First Laser Ltd v. Fujian Enterprises (Holdings) Co Ltd and Another

① Plaintiff\

Case No.HCA 4414/2001

Court

High Court CFI

Date05 Feb 2008

Judge—

Case Document

100%Judiciary

HCA 4414/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4414 OF 2001

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BETWEEN

	FIRST LASER LIMITED	Plaintiff
	第一激光有限公司
	and
	FUJIAN ENTERPRISES (HOLDINGS) COMPANY LIMITED	1^st Defendant
	華閩(集團)有限公司
	JIAN AN INVESTMENT LIMITED	2^nd Defendant

______________________

Before : Deputy High Court Judge To in Court

Dates of Hearing : 4-5, 8-12, 15, 31 October 2007 and 1 November 2007

Date of Judgment : 5 February 2008

______________________

J U D G M E N T

______________________

introduction

1.This is an action for breach of contract and/or breach of trust. The Plaintiff is a company incorporated in Macau and controlled by Mr Ngan In Leng (顏延齡) (“Ngan”), a Macanese resident. The Defendants are companies incorporated in Hong Kong. They are window companies of the Fujian Provincial People’s Government of the People’s Republic of China (“PRC”). This action arose out of a dispute between Ngan and the 1^st Defendant about a joint venture in optronic business (光電子項目) conducted by two companies incorporated in the PRC, Fujian Casix Laser Inc (福建華科光電有限公司) (“FCL”) and Fuzhou Casix Optronics Inc (福州科騰光電技術有限公司) (“FCO”), which were owned by the 1^st Defendant or its subsidiaries prior to the commencement of the joint venture. Another company incorporated in Macau by Ngan, known as Casix Optronic Manufacturing Limited (宇星光電企業製造有限公司) (“COM”), was used as the corporate vehicle for carrying out the joint venture.

2.For the purposes of the joint venture, three agreements were entered into between COM and companies owned and controlled by Ngan (“Ngan’s camp”) on the one part and the 1^st Defendant and its subsidiaries on the other in December 1996. The three agreements are hereinafter called the “Hang Wo Agreement”, the “COM Agreement” and the “First Laser Agreement”. In the conduct of the joint venture, the parties, particularly Ngan, had total disregard of the concept of corporate identity under PRC law and Hong Kong law. Stripped of the legal issues raised by the concept of corporate identity, the Plaintiff’s or Ngan’s case is as follows. Through the Plaintiff, Ngan purchased from the 1^st Defendant 51% of its shares in FCL and FCO for US$3,187,500 (equivalent to HK$24.64 million), that the 1^st Defendant agreed to transfer all its shares in FCL and FCO to COM which would be held by Ngan’s camp and the 1^st Defendant in the ratio of 51:49. Part of the purchase price of HK$20 million was paid by COM and the Plaintiff to the 1^st Defendant and the balance of HK$4.64 million was by an agreement dated 13 March 1998 (“1998 Memorandum”) deemed to have been paid as the 1^st Defendant’s contribution for its 49% interest in COM. All the shares in FCO were transferred to COM in March 1997 but not any of the shares in FCL. Despite that, the parties conducted the management of FCL and FCO on the basis that they were partners to the joint venture. In July 1997, at the request of FCL, Ngan provided funds for an optronic project (光纖無源器件項目) (“Project”), which the 1^st Defendant decided would not be undertaken by the joint venture. The Project was about research, development and production of fibre collimator, fibre optic isolator, fibre optic circulator and fibre coupler. That Project turned out to be a success and enhanced the value of the shares in FCL. Then, in breach of the joint venture agreement, the 1^st Defendant sold all the shares in FCL to a third party, JDS Uniphase China Holdings Company (“JDS”) for US$60 million. The 2^nd Defendant is a nominee or conduit of the 1^st Defendant for the receipt and transfer of the proceeds of sale of the shares in FCL.

3.The Plaintiff’s claim is founded on breach of contract, breach of trust and as a fall back on restitution. The contract relied on by the Plaintiff as having been breached by the 1^st Defendant is the latest of the three agreements, i.e. the First Laser Agreement, entered into between the Plaintiff and the 1^st Defendant on 28 December 1996, which superseded the earlier two agreements. The Plaintiff says that in breach of the First Laser Agreement, the 1^st Defendant failed to transfer to the Plaintiff 51% of the shares in FCL which were sold by the 1^st Defendant to JDS and the sale included the Project which was funded solely by the Plaintiff. Arising out of the alleged breach of contract, the Plaintiff has a claim for damages and a proprietary claim in respect of part of the proceeds of sale of the shares in FCL to JDS which is attributable to the Plaintiff’s 51% of the shares in FCL. The Plaintiff further claims that those proceeds are trust assets beneficially belonging to the Plaintiff and held on trust by the 1^st Defendant. The Plaintiff seeks an account for the Plaintiff’s share of the proceeds of sale from the 1^st Defendant. In the alternative, if the First Laser Agreement is void, invalid or unenforceable, the Plaintiff claims restitution and tracing.

4.The Defendants’ main defence is that the dispute between the parties had been litigated in the PRC and the decision of the Supreme People’s Court of the PRC was final and conclusive. Specifically, the Supreme People’s Court held that the law applicable for determining the validity of the three agreements and the 1998 Memorandum was the law of the PRC. The Supreme People’s Court held that the three agreements and the 1998 Memorandum insofar as they related to the sale of the shares in FCL to the Plaintiff were of “no effect (無效)”, a term which the legal experts of both parties considered more appropriate than the common law term of “null and void”. The basis of the Defendants’ defence is that the 1^st Defendant, being a window company of the Fujian Provincial People’s Government, is a state-owned corporation and that FCL is a wholly foreign-owned enterprise. The 1^st Defendant avers that under the laws of the PRC, prior approval from the Fujian Provincial People’s Government is required before entering into the three agreements. In addition, the shares of FCL would have to be valued, approved and confirmed by the Fujian Provincial State-owned Assets Administration Bureau (福建省國有資產管理局) pursuant to articles 3, 18 and 19 of Rules on The Evaluation And Management of State Assets《國有資產評估管理辦法》and article 10 of Detailed Rules for the Implementation of The Rules on The Evaluation And Management of State Assets《國有資產評估管理辦法施行細則》and approved by the Fujian Provincial Foreign Trade & Economic Commission (福建省對外經濟貿易委員會) pursuant to article 23 of Detailed Rules for the Implementation of the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises《中華人民共和國外資企業法實施細則》and article 3 of Certain Regulations on Changes to Shareholders’ Rights in Foreign Investment Enterprises《外商投資企業投資者股權變更的若干規定》. In brief, this defence is that the three agreements and the 1998 Memorandum were of no effect and not binding for want of such valuation, approval and confirmation. The 1^st Defendant also pleads some minor alternative defences. The 1^st Defendant denies there were any agreement to sell the FCL shares to the Plaintiff but alleges that the agreement was to sell 100% of the FCO shares to COM for HK$20 million (“FCO Agreement”) and that the FCO Agreement was performed. Because of the transfer of 100% of the shares of FCO to COM on 3 March 1997, the First Laser Agreement was precluded since then from being submitted to the Fuzhou Municipality Jin An District Foreign Trade & Economic Commission (福州市晉安區對外經濟貿易委員會) for approval. Furthermore, the proper law of the First Laser Agreement is the law of the PRC which does not recognize any beneficial interest and/or constructive trust of any shareholding in any wholly foreign-owned enterprise incorporated in accordance with the law of the PRC. In respect of the Plaintiff’s claim under the Project, the Defendants put the Plaintiff to strict proof. The 1^st Defendant also seeks to counterclaim for a declaration that the three agreements and the 1998 Memorandum are invalid, of no effect and not binding upon the 1^st Defendant.

5.This case involves a foreign element as it is a dispute between a Macanese party and a Hong Kong party about an agreement entered into in Hong Kong for purchase of shares in the PRC. The most crucial legal issue in this case is what is the system of law to be applied either to the case as a whole or to a particular issue or issues in dispute. Having decided the system of law, the dispute will be resolved by applying that system of law to the facts as I find in this case. Before turning to that legal issue, I shall first outline the facts of this case.

The facts

6.Each side called one legal expert on PRC law. Ngan gave factual evidence on behalf of the Plaintiff. No factual witness was called by the Defendants. Ngan’s evidence was not seriously challenged. Except his evidence of the parties’ intention to avoid the application of PRC law to the agreements specifically referred to below (see paragraph 29), I have no difficulties in accepting Ngan’s evidence. The Defendants dispute the authenticity of a number of the documents produced by the Plaintiff. In the absence of contrary evidence from the Defendants, I am satisfied as to their authenticity. The Plaintiff disputes the authenticity of two versions of an agreement purportedly entered into between COM and two subsidiaries of the 1^st Defendant concerning assignment of all the shares in FCO to COM (“COM/Casix/Kexin Agreement”) produced by the 1^st Defendant. The Plaintiff explains that the COM/Casix/Kexin Agreement did not represent the whole of the agreement under the joint venture between the parties but was created for the purpose of seeking governmental approval for the transfer of the FCO shares to COM pursuant to the First Laser Agreement. In the absence of contrary evidence from the Defendants, I do not admit the two versions of the COM/Casix/Kexin Agreement produced by the 1^st Defendant in evidence. The following facts are based on the pleadings of the parties, incontrovertible documents and the evidence of Ngan. Those facts are not in serious dispute.

7.The following are the main characters and corporations involved in these proceedings.

Dramatis personae

8.Ngan In Leng (顏延齡) (“Ngan”) - Ngan is a Fujianese who migrated to Macau in 1980. He is now a resident of Macau and a businessman of some substance. He has investments and businesses in Macau, the PRC, Sydney, Singapore and USA. His businesses include electronics, food, jewelry, garment, communication, port work, wharfing and real property. He had business relations with the 1^st Defendant since 1990, mainly through Wang Chengming (王承明) and Kong Fanli (孔凡立)(“Kong”).

9.Ngan is a director and shareholder of the Plaintiff. He and his family members are owners of the following companies which are featured in these proceedings: First Laser Limited (the Plaintiff), Bao Shing (Group) Company Limited (寶盛集團有限公司) (“Bao Shing”), Fujian Ocean Communication Company Limited (福建大洋通訊器件有限公司) (“Fujian Ocean”) and Hang Wo Properties Investment and Management Company Limited (恆和物業投資管理有限公司).

10.Ngan is also a man of substance in the PRC. He is a member of the National Committee of the Chinese People’s Political Consultative Conference (中國人民政治協商會議全國委員會委員) and a member of the Standing Committee of the Fujian Provincial Committee of the Chinese People’s Political Consultative Conference (福建省人民政治協商會議常務委員會委員). As revealed in his evidence, he had direct dialogue with senior officials of the Fujian Provincial People’s Government.

11.Jenwing Holdings Limited (“Jenwing”) - This is a company incorporated in the British Virgin Islands. The shares in this company are held on trust by Ngan’s camp for the 1^st Defendant. Hang Wo and Jenwing are the sole registered shareholders of COM.

12.Casix Optronic Manufacturing Limited (宇星光電企業製造有限公司) (“COM”) - This is a company incorporated in Macau. It was formerly known as Casix Optronic Enterprises Limited (宇星光電企業有限公司). It is the corporate vehicle for carrying out the joint venture between the Plaintiff and the 1^st Defendant. Its registered shareholders are Hang Wo and Jenwing which respectively holds 51% and 49% of the shares in COM. As from March 1997, COM holds all the shares in FCO.

13.Fujian Enterprises (Holdings) Company Limited (華閩(集團)有限公司) (the 1^st Defendant) - This is a window company of the Fujian Provincial People’s Government of the PRC. It is a company incorporated in Hong Kong. Its shareholders are nominee shareholders holding shares on behalf of the Fujian Provincial People’s Government. The directors are appointed by the Fujian Provincial People’s Government. Its assets are state assets.

14.Jian An Investment Limited (the 2^nd Defendant) - It is a company incorporated in Hong Kong. It is a window company of the Fujian Provincial People’s Government. It shares the same office as the 1^st Defendant and is operated and controlled by the same personnel of the 1^st Defendant.

15.Fujian Casix Laser Inc (福建華科光電有限公司) (“FCL”) - It was originally incorporated as an equity joint venture (中外合資企業) in accordance with the law of the PRC under the name of Fuzhou Castech-Phoenix Inc (福州科鳳激光有限公司) in 1992. Its shareholders were Fujian Research Institute of Material Structures of the Academy of Science of the PRC (中國科學院福建物質結構研究所) (“FRIMS”) and the 1^st Defendant. It was then mainly engaged in the production of two kinds of non-linear crystals commonly known as LBO crystal and BBO crystal. In about June 1996, following a dispute with FRIMS, the 1^st Defendant bought FRIMS out. Since then, FCL became a wholly foreign-owned enterprise (外商獨資企業) and changed to its present name.

16.Fuzhou Casix Optronics Inc (福州科騰光電技術有限公司) (“FCO”) - It was incorporated in June 1995 as an equity joint venture (中外合資企業) between Casix Limited and Fujian Kexin Technology Development Company (福建科星技術發展公司) (“Fujian Kexin”). The former is a company incorporated in Hong Kong. The latter is a company incorporated in the PRC. Both are subsidiaries of the 1^st Defendant. FCO was spin off as a separate entity from FCL when FCL transferred its incubation furnaces and part of its business to FCO.

17.Casix Limited - This is a company incorporated in Hong Kong. It is a wholly owned subsidiary of the 1^st Defendant, which together with Fujian Kexin held all the shares in FCO until March 1997 when all the shares in FCO were transferred to COM.

18.Fujian Kexin Technology Development Company (福建科星技術發展公司) (“Fujian Kexin”) -This is a company incorporated in the PRC. It is a wholly owned subsidiary of the 1^st Defendant which together with Casix Limited held all the shares in FCO until March 1997 when all the shares in FCO were transferred to COM.

19.Casix Inc - This is a wholly owned subsidiary of FCL incorporated in the United States, which carried out the Project.

20.Wang Chengming (王承明) - He was the director and general manager of the 1^st Defendant between 1990 and 1994. He became the chairman of the board of directors of the 1^st Defendant from November 1994 to April 1998.

21.Kong Fanli (孔凡立) (“Kong”) - He was one of the directors and the deputy general manager of the 1^st Defendant between 1990 and 1994. Kong became its chairman of the board of directors and general manager between November 1994 and May 1998. In April 1999, Kong joined Bao Shing as its chief executive officer.

22.Xu Meixing (許美星) (“Xu”) - He succeeded Kong as director and the chairman of the board of directors of the 1^st Defendant since May 1998.

23.Wang Hongrui (王洪瑞) - He was a scientist who deflected with other scientists and technologists from FRIMS to join the 1^st Defendant’s camp. He subsequently became the general manager of FCL.

The background leading to the three agreements between Ngan’s camp and the 1^st Defendant’s camp

24.A litigation arose between the 1^st Defendant and FRIMS concerning FCL’s then use within the PRC of technology in relation to the incubation furnaces for producing LBO crystal and BBO crystal which was subject to the patents held by FRIMS. FRIMS was successful in the litigation, which resulted in the 1^st Defendant buying out FRIMS’ shares in FCL and FCL was restrained from carrying on its use of the aforesaid patented technology within the PRC. This led to the change of name of FCL to its present name and the change of its status from an equity joint venture between FRIMS and the 1^st Defendant to a wholly foreign-owned enterprise (though the 1^st Defendant is a window company of the Fujian Provincial People’s Government, for the purpose of classification as a business entity, it is regarded as a foreign enterprise as it was incorporated in Hong Kong). Part of FCL’s business which was subject to the aforesaid patented technology, namely the incubation furnaces, was transferred to FCO. Wang Hongrui, formerly from FRIMS, led his team of scientists and technologists to join FCL and FCO. They continued to work in the same factory premises as before and used the same machinery. It was under that setting the 1^st Defendant urgently searched for a new partner outside the PRC who would be willing to pay substantial capital within a short time to buy into FCL and FCO, so that the incubation furnaces and related operation could be relocated outside the PRC to avoid further disputes with FRIMS. Between mid and late 1996, the 1^st Defendant and Ngan conducted negotiations on the above business joint venture and entered into the three agreements. All the three agreements were executed in the 1^st Defendant’s office in Hong Kong.

The Hang Wo Agreement

25.The first agreement between the two camps was entered into between the 1^st Defendant and Hang Wo (“Hang Wo Agreement”) dated 12 December 1996. In the preamble, it was stated that the parties would make use of the 1^st Defendant’s optronic technology (高科技光電子產業) and to jointly invest US$20 million in a Macanese company to be incorporated and called COM for the purpose of producing crystals. The parties agreed as follows:

(1) the 1^st Defendant would transfer its 100% shareholding in FCL and FCO to COM and the shares of COM would be held by the 1^st Defendant and Hang Wo in the ratio of 49:51 (clause 1);

(2) Hang Wo would purchase 51% of the 1^st Defendant’s shareholding in FCL and FCO by cash (clause 2);

(3) Hang Wo would be solely responsible for contributing to the initial capital of COM in the amount of US$10 million (clause 3); and

(4) the parties understood that certain legal formalities were required for the transfer of the shares in FCL and FCO to COM, hence, in the meantime, the 1^st Defendant’s shares in COM would be held by Jenwing, a British Virgin Islands incorporation, on behalf of the 1^st Defendant and would be transferred to the 1^st Defendant when its shares in FCL and FCO were transferred to COM (clause 4).

The COM Agreement

26.The two camps also entered into a second agreement of the same date (“COM Agreement”). The parties to the agreement were the 1^st Defendant and COM. The preamble stated that COM was to acquire the 1^st Defendant’s shareholding in FCL and FCO. The parties agreed, inter alia, that:

(1) the 1^st Defendant would sell all its shares in FCL and FCO to COM at the valuation of US$6.25 million (clause 1);

(2) COM would pay the 1^st Defendant US$3.125 million within one month of execution of the agreement and the balance within three months (clause 5); and

(3) the parties would immediately set up a working party to deal with the necessary procedures and instruct lawyers to handle the share transfer in the PRC (clause 6).

The agreement expressly stated that it was executed on 12 December 1996 in Hong Kong.

The First Laser Agreement

27.Then the two camps entered into yet a third agreement dated 28 December 1996 (“First Laser Agreement”). The parties to this agreement were the 1^st Defendant and the Plaintiff. This is the latest agreement in the series and the one relied on by the Plaintiff as the basis of this action. The agreement was vague as to the subject matter. As a result, the 1^st Defendant raises a defence of uncertainty of the subject matter. The preamble of the agreement states that the 1^st Defendant agreed to sell to the Plaintiff 51% its investment in the optronic project in Fuzhou (福州所投資的光電子項目中的51% 的股權). The parties agreed, inter alia, that:

(1) upon completion of the share transfer, the ratio of the shareholding of the 1^st Defendant and the Plaintiff would be 49:51 (clause 1);

(2) the net asset value of the project to be sold was agreed to be US$6.25 million, hence, the 1^st Defendant would sell 51% of its shareholding to the Plaintiff for US$3.1875 million (equivalent to HK$24.64 million) (clause 2);

(3) upon admission of the Plaintiff into the business, the boards of directors of FCO and FCL would be reorganized, the composition of the new boards would be subject to consultation (clause 3);

(4) the Plaintiff would pay the 1^st Defendant HK$10 million within ten days of execution of the agreement and the balance by two instalments within three months (clause 7); and

(5) both parties would form a working party as soon as possible for the purpose of liaison and handling the related matters and would instruct lawyers in the PRC to handle matters relating to the change in ownership of the relevant companies (clause 8).

The agreement stated that it was executed on 28 December 1996 in Hong Kong.

28.According to Ngan, the First Laser Agreement was entered into because the 1^st Defendant felt it inappropriate to enter into a joint venture arrangement in optronic industry with Hang Wo which is a company dealing with property investment and that the name of the Plaintiff was also suggested by the 1^st Defendant. Ngan said that the parties’ intention was that the First Laser Agreement superseded the earlier two agreements. In the absence of contrary evidence from the Defendants, I accept Ngan’s evidence.

29.It is also Ngan’s evidence that during the course of negotiation of the agreements there was never any suggestion that PRC law would or was intended to apply to the three agreements. Ngan said that in fact it was the 1^st Defendant’s intention not to subject their contractual relationship to PRC law because of the 1^st Defendant’s then intention to avoid disputes and litigations with FRIMS in the PRC and he agreed. Despite that there is no contrary evidence from the 1^st Defendant, I give no weight to this aspect of Ngan’s evidence. First, I have difficulties in following the logic of that evidence because according to Ngan, it was the parties’ understanding that FRIMS’ patent right had no protection outside the PRC which was the sole reason behind the sale of the FCO and FCL shares to the Plaintiff. Second, there was express mention in the Hang Wo Agreement and the COM Agreement that the parties would observe international conventions and the lex situs in respect of intellectual property rights. Had the parties indeed agreed that PRC law should not apply to the three agreements, they would not have omitted such provision from the three agreements, especially if it was their intention to avoid further litigations with FRIMS in respect of their patent rights. I find that the truth was that the parties had never directed their minds to the question of applicable law of the three agreements. In any event, evidence of a party’s intention is not admissible for the purpose of construing the agreement.

The COM/Casix/Kexin Agreement

30.In addition to the three agreements, COM and the 1^st Defendant’s subsidiaries, namely Casix Limited and Fujian Kexin, also executed another agreement, i.e. the COM/Casix/Kexin Agreement dated 12 December 1996 solely in relation to the transfer or the sale and purchase of the shares in FCOThere are three different versions of this agreement, one produced by the Plaintiff and two produced by the 1^st Defendant. The Plaintiff disputed the authenticity of the two versions produced by the 1^st Defendant. Mr Chan Chi Hung SC suggests that the two versions produced by the 1^st Defendant were created by transplanting photocopies of the signatures of COM onto the documents. In the Plaintiff’s version, Fujian Kexin and Casix Limited agreed to transfer their capital investment respectively in the sum of US$63,000 and US$1,447,000 in FCO to COM and COM agreed to accept the transfer of the investment in the total amount of US$1,510,000 and thereafter to assume all the rights and liabilities of Fujian Kexin and Casix Limited in respect of FCO. The short version produced by the 1^st Defendant is similar to the Plaintiff’s version. The 1^st Defendant’s long version alleges an agreement by the Plaintiff to purchase the 1^st Defendant’s shares in FCO for US$3.125 million (equivalent to HK$24.375 million), with an unknown balance to be paid within three months of the date of the agreement. As the 1^st Defendant called no factual witness to prove the authenticity of either of its two versions of the agreement, I reject the two versions produced by the 1^st Defendant. I accept the Plaintiff’s version as authentic.

31.However, according to Ngan, the COM/Casix/Kexin Agreement did not represent the whole of the parties’ agreement under the joint venture but was a document generated solely for producing to the PRC authorities the purpose of obtaining approval for the transfer of the FCO shares to COM pursuant to the First Laser Agreement. In the absence of contrary evidence from the Defendants, I accept Ngan’s evidence. The COM/Casix/Kexin Agreement is not a genuine agreement supported by underlying transaction. It does not have the effect of replacing or superseding any of the three agreements, particularly the First Laser Agreement which was executed subsequent to the COM/Casix/Kexin Agreement.

Payment of the purchase price for the FCL and FCO shares by the Plaintiff

32.Pursuant to the First Laser Agreement, Ngan caused two sums of HK$10 million to be paid to the 1^st Defendant. The first payment was by a cheque issued by COM dated 31 December 1996. That payment was made within ten days of execution of the First Laser Agreement in accordance with clause 7 of that agreement. The second payment was by the Plaintiff’s cheque dated 30 April 1997. That payment was the first of the two instalments to be made within three months of execution of the First Laser Agreement pursuant to clause 7. The 1^st Defendant does not dispute receipt of those two sums, but argues that the first payment was not paid by the Plaintiff but by COM and the two payments were not made pursuant to the First Laser Agreement but to the FCO Agreement. Receipt of those payments were acknowledged by the 1^st Defendant as payment for shares of “科鳳”, which was part of the former name of FCL, i.e. Fuzhou Castech-Phoenix Inc. More importantly, the receipts issued by the 1^st Defendant acknowledged that the payments were made by the Plaintiff. There is nothing unusual for a party to a contract to cause a third party to perform its payment obligation under the contract, particularly as in the present case where the two parties are related. There is no dispute that Ngan provided the working capital for COM. In the circumstances, in view of the acknowledgement by the 1^st Defendant in the receipts, I find that the HK$20 million under the two payments were made by the Plaintiff. As for the balance of HK$4.64 million, it was agreed under the 1998 Memorandum dated 13 March 1998 to have been paid by the Plaintiff by treating a capital investment in the sum of HK$4.64 million made by the Plaintiff in COM as investment by the 1^st Defendant. That payment was also made within three months of execution of the First Laser Agreement in accordance with clause 7. I find that the two payments of HK$10 million and the acknowledgment of HK$4.64 million were referable to the First Laser Agreement. I further find that the consideration for the full purchase price for 51% of the shares in FCL and FCO were fully paid by the Plaintiff in accordance with the terms of the First Laser Agreement.

Whether the FCO Agreement was a genuine agreement

33.At this stage, it would be convenient to dispose of the 1^st Defendant’s pleaded defence that the only agreement between the parties was an agreement by the 1^st Defendant’s subsidiaries to sell all their shares in FCO to COM for HK$20 million, i.e. the FCO Agreement based on the 1^st Defendant’s long version of the COM/Casix/Kexin Agreement. This defence is based on the two payments of HK$10 million by COM and by the Plaintiff, the 1^st Defendant’s long version of the FCO Agreement and the transfer of the FCO shares to COM in March 1997.

34.With the 1^st Defendant’s two versions of the COM/Casix/Kexin Agreement out of the way, the 1^st Defendant cannot rely on those documents in support of this defence. In any event, the consideration stated in the two versions of that agreement produced by the 1^st Defendant do not support that defence. On the facts, two sums of HK$10 million were paid by COM and the Plaintiff and the amount of HK$4.64 million was agreed under the 1998 Memorandum to be treated as having been paid by the Plaintiff and as the 1^st Defendant’s capital contribution to COM. For reasons as I have explained in paragraphs 32, viewed objectively, those payments by the Plaintiff, their receipts and acknowledgement by the 1^st Defendant could only be referable to the First Laser Agreement but not to the FCO Agreement. I reject as unmeritorious this defence of the 1^st Defendant.

Transfer of the shares in FCL and FCO

35.On 30 December 1996, i.e. one day prior to the payment of the first sum of HK$ 10 million to the 1^st Defendant due under the First Laser Agreement, the board of directors of FCO passed a resolution consenting to transfer all the shares in FCO to COM in accordance with the wishes of its shareholders, Casix Limited and Fujian Kenxin. It should be noted that no similar board of directors meeting was ever held by the board of FCL approving the transfer of its shares to COM or to the Plaintiff.

36.On the other hand, on the same day Ngan conducted a board of directors meeting of COM in which a resolution was passed appointing himself as the managing director and Wang Hongrui as general manager of FCL. This meeting was stated to be the first board of directors meeting of COM and not of FCL. On 20 January 1997, COM issued a notice appointing Ngan, Miss Ngan and Wang Hongrui as directors of FCL. The appointments were of course invalid. However, the meeting was attended by Kong and Wang Hongrui on behalf of the 1^st Defendant and Ngan, Miss Ngan and Huang Xiaodong (黃曉東) on behalf of Ngan’s camp. It, nevertheless, shows recognition by those who had control of FCL that Ngan’s camp had beneficial interest in the shares in FCL.

37.The shares in FCO were properly transferred to COM in March 1997 instead of to the Plaintiff pursuant to the First Laser Agreement. On 10 May 1997, the PRC State Administration of Industry and Commerce issued a business licence to FCO with Ngan as the chairman of its board of directors and Wang Hongrui as its general manager. On 30 May 1997, COM issued a letter to FCO appointing Chen Tianbin (陳天彬) as director of FCO in place of Wang Hongrui.

38.The shares in FCL were never transferred to Ngan’s camp. Apart from the absence of a board of directors meeting approving the transfer, it appears that the transfer was rendered impossible because governmental approval for the transfer would not be granted as the share capital of FCL had not been fully paid up as indicated in the 1^st Defendant’s letter to Bao Shing dated 19 February 1998 and the 1998 Memorandum.

Carrying out of the joint venture and the Project

39.In the conduct of the affairs of the joint venture, Ngan, the 1^st Defendant and their staff in FCO and FCL drew no distinction between Ngan’s personal capacity and those of his other companies. Correspondences to or from Ngan were addressed to or issued by Bao Shing, COM or the Plaintiff. The concept of corporate identity was completely ignored by the parties.

40.Since 31 December 1996 when the first sum of HK$10 million was paid, the 1^st Defendant, FCL and FCO treated Ngan’s camp as a shareholder of FCL and FCO and Ngan and Miss Ngan participated in the management of FCL and FCO as de facto directors. Decisions regarding the operation of FCL and FCO were referred to Ngan and Kong for approval. Financial statements of FCL and FCO, requests for increase in staff remuneration of FCL and FCO request for purchase of staff quarters for FCO and FCL, reports on construction of a building complex for FCL, request for payment of construction costs of the complex, requests for funds for setting up a branch office of FCL and recommendation of a bonus share scheme for the staff of FCL were referred to both Kong and Ngan for consideration and approval. There is ample evidence of participation by Ngan in the management and important decision making of FCL and FCO. In a report to the Fujian Provincial People’s Government dated 5 June 1997, the 1^st Defendant acknowledged that Ngan had 51% interest in the joint venture.

41.On 17 July 1997, Wang Hongrui, on behalf of FCL, submitted a feasibility study report on production of a special optical fibre instrument (光纖無源器件項目) i.e. the Project, to the 1^st Defendant for consideration. On 21 July 1997, Kong rejected the proposal and refused to inject funds into FCL’s subsidiary in the United States, Casix Inc for implementing the Project because of the business risk involved. He suggested Wang Hongrui to enquire if Ngan would take on the Project as a personal investment. As a result, Ngan remitted RMB 1 million to FCL on 1 August 1997, US$500,000 to Casix Inc on 12 August 1997 and US$100,000 to Casix Inc on 17 April 1998 for the purposes of the Project.

42.On 13 March 1998, about a month before Kong was due to vacate his office in the 1^st Defendant, he signed the 1998 Memorandum setting out the rights of the parties and capital arrangement of COM and FCL. The 1998 Memorandum explained why the shares in FCL were not transferred to COM. It acknowledged:

(1) that for some historical reasons, such as the fact that US$2.5 million of the registered capital of US$7 million had not yet been injected into FCL and that there were some outstanding legal disputes relating to FCO, the 1^st Defendant was still temporarily wholly holding FCL while COM was still temporarily wholly holding FCO; when the above problems were resolved, the Plaintiff’s and the 1^st Defendant’s shareholding in COM and FCL would be regularised (理順股權關係) in the ratio of 51:49 (paragraph 1);

(2) that prior to the said regularisation, COM’s and FCL’s investments and rights in respect of FCL, COM and FCO shall be governed by the agreements of 1996 (paragraph 2); and

(3) that as the Plaintiff incurred significant costs in setting up COM and as the 1^st Defendant would hold 49% of the shares in COM upon the said regularisation, the outstanding payment in the amount of HK$4.64 million due from the Plaintiff to the 1^st Defendant under the First Laser Agreement was treated as having been paid by the Plaintiff and representing the 1^st Defendant’s capital contribution to COM (paragraph 3).

43.The relationship between the parties took a turn in May 1998 when Xu replaced Kong as the deputy chairman of the board of directors of the 1^st Defendant and the shares of the 1^st Defendant were reassigned to Sun Ming (孫明), Yang Dongcheng (楊東成) Chen Ruizeng (陳瑞曾) and Li Jinlin (李金林).

44.The conflict between Ngan and the 1^st Defendant became obvious since August 1998. At a meeting on 18 August 1998, Xu attempted to re-negotiate the terms of the joint venture with Ngan by suggesting to increase the share ratio between the 1^st Defendant and the Plaintiff in COM to 51:49. Ngan refused. The negotiation continued, but without success. Ngan sought help from the Governor and other senior officials of the Fujian Provincial People’s Government to resolve their dispute, but to no avail.

45.On 29 September 1998, Ngan wrote to FCL requesting the transfer of the Project to Fujian Ocean which was a Fujian company set up by him specifically for the purpose of taking over the Project. Wang Hongrui confirmed to the 1^st Defendant that the Project was funded by Ngan and sought instruction to effect the transfer after discounting for the costs of the research and development as well as depreciation of plant and equipment used in connection with the Project. The 1^st Defendant instructed Wang Hongrui not to effect the transfer for the reasons that there were other accounts in relation to other joint ventures with Ngan and his group of companies and other outstanding issues in relation to the present joint venture which had not yet been resolved.

46.Then, presumably for the purpose of tightening his reign over FCL, Xu appointed himself as chairman of the board of directors and Wang Hongrui and two others as directors of FCL on 3 February 1999. On 15 April 1999, Xu also appointed Wang Hongrui as general manager of FCL. Knowing that the 1^st Defendant would not allow him to have the fruits of his investment in the Project, Ngan had, since 16 April 1999, been repeatedly requesting the 1^st Defendant to return his funds invested in the Project. The 1^st Defendant ignored those requests. On 6 January 2000, Ngan wrote to Xu complaining about the proposed sale of the shares in FCL without the consent of COM. On 12 January 2000, the 1^st Defendant replied that the production by FCO of LBO crystal and BBO crystal was in violation of the rights of FRIMS, that the 1^st Defendant was the 100% legal owner and had de facto control of FCL and that the 1^st Defendant had full right to dispose of FCL. On 29 February 2000, the 1^st Defendant sold all its FCL shares, including the benefit of the Project, to JDS for US$60 million.

47.In October 2000, the parties accompanied by their lawyers attended two meetings in Zhuhai in an attempt to resolve their dispute, but no solution could be reached. However, they recorded their common understanding and their differences in the minutes of the meetings. The minutes of the meeting on 3 October 2000, which I shall refer to later, contains a succinct statement of the above facts mutually agreed to by the parties.

The litigations

48.On 9 October 2001, the Plaintiff commenced the present action against the Defendants in Hong Kong.

49.At about the same time, the 1^st Defendant commenced legal proceedings in Fujian Higher People’s Court, (福建省高級人民法院 (2001) 閩經初字第43號), seeking a declaration against Hang Wo, COM and the Plaintiff, that the Hang Wo Agreement, the COM Agreement, the First Laser Agreement and the 1998 Memorandum were of no effect (無效). Ngan’s camp disputed the jurisdiction of the Fujian Higher People’s Court over the agreements. The Fujian Higher People’s Court held it had jurisdiction. Ngan’s camp appealed. Their appeal was dismissed by the Supreme People’s Court on 22 July 2002 and the action was remitted back to the Fujian Higher People’s Court for adjudication. On 18 July 2003, the Fujian Higher People’s Court delivered judgment declaring that the Hang Wo Agreement, the COM Agreement and the First Laser Agreement were of no effect but dismissing the 1^st Defendant’s claim that the 1998 Memorandum was of no effect. Ngan’s camp appealed to the Supreme People’s Court, (中華人民共和國最高人民法院 (2003) 民四終字第19號). On 3 December 2004, the Supreme People’s Court allowed the appeal in part, but effectively dismissed it. The Supreme People’s Court held that the Hang Wo agreement, the COM Agreement, the First Laser Agreement and the 1998 Memorandum to the extent that they relate to the transfer of shares in FCO and FCL were all of no effect.

The Applicable law

50.Ascertaining the applicable law or the lex causae is a matter of procedure for the court in which the case is tried. It is therefore to be ascertained according to the domestic law of the forum, i.e. the lex fori.

51.However, Mr Warren Chan SC, counsel for the Defendants, refers me to the following dicta of the decision of the Supreme People’s Court in (2003) 民四終字第19號, to which both the Plaintiff and the 1^st Defendant were parties:

「本案訟爭的三份協議及《備忘錄》均沒有對如何適用法律作出約定，雖然三份協議和《備忘錄》的簽訂者均為中國境外當事人，但由於四份文件涉及的主要內容均為中國企業即華科公司和科騰公司的股份轉讓問題，因此，根據國際私法的“最密切聯系原則”，本案糾紛的解決應適用中華人民共和國法律。對此，本案各當事人均沒有異議。」

[Translation]

“ The three agreements and the memorandum in dispute in this litigation made no provision as to the law applicable to the agreements. Though the signatories of the agreements and the memorandum were parties outside the jurisdiction, the subject matters involved in the four documents were Chinese enterprises, i.e. FCL and FCO. Thus, in accordance with the principle of the closest connection under private international law, the law of the PRC should be applied for resolving the dispute in this case. To this conclusion, all the parties to this litigation had no contrary views.”

Based on the above dicta, Mr Warren Chan SC argues that the question of the applicable law is now res judicata. He submits that it is apparent from the dicta that the Supreme People’s Court adopted the same conflict of law rules as those adopted in Hong Kong for the purpose of determining the proper law. He further submits that in the absence of expert evidence suggesting that the conflict of law rules in the PRC are different from those in Hong Kong, it can be assumed that the conflict of law principles in the PRC are the same as those in Hong Kong. On that basis, he argues that there is no reason for the Hong Kong court to reach a conclusion on the applicable law different from that reached by the Supreme People’s Court. Also, arising out of the last sentence of the above quoted dicta, Mr Warren Chan SC argues that the Plaintiff is estopped from asserting that the applicable law is not PRC law.

52.With respect, I disagree. I do not think it necessary to refer to the authorities cited by Mr Warren Chan SC. The principles are trite principles. When Hong Kong court is applying foreign law, there is a presumption in the absence of expert evidence to the contrary that foreign law is the same as domestic law. But the presumption does not operate in the reverse direction when a Hong Kong court is applying Hong Kong law to determine whether PRC law is the proper law. Hence, it is wrong to assume that the conflict of law principles in Hong Kong are the same as those in the PRC. Furthermore, the Supreme People’s Court was obviously referring to the conflict of law rules under its own private international law, which may not be the same as those under Hong Kong law. The Supreme People’s Court did not purport to use an international set of conflict of law rules. And strictly speaking none exists. But assuming for the sake of argument that such a set of rules can be identified and the Supreme People’s Court was following the international set of conflict of law rules, those rules may not be the same as those under the Hong Kong conflict of law rules, though in many respects Hong Kong follows most of the rules under the Rome Convention. Very obviously, the Hong Kong conflict of law rules do not simply apply the most closely related principle (最密切聯繫原則) as adopted by the Supreme People’s Court and certain presumptions under the Rome Convention are not applicable to Hong Kong. The approach in Hong Kong in ascertaining the lex causae is the three stage approach as stated by Staughton LJ in Macmillan Inc v Bishopsgate Trust Investment Plc and Others (No. 3) [1996] 1 WLR 387, CA and the test in one of those three stages is the closest and most real connection test (最密切及真實聯繫測試). If the choice of law rules under the two jurisdictions are different, I do not think the principle of res judicata applies.

53.On the question of estoppel, Mr Chan Chi Hung SC, counsel for the Plaintiff, submits that the issues in dispute before the Supreme People’s Court are different from those now before me. According to Mr Bai Tao (白濤), the Defendants’ legal expert, the issue before the Supreme People’s Court was the transfer of shares in a legal person in the PRC and the validity of the three agreements and the 1998 Memorandum under the laws of the PRC, whereas the remedy sought was a declaration that the three agreements and the 1998 Memorandum were of no effect. Mr Chan Chi Hung SC submits that the issues in the present case are the validity of the three agreements, breach of contract and breach of trust under Hong Kong law. Having read the judgment of the Supreme People’s Court and considered the issues in dispute in this case, I agree with Mr Bai’s opinion. I am satisfied that the issues before the Supreme People’s Court were different from those now before me. It is therefore open to me to determine afresh the lex causae according to the domestic law of Hong Kong and not that of the procedural rules of the PRC including its choice of law rules.

The approach

54.The proper approach in determining the system of law to be applied, or the lex causae, as conflict lawyers call it, was stated by Staughton LJ in Macmillan Inc. This involves a three stage process: (1) identifying and characterising the issue that is before the court; (2) selecting the rule of conflict of laws which lays down a connecting factor for the issue in question; and (3) identifying the system of law which is tied by that connecting factor to the issue characterised. His Lordship said at 391 and 392:

“ In finding the lex causae there are three stages. First, it is necessary to characterise the issue that is before the court. Is it for example about the formal validity of a marriage? Or intestate succession to moveable property? Or interpretation of a contract?

The second stage is to select the rule of conflict of laws which lays down a connecting factor for the issue in question. Thus the formal validity of a marriage is to be determined, for the most part, by the law of the place where it is celebrated; intestate succession to moveables, by the law of the place where the deceased was domiciled when he died; and the interpretation of a contract, by what is described as its proper law.

Thirdly, it is necessary to identify the system of law which is tied by the connecting factor found in stage two to the issue characterised in stage one. Sometimes this will present little difficulty, though I suppose that even a marriage may now be celebrated on an international video link. The choice of the proper law of a contract, on the other hand, may be controversial.

In an ideal world the answers obtained in these three stages would be the same, in whatever country they were determined. But unfortunately the conflict rules are by no means the same in all systems of law. In those circumstances a choice of conflict rule may have to be made. It is clear that, in general, the second and third stages are to be determined by the law of the place where the trial takes place (lex fori). That law must tell one what the connecting factor is for the issue before the court, and what system of law it points to.”

I shall adopt the three stage approach in ascertaining the lex causae in this case.

Characterisation of the issue

55.In general, characterisation of the issue is governed by the lex fori. The rules of conflict of laws must be directed at the particular issue of law which is in dispute, rather than at the cause of action. The issue of a case is determined by the pleadings of both parties, but very often, it is the defence which identifies the issue rather than the claim. In relation to characterisation of the issue, Staughton LJ said in Macmillan Inc at 399:

“ I would regard it as plain that the rules of conflict of laws must be directed at the particular issue of law which is in dispute, rather than at the cause of action which the plaintiff relies on. We should translate lex causae as the law applicable to the issue, rather than the suit. In this case the issue is whether in law the defendants were purchasers for value in good faith without notice, so as to obtain a good title to the shares.

Macmillan still assert, against Credit Suisse only, a claim in conversion, although the judge thought that it had been abandoned during the trial. That claim, it is said, must be governed by English law. But again it is the defence which identifies the issue.”

Thus the proper approach is to look beyond the formulation of the claim and to identify according to the lex fori the particular issue in dispute. In characterising the issue, one must bear in mind the underlying principle of striving for comity between the competing legal systems. As was held by Auld LJ in Macmillan Inc at 407, characterisation should not be constrained by particular notions or distinctions of the domestic law of the lex fori, or that of the competing system of law which may have no counterpart in the other’s system, nor should the issue be defined too narrowly so that it attracts a particular domestic rule under the lex fori which may not be applicable under the other system and vice versa.

56.The thrust of the Plaintiff’s case, as Mr Chan Chi Hung SC opens it, is the proprietary nature of its claim. The purpose of Mr Chan Chi Hung SC adopting such an approach is obvious. This is because once it is established that as a matter of Hong Kong law, the 1^st Defendant held 51% of the shares in FCL on trust for the Plaintiff, the Plaintiff would be able to trace the proceeds of sale of the shares into whosever hands holding them and whatever they have become. Mr Warren Chan SC refers to paragraph 16 of the Statement of Claim in which the Plaintiff pleads:

“ 16. … by the latest on 13 March 1998, beneficial ownership of 51% of the shares in each of FCL and FCO had passed to the Plaintiff and the 1^st Defendant thereafter held the shares on trust for the Plaintiff (hereinafter “the Trust”).”

Mr Warren Chan SC argues that the issue is to be characterised as one of title. This characterisation is important because how an issue is characterised determines the outcome in the second and third stages in the determination of the lex cause.

57.The Plaintiff pleads breach of contract as well as breach of trust. Despite the emphasis placed on the proprietary nature of its claim, on a proper understanding of the Plaintiff’s case, the Plaintiff’s claim is based on breach of the First Laser Agreement, as a result of which the Plaintiff has a claim for damages for breach of contract as well as a proprietary claim. The defence is essentially that the three agreements and the 1998 Memorandum were of no effect under the laws of the PRC. The Plaintiff’s proprietary claim does not and cannot stand on its own. If the Plaintiff is unable to prove the validity of the First Laser Agreement and its breach, there would be no claim for damages and no proprietary claim at all. I think Mr Warren Chan SC is over-emphasising the nature of the remedy sought by the Plaintiff as to over-look the real basis of the claim is breach of contract.

58.In respect of the Plaintiff’s contractual claim, Mr Warren Chan SC argues that the issue raised by the Plaintiff is one of transfer and registration of the FCL shares. He refers to paragraph 25 of the Statement of Claim under which the Plaintiff pleads:

“ 25. In breach of the Agreement and/or the Trust, the 1^st Defendant has failed to transfer and register the 51% of the shares in FCL beneficially belonging to the Plaintiff (hereinafter “the Plaintiff’s Shares”) to and in the name of the Plaintiff, but has made such transfer impossible by the following conduct.”

59.I think, by this averment, the Plaintiff pleads the fact of breach: the breach being the non-performance of the contractual obligation to transfer and register the shares in FCL and the repudiation by transferring the shares to JDS. The issue remains whether the 1^st Defendant was under a contractual obligation to transfer the shares in FCL to the Plaintiff. As was recognised by the House of Lords in The Colonial Bank and Cady and Williams, (1980) 15 App Cas 267, which I shall refer to in the second stage of my determination of the applicable law, what is necessary or effectual to transfer the shares in a company and what governs the rights arising out of a transaction in relation to those shares entered into by parties in England may be subject to two different systems of law. In characterising the issue, one must first identify the relevant transaction. The transaction here is the sale and purchase of shares. It must follow, therefore, that the issue must be validity of or the rights and obligations of the parties to that transaction and not the title or priority to the shares as between the parties.

60.Mr Warren Chan SC further argues that the place of performance of the obligation of transferring and registering the shares in FCL is Fujian and it would be futile to discuss registration of shares without reference to the law of the place of incorporation. I am mindful of the defence that the three agreements were of no effect under the laws of the PRC. I am also conscious that in characterising the issue, it is the defence which carries more weight. But on the other hand, as observed by Auld LJ in Macmillan Inc at 407, characterisation should not be constrained by particular notions or distinctions of the domestic law of the lex fori or that of the competing system of law which may have no counterpart in the other’s system. The court would be abdicating its function in characterising the issue by allowing itself to be constrained by a particular aspect of the domestic law or the competing system when determining characterisation of the issue. That defence may be relevant for the second or third stage of the determination but is not determinative for the purpose of characterising the issue.

61.I therefore identify the transaction as the sale and purchase of the shares in FCL and characterise the issue as the rights and obligations of the parties to that transaction, i.e. the rights and obligations of the parties to the three agreements, and not as one of title of the shares in FCL. This is especially so as the claim as it now stands is one between two parties who are transferor and transferee to the transaction and not a claim between non-parties to that transaction.

The appropriate conflict rule

62.This stage of the determination is the ascertainment of the appropriate conflict of law rule which lays down a connecting factor for the issue in question. Mr Chan Chi Hung SC submits that a review of the cases shows that there are two lines of authorities on the conflict rule applicable to shares in a company. He submits that if the issue is one of title of the shares, the applicable rule is the lex situs of the shares, but if the issue is one about the rights and obligations of the parties to the transaction, the applicable rule is the lex loci actus. He quotes the English Court of Appeal decision in Macmillan Inc in support of the first proposition and the House of Lords decision in Cady’s case in support of his second proposition. Macmillan Inc is also relied on by the Defendants. Mr Warren Chan SC seeks to distinguish Cady’s case from Macmillan Inc and argues that the applicable rule in the present case is the lex situs of the shares.

63.In Cady’s case, the executors entrusted the deceased’s shares certificates in a New York company to their brokers in London for the purpose of registering them in the executors’ names. The brokers fraudulently pledged the share certificates with the appellant bank. The House of Lords held that since the dealings with the share certificates were transacted in England by persons domiciled there, the respective rights of the executors and the bank must be determined by English law, i.e. the lex loci actus and not the lex situs of the shares. Lord Herschell said at 283:

“ I agree that the question, what is necessary or effectual to transfer the shares in such a company, or to prefect the title to them, where there is or must be held to have been an intention to transfer them, must be answered by a reference to the law of the State of New York. But I think that the rights arising out of a transaction entered into by parties in this country, whether, for example, it operated to effect a binding sale or pledge as against the owner of the shares, must be determined by the law prevailing here.”

In effect, the House of Lords identified the transaction as pledge of share certificates, characterised it as the right arising out of that transaction and held that the applicable law was the lex loci actus, which was the law of England.

64.Cady’s case was distinguished in Macmillan Inc by Staughton LJ. In Macmillan Inc, shares in a United States company belonging to the plaintiff, a public company, were transferred to the first defendant as nominee under a nominee agreement which provided that the nominee had no power or right to take any action with respect to the shares without the express consent of the plaintiff and that the nominee agreement was governed by the law of the State of New York. Some of those shares were used as security for debts owed to creditors of the major shareholder of the plaintiff. The plaintiff sought a declaration that the shares were held on a constructive trust for damages for breach of trust. Staughton LJ characterised the issue as whether the defendants have a defence on the ground that they were purchasers for value in good faith without notice of the plaintiff’s claim. His Lordship then concluded, distinguishing Cady’s case, that the issue in Macmillan Inc was as to title to shares in a company and fell to be decided by the lex situs of the shares.

65.These two cases have been vigorously argued by counsel on both sides. I shall quote extensively from Macmillan Inc. In that case, Staughton LJ classified the issue as one of title to the shares in dispute, i.e. whether in law the defendants were purchasers for value in good faith without notice so as to obtain a good title to the shares. In the second stage of his determination, his Lordship considered the conflict rules applicable to property issues in general, i.e. rights to property, chattels, negotiable instruments and choses in action. He considered the authorities as to shares separately, but against the background of the law relating to land, chattels, negotiable instruments and other debts. On that basis, he reached the conclusion that the issue as to who has title to shares in a company should be decided by the law of the place where the shares are situated, i.e. lex situs. In relation to the applicable rule to choses in action to which shares belong, his Lordship said at 400:

“ I turn now to other moveable but intangible property, that is to say choses in action. The general rule for this kind of property is stated by Dicey & Morris, vol 2, p 979, rule 120 as follows:

“ (1) The mutual obligations of assignor and assignee under a voluntary assignment of a right against another person (‘the debtor’) are governed by the law which applies to the contract between the assignor and assignee. (2) The law governing the right to which the assignment relates determines its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment can be invoked against the debtor and any question whether the debtor’s obligations have been discharged.”

Paragraph (1) of the rule raises a topic to which I shall have to return later in relation to Cady’s case (Colonial Bank v Cady and Williams (1890) 15 App Cas 267). It also leaves a question as to what happens if there is no contract between the assignor and the assignee; but that does not arise in the present case. The rule is based on article 12 of the Rome Convention on the Law Applicable to Contractual Obligations and the Contracts (Applicable Law) Act 1990. It is said by Dicey & Morris, vol 2, p 979 to represent the common law.

The law governing the right to which the assignment relates, in paragraph (2) of the rule, in the case of a debt points to the proper law of the contract or other obligation by which the debt was created. The corresponding rule in Dicey & Morris, 11^th ed, vol 2, p 964, rule 123 was as follows: “The priority of competing assignments of a debt or other intangible thing is governed by the proper law of the debt or the law governing the creation of the thing.”

Thus in respect of choses in action, to which shares belong, rule 120 in Dicey & Morris which represents the common law position applies in England and therefore also in Hong Kong. This rule recognises the distinction between the mutual obligations between parties to an assignment and the assignee’s rights against the debtor etc. The former is governed by the law applicable to the contract of assignment, while the latter is to be determined by the law governing the rights to which the assignment relates.

66.Rule 120 then formed the basis of his Lordship’s finding of the conflict rule applicable to shares and specifically where the issue is one of title to the shares. His Lordship said at 402 to 404:

“ I now turn to the specific case of an issue as to the ownership of shares in a company. It is not argued that shares are within article 12 of the Rome Convention on the Law Applicable to Contractual Obligations, and therefore within rule 120 of Dicey & Morris. Indeed it may be that shares have a rule of their own. I must consider the authorities as to shares separately, but against the background of the law relating to land, chattels, negotiable instruments and other debts which has already been discussed. We have the authority of the House of Lords for the proposition that to some extent, as between transferor and transferee, the effect of an assignment of shares is determined by the law of the place where the assignment takes place. As with rule 120(1) in Dicey & Morris, it is important to determine the limits of that proposition. The case is Williams v Colonial Bank (1888) 38 Ch D 388 in the Court of Appeal, and Colonial Bank v Cady and Williams, 15 App Cas 267 in the House of Lords. … ( His Lordship then quoted the facts of Cady’s case).

The evidence of American law was that the certificates were not negotiable instruments; but that the banks obtained a good title in law and equity because the owners had “so dealt with that certificate as to lead the purchaser for value to believe honestly that he was taking a good title to it. In other words the foundation rests in the principle of estoppel” (38 Ch D 388, 399).

In those circumstances it is scarcely surprising that the law of England was held to be applicable. Cotton LJ at p 399, said that the question whether the bank obtained a good title “depends on transactions in England” and so must be governed by English law, although the law of America would be “properly referred to for the purpose of deciding what would be the effect of a valid effective transfer of the certificates on the title to shares in an American company.” …

In the House of Lords, 15 App Cas 267, 272, Lord Halsbury LC recorded that the transaction of loan took place in London. He added:

“ if it were necessary to consider what law must govern, as between these parties, the right to these certificates on the one hand, and the right to detain them as pledged for the money advanced on them on the other, though the certificates themselves were the certificates of shares in a foreign corporation, I should not doubt that it is to the law of England you must look, and not to the law of the United Stastes.”

Lord Watson said, at pp 276-277:

“ That the interest in the railway company’s stock, which possession of these certificates confers upon a holder who has lawfully acquired them, must depend upon the law of the company’s domicil, seems clear enough, and has not been disputed by the respondents. But the parties to the various transactions, by means of which the certificates passed from the possession of the respondents into the hands of the appellants, are all domiciled in England; and it is in my opinion equally clear that the validity of the contracts of pledge between Blakeway and the appellants, and the right of the latter to retain and use the documents as their own, must be governed by the rules of English law.”

Lord Bramwell said, at p 281:

“ the shares being of an American company domiciled in one of the United States of America, an act effectual by the law of that state to transfer the property, and no other, would transfer it.”

Lord Herschell said, at p 283:

“ I agree that the question, what is necessary or effectual to transfer the shares in such a company, or to perfect the title to them, where there is or must be held to have been an intention to transfer them, must be answered by a reference to the law of the State of New York. But I think that the rights arising out of a transaction entered into by parties in this country, whether, for example, it operated to effect a binding sale or pledge as against the owner of the shares, must be determined by the law prevailing here.”

Four points are clear from that decision. First, there is a dual conflict rule, which allocates some issues to one country and others to another. Secondly, the issue in Cady’s case was as to who was entitled to the certificates, not as negotiable instruments but as pieces of paper. Thirdly, that issue was to be decided by English law, since the transaction took place here or (per Lord Watson) the parties to it were domiciled here. Fourthly, any issue as to the effect of possession of the certificates, or as to how shares could be transferred, should be decided by the law of the company’s domicile or (it would seem) its place of incorporation.

I do not find it easy to determine the precise borderline between points three and four in that case, or for that matter between paragraphs (1) and (2) in rule 120 of Dicey & Morris. But what is in my judgment clear is that the issue in the present case comes in the second class, and must be decided by the law of New York. It is not an issue as to the validity of a contract between Macmillan and one or other of the defendants; so far as the facts go they had never met each other and there was no contract between them. … The issue is whether, in the words of Lord Bramwell and Lord Herschell, there has been an act effectual by New York law to transfer the property in the shares.

67.Mr Chan Chi Hung SC argues that in the penultimate passage quoted above, Staughton LJ distinguished between four classes of cases and the Plaintiff’s case falls within the third class. With respect, I think that is a misunderstanding of his Lordship’s judgment. In my view, the four points mentioned in that passage were not intended by his Lordship as points of categorisation but four observations. All along, his Lordship was talking about two classes, the rights under the transaction relating to the shares or share certificates and rights under the shares. That was why in the last passage quoted above, his Lordship referred to points three and four of his observation and paragraphs (1) and (2) of rule 120 of Dicey & Morris and he concluded that the issue fell within the second class, which was title and ownership of the shares. However, my disagreement with counsel’s submission does not affect the validity of his argument.

68.From the dicta of the House of Lords in Cady’s case as quoted by Staughton LJ, it is clear that the House of Lords distinguished between share certificates and shares and also between the issue as to the rights of the parties to a pledge of share certificates and ownership and title to shares. On that basis, the House of Lords identified the transaction as one of pledge of share certificates and characterised the issue as the rights arising out of the pledge of share certificates by parties in England and not one of ownership or title of the shares of a company in the United States between non parties to the transaction. The House of Lords then held that the rights arising out of the pledge was governed by the lex loci actus but entertained no doubt that title, ownership, effectiveness of the transfer of the shares and incidence of ownership of the shares were governed by the lex situs of the shares. Mr Warren Chan SC seizes on that distinction and argues that Cady’s case is applicable to share certificates but not to shares. As a legal proposition, that must be correct. He then argues by relying on Macmillan Inc that as the dispute in the present case is about transfer, title or ownership in the shares, the applicable rule is the lex situs of the shares. However, the issue in the present case as I have characterised it is the rights of the parties under the sale and purchase agreement and not title or ownership in shares. Macmillan Inc is clearly inapplicable.

69.It is true that Cady’s case was about pledge of share certificates and not about sale and purchase of shares, but the principle is the same. If I have to make a determination afresh, I would reach the same conclusion for a transaction involving sale and purchase of shares by adopting the three stage approach in Macmillan Inc. To begin with, I would identify the transaction as the sale and purchase of shares and characterise the issue as one of the rights and obligations of the parties under the sale and purchase agreement. The subject matter of the sale and purchase agreement is the shares in FCL. Share is a particular kind of property. It is neither land nor chattel. It is a chose in action. It is a bundle of rights in a company, as distinct from a share certificate which is a document evidencing the fact that the person stated therein is the holder of a specified number of shares in the company. Thus an agreement to sell shares in a company is essentially of the nature of an assignment of a chose in action. The prima facie rule therefore is that as between the transferor and the transferee, the effect of an assignment of shares is to be determined by the law of the place where the assignment takes place, i.e. the lex loci actus.

70.I now turn to the other authorities quoted by Mr Chan Chi Hung SC. The first one is North Western Bank, Limited and John Poynter, Son, & Macdonalds [1895] AC 56. In that case, the pledgors of a bill of lading representing a specific cargo were under a contract to sell a larger quantity of like goods to third parties. The cargo was on its way from Scotland to England. The pledgees released the bill of lading to the pledgors to sell on the pledgees’ behalf and to account for the proceeds towards satisfaction of the debt. The pledgors then transmitted the bill of lading to the purchaser through a creditor of the pledgors. The question before the court was whether Scottish law or English law applied to the proceeds representing the cargo on its way from Scotland to England then in the hands of a creditor of the pledgors. Lord Herschel LC held at 66:

“ Now, I cannot help saying at the outset that, in my opinion, it is abundantly clear that the rights of Messrs Page & Co and the bank respectively must be determined, if the strictly legal course is to be followed, by the law of England. A transaction between a merchant in England and a bank in England, and the rights which arise out of that transaction, cannot, as it seems to me, fall to be determined by anything but the law of England; just in the same way as, if this had been a transaction between a banker and a merchant in Glasgow, and a question had arisen in an English proceeding as to the rights that arose out of that transaction, it would have fallen to be determined according to the law of Scotland. …

Of course, when I say that the rights arising out of this transaction between these parties would fall to be determined by the law of England, I do not for a moment intend to dispute that, where such a transaction has been entered into, there may be proceedings or transactions in Scotland which would render a recourse to the law of Scotland necessary to ascertain the rights which had arisen in respect of transactions relating to the contract though it had its basis and origin in England. Those are considerations quite beside the present case; because it seems to me that, in the present case, there is really nothing which needs to be determined for the purpose of arriving at a conclusion in this action, except what was the real nature of the transaction at Liverpool between Messrs Page & Co and the North Western Bank.”

If one has to characterise the issue in that case, it was one of the rights of the parties to pledge of a bill of lading. Lord Herschel LC held that the rights which arose out of a transaction by parties entered into in England fell to be determined by the law of England. That was also his Lordship’s view in Cady’s case. Mr Warren Chan SC seeks to distinguish North Western Bank, Limited by arguing that the question there was one of pledge of bill of lading as was the pledge of share certificates in Cady’s case. I think the difference is one of no distinction. The principles are the same. The conclusion depends on how the issue is characterised. The issue as I have characterised in the present case is one of the rights of the parties to the sale and purchase agreement which is no different from the rights of the parties to a pledge transaction. I think the decision in North Western Bank, Limited supports the Plaintiff’s argument.

71.In In re Smith, Lawrence v Kitson [1916] Ch D 206, a testator charged all his share and interest in an estate in the island of Dominica in West Indies to secure repayment of a loan owed to his sisters and agreed to execute a legal mortgage of the said property whenever required. By the law applicable to immovables in Dominica, the equitable charge was not sufficient to create a valid incumbrance upon the property. The sisters issued a summons seeking a declaration that they were entitled to be executed a legal mortgage of the property by the trustees. In a very short judgment, Eve J granted the declaration. He held that the agreement entered into in England was a contract to give a mortgage on foreign land which was governed by the law of England. He said at 209:

“ If the testator were still alive the right of these ladies to their mortgage is established, I think, by the decision of the Court of Appeal in British South Africa Co v De Beers Consolidated Mines [1910] 2 Ch 502, 515, 524. Cozens-Hardy MR there says: “In my opinion an English contract to give a mortgage on foreign land, although the mortgage has to be perfected according to the lex situs, is a contract to give a mortgage which – inter partes – is to be treated as an English mortgage and subject to such rights of redemption and such equities as the law of England regards as necessarily incident to a mortgage.”

Mr Chan Chi Hung SC submits that In re Smith is on all fours with the present case. In re Smith was about an agreement entered into in England between parties domiciled in England to execute a mortgage over foreign property. In the present case, though the Plaintiff is a Macanese party, the 1^st Defendant is a Hong Kong party and the agreement was entered into in Hong Kong for transfer shares in the PRC. Mr Warren Chan SC seeks to distinguish In re Smith from the present case on the basis that in In re Smith the performance of the obligation, i.e. the execution of the mortgage was to be effected in England, whereas the performance of the obligation in the present case, i.e. the transfer and registration of shares was to be carried out in the PRC. He also seeks to rely on the distinction between transfer of shares and transfer of interest in land. I do not think those distinctions material. They might have some bearing on the third stage of the determination but not on the second stage.

72.In In re The Anchor Line (Henderson Brothers), Limited [1937] 1 Ch 483, a shipping company registered in England owned heritable and movable property in Scotland. It created a floating charge in Glasgow over its entire undertaking and assets in favour of a Scottish bank. The charge was registered in England. But the concept of floating charge was unknown to the law of Scotland. The company was wound up. The bulk of its property had been sold and the proceeds of sale were in the hands of the liquidator. The liquidator took out an originating summons to determine whether the charge was valid and effectual insofar as it related to the assets situated in Scotland at the commencement of the liquidation of the company. In a short judgment, Luxmoore J held that the question was whether in the distribution of the assets of the company effect ought to be given to the document creating the floating charge. He said at 488:

“ The law on this point is correctly stated by Sir Francis Palmer in the 5^th edition of Company Law at p 236 : ‘Even without complying with the formalities required by the local law in relation to transfer or mortgages, it is competent to a company to create an effective charge on property belonging to it in a foreign country, for the Court, in virtue of its Chancery jurisdiction in personam, enforces equities in regard to foreign land where the mortgagor company is within the jurisdiction (Penn v Lord Baltimore (1750) 1 Ves Sen 443, 444; Mercantile Investment and General Trust Co v River Plate Trust, Loan and Agency Co [1892] 2 Ch 303; and Westlake’s International Law (1880) 183); and in determining whether there is an equity the Court regards English, not foreign law, and if according to English law there is an equity, e.g., if for valuable consideration a company agrees to give a charge on foreign property, the Court will enforce it, although the equity may be one not recognized by the lex loci rei sitae.”

Mr Warren Chan SC submits that the ratio in that case is that when an English company possesses land abroad and purports to charge it by way of floating charge, the charge amounts to an agreement to charge that land, and is a valid equitable security according to English law. Hence, that ratio has no application to the present case. Though that case was decided as a matter of company law and floating charge, the principle as stated by Sir Francis Palmer is of general application. That principle is supportive of the Plaintiff’s argument of the applicable conflict of law rule.

73.In In re United Railways of The Havana And Regla Warehouses Ltd [1960] Ch D 52, an English company conducting a railway operation in Cuba leased rolling stock from its own subsidiary which was an American corporation. The lease was executed in New York. The consideration for the lease in that case was payable in gold coins. The parties never intended Cuban law to be the governing law. The Court of Appeal adopted the closest and most real connection test and held that the proper law of the lease was the law of Pennsylvania. Under this test, a host of factors has to be taken into account. The conclusion reached by the court was not surprising. I agree with Mr Warren Chan SC that that decision was one based on its facts and has no bearing on the present case. In any event, that case does not decide any principle on the applicable conflict rule. It may be relevant for the third stage of the determination, but certainly not the second stage.

74.Having characterised the issue as one of the rights and obligations of the parties to a transaction for sale and purchase of shares and not ownership and title of the shares, I find that the connecting factor for the issue is the place where the transaction was entered into. On the authorities, I find that the applicable conflict rule is the law of the place where the transaction took place, i.e. the lex loci actus.

The system of law

75.Usually, the lex loci actus is also the system of law which is tied by the connecting factor found in stage two to the issue characterised in stage one. The three agreements were all entered into in Hong Kong. Under Hong Kong law, the system of law to be applied to a contractual dispute is the proper law of the contract. What is the proper law of a contract is a matter of actual or presumed intention of the parties to the contract. If the parties have chosen the proper law of the contract, that choice of law shall be binding on the parties. Parties to a transaction in Hong Kong may by contract provide that their transaction be governed by a foreign system of law. In the absence of an express agreement on the proper law of the contract, the law implies that the proper law is that system of law which has the closest and most real connection with the transaction. The connecting factors have to be determined by taking into account all the circumstances relating to the transaction in question. It is well settled that it is the lex fori which defines what the connecting factors mean and whether the connecting factors link a given issue with one legal system or with another: see para 1-081; Dicey, Morris & Collins on The Conflict of Laws (14^th Edn 2006). A useful statement as to the kind of factors to be considered is to be found in the following dicta of Jenkins LJ in In re United Railways of The Havana And Regla Warehouses Ltd at 91:

“ In an inquiry as to what is the proper law of a contract in which the parties have not expressed their own selection of the law to be applied, many matters have to be taken into consideration. Of these, the principal are the place of contracting, the place of performance, the places of residence or business of the parties respectively, and the nature and subject-matter of the contract (Dicey, pp 719, 720, citing Falconbridge, Selected Essays on The Conflict of Laws, 2^nd ed, p 378). But, as the editor points out, the most satisfactory formulation is that the proper law is the one “with which the transaction has its “closest and most real connection”: (per Viscount Simonds in Bonython v Commonwealth of Australia [1951] AC 201, 219. “The country in which [the contract’s] elements are most densely grouped will represent its natural seat and the law to which in consequence it belongs. It may have factual links with several countries, each of which has some claim to be considered. … In most cases, however, an examination of these connecting ties will disclose without undue difficulty the country with which the contract is in fact most closely connected and in which it has its natural seat and centre of gravity.” (Cheshire’s Private International Law, 5^th ed, p 207.)”

There is no dispute that the parties have not chosen the proper law of the contract. The next question is what are the connecting factors and which system of law do the connecting factors point to. Before examining those factors, it should be noted that under the Rome Convention there are certain presumptions, such as presumption of characteristic performance and presumption that the contract is most closely connected with the principal place of business of the party who is to effect the characteristic performance. While those presumptions are not available under the common law, inferences as to connection may nevertheless be drawn from those factors. It is just a question of weight.

76.Ngan is a Macanese. The Plaintiff, COM and Hang Wo are companies incorporated in Macau. The 1^st Defendant is a window company of the PRC. It was incorporated in Hong Kong and has its principal place of business and central administration in Hong Kong. Against this background, the fact that the three agreements, in particular the First Laser Agreement, were all entered into in Hong Kong points to a Hong Kong connection.

77.The Plaintiff’s obligation was to pay for the shares and the 1^st Defendant’s obligation was to transfer 51% of the shares in FCL and FCO to Ngan’s camp. Payment of money is not the characteristic performance of the agreement and not indicative of any connection to any jurisdiction. However, the price was stated in US dollars but paid in Hong Kong currency. Two significant sums of HK$10 million were received and acknowledged by the 1^st Defendant in Hong Kong. The balance of the purchase price of HK$4.64 million was acknowledged as having been received by the 1^st Defendant under the 1998 Memorandum issued from its Hong Kong office. Those facts are mildly indicative of a Hong Kong connection and are more consistent with a Hong Kong connection than with a PRC connection.

78.The 1^st Defendant’s obligation was to transfer the shares in FCO and FCL to Ngan’s camp. This was the consideration moving from the 1^st Defendant to the Plaintiff under the three agreements and for which the Plaintiff’s payment of HK$24.64 million was due. This was the essence of the transaction if not the characteristic performance of the transaction. This performance was to be effected in the PRC. Under the three agreements, the parties agreed that they would instruct PRC lawyers to handle the share transfer in the PRC. Under common law, this points strongly to a PRC connection.

79.However, on the other hand, this essence of the transaction was to be performed by the 1^st Defendant, which is a company incorporated in Hong Kong and having its registered office and central administration in Hong Kong. The directors and shareholders of the 1^st Defendant are in Hong Kong and had Hong Kong addresses. Not only that, the 1^st Defendant conducts its business from its office in Shun Tak Centre in Hong Kong. All the correspondences in relation to this joint venture or the three agreements were emanated from its office in Hong Kong. Though the Plaintiff may not rely on the presumptions under the Rome Convention, these are facts on which an inference of Hong Kong connection can be drawn. This inference offsets, if not outweighs, the inference to be drawn from the fact that performance of the First Laser Agreement was to be effected in the PRC.

80.Mr Chan Chi Hung SC also seeks to bolster the three agreements’ Hong Kong connection by referring to the factual matrix of the case. As mentioned earlier, the 1^st Defendant and FRIMS were engaged in a joint venture which turned sour and ended in litigation. Prior to December 1996 the 1^st Defendant was facing threat of litigation from FRIMS again in the PRC. To avoid being engaged in further litigation, the 1^st Defendant brought in Ngan’s camp as a foreign investor so that the production lines of LBO and BBO crystals originally in Fuzhou in the PRC would be relocated to Macau. The Hang Wo Agreement and the COM Agreement were signed just two days after receipt of a letter before action from FRIMS. In its report dated 5 June 1997 to the Fujian Provincial People’s Government, the 1^st Defendant recited its dispute with FRIMS and its reasons for transferring the production lines out of Fuzhou to Macau to avoid further litigation with FRIMS. In particular, it sought reliance on the one country two system in Macau and Hong Kong after the return of their sovereignty to the PRC. It referred specifically to the Sino British Joint Declaration, the Sino Portuguese Joint Declaration, the Hong Kong Basic Law and the Macau Basic Law. The report stated:

「 … 將該項目控股權轉讓給澳門知名愛國人士顏延齡先生(顏先生現任省政協常委，澳門寶盛集團有限公司總裁)，我方仍保留49% 的股權。同時，也已將雙方爭議的生產部份轉移至澳門，并由中方人員全面負責管理。根據中英、中葡聯合聲明和基本法的規定，港澳地區在主權回歸后有獨立司法地位，福建物構所目前所擁有的晶體生產方法專利權僅在中國境內生效(俄羅斯和美國都在大批生產)，在境外不受任何保護。」

[Translation]

“ … to transfer the controlling shareholding in that item to a well known patriotic Macanese Mr Ngan In-leng (Mr Ngan is currently a member of the Standing Committee of the Fujian Provincial Committee of the Chinese People’s Political Consultative Conference, the Chief Executive of Bao Shing Group of Company Limited), our side still maintains 49% shareholding. At the same time, (we) have removed the disputed production line to Macau, which shall be managed by Chinese personnel. According to the SinoBritish Joint Declaration, the Sino Portuguese Joint Declaration, the Hong Kong Basic Law and Macau Basic Law, after the return of their sovereignty to the PRC, Hong Kong and Macau have independent judicial status. The patent right in the technology of producing crystals in the possession of FRIMS is only effective within the PRC (Russia and the United States are in the process of mass production) and has no protection outside the PRC.”

On the face, the above passage does not suggest that the parties intended any choice of law under the three agreements. The 1^st Defendant’s intention to rely on the separate judicial and legal system in Macau and Hong Kong was clear. So too was its intention that the three agreements shall operate outside the PRC. The parties were clearly distancing themselves from the PRC. This also points very strongly to a Hong Kong connection than a PRC connection.

81.Weighing all these factors together, I cannot help but conclude that Hong Kong, not the PRC or Macau, is the place in which these factors are most densely grouped and represent the natural seat of the three agreements and the law to which in consequence they belong and Hong Kong law is the law with which the transaction for sale and purchase of the shares in FCL has its closest and most real connection. The proper law of the First Laser Agreement is therefore Hong Kong law.

the first laser agreement

82.The Plaintiff’s claim is based on breach of the First Laser Agreement by the 1^st Defendant. Its pleaded case is that the First Laser Agreement dated 28 December 1996 superseded the earlier Hang Wo Agreement and the COM Agreement, both dated 12 December 1996. Some difficulties were created by Ngan’s ignorance of the concept of corporate identity in his dealing with the 1^st Defendant in relation to the three agreements and by his evidence in Court. Some of the defences are directed at those difficulties, such as uncertainty of the subject matter of the First Laser Agreement and that the parties had reached a different agreement, namely the FCO Agreement (that defence has been dealt with in paragraphs 33 and 34 above). Mr Warren Chan SC also queries if the Plaintiff has discharged the burden of proof.

Uncertainty of the subject matter of the First Laser Agreement

83.The 1^st Defendant pleads that the subject matter of the First Laser Agreement, namely 51% of the interest in the optronic project in Fuzhou (福州光電子項目) was uncertain. Though this plea is raised in the context that the First Laser Agreement is subject to PRC law, I feel I should also consider this defence even though I have found that the applicable law is Hong Kong law.

84.Clause (1) of the Hang Wo Agreement clearly referred to the sale and purchase of 100% of the shares in FCO and FCL to COM. The preamble of the COM Agreement recited the fact that the 1^st Defendant was the owner of FCO and FCL. Clause (1) of the COM Agreement stated clearly that the 1^st Defendant agreed to sell the shares in FCO and FCL to COM at a valuation of US$6.25 million. Insofar as those two agreements are concerned, there is no uncertainty in the subject matter. It was under that factual matrix that the First Laser Agreement was brought into existence.

85.The title, preamble and clauses (1), (2), (3) and (8) of the First Laser Agreement read as follows:

「關於轉讓福州光電子高科技項目部分股權的協議

甲方：華閩(集團)有限公司

乙方：澳門第一激光有限公司

為共同發展高科技項目，甲、乙雙方代表於1996年12月初經友好協商同意將甲方在福州所投資的光電子項目中的51% 的股權轉讓給澳門第一激光有限公司。鑒此，雙方就股權轉讓中的有關事宜達成以下協議：

一、股份轉讓之後，雙方的股權比例為：甲方持股49%，乙方持51%。

二、雙方同意，甲方以該項目96年12月31日的公司淨資產值625萬美元作價。因此，甲方將以318.75萬美元的價格轉讓給乙方51% 上述項目的股權。

三、乙方介入之後，福州科騰公司、福建華科公司的董事會將進行重組，有關新董事會的組成將另行協商。

…

八、雙方同意將盡快組織工作小組協調和處理有關事宜，並請律師在國內辦理有關公司的變更手續。」

The First Laser Agreement is titled “In the matter of the agreement to transfer part of the shareholding in the high-tech optronic project in Fuzhou”. The subject matter of the agreement was identified in the preamble as 51% of the shareholding in the high-tech optronic project invested by the 1^st Defendant in Fuzhou. Though the high-tech optronic project was not further identified or defined in the agreement, clause 3 stated that after the participation by the Plaintiff, the boards of directors of FCO and FCL would undergo re-organisation and the constitution of the new boards of directors would be subject to consultation between the parties. Clause 8 further provided that the parties would form working party to co-ordinate and handle the relevant matters and instruct lawyers in the PRC to handle the changes in the companies concerned. FCO and FCL were the only companies mentioned in the agreement and must be the “companies concerned” referred to in clause 8. Both companies were located in Fuzhou. If those two companies were not the subject matter of the agreement, there would be no need for the boards of directors of those two companies to undergo re-organisation and for the parties to engage lawyers in the PRC to handle the changes in those two companies. The intention of the parties as conveyed to a reasonable reader by reading the First Laser Agreement as a whole with knowledge of the factual matrix including the Hang Wo Agreement and the COM Agreement must be that the parties intended to sell and purchase 51% of the shares in FCO and FCL owned by the 1^st Defendant.

86.Furthermore, as mentioned above, Ngan’s camp participated in the management of FCO and FCL. The 1^st Defendant also took an interest in COM. The staff of FCO and FCL treated Ngan and Ngan’s camp as shareholders of FCO and FCL. The facts show clearly that the parties entertained no misunderstanding that the subject matter of the First Laser Agreement was 51% of the shares in FCO and in FCL. In a report to the Fujian Provincial People’s Government dated 5 June 1997, the 1^st Defendant acknowledged Ngan’s 51% interest in FCO and FCL. Even after Xu replaced Kong as the chairman of the board of directors of the 1^st Defendant in May 1998, the 1^st Defendant never disputed its obligation to transfer 51% of the shares in FCL to Ngan’s camp. Since then, Xu only sought to re-negotiate for a reduction of the amount of shares to be transferred to 49% instead. The request was made by Xu on 18 August 1998, but was rejected by Ngan. Then, even as late as 3 October 2000 when the parties attempted to settle their differences in Zhuhai after the FCL shares had been sold to JDS, the 1^st Defendant acknowledged in paragraphs 1.5 and 1.6 of the minutes of that meeting its obligation to transfer the shares in FCL to the Plaintiff and that the subject matter of the three agreements was FCL, FCO and COM. COM was then holding all the shares in FCO on behalf of the Plaintiff and the 1^st Defendant. The parties have gone so far in performing the First Laser Agreement for almost four years with no misunderstanding of the subject matter that it is impossible now to argue that there was uncertainty in the subject matter of the agreement. I find as a matter of fact that the parties had no misunderstanding of the subject matter of the three agreements. There was no uncertainty in the subject matter of the First Laser Agreement and the other two agreements. It was the intention of the parties under those three agreements to transfer 51% of the 1^st Defendant’s shareholding in FCO and FCL to the Plaintiff for a consideration of US$3.1875 million, equivalent to HK$24.64 million.

Proving the First Laser Agreement

87.Mr Warren Chan SC submits that the Plaintiff has failed to discharge the burden of proving the agreement. His argument is as follows. On the Plaintiff’s pleaded case there are three different agreements signed in December 1996 with their contents different and mutually exclusive of each other insofar as the transfer of the shares in FCO and FCL were concerned. Under the COM Agreement, it was envisaged that all the shares in FCO and FCL would be transferred from the 1^st Defendant to COM for US$6.25 million, while under the First Laser Agreement, 51% of the shareholding in FCO and FCL would be transferred from the 1^st Defendant to the Plaintiff at the price of US$3.1875 million. Thus, should the COM Agreement have been performed with the shares transferred to COM, the First Laser Agreement could no longer be performed. Furthermore, it is also the Plaintiff’s pleaded case that the First Laser Agreement superseded the Hang Wo Agreement and the COM Agreement. However, Ngan’s evidence is contradictory. While in his affirmation, Ngan said that there was never any doubt that the First Laser Agreement superseded the earlier two agreements, in his evidence under cross-examination he said that the three agreements were equally operative. Mr Warren Chan SC submits that such inconsistency is fatal to the Plaintiff’s case in identifying the exact agreement upon which the Plaintiff is suing and Ngan’s evidence should be rejected.

88.It would now be appropriate to revisit what was the common understanding of the parties as acknowledged at the meeting on 3 October 2000 just before the litigation commenced. The minutes recorded as follows:

「一、雙方達成以下共識：

1、有關華閩向寶盛轉讓光電子項目部分股權的背景和過程，97年6月5日華閩給省政府辦公廳《關于對福州光電高科技項目處理情況的匯報》作了基本描述。

2、 96年12月12日華閩與恒和簽訂了《關于設立澳門宇星光電企業有限公司的協議》，但未對宇星的注冊資本作出約定。同日，華閩與宇星簽訂了《關于轉讓福州光電子項目股權的協議》。經過雙方當事人的確認，簽署上述兩份協議是為了應付物構所可能對華科和科騰提起的訴訟保全而採取的措施。…

3、 98年3月13日，華閩…與第一激光 …，就澳門宇星光電企業製造有限公司和福建華科光電有限公司權益和資金安排等問題進行了磋商，并簽訂了《關於澳門宇星光電企業製造有限公司和福建華科光電有限公司權益和資金安排問題的備忘錄》(下稱《備忘錄》)。雙方約定，在未理順法律關係的情況下，關於華科、宇星、科騰的投資和權益仍按雙方96年協議議定的條款執行。

4、第一激光在華閩認可的期限內支付了2000萬港幣的股權轉讓金，轉讓金尾款464萬港幣的處理已在《備忘錄》中另有約定。

5、鑒於一些歷史的原因(詳見《備忘錄》)，與《協議》有關的華科股東變更的批准登記手續沒有辦理。

6、光電子項目包括了華科、科騰、宇星，在工商登記上，華科是華閩全資擁有，科騰和宇星則是顏延齡先生全資擁有，雖然沒有文字上的明確約定，實際上雙方都參與了華科、科騰和宇星的經營管理。

7、光纖無源件項目的開發研製階段是在華閩不同意立項的情況下由顏延齡先生單方出資進行的，在研製完成後繼續進行的生產開發和銷售階段，是在華科進行的。」

89.Paragraph 1.1 of the minutes confirmed the accuracy of the 1^st Defendant’s report to the Fujian Provincial People’s Government. That report confirmed, inter alia, Ngan’s 51% interest in FCO and FCL. Paragraphs 1.2 and 1.3 of the minutes confirmed the factual matrix leading to the signing of the three agreements and the 1998 Memorandum. In particular, paragraph 1.3 acknowledged that further arrangements would have to be made in respect of the capitalisation of FCL and COM and that pending such regularisation, the parties’ rights and obligations in respect of FCO, FCL and COM would be governed by the three agreements. Paragraph 1.4 acknowledged that the full price of HK$24.64 million under the First Laser Agreement had been paid by the Plaintiff. Paragraph 1.5 acknowledged that the 1^st Defendant had not performed its obligation to transfer the shares in FCL because of historical reason as stated in the 1998 Memorandum. The reason stated in the 1998 Memorandum was “historical reason, such as the under-capitalisation of FCL”. There was no denial of the 1^st Defendant’s contractual obligation under the First Laser Agreement or the three agreements to transfer the shares in FCL to Ngan’s camp. Paragraph 1.6 recorded the parties’ common understanding that the subject matter of the three agreements was the shares in FCO, FCL and COM. COM was then holding all the shares of FCO on behalf of the parties. The parties also acknowledged that though on paper FCL was wholly owned by the 1^st Defendant while FCO and COM were wholly owned by Ngan, both parties participated in the operation and management of FCO, FCL and COM.

90.It is true that Ngan had no regard for the concept of corporate identity and treated the Plaintiff, Hang Wo, Bao Shing and himself as one in his dealing with the 1^st Defendant. Had those companies been truly separate from Ngan and had the factual matrix been different, I would agree with Mr Warren Chan SC’s submission. However, all those companies are owned by Ngan and his family and controlled by Ngan. The undisputed factual matrix was that the arrangement was to sell 51% of the 1^st Defendant’s shareholding in FCO and FCL to Ngan’s camp so as to enable the 1^st Defendant to transfer the operation of FCO and FCL from Fujian to Macau to avoid litigation with FRIMS. The Hang Wo Agreement and the COM Agreement were entered into just two days after receipt of FRIMS’ letter before action. The First Laser Agreement was entered into at the behest of the 1^st Defendant who felt it inappropriate to sell the shares in those companies engaging advanced technology to Hang Wo which is a property investment company. The name of the Plaintiff was even decided by the 1^st Defendant for the purpose of dressing up the purchaser as an expert in the technology so as to facilitate approval of the sale and purchase by the authority. All the documents were prepared and drafted by the 1^st Defendant. None of those evidence is contested by the 1^st Defendant.

91.More importantly, in the performance of the three agreements, the 1^st Defendant also regarded Ngan and Ngan’s camp as one. All the shares in FCO were transferred to COM on 13 March 1997 in accordance with the Hang Wo Agreement and the COM Agreement. Though that was not in accordance with the First Laser Agreement, it was in accordance with the spirit of that agreement as the entirety of the FCO shares were transferred to COM which, on the Plaintiff’s evidence, was held by Hang Wo as to 51% absolutely and by Jenwing as to the balance of 49% on trust for the 1^st Defendant. Mr Warren Chan SC argues that transfer of all the shares in FCO to COM to the exclusion of the Plaintiff has the effect of excluding the First Laser Agreement and rendering it impossible of performance. In the light of the peculiar facts of the case and the shareholding structure of COM, I respectfully differ.

92.The Plaintiff’s principal obligation under the First Laser Agreement was to pay and that obligation has been fully performed by the Plaintiff in accordance with the terms of the First Laser Agreement. Under such circumstances, the Court should be slow to find that the First Laser Agreement has been excluded or rendered impossible of performance by the transfer of all the FCO shares to COM. In approaching the evidence, the Court must bear in mind the factual matrix, the share structure of COM and the participation by Ngan’s camp in the management of FCL. When the evidence is considered with commercial realism and business sense, I have no difficulties to find that the transfer of all the FCO shares to COM was a varied and part performance of the First Laser Agreement agreed to by the parties and accepted by the Plaintiff within the framework of the First Laser Agreement.

93.For the above reasons, I am satisfied that the Plaintiff has adequately discharged the burden of proving the First Laser Agreement. There is no dispute that the 1^st Defendant has not performed its obligation under the agreement insofar as the transfer of 51% of the shares in FCL to the Plaintiff or 100% of the shares in FCL to COM is concerned. All the shares in FCL were sold to JDS on 29 February 2000.

The contractual claim

94.In considering the Plaintiff’s contractual claim, it must be remembered that the applicable law of the contract, as I have found it, is Hong Kong law, though PRC law as lex situs of the shares has an impact on the conclusion that I am about to reach.

Breach of agreement

95.Mr Warren Chan SC submits that even if the First Laser Agreement is governed by Hong Kong law, the Plaintiff has failed to prove breach of the agreement, loss or damage. The Plaintiff has proved the First Laser Agreement and payment of the purchase price for the shares in FCO and FCL. There is no dispute that the shares in FCL had not been transferred to the Plaintiff. This is prima facie evidence of breach of contract and in an ordinary case of sale and purchase of shares listed in the Hong Kong Stock Exchange would have entitled the plaintiff to judgment. It appears that the Plaintiff is contented to rely on the 1^st Defendant’s failure to transfer the FCL shares as breach of contract. However, the subject matter in the present case is sale and purchase of shares in the PRC. According to the lex situs of the shares, approval from the authorities was required for such transfer. There is no dispute that such approval had not been granted. Though not specifically pleaded by the 1^st Defendant in the context of Hong Kong law, the want of approval according to the lex situs of the shares may relieve the 1^st Defendant of its obligation to transfer the shares in FCL to the Plaintiff. The issues raised then are: (1) who was under the obligation to procure the approval; (2) if it was the 1^st Defendant, whether it was in breach of that obligation; and (3) who bears the burden of proof. These issues were not pleaded by the parties in the context that the applicable law is Hong Kong law but were pleaded and dealt with by their experts in the context that PRC law is applicable to the First Laser Agreement. I think I should also address these issues in the context of Hong Kong law.

96.It is trite law that the burden of proof is determined by the pleadings. If the issues were to be properly pleaded, it would have been for the Plaintiff to plead the 1^st Defendant’s breach by failure to transfer the shares in FCL and then for the 1^st Defendant to rely on lack of governmental approval for the share transfer. There is no dispute that governmental approval was required for the share transfer. The evidential burden, at least, must be on the 1^st Defendant to prove that the obligation for procuring the approval was on the Plaintiff or if it was on the 1^st Defendant that it has adequately discharged that burden.

97.The three agreements are silent as to who bears the obligation of obtaining approval for the transfer of the shares. The Plaintiff contends that under the law of the PRC, the 1^st Defendant has a duty to procure and seek the necessary registration and approval for the transfer of the 51% of the FCL shares. The 1^st Defendant contends that under PRC law, the obligation was on the enterprise itself, which was FCL. The parties called experts in PRC law in support of their contentions. As the applicable law of the First Laser Agreement is Hong Kong law, PRC law is not determinative of the issue as to who bears the burden of obtaining approval for the transfer of the shares under the First Laser Agreement. However, provisions of the PRC law in that respect would assist the Court in ascertaining the presumed intention of the parties to the agreement.

98.Counsel have no dispute that the expert called by the other side was qualified to give expert legal opinion on PRC law. However, Mr Warren Chan SC is very critical of the legal expert called by the Plaintiff, Professor Wang Shizhou (王世洲). He criticized Professor Wang as being biased and his legal opinion as inconsistent with the decision of the Fujian Higher People’s Court and the Supreme People’s Court. He also criticizes Professor Wang as being wrong about the facts and about very simple legal issues, such as the application ofPRC Contract Law (中華人民共和國合同法)). He pointed out that Professor Wang’s specialization as shown in his internet information updated to 2003 related to criminal law of the PRC and the United States and constitutional law of Germany, but not foreign investment law and contract law in the PRC. These are strong criticisms. Professor Wang gave expert opinion on a vast number of issues on PRC law on the basis that the First Laser Agreement is governed by PRC law. As I have found that the First Laser Agreement is governed by Hong Kong law, much of Professor Wang’s and Mr Bai’s expert opinion on PRC law is irrelevant. I do not find it necessary to adjudicate on the criticisms made against Professor Wang in order to dispose of the issue here. The point of PRC law on which I need expert evidence for the purpose of resolving this issue is a very narrow one, i.e. who bears the burden of obtaining approval for the transfer of the FCL shares under the First Laser Agreement. Professor Wang’s opinion on this issue is so lacking in legal reasoning and so inconsistent with the relevant statutory provisions that I feel his opinion is only to be rejected.

99.Firstly, in paragraph 6 of his expert report dated 8 April 2005, Professor Wang relying on the Supreme People’s Court judgment pointed out in unequivocal terms that the 1^st Defendant was under an obligation to procure the necessary approval from the authorities for the transfer of the shares in FCL. He wrote:

「 6. 最高人民法院在判決中明確指出，是“華閩公司未將上述三份協議報經審批機關審批。”(見附件一)福建省高級人民法院的一審判決中僅僅指出“以上三份協議均未報經審批機關審批。”把一審判決書與終審判決書進行比較，可以看出：最高人民法院已經說明了華閩公司的報批義務。」

[Translation]

“ 6. The Supreme People’s Court clearly pointed out in its judgment that it was “[the 1^st Defendant] who did not present the above three agreements to the approving authorities for approval.” (see Annex I) The Fujian Higher People’s Court only pointed out in the first instance judgment that “the above three agreements had not been approved by the approving authorities”. By comparing the first instance judgment with the final judgment, it can be seen that the Supreme People’s Court has stated the [1^st Defendant’s] obligation in procuring approval.”

In paragraph 9 of his further report dated 12 January 2006, Professor Wang repeated his reliance on the Supreme People’s Court judgment to argue that the 1^st Defendant failed to discharge the duty of obtaining approval. He wrote:

「 9. 最高人民法院指出，在涉及華科股份轉讓中，合同無效的原因是“華閩公司未將上述三份協議報經審批機關審批…:」

[Translation]

“ 9. The Supreme People’s Court pointed out that in respect of the transfer of the shares in FCL, the reason why the agreement was of no effect is because “[the 1^st Defendant] had not presented the three agreements to the approving authorities for approval;” …”

100.The quotation from the Supreme People’s Court referred to in Professor Wang’s two reports is just a statement of fact in the Supreme People’s Court’s finding of facts. The reason for the Supreme People’s Court holding that the three agreements were of no effect as stated towards the end of the judgment was simply lack of approval by the approving authorities as was held by the Fujian Higher People’s Court. To draw the inference and to assert as Professor Wang did by comparing the two judgments is inappropriate and misleading. The Supreme People’s Court did not assign the responsibility for the lack of approval or for failure to present the agreements for approval to any party, let alone to the 1^st Defendant. The issue before the Supreme People’s Court was validity of the three agreements and not remedies for the agreements being of no effect. The Supreme People’s Court was not asked to determine if any party was at fault under the law of the PRC for the three agreements being of no effect. Professor Wang admitted under re-examination that that issue was not before the Supreme People’s Court. With respect to Professor Wang, his opinion is a serious misrepresentation and misinterpretation of the judgment of the Supreme People’s Court. His opinion is a careless one, if not an irresponsible one. The mistake is so obvious that it casts doubts if his opinion was aimed at achieving the desired result for his client rather than to assist the Court.

101.Secondly, in his report dated 8 April 2005 Professor Wang reinforced his opinion that the 1^st Defendant was under an obligation to procure the necessary approval by relying on three statutes, namely, article 10 of Law of the People’s Republic of China on Foreign Capital Enterprises《中華人民共和國外資企業法》, article 22 of Detailed Rules for the Implementation of the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises《中華人民共和國外資企業法實施細則》and article 9 of Certain Regulations on Changes to Shareholders’ Rights in Foreign Investment Enterprises《外商投資企業投資者股權變更的若干規定》. After quoting those provisions, Professor Wang asserted without giving reasons in paragraphs 7 and 8 of his report that the 1^st Defendant was under an obligation to procure the approval. He wrote in paragraphs 7 and 8 of his report:

「 7. … 根據這些法律和規定，毫無疑問，申請報批的責任是由華閩一方承擔的。

8. 根據最高法院的判決和大陸的有關規定，完全可以認定，合同無效是由於華閩公司未將上述三份協議報送審批機關審批造成的，因此，合同無效的責任(或者過錯)應當由完全由華閩公司承擔。」

[Translation]

“ 7. … according to these law and regulations, there is no doubt that the 1^st Defendant bears the obligation of applying for approval.

8. According to the judgment of the Supreme People’s Court and the regulations of the Mainland, it can be absolutely confirmed that the reason for the agreements being of no effect was caused by failure on the part of the 1^st Defendant to present the three agreements to the relevant authorities for seeking approval. Accordingly, the consequence of the agreements being of no effect (or the fault) should be borne by the 1^st Defendant.”

Despite references to the three statutory provisions, Professor Wang’s opinion or conclusion is not a reasoned one. It is just a bare assertion. A closer examination of the statutory provisions does not support his conclusion.

102.Article 10 of Law of the People’s Republic of China on Foreign Capital Enterprises《中華人民共和國外資企業法》provides:

「第十條外資企業分立、合併或者其他重要事項變更，應當報審查批准機關批准，並向工商行政管理機關辦理變更登記手續。」

[Translation]

“ 10. In the event of separation, merger or other major changes, an enterprise with foreign capital shall report to and seek approval from the authorities in charge of examination and approval, and register the change with an administrative authority for industry and commerce.”

This legislation was adopted by the National People’s Congress in 1986. It is of the nature of a superior legislation. The Chinese version is devoid of a subject. Article 10 imposes the obligation to seek approval in certain circumstances but does not identify the party on whom the obligation is imposed. But in the Chinese language, the subject could be readily read in as the enterprise in which the specified events occurred. This is what is provided in the English version, though the English version is not authentic. In fact, this is the way the Defendant’s expert, Mr Bai, interpreted article 10. I agree with that interpretation.

103.Article 22 of Detailed Rules for the Implementation of the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises《中華人民共和國外資企業法實施細則》provides:

「第二十二條外資企業註冊資本的增加、轉讓，須經審批機關批准，並向工商行政管理機關辦理變更登記手續。」

[Translation]

“ To increase or assign the registered capital of a wholly foreign-owned enterprise, the approval of examining and approving authorities must be obtained and procedures for registration of the change must be undertaken with an administrative authority for industry and commerce.”

This legislation is of the nature of a subsidiary legislation approved by the State Council and issued by the Ministry of Foreign Economic Relations and Trade in 1990. Similarly, this article imposes an obligation to seek approval and registration in cases where the registered capital of an enterprise with foreign capital is increased or where its shares are to be transferred. The article is written in the passive voice without a subject. The party on whom the obligation is imposed is not identified. For similar reasons, I agree with Mr Bai’s interpretation that the obligation is imposed on the foreign enterprise the capital of which is to be increased or the shares of which are to be transferred.

104.Article 9 of Certain Regulations on Changes to Shareholders’ Rights in Foreign Investment Enterprises《外商投資企業投資者股權變更的若干規定》 provides:

「第九條由於本規定第二條(一)、(二)項原因需要變更股權的，企業應向審批機關報送下列文件：…」

[Translation]

“ 9. If shareholders’ rights are required to be changed due to the reasons in items (1) or (2) of Article 2 of these Regulations, the enterprise must submit the following documents to the examination and approval authority: …”

This legislation is of the nature of a subsidiary legislation promulgated by Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce in 1997. It provides for specific issues relating to changes to shareholders’ rights in foreign investment enterprises. This article expressly imposes the obligation to seek approval on the foreign enterprise involved. Though of the nature of a subsidiary legislation, it clearly reflects the intention of the legislature in article 10 of Law of the People’s Republic of China on Foreign Capital Enterprises《中華人民共和國外資企業法》.

105.I accept Mr Bai’s interpretation that under these statutory provisions the obligation to procure the necessary approval for transfer of the shares in FCL is on the enterprise concerned, i.e. FCL and not the 1^st Defendant. In fact, in respect of the transfer of the shares in FCO to COM, it was FCO which procured the necessary approval.

106.As a matter of Hong Kong law and as between the Plaintiff and the 1^st Defendant, the question of which party bears the obligation of procuring the approval is a matter of agreement under the First Laser Agreement. If the agreement is silent, the court may imply such term as will give effect to the presumed intention of the parties by giving business efficacy to the First Laser Agreement in accordance with The Moorcock principle, (1889), 14 PD 64. In The Moorcock, Bowen LJ explained the nature of the implication at 68 to 70 as follows:

“ I believe if one were to take all the cases, and there are many, of implied warranties or covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention of the parties, with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have. In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men. … The question is what inference is to be drawn where the parties are dealing with each other on the assumption that the negotiations are to have some fruit, and where they say nothing about the burden of this unseen peril, leaving the law to raise such inferences as are reasonable from the very nature of the transaction.”

107.Various formulations for the Moorcock test have been adopted in the cases that followed. In Reigate v Union Manufacturing Co, [1918] 1 KB 592, Scrutton LJ emphasised that a term could only be implied if it is necessary in the business sense to give efficacy to the contract such that if at the time the contract was being negotiated some one had said to the parties: “What will happen in such a case?” they would both have replied: “Of course so and so will happen; we did not trouble to say that; it is too clear.” In Shirlaw v Southern Foundries (1926) [1939] 2 KB 206, Mackinnon LJ adopted the officious bystander test, i.e. a term will be implied if it is so obvious that if it was suggested to the parties to include it in their agreement during their negotiation they would have said “it goes without saying.” A more recent statement of the test is to be found in Lord Pearson’s speech in Trollope & Colls v North West Metropolitan Regional Hospital Board [1973] 2 All ER 260. His Lordship emphasised that the term must be so obvious that it goes without saying that the parties must have intended that it formed part of the contract. His Lordship said at 268:

“ An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: It is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them; it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which although tacit formed part of the contract which the parties made for themselves.”

108.In the present case, the Plaintiff and the 1^st Defendant had a long standing business relationship. Ngan who represents the Plaintiff was described as a patriotic businessman. He is a member of the National Committee of the Chinese People’s Political Consultative Conference (中國人民政治協商會議全國委員會委員) and a member of the Standing Committee of the Fujian Provincial Committee of the Chinese People’s Political Consultative Conference (福建省人民政治協商會議常務委員會委員). He has extensive business experience in the PRC and is thoroughly familiar with the business environment and relevant governmental regulations in the PRC. He was aware of the requirement for governmental approval for the transfer of the shares in FCL. The 1^st Defendant is a window company of the Fujian Provincial People’s Government and was familiar with such requirements. The three agreements stipulated that the parties would instruct lawyers in the PRC to handle the share transfer. In a share transfer transactions such as this in the PRC, approval by the authorities is a necessary condition. To give business efficacy to the transaction a term must be implied as to which party would procure such approval to be obtained. If someone had asked this question, Ngan and his counterpart in the 1^st Defendant who must be totally familiar with the three statutory provisions referred to above, must have answered “FCL will obtain the approval and as the 1^st Defendant is the sole shareholder who had control and management of FCL, it goes without saying that the 1^st Defendant will procure the approval”. I therefore reach the same conclusion as did Professor Wang, but on a different basis which accords with reasoning under PRC law, the opinion of the Defendant’s legal expert in PRC law and also in accordance with the applicable legal principles under the law of Hong Kong. There is no evidence from the 1^st Defendant that it has discharged or attempted to discharge or otherwise frustrated from discharging the burden of procuring the approval such that it may be excused from transferring the shares in FCL. I am therefore satisfied that the Plaintiff has proved breach of the First Laser Agreement by the 1^st Defendant.

Proof of loss or damage

109.Mr Warren Chan SC argues that the Plaintiff has failed to discharge its burden of proving loss and damage. He submits that in order for the Plaintiff to prove its loss and damage resulting from such breach on the part of the 1^st Defendant, the Plaintiff should have adduced evidence on the market price of the 51% shares in FCL at the contractual time for delivery less the contract price but the Plaintiff has failed to plead either the contractual time for delivery or the market price of the FCL shares thereat.

110.Mr Chan Chi Hung SC argues that the contractual time of delivery is the same as the time of breach. He refers to paragraph 25 of the Statement of Claim in which the Plaintiff pleads:

“ 25. In breach of the Agreement and/or the Trust, the 1^st Defendant has failed to transfer and register the 51% of the shares in FCL beneficially belonging to the Plaintiff (hereinafter “the Plaintiff’s Shares”) to and in the name of the Plaintiff, but has made such transfer impossible by the following conduct.”

The conduct referred to in paragraph 25 which rendered the transfer impossible was the sale to JDS. The pleaded breach of contract was the wrongful sale of the 51% of the shares in FCL to JDS and not non-delivery of the shares or failure to obtain approval or transfer of the shares as such.

111.The First Laser Agreement does not provide for the time of delivery of the 51% FCL shares. Time of delivery is therefore not of the essence of the agreement. The shares may be delivered at such time as may be mutually agreed. The transfer has to be approved by the authorities. The evidence shows that the parties had been progressing towards obtaining such approval, at least up until Kong was removed as the deputy chairman of the board of directors of the 1^st Defendant in May 1998. The progress was delayed because of under-capitalisation of FCL. The registered capital of FCL had been reduced from US$15.15 million to US$7 million in March 1998. However, US$2.5 was not yet paid up. Not until this capital requirement was met could the share transfer be approved by the authorities. On 19 October 1998, the 1^st Defendant proposed to COM to transfer the profits of FCO and FCL to FCL for the purpose of enabling FCL to fulfil its capital requirement. On 21 October 1998, the Plaintiff agreed subject to a written confirmation from FCL that the capital was jointly invested by the Plaintiff and the 1^st Defendant. Since then the communication between the parties on this issue discontinued and FCL was sold to JDS four months later. From the First Laser Agreement and the conduct of the parties at least up to October 1998, time of delivery of the shares in FCL was not of the essence of the agreement. The shares in FCO were duly transferred in March 1997 in accordance with the First Laser Agreement. Ngan and his camp were treated by the 1^st Defendant and FCL as shareholders in FCL up until the sale of the shares in FCL to JDS. The parties were working out means to solve the under-capitalisation problem of FCL to enable approval for the transfer to be obtained. I find that the agreement between the parties as to the time of delivery of the FCL shares was that the shares were to be delivered at such time as was mutually agreed after the necessary approval had been obtained. However, when the 1^st Defendant entered into agreement to sell its shares in FCL to JDS, it evinced an intention no longer to be bound by the First Laser Agreement. The Plaintiff is entitled to accept that breach and to treat the date of sale to JDS under that agreement as the date of the 1^st Defendant’s breach of the First Laser Agreement. It is therefore appropriate for the Plaintiff’s loss and damage to be assessed as at that date. I also accept Mr Chan Chi Hung SC’s submission that the price of sale is the best evidence of the market price of the share at the time of breach. The purchase price having been fully paid by the Plaintiff, the Plaintiff is entitled to 51% of the total consideration of the sale to JDS, i.e. US$30.6 million.

Public policy and comity

112.In answer to the Plaintiff’s argument on estoppel by convention, Mr Warren Chan SC argues that as a matter of public policy, the Hong Kong Court should not recognise the Plaintiff’s beneficial interest in the FCL shares, whether by way of recognising the First Laser Agreement or under the estoppel argument. Mr Chan Chi Hung SC argues that in the absence of a pleaded defence of illegality or breach of statute or public policy of Hong Kong, this defence should not be considered. However, in view of the judgment of the Supreme People’s Court and the factual circumstances of this case, particularly that the subject matter is shares in a PRC company, I think this defence should be explored and if appropriate leave will be granted for the pleading to be amended.

113.Mr Warren Chan SC refers to Kuwait Airways Corpn v Iraqi Airways Co [2002] 2 AC 883 at 1108 in which Lord Hope of Craighead emphasized at paragraph 138 that a judge should be slow to refuse to give effect to the legislation of a foreign state in any sphere in which, according to accepted principles of international law, the foreign state has jurisdiction. Lord Hope of Craighead said at paragraph 138, quoting Lord Cross of Chelsea in Oppenheimer v Cattermole [1976] AC 249 at 277-8:

“ 138. … As Lord Cross recognized in Oppenheimer v Cattermole [1976] AC 249 at 277-278, a judge should be slow to refuse to give effect to the legislation of a foreign state in any sphere in which, according to accepted principles of international law, the foreign state has jurisdiction. Among these accepted principles is that which is founded on the comity of nations. This principle normally requires our courts to recognise the jurisdiction of the foreign state over all assets situated within its own territories: see Lord Salmon, at p 282. A judge should be slow to depart from these principles. He may have an inadequate understanding of the circumstances in which the legislation was passed. His refusal to recognize it may be embarrassing to the executive, whose function is so far as possible to maintain friendly relations with foreign states.”

114.It is the “one country, two systems” concept which enables Hong Kong to treat the PRC legal system and its judicial decisions as those of a foreign jurisdiction. Despite that, because of the constitutional status of Hong Kong vis-à-vis the PRC, the above dicta must apply with much stronger force and comity has a much stronger tie. The FCL shares are shares of a company incorporated and situated in the PRC. I fully appreciate the embarrassment I may cause to the Chief Executive if I do not, except on compelling and valid legal basis, recognise the jurisdiction of the Supreme People’s Court over the FCL shares situated within the PRC. There is no dispute that the transfer of the FCL shares required governmental approval under article 10 of Law of the People’s Republic of China on Foreign Capital Enterprises《中華人民共和國外資企業法》and the other related statutory provisions. I accept Mr Bai’s legal opinion that the legislative rationale for these statutory provisions was to protect the economic and legal order in the PRC. But I am unable to accept Mr Bai’s opinion that giving effect to the Plaintiff’s beneficial interest in 51% of the shares in FCL would be damaging to the public interest of the PRC. This is because the sale of the entirety of the shares in FCL, albeit to another purchaser, was approved. If the sale of the entirety of the shares did not raise any public interest issue, it is impossible to see how the sale of 51% of the FCL shares to the Plaintiff could be damaging to the public interest of the PRC, especially as the sale to the Plaintiff was a sale to an enterprise subject to the ownership and control of a patriotic businessman as contrasted to the sale to JDS which was to a truly foreign enterprise. Mr Bai’s opinion on this issue is only an opinion of fact which I am entitled, for the above reasons, to differ.

115.On a proper consideration of all the circumstances of the case, I do not think giving effect to the First Laser Agreement and giving effect to the Plaintiff’s beneficial interest in 51% of the shares in FCL would offend comity with the PRC. There is no dispute that the issue before the Fujian People’s Higher Court and the Supreme People’s Court was whether the three agreements were of no effect according to the law of the PRC. That an agreement is of no effect under the law of the PRC does not mean the agreement is of no consequence whatever. It is the common opinion of the experts of both sides that under such circumstances the parties will be restored (返還) to their pre-contract position and that the party at fault (過錯) is liable to pay compensation to the other party. “Fault” is to some degree synonymous with “breach”. The difference is only one of degree under the two different systems of law. Whether the payment is called “compensation” under PRC law or “damages” under Hong Kong law is a matter of terminology under the two different systems of law. Similarly, how that compensation is assessed under PRC law or Hong Kong law is also a matter of quantum under the two different system. What is common to the two systems is that the party at fault is liable to pay compensation. In this regard, it is important to note that the issue before the Supreme People’s Court was whether the three agreements and the 1998 Memorandum were of no effect and the further issue of whether any party was at fault was never before the court. Any decision of this Court on the further issue that any party was at fault or that neither party was at fault would not offend comity.

116.Though I have rejected Professor Wang’s opinion that the 1^st Defendant was under a statutory obligation to procure the approval, I have no difficulty to find that such an obligation could be implied into the First Laser Agreement as a matter of Hong Kong law. It is open to me to presume the same is true under PRC law as FCL was under a statutory obligation to procure the approval and the 1^st Defendant was the only shareholder and solely had control and management of FCL. Thus, under PRC law, the 1^st Defendant was at fault in not procuring the approval and is liable to pay compensation. A finding of liability against the 1^st Defendant is consistent with the law of the PRC. The quantum under the two systems may be significantly different. Such difference would be accommodated under the principle of comity as comity is reciprocal.

117.As for the question of public policy, I think it is the public policy of the forum which counts. There is, as Mr Chan Chi Hung SC rightly points out, no plea that enforcement of the First Laser Agreement is contrary to the public policy of Hong Kong. In any event, there is no argument on how enforcement of the First Laser Agreement would be contrary to the public policy of Hong Kong. The best one could think of is that because of the home consideration a contravention of the public policy of the PRC is as much a contravention of the public policy of Hong Kong. As I have already indicated, it is difficult to see how a sale of 51% of the shares in FCL to an enterprise subject to the ownership and control of a patriotic businessman would contravene public policy if the sale of 100% of the shares to a truly foreigner would not. The 1^st Defendant had agreed to sell the shares in FCO and FCL and had received its consideration in full but had only partly performed the contract by transferring the shares in FCO. This is an obvious case of a state-owned corporation while in the progress of performing the balance of its obligation in transferring the shares in FCL, took advantage of its own default by not obtaining the necessary approval when it realised that the value of the shares in FCL had been significantly enhanced by the Project invested by the Plaintiff and then unconscionably sold all the shares of FCL in breach of its contractual obligation for its own benefit. There is really no question of public policy, whether of Hong Kong or of the PRC being involved. If the Hong Kong Government or a statutory body in Hong Kong is in breach of contract, there is no public policy to protect it from the consequences of breach. Furthermore, the Court will not condone such unconscionable conduct or countenance such commercial immorality. I think the attitude of the courts in the PRC would be the same. I therefore conclude that giving effect to the First Laser Agreement or to the Plaintiff’s beneficial interest in the shares in FCL is not contrary to the public policy of Hong Kong or of the PRC. Accordingly, on the contractual claim, the Plaintiff is entitled to an award of US$30.6 million against the 1^st Defendant.

The proprietary claim

118.The Plaintiff’s case on the proprietary claim is that having paid the full purchase price for 51% of the shares in FCL, the Plaintiff acquired an equitable interest in 51% of the shares in FCL held by the 1^st Defendant, which were then held on constructive trust for the Plaintiff’s benefit. The sale of the 51% of the shares in FCL without the Plaintiff’s consent or knowledge by the 1^st Defendant constituted a breach of contract as well as a breach of trust. The Plaintiff, therefore, has a proprietary claim for the proceeds of sale attributable to 51% of the shares in FCL and may trace the same into whatever they have become. The Plaintiff also has a proprietary claim against whoever in possession of the proceeds of sale other than a bona fide purchaser for value without notice of the Plaintiff’s interest.

119.These are trite principles applicable to sale and purchase of land or interest in land: see for example Rose and Others v Watson (1864) HL Cas 672 and 683. The principles also apply to unique property or contracts which are specifically enforceable or under circumstances where compensation by way of damages would not be adequate: see for example Stucley v Kekewich [1906] 1 Ch 67 at 79-80, Sky Petroleum Ltd v VIP Petroleum Ltd [1974] 1 WLR 576 at 578H and Verrall v Great Yarmouth Borough Council [1981] 1 QB 202 at 220F-221B. Mr Chan Chi Hung SC submits that the principles are equally applicable to sale and purchase of shares in private companies engaging in specialized business activities, such as FCO and FCL. He quotes the case of Chattey and another v Farndale Holdings Inc and others [1997] 1 EGLR 153 in support of his proposition. But, that case was about sale and purchase of land. However, Mr Warren Chan SC does not argue otherwise.

120.Shares in a company are a peculiar type of property. They are choses in action. Shares are a bundle of rights in a company to which the share certificate relates. The most widely quoted definition of a share is that of Farwell J in Borland’s Trustee v Steel [1901] 1 Ch 279 at 288:

“ A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with [section 20 of the Companies Act 1948]. The contract contained in the articles of association is one of the original incidents of the share. A share is not a sum of money … but an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of a more or less amount.”

Very often, shares are not regarded as specific goods. A contract to sell shares need not be for the sale of specific shares identified at the time the contract is made. In fact, all contracts made on the Hong Kong Stock Exchange are for the sale of unascertained shares and a seller fulfils his obligations by delivering a transfer of any shares which conform to the description in the contract. For the sale of unascertained shares, it is difficult to see how an equitable interest in shares could arise. In the case of sale of specific shares, the equitable title to them passes to the purchaser at the time of the contract, and until the legal title is transferred by registration in the register of members, the seller holds the shares as a bare trustee for the purchaser: see Hawks v McArthur [1951] 1 All ER 22 at 26. If a contract is made for the sale of shares which are not identified in the contract; the equitable title passes to the purchaser only when the seller appropriates particular shares to the contract. That usually takes place when the seller executes the transfer form identifying the shares by number: see Re London, Hamburg and Continental Exchange Bank, Ward and Henry’s Case (1867) 2 Ch App 431, per Cairns, LJ at 438.

121.The FCL shares sold under the three agreements were not specific shares and there is no evidence of appropriation by the 1^st Defendant of any of its FCL shares to the First Laser Agreement. However, the 51% of the FCL shares to be transferred to the Plaintiff are unique. They are shares in a private company and all the shares in FCL were held by the 1^st Defendant. The 51% shares in FCL sold to the Plaintiff are part of an identifiable whole. They represent the Plaintiff’s partnership rights against the only other partner, i.e. the 1^st Defendant who was holding the remaining 49% of the shares in the company. I am prepared to hold in the circumstances, that the equitable interest in the shares passed to the Plaintiff on 13 March 1998 when the parties signed the 1998 Memorandum acknowledging that the purchase price had been fully paid. With effect from that day, the 1^st Defendant held 51% of the whole of its shareholding in FCL under a constructive trust for the benefit of the Plaintiff. Alternatively and at the latest, when the 1^st Defendant executed the transfer of all the FCL shares to JDS, it must be deemed to have appropriated the particular shares to the First Laser Agreement along with the appropriation of all the shares in FCL for the purpose of completing the sale to JDS. The Plaintiff’s equitable interest crystallized at the very moment the 1^st Defendant effected the transfer of the FCL shares to JDS.

122.It is the 1^st Defendant’s defence that under the lex situs of the shares, the transfer could not be effected unless approval from the authorities has been obtained. Mr Warren Chan SC argues that there is no evidence that such approval would be forthcoming. I think whether such approval would be granted is irrelevant. Under Hong Kong law, the 1^st Defendant held 51% of the shares in FCL as a constructive trustee for the Plaintiff until such time as the approval would be granted and the legal title vested in the Plaintiff or as in the facts of the present case until the 1^st Defendant sold all the shares in FCO to JDS when it continued to hold 51% of the proceeds of sale on trust for the Plaintiff.

123.Mr Chan Chi Hung SC submits that as the Plaintiff’s shareholding was the majority shareholding, the Plaintiff is entitled to more than 51% of the proceeds of sale under the principle in Denekamp v Pearce (Inspector of Taxes) [1998] STC 1120 at 1127J-1128A. In that case, a discount of 66% was applied to a minority shareholding of 24%. Mr Chan Chi Hung SC also refers me to Caton’s Administrators v Couch (Inspector of Taxes) [1995] STC (SCD) 10 in which a discount of 50% was applied to a minority shareholding of 14.20%. He submits a discount of 30% ought to apply to the 1^st Defendant’s minority shareholding. The discount for minority interest in those cases cited were justified on the basis that the taxpayer only had a very small slice in the business. In the present case, the shareholding ratio is 51:49. The parties were effectively of equal strength. I am not prepared to apply any discount.

124.The 2^nd Defendant is a window company of the Fujian Provincial People’s Government. It is the conduit of the 1^st Defendant for the receipt and transfer of the proceeds of sale. There is no dispute that it is controlled and managed by the 1^st Defendant or by the same persons as those in control of the 1^st Defendant. As such, it has full knowledge of the 1^st Defendant’s breach of trust and that part of the proceeds it received from the sale of the FCL shares to JDS is property held on trust for the benefit of the Plaintiff. The 2^nd Defendant also becomes a constructive trustee of the Plaintiff in respect of 51% of the proceeds of sale.

125.In the circumstances, in respect of the Plaintiff’s proprietary claim, the Plaintiff is entitled (1) as against both the 1^st and 2^nd Defendants, to the declaration sought under Clause (A) of its claim; (2) as against the 1^st Defendant only, the remedies sought under Clause (C) of its claim; and (3) as against the 2^nd Defendant only, the remedies under Clause (D) of its claim.

The Project

126.The Plaintiff’s claim in respect of the Project is that it invested US$410,000 and RMB 1,000,000 in the Project and it paid Wang Hongrui additional remuneration of HK$8,000 per month for his work in the Project. The defence is just one of putting the Plaintiff to strict proof. However, Ngan’s evidence was not seriously challenged. The documents show that US$500,000 was remitted from COM to Casix Inc on 12 August 1997 and two sums in the amount of RMB 500,000 were acknowledged by FCL as having been received from COM on 31 October 1997. The documents also show that on 7 April 1998 Wang Hongrui requested Ngan to remit US$100,000 to Casix Inc and Casix Inc acknowledged receipt of the money from COM on 1 May 1998. Though the money was remitted by COM, it was not disputed that the money came from Ngan’s camp. There were numerous correspondences from the 1^st Defendant and FCL confirming that the investment came from Ngan’s camp. The best evidence relating to the Project is the agreement of the parties as recorded at the meeting on 3 October 2000 in which the parties agreed that Ngan provided the capital for the research and development while FCL provided the manpower and facilities for the subsequent product development and sale. In the light of the evidence, though the payments were made by COM, I accept that they were made at the direction of the Plaintiff and were payments by the Plaintiff.

127.Mr Warren Chan SC’s submission is that the proper defendant to the claim in respect of the Project is FCL and not the 1^st Defendant, though the 1^st Defendant was at the material time the sole shareholder of FCL. It is true that as the sole legal owner of FCL, the 1^st Defendant had the benefit of the Plaintiff’s investment in the Project and it realised the fruit of the Plaintiff’s investment when it sold all the shares in FCL to JDS. However, the money was received by FCL and the Project was held by FCL. The trustee of the Plaintiff’s funds and investment in the Project was FCL and not the 1^st Defendant. I find Mr Warren Chan SC’s submission unanswerable. The Plaintiff’s claim in respect of the Project must be dismissed.

128.However, the Plaintiff could find comfort in that the award under the proprietary claim or contractual claim would also include 51% of the enhancement in the value of the FCL shares as a result of the Plaintiff’s investment in the Project. If accepting the agreement of the parties as recorded at the meeting on 3 October 2000 that Ngan provided the capital for the research and development of the Project while FCL provided the manpower and facilities for product development and sale, the award probably includes a fair and significant part, if not the entirety, of the Plaintiff’s return under the Project.

conclusion

129.Accordingly, I enter judgment in respect of the Plaintiff. The Plaintiff is entitled:

(1) as against both the 1^st and 2^nd Defendants, to the declarations sought under Clause (A) of its claim;

(2) as against the 1^st Defendant only, damages for breach of contract assessed in the amount of US$30.6 million with interest from 2 September 2002 and the remedies sought under Clause (C) of its claim; and

(3) as against the 2^nd Defendant only, the remedies sought under paragraph (D) of its claim.

As some of the remedies may overlap, I therefore invite the parties to address me as to precise terms of the order sought.

130.I grant leave to the 1^st Defendant to withdraw its counterclaim for a declaration in respect of the three agreements and the 1998 Memorandum.

131.I make a costs order nisi that the 1^st Defendant shall pay the Plaintiff’s costs of the action with certificate for two counsel and that there be no order as to costs as against the 2^nd Defendant.

(Anthony To)
Deputy High Court Judge

Mr Chan Chi Hung SC and Mr Jeremy SK Chan, instructed by Messrs Johnson Stokes & Master, for the Plaintiff

Mr Warren Chan SC and Mr Law Man Chung, instructed by Messrs Paul, Hastings, Janofsky & Walker, for the Defendants

① Plaintiff's application for leave to amend ground (7) of the Amended Respondent's Notice granted by Court of Appeal. Please refer to CACV126/2008 dated 25 June 2010.
② Plaintiff's application for leave to amend its Respondent's Notice to add ground No (5) granted by Court of Appeal and leave to the Plaintiff to file a rejoinder granted by Court of Appeal. Please refer to CACV126/2008 dated 8 July 2010

Cites 1 case

Cases cited in this judgment

First Laser Ltd v. Fujian Enterprises (Holdings) Co Ltd and Another

HCA 4414/2001

High Court CFI30 Sep 2020

Other Judgments in This Case

Further hearings and rulings under HCA 4414/2001

First Laser Ltd. v. Fujian Enterprises (Holdings) Co. Ltd. and Another

High Court CFI12 Dec 2002

First Laser Ltd v. Fujian Enterprises (Holdings) Co Ltd and Another

High Court CFI28 Apr 2008

First Laser Ltd v. Fujian Enterprises (Holdings) Co Ltd and Another