HINGONE INVESTMENT CO LTD v. LEUNG TUNG HOI AND ANOTHER
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HCA 1119/2011
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1119 OF 2011
_______________________
| BETWEEN | ||
| HINGONE INVESTMENT COMPANY LIMITED | Plaintiff | |
| and | ||
| LEUNG TUNG HOI | 1st Defendant | |
| LEE YUET WAH | 2nd Defendant | |
| _______________________ (By Original Action) | ||
| AND BETWEEN | ||
| LEUNG TUNG HOI | 1st Plaintiff | |
| LEE YUET WAH | 2nd Plaintiff | |
| and | ||
| MICHAEL YAP | 1st Defendant | |
| WIN TALENT DEVELOPMENT LIMITED | 2nd Defendant | |
| HINGONE INVESTMENT COMPANY LIMITED | 3rd Defendant | |
| _______________________ (By Counterclaim) | ||
_______________________
| Before: Mr Recorder Stewart Wong SC in Court |
| Dates of Hearing: 1 – 4 and 10 December 2015 |
| Date of Judgment: 4 November 2016 |
_______________________
JUDGMENT
_______________________
A. Introduction
1. The plaintiff by original action (“Hingone”) was and is the registered owner of premises known as Apartment 19D, 19th floor, Block D, and car parking spaces 95 and 121, at Hilltop, 60 Cloud View Road, Hong Kong (“the Property”). Hingone’s sole purpose and function was and is to hold the Property.
2. The defendants by original action (who were and are a married couple) (“Leung”[1] and “Mrs Leung” respectively) were the sole directors and shareholders of Hingone, holding one issued share each. It is not in dispute that:
(1) By letters which had the date of “16 March 2007” chopped thereon, Leung and Mrs Leung resigned as directors of Hingone. The 1st defendant by counterclaim (“Yap”) and one Kar Wai Man were appointed as directors instead.
(2) By Bought and Sold Notes and Instruments of Transfer, all having the date of “23 March 2007” chopped thereon, Leung and Mrs Leung transferred their shares in Hingone to the 2nd defendant by counterclaim (“Win Talent”), a company wholly owned by Yap (through direct and indirect shareholdings),and Yap respectively (“the Transfer”).
3. Thus, as appeared on paper, as from 23 March 2007, Hingone became under the effective control and ownership of Yap. It is the circumstances (and even the date), and the agreement between the parties, under which the Transfer took place, and the effect thereof, which is the major dispute in this matter.
4. It is also not in dispute that Leung and Mrs Leung, and their family members, have been residing at and occupying the Property at all material times, both before and after the Transfer.
5. It is Hingone’s case that since the Transfer, pursuant to an “arrangement” between Hingone and Leung, Leung and Mrs Leung and their family members had been occupying the Property as mere licensees with the licence revocable by Hingone giving to Leung and Mrs Leung (on behalf of themselves and other licensees) one month’s notice to revokethe licence. By a letter to Leung and Mrs Leung from Hingone’s solicitors dated 18 May 2011, Hingone purported to do so, asking for the Property to be vacated by 30 June 2011. They did not vacate as demanded.
6. Hingone, being the owner of the Property, having demanded possession thereof from persons in occupation of the same, ie Leung and Mrs Leung and their family members, is prima facie entitled to possession and, as from 30 June 2011, mesne profits, unless Leung and Mrs Leung establish to the satisfaction of the court that they had and have some legal entitlement to occupy the Property as against the owner, Hingone. In Portland Managements Ltd v Harte [1977] QB 306, Scarman LJ said:
“... if the absolute owner is suing, and if the absolute owner has shown by his conduct an intention to recover possession, then it is not enough for the defendant merely to assert or give evidence that he is in possession: he has got to show that he is there on the basis of some title which is consistent with the ownership of the premises being vested in the plaintiff.” (314F)
“ I cite those cases in support of the proposition, which appears to me to be clear law, that when an owner of land is making a case of trespass against a person alleged to be in possession, all that the owner has to prove is his title and an intention to regain possession. If the defendant to the action either admits his ownership or is faced with evidence, which the court accepts, that the plaintiff is in fact the owner, then the burden is upon the defendant to confess and avoid: that is to say, to set up a title or right to possession consistent with the fact of ownership vested in the plaintiff.” (316D–E)
7. Bridge LJ agreed with Scarman LJ (see 320G) and Megaw LJ was of the same view (see 320G–321D).
8. In their defence, Leung and Mrs Leung do not set up any right or entitlement, as against Hingone, to occupy or remain in possession of the Property. Rather, they assert that, despite the Transfer but by reason of the true reason and purpose thereof, they remained and remain the true owner of Hingone (and hence, so it is said, the Property), and various reliefs in relation to the shares of Hingone are being sought, including an order that Yap and Win Talent take “all necessary steps ... to reinstate [Leung and Mrs Leung] as the owners of the issued shares of [Hingone] as if it was before the Transfer”. This, of course, does not mean that as against Hingone they have (even if I accept their case) thereby established a defence to the claim for possession of the Property by Hingone, because it is trite law that the shareholders of a company do not have any interest or entitlement as such in the assets of the company[2], since it has not been alleged at all that Hingone has at any time been holding the Property on trust for Leung and Mrs Leung, and no case is made to challenge the validity of the notice by Hingone to revoke the licence. What ought to happen, if Leung and Mrs Leung is successful in getting Hingone back, is really for them to immediately cause Hingone to re-grant to themselves some licence or right to occupy the Property.
9. It is necessary to set out some background leading to the Transfer, and each side’s respective pleaded case.
B. Background and the pleaded cases
10. Leung, together with one Tse Wing Chiu Ricky (“Tse”) and one Lee Cheuk Kwon Thomas (“Lee”) (who is the younger brother of Mrs Leung), were the directors and shareholders[3] of a company called Lai Yip Dyeing Factory Limited (“Lai Yip”), which carried on a business of dyeing and selling of yarn. The dyeing was in fact carried out by Lai Yip (Panyu) Dyeing Factory Limited (“Panyu Lai Yip”), a co-operative joint venture in which Lai Yip participated, at factory premises at Panyu in Guangdong province in the Mainland.
11. Rose Knitting (Asia) Limited (“Rose Knitting”), a knitwear manufacturer, had been doing substantial business with Lai Yip. It was owned and controlled by Yap.
12. It is not in dispute that Lai Yip ran into serious financial difficulties by 2005. Yap had been lending money to it in various batches by himself or through his companies, culminating in what is called a “Proposal for Debt Restructure” (“the Proposal”) being made by Leung, Tse and Lee.
13. The Proposal was dated 6 September 2006. It was signed by Leung, Tse and Lee and addressed to “LaiYip Group [Ricky Tse, Tony Leung, Thomas Lee]” and “RoseKnitting Group [Michael Yap, Alan Kar, Dennis Yap[4]]”. The Executive Summary of the Proposal contained four points:
“+ Strip off bank debts in Hong Kong
[by disposal of properties]
+ New LaiYip Company
[raises HK$30,000,000 new funds]
+ Directors and Shareholders’ emoluments and dividends
[by profits shares + bonus + allowances]
+ Pledge PRC fixed assets to New LaiYip Company
[fixed assets: land, buildings and plant]”
14. Regarding the first point, this was elaborated as follows:
“I. Setting up a new property company
[property holding]
+ By disposal of all LaiYip Group properties in Hong Kong to RoseKnitting at market valuation.
– [Estimated valuation: HK$44.5 millions]
+ Net disposal proceeds after setting off all pledged deposits at the banks are to be used for repayment of all LaiYip bank debts in Hong Kong
+ Pledged deposits at the banks
– [Estimated position: HK$12.5 millions]
+ Bank debts in Hong Kong
– [Estimated position: HK$60.0 millions]
II. Buy back option
[2 years term]
+ Within 2 years, Ricky Tse, Tony Leung or Thomas Lee have the option(s) to buy back these disposed propertiesat its original transfer price(s) to RoseKnitting [2 years: from the respective dates of transfer].
III. User(s) duties
[market rent]
+ After the acquisitions, RoseKnitting will charge market rent(s) to the properties user(s).”
15. In a chart annexed to the Proposal as Schedule II, six properties were listed. They included the Property (valued at $13,000,000), two owned by Koyo Investment Limited (“Koyo”)[5], one owned by Fairich Industrial Limited (“Fairich”)[6], one by Stellar Textiles Company Limited (“Stellar”)[7], and one[8] by Lee. According to the chart, it was expected that, “post reorganization”, Hingone, Fairich, Koyo and Stellar, as well as a company called Enterlink Investment Limited[9], and the Regalia Property[10], would be wholly owned by Win Talent.[11] That, however, appears to be inconsistent with the elaboration set out at §14 above, which stated that the properties would be transferred to Rose Knitting[12] or a new company to be set up, although all these companies were (or to be) ultimately owned by Yap.
16. The Proposal also noted that the Property had been mortgaged to HSBC, and that Hingone was “owned by Tony Leung, holding the property only (user: Tony Leung)”.
17. The matters referred to in §§10 – 16 above are not in dispute and I find them as facts.
18. It is common ground on the pleadings that some agreement was eventually reached between Yap and/or his companies[13] on the one hand, and Leung, Lee and Tse on the other, regarding further financial assistance from the former, but the parties disagree as to what had been agreed (and whether there was one single agreement or a series of agreements). In both the Re-Amended Statement of Claim[14] and the Defence and Counterclaim[15] it is stated that the agreement reached between the parties was “evidenced” by the Proposal. It is therefore an issue of fact as to what had been agreed between the parties, in particular, for the purpose of this matter, in relation to the Property. It is, however, not alleged that there was any agreement made between Mrs Leung on the one hand, and Yap and/or his companies on the other.
19. On the side of Hingone and Yap, it is pleaded that the agreement reached was “made orally, by conduct and/or in writing as evidenced by document(s) especially [the Proposal]” and it was pursuant to that that the Transfer was made. It is also pleaded that under the agreement Leung agreed to transfer and/or procure the transfer of all the shareholdings in Hingone (and the other Property Companies) to Win Talent (although one share in Hingone was eventually transferred to Yap personally). It is pleaded that the purpose of the said transfer of shareholdings was to pass ownership of those companies to Win Talent.
20. In their Defence and Counterclaim, Leung and Mrs Leung pleaded that a debt restructuring plan, evidenced by the Proposal[16], was agreed between Yap and Yip acting on behalf of Rose Knitting on the one hand, and Leung, Lee and Tse acting on behalf of Lai Yip on the other, for the further injection of funds into Lai Yip, the application for loan facilities from banks (with the assistance from Rose Knitting), and the setting up of a new company called Lai Yip International Limited (“New Lai Yip”) to purchase inter alia cotton yarns for Lai Yip.
21. Regarding the application for loan facilities from banks, it is the pleaded case of Leung and Mrs Leung that:
(1) Yap made the following warranties and/or representations to Leung:
(a) Securities would be required to apply for bank loan facilities.
(b) In order to obtain the bank loan facilities, Leung should re-mortgage some of his real properties as securities for the loan facilities.
(c) The real properties would only be used as security for the purpose of obtaining loan facilities.
The aforesaid is collectively referred to as “the 1st Representation”. It is not specified in the pleadings as to when the 1st Representation was supposed to have been made. It was upon Yap’s request and in reliance on such representations by Yap that Leung agreed to re-mortgage his share in the Property as security on the condition that the Property must only be used as security for the purpose of obtaining loan facilities.
(2) In about December 2006, in order to induce Leung to sign on various blank forms[17] (in relation to his 50% shareholding in Hingone), Yap further expressly warranted and/or represented to Leung that:
(a) In order to facilitate the applications to the banks for loan facilities, Leung should provide Yap with all necessary signed blank forms/documents for transferring his shareholdings in Hingone and the resignation of his directorship.
(b) Despite the aforesaid documents, Yap himself or any related person would never become entitled to the shareholdings in Hingone nor to the Property absolutely.
(c) Leung would still be the true 50% owner of Hingone (and hence the Property).
The aforesaid is collectively referred to as “the 2nd Representation”. I shall refer to the 1st and the 2nd Representations together as “the Representations” in this Judgment.
(3) Upon Yap’s request and in reliance on the Representations:
(a) Leung signed on various blank forms (including the instrument of transfer and bought and sold notes for hisshare in Hingone, and the letter of resignation as director of Hingone) as produced, requested and given by Yap.
(b) Leung gave the same to Yap for his further handling in the belief that they would only be used for applying forbanking facilities, and in any event, Yap himself or anyrelated person would never become entitled to Leung’s50% shareholding in Hingone or to the Property absolutely.
(c) Leung would still be the true 50% owner of Hingone (and hence the Property).
(4) Lee, as the authorised agent of Yap, visited Mrs Leung at the Property, and made the Representations to her in order to induce her to sign on the requested blank forms, and upon Lee’s request and in reliance on the Representations made by him (as Yap’s agent):
(a) Mrs Leung signed on various blank forms (including the instrument of transfer and bought and sold notes for her share in Hingone, and the letter of resignation as director of Hingone) as produced, requested and given by Lee.
(b) Mrs Leung gave the same to Lee for his further handling in the belief that they would only be used for applying for banking facilities, and in any event, Lee or Yap himself or any related person would never become entitled to her 50% shareholding in Hingone or to the Property absolutely.
(c) Mrs Leung would still be the true 50% owner of Hingone (and hence the Property).
(5) The Representations also formed and took effect as a collateral agreement and/or warranty between Yap, Leung and Mrs Leung (“the Collateral Agreement”).
(6) Yap’s acts in causing the Transfer, and causing Leung and Mrs Leung to resign as directors of Hingone, and (with Win Talent) purporting to own the shares of Hingone absolutely, were wrongful and in breach of the Collateral Agreement.
(7) Further or alternatively, the Representations were “obviously untrue and were made by [Yap] well knowing that they were false, and/or not caring whether they were true or accurate”, or were made by Yap “negligently and/or without any basis”.
(8) Further or alternatively, there was total failure of consideration and/or lack of bona fide consideration for the Transfer.
22. Leung and Mrs Leung further allege that the Transfer was null and void, and counterclaim inter alia for a declaration that Yap and Win Talent hold the shares in Hingone on trust for them.
23. In reply, Yap and Win Talent deny the making of the Representations (and they say they never asked Lee to visit Mrs Leung at the Property). They allege that the transfer of the shares in Hingone, and the other Property Companies, the purpose of which was to pass ownership of the properties they were holding to Win Talent, were all completed eventually, and, with the exception of the Property (and one property owned by Koyo referred to as “the Midland Centre Property”), the properties owned by those companies, as well as the Regalia Property, were then sold “to raise funds for the day-to-day running of and debt repayment by Lai Yip and/or its group of companies to bank(s)”. In particular, the purpose of the Transfer was “to enable the Premises to be sold to raise funds for Lai Yip and/or its group of companies”. It has not been pleaded, however, as to why the Property was not sold but instead the “arrangement” referred to in §5 above, the particulars of which are not provided save that it was made orally between Yap (on behalf of Hingone) and Leung (on behalf of himself and his wife), was entered into.
24. It is alleged by Yap and Win Talent that the consideration provided for the Transfer was (i) $1 per share and (ii) the further financial support to Lai Yip and its group of companies.[18]
25. It is also alleged by Yap and Win Talent that all the forms and documents for the Transfer and the resignation of directorships were complete in “all material respect” at the time of signing by Leung and Mrs Leung.
C. Discussion
26. As stated above, Leung and Mrs Leung do not plead any right or entitlement as against Hingone for the continued occupation of the Property. I therefore see no reason not to order possession and award mesne profits against them. The issue for me to decide is whether they — the burden being on them — should in effect be given back Hingone as counterclaimed. It is for them to establish the factual and legal basis for this.
27. In his witness statement, Leung says that he agreed to re-mortgage the Property as security for further loan facilities to be obtained from banks for Lai Yip, as he was told by Yap that securities would be required, and he agreed to re-mortgage the Property on condition that the Property would only be used as securities for such a purpose. He says that it was specifically agreed that the Property could not be sold or transferred to anyone else as that was his matrimonial home. He further says that when Yap asked him to sign the transfer form and resignation in blank in December 2006, Yap said that he would hold the shares in Hingone on trust for him and his wife, and he would transfer them back to Hingone after the financial situation of Lai Yip had greatly improved or it had becomea listed company. I note, however, that these alleged representations from Yap regarding the trust and transfer back are not pleaded.
28. In his witness statement, Yap says that the shares in the Property Companies were offered to him so that he could use them to secure or set off the debts owed by Lai Yip to him and his companies and to repay the banks. And, in consideration of the transfer of the shares of the Property Companies, Yap agreed to cause Rose Knitting’s group companies to inject further funds into Lai Yip, to assist Lai Yip with its bank loan applications, and to set up New Lai Yip to purchase yarns for the use of Lai Yip.
29. I note and find that apart from Hingone, shares held by Leung and Mrs Leung (and other shareholders) in the other Property Companies were also transferred to Win Talent or Yap. The dates appearing on the transfer documents for the other companies are as follows:
(1) Enterlink: 23 March 2007;
(2) Koyo: 23 March 2007;
(3) Fairich: 27 March 2007;
(4) Stellar: 27 March 2007.
30. The witness statement of Leung did not explain why, and the circumstances under which, they were so transferred, for example whethersimilar (or different) agreements were supposed to have been made by Yap and Leung in relation to the properties held by those companies as in the case of Hingone.
31. I further note that documentary evidence has been adduced, which I accept, that the properties held by the various Property Companies, apart from the Property and the Midland Centre Property, had all been sold sometime in 2007, not long after their shares were transferred to Yap or Win Talent. The dates of the provisional sale and purchase agreements entered into by the companies are as follows:
(1) Stellar: 29 March 2007;
(2) Fairich: 23 May 2007;
(3) Koyo: 23 October 2007.
32. I reject the case of Leung and Mrs Leung regarding the making of the Representations, for the following reasons:
(1) As both sides accept in the pleadings that the eventual agreement was “evidenced” by the Proposal, in my judgment there was, and I find, an agreement between Leung, Tse and Lee on the one hand, and Yap and/or his companies on the other, that, in consideration of Yap and/or his companies inter alia agreeing to provide further financial assistance to Lai Yip (in the form offurther funding from Yap’s companies and assistance to obtain further banking facilities[19]), Leung, Tse and Lee would make available properties, by transferring shares in the Property Companies (including Hingone), so that the properties could be used (if necessary by the sale thereof) to pay off debts owed by Lai Yip. As Yap explains, which I accept as credible, sinceit took time for properties to be sold, the intention was for Yap’s companies to provide the funds to repay the banks first, and they were given the properties (via ownership of their holdingcompanies) in the meantime so that the properties could be sold in due course to repay Yap’s companies.
(2) This is evidenced by the fact that the shares in the Property Companies, including Hingone, were indeed transferred to Yap or his companies, and the properties, apart from the Property and the Midland Centre Property, were indeed sold not long after. There is no evidence that there was any complaint regarding the sale of those properties. Indeed, Yap’s evidence is that it was Lee, authorised by Yap, who found the purchasers of the properties, and there is no challenge to that evidence, which I accept.
(3) Thus, there can be no doubt that the intention was for the otherproperties to be sold to raise funds. In any event, there appears to be no terms prohibiting any sale by Yap after the Property Companies were transferred to his companies (I shall deal withthe two-year buy back option below). If the properties wereonly to be used as securities for further bank loans, I do not see why the transfer of the ownership of their holding companies was necessary and offered and, as is the fact, effected. The intention must be for them to be realised by Yap and his companies if necessary, and I so find.
(4) The question is whether the Property[20] was intended to be treated differently from the other properties, so that, for the Property, the agreement and intention was that it would not be sold.
(5) I do not think that the fact that the Property has not been sold (while others were) supports the case of Leung and Mrs Leungthat there was some specific agreement between Yap and Leungthat it would not be sold (§27 above). It does not make sensethat, if, because of the fact that the Property was the matrimonial home of Leung so that the same could not be sold, then it would even be included as part of the properties offered to Yap under the Proposal. Further, as stated at (3) above, if the Property was only to be used as security, I do not see why the Transfer was required.
(6) When Leung is asked in cross-examination whether there was an agreement with Yap that the Property would not be sold ever, he refers to the clause in the Proposal for the buy back within two years. Yap is also asked about this clause, and he explains that the clause was put in because Leung asked him not to sell the Property as that was his matrimonial home, so a buy-back provision for two years was put in.
(7) The existence of this clause in the Proposal is curious because as I hold above the intention of the parties as agreed (and proposed) was that the properties (at least those actually sold) could be sold at Yap’s discretion. Yet the buy-back provision was general, not limited to the Property, and such a provision would prima facie be inconsistent with an intention (and liberty) to sell the properties.
(8) The existence of a buy-back provision is also inconsistent with any suggestion that Leung never intended to pass any beneficial ownership of Hingone to Yap’s companies. Otherwise there would be nothing to buy back (save the bare legal title but there is no evidence that the “price” therefor (valued at HK$13,000,000, which is a substantial sum) was for the bare legal title).
(9) Further, at least for the Property, the existence of the buy-back provision limited to two years[21], which means that after that Leung would have no right to buy back the Property, is also inconsistent with an agreement that the Property would not be sold at all. The most plausible explanation reconciling all these conflicting positions is, in my judgment, and I find, that an agreement was indeed reached between Yap and Leung that, to accommodate Leung, any sale of the Property (and the Midland Centre Property) would be held off for two years, which is what Yap says in evidence and which is a position also consistent with Leung’s evidence I refer to at (6) above. While, as I suggest, the buy-back provision is actually applicableto all properties, I do note that the Proposal is not a well-drafteddocument (see for example §15 above), and so such problems of drafting have to be considered with a sense of perspective, and I do not find that to be fatal to my conclusion here.
(10) Given the lapse of time, I do not find anything suspicious in Yap’s failure to remember exactly when this agreement regarding the Property was made.
(11) If the inclusion of the Property as part of the agreement was so that it could only be used as security to raise further funds from banks, as Leung suggests, then there was always a possibility that it would have to be sold eventually when the mortgagee enforced the mortgage in the event of default by Lai Yip. As a seasoned businessman (he was, for example, involved in the projects and foundations of the late Mr Henry Fok, having worked for the group since he graduated from high school[22]), Leung must have known of this at the time and it does not make sense for him to still make the Property available as security on the basis that it could never be sold. In cross-examination, he accepts that banks could sell the Property if mortgaged and the debt not repaid.
(12) I also find it incredible that Leung would have believed that it was necessary for him to transfer his shareholding in Hingone, and to resign his directorship, just so that the Property could be re-mortgaged as security for any loan to be made to Lai Yip.
(13) In his testimony, Leung says that it was Lee who made the Representations (both the 1st and the 2nd)[23] to him, not Yap. This of course is not what he says in the Defence and Counterclaim or in his witness statement. There is no real explanation for this mistake on the very crucial part of his case, which calls into question the credibility of everything he says about the Representations.
(14) In the light of the agreement as I find above, I find the alleged making of the Representations to Leung, and his alleged reliance thereon, incredible and I reject the same.
(15) If I do not think that the case of the making of the Representations to Leung has been made out, I do not see how the allegation of the making of the same Representations (pleaded in effectively identical terms) to Mrs Leung can be accepted either (as it must be incredible that the same were made to her but not to him). I further find it incredible that Mrs Leung would have signed away her matrimonial home simply because her brother told her to by making the Representations, without consulting her husband (who owned the other half of Hingone) at all.
(16) Further, while it is pleaded that Lee made the 2nd Representationto Mrs Leung as agent for Yap, there is absolutely no evidence in support of this allegation.
(17) Rather, I accept the evidence of Yap that Leung requested himnot to sell the Property for two years as that was his matrimonial home and Yap agreed, as being more inherently credible and consistent with the broad terms of the Proposal and the eventual agreement reached.
33. In her closing submissions, counsel for Leung and Mrs Leung, relying on an apparent inconsistency between the statement (at §27: “... the Agreement was not manifested in the terms of the said Proposal for Debt Restructure ...”) and the testimony (when he said the terms of the Agreement were confined to the Proposal) of Yap to argue that there was never any concluded terms on the alleged agreement. But this argument goes against the pleaded case of Leung and Mrs Leung that a “debt restructuring plan was therefore explored, discussed and agreed between” the parties (emphasis added), which was evidenced by the Proposal. Further, without some sort of agreement, I fail to see why the shares in the Property Companies were then transferred to Yap or his companies. The apparent inconsistency between Yap’s written and oral evidence, in my judgment, reflects the fact that the broad terms of the agreement reached might not have been set out in the Proposal as clearly as it could have been, and what he has done at his witness statement is to elaborate more clearly those broad terms and objectives of the agreement. More importantly, what Yap says at §27 of his statement is in broad agreement with what Leung says at §12 of his.
34. It is also submitted that it is not clear how the terms of the agreement as stated by Yap had been implemented. However, this is not an action to enforce that agreement, and the point is what had been agreed (rather than implemented) between the parties, in particular the terms regarding the transfer of Hingone. In any event, what is clear from the evidence is that subsequent to the making of the agreement Leung and others did transfer not just the shares of Hingone but other Property Companies as well, and there is documentary evidence, which I accept, that Yap’s companies did provide further funds[24], and assistance regarding bank loan applications, to Lai Yip.
35. I therefore reject the case of Leung and Mrs Leung based on the alleged Representations, including the alleged Collateral Agreement.
36. As for the lack of consideration point, I do not see why the consideration relied upon by Yap and Win Talent (§§24 and 34 above) is not sufficient or adequate. In particular, shares in Hingone were not transferred for HK$2 alone, but as part of the debt restructuring plan which contained other terms.
37. No other grounds having been pleaded and established by Leung and Mrs Leung, I do not see any basis for impugning the Transfer or to order any re-transfer of the shares in Hingone back to Leung and Mrs Leung.
38. While I note that Mrs Leung was not a party to any agreement made with Yap or his companies, the burden remains on her to establish such circumstances under which she transferred her shareholding in Hingone entitling her in law to impugn the same, and for reasons stated above, she has not. In particular, since I reject her case that she signed the forms pursuant to the alleged Representations, I am left with no evidence, and thus not able to make any findings, as to the true circumstances under which she signed, and, with the burden being on her, her counterclaim must fail. As she has not established what were the circumstances, I do not agree with the submission that the “default” position is that she transferred the shares for no consideration, for that the consideration had failed.
39. The counterclaim is dismissed.
40. In submissions and/or evidence, a number of other issues were canvassed, such as the circumstances of the signing of the transfer documentsby Leung and Mrs Leung (for example how much details had been filled in), previous financial dealings between Lai Yip on the one hand and Yap and his companies on the other, debts owing to Leung by Lai Yip, alleged improper conduct by Yip (regarding Panyu Lai Yip), and other litigations between the parties, which I do not find at all relevant to the issue I have to decide, and I say no more about them.
D. Disposition
41. A valuation report prepared by KT Liu Surveyors Limited, the joint expert, is submitted to the Court and the parties accept the conclusion therein that the market rental value of the Property is HK$2,578,677 from 30 June 2011 to 5 November 2014 (with the rental value being HK$63,500 per month from 30 June 2011 to 29 June 2013, and HK$65,000 per month as from 30 June 2013). Using HK$65,000 as the figure, the total amount for 6 November 2014 to 5 November 2016 is HK$1,560,000.
42. I make the following orders:
(1) The defendants (by original action) do deliver up possession of Apartment 19D, 19th floor, Block D, and car parking spaces 95 and 121, at Hilltop, 60 Cloud View Road, Hong Kong to the plaintiff (by original action) within three months of the date of this Judgment (or such further time as the plaintiff (by original action) shall agree or as extended by the court on application by the defendants (by original action)).
(2) The defendants (by original action) do pay to the plaintiff (by original action) the sum of HK$4,138,677 as mense profits up to 5 November 2016, and for each monthly period (or part thereof) thereafter at the rate of HK$65,000 for each such period up to the delivery of possession under (1) above, together with interest thereon.
(3) As for interest,the pre-judgment rate should be 1% above prime rate from time to time. For each monthly period for which mense profits are payable, interest at the said rate should accrue from the end of the period until the date of this Judgment and then at the judgment rate until payment. The mense profits payable for each monthly period (or a part thereof), on which the interest payable is to be computed, is, as per the join expert report, the sum of HK$63,500 in the period of 30 June 2011 to 29 June 2013, and the sum of HK$65,000 thereafter.
(4) The counterclaim is dismissed.
43. An injunction restraining Leung and Mrs Leung and their family members from using and occupying the Property has also been asked for in the Re-Amended Statement of Claim, but I do not see the necessity for that at this stage.
44. I also make an order nisi that the defendants (by original action) do pay the plaintiff (by original action) the costs of the action, and the plaintiffs (by counterclaim) do pay the defendants (by counterclaim) the costs of the counterclaim, to be taxed if not agreed.
45. I thank counsel for their assistance.
| (Stewart Wong SC) Recorder of the High Court |
Mr Samuel Wong, instructed by Henry Wan & Yeung, for the plaintiff (by original action) and the defendants (by counterclaim)
Ms Candy Tang, instructed by B Manek & Co, for the defendants (by original action) and the plaintiffs (by counterclaim)
[1] Leung is also known as Tony Leung.
[2]Macaura v Northern Assurance Co Ltd [1925] AC 619 at 626–627 per Lord Buckmaster; Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 at §34 per Ribeiro PJ.
[3] There were other minority shareholders as well.
[4] It would appear that this is a reference to the cousin of Yap, whose English surname is actually spelt as “Yip”.
[5] A company owned as to 99.999% by Leung and 0.0001% by his son.
[6] A company owned as to 72.13% by Leung and Mrs Leung directly and indirectly, as to 18.13% by Lee, and as to the rest by other minority shareholders.
[7] A company owned as to 50% by Leung and Mrs Leung directly and indirectly, as to 30% by Lee, and as to 20% by another minority shareholder.
[8] Described as the “Regalia Property” in these proceedings.
[9] Which was wholly owned by Leung and Mrs Leung and through which they held shares in Fairich and Stellar.
[10] Footnote 8 above.
[11] For convenience, I shall call Hingone, Koyo, Fairich, Stellar and Enterlink collectively as “the Property Companies” herein. Even though Enterlink did not own any property itself, it owned Fairich and Stellar which did.
[12] Although, by referring to “RoseKnitting”, the parties might be intending to refer to the “RoseKnitting Group” rather than to the company of that name.
[13] I shall refer to Yap’s “companies” in the plural herein because Rose Knitting (either the group or the company), Win Talent, or a new company, were all mentioned in the Proposal.
[14] §2. The same point is made at §11 of the Reply and Defence to Counterclaim.
[15] At §19 thereof it is pleaded that the parties agreed on a “debt restructuring plan” which was “evidenced in various minutes dated 6th September 2006”, which I take to mean the Proposal, as no other documents of that date have been adduced.
[16] Footnote 15 above.
[17] It is clarified by Leung during his testimony that when he says the forms he signed were blank, he means that the date thereon had not been put in, and they had not been signed by Yap or his companies concerned, and the name of the transferee of the shares had not been put in.
[18] Yap and Win Talent have adduced various loan confirmations and agreements between March 2007 and March 2011 under which a total of HK$208,274,995.99 was lent by Win Talent to Lai Yip.
[19] Both sides refer to the injection of further funding and further banking facilities as what Yap and his companies were to do under the restructuring plan: see §12 of Leung’s statement and §27 of Yap’s statement.
[20] And perhaps the Midland Centre Property too.
[21] There is some inconsistency between Yap’s evidence and the pleaded case as to when the two-year period started to run. It is argued on behalf of Leung and Mrs Leung that this inconsistency shows that there was no agreement on buy-back, but with respect I do not see how this argument assists them — if there was no agreement on buy-back then it is all the more likely that, given the agreement on a transfer, Yap would be at liberty from the start to sell.
[22] In her opening submissions, counsel for Leung describes him as “working as a substantial figure in a large corporation”.
[23] In examination-in-chief, he corrects his statement regarding the 2nd Representation by saying that it was Lee who made the Representation. In cross-examination, he is asked about both Representations and each time he says it was Lee who made the particular Representation.
[24] Footnote 18 above. There is also evidence, which I accept, that Yap’s companies arranged to repay some loans owed by Lai Yip to the banks subsequent to the agreement.