writing.

99. As has been said earlier, payment was alleged to have been made on the basis that there were 515,000 shares but in fact there were only 514,200 shares. The total payment would therefore have been $103,000. Ng said he made the payment to Chow. There is documentary evidence showing that he had brought a total of about $500,000 into Taiwan (Yellow 3, pp. 122 - 124, 134). However there is no documentary proof showing the exact amount paid and to whom it was paid. Those shares were supposedly acquired on Ng's own account and paid for out of his own pocket. The total net worth of Ng at that time was about $1.5 million. In my view payment was made to wards those shares, but it is not possible to make a finding as to the precise purpose of such payment.

100. I would comment here that I give no weight to statements purported to have been made by Lee and Fong as contained in the defendants' Hearsay Notices.

101. These shares were supposed to have been bought at 20 cents each. They were later sold to Rocky at a true price of $1.63 each. The profit was therefore enormous. There was no plausible reason for Ives and Ho to permit Ng to pocket the whole profit on the shares alleged to have been acquired from Lee and Fong. Ng, Ives and Ho gave somewhat differing reasons for agreeing to Ng's purchase of those shares on his own account. One reason was that because Ng had done a lot of "legwork" between Hong Kong and Taiwan, he was allowed to have this extra bonus to himself. It will be recalled that the sole reason for bringing him into the Syndicate was to find San Imperial shares, i.e., to do the legwork. Another reason advanced was that the Syndicate wanted to keep their capital outlay to a minimum. It was therefore against their policy to use actual cash to buy shares. This reason is inconsistent with the Syndicate's purchases with their own money of some 2 1/4 million San Imperial shares from the open market for about $1 1/4 million from 3rd January to 28th June 1977. Yet another reason, given by Ho but not by Ives and Ng, was that this purchase was against the Syndicate's policy of proving the authenticity of shares. Ho, however, did not explain why this lot of shares could not be proved in the same way as the 15 million shares. The same observations apply to the 1,650,000 shares Ng was alleged to have bought in Taiwan or his own account.

102. The 514,200 shares was subsequently registered in the name of MAF Nominees Ltd., then City Nominees Ltd., and finally, IPC (Ex. D8A). They formed part of the 8 million shares sold to Rocky. In my judgment, the alleged acquisition of those shares by Lee and Fong either never took place or was a sham and a nullity. The alleged acquisition of the same shares by Ng from Lee and Fong was also a sham and a nullity. The beneficial interests in these shams therefore had not passed from C.K. San to Ng.

103. If the 12th May 1977 agreement between the Syndicate and Rocky was a genuine and bona fide agreement, then the price for those shares (less the sums already paid) was in truth due and owing to C.K. San and not to the Syndicate. If the agreement was a sham, then the 514,200 shares are still C.K. San's.

(2) The 1,650,000 shares were allegedly acquired by Ng on his own account from Lee and Fong for 20 cents each during his fifth visit to Taipei, which was from 27th February to 2nd March 1977. On that occasion Chow was said to have lowered his price on the 15 million shares from $1 to 80 cents but Ng's counter-offer was 60 cents. Ng paid Chow $330,000 for those shares on his sixth visit later in March. As has been said, there are documents (Yellow 3, pp. 122 - 124, 134) showing that he had brought about $500,000 in all into Taipei, but these documents do not show the exact amount paid, to whom it was paid or the precise purpose for which it was paid. These shares were registered in the name of Triumphant, which held the shares for C.K. San. After payment in cash (Ex. P. 14, pp. 11, 14), Ng had them registered on 29th March, 1977, in the name of MAF Nominees. I repeat all the observations I have made respecting the 514,200 shares in so far as they are applicable.

104. Ng in his evidence has conceded that he had purchased shares from C.K. San's nominees, so the probability is that Lee and Fong (if they ever existed) were acting as C.K. San's nominees.

105. For the two lots of shares, Ng paid $433,000 out of his own pocket, which represented just over a quarter of his net worth, without knowing whether his suspicion as to the authenticity of the share certificates and transfer forms was correct or incorrect.

106. These shares were later registered in the name of MAF Nominees Ltd., then City nominees Ltd., and finally, IPC (Ex. D8B).

107. In my judgment, either there was no acquisition of those shares by Lee and Fong or the acquisition was a sham and a nullity. The acquisition of these shares by Ng from Lee and Fong was also sham and a nullity. The Syndicate in my view knew that these transactions were shams. As regards the 12th May 1977 agreement between the Syndicate and Rocky, I repeat the observations I have made in respect of the 514,200 shares.

108. The two lot of shares, totalling 2,164,200 in number, were sold to Coe or Rocky for $3,246,300 at $1.50 each.

(3) The 2,609,800 shares were, on the balance of probabilities, acquired from the local market and from private sellers locally and had nothing to do with C.K. San. There is no evidence to show that C.K. San had held these shares beneficially.

(4) The 3,226,000 shares were made up of the following:

109. By a letter dated 23rd July 1977 (Yellow 1, Document 98), Mr. Cheng confirmed that MAF had held in it's own interest the 322,600 San Imperial shares as at 31st December 1976. There is no reason for me to believe that that situation has changed since that date.

110. The conclusion is therefore that these 3,226,000 shares had nothing to do with C.K. San. (See also my comments on Mr. Y.S. Cheng above).

111. In the light of Mr. Y.S. Cheng's evidence, which I accept in full, it will not be necessary for me to make any finding as to the genuiness or otherwise of the MAF option agreement of 30th March 1977. It is clear that the person in charge of MAF, Ho Chung-po, was C.K. San's agent throughout the relevant period. It is also clear, particularly from a scrutiny of San Imperial's register of share transfers (Ex. P. 14), that he and C.K. San were engaged in certain fraudulent schemes. However, in the light of Mr. Y.S. Cheng's evidence, it will not be necessary for me to embark upon an enquiry into that part of the case.

112. It has been noted that MBF makes no allegation of conspiracy against Coe, and the implication of MBF's pleadings is that Rocky was an innocent purchaser. It follows, as far as MBF is concerned, that Rocky entered into the two agreements innocently with the Syndicate on 30th April and 12th May 1977 respectively. Moreover, there is no evidence against Coe of any deceit or intention to mislead on his part.

113. On the evidence I am also of the view that MBF has not made out a case of conspiracy against the Syndicate, as described in para. 7 of their Statement of Claim.

114. I must nevertheless consider these two agreements in the context of the claims by the plaintiffs Lee Ing Chee and Lee Kon Wah, and in the context of MBF's alternative claim, and decide whether these were sham agreements.

115. I shall deal with them under a separate heading below and refer to them respectively as the replaced Rocky agreement and the new Rocky agreement.

116. The Replaced and the New Rocky Agreements

117. On 13th March 1977 Ho, Ng and Coe met at the Holiday Inn. After some discussion, the price for the shares was agreed at $1.50 per share plus a finder's fee of $3 million, which in effect brought the price up to $1.63 per share. Coe's evidence is that he was at the time hoping to acquire even more shares in the future. If the price was stated at $1.50 in the contract, then for the purpose of bargaining he would be able to tell future sellers that he had bought at that price. I cannot believe that Coe, being a successful businessman, would be so naive as to think he could conceal the payment of a finder's fee or the real price from future sellers, or that future sellers would refrain from demanding a higher price simply because Coe had paid a lower price in a previous transaction. It is also a little difficult to see the need for more shares if he had already got control of San Imperial by his acquisition of 23 million shares from the Syndicate. Ho's evidence however is that sometime in March, Coe told him that he was short of cash, and "he would settle for 23 or even 22 million shares."

118. Coe said he was in fact purchasing the shares on behalf of SKC but he wanted to keep this fact a secret because, in view of the sensitiveness of the market, news of SKC's acquisition would cause speculation in SKC as well as San Imperial shares. The 30th April 1977 agreement was therefore supposedly made between Ng acting on behalf of the Syndicate, and Rocky acting on behalf of SKC. There is however no documentary evidence to support Coe's allegation, and there is nothing, documentary or otherwise, upon which SKC could demand that the shares be transferred to its name.

119. The Syndicate might or might not have known that Coe was acting on behalf of SKC (if he did in fact so act).

120. On 13th April the plaintiff Lee Ing Chee's notice appeared in the South China Morning Post (Yellow 1, Document 26) to the effect that he had obtained an interim attachment in the High Court in respect of C.K. San's 16.5 million San Imperial shares and also his shares in other companies. Strangely, there was no discussion between any member of the Syndicate and Coe about this notice. On the 20th April Coe called on the Acting Commissioner for Securities Mr. McInnes and enquired how best to acquire San Imperial. On this occasion Mr. McInnes was given the impression that Coe was acting for himself. On the 4th May, when San Imperial shares were suspended in the local stock market, Coe and his solicitor Mr. Philip K.H. Wong again called on Mr. McInnes and in the conversation Coe mentioned that he had entered into an agreement to purchase 48% of San Imperial on behalf of SKC. As has been pointed out, Mr. Wong, however, in his affidavit stated that he was acting for Rocky in the acquisition of these shares.

121. On 29th April MBF put a notice in the South China Morning Post (Yellow 1, Document 35) to the effect that MBF had, in High Court Action 252 of 1977, obtained an injunction against C.K. San in respect of 17,421,960 San Imperial shares. Coe's evidence is that this was the first time he knew of any restraints on C.K. San's Imperial shares.

122. On the same day, Coe gave his solicitor two cheques totalling $1 1/2 million to be paid to the Syndicate as deposit for the 23 million shares (Yellow 1, Documents 34, 44 and 47).

123. On 30th April the replaced Rocky agreement was entered into (Yellow 1, Document 40) for the sale and purchase of 23 million San Imperial shares. Clause 19 of the agreement is important. It provides: "This sale is conditional and it is of the essence that (i) the Vendors shall not be restrained by any order made in Action No. 252 of 1977 in the High Court from completing the transaction and (ii) at the time of completion there shall be no suspension of trading of San Imperial shares consequent upon any proceedings taken under Action No. 252 of 1977." This clause would have been superfluous if the agreement were a sham.

124. In order to guarantee the value of San Imperial, Ng or the Syndicate was made to insert clause 7(c), which provided that on completion San Imperial "shall remain the registered owner of or be otherwise beneficially entitled to six listed properties, namely -

It will be noted that there is nothing in this agreement to show that Coe signed on behalf of Rocky. And there is no evidence to show that he had the authority to sign for Rocky. It is necessary in this context to refer to a resolution of SKC dated the 30th March which authorized Coe to negotiate and purchase on behalf of SKC the controlling shares of San Imperial. Coe therefore acted in breach of that resolution. Moreover, there is also nothing to show that Rocky entered into the agreement on behalf of SKC.

125. Neither SKC, Rocky or Coe had the cash to pay for the shares at the time. So by clause 13, Ng was to lend $17 1/4 million to Rocky on the security of the 23 million San Imperial shares. This loan represents half the total amount which Rocky had to pay Ng or the Syndicate, namely $3 million finder's fee plus the purchase price of $34.5 million for the 23 million shares at $1.50 each.

126. By a supplemental agreement of the same date (Yellow 1, Document 41), Ng agreed to use his best endeavours to raise a further loan in favour of Rocky in the sum of $17 1/4 million (i.e., half of the total amount due under the replaced Rocky agreement) on the security of 23 million SKC shares. The total issued share capital of SKC was 44 1/2 million shares. About 11 million of the 23 million SKC shares belonged to Coe and his family, the rest was held by companies under his control. There is however nothing to show that Coe had the authority to pledge those shares.

127. By a memorandum of the same date (Yellow 1, Document 38) Coe agreed to give Ng a 1% commission for raising the loan. It is common ground that if Coe had gone to a bank to raise the loans, the bank would only charge a 1/2% handling charges. It is also not disputed that SKC shares were steady and were worth $1 on the stock market.

128. On the same date Coe wrote to Ho and undertook to pay a $3 million finder's fee (Yellow 1, Document 43).

129. Again on the same day, Coe guaranteed Rocky's performance of the contract and in turn Ho guaranteed Ng's performance of the contract (Yellow 1, Documents 37 and 39). This was necessary because Ho knew Coe but not Rocky, and Coe knew Ho but not Ng. In my view if the agreement were a sham, these guarantees would not have been necessary.

130. By a document called an undertaking (Yellow 1, Document 42), and dated 30th April, Ng undertook on behalf of the Syndicate to cause all existing directors of San Imperial to resign and to make Coe and his nominees the new directors. Ng also undertook to sell the Oxford Road property at $2 1/2 million and to use his best endeavours to sell the Bangkok Hotel property for $7 1/2 million. This undertaking remained binding notwithstanding the coming into being of the new Rocky agreement. The undertaking was given at Coe's insistence because he did not want any of the directors then on the board of San Imperial to remain, and he thought the rents collected from the Oxford Road and Bangkok Hotel properties too low. Again it would seem that this undertaking would have been unnecessary if the agreement were a sham.

131. On or about 2nd May Coe paid the Syndicate another $1 1/2 million as deposit (Yellow 1, Documents 44 and 47).

132. Then, on 5th May, a news item appeared in the South China Morning Post reporting, inter alia, the charges of fraud against C.K. San (Yellow 1, Document 51). The amount involved was $14 million.

133. Coe was by then sufficiently concerned about the development of events as to request a new agreement to replace the 30th April agreement.

134. On 12th May the new Rocky agreement was entered into (Yellow 1, Document 54).

135. By clauses 2(a) and 10, Ng granted Rocky an option to purchase the whole of the Fermay shares or the 15 million San Imperial shares registered in the name of Fermay. By clause 2(b), Ng was to cause City Nominees, Ltd. (which by now was holding about 8 million San Imperial shares on behalf of the Syndicate) to transfer to Rocky not less than 7 million nor more than 8 million San Imperial shares.

136. Clause 4 provides for the payment of $4 million as an option fee. Clause 4(e) provides that the option shall be permanent and irrevocable.

137. Clauses 5(c)(v) and (vi) of the new Rocky agreement repeat clauses 7(c)(v) and (vi) of the replaced Rocky agreement (supra).

138. Clause 10 provides that on completion of the 15 million shares Ng was to lend Coe $18.5 million on the security of the 23 million San Imperial shares. The $18.5 million was arrived at by deducting the option fee from the purchase price of $22,500,000 for the 15 million shares at $1.50 per share.

139. Clause 16 provides, "This sale is conditional and it is of the essence that (i) the Vendor shall not be restrained by any court order in particular those made under High Court Action No. 252 of 1977 and Action No. 2459 of 1976 in the High Court from completing the transaction and (ii) at the time of completion there shall be no suspension of trading of San Imperial shares consequent upon any rule, regulation, actions or proceedings." This clause would not have been necessary if the new Rocky agreement were a sham.

140. There is in my opinion no advantage in entering into a sham agreement on 12th May.

141. By two documents of the 12th May (Yellow 1, Documents 55 and 56) Coe guaranteed Rocky and Ho guaranteed Ng for the same reasons as before.

142. There of the 30th April documents were not superceded and were held over, namely -

143. As in the case of the replaced Rocky agreement there is nothing to show that Coe had the authority to sign for Rocky or that he was signing for Rocky, nor that Rocky was acting for SKC.

144. It is necessary to digress here and refer to the MAF option agreement for the 3,226,000 San Imperial shares. The Syndicate did not have sufficient money or did not want to use their own money to pay for those shares. They therefore obtained a loan from Oceania. The story starts from 1976 and involved a company called the H.K. Estates, Ltd. It will be seen that the whole manouvre was very complicated indeed.

145. In 1976 a subsidiary of MAF Credit, Ltd., called MAF Investment, Ltd., had a property known as Loong San Building at Nos. 140 and 141, Connaught Road, Central. A subsidiary of San Imperial called Hong Kong Estates, Ltd., had deposited $5 million with the MAF Group as a loan. The MAF Group was not in a healthy financial position, so San Imperial wanted to "uplift" that loan. The MAF Group did not have sufficient cash, but they had the Loong San property, so it was agreed between the two sides that San Imperial would purchase this property and the $5 million would be used as a deposit (see Yellow 5, P. 64).

146. So on 17th July 1976 MAF Investment granted Hong Kong Estates an option to buy the Loong San property for $14 million. The option fee was $5 million (Yellow 4, P. 126). Nothing was done until 17th January 1977 when Hong Kong Estates exercised the option and instructed MAF Investment to enter the agreement of sale with Oceania, which was also a subsidiary of San Imperial (Yellow 4, P. 127). On 18th January MAF Investment and Oceania entered into an agreement for the sale and purchase of the Loong San property (Yellow 1, Document 9, p. 2).

147. H.K. Estates had paid the option fee of $5 million before the 18th January. Another sum of $1 1/2 million was paid on the 18th January to MAF, which was also a subsidiary of MAF Credit.

148. Then for reasons which are not entirely clear or acceptable, the agreement was cancelled by a resolution at a board meeting of San Imperial on 3rd May (Yellow 1, Document 48). MAF Investment was to repay $6 million to Oceania but was permitted to retain $1/2 million as a penalty for the cancellation of the 18th January agreement. When Oceania received the $6 million, it was to hold the money on behalf of Hong Kong Estates which was of course the true owner of the money.

149. MAF did not have the cash to repay Oceania, so it had to sell the 3,226,000 San Imperial shares (see Yellow 5, P. 63) to raise the money. The completion date for the MAF option agreement (Yellow 1, Document 18) was 22nd July (Yellow 1, Documents 30 and 32). By an agreement between MAF Investment and Oceania, also dated 12th May (Yellow 1, Document 9), MAF Investment paid Oceania one dollar forthwith, and was to pay $4,799,999 on or before 22nd July, and a further sum of $1.2 million one month thereafter. This and the two other agreements, viz, the MAF option agreement and the new Rocky agreement therefore formed the integral parts of one single plan. Ng's evidence that it had nothing to do with his re-financing arrangements with Coe is false. His evidence that the dates of 12th May and 22nd July were pure coincidences is also false.

150. The price for the 3,226,000 shares at $1.50 each was $4,839,000. On 2nd May MAF requested Ng and Ho to pay $4.8 million to Oceania direct because MAF owed Oceania $6 million over the canaellation of the Loong San property deal; the balance of $39,000 was to be paid to MAF (Yellow 1, Document 46; Yellow 2, Document 131). On 15th June, MAF Investment paid Oceania $5,999,999 (Yellow 1, Documents 81 and 82; Yellow 4, P. 128). Of the $5,999,999, a cheque for $4.8 million was issued on behalf of the Syndicate. Owing to Ng's failure to raise $4.8 million for the 3,226,000 shares, other arrangements were made. The cheque was therefore cancelled on or about 27th June and later replaced by five cheques totalling $4.8 million but payable to Hong Kong Estates (Yellow 4, P. 132; Yellow 2, Document 132). On the same day Hong Kong Estates acknowledged receipt of the $5,999,999 (Yellow 4, P. 129).

151. As has been noted the Syndicate either did not have sufficient funds or did not want to use their own money to pay for the 3,226,000 shares under the MAF option agreement. With the assistance of Coe, they were able to raise sufficient funds with which to pay for those shares. This was in late June 1977.

152. The 9th June saw the completion of that part of the new Rocky agreement relating to the 8 million shares. Coe had by then paid two sums of $1 1/2 million each as deposit. The total that had to be paid was $19.2 million, made up as follows -

The sum still outstanding was therefore $16.2 million (i.e. $19.2 million less $3 million already paid).

153. A number of documents came into being on 9th June, all contained in the bundle of documents marked Yellow 1 -

154. By a letter dated 25th June, Ng acknowledged the receipt of nine post-dated cheques from Coe (Yellow 1, Document 88). Six of these cheques totalling $9 million were paid towards the purchase price of the 8 million shares (Yellow 2, Documents 106(iv) to (ix)). Three of these cheques totalling $4 million were paid as option fee (Yellow 2, Documents 107(i) to (iii)). The total therefore came to $13 million. The first six cheques were cleared between 26th July and 5th August; the last three cheques between 9th and 13th August. The letter concluded by stating that upon the clearing of these nine cheques, the loan agreement of 9th June (supra) between Ng and Coe would be "abandoned". It will be recalled that the total loan was $16.2 million. There was therefore a balance of $3.2 million. The $3 million was the finder's fee. The payment of that sum took the form of an undated cheque issued to Ho. It was cashed in October. The remaining $200,000 was for expenses and was paid to Ng by Coe's cheque dated 15th August (Yellow 2, Document 108).

155. As has been noted, the Syndicate needed $4.8 million to pay for the 3,226,000 shares acquired under the MAF option agreement. This sum they borrowed from Coe, for it was in his interest to lend the money to the Syndicate so that he could obtain those shares.

156. Before coming to the manner in which the $4.8 million was borrowed, it will be convenient to state at this juncture that at the end of the day the sum of $4.5 million (represented by the first three cheques of Coe's nine cheques referred to in the previous paragraph) was used to repay Coe towards that loan of $4.8 million from Coe to the Syndicate. Interests at 1% per month were charged by both parties for the loan and cross-loan. The remaining six cheques were, upon maturity, paid into Ng's account. The money was then re-lent to Coe, earning interest at 1% per month for the Syndicate (see Yellow 5, pp. 118 - 125). The 23 million SKC shares deposited by Coe with Ng as security were returned to him on 31st October, after all the loans had been repaid.

157. Returning to the $4.8 million required by the Syndicate for the 3,226,000 shares, $1 million came from Coe in the following manner. On 27th June, Coe deposited $1 million into Ng's firm of stockbrokers which was allegedly for the purpose of trading in the stock market (Yellow 5, P. 1). It is interesting to observe here that San Imperial shares, having been suspended from trading on 4th May, were re-listed on 27th June. Ng's evidence is that the $1 million was, with Coe's consent, borrowed without interest by the Syndicate to form part of the $4.8 million. In fact, according to the accounts kept by Ng's firm (Yellow 5, P. 1), the $1 million was not used for a whole month, and there is nothing in those accounts indicating that the $1 million was paid towards the purchase of the 3,226,000 shares. Coe on the other hand said in evidence that he did not know how Ng had got the $1 million. Be that as it may, that leaves $3.8 million to be raised.

158. The already complicated situation is further complicated by Coe's purchase of Oceania, from which company the $3.8 million was to come. There is exhibited a most useful and ingenious diagram fathered by Mr. Fung and adopted by Mr. Yorke (Ex. P. 21), which attempts to show how this was done. Some of my findings on this part of the case are based on this diagram.

159. On 22nd June, San Imperial sold its subsidiary Oceania to SKC for $7 million (Yellow 4, P. 12).

160. In payment for the purchase of Oceania for $7 million, SKC issued 7 million new shares to San Imperial. The 7 million new shares were issued under a mandate given at SKC's board meeting of 5th November 1976 (Yellow 4, Documents 10 and 11).

161. The 7 million new shares would not yield any dividends until 1st April 1978 (Ex. P. 24, p. 30). In 1976 SKC shares were yielding a dividend of 11 cents, in 1977 the dividend was 13 cents. Coe's evidence is that SKC will pay a dividend of 13 cents in 1978, and the 7 million new shares will be entitled to the same dividends as the other SKC shares. This being a statement made in public by the Chairman of SKC, I have no reason to doubt its truthfulness.

162. The book value of Oceania was $5 million. So the sale by San Imperial to Oceania for $7 million would show a gain of $2 million in San Imperial's books. SKC too benefited from the deal because the Bangkok Hotel property was worth $7 1/2 million. It was in fact sold for $7.4 million. SKC therefore made a profit of $400,000 and still retained Oceania. Why San Imperial themselves could not have sold the Bangkok Hotel property for $7.4 million has not been explained.

163. No plausible explanation has been advanced as to why San Imperial preferred SKC shares to cash, except that the 7 million shares would yield a dividend of $910,000 for San Imperial in 1978. Their annual report for the year ended 30th June 1976 disclosed a very poor financial picture (Yellow 5, pp. 92 - 109). Compared with 1975, the company was borrowing more money and paying more interests. The turnover of the San Imperial Group Dropped from $9 million in 1975 to $7.4 million in 1976. The net current assets dropped from $9 million to $5.1 million in the same period. Their fixed assets however showed a slight increase. San Imperial had not been paying dividends for two or three years, and was in 1976 fast running out of liquid assets. Their interest expenses were also fast rising, indeed, 27% of the Group's revenue was used for payment of interest on loans. San Imperial issued an interim report in 1977 covering the period from 1st July to 31st December 1976 (Yellow 5, pp. 111 - 117 ). Mr. Tang, in what must be described as a brilliant address, argued inter alia, that San Imperial's financial position had improved in the second half of 1976 and was no longer "strapped for cash". The interim report was issued by Ng as Chairman. It shows that the turnover for the six months was $5.6 million, as compared with $7.4 million for the whole year 1975 - 1976. If the turnover of any business is greater, then it follows that the business is going to require more working capital, which must be provided from liquid assets, as opposed to fixed assets. Their current assets were however $2 million as compared with $5.1 million for the year 1975 - 1976. Interest expenses for the six months came to $1.7 million, as compared with $2 million in 1975 - 1976. The Group's fixed deposits for the six months were $1.8 million, as compared with $5 million in the previous year. Cash and bank balance went up to $616,331 from $283,937 in the previous year. However the increase was, as Mr. Yorke described it, a dribble in the bucket. Even Coe was forced to agree that San Imperial was desperately in need of cash and would "finish up" in seven months.

164. On 22nd June Coe, was by virtue of his holding of the 8 million shares, already managing director of San Imperial. It is significant to note that as early as 26th October 1976, two days before he left Hong Kong, C.K. San had executed a declaration of trust in favour of San Imperial in respect of his three shares in Oceania (Yellow 4, Documents 22 and 20). He therefore must have intended to sell Oceania at some future point of time. There is however no evidence to show that Coe knew about it. It subsequently transpired that C.K. San had executed similar declarations of trust in respect of some of his other companies.

165. Oceania's only assets were the Bangkok Hotel property. The $6 million which came into Oceania from MAF (supra) was of course in truth the property of Hong Kong Estates.

166. It has already be said that the Bangkok Hotel property was subsequently sold by Oceania for $7.4 million on 24th October (Ex. P. 22, p. 3; see also Yellow 4, pp. 34 - 35).

167. The plaintiffs argue that the $7.4 million was used to finance the $4.8 million required by the Syndicate. This was not entirely true, because the sale of the Bangkok Hotel property was on 24th October but the loans from Oceania were given on 27th June (Yellow 4, Document 33). On that day, a total of $4.6 million went as loans from Oceania to five nominees. Each nominee asked for the sum borrowed to be forwarded to Ming Kee Trading Co., Ltd. (hereinafter referred to as Ming Kee), which was one of Coe's companies. Each nominee also offered securities which in fact belonged to Coe. These moneys then went from Ming Kee to Coe, who lent the money to the Syndicate. Of the $4.6 million, $3.8 million was for the Syndicate to pay off MAF. It is not entirely clear what the remaining $800,000 was for. All the loans were subsequently repaid on 27th October, three days after the sale of the Bangkok Hotel property.

168. It is not disputed that Oceania was a deposit taking company, whose paid up capital at the time was $5 million. On 27th June, Oceania extended to Ming Kee or Coe through nominees loans totalling $4.6 million. Coe was at the time a director of Oceania and he admitted to being the real borrower and the guarantor of the nominees. It therefore appears that a breach of Sec. 22 of the Deposit-taking Companies Ordinance, Cap. 328, has been committed. I shall in due course inform the Attorney-General of this fact.

169. On Coe's own admission Oceania had $1.2 million available at the time. The $1.2 million in fact belonged to Hong Kong Estates. His theory, the fallacy of which will be exposed in a moment, is that by "creation of money" $3.8 million might be generated. This is what he said: "The $3.8 million lent by Oceania to the six nominees came in this way: $1 million was taken out of the $1.2 million by creation. By' creation there were $1 million, $1 million and $1 million and $800,000, making $3.8 million in order to have the six nominees written off (sic). Starting from Oceania, you make a round with Ng, MAF and H.K. Estates. In order to form the circle, Oceania must have $1 million (which Oceania had). Oceania lent $1 million to Ng, Ng returned the $1 million to MAF, MAF returned that $1 million to H.K. Estates, which then deposited the $1 million with Oceania on fixed deposit. In the second round the same parties were used, so there was another $1 million, making $2 million deposited with Oceania. The third time was the same; so there was $3 million with Oceania. The fourth round was for $800,000. When it got back to Oceania there was then a total of $3.8 million. Then H.K. Estates deposited $200,000 with Oceania making a grand total of $4 million."

170. Coe went on to say, "There must be money to start with, even if it was only $100. It depends on how many rounds you have to go to make up $4 million. If we had $3.8 million we only needed to go one round. The reason for doing this is because Ng had to pay MAF for the 3,226,000 San Imperial shares."

171. Mr. Yorke produced a chart (Ex. P. 26) which at once shows the fallacy of Coe's theory. It is reproduced below -

"SIMPLE DIAGRAM OF PYRAMID OF CREDIT @ 80%

BANK

172. The so-called creation of money therefore involves certain characteristics: (1) the bank gives a loan which has to be repaid and not an outright payment, otherwise the bank will soon exhaust its funds, and (2) the system depends on the depositors not wanting their money back immediately or simultaneously, otherwise there would be a run on the bank.

173. The only conclusion that may reasonably be drawn is that the loans by Oceania to the Syndicate were sham transactions, designed to create the impression that actual loans were given.

174. The plaintiffs contend that no real money was used for any of these transactions. The resourcefulness and diligence of Mr. Poon resulted in a number of charts. I refer in particular to two charts (Exs. P. 13 and 13A) showing the payments and receipts of money by the Syndicate, Coe and other parties. They show that up to the 30th August Coe had actually paid out $12.2 million. On 14th October, I ruled that the defendants were not permitted to go behind the judgments already obtained by the plaintiffs and that the case must be tried on its merits. From 24th to 31st October Coe paid further sums totalling $7,189,446.67. It has been argued on behalf of the plaintiffs that the payments made in October were not genuine payments because they were made as a result of my ruling. It is however clear from Mr. Swaine's final address to this Court that the defendants had anticipated that the merits would have to be investigated. My conclusion is that the 8 million shares have been paid for by that Rocky and all his payments were genuine. It is obvious that the price for the 15 million shares does not as yet have to be paid.

175. In October, the outstanding sum Rocky still owed the Syndicate for the 8 million shares was about $7 million. The bank overdraft facilities which SKC, IPC and another of Coe's company called Rockson, Ltd. had as at 15th October came to $4,920,000, which could be used to pay the Syndicate. If necessary the finder's fee of $3 million could be deferred. Ho had by then received Coe's undated cheque but agreed not to pay it in.

176. It may be also noted here that Coe could have used his overdraft facilities to lend the Syndicate the $3.8 million. There was therefore no necessity for him to use Oceania.

177. Whatever the true relationship between Rocky and SKC on the question of the acquisition of San Imperial shares, and whatever the true relationship between San Imperial and SKC on the question of the Oceania deal, on the balance of probabilities my judgment is that both the replaced and the new Rocky agreements were genuine and bona fide for full value without notice of defect in the vendors' title. There is nothing in the evidence which inevitably leads to the conclusion that Coe was aware of the sham agreements which the Syndicate had entered into.

178. It is clear from what I have stated above that the Syndicate had no beneficial interests in the shares Ng was alleged to have bought from Lee and Fong. nor in that portion of the money paid by Rocky for those shares.

179. On all the findings above, it follows (1) that the beneficial interests in the 8 million shares have passed from C.K. San to Rocky, and (2) that the purchase price paid by Rocky to the Syndicate under the Rocky agreements for the 2,164,200 shares alleged to have been bought by Ng from Lee and Fong, less $433,000 already paid by Ng to Chow, was in fact receivable by C.K. San.

Orders Absolute

180. On my findings of facts I make the following orders:-

(I) Under the consolidated actions

(II) Under the MBF action

Representation:

Mr. Charles Ching, Q.C. with Mr. P. Fung (Descons) for Plaintiffs in Action No. 2459 of 1976 and Miscellaneous Proceedings No. 155 of 1977

Mr. Richard Yorke, Q.C. with Mr. Winston Poon (Johnson, Stokes & Master) for Plaintiff in Miscellaneous Proceedings No. 540 of 1977

Mr. Swaine, Q.C. with Mr. Robert Tang (Peter Mo) for 4th, 5th, 6th and 7th Defendants

Mr. Swaine, Q.C. with Mr. R. Tang (Philip K.H. Wong) for 10th Defendant

Note: (1) Throughout this judgment share dealings are, for the sake of convenience, referred to as sale and purchase of shares.

(2) (1974) 3 All E. R. 638.

(3) (1875) XX L. R. Equity Cases 677.

(4) (1872) VII L. R. Excheq. 332.

(5) (1886) 32 Ch. D. 512.

(6) (1951) 1 All E. R. 22, at p. 24 F & G, p. 26 G & H, p. 27 A, D - H, and p. 28A.

(7) (1924) 19 Lloyd's List Law Reports 94, at pp. 95 - 97, for The Earl of Birkenhead.

(8) that the Bank has not paid anybody anything.

(9) of the 3,336,600 only, 1 M was ever 'cash', 1,689,300 is 'created' money."