Poon Hiao Yen v. Kwok Wood Yan and Others
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HCA 1813 / 2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1813 OF 2003
BETWEEN
Coram: Before Deputy High Court Judge Au in Court Dates of Trial: 22, 23, 31 July & 1August 2008 Dates of supplemental written submissions: 7 and 15 August 2008 Date of Handing Down Judgment: 13 October 2008
JUDGMENT
I. Introduction 1. Under an agreement in Chinese entitled “有關合作成立股票公司臨時協議書” and dated 18 August 2001 (“the Share Purchase Agreement”), Ms Poon (the Plaintiff) as purchaser paid Mr Kwok (the 1st Defendant) and his wife Ms Fong (the 2nd Defendant) as vendors HK$1,500,000 to purchase 1,500,000 shares in Tiffit Securities (Hong Kong) Limited (the 3rd Defendant) (“Tiffit”). At the time of the agreement, Mr Kwok and Ms Fong were the directors and only shareholders of Tiffit. 2. The 1,500,000 shares in Tiffit were never issued to Ms Poon. 3. By way of this action issued on 21 May 2003, Ms Poon asks for the repayment of HK$1,500,000 for total failure of consideration, or alternatively as damages for Mr Kwok and Ms Fong’s breach of the agreement. 4. Although accepting that no shares in Tiffit have been issued or transferred to Ms Poon, Mr Kwok and Ms Fong defend the claim on the following principal grounds:
5. In reply, Ms Poon in essence says that she had through her staff completed the questionnaire and returned the same to the accountancy firm as directed. Further, there was no question of not knowing to whom the shares should be issued, since it was always intended under the Share Purchase Agreement, and known to the parties, that the shares should be issued to her personally. II. Issues for trial 6. In light of the above[1], the issues for trial are thus:
III. Some procedural background 7. After the issue of the action, Ms Poon applied for summary judgment against Mr Kwok and Ms Fong. By an affirmation filed by Mr Kwok (also for and on behalf of Ms Fong) in opposing the application, they raised the same principal defences as set out above. 8. By an Order dated 1 December 2003, Chung J granted conditional leave to them to defendupon payment of HK$1,500,000 into Court. On 24 February 2004, Mr Kwok and Ms Fong made the payment into Court. 9. Since then, a Defence was filed by Mr Kwok and Ms Fong, and a separate Defence was filed by Tiffit. 10. In July 2006, SFC suspended the trading of Tiffit as a member of the Stock Exchange of Hong Kong Ltd (“the Stock Exchange”). On 24 July 2006, the SFC appointed KPMG as the Administrator to conduct an audit check on Tiffit’s accounts. These were prompted by SFC’s discovery of Tiffit’s failure to maintain the minimum requirement of liquid capital. 11. Subsequently, Tiffit went into provisional liquidation. Upon the appointment of the provisional liquidator, by an Order dated 28 February 2007 made by Master S Kwang, this action against Tiffit was stayed. The trial thus only concerns with Mr Kwok and Ms Fong. 12. In about July or August 2007, Mr Kwok was convicted and sentenced by the District Court to imprisonment for his unauthorized dealing with and misappropriation of the securities of Tiffit’s customers. Apparently, Ms Fong had by then left Hong Kong. 13. Since the issue of the action, Messrs John Ku & Co had been representing Mr Kwok, Ms Fong and Tiffit (before the action was stayed against it). 14. Just before the pre-trial review on 16 June 2008, Mr Kwok filed a notice to act in person. Messrs John Ku & Co also successfully applied to cease to act for Ms Fong. 15. Ms Fong did not appear at the first day of this trial. Apparently, Ms Fong is nowhere to be found. Mr Kwok also says he could not get in touch with her. 16. Given the above background, I am satisfied that Ms Fong should be aware of the proceedings against her and the trial date (since she was before the PTR still represented by her solicitors). I therefore direct that the trial should proceed notwithstanding her absence. 17. In these circumstances, only Mr Kwok appears in person at this trial to defend the claim[2]. IV. Background 18. Unless otherwise stated, the following are the uncontroversial background facts leading to the dispute. 19. By 2001, Mr Kwok had been in the securities trading and brokerage business for almost 30 years. After taking over his father’s membership with the Stock Exchange, Mr Kwok had since December 1990 been a registered securities dealer. He then started his own business under the name of Tai Fat Securities Company as a sole proprietor. 20. On 25 August 2000, he and his wife Ms Fong set up Tiffit as a limited company to take over the stock-broking business of Tai Fat, as the Stock Exchange at that time encouraged its members to incorporatise their securities trading and brokerage businesses. Mr Kwok and Ms Fong were the only shareholders of Tiffit, with Mr Kwok owning the majority shares. Ms Fong was also a registered dealing representative. 21. In 2001, Ms Poon was running a real estate agency called Sha Lung Real Estate Agent (“Sha Lung”) at a shop (“the Mongkok Shop”) at Mongkok. She had also been using part of the Mongkok Shop to carry on securities trading business as a branch of Whole Win Securities Ltd (“Whole Win Securities”). 22. However, in early 2001, Ms Poon and Whole Win agreed to part company in about 6 months’ time. 23. In about April or May 2001, Ms Poon’s friend Ms Suen Tze Kuen introduced Mr Kwok to Ms Poon to explore the possibility of setting up a branch of Tiffit at the Mongkok Shop. Ms Suen was a dealing representative with Whole Win Securities between 1992 and early 2001, and with Kingston Securities Ltd between February and August 2001. Ms Suen had become acquainted with Mr Kwok on social occasions. 24. In June 2001, Mr Kwok and Ms Poon came to an agreement (“the Branch Set Up Agreement”) to set up a branch of Tiffit at the Mongkok Shop. On 21 June, they signed an agreement in Chinese known as “有關設立分行的協議” on the mechanics and logistics of the setting up of the branch office. This agreement provided, inter alia, that (a) Ms Poon should purchase new equipment, such as monitors, telephone system and office furniture for the branch as and when necessary[3], and (b) Ms Suen would be appointed as the dealing director and branch manager of this branch[4]. 25. On 19 June 2001, Ms Suen was registered as a director of Tiffit. She started working for Tiffit in August 2001 and resigned from it in May 2003. 26. On 6 August 2001, about a year after its incorporation, Tiffit was issued the licence by the SFC to carry on securities broking and trading business. 27. On 18 August 2001, Ms Poon on the one hand and Mr Kwok and Ms Fong on the other hand entered into the Share Purchase Agreement. 28. The Share Purchase Agreement provided, amongst others, the following:
29. There is no dispute between the parties that under the terms of the Share Purchase Agreement, Ms Poon could unilaterally without any reason terminate it within 6 months, and upon such termination, Mr Kwok and Ms Fong would have to repay her whatever sums she had already paid within these 6 months under the agreement. 30. Ms Poon duly paid the initial HK$1,500,000 by way of a cheque with Tiffit as the payee upon signing the Share Purchase Agreement. The cheque was issued by Jamco Development Ltd (“Jamco”), a company owned by Ms Poon. Tiffit also immediately banked the cheque on the same day, which was a Saturday. 31. Mr Lai Wai Leung is an accountant, who had formerly worked for an accountancy firm known as Messrs Lam Lee & So, which had been engaged by Tai Fat and Tiffit as their auditors. Mr Lai had been assisting Mr Kwok to deal with regulatory matters concerning Tai Fat, and to set up Tiffit. 32. In 2001, Mr Lai was no longer working for Lam Lee & So but was employed by Lucky Securities Co Ltd as its Finance and Compliance manager. He however still handled Mr Lai’s file as a freelancer for Lam Lee & So. 33. On 12 September 2001[5], Mr Lai faxed to Mr Kwok a questionnaire prepared by Mr Lai. The content of this questionnaire (which was prepared under the letterhead of Lam Lee & So) was modelled upon the SFC’s requisite form required to be submitted by an applicant seeking approval to become a substantial shareholder of a registered person (such as Tiffit). 34. In about the middle of September 2001, Mr Kwok provided the questionnaire to Ms Poon through Ms Suen, and asked her (Ms Poon) to give the completed form back to the office of Lam Lee & So for the attention of Mr Lai. 35. Ms Poon says she had the questionnaire completed by her accounting clerk and returned it to the office of Lam Lee & So. Mr Kwok hotly disputes this, saying that Ms Poon did not return the questionnaire, which had made it impossible for him to submit the application to the SFC to approve Ms Poon’s becoming a shareholder of 1.5 million shares of Tiffit. 36. Ms Poon also says between September 2001 and March 2003, she had been orally chasing (by herself and through Ms Suen) Mr Kwok for the shares, but he had invariably provided various excuses to stall the matter. This is disputed by Mr Kwok, who says that instead he had been the one chasing up Ms Poon for the return of the questionnaire without any success. 37. In about November and December 2001, Mr Kwok told Ms Poon (and Ms Suen on different occasions) that there were negotiations underway between him and a potential purchaser to take over Tiffit. The takeover however eventually did not materialise. 38. In the meantime:
39. All these proposals to increase the issued capital of Tiffit were made by Mr Kwok. 40. The 1.5 million shares of Tiffit were however never issued to Ms Poon. 41. On 19 March 2003, Ms Poon through her solicitors wrote respectively to Mr Kwok, Ms Fong and Tiffit, stating Mr Kwok and Ms Fong’s breach of the Share Purchase Agreement in not causing the issue of the shares to her. In the letters, she demanded for the return of the HK$1,500,000, and threatened legal action if the sum was not repaid to her within 7 days of the letter. 42. On 25 March 2003, Tiffit wrote back to Ms Poon’s solicitors stating that (a) it was not a party to the Share Purchase Agreement, (b) Mr Kwok had informed the company that Ms Poon indicated at the signing of the Share Purchase Agreement that she had not made up her mind as to whether Jamco or she would be the registered shareholder, and (c) despite repeated requests by Mr Kwok, Ms Poon had failed to inform him the identified name of the transferee and to provide the necessary and essential information of the transferee. Ms Fong signed this letter for Tiffit. 43. On the same date, Mr Kwok and Ms Fong also through their solicitors replied to Ms Poon’s solicitors, rejecting any claim of their breach of the Share Purchase Agreement, and repeated the matters as stated in the Tiffit letter. 44. On 4 April 2003, Ms Poon’s solicitors replied to Mr Kwok and Ms Fong’s solicitors denying their allegations against Ms Poon. It was further pointed out in the letter that the requested information had been returned to Lam, Lee & So in about September 2001. 45. On 21 May 2003, Ms Poon brought the present claim against Mr Kwok, Ms Poon and Tiffit. Ms Poon’s case is that she accepted the breach of the Share Purchase Agreement by Mr Kwok and Ms Pooneither by way of her solicitors’ letter dated 19 March 2003 or by the issue of the writ in this action. V. Witnesses and the evidence The witnesses 46. Mr Kwok gives evidence himself. He has also called Mr Lai to give evidence at trial. Mr Lai’s witness statement was filed on 23 June 2008, about a month before the trial. 47. Ms Poon gives evidence herself. She has also called Ms Poon and one Ms Chan Yin Mui to give evidence. Ms Chan Yin Mui is said to be the messenger working for Ms Poon’s companies, who delivered the questionnaire to Lam, Lee & So. Chan Yin Mui’s witness statement was filed after the filing of Mr Lai’s witness statement. The evidence for Ms Poon Ms Poon’s evidence 48. Subject to the common background as set out above, Ms Poon’s relevant evidence in support of her case can be summarized as follows. 49. During the negotiations for the setting up of the branch at the Mongkok Shop, Mr Kwok had promised Ms Poon and Ms Suen that Tiffit had the ability to, and could accept margin account customers. After the Branch Set Up Agreement, Mr Kwok however told Ms Poon that Tiffit did not have enough cashflow to take on her then existing margin account customers from Whole Win. He then asked her to lend him HK$1,000,000 to HK$1,500,000 as Tiffit’s working capital. Ms Poon refused the request. 50. But in light of her need to transfer her existing margin account customers to Tiffit, after further negotiations, Ms Poon eventually agreed to inject funds into Tiffit by becoming a shareholder. Hence the signing of the Share Purchase Agreement. 51. On signing the Share Purchase Agreement, Mr Kwok also agreed that he would later provide her with the audited report of Tiffit for her to look at its financial position. 52. In mid September 2001, Ms Poon asked Mr Kwok for the audited report. Mr Kwok told her to liaise with Mr Lai of Lam, Lee & So. She did and told Mr Lai that she was the new shareholder of Tiffit, and asked Mr Lai to provider her with the audited report of Tiffit. Mr Lai initially said as she was not on Tiffit’s shareholders register, he could not provide her with the audited report. Upon Ms Poon’s further explanations, Mr Lai then said the audited report had been sent to Mr Kwok and she should ask Mr Kwok for it. When asked about when the shares would be issued to her, Mr Lai said he did not have any of her information, and if she was to become a shareholder of Tiffit, she would need to first fill in a form to be submitted to SFC. Mr Lai then said he would send the relevant form to Mr Kwok. 53. Later, after receiving the questionnaire from Ms Suen, Ms Poon asked her then accounting clerk Ms Chan Wai Suen[6] (“the accounting clerk”) to talk to Mr Lai on how to fill in the questionnaire. 54. After completing the questionnaire, the accounting clerk made a photocopy of it, and asked Ms Chan Yin Mui (the messenger) to deliver the copy to Lam, Lee & So. 55. Ms Chan returned to the office after delivering the questionnaire. The Staff of Lam, Lee & So stamped on a small piece of paper with the firm’s chop to acknowledge the receipt of the document. However, Ms Poon has not kept the receipt as she did not, and could not have thought at that time that this would be important. 56. In about November or December 2001, Mr Kwok asked Ms Poon to attend a dinner at a restaurant near the Mongkok Shop. Over the dinner, Mr Kwok told Ms Poon that there was a listed Mainland company negotiating to takeover Tiffit. He further said to her that if the takeover was successful, he would ask her withdraw from the shareholding and pay her back the HK$1,500,000. He also emphasized that she should not in any way interfere with this takeover transaction. He said that, after the takeover, the Mongkok Shop could still continue to operate as Tiffit’s branch office. Ms Poon indicated to Mr Kwok that she had no objection to what he had said, as long as he would pay her back HK$1,500,000. 57. Later in about February and March 2003, Ms Poon enquired with Mr Kwok over the phone about the progress of the takeover. Mr Kwok said he was waiting for the purchaser’s Beijing representative to come to Hong Kong to sign the documents. 58. At the same time, since she had not heard of any progress on the issue of the shares:
59. Further, given the lack of progress in relation to the issue of the shares, and Mr Kwok’s failure to provide her with Tiffit’s audited accounts:
60. Ms Poon then consulted her lawyers, and later issued the demand letters and this action against Mr Kwok, Ms Fong and Tiffit. 61. It was only after the start of the proceedings that she came to know about the various subsequent increases in the issued capital of Tiffit. She says she was not informed of and had never consented to the increases, other than the one provided for in the Share Purchase Agreement. Ms Suen’s evidence 62. Ms Suen’s evidence on the events leading to the signing of the Share Purchase Agreement is consistent with that of Ms Poon’s evidence. In particular, she confirms that:
63. Ms Suen further confirms in her evidence that:
Ms Chan’s evidence 64. Ms Chan has since 1999 been working for Ms Poon as a helper to deal with miscellaneous matters, including the work of a messenger. She says in her witness statement that some years ago in a hot day, she was working at the Mongkok Shop. The accounting clerk after filling in a document, handed her the same and asked her to deliver it to an accountancy firm with the name of “So”, the full name of which she could not remember now. The accounting clerk gave her a piece of paper with the name of the firm and its address written on it. She went and delivered the document to that firm, and the staff there stamped on that piece of paper with the firm’s chop to acknowledge the receipt of the document. She retuned to Mongkok Shop on that day, and gave the piece of paper to the accounting clerk. 65. When giving oral evidence in Court, she says she went to that particular address of Lam Lee & So that morning before coming to Court, and can confirm that it is the same place that she went to 7 years ago as stated in the witness statement. The evidence for Mr Kwok Mr Lai’s evidence 66. Mr Lai’s relevant evidence can be summarized as follows. 67. In mid September 2001, Mr Kwok informed Mr Lai that Tiffit would have a new substantial shareholder. He asked Mr Lai to assist in dealing with the necessary procedures. 68. Accordingly, Mr Lai prepared the questionnaire by copying the questions from the SFC’s relevant form downloaded from SFC’s website. The questionnaire was not the proper form to be submitted to SFC for its approval. The questionnaire was intended only for Ms Poon to provide him with the necessary initial information. After receiving the information, he would still have to do follow-up works such as filling in the SFC’s form, and to request for and receive additional information and necessary supporting documents from Ms Poon. 69. He gave the questionnaire to Mr Kwok to be passed on to Ms Poon. However, after that, he had not received the completed questionnaire from Lam, Lee & So. 70. He had once enquired with Mr Kwok as to the progress of the questionnaire, and as requested by Mr Kwok, he had called Ms Poon to ask for the progress. He could not remember whether he had spoken to Ms Poon or her staff. He also could not remember what was discussed over the telephone conversation. On cross-examination and in answering questions from this Court, he accepts that he might have discussed with Ms Poon or her staff on the contents of the questionnaire and how to complete it. He however could not remember what was the reply when he asked about the progress of the questionnaire. 71. He says at paragraph 6 of his witness statement that Ms Poon’s evidence[7] about asking him for the audited reports of the Tiffit is untrue and could not have been possible, since at that time Tiffit did not have any audited or financial reports, as it was only issued with the licence to operate on 6 August 2001. 72. During examination in chief, he also says the information provided by Ms Poon in the questionnaire is inadequate. Ms Poon has also failed to provide the necessary supporting documents with the questionnaire. As such, this would not have been adequate for the purpose of filling in the SFC’s form and submitting it for approval. If he had received it in September 2001, he would have to ask Ms Poon (or her staff) to provide further information and supporting documentations. 73. On cross-examination, he accepts that if Lam, Lee & So had failed to send to him the questionnaire due to an over-sight, he would not have known. He however says that there was no reason why Lam, Lee & So would have wanted to keep the questionnaire. Mr Kwok’s evidence 74. Mr Kwok’s evidence is in substance as follows. 75. After entering into the Branch Set Up Agreement, Ms Poon suddenly asked to invest in Tiffit as a shareholder. He believed she so suggested because she did not want to spend her own money in upgrading the facilities and equipment of the Mongkok Shop, and instead wanted to use the money to invest in the company, in which case she would be able to recoup it through the profits. He did not object to this suggestion as he welcomed the injection of capital so as to expand Tiffit’s operation. He however maintained that Ms Poon would not hold more than 50% of Tiffit’s shares. 76. He denies that (a) he tried to borrow money from Poon as Tiffit’s working capital, and (b) Tiffits lacked the necessary capital to obtain a licence to operate margin accounts trading. He says margin accounts trading at that time did not require SFC’s approval or licence. He also says Tiffit was in a very healthy financial position in around 2001 and 2002, since it had an issued capital initially of HK$10,000,000, which was later increased to HK$15,000,000. 77. After giving the questionnaire to Ms Poon via Ms Suen, he had repeatedly orally asked Ms Poon about the questionnaire, and she simply said she would complete and return it later. 78. Mr Kwok denies that Ms Poon or Ms Suen had ever orally chased him up for the issue of the shares. He says the only time Ms Poon asked him about the shares was when she called him on about 4 March 2003. 79. On the other hand, although Ms Poon had not returned the questionnaire to him or Mr Lai, he had in effect treated Ms Poon as a shareholder. This is supported by the following:
80. Further, Ms Poon was fully aware of and consented to the various subsequent increases in the issued capital of Tiffit through Ms Suen, as her representative director of Tiffit. VI. Evaluation of the evidence Credibility of Ms Poon’s witnesses Ms Poon 81. I find Ms Poon a credible witness. My reasons are as follows:
82. I therefore accept Ms Poon’s evidence generally. Ms Suen 83. I also find Ms Suen credible, as she is a straightforward witness who answers question in a direct and non-evasive manner. Her evidence is consistent throughout and is not shaken under cross-examination. 84. Insofar as her evidence is consistent with and in support of Ms Poon’s evidence, for the same reasons for my acceptance of Ms Poon’s evidence, I also find Ms Suen’s evidence inherently more likely and credible. 85. I therefore similarly accept Ms Suen’s evidence generally. Ms Chan 86. In relation to Ms Chan’s evidence, I would not put any weight on it since:
87. However, I should make it clear that in not putting any weight on her evidence, I am not concluding that what she says in relation to the delivery of the document is untrue or incorrect. I am only saying that given the quality of the evidence, I am not satisfied that she could now recall the event, even if it did occur. I therefore would disregard her evidence in making my findings below. Credibility of Mr Kwok’s witnesses Mr Kwok 88. On the other hand, I find Mr Kwok not a credible and reliable witness for the following reasons. 89. First, he is generally evasive in answering questions. He takes long pauses and time before even answering simple questions. 90. Secondly, Mr Kwok could not offer any good reasons to explain why some essential parts of his oral evidence, if true, are not contained in his witness statement or affirmation. For example: He says at trial that he had repeatedly chased Ms Poon for the return of the questionnaire with no success. However, this important aspect of his evidence is nowhere to be found in his witness statement. He only said at paragraph 68 of his witness statement that “Mr Lai had told [Mr Kwok] that he had called Poon asking her to provide the information but he was ignored.”
91. Thirdly, his evidence is inherently incredible as it is contrary to common and commercial sense, contradicted by the contemporaneous documents or inconsistent with his own evidence:
92. Fourthly, Mr Kwok’s evidence of his continued oral demand of Ms Poon to return the questionnaire to him until March 2003 is unreliable and inherently incredible:
93. Finally, Mr Kwok’s evidence is contradicted by Mr Lai’s evidence:
94. For the above reasons, I reject Mr Kwok’s evidence insofar as it conflicts with that of Ms Poon and Ms Suen. Mr Lai 95. In relation to Mr Lai’s evidence, for the reasons below, I am of the view that his recollection of the events which occurred more than seven years ago is also inherently unreliable:
96. I however accept that if Mr Lai had in fact received the questionnaire from Lam, Lee & So, it would be unlikely that he could not have remembered it, as he would need to follow up the matter with various tasks. 97. On the other hand, Mr Lai accepts under cross-examination that if the questionnaire was not forwarded to him by the staff of Lam, Lee & So due to an oversight, he would not have known. As such, I do not find his evidence that he had not received the questionnaire necessarily in conflict with Ms Poon’s evidence that her accounting clerk had completed the questionnaire and returned it to Lam, Lee & So. 98. Therefore, subject to this qualification set out in paragraph 97 above, insofar as Mr Lai’s evidence is in conflict with that of Ms Poon’s, I would prefer Ms Poon’s evidence to his. VII. Finding of facts 99. Given my above assessment of the evidence, coupled with the above common background facts, on the balance of probabilities, I make the following factual findings relevant to my determination of the issues:
VIII. Determination of the issues Issue 1: Whether Ms Poon had returned the questionnaire as directed 100. Given my above findings of facts, I conclude that Ms Poon has proved on a balance of probabilities that she had completed the questionnaire and returned it to Lam, Lee & So, as requested by Mr Kwok. 101. As such, Ms Poon had carried out what she was required to do by Mr Kwok to enable him to follow up with the necessary procedures to facilitate the issue of the new shares in Tiffit to her. 102. The fact that for reasons unknown or unforeseen, the questionnaire did not reach Mr Lai did not, and should not, in my view prevent Mr Kwok (and Ms Fong) from performing their obligations under the Share Purchase Agreement to cause the issue of the shares to Ms Poon. It must be remembered that Mr Kwok asked Ms Poon to return the questionnaire to Lam, Lee & So for the attention of Mr Lai. This is a procedure prescribed by Mr Kwok, and Ms Poon complied with it. She could not be held responsible for Lam, Lee & So’s failure to forward the questionnaire to Mr Lai. 103. It was incumbent upon Mr Kwok to follow up the matter and to chase up with Ms Poon if he (or Mr Lai) had not received the questionnaire. This, as I have found, he had not done. 104. They were therefore in breach of the Share Purchase Agreement in failing to cause Tiffit to issue the 1.5 million shares to Ms Poon, and this was not caused by any default on the part of Ms Poon. Issue 2: whether the information provided in the questionnaire was inadequate to render Mr Kwok and Ms Fong unable to perform the Share Purchase Agreement 105. I accept Mr Lai’s evidence that the information already provided in the questionnaire alone was inadequate for the purpose of seeking SFC’s approval of Ms Poon’s becoming a substantial shareholder of Tiffit. 106. However, that per se did not in any way prevent Ms Kwok and Ms Fong from performing their obligations under the Share Purchase Agreement. This is so because:
107. I therefore conclude that the inadequacy of the information provided in the questionnaire did not per se prevent Mr Kwok and Ms Fong from performing their obligations under the Share Purchase Agreement. They could and should have followed up the matter with Ms Poon. Issue 3: Whether Ms Poon had said that she would inform Mr Kwok who the allotee of the shares would be, and had failed to so inform him so as to render Mr Kwok and Ms Fong unable to perform the agreement. 108. I have already found above that Ms Poon did not at the signing of the Share Purchase Agreement told Mr Kwok that she had yet to decide whether the shares should be issued to her or Jamco. 109. Thus, there is no question of her failure to inform Mr Kwok and Ms Fong who the allotee was to make it impossible for them to cause Tiffit to issue the shares. The Share Purchase Agreement provided expressly that it was Ms Poon who purchased the shares. Issue 4: Whether Mr Kwok and Ms Fong are still personally liable to repay the HK$1,500,000 or in damages for breach of the agreement when the sum was paid to Tiffit instead of them 110. There is no substance in this defence:
111. I therefore also conclude that the fact that the money was paid to Tiffit (in accordance with the terms of the agreement) but not Mr Kwok and Ms Fong is irrelevant to the question of whether Mr Kwok and Ms Fong were in breach of the Share Purchase Agreement. 112. Mr Kwok and Ms Fong were in breach of the Share Purchase Agreement in failing to cause the issue of the shares to Ms Poon, and are thus personally liable to Ms Poon for damages. 113. Alternatively, they are liable for the return of the purchase price for totally failure of consideration, which was paid to Tiffit at the request of Mr Kwok and Ms Fong. See: Chitty on Contracts (29th ed), paras 29-055 – 29-56. Issue 5: In light of the determination of the above issues, whether Mr Kwok and Ms Fong are liable to pay Ms Poon HK$1,5000,000 as damages or by way of restitution 114. In light of the conclusions I have reached for the above issues, I further conclude that:
IX. Conclusion 115. For the above reasons, Ms Poon succeeds in her claim against Mr Kwok and Ms Fong. 116. I therefore give judgment in favour of Ms Poon against Mr Kwok and Ms Fong, in that Mr Kwok and Ms Fong shall pay Ms Poon HK$1,500,000, with interest thereon at 1% above the prime rate quoted by the Hongkong and Shanghai Bank from time to time for the period from the date of the Writ to today, and thereafter at judgment rate until full payment. 117. There is no reason why costs should not follow the events. I further make an Order nisi that Ms Poon’s costs of this action be paid by Mr Kwok and Ms Fong, to be taxed if not agreed. Unless any of the parties applies to vary it in writing, the nisi Order shall be made absolute 14 days from today.
Mr. Peter WONG Ting-Kwong instructed by Messrs Li, Chow & Co. for Plaintiff. 1st Defendant, acting in person, present. 2nd Defendant, acting in person, absent. [1] Ms Poon does not dispute that at the material time under s. 26A of the Securities and Futures Commission Ordinance (Cap 24), approval was required to be given by the SFC for Ms Poon to become a more than 10% shareholding of Tiffit. [2] Although acting in person, Mr Kwok agrees to this judgment being written in English. [3] Clause 3(2) of the Branch Set Up Agreement. [4] Clause 4(1)(iii) of the Branch Set Up Agreement. [5] This is the date of the fax header appearing on the original of the questionnaire provided by Ms Poon at trial as the Plaintiff’s Exhibit P-1. The fax header bears the name and the fax number of Lucky Securities (where Mr Lai worked) as the sender. [6] According to Ms Poon, Ms Chan Wai Suen (the accounting clerk) left the employment of Sha Lung in October 2001, and Ms Poon has not been able to locate her to give evidence. Ms Poon produces the tax return of Ms Chan filed by Sha Lung to show that Ms Chan left the company in October 2001. Mr Kwok does not challenge this. [7] As set out in paragraph 15 of her witness statement. [8] As set out in SFC’s press release dated 18 August 2003 in relation to its successful prosecution of Tiffit of its violation of the requirements. |