Re Chor Lau Heung Restaurant Co. Ltd.

HCCW000063/1999

HCCW 63/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.63 OF 1999

-------------------

-------------------

Coram: Hon Le Pichon J in Court

Dates of Hearing: 13 - 17, 20 and 21 March 2000

Date of Judgment: 21 March 2000

Date of Handing Down of Reasons: 31 March 2000

------------------

R E A S O N S

------------------

1. This petition was presented on 19 January 1999 by Hung Jin Mui ("the Petitioner"), the widow of Tang Wing Cheung ("the Deceased"), a celebrated Cantonese opera singer and actor who died on 21 April 1997. The Petitioner is the registered owner of 50 shares of the Company whose issued capital consists of 500 shares. The Deceased was the registered holder of the balance of those issued shares. The personal representatives of the Deceased are two of the four children of the Deceased and the Petitioner, namely Angela Tang Chui Yuk ("Angela") and Tang Siu Wing ("Siu Wing"). The four children of the marriage are the beneficiaries under the will of the Deceased dated 25 September 1996 ("the 1996 Will").

2. The Petitioner seeks an order that Chor Lau Heung Restaurant Company Limited ("the Company") be wound up on the just and equitable ground and alternatively, for a buy-out by the personal representatives of the estate of the Deceased of the Petitioner's shares.

3. The hearing lasted 7 days. At its conclusion, I dismissed the petition. The reasons appear below.

CORPORATE HISTORY

4. The Company's business consists of the operation of the restaurant known as Chor Lau Heung. It was incorporated on 7 July 1989 to take over the business of an existing restaurant of that name which was then being operated by a company called Rapid Reach Limited. The premises in which the restaurant was situate were acquired by Acegrowth Development Limited ("Acegrowth") at the price of $20 million in 1987, at the time when the landlord of the premises began distraint proceedings against the then lessee, a restaurant known as Kam Lai Kung Restaurant which was a joint venture in which each of the Petitioner and the Deceased had an interest. As will become apparent, in 1987, the Petitioner was not a shareholder of Acegrowth. She first became a shareholder in Acegrowth on 5 September 1988 when approximately 3.75% of the issued capital was transferred to her. By 21 June 1995, by virtue of a substantial transfer by the Deceased, 3.5 million out of an issued capital of 6 million shares came to be registered in the Petitioner's name, thus giving her a 58% interest in Acegrowth. Upon the acquisition by Acegrowth, the restaurant's name was changed to Chor Lau Heung.

5. The Deceased and one Tsang Kwok Wah ("Mr Tsang") were the two subscribers to the memorandum of association of the Company. Several weeks after the Company's incorporation, on 21 August 1989, a further 498 shares were allotted resulting in the Deceased and Mr Tsang holding 450 and 50 shares respectively. Mr Tsang was the general manager of the Company, a position which he occupied until 13 July 1993 when he resigned. On 31 December 1993 Mr Tsang transferred the 50 shares held by him to Angela. Approximately a year later, on 19 December 1994, Angela transferred the 50 shares registered in her name to the Petitioner. Neither Mr Tsang nor Angela received payment for the shares transferred by them; equally they did not make any payment for the shares allotted or transferred to them.

6. The Deceased and Mr Tsang became the first directors on 21 August 1989. Under the Articles, the Deceased was a permanent director. On 9 August 1990, Angela also became a director. Upon Mr Tsang's resignation on 13 July 1993, the Deceased and Angela were the only directors. On 14 December 1994, Angela resigned as director and the Petitioner was appointed in her place.

7. So far as the bank mandates are concerned, from August 1990 when Angela was appointed a director until sometime in 1991 or 1992, two signatures were required and one had to be the Deceased's. After that the arrangement was altered and any two of the three directors (i.e. the Deceased, Mr Tsang and Angela) could operate the bank accounts and after Mr Tsang resigned in July 1993, either one of the Deceased and Angela could operate the accounts. When the Petitioner replaced Angela as a director, again either one of the two directors, i.e. the Deceased or the Petitioner could operate the Company's bank accounts.

BACKGROUND FACTS

8. Before turning to the petition itself, it is relevant to refer to the state of family relationship subsisting as at September/October 1996 and litigation that erupted in the course of 1997. They form the backdrop to the petition before me.

9. A breakdown in relationship occurred in or about October 1996 between the Petitioner on the one part and the Deceased and the four children on the other. This breakdown was widely publicized. As a result of the breakdown, the Petitioner left the family home at Wing Cheung Mansions on 12 December 1996. It is common ground that at that time the Deceased was still in good health. On 3 January 1997, the Deceased was admitted into hospital. He remained there until his death on 21 April 1997.

10. There is no allegation that the Deceased or the children was responsible for the breakdown in relationship.

11. On 28 April 1997, exactly a week after the Deceased's death, the Petitioner commenced a probate action contesting the 1996 Will which stated, inter alia, that no provisions were being made for the Petitioner "as she is financially independent and has been amply provided for" during the Deceased's lifetime. The Petitioner sought to set up an earlier will executed on 3 March 1994 under which the Petitioner was the major beneficiary. Pleadings were eventually filed alleging the lack of testamentary capacity and in the alternative undue influence on the part of the children. Shortly thereafter, the Petitioner presented a winding up petition (HCCW474/1997) relating to Marvel Ace Limited, the respondents to which included the children and the estate of the Deceased.

12. On 17 November 1997, Angela and Siu Wing, as the Deceased's personal representatives, applied for an order that an EGM of the Company be convened for the appointment of the children as directors of the Company. It is clear from the supporting affirmation that the proposed appointment was as additional directors and not in substitution for the Petitioner. Then on 2 December 1997, the Petitioner issued an originating summons, also pursuant to section 114B of Cap.32 for an EGM to be convened for the purpose of passing the resolution appointing the Petitioner and one Anthony Collins, the proposed administrator pending suit of the estate of the Deceased, as directors and that they together shall appoint a third director.

13. By Order dated 15 December 1997, the court appointed receivers and managers of the Company with a view to preserving the status quo of its business and maintaining its continuance as a going concern pending the resolution of the proceedings or further order.

14. By a Consent Order dated 8 October 1998, the probate action was dismissed upon the Petitioner's undertaking to Angela and Siu Wing not to contest the proving of the 1996 Will. The Petitioner also agreed to pay a specified sum by way of agreed costs. At the same time, the winding-up petition relating to Marvel Ace was also withdrawn. The withdrawals were apparently out of "sentimental considerations (sic) and without admission to the allegations made in pleadings and affirmations" filed by Angela and Siu Wing in those actions. On 14 December 1998, the stay of MP3907/1997 was lifted and directions given for the filing of evidence, inter alia, by the Petitioner who was the 1st Respondent to those proceedings, and for a date to be fixed for the hearing. On 18 January 1999, the Petitioner filed an affirmation foreshadowing the petition which was presented the following day.

THE PETITION

15. The petition alleged that in or about August 1987, the Deceased and the Petitioner set up Chor Lau Heung Restaurant ("the Restaurant") and that the Deceased and the Petitioner jointly participated in the running of the business with the assistance of Mr Tsang. It alleged that the Restaurant had thus been operated and managed by the Deceased and the Petitioner in the nature of a quasi-partnership and/or as a family business.

16. The Company was incorporated in July 1989 to acquire the business of the Restaurant. The Petitioner maintained that the operation and management of the Restaurant remained in the nature of a quasi-partnership and/or a family business between the Deceased and the Petitioner. The petition further alleged that the relationship between the Petitioner and the Deceased and the children broke down in October 1996 as a result of which the Petitioner left the matrimonial home in December 1996 and was "effectively" ousted by the Deceased and the children from management. It also alleged that "irregularities" and "improprieties" were disclosed by Angela in affirmations filed by her in HCMP3907/1997, that since December 1996, the Deceased and the Children had managed the Company to the exclusion of the Petitioner, that the conduct of the Deceased and the children had irreparably destroyed the mutual trust and confidence that was the basis for the carrying on of the business of the Company, that the affairs of the Company were conducted in contravention of the Articles and in a manner that was unfairly prejudicial to the interests of the Petitioner. It further asserted that the Petitioner had lost confidence in the children's propriety and good faith towards her.

17. On 26 April 1999, Angela filed an affirmation in opposition to the petition. In that affirmation, one of the matters raised was whether the Petitioner owns the shares beneficially or whether they are held by her in trust for the Deceased (the trust issue). Counsel for the Petitioner accepted that the petition is predicated on the Petitioner being beneficial as well as the legal owner of the 50 shares in the Company registered in her name. Accordingly, the preliminary issue which arises is the trust issue to which I now turn.

THE TRUST ISSUE

18. As a matter of record, the Deceased and Mr Tsang were the original subscribers to the Company. One share was issued to each subscriber on 24 February 1989. The Company was not incorporated until 7 July 1989. As noted above, six weeks later, on 21 August, a further 498 shares were allotted : 449 to the Deceased and 49 to Mr Tsang. Mr Tsang therefore came to hold 50 shares which he did until he resigned as director on 13 July 1993. His 50 shares were transferred to Angela for no consideration. The actual date of the transfer is unclear : it would appear to be 13 July 1993. At any rate, by 31 December 1993, the 50 shares were already registered in Angela's name.

19. Under cross-examination, the Petitioner stated that the reason for Mr Tsang's resignation was that he did not get along with Angela who had been apprenticed to him for some years. The Petitioner said that Angela often came back and complained to her and to the Deceased about Mr Tsang and for that reason and no other, Mr Tsang was asked to leave. This evidence was wholly inconsistent with the Petitioner's affirmation of 2 December 1997 made in support of an application in the probate action for the appointment of an administrator pendente lite and for an injunction against Angela and Siu Wing from dealing with the assets of the estate of the Deceased. In that affirmation, the Petitioner alleged that Mr Tsang had reported to her and the Deceased that he had discovered a theft of cash from the Restaurant's cash register which he believed had been committed by Angela. She stated that after investigation, they found Mr Tsang's allegations to be true, but because Angela was their daughter, they fell they had to protect her and the incident was never reported. Instead, Mr Tsang was asked to resign as director and to transfer the 50 shares to Angela. If it were true, it does stretch one's credulity that Angela should be 'rewarded' in those circumstances.

20. Be that as it may, it is common ground that Mr Tsang received no consideration for the transfer of the 50 shares. Assuming (without deciding) that the Deceased gave personal monies to Mr Tsang at the time of Mr Tsang's departure as is asserted by the Petitioner, there is no evidence that this was consideration for the shares transferred.

21. When taxed about this in cross-examination, the Petitioner stated that Mr Tsang was around and could testify. It certainly appears from the affirmation she filed in the probate proceedings that she and Mr Tsang have remained on good terms. It is therefore surprising that Mr Tsang has not been called by the Petitioner as her witness. His evidence would have been relevant not only on the trust issue, i.e. whether or not he held those shares on trust for the Deceased which, prima facie, is consistent with his not receiving any consideration for the transfer, but also the theft allegation and the Petitioner's role (if any) in the management of the Company during the time that he was general manager. He would have been an important witness.

22. On 19 December 1994, Angela transferred the 50 shares which were registered in her name to the Petitioner. The Petitioner's case is that these shares had been a gift to Angela in 1993 and that Angela transferred the shares to the Petitioner in December 1994 when she decided to get married and to quit her job at the Restaurant. The Petitioner, in particular, disapproved of the marriage and it was in those circumstances that the transfer took place. The Petitioner went on to say that she allowed Angela to return to work for the Company after about five months of her marriage.

23. Angela's account of events is somewhat different. It is common ground that her decision to marry did not meet with her parents' approval. The marriage took place in May 1995. Angela's evidence was that she continued to work until shortly before her marriage and that she stopped only for a month. She said that she never regarded the shares as having been a gift to her. Rather, as far as she was concerned, she held them on trust for her father whom she regarded as the sole owner of the Company. At the time when she decided to marry, many assets of the Deceased had already been transferred into her name. Because of family opposition to her marriage, she re-transferred them at the Deceased's direction. This occurred over a period of months prior to her marriage and the 50 shares were transferred in those circumstances. She did not want anyone to think that she was after the Deceased's assets.

24. For the Petitioner, it was submitted that the trust allegation is a belated and disingenuous attempt to thwart her rights as a shareholder in the Company. It was contended that since the point was not taken in the probate action or MP3907/1997 and MP4196/1997, it was an afterthought and therefore totally unfounded.

25. I do not agree. Whether or not a trust exists is an inference to be drawn from the facts established at trial. The fact that it had not been raised earlier may be attributable to any number of reasons including a desire to contain the family dispute which, on any view, had become unseemly and unedifying. In any event, Angela's motive in not raising the point earlier has no bearing on the proper inference to be drawn from the relevant facts.

26. Since the Petitioner herself paid no consideration for the shares, her beneficial entitlement (if any) would depend on the operation or otherwise of the presumption of advancement in her favour. The question, therefore, is whether the facts negative any intention of advancement on the part of the Deceased. For the respondents, it was contended that historically, the 50 shares had always been held on trust for the Deceased. So far as Mr Tsang is concerned, whilst the issue of the further 49 shares to him was consistent with the Petitioner's explanation that they were meant as an incentive and therefore belonged beneficially to Mr Tsang, there is no plausible explanation as to why, upon his resignation, he readily transferred them at the Deceased's direction to Angela for no consideration. Mr Tsang would be in a position to clarify these matters. For reasons not readily apparent, Mr Tsang never filed any evidence on behalf of the Petitioner.

27. The fact that Mr Tsang was prepared to part with the shares for no consideration is only consistent with his not being the beneficial owner of the same. So far as Angela herself is concerned, prima facie, there was scope for the application of the presumption of advancement. Yet, it was Angela's understanding and belief that she held them on trust for the Deceased. It is a permissible inference from those facts that Mr Tsang and Angela held the 50 shares in trust for the Deceased.

28. Even if that inference were drawn, of itself, it would not be sufficient to displace the presumption of advancement. The question therefore is whether the circumstances and the reason for the transfer to the Petitioner negative the presumption. In this connection, it should be borne in mind that those shares had to be transferred to someone other than the Deceased himself in order to satisfy the statutory requirements as to the number of shareholders.

29. The presumption for advancement can be rebutted by evidence of the actual intention of the donor or transferor, i.e. the Deceased. Where there is no express declaration of trust, as is stated in Snell's Equity, 30th Ed. at 9-15,

"The court puts itself in the position of a jury and considers all the circumstances of the case so as to arrive at the [deceased's] real intention; it is only where there is no evidence to contradict it that the presumption of .... advancement will prevail."

Further, it is to be noted that in view of the clear statements in Petit v. Petit [1970] AC 777 by Lord Reid at 793F, Lord Hodgson at 811G and Lord Diplock at 824D, the strength of this presumption has been much diminished with changing conditions of society.

30. Having regard to the circumstances that existed and the reason for transferring the shares into the Petitioner's name, I find that the evidence is sufficient to rebut the presumption of advancement and that the Deceased did not intend to make a gift of those shares to the Petitioner. It would have been a different matter altogether had a transfer taken place that was wholly independent of extraneous reasons requiring such a transfer. But that was not the case.

31. It follows that the petition must fail in limine and be dismissed.

32. In case I am wrong about this and the Petitioner is beneficially entitled to the 50 shares registered in her name, I will turn to consider whether or not a case has been made out either for the winding-up of the Company on the just and equitable ground or for a buy-out under section 168A.

WAS THERE A QUASI-PARTNERSHIP?

33. It is the Petitioner's case that she was involved in the Company from inception and that the Company was formed as a quasi-partnership between the Deceased and herself. Prior to the incorporation of the Company, the Restaurant business had existed and was operated by Rapid Reach. The Petitioner was neither a director or shareholder of Rapid Reach. When the Company was incorporated, she held no shares and was not appointed a director whereas the Deceased was named a permanent director. The Deceased financed all the operations of the Company and its working capital. The Petitioner never contributed any of her own monies into the Company. There was no evidence of any understanding or agreement between herself and the Deceased at the time the business was acquired as to the role which she would assume. Given those facts, it is difficult to see what interest, if any, she had in the Company from inception. Plainly, she had no formal role until her appointment as director some 5 1/2 years after the Company's incorporation.

34. The Petitioner's evidence as to the extent of her involvement came to this : she would ring up the Restaurant on a daily basis at about noon to find out about business conditions. She was concerned with its daily expenses, profits and accounts. When the Deceased was alive, she would go there every two or three days together with him and looked into business affairs. She tried out new products to test their quality and asked about the business turnover. In 1993, she was also involved in the redecoration of the Restaurant. Cash books were brought home and she attended staff meetings on a regular basis. After she became a director, she also attended board meetings. She had authority to sign cheques and audited accounts as well as annual returns. She was also involved in promoting the business of the Restaurant by organizing banquets and performances.

35. There is a conflict of evidence as to the extent of the Petitioner's involvement in the Company. In particular, Angela disagreed that the Petitioner ever attended any of the staff meetings which were held monthly, much less on a regular basis. She did not accept that the Petitioner visited the Restaurant as often as was alleged, i.e. every two or three days, although the Petitioner and the Deceased would sometimes go and eat at the Restaurant. Angela also took issue with the assertion that the Petitioner organized banquets and performances : as far as she could recall, it only happened once.

36. On these matters, Angela's evidence is to be preferred. The Petitioner's attendance at staff meetings had never before reared its head until cross-examination. For someone who had been attending them regularly as was the Petitioner's evidence, it is inexplicable that she was so hesitant as to whether minutes were taken by anyone of those meetings. Eventually she said there were none and it was put to her that they were kept in book form. The Petitioner clearly sought to inflate her involvement in the course of cross-examination. Again, for one who maintained that she had such a close involvement in the business, it is surprising that she could not remember the name of any of the accounting staff of which there were about five, and saw fit to allege that most of them had been replaced by Angela as part of her strategy to impede the Petitioner's access to the Company's financial information when, in fact, virtually all the accounting staff is still with the Company including the head of that department who has been with the Company since 1993.

37. Another telling example is to be found in paragraph 15 of the Petitioner's affirmation filed on 2 December 1997 in the probate action where she said :

"The Restaurant has always been profitable. After my appointment as a director and as the Deceased's health and mental capacity began to fail, I spent more and more time managing the affairs of the Restaurant. I would go to the Restaurant approximately every other day to check the volume of daily restaurant sales. On the days I did not go to the Restaurant I would telephone the accounting department to inquire as to sales volume. I managed all the financial aspects of the Restaurant. I would receive monthly in-house profit and loss statements from the accounting staff. From these reports, I know that with the exception of 2 months every year, the Restaurant had gross sales of approximately HK$3,000,000 to HK$4,000,000 each month and profits of approximately HK$600,000 to HK$800,000 each month."

The first sentence is demonstrably wrong when one looks at the profit and loss accounts of the Company for the years 1992 through 1997. Below is a summary of the position extracted from the audited accounts of the Company. It is to be noted that for the years ended 31 March 1996 and 1997, the accounts were audited but remained in draft.

38. The statement that with the exception of two months in each year, the Restaurant had profits of approximately $600,000 to $800,000 each month based on monthly in-house profit and loss statements is not supported by the documentary evidence. When confronted with the monthly profit and loss statements for the year April 1995 to March 1996 when the Petitioner was a director, the Petitioner was unable to identify a single month during that year in which the Company made profits remotely approaching $600,000, let alone $800,000. December 1995 showed the highest profit which was $490,000. Even the Petitioner had to accept that in none of the months for the year 1995 to 1996 did the Company make the sort of profit she asserted. If she had been as involved with the business as she made out, she could not have been so wildly wrong about the Company's profitability unless her evidence was intentionally misleading.

39. On the evidence, I find that the Petitioner has failed to make out a case that the business was run as a quasi-partnership or family business from inception. Her evidence as to her involvement has been shown to be unreliable (if not downright untruthful). I find that prior to becoming a director, her involvement was peripheral and informal : as the boss' wife, it is hardly surprising if she should have taken an interest in how the Restaurant was doing or was consulted on certain matters arising in the course of redecorating the Restaurant's premises. That kind of involvement was insufficient to bring a quasi-partnership into existence. After her appointment as director, the Petitioner signed formal documents, paid bills, checked vouchers, etc. Those duties are duties one would expect a director might be asked to perform. The fact that those duties were performed would not render the director a quasi-partner.

40. It is clear from the evidence that the Deceased made all the important decisions concerning the Company and its business. It was he who financed the Company when it was necessary to do so. Pausing there, it is worth noting that Mr Tsang would have been in a position to corroborate the extent of the Petitioner's involvement if there was any truth in her case. The total absence of any evidence from Mr Tsang suggests that the Petitioner was unable to secure any corroboration for her version of the evidence.

EFFECT OF THE BREAKDOWN IN FAMILY RELATIONSHIP

41. Whilst the Petitioner relies on the fact that there was a breakdown in family relationship, it is not now alleged that responsibility lay either on the Deceased or the respondents. The Petitioner frankly acknowledged that her leaving the matrimonial home "had nothing to do with the business of Chor Lau Heung".

42. Dealing with the breakdown point, the fact of a breakdown of itself is not sufficient to trigger section 168A or indeed section 177(1)(f) : unfairly prejudicial conduct must be established in order to invoke jurisdiction under either of those sections. See O'Neill v. Phillips [1999] 1 WLR 1092 where Lord Hoffmann held at 1104F-G :

" I do not think that there is any support in the authorities for such a stark right of unilateral withdrawal. There are cases, such as In re A Company (No.006834 of 1988), Ex parte Kremer [1989] B.C.L.C.365, in which it has been said that if a breakdown in relations has caused the majority to remove a shareholder from participation in the management, it is usually a waste of time to try to investigate who caused the breakdown. Such breakdowns often occur (as in this case) without either side having done anything seriously wrong or unfair. It is not fair to the excluded member, who will usually have lost his employment, to keep his assets locked in the company. But that does not mean that a member who has not been dismissed or excluded can demand that his shares be purchased simply because he feels that he has lost trust and confidence in the others.... And as Lord Wilberforce observed in In re Westbourne Galleries Ltd.[1973] A.C.360, 380, one should not press the quasi-partnership analogy too far: 'A company, however small, however domestic, is a company not a partnership or even a quasi-partnership...' "

WAS THERE OPPRESSION AND/OR UNFAIRLY PREJUDICAL CONDUCT?

43. As I understand it, counsel for the Petitioner relied on post-departure events :

- the setting up of the 2nd set of bank accounts in January 1997 to the exclusion of the Petitioner;

- the mixing of the Company's money with the personal monies of the respondents in their personal accounts;

- the deliberate attempt to tamper with the Petitioner's interests in Wing Cheung Records ("WCR") by diverting monies payable to WCR into the respondents' personal accounts;

- management of the Company by persons other than properly appointed directors.

Events from 12 December 1996 to 15 December 1997

44. The Petitioner left the matrimonial home on 12 December 1996. Thereafter, she never returned either to the matrimonial home or the Restaurant. The Deceased was admitted into hospital on 3 January 1997. It would appear that the Deceased and the children were sufficiently prescient in that shortly after being hospitalized, the Deceased made arrangements for the setting up of the 2nd set of bank accounts. The accounts were opened on the 2nd and 4th January. They could be operated by any two signatories among the Deceased and the four children. Since her departure on 12 December, the Petitioner did not sign any cheques. During that period until the opening of the 2nd set of accounts, all the cheques were signed by the Deceased. Thereafter the Deceased's condition deteriorated substantially and he never left the hospital until his death in April.

78 Angela gave evidence to the effect that prior to and after her father's admission into hospital, she tried to contact the Petitioner on her mobile telephone. Angela knew the number since the telephone was in fact registered in her name. Angela said she was unsuccessful in reaching the Petitioner. She therefore contacted the Petitioner's friend Mrs Wong, her maternal uncle as well as reporters in trying to get a message to the Petitioner.

45. It is common ground that the Petitioner visited the Deceased on 5 January 1997 and that it was the only visit she paid him during the 3 1/2 months that he was hospitalized. The Petitioner maintained that she learned of the Deceased's hospitalization via news reports and that the children never contacted her. She also learned from the doctor that the Deceased's illness was terminal. Yet she only paid him the one visit during the 3 1/2 months the Deceased was in hospital. The Petitioner did not concern herself over his medical bills which she left to the children to settle.

46. The Deceased died on 21 April 1997. Within a week of his death, the Petitioner commenced the probate action in which she sought to set up the earlier will under which she was the major beneficiary.

47. Angela acknowledged that sometime in May, she was advised by her solicitors to open separate accounts for the Restaurant. She explained that the chaos and stress at the time resulting from the Deceased's death, the probate action and the restaurant business were such that the advice was overlooked and on 10 July 1997, the 3rd set of bank accounts, namely personal accounts of the respondents were used as the Company's bank accounts.

48. By late July 1997, Angela was also concerned about the Restaurant's licence. On 1 August 1997, her solicitors wrote to the Urban Services Department ("USD") for guidance concerning the transfer of the restaurant licence. Correspondence on this subject ensued between Angela's solicitors and USD for several months and on 17 November 1997, the Company was warned that it should not carry on food business before nominating an appropriate person to conduct the business. USD also threatened legal action. Some four weeks earlier, on 22 October 1997, Angela's solicitors had been informed by USD that the Petitioner's solicitors had advised them that it was not the intention of the board to nominate any person to continue the licence.

49. Meanwhile, on 1 September 1997, the Petitioner's allegations in the probate action became known. The statement of claim was filed alleging lack of testamentary capacity on the part of the Deceased and/or undue influence on the part of the children. Within 10 days thereafter, the Marvel Ace petition was filed.

50. Four weeks later, the Petitioner appointed two other directors to the board. In response to that, K.C. Ho & Fong, the respondents' solicitors, wrote to the Petitioner's solicitors suggesting that general and board meetings be held. This request was ignored. On 17 November 1997, the children issued the originating summons in MP3907. Two weeks later, the Petitioner issued the originating summons in MP4158. Both MP3907 and MP4158 were stayed on 4 December 1997 and on 15 December 1997, receivers were appointed.

The 2nd and 3rd sets of bank accounts

51. As a result of the breakdown in relationship, the Petitioner did not feel able to go back to the Restaurant. Where, as here, it is not part of the Petitioner's case that the respondents were responsible for the breakdown, they cannot be held responsible for her reluctance to go back to the Restaurant or involve herself in the business. By absenting herself from the matrimonial home and from any contact with her family other than the one visit to the hospital on 5 January 1997, the Petitioner failed to discharge the duties she had for some years been carrying out as director, i.e. signing cheques and operating autopay instructions. The Restaurant had to continue to operate. Expediency required the opening of the 2nd set of accounts to enable the Restaurant to continue in operation during the Petitioner's 'absence' and the Deceased's indisposition.

52. So far as the 3rd set of bank accounts are concerned, as leading counsel for the respondents acknowledged, it was unfortunate that the respondents did not implement their solicitors' advice to open a separate account to deal with the Restaurant's income and expenditure. The use of their personal accounts by the respondents for the Restaurant's business meant mixing the Restaurant's monies with their own; naturally, that excited suspicion. That said, the respondents were able to account for every single cent. Internally, the accounting records were properly kept inasmuch as every single entry about which the Petitioner had a query could be explained or accounted for. The Petitioner does not complain of inadequate or insufficient discovery and having had access to such discovery as she desired, not a single allegation of misappropriation, fraud or impropriety could be levied at the respondents.

53. Plainly, members of the Company were not prejudiced by the actual mixing of the Restaurant's monies with the personal monies of the respondents. In fact, the total amount paid out of the 3rd savings account for the business expenses of the Company of approximately $25.5 million exceeded the total amount of deposits from the Restaurant's income of approximately $23.1 million by some $2.39 million. So while the respondents must accept criticism for using their personal accounts rather than causing new and separate accounts to be opened, no harm was done.

Exclusion

54. It is the Petitioner's case that the relationship with the Deceased and the children broke down in October 1996. Yet when one looks at the evidence, she was able to make a withdrawal in favour of herself of $700,000 on 9 October 1996. This formed part of the $2.2 million that the Petitioner in fact withdrew from the Company between November 1995 and October 1996, which is considered in greater detail later. As late as 22 November 1996, the Petitioner was still giving autopay instructions in respect of the Company's account. The breakdown therefore did not prevent the Petitioner from carrying out the role she had been performing as director.

55. On the facts, I find that it was her departure from the matrimonial home and her unwillingness to return either to the Restaurant or to the matrimonial home that resulted in her non-participation. It is plain from those facts that the Petitioner wished to remain isolated from the members of her family. That is wholly different from her having been excluded by the respondents. Further, the probate action she commenced at the end of April and the Marvel Ace petition contributed to the widening of the gap between herself and her children. When these matters are coupled with the fact that the Petitioner has shown no interest in the Company's affairs since her departure, I find that the Petitioner's non-participation in the Company's affairs was really self-induced.

56. I now turn to the allegation that the Petitioner was denied access to financial information. The first point to note is that this was not raised in the petition and was not one of the complaints made. It is too late for the Petitioner to raise it now. See In re Fildes Brothers Limited [1970] 1 WLR 592.

57. In any event, the Petitioner's evidence on this issue is to be rejected for the following reasons. On 2 December 1997, she filed an affirmation in the probate proceedings to the following effect :

"Beginning about September 1996, I was informed by the accounting staff that the (sic) Angela had told all the staff in the accounting department not to provide me, in future, with any information about the Restaurant's gross sales figures or monthly in house profit and loss statements over the telephone even though I am, of course, a shareholder and was a director of the company. For a short time after that, I was still able to obtain information regarding the income of the Restaurant by personally going down to the accounting office and demanding this information. However, by October 1996, I found that most of the old accounting staff had been dismissed by Angela and replaced by persons she had hired."

As noted above, her allegation that the accounting staff had been changed has been shown to be wrong. When cross-examined about the alleged withholding of accounting information, she said that she was only able to get information when the relationship between the parties was still cordial. This, of course, is different from what was asserted in her affirmation.

58. Then there is the Petitioner's general credibility, I have already referred to several instances of the Petitioner's evidence being untruthful. There are other instances, some of which are mentioned below. These reinforce the view that the Petitioner's evidence was at best unreliable and at worst false.

59. The most egregious example relates to her assertion stated in previous affirmations that she received dividends from the Company on two separate occasions in the total sum of $1.2 million, seeking to contrast that with the fact that since the breakdown and assumption of control of the Company by the respondents, no dividends have been declared. Based on that evidence, she applied for an ex parte injunction against the children. (See paragraph 22 of the affirmation filed on 2 December 1997 in the probate action and paragraph 79 of her witness statement dated 17 April 1998.) But the truth of the matter is that the Company has never declared any dividends. That is readily apparent when the Company's financial position is perused, a summary of which appears above.

60. To make matters worse, it transpired that the Petitioner had in fact withdrawn an aggregate of $2.2 million from the Company between November 1995 and October 1996. There were altogether six withdrawals, ranging from $200,000 to $700,000 each. Each cheque was made out to the Petitioner, signed by her and paid into her personal bank account. She sought to justify these withdrawals as representing profits of the Company. That again was untrue. Having regard to the accumulated losses carried forward of over $9 million and $6.7 million for the financial years ended 31 March 1996 and 1997 respectively, the Petitioner had little option but to accept that those withdrawals did not represent dividends.

61. Angela gave a different account of the Deceased's reaction to those withdrawals. Her evidence was that the Petitioner was asked to repay those monies to the Company and that she had repeatedly promised to do so.

62. Leaving aside this conflict of evidence, when initially confronted by the withdrawals, the Petitioner sought to suggest that she had no recollection of such withdrawals. Her assertion of having received dividends of $1.2 million was made in December 1997, only a year after the last and the largest amount of the withdrawals of $700,000. The cheque was paid into her personal account. I find it incredible that only a year later the Petitioner could have no recollection of the withdrawal. In any event, by the time she made her witness statement in April 1998, she would have obtained the relevant records from her bank. Yet she persisted in perpetuating the untruth. A year later, when she came to making her affirmation in these proceedings in May 1999, she stated (at paragraph 11) :

"I have no recollection as to whether I received such alleged cheques and, if so, the circumstances under which I received them.... I am also in the process of obtaining copies of the relevant bank statements from my bank."

In cross-examination, the Petitioner's evidence was that at the time she made the December 1997 affirmation, she had in her possession only two bank records which showed a total of $1.2 million having been received. Three months later, i.e. by April 1998, she received further records. She was given photocopies of the six cheques which totalled $2.2 million. That evidence in itself was problematic as appears from the schedule below which sets out the dates and amounts of withdrawals :

The first point to note is that no two withdrawals add up to $1.2 million. In her latest affirmation filed in these proceedings on 16 February 2000, she stated (at paragraph 4) :

"...Frankly, I have no recollection as to the purposes of the 6 drawings totalling HK$2,200,000 between 22/11/95 and 10/10/96 due to the passage of time. I cannot say whether the said sum had been jointly used by the deceased and me or whether it was used by myself exclusively. I have been advised by my lawyers and accountants and verily believe that there was no documentation to record the basis, both in law and in accounting perspective, for such change in accounting treatment. I have been advised by them and verily believe that the said sum of HK$2,200,000 should be treated as joint drawings by myself and the deceased in equal shares...."

Yet, under cross-examination, the Petitioner was able to say that they represented profits and that the Deceased had told her not to leave so much cash in the Company.

63. Having regard to these matters, I am driven to conclude that the Petitioner is an untruthful witness.

Diversion of Wing Cheung Record's income

64. The Petitioner also complained about the payment of monies belonging to Wing Cheung Records ("WCR") in which she holds 90% of the shares into the 3rd set of bank accounts.

65. When cross-examined about this, Angela's evidence was that her maternal uncle was looking after the WCR operations. Cheques made out to WCR could not have been paid into the respondents' personal accounts. WCR's income represented royalties. Angela denied ever having made arrangements for royalties to be made payable to the respondents personally. She did not know who had made the arrangements. As to the diverted income, every cent has been clearly recorded and accounted for.

66. The Petitioner adduced no evidence to show that the respondents were responsible for diverting WCR's income. As a director and majority shareholder of WCR, the Petitioner must have known the identity of those who regularly paid royalties to WCR. It would have been relatively simple for those persons to be approached to substantiate her case that it was Angela who arranged for the cheques to be made out in her own name rather than that of WCR. There was no such independent evidence.

67. In these circumstances, the Petitioner's allegation that Angela made the arrangements is unsubstantiated and falls to be rejected.

Conclusion

68. To sum up, the Petitioner has failed miserably in seeking to establish that there was a quasi-partnership, let alone oppression or unfair prejudicial conduct on the part of the respondents. But the situation is worse than that because there is every reason to conclude that the Petitioner's own conduct (considered below) in relation to the Company after her departure from the matrimonial home was such as would have disentitled her to any relief had she been successful in establishing a prima facie case of triggering the exercise of the court's discretion in granting relief.

- The restaurant licence

69. When efforts were being made by K.C. Ho & Fong to secure a restaurant licence to enable the Company to continue to operate its business, the Petitioner's then solicitors wrote to USD informing them of the appointment of two new directors and sent them a board resolution to the effect that the board would not be nominating any further person to take up the general restaurant licence. This is recorded in an attendance note made by the respondents' solicitors on 22 October 1997 when they spoke to a senior inspector of USD. As her solicitors had been in touch with USD, they would have been informed that for a registered company, a new licence would only be issued to a person nominated by the board of directors. The notification to USD served only one purpose : to obstruct or impede the efforts of the children to obtain a general restaurant licence to enable the Company to continue in operation.

- The lease

70. The premises occupied by the Restaurant belong to Acegrowth, a company in which the Deceased and the Petitioner are the sole shareholders. Whilst the Deceased was still alive, rent was never an issue given the ownership of Acegrowth and the Company. In fact, no payment was actually made though the accounts showed an item for rent. It is also relevant to mention that it was clear from the evidence that in 1994, tax advice was received and a tax arrangement implemented whereby a loan of $10 million owed by Acegrowth to the Deceased was assigned to the Company with interest at 10% per annum. The Company's accounts have consistently showed the $10 million loan due from a 'related' company and interest income of $1.2 million per annum received by the Company for this loan. Acegrowth's accounts also reflect this arrangement.

71. On 23 February 1998, two months after the court had appointed a receiver and manager of the Company, the Petitioner caused Acegrowth to issue distraint proceedings against the Company. At the hearing on 4 December 1997 relating to the applications for convening a meeting pursuant to section 114B of Cap.32 when both applications were stayed until further order, the court intimated that the appointment of a receiver and manager might be appropriate. It was made clear to the parties that the overriding concern of the court was to maintain the status quo pending the determination of the probate action and in order to enable the restaurant business to be continued, it appeared desirable that a receiver and manager be appointed to hold the ring. The Petitioner and her advisers could not but have known that distraint proceedings would inevitably affect the continued operation of the Restaurant and render nugatory the court appointment. The Petitioner even caused a notice of termination to be served, purporting to terminate the tenancy as from 31 August 1998.

THE COURT'S DISCRETION

72. I am grateful to leading counsel for the respondents for his very full and helpful submissions on the issue of tangible interest but having regard to the conclusions reached on the trust issue and on the Petitioner's case, it is unnecessary for me to consider matters which are relevant to the exercise of the court's discretion including the question whether a tangible interest has to be shown.

73. In the context of the exercise of the court's discretion (which, on the facts, does not arise), I would only add that the respondents had made open offers in December 1997 and again in April 1999 to purchase the shares registered in the Petitioner's name at a price to be valued by an independent valuer with full access to the Company's books and records. The Petitioner advanced six reasons for her rejection of the offer. Suffice to say that none had any substance. Had it been necessary to consider the exercise of the court's discretion, I would have held that the open offers were unreasonably rejected by the Petitioner.

74. This is a sad case. Family disputes of this nature should not be lightly brought. When asked why she issued these proceedings the Petitioner responded that it was in order to obtain rent for the premises. That answer was both irrational and illogical given that Acegrowth is indebted to the Company for $10 million. Further, it betrays a fundamental lack of understanding of the proceedings.

75. Viewed objectively, the Petitioner should never have been encouraged to embark on or pursue a course that is so destructive of family ties when no sound basis existed in fact and in law.

76. As the originating summonses in MP3907 and MP4196 have been adjourned pending this petition, they should now be restored for hearing. The question of costs of these proceedings as well as the costs of the receiver and manager can conveniently be dealt with at the same restored hearing.

Representation:

Mr Jason Pow, instructed by Messrs Fairbairn Catley Low & Kong, for the Petitioner

Mr Benjamin Yu, SC and Mr Anderson Chow, instructed by Messrs K.C. Ho & Fong, for the Respondents