King Wong Development Ltd v. Yat Fat Ltd and Others
Read the full judgment text of HCMP 658/2013 on BabelCite. This High Court CFI judgment was delivered on 9 January 2014.
1. The 1 st respondent (“ Yat Fat ”) was incorporated in Hong Kong on 10 January 1995 with a share capital of HK$10,000 divided into 10,000 shares of HK$1 each. According to Yat Fat’s various annual returns, their shareholders from March 2007 to April 2013 were as follows:
Cited by 8 cases · Cites 4 cases
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HCMP 658/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 658 OF 2013 _________________________
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_______________ J U D G M E N T _______________ I. INTRODUCTION 1.The 1st respondent (“Yat Fat”) was incorporated in Hong Kong on 10 January 1995 with a share capital of HK$10,000 divided into 10,000 shares of HK$1 each. According to Yat Fat’s various annual returns, their shareholders from March 2007 to April 2013 were as follows:
2.Li and Leung had been close personal friends for over 35 years. Li was involved in real estate business which included acquiring land (mainly in Lamma Island) for resale to potential property developers and for property development through different corporate vehicles either by the plaintiff (“King Wong”) or by entering into joint ventures with other investors/developers. 3.The project company for the Linkan Cooperation Project (麗嘉合作計劃, “Project”) referred to in the Transfer Agreement[1] and in other documents discussed below was Wealthy Honest Development Limited (“Wealthy Honest”). Its ultimate holding company was Eagle Faith Holdings Limited (“Eagle Faith”) which held a string of subsidiaries. The Project was a cooperation with Agile Property Holdings Limited (“Agile Property”), a Cayman Islands property development company publicly listed in Hong Kong that was to hold at least 60% interest in the Project through a BVI company Linkan Enterprises Limited (“Linkan Enterprises”).4.In a nutshell, the arrangement under the Project was for Wealthy Honest to purchase land from King Wong, Yat Fat and Lamma Island Holdings Limited (“LIHL”) for development, and such purchase would be funded by a loan to be made by Agile Property/Linkan Enterprises. II. BACKGROUND 5.Li claimed that in/about mid-February 2007, he on behalf of King Wong, Yat Fat, Leung and other investors negotiated with Agile Property to explore possible property development of certain land within DD7 and DD9, Lamma Island (“Development Area”) which eventually became the Project. 6.By a Share and Debt Transfer Agreement dated 29 March 2007 (股權及債權轉讓合同, “Transfer Agreement”), Leung and King Wong agreed inter alia as follows: “(1) 事緣
7.The purpose of the Transfer Agreement was to restructure Yat Fat for the Project under a joint venture agreement between Linkan Enterprises and Eagle Faith and its group of companies (clauses 1.1 and 1.4) whereby Wealthy Honest would acquire certain land held by Yat Fat (clause 1.5), and if the Project would go ahead and Linkan Enterprises would grant a loan to the borrower company Join Billion (億群發展有限公司), Leung would sell his 2,000 Shares (clause 1.2) and his HK$5,000,000 Leung Loan (clause 1.3) in Yat Fat to King Wong in exchange for (a) cash payment of HK$5,000,000 to be paid by King Wong within three working days of the advance of HK$220,000,000 (“Tranche A Loan”) in respect of the first instalment loan by Linkan Enterprises to Join Billion (“Tranche A Facility”) and (b) 3% shareholding in Eagle Faith (clauses 2.2-2.4). In short, upon completion under the Transfer Agreement, Leung would become a 3% shareholder of Eagle Faith and the Leung Loan of HK$5,000,000 would be repaid by King Wong, on the other hand King Wong would become holder of the Shares in Yat Fat. 8.Before the above restructuring was to take effect, the following conditions precedent had to be satisfied within six months of the Transfer Agreement, failing which the Transfer Agreement shall automatically lapse (clauses 5.1-5.2):
9.Clause 4.1 of the Transfer Agreement provided that Leung shall attend the offices of Messrs Terry Yeung & Lai (楊寶林，黎雅明律師行, “TYL”), solicitors designated by both parties, to sign the following documents within seven days of notice to be given by King Wong:
10.On 29 March 2007, 9,999 ordinary shares of Eagle Faith at HK$1 each were allotted, so the cumulative total paid-up share capital of Eagle Faith was HK$10,000. Of the 9,999 new ordinary shares of Eagle Faith, 7,987 and 300 shares were allotted to King Wong and Leung respectively, and the remaining shares were allotted to others.[5] It was provided in the Transfer Agreement that the allotment of 300 Eagle Faith shares to Leung was part of the consideration for the sale of the Shares in Yat Fat by Leung to King Wong.[6] 11.On the same day, various investors (ie King Wong, Fast Wealth International Limited (“Fast Wealth”), Leung and Yeung To Lai Omar (“Yeung”)) executed a Joint Venture Company Agreement (合資經營公司合同, “Eagle Faith Agreement”) that set out their respective rights and liabilities under the Project through being shareholders of Eagle Faith. 12.Clause 1.1 of the Eagle Faith Agreement defined the Project (麗嘉合作計劃) as “一個按附表 (3) 之備忘錄所述之合作計劃，合作雙方分別為[Linkan Enterprises]及[Join Billion];但一切以[Linkan Enterprises]及合資公司的代表律師草擬及同意的法律文件為依歸”. Clauses 2.1-2.2 provided that “合資公司” was Eagle Faith.13.The memorandum at schedule (3) of the Eagle Faith Agreement (“Memorandum”) provided as follows:
14.As seen from above, the Memorandum and the corporate chart in paragraph 4.1 thereof set out the parties having interests in the Project and the shareholding structure of those companies:
15.The Eagle Faith Agreement further provided as follows:
16.According to the Eagle Faith Agreement, the share capital of Eagle Faith were divided into 7,988 shares (79.88%) for King Wong, 1,518 shares (15.18%) for Fast Wealth, 300 shares (3%) for Leung, and 194 shares (ie 1.94%) for Yeung.[9] Further, it was agreed that various plots of land within the Development Area held by King Wong, LIHL and Yat Fat (which companies were controlled by the shareholders of Eagle Faith, and each of which agreed to procure their respective companies to complete the sale) were to be purchased and transferred to Wealthy Honest at an agreed price of HK$538.46 per sq ft (ie HK$7,000 ÷ 13).[10] The Eagle Faith shareholders would be entitled to share in the profits of the subsidiaries via declaration of dividends (clause 10). 17.By three separate sale and purchase agreements made by King Wong, Yat Fat and LIHL respectively with Wealthy Honest all dated 3 May 2007 (“SPAs”), these three companies respectively agreed to sell and Wealthy Honest agreed to purchase certain land in the Development Area (collectively, “SPA Land”), and completion was to take place on 6 June 2007:
18.In/about May 2007, pursuant to clause 4.1 of the Transfer Agreement, the following resolutions of Yat Fat (“Resolutions”) were executed in support of the transfer of the Shares by Leung to King Wong under the Transfer Agreement:
19.Pursuant to the “Tranche A Notice of Drawing” dated 31 May 2007 and issued by Join Billion to Linkan Enterprises (and confirmed/acknowledged by Straight Up and Wealthy Honest), the deal would be as follows:
20.On 13 June 2007, the Tranche A Loan of HK$220,000,000 (which was intended to be part of the funds for Wealthy Honest’s purchase of the SPA Land) was drawn by Linkan Enterprises in favour of various parties as directed by Join Billion.[13] Pursuant to a notice by Straight Up to Join Billion dated 13 June 2007, Straight Up confirmed acceptance of Join Billion’s application for allotment of 44,599,990 shares of US$1 each (which together with Join Billion’s existing 10 shares made up a total of 44,600,000 shares of US1 each), and directed payment of the consideration of HK$347,880,000 to the order of Wealthy Honest in such manner as shall be informed. 21.Pursuant to the Transfer Agreement, Wealthy Honest entered into three deeds with King Wong, Yat Fat and LIHL respectively (“King Wong, Yat Fat and LIHL Deeds” or collectively, “Deeds”) that contained directions by King Wong, Yat Fat and LIHL as to payment of the purchase price under the King Wong SPA, Yat Fat SPA and LIHL SPA respectively. 22.By a notice dated 13 June 2007 to Join Billion, Wealthy Honest directed that the sum of HK$347,879,999 (being payment for 44,600,000 shares of US$1 each in the capital of Straight Up) be paid to various parties pursuant to the Deeds. For the items of payment specified in such notice, items (1)-(5) in the total sum of HK$89,716,846.15, items (6)-(10) in the total sum of HK$52,188,230.77, and items (11)-(29) in the total sum of HK$205,938,276.92 were respectively the purchase price under the King Wong SPA, Yat Fat SPA and LIHL SPA. It was also directed under such notice that the Eagle Faith Loan in the sum of HK$127,843,353.84 would be paid to King Wong and the remaining balance of HK$36,645.16 be paid to Wealthy Honest. 23.Each of King Wong, Yat Fat and LIHL executed an assignment dated 13 June 2007 for sale of various plots of land in the Development Area under the King Wong SPA, Yat Fat SPA and LIHL SPA respectively (“King Wong, Yat Fat and LIHL Assignments” or collectively, “Assignments”), and each such assignment acknowledged receipt of the consideration paid by Wealthy Honest as purchaser in the respective sums of HK$89,716,846.15, HK$52,188,230.77 and HK$205,938,276.92 (clause 1). 24.Hence, the following conditions precedent under the Transfer Agreement had been fulfilled:
25.Pursuant to clause 4.1 of the Transfer Agreement, the following documents were executed in June 2007 at TYL’s offices:
26.The recitals of the Debt Assignment provided that:
27.Pursuant to the Debt Assignment, Leung also executed a notice of assignment of debt (債權通知書) dated 26 June 2007 addressed to Yat Fat by which he notified Yat Fat that his Leung Loan of HK$5,000,000 had been assigned to King Wong, and thereafter he no longer had any right or interest in such Leung Loan (“Assignment Notice”). On the same day, Yat Fat acknowledged receipt of such notice of assignment of debt. 28.According to Form D4 filed by Yat Fat on 16 October 2007, Leung resigned as director of Yat Fat which took effect on the same day. Since then, the directors of Yat Fat were Pu, Keung ad Li. 29.King Wong claimed they and Leung had performed their obligations under the Transfer Agreement for the completion of the transfer of the Shares that took place on 13 June 2007, and the Project did go ahead, so the conditions precedent under the Transfer Agreement had been fulfilled:
30.As seen below, Li claimed that King Wong sent the original transfer documents[17] to Yat Fat/Pu in July 2007, receipt of which was acknowledged by Yat Fat (as countersigned by Pu’s personal assistant Ms Cheung Hoi Yee Kanny (“Cheung”)) (“Receipt”),[18] and such transfer documents had all along been kept by Yat Fat/Pu. 31.In 2008, Leung (together with other shareholders of Eagle Faith, ie King Wong, Fast Wealth and Yeung) executed two further agreements to amend the Eagle Faith Agreement:
32.Under the Eagle Faith Agreement, Leung was given the option, exercisable within 119 months, to sell all his shares in Eagle Faith to King Wong at the total price of HK$15,000,000 (minus any bonus received) (clause 4.8, “Option”).[19] This was a special provision for Leung and not other shareholders of Eagle Faith. 33.Upon Leung’s request in mid-2008, King Wong did purchase 100 shares in Eagle Faith from Leung at the pro rata price of HK$5,000,000. On 2 September 2008, all shareholders (including Leung) executed the 2nd Project Amendment Agreement to amend clauses 4.2 and 4.8 for the Eagle Faith Agreement to reflect the transfer of 100 shares from Leung to King Wong. 34.The 2nd Project Amended Agreement provided as follows:
35.This was a partial exercise of the Option, which was governed by a Share and Debt Transfer Agreement (股權及債權轉讓合同) between King Wong and Leung dated 8 September 2008 (“2008 Eagle Faith Transfer Agreement”) whereby Leung agreed to sell 100 shares in Eagle Faith to King Wong at the consideration of HK$5,000,000. Clause 1.1 of the 2008 Eagle Faith Transfer Agreement defined “出讓股權” as “由[Leung]現在擁有在[Eagle Faith]的(其中)100股普通股(即1%股份)”. Clause 2 provided as follows:
36.By a letter dated 6 December 2012, King Wong’s solicitors Tong Kan & Co (“TKC”) wrote to Pu enclosing inter alia the Resolutions and requesting her in her capacity as company secretary of Yat Fat to update Yat Fat’s register of members to reflect the transfer of the Shares from Leung to King Wong. 37.On 12 December 2012, Pu’s solicitors Cheung, Chan & Chung (“CC&C”) replied declining such request on the ground that Pu as company secretary did not have authority to make entries in the register of members and asking King Wong to make proper application to Yat Fat’s directors. 38.On 14 December 2012, TKC wrote to CC&C referring to the Resolutions that recorded Yat Fat’s sanction of such transfer of the Shares and again requesting Pu to update Yat Fat’s register of members. In CC&C’s reply dated 18 December 2012, they refused King Wong’s request by challenging the effect of the Resolutions on the following grounds:
39.TKC by their reply dated 7 January 2013 again requested Pu to update Yat Fat’s register of members “[since Yat Fat] has through the unanimous resolution of all the shareholders of [Yat Fat] approved the [transfer of the Shares]”, and they responded to CC&C’s allegations as follows:
40.At the Hearing, Mr Kam, counsel for Leung, did not take issue over the terms of the aforesaid documents/agreements duly executed by various parties including Leung. III. PROCEEDINGS 41.On 3 April 2013, King Wong commenced the present proceedings against Yat Fat and Pu pursuant to section 100 of the Companies Ordinance Cap 32 (“Ordinance”) for the following reliefs:
42.On 24 May 2013, Master Ho directed that Leung be added as the 3rd respondent in the present proceedings, and on 27 May 2013 the originating summons was amended accordingly. Yat Fat’s attendance at the hearing of the amended originating summons was excused. On 16 September 2013, Master Ho granted leave for King Wong to discontinue the present proceedings against Pu. In light of such procedural developments, the remaining protagonists in the present proceedings are King Wong (applicant) and Leung (3rd respondent). 43.In a nutshell, King Wong sought summary disposal of their claim against Leung in the present proceedings commenced by originating summons. Leung contended there were substantial and bona fide disputes of facts such that the present proceedings could not fairly be determined without a trial, and it was inappropriate for summary judgment to be granted. Leung further said the present proceedings should be continued as if they had begun by writ per Order 28 rule 8 of the Rules of the High Court (“RHC”), or they should be determined following the taking of oral evidence per Order 28 rule 4(3) of the RHC. 44.On 3 April and 25 September 2013, King Wong filed the 1st and 2nd affirmations of their director and shareholder Li in support of their claim (“Li 1st and 2nd Affs”). On 27 August 2013, Leung filed his own affirmation in opposition (“Leung Aff”). IV. LEGAL PRINCIPLES: SECTION 100 OF THE ORDIANNCE 45.Section 100 of the Ordinance provided as follows:
46.The “person aggrieved” under section 100 of the Ordinance includes a person whose name ought to be entered in the register under section 100(1)(a) of the Ordinance.[24] Millett J in Re Piccadilly Radio plc held that “[that] remedy is discretionary. It is not automatic. The court must consider the circumstances in which and the purpose for which the relief is sought”. [25] 47.The procedure under such provision is summary in nature, but in Re Sussex Brick Company,[26] Vaughan Williams LJ said:
48.Re Sussex Brick Co was cited in In re Leon Needham, Ltd [28] in which serious issues of fact arose between the parties and it was not even clear that the transfers of the shares were executed. Buckley J said that “[where] a claim to relief arose out of a dispute between members, and not merely between members and the company, the court would not entertain it, on motion, if it was one of complication and difficulty which ought properly to be tried by writ and with pleading, discovery, etc, and with the advantage of oral evidence. It was true that discovery could now be given under RSC Ord 24, r 3, but the court ought not readily to agree to trial by summary proceedings on motion unless the case was really simple”. 49.In Re Hoicrest Ltd,[29] Mummery LJ said that jurisdiction to rectify is conferred by the English equivalent to section 100(1) of the Ordinance, but subsection (3) confers a general discretionary power such that the court may “decide any question relating to the title of a person who is a party to the application to have his name entered in or omitted from the register … and generally may decide any question necessary or expedient to be decided for rectification of the register.” He said it is not an appropriate procedure for resolving factual disputes as to the ownership of the shares in which “[oral] evidence and cross-examination are necessary to resolve the dispute”.[30] But in that case, it was considered appropriate, given the advent of the Civil Procedure Rules, to grant directions for trial of a preliminary issue, including “an order for the service of a statement of case and other pleadings on the preliminary issue, with directions for disclosure and inspection of documents”.[31] 50.In Re ISIS Factors plc,[32] the claimant applied to rectify the register of members of the 1st defendant company by removing the name of the 2nd defendant in respect of 10,000 shares and inserting the name of the claimant as the holder of them instead. The claimant argued it had been agreed that in return for a cheque for £10,000 received by the 1st defendant in December 1991 he would be allotted 10,000 fully paid ordinary shares and negotiations continued for him to purchase another 40,000 shares at par. The defendants argued that discussions with the claimant involved the investment of £50,000 for 50,000 shares such that the payment of £10,000 was payment of 20p per share on 50,000 shares and a call was made in 1992 for a further 25p per share which the claimant did not pay. In 1998, the 1st defendant was sold to the 2nd defendant, and after seven years’ inactivity the claimant sought a proportion of the price in 2001. The claim was dismissed on the basis that the evidence did not support it. 51.Blackburne J observed obiter that even if there was an enforceable claim for allotment of 10,000 shares the court would not have granted relief since the discretion in question was not different from that of whether to order specific performance of an agreement to allot shares (in fact no shares had been allotted, no share certificates had been issued, and the claimant’s name was not entered on the 1st defendant’s register of members). The defendant did nothing to assert his alleged ownership of the 10,000 shares for seven years, ignored letters making a call on him, and gave inconsistent explanations for his inactivity such that the delay would have led to refusal of relief. Further, rectification of the register would be manifestly unjust to the 2nd defendant who acquired the 1st defendant company in ignorance of the claimant’s claims on the basis that it was acquiring the whole issued share capital. 52.In World International Development (BVI) Limited v China Renji Medical Group Limited & anor,[33] Harris J did not hear argument (as the matter was resolved by the parties), but held on the issue of costs that the plaintiff’s application for rectification would have been unsuccessful in any event because it was not the legal owner at the time of the sale of the shares and there was a dispute about the beneficial ownership of such shares, “which obviously cannot be resolved in a summary application under section 100: see in this regard Re Hoicrest Ltd ……” The learned judge went on to say as follows:
V. LEGAL PRINCIPLES: ORDER 28 OF THE RHC 53.The court has power under Order 28 rule 4(1) of the RHC to dispose of the matter summarily if it is satisfied that no triable issues of fact are raised:
54.But if there are genuine and/or substantial factual disputes that cannot be resolved on affidavit evidence, the court has the power under Order 28 of the RHC to (a) give directions for evidence to be taken orally, including cross-examination of the deponent under Order 28 rule 4(3) of the RHC, or (b) order that the proceedings continue as if the cause or matter had been begun by writ under Order 28 rule 8 of the RHC.[34] 55.In Shum Wah Ming v The Estate of Chen King Ngo, deceased & anor,[35] Cheung J reminded that the originating summons procedure was not and was never intended to be a short-cut to resolve disputes that could only be properly dealt with in a writ action.[36] Mayo JA accepted there was no hard and fast principle concerning what cases could properly come within the ambit of Order 28 of the RHC, but it would be inappropriate to resort to the originating summons procedure where there were significant factual issues requiring determination.[37] In Wing Hang Bank Limited v Crystal Jet International Limited & ors,[38] the court could not decide the matter in the manner envisaged by the originating summons process where there were 19 affidavits and voluminous exhibits. The onus is on the applicant to show it will be just and convenient to make the order.[39] 56.But where the defendant’s liability to the plaintiff is established and there are no triable issues of fact, summary disposal is permissible under Order 28 rule 4(1) of the RHC. The Court of Appeal in Bank of China (Hong Kong) Limited v Keen Lloyd Resources Limited held that with the wide discretion given to the court, “[if] the case can be dealt with summarily and the nature of the case requires, there is no reason not to grant summary judgment in favour of the plaintiff. This is the approach we adopt. The defendant agrees with the basic facts, which supports the plaintiff’s claim. The only defence raised by the defendant was found to be unbelievable. What then are the issues that need to be resolved by way of a trial?”[40] In Wing Hang Credit Limited v Chan Kit Ha & anor, Mr Recorder A Ho SC adopted the above approach with approval.[41] 57.In Bank of China (Hong Kong) Ltd v Twin Profit Ltd,[42] Fok J (as he then was) affirmed that if the plaintiff considers the defendant’s evidence discloses no triable issue, he may seek summary judgment under Order 28 rule 4(1) of the RHC. Fok J (as he then was) went on to say:[43]
58.I note that in both Keen Lloyd Resources Limited and Chan Kit Ha, the defendant admittedly executed the mortgage, but raised various other defences which were rejected without hearing oral evidence. In Chan Kit Ha, the learned judge said “[it] is therefore, incumbent upon the Defendants to demonstrate a bona fide defence. In this sense, the approach can be said to be akin to an application for summary judgment under Order 14”.[44] In that case, there was no bona fide defence to the claim, so the plaintiff was entitled to judgment. 59.On the question of factual disputes, the first question is whether there are conflicting affirmations from the parties that raise substantial factual disputes requiring oral evidence or trial. The observations of Deputy Judge A To (as he then was) in Ip Kam Wah & anor v Fair City Group Ltd [45] are pertinent to such question:
60.In Billion Wealth Group Limited v Strategic Media International Limited,[46] Fok J (as he then was) followed the approach adopted by Ma J (as he then was) in Liu Kam Ying for summary judgment under the originating summons procedure, and said as follows:
61.If there are factual disputes that cannot be resolved on affidavit evidence, the court’s power to order originating summons proceedings to continue as if the cause or matter had been begun by writ is not the only way forward. Order 28 rule 4 of the RHC provides as follows:
62.Order 28 rule 4(4) of the RHC enables the court to give directions for the attendance of deponents of affidavits/affirmations for cross-examination. But even though it is permissible to receive oral evidence to resolve factual disputes in originating summons proceedings, what the court has to consider is “whether the just, expeditious and economical disposal of the proceedings can …… best be secured by hearing the summons on oral evidence or mainly on oral evidence”. In Ye Hong-ying v Chan Lup-ying,[47] the procedure under Order 28 rule 4(3) of the RHC was adopted since it was not desirable in the context of that case to significantly delay the resolution of the dispute by ordering that the proceedings should continue as if they had been begun by writ under Order 28 rule 8 of the RHC. 63.With the above legal principles in mind, I turn to the circumstances of the present application. VI. ANALYSIS (a) King Wong’s prima facie case 64.Given that (a) Leung executed the Transfer Agreement, Eagle Faith Agreement, Resolutions, Transfer and B/S Notes, Debt Assignment and Assignment Notice, (b) the conditions precedent in the Transfer Agreement and Eagle Faith Agreement had been satisfied, and (c) the originals of the transfer documents had been submitted to Yat Fat/Pu as evidenced by the Receipt, King Wong had demonstrated prima facie on the evidence they were the transferee of the Shares pursuant to the terms of the Transfer Agreement, and Leung’s interest and participation in the Project would be reflected by his shareholding in Eagle Faith. King Wong argued that, as evident from the terms of the Transfer Agreement, Leung would be entitled to share in the profits of the Project through declaration of dividends by Eagle Faith,[48] but he was not to have any share in the profits made by the vendors (including Yat Fat) in the sale of their land to Wealthy Honest as he acknowledged and agreed under clause 3.2 of the Transfer Agreement[49] and clause 5.5 of the Eagle Faith Agreement.[50] It was also said that Leung continued to retain an interest in the Project up to now through his continued shareholding in Eagle Faith. 65.In my view, King Wong was prima facie entitled to ask for an order that Yat Fat’s register of members be rectified in terms of the amended originating summons, and the next question is whether Leung’s affirmation evidence (when considered against the context/background that is undisputed or beyond reasonable dispute) was believable, and if it was, whether he had an arguable defence to the application. (b) Volume of materials 66.Mr Kam submitted that the volume of materials alone made the present application unsuitable for summary disposal. Mr Kam acknowledged that the affirmations were few in number but reminded that the documents ran to over 550 pages and numerous authorities were cited by Mr Lam, counsel for King Wong, which suggested that a quick disposal of simple points was unlikely. I do not agree that the volume of materials of itself prevented summary disposal in the present proceedings. It is evident from Part II above that Leung did not take any issue over the execution of the abovementioned agreements and documents, in particular the transfer documents that he executed in respect of the Shares, and from Parts IV ad V above that there was little disagreement on the relevant legal principles. (c) Leung Aff 67.Leung claimed he carried on various businesses in Macau since 1970. Sometime around the end of 1999, Li invited him to participate in a joint venture to acquire various lots of land in Lamma Island (“Lamma Island Project”) of which Li would have 80% stake whilst Leung would have 20%. Li suggested (and Leung agreed) that when they purchased a sufficiently big plot of land for the Lamma Island Project they might apply to the government for conversion of agricultural land into building land and earn substantial profit therefrom, and they should use a limited company for such project. Li suggested using Yat Fat which was controlled by him, and Leung acquired 20% of Yat Fat’s shares (ie the Shares). Leung trusted Li (who appeared to be honest/sincere and who always talked of his success in real estate projects) and let him be in sole charge of the Lamma Island Project. 68.Between 1996 and 1999 Leung contributed total payment of HK$4,873,093.44 to Yat Fat by shareholder’s loan for the Lamma Island Project, and Yat Fat acquired 461,022.40 sq ft of agricultural land for HK$24,549,279.39 (ie approximately HK$53 per sq ft). After 1999, Yat Fat ceased to buy land in Lamma Island, but Leung knew Li continued to acquire land for the Lamma Island Project under the name of King Wong of which he was 70% major shareholder and person having control of the management. Leung claimed he was also invited to participate in King Wong’s acquisition in 2000-2001 of 135,963.828 sq ft of land, and he was presently suing Li and King Wong in HCA884/2013 for inter alia breach of trust and an account of his interest in respect of King Wong’s interests in such land. 69.Leung claimed that around mid-February 2007 Li told him he was in the process of negotiating on behalf of all of them (including himself, King Wong, Yat Fat and Leung) the sale of land in Lamma Island acquired by Yat Fat and King Wong to Agile Property for property development at a price of about HK$500 per sq ft, which eventually became the Project that involved Wealthy Honest acquiring plots of land held by King Wong, Yat Fat and LIHL. 70.Leung claimed that in/about the end of February 2007 Li telephoned to request him to transfer the Shares to King Wong, which company would cooperate with a potential investor that would 100% finance the purchase of all land acquired over the years by Yat Fat and King Wong for the Lamma Island Project, and most of the acquired land would be injected into a joint venture company (“Joint Venture Company”) at a substantially higher price which would earn them a high profit. They would also hold 40% of the shares of the Joint Venture Company (which would participate in development of such land) and thereby earn more profit. Li also told Leung the conditions precedent of the deal were (a) the potential investor would only negotiate with one representative (ie Li himself) and (b) all land to be sold to the Joint Venture Company should be held in the name of King Wong or in the names of companies of which King Wong or Li should be the sole owner, which was why Leung had to transfer the Shares to King Wong to enable Li to hold out himself as the sole owner of Yat Fat. 71.Shortly thereafter, Leung signed the Transfer Agreement dated 29 March 2007 and the relevant transfer documents (ie the undated Transfer and B/S Notes) based on his trust in and the following assurances by Li:
72.The Leung Aff stated that at around May 2007 Yat Fat sold 96,921 sq ft of land to Wealthy Honest being the project company for the joint venture for HK$52,188,230.77 (ie approximately HK$538 per sq ft). In June 2007, Li told Leung that as a result of such sale Yat Fat would be able to repay all shareholders’ loan made by them to Yat Fat, and he asked Leung to sign the Debt Assignment to acknowledge receipt of repayment of Leung’s part of the shareholders’ loan. Li told Leung he “was required to sign the documents as a formality to compete the accounting procedures”, and assured Leung “there would be no change in the shareholding of [Yat Fat] until Leung was allotted the shares in King Wong by [Li] as agreed”. Leung signed “the said document” based Li’s representation. 73.After the joint venture was implemented (ie when Wealthy Honest started to purchase lands in Lamma Island from Yat Fat and King Wong), Leung continuously demanded Li to account for his profit share in the Lamma Island Project, especially the profit made from sale of the land acquired by Yat Fat and King Wong to Wealthy Honest, and he asked Li when Li would transfer the shares in King Wong to him as agreed. But Li repeatedly told Leung the calculation was not yet available as the joint venture was still ongoing with the acquisition of more land, and the ultimate shareholding of King Wong in the joint venture could only be ascertained when the joint venture acquired not less than 1,000,000 sq ft of land. 74.Sometime in mid-2008, Leung again pressed Li for allotment of shares in King Wong to him and to account for the profits due to him as promised. Leung stated he would no longer accept Li’s repeated excuse to delay final determination of his entitlement in the Lamma Island Project. He also demanded Li to transfer to him the shares in King Wong representing his interest in the Lamma Island Project forthwith. During one of their meetings, Li told Leung he would agree to cancel the Transfer Agreement and immediately destroy all undated Transfer and B/S Notes Leung signed to allay Leung’s concern pending transfer of the shares in King Wong to Leung as agreed. 75.Leung claimed that sometime after mid-2012, Li telephoned and asked him to attend Yat Fat’s extraordinary general meeting (“EGM”) to help him appoint new directors nominated by him to take care of his interests as 50% shareholder to Yat Fat’s board of directors as his then relationship with Pu was not good. Li also told Leung he was worried Pu would act contrary to his directions/interests and dispose of Yat Fat’s assets without his consent because all Yat Fat’s directors were on Pu’s side and he was on his own. Li said he would ask his solicitors TKC to send Leung the relevant notices, and Leung could appoint him as the proxy to attend the meeting on his behalf to save him the trouble. 76.In/about September 2012, Leung received a letter dated 20 September 2012 from TKC acting for TKEEN addressed to him as a member of Yat Fat [51] enclosing a notice of EGM of Yat Fat, which showed that even up to that moment Li still acknowledged Leung’s status as 20% shareholder in Yat Fat. Leung claimed that since Li and King Wong were unable to produce the original Transfer and B/S Notes and only submitted copies for stamping in December 2012, the originals of the transfer documents must have been destroyed pursuant to the agreement to cancel the Transfer Agreement. The Certificate of Payment of Stamp Duty dated 5 December 2012 was a self-serving document with no probative value since it only recorded the payment of HK$10,004 stamp duty and HK$7,650 penalty based on Li’s representation to the Inland Revenue Department without the original transfer documents. 77.I note that Leung did not suggest that the cancellation of the Transfer Agreement was based on misrepresentation, but he argued that King Wong’s application to rectify Yat Fat’s register of members was misconceived as Li and/or King Wong had concealed (or not disclosed) materials facts relating to the Transfer Agreement and its cancellation which led to the destruction of the original Transfer and B/S Notes. It was on such basis that Leung claimed there was arguably no transfer of the Shares under the Transfer Agreement, and Mr Kam submitted there were triable disputes as to (a) the beneficial ownership of the Shares and (b) the cancellation of the Transfer Agreement. (d) Discussion 78.On the other hand, Li denied (a) he ever promised or discussed with Leung that he would account to Leung the profits of the sale of land by Yat Fat to Wealthy Honest, or (b) he ever said he would allot to Leung shares in King Wong “to reflect his interest in the Lamma Island Project”, or (c) he had agreed to cancel the Transfer Agreement, or (d) he ever suggested he had destroyed the original transfer documents or had agreed with Leung to do so. Mr Lam submitted that Leung’s allegations did not raise any arguable defence in that the factual matters raised were not believable and in any event did not amount to any defence in law. 79.In my view, the viability of Leung’s contentions (and King Wong’s denial) must be viewed against the contemporaneous documents, especially when Leung himself was a party to and executed various agreements. It is not enough to say summary disposal of the application is inappropriate because his assertions go to the issue of beneficial ownership of the Shares. 80.There is no dispute that Leung was a passive investor in Yat Fat who left all decisions as to the sale and purchase of the land and property development to Li. But it is not correct for Leung to say in the Leung Aff that it was sometime around the end of 1999 that Li invited him to join in the acquisition of various lots of land for the Lamma Island Project. In fact, Leung became a director/shareholder of Yat Fat in January 1997, and even on his own case he contributed HK$4,873,093.44 to Yat Fat for the Lamma Island Project “[in] between 1996 to 1999” and during such period Yat Fat purchased 461,022.40 sq ft of land for HK$24,549,279.39. 81.But despite the precision down to the last dollar and cent given by Leung as to the total amount of his shareholder’s loan to Yat Fat in the alleged sum of HK$4,873,093.44, Leung did not provide any particulars/breakdown of and/or any documentation for such total sum. But Li produced Yat Fat’s management accounts for the years ended on 31 March 2006 to 31 March 2011 which recorded that Leung only contributed a total sum of HK$3,811,093.44 as shareholder’s loan to Yat Fat. There is no dispute that King Wong received a total sum of HK$1,010,000 from Leung in 2000-2001 as contribution for King Wong’s acquisition of land in Lamma Island. But even taking these two sums of HK$3,811,093.44 and HK$1,010,000 together, they were still HK$52,000 short of the sum of K$4,873,093.44 that Leung claimed (without any breakdown clarification and/or supporting documents) to have contributed to Yat Fat between 1996 and 1999. 82.So (subject to above observations in paragraph 81 above) Leung’s own case was broadly consistent with Li’s affirmation evidence that it was originally intended for Leung to have 20% interest in Yat Fat because Leung provided roughly 20% of the funds for the acquisition of lots of land in Lamma Island until he ceased making further contribution. However, there is a difference in their affirmation evidence in that Leung claimed Yat Fat ceased to buy land in Lamma Island after 1999 but Li claimed Yat Fat acquired more land (of about 300,000 sq ft) since 2002. However, this would not have any material effect because Li acknowledged he never held Leung to a lesser extent than his 20% shareholding in Yat Fat. 83.In respect of Leung’s alleged agreements/assurances in paragraphs 69-71 above, they do not sit well with the contemporaneous documents at all, particularly the Transfer Agreement. The essence of Leung’s case was that Li suggested they would earn high profit through (a) the sale of land in Lamma Island held by Yat Fat to the project company at a high price and (b) sharing of profits from the Project via their 40% shareholding in the Joint Venture Company, and that Li assured he would calculate/account for and transfer shares in King Wing to reflect Leung’s interest in the Lamma Island Project and the Joint Venture Company. It was said that Leung signed the Transfer Agreement and other ancillary agreements and documents on such basis. 84.But such allegations were contradicted by clause 3.2 of the Transfer Agreement (which agreement was executed by Leung) by which Leung acknowledged he would have no share in the profits of the sale of land by Yat Fat.[52] 85.It is interesting to note that even though Mr Kam in his written submissions stated that under the Transfer Agreement Leung would sell his 2,000 Shares in Yat Fat in return for 300 shares in Eagle Faith and repayment of the Leung Loan of HK$5,000,000 that had been made over the years to Yat Fat subject to various conditions precedent in relation to the implementation of the Project, there was no mention of the transfer of the Eagle Faith shares to Leung in the Leung Aff at all. 86.In my view, despite Leung’s reticence, there can be no shying away from the fact that his allegations were inconsistent with the agreed arrangement under the Transfer Agreement that his interest in the Project would be reflected by his shareholding in Eagle Faith (ie the ultimate holding company of Wealthy Honest as the project company). It is plain from the Transfer Agreement that in exchange for his sale of the 2,000 Shares in Yat Fat to King Wong, Leung would be recompensed for his capital contribution for acquisition of land in Lamma Island (to be purchased by Wealthy Honest for the Project) and he would participate in the Project through his shareholding in Eagle Faith (see also paragraph 84 above). 87.The rights and obligations of King Wong and Leung in relation to the Project had been set out in the Transfer Agreement and the Eagle Faith Agreement, which nowhere mentioned any of the matters raised in paragraph 83 above. No or no satisfactory explanation is forthcoming from Leung as to why that was so and why he would have signed such agreements, especially in light of the entire agreement provision in clause 17.2 of the Eagle Faith Agreement that excluded oral agreements and assurances.[53] Mr Kam reminded there was no entire agreement clause in the Transfer Agreement or no contractual provision that prevented variation of its terms. But it must be remembered that the Eagle Faith Agreement was the governing agreement that comprehensively set out the rights and obligations of the participating parties in the Project and it was executed by inter alia King Wong and Leung on the same day as the Transfer Agreement. In any event, Leung’s alleged assurances contradicted clause 3.2 of the Transfer Agreement. 88.I note that the parties’ shareholdings in Eagle Faith had been fixed from the start under clause 4.2 of the Eagle Faith Agreement, and Leung was entitled to share the profits of such Project through such shareholding under clause 10.2 of the Eagle Faith Agreement. Further, by the Option Leung’s shareholding in Eagle Faith was guaranteed to be worth at least HK$15,000,000, which was more valuable than his interest in Yat Fat. I agree with Mr Lam it made no sense for Leung and Li to agree (as Leung alleged) that in addition to Leung’s interest held through his 3% direct shareholding in Eagle Faith he would also hold certain interest in the Project through King Wong. 89.Rather, the contemporaneous documents were consistent with Li’s 2nd Aff which explained that when Li told Leung about the proposed Project in/about the end of February 2007, Leung was not keen and told Li that he was thinking of retirement as he over 60 years old. He urged Li to acquire all his interests in Lamma Island, and at least pay back the funds he invested in Yat Fat and King Wong, which was why Leung and King Wong entered into the Transfer Agreement and the Eagle Faith Agreement with the Option to address Leung’s concerns as to the uncertainty of the Project. 90.Whilst Li agreed that Agile Property only negotiated with him as representative of all the investors in Yat Fat, King Wong and LIHL, he explained that Leung’s suggestion that Agile Property requested “all lands be sold to the joint venture company should be held in the names of King Wong or in the name of companies of which King Wong or Li should be the sole owner” so that he would have to sell the Shares in Yat Fat to King Wong was wrong and belied by the following matters:
91.For the assignment of the Leung Loan, clause 4.1 of the Transfer Agreement provided for the execution of the Debt Assignment, which Leung only executed in June 2007 when the condition precedent of transfer of the land to Wealthy Honest for the performance of the Transfer Agreement was satisfied. The terms of the Transfer Agreement and Eagle Faith Agreement did not even hint that Leung would be allotted shares in King Wong. 92.As regards Leung’s claim that in 2007-2008 he made repeated requests and demands which led to the agreement to cancel the Transfer Agreement, I bear in mind that Leung was all along a party to and executed various documents for the Project which clearly set out the shareholding and respective rights of various investors in Eagle Faith and the total sale price of land by Yat Fat to Wealthy Honest, eg:
93.Insofar as it was suggested that it was the failure to account for Leung’s interests in the Lamma Island Project and the Joint Venture Company and to transfer King Wong’s shares to Leung to reflect his interest in such project that led to the cancellation of the Transfer Agreement, I find such allegations inconsistent with Leung’s continued participation in the Project and his continued retention of the benefit of the Transfer Agreement through his 3% shareholding in Eagle Faith. 94.Significantly, Leung executed two amendments to the Eagle Faith Agreement, and he partially exercised the Option in mid-2008 to sell 100 Eagle Faith shares back to King Wong for HK$5,000,000,[55] and steadfastly retained and still retains the remaining 200 Eagle Faith shares being part of the consideration for the sale of his 2,000 Shares in Yat Fat. This is contradictory to his allegation that there was an agreement to cancel the Transfer Agreement in mid-2008. The partial exercise of the Option must have proceeded on the basis of Leung’s acknowledgment of the validity of the Transfer Agreement and the Eagle Faith Agreement which entitled him to become the holder of 300 shares in Eagle Faith. 95.Indeed, Mr Kam’s written submissions acknowledged that the condition precedents in the Transfer Agreement had been satisfied and the 300 shares in Eagle Faith were transferred to Leung. But there was no mention of this in the Leung Aff even though upon cancellation of the Transfer Agreement one would have expected that Leung would have to disgorge what he had gained via the Transfer Agreement, ie the 3% shareholding in Eagle Faith and cash payment of HK$5,000,000. Yet he was completely silent in this respect. Without actual repayment or at least an offer for repayment of the consideration he received under the Transfer Agreement, Leung’s suggestion of a binding agreement to cancel the transfer of the Shares to King Wong is especially incredible when it would have equated to him having the 300 Eagle Faith shares and the subsequent partial exercise of the Option for free. There was also no suggestion that the consideration of HK$5,000,000 for the assignment of the Leung Loan already received by Leung would be repaid. 96.That being the case, Mr Lam submitted that the alleged agreement to cancel the transfer of the Shares was not supported by valuable consideration and was therefore wholly ineffective. He argued that since the Transfer Agreement was a binding agreement that had been performed by both parties, the transfer was complete subject only to the registration of the transfer by Yat Fat, and that King Wong therefore obtained equitable title to the Shares such that Leung held them as trustee pending registration.[56] Pending such registration, any agreement to discharge or reverse the binding Transfer Agreement or any new agreement to cancel the Transfer Agreement must be supported by consideration.[57] None has been identified since there is no suggestion that the consideration received by Leung for his 2,000 Shares had been or would be returned. 97.Mr Kam in his written submissions submitted there was consideration because “Leung would be allowed to keep his [Shares] in Yat Fat in return for forfeiting his right to shares in King Wong” and “his right to have an account of the profits made from the sale of land acquired by Yat Fat and King Wong to Wealthy Honest”. Mr Kam submitted that this was borne out by the following:
98.In respect of paragraph 97(d) above, such submissions still avoided dealing with Leung’s 3% shareholding in Eagle Faith which he received as part of the consideration for completion of the transaction under the Transfer Agreement. Leung’s shareholding in Eagle Faith could not be lightly brushed aside as being irrelevant. 99.Leung’s allegation in paragraph 97(a) above that he repeatedly chased Li for transfer of King Wong’s shares and an account of profits between March 2007 and mid-2008 but ceased doing so after mid-2008 is a self-serving allegation which is contradicted by Leung’s own Amended Statement of Claim in HCA884/2013 (“ASoC”) which was verified by his own statement of truth. 100.Leung commenced HCA 884/2013 against King Wong and Li on 22 May 2013 for various reliefs to reflect his alleged investments in King Wong, ie his contributions towards King Wong’s purchase of land for the Lamma Island Project. In the ASoC, he averred as follows:
101.Plainly, the ASoC still claimed against King Wong and Li for declarations and accounts of Leung’s interests in the acquired properties, remaining properties and/or proceeds from his investment in King Wong, which contradicted Mr Kam’s suggestion that Leung would forfeit his right to shares in King Wong and his right to any account of the profits. If Leung’s allegation in HCA884/2013 were right, not only would he obtain 3% shareholding in Eagle Faith and the right to dividends pursuant to such shareholding, retain the consideration of HK$5,000,000 received under the Transfer Agreement, the right under the Option as well as his entitlements to interests in King Wong (as claimed under HCA 884/2013) upon cancellation of the Transfer Agreement. That cannot be right. 102.On the other hand, Li explained that Leung’s contribution in the sum of HK$1,010,000.00 to King Wong in 2000-2001 and his interest in King Wong’s purchases of land in Lamma Island had already been fully accounted for by the transaction under the Transfer Agreement and the Eagle Faith Agreement. Li further explained that at the time of the Transfer Agreement, King Wong agreed to repay Leung’s total contribution for the acquisition of land in Lamma Island (comprising the sum of HK$1,010,000.00 and Leung’s shareholder’s loan recorded in Yat Fat’s financial statements in the sum of HK$3,811,093.44, which together were treated as the Leung Loan to be assigned to King Wong under the Transfer Agreement) by making a total payment of HK$5,000,000 to him. King Wong accepted that clause 1.3 of the Transfer Agreement described the Leung Loan of HK$5,000,000 as Leung’s shareholder loan to Yat Fat, but Li explained it was fixed at HK$5,000,000 (even though all along Leung was recorded to have only contributed HK$3,811,093.44 in Yat Fat’s management accounts) in order to repay Leung for his total contributions to Yat Fat and King Wong for acquisition of land in Lamma Island. Li believed Leung was mistaken in saying his shareholder’s loan to Yat Fat was HK$4,873,093.44. Mr Kam suggested that the unexplained difference of HK$52,000 between HK$4,873,093.44 and the combination of HK$3,811,093.44 and HK$1,010,000 undermines such explanation. But it must not be forgotten that although Li gave a detailed explanation Leung did not even give any breakdown, explanation or documentary support for his suggestion that his shareholder’s loan to Yat Fat was HK$4,873,093.44, which amount was different from the Leung Loan of HK$5,000,000 recorded in clause 1.3 in the Transfer Agreement and substantially more than the shareholder’s loan of HK$3,811,093.44 recorded in Yat Fat’s management accounts. 103.Mr Kam submitted that Leung’s allegations were supported in three ways. 104.First, Mr Kam argued that the letter dated 20 September 2012 by TKC as solicitors for TKEEN to Leung inviting him to attend the EGM of Yat Fat and stating they were “given to understand that [Leung was] also a member of [Yat Fat]” was a clear acknowledgment of Leung’s status as a beneficial shareholder of Yat Fat. It was suggested that must be so since there was no mention that Leung was only a trustee of the Shares and there were no instructions given to Leung to vote as directed by the beneficial owner. 105.Li explained that all along he entrusted Yat Fat’s management to Pu until his relationship with her broke down. Li claimed that in/about 2011 Pu with the help of Keung (who sided with her) seized control of Yat Fat’s board of directors and purported to appoint Pu’s personal assistant Cheung as additional director at a board meeting held on 8 December 2011 in order to outvote Li on the board. Li claimed he had not been given notice of such board meeting, and Cheung’s appointment was invalid since it was made without notice to him and/or without a proper board resolution. Although Li was worried that Pu would act contrary to his direction and interests and dispose of the assets of Yat Fat without his consent because the other directors of Yat Fat were all standing on her side, he did not telephone Leung to discuss those matters with him. It was against such background that Li sought to appoint additional directors to the board by causing TKEEN to requisition for an EGM, but the EGM could not proceed due to want of quorum since both Leung ad Pu refused to attend the meeting. At that time, Pu did not want Li to gain a majority shareholding and sufficient quorum to control Yat Fat, but she was in fact privy to the matters set out Part II above as she was involved in the implementation of the Project in her capacity as a director of Yat Fat and also signed many of the documents forming part of the deal on behalf of Yat Fat, including the Yat Fat SPA dated 3 May 2007, the undated Yat Fat Deed, and the Yat Fat Assignment dated 13 June 2007. Li claimed Pu was aware that the conditions precedent for the transfer of the Shares from Leung to King Wong had long been fulfilled. 106.In my view, there is no merit to Leung’s contention in paragraph 104 above. Leung did not disagree that the relationship between Li and Pu broke down in mid-2012. I agree with Mr Lam it is trite that as a matter of company law only registered members can attend shareholders’ meetings and vote and that the beneficial ownership of the shares is irrelevant.[58] For the purpose of giving formal notice to attend an EGM (which notice in the present case was attached to TKC’s letter), beneficial ownership was irrelevant. The reason why a notice of EGM was served on Leung was because he was still the registered shareholder of the Shares in Yat Fat as Yat Fat did not register the transfer. An identical letter was also sent to Pu. 107.In any event, King Wong clearly did not regard the Transfer Agreement as having been cancelled. After the failure of the first EGM due to lack of quorum, Li intended to convene another EGM. By a letter from TKC to Leung’s solicitors dated 31 October 2012 on the basis that King Wong was the beneficial owner of the Shares under the Transfer Agreement, King Wong demanded Leung to give a proxy to King Wong or its nominee to enable King Wong to exercise its voting rights. 108.Secondly, Mr Kam argued that since King Wong was unable to produce the duly stamped original Transfer and B/S Notes, this pointed to their destruction in line with the cancellation of the Transfer Agreement. Such originals should have been easily available for stamping between mid-2008 and mid-2012 before the breakdown of Li’s relationship with Pu, and King Wong’s inaction over such period was unconvincing when considered in light of the speed by which Li and King Wong were able to put the Transfer Agreement into effect by asking Leung to sign the Debt Assignment, Assignment Notice, Transfer and B/S Notes and declaration of resignation as director of Yat Fat within three months, and filing Form D4 with the Companies Registry on 16 October 2007. 109.As explained above, Li claimed that prior to the breakdown of his relationship with Pu he all along entrusted Yat Fat’s administrative matters, including safekeeping various corporate documents, to Pu who acted as Yat Fat’s company secretary since 1997. After the transfer documents were executed by Leung and others, King Wong caused inter alia the original Transfer and B/S Notes to be sent to Yat Fat/Pu for safekeeping in July 2007.[59] At that time Pu and Li were still on good terms, and they together owned and had complete control over Yat Fat, so it did not occur to Li to chase Pu to complete the formalities of the transfer. Thus, the original Transfer and B/S Notes were all along kept by Yat Fat/Pu, and it was only in mid-2012 (ie after the breakdown of Li’s relationship with Pu) that Li began to chase for return of such documents. By that time, Yat Fat’s board was already under Pu’s control with Cheung purportedly appointed as a director. Li was unable to have access to the corporate documents of various companies controlled by him, including Yat Fat, and he had to commence HCMP 738/2012 on 17 April 2012 against Yat Fat, Pu, Keung and Cheung to get back some of the documents. On 11 June 2012, by consent Harris J ordered that Yat Fat do forthwith make available their books of account and open the same for inspection by Li and/or his representatives at their registered office, and provide copies thereof if so requested upon payment of copying charges. 110.By a letter dated 28 June 2012, King Wong demanded Yat Fat to return the original transfer documents, including the Transfer and B/S Notes signed in June 2007, but there was no reply. On 24 August 2012, TYL on behalf of King Wong also wrote to Pu and Cheung to chase for the return of the original Transfer and B/S Notes, but again no reply was given. Li claimed that it was Yat Fat/Pu who failed/refused to return the original Transfer and B/S Notes to King Wing; it was not the case that they had been destroyed. Since the above requests to Pu and Yat Fat proved futile, Li submitted certified true copies of the Transfer and B/S Notes prepared by TYL (who actually witnessed the execution of the originals of those documents) for stamping, which was finally completed in December 2012. 111.Mr Kam questioned why, despite the discontinuance of the present proceedings against Pu, she had not come forth to confirm that the original Transfer and B/S Notes were with her or Yat Fat. He argued that Leung should be given the opportunity to cross-examine Li on his explanation. But it cannot be ignored that King Wong and Li were able to produce documentary support for their explanation by way of the Receipt which confirmed Yat Fat’s receipt of the original Transfer and B/S Notes in 2007 and King Wong’s demands to Yat Fat and Pu in mid-2012, which all came into existence before the present dispute with Leung. 112.Thirdly, Mr Kam submitted that Li and King Wong did not make any attempt to change the register of members between mid-2008 and mid-2012 when there was no dispute between Pu and Li, and such inaction was reflective of the Transfer Agreement having been cancelled, especially in light of King Wong’s and Li’s ability to swiftly put the Transfer Agreement into effect as explained in paragraph 108 above. Mr Kam argued that such delay (which indicated there was no urgency in the matter) would have justified refusal of the relief sought as explained in Re ISIS Factors plc. 113.In my view, it is not correct to say that King Wong did not give any explanation. Li’s explanation is found in paragraphs 105 and 109 above. In my view, Re ISIS Factors plc is distinguishable on the facts. The obiter observations by Blackburne J were case-specific, and that case was concerned with an alleged agreement for the allotment of shares to the claimant which had not been carried into effect for over seven years. Even if there were an enforceable claim, it was in substance a claim for specific performance and any exercise of discretion in such context would be influenced by laches. The present situation is wholly different in that there was no dispute that both King Wong as transferee and Leung as transferor had executed the Transfer Agreement, and King Wong had fully satisfied their obligations under such agreement, so it was not a case of specific performance. King Wong’s case was that it was a full beneficial owner who would be entitled to call for the legal title, and in such circumstances no injustice would be caused by any delay. No third party interests were involved, and there was no suggestion that Leung (who never took part in Yat Fat and was never re-appointed as a director) suffered any prejudice as a result of any delay. I agree that any delay would not be a bar if King Wong can establish they were the beneficial owner of the Shares.[60] 114.In my view, Leung was quite unable to raise an arguable defence against the validity of the Transfer Agreement or any triable issue as to the alleged agreement to cancel the Transfer Agreement and the alleged destruction of the transfer documents, so there cannot be any successful challenge to King Wong’s claim they were the beneficial owners of the Shares under the Transfer Agreement. 115.The fact that Leung attempted to raise an issue over the title of the Shares and to allege that the original Transfer and B/S Notes had been destroyed is not enough. After all, the court has power to determine dispute on title of the shares in an application under section 100(3) of the Ordinance, and if the issue is clear, the court can decide the dispute summarily. 116.In Re The Diamond Rock Boring Co Ltd ex parte Shaw,[61] S employed A to buy 40 shares in a company and paid A the purchase monies. The vendor P executed the transfer and forwarded it to the company with the scrip. The company returned the transfer after noting that certificates were lodged with them. S signed the transfer and returned it to A to arrange the transfer, but A did not pay the purchase monies to P and falsely told him S would not complete. P demanded back the transfer. A cut off P’s signature from the transfer and returned it. In S’ application to rectify the register, P and S disputed over the title of the shares, but rectification was ordered because S had legal title having paid P’s agent A for the shares and executed the transfer (which was later mutilated). Brett LJ said as follows:
117.In the circumstances, I should exercise my discretion to give effect of the Transfer Agreement and order rectification of Yat Fat’s register of members to reflect the transfer of the Shares by Leung to King Wong as the “person aggrieved” under section 100 of the Ordinance. I note neither Yat Fat nor the directors (as evident from the Resolutions and despite Pu’s earlier objection which had been resolved) raise objection to the application. VII. CONCLUSION 118.I therefore grant an order in terms of paragraph 41(a)-(c) above. There is no reason why costs should not follow event. I grant a costs order nisi that Leung do pay the costs of the application as between King Wong and Leung (including all costs reserved if any) to be taxed if not agreed.
Mr Keith Lam, instructed by Tong Kan & Co, for the applicant Mr Hugh Kam, instructed by Ong & Chung, for the 3rd respondent Tung, Ng, Tse & Heung for the 1st respondent excused from attendance Schedule
[1] see paragraph 6 below [2] see paragraphs 11 and 13 below [3] see paragraph 7 below [4] see paragraph 7 below [5] see share certificate no 003 dated 3 April 2007 and issued by Eagle Faith to Leung certifying that Leung was the registered holder of 300 fully paid shares of HK$1 each numbered 9,507 to 9,806 inclusive in Eagle Faith subject to the Memorandum and Articles of Association thereof [6] see clauses 2.2 and 2.4 of the Transfer Agreement (see paragraph 6 above) [7] see paragraphs 6.1-6.2 of the Memorandum [8] see paragraph 4.2 of the Memorandum [9] see clause 4.2 of the Eagle Faith Agreement [10] see clause 5 of the Eagle Faith Agreement [11] ie if the conditions precedent in the Transfer Agreement were fulfilled, and Leung transferred the Shares to King Wong, the other shareholders of Yat Fat unanimously agreed that King Wong shall become a shareholder of Yat Fat [12] see certificate of payment of stamp duty issued by the Inland Revenue Department dated 5 December 2012 [13] see paragraph 8(b) above [14] see paragraph 10 above [15] see paragraphs 18(a)-(b) and 25(b) above [16] see paragraph 18(a)-(b) above [17] see paragraphs 18(a)-(b) and 25(b) above [18] see receipt dated 13 July 2007 signed by Cheung on behalf of Yat Fat confirming receipt of the originals of the following documents from King Wong: (a) the Transfer Agreement, (b) the Resolutions, (b) the Transfer and B/S Notes, and (b) the Debt Assignment and Assignment Notice [19] see paragraph 15 above [20] see cheque dated 29 July 2008 for HK$5,000,000 drawn by King Wong in favour of Leung [21] see instrument of transfer and bought and sold notes dated 11 September 2008 signed by Leung and King Wong and stamped on 10 November 2011 [22] see copy letter by TYL dated 19 October 2011 to the Collector of Stamp Revenue attaching the supporting documents for the transfer, including the 2008 Eagle Transfer Agreement and the aforesaid cheque of HK$5,000,000 [23] see updated annual return of Eagle Faith filed on 31 July 2013 [24] Yip Peter v Asian Electronics Ltd [1998] 2 HKC 96, 101 [25] (1989) 5 BCC 692, 704 and in that case, the applicants had no interest in the shares and sought restoration of another’s name to the register, but such other did not seek restoration, the company did not support the application, and the licensing authority did not complain, so it was held that the purpose of the application was foreign to the statutory remedy which was invoked, and it would not be a proper exercise of judicial discretion to grant rectification [26] [1904] 1 Ch 598 and in that case the transferee of shares sent in his transfer to the company for registration but by mistake/oversight registration was omitted, and later when the company passed resolutions for voluntary winding up with a view to reconstruction, the transferee thinking his transfer had been registered served notice of dissent; the court granted rectification but did not invalidate the notices to registered members by which the meetings for a voluntary liquidation had been called [27] [1904] 1 Ch 598, 606-607 [28] (1966) 110 SJ 652 (Ch) [29] [2001] 1 WLR 414 and in that case, (a) the parties were directors of a company formed in 1991 with each holding one share, (b) in 1993 98 shares were issued and allotted to the respondent, (c) the parties’ business relationship ended in 1995, (d) the applicant applied for rectification of the company’s register in respect of 49 shares of which he claimed beneficial ownership in reliance on an oral agreement which the respondent (who claimed sole and beneficial ownership of all the shares registered in her name) denied, and the court held the respondent had a reasonable cause of action for rectification [30] [2000] 1 WLR 414, 419-420 [31] [2000] 1 WLR 414, 420-421 [32] [2004] BCC 359 (Ch D) [33] HCMP294/2011, Harris J (unreported, 7 September 2011) [34] see Hong Kong Civil Procedure 2013 Vol.1 para.28/2/2 at p.634 [35] CACV21/1996 (unreported, 10 July 1996) [36] at para 25 [37] see paras 50-52 (see also para.57 per Nazareth VP) [38] CACV140/2000 (unreported, 9 June 2000) [39] see Anne Dorothea Erna Lungershausen & anor v Thomas Joseph Dillon, Jr HCMP1751/2002, DHCJ Mutttrie (unreported, 10 October 2005) at para 21 [40] CACV1787/2001 (unreported, 26 February 2002) paras 19-20 [41] HCMP2586/2005 (unreported, 4 December 2008) at para 23 [42] [2010] 2 HKLRD 1065 [43] at p 1068 [44] at para 27 [45] [2005] 4 HKLRD 168, 174 [46] HCMP2586/2009 (unreported, 3 May 2010) [47] [1996] 1 HKLR 255, 258 [48] see paragraph 10 of the Eagle Faith Agreement in paragraph 15 above [49] see paragraph 6 above [50] see paragraph 15 above [51] “We act for “TKEEN], a member of [Yat Fat] and are given to understand that you are also a member of [Yat Fat]. ……” [52] see paragraph 6 above (and see also clauses 5.4 and 5.5 of the Eagle Faith Agreement – see paragraph 15 above) [53] “本合同已包含各方之一切承諾、協議及共識，並取代之前一切口頭協議、承落。各方在達成本合同時，未有依靠任何一方在磋商過程中所提供之任何數據或陳述。” [54] see clause 5 and schedule of the Transfer Agreement (see paragraph 6 above) [55] see 2nd Project Amendment Agreement dated 2 September 2008 (see paragraphs 31(b) and 33-34 above) and the 2008 Eagle Faith Transfer Agreement (see paragraph 35 above) [56] see Palmer’s Company Law, Vol 1 para.6.412 at p 6063 [57] Chitty on Contracts 31st ed Vol 1 para 22-001 at pp 1607-1608 [58] see Re Universal Horizon Investment Ltd [2000] 3 HKC 627 [59] see copy of receipt issued by Yat Fat dated 13 July 2007 and signed by Pu’s assistant Cheung on behalf of Yat Fat in respect of the Transfer Agreement, the Directors’ Resolution, the Shareholders’ Resolution, the Transfer and B/S Notes, the Debt Assignment and the Assignment Notice [60] see also Wong Kwok Learn Baldwin & anor v International Trading Company Limited CACV70/2009 (unreported, 4 March 2010) in which the shares in a company were transferred away to third parties which held them on resulting trust for the original owners, but the court held that the application for vesting of the shares and rectification of the register 39 years later was not affected by laches because (a) there was satisfactory account of the delay in that the owners (and successive personal representatives) had been in control of the company and did not see the need for an application and (b) the purchasers never asserted any interest in the shares [61] (1887) 2 QBD 463, 475-476 and 482-484 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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