ZHENG LI FENG v. SUPER WORTH INTERNATIONAL LID AND ANOTHER

HCA 1043/2012

[2019] HKCFI 868

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1043 OF 2012

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D E C I S I O N

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I.  BACKGROUND

1.  The trial of this action was held on 10 and 11 April 2018.  On 6 April 2018 (i.e. just a few days before commencement of the trial), Messrs Charles Yeung Clement Lam Liu & Yip (“CYCLLY”), who were then on record solicitors acting for the 1^st and 2^nd Defendants (“the Defendants”) applied to cease to act for their clients.  At the end of the hearing of the application on 10 April 2018 (i.e. the first day of trial), I granted the application upon an undertaking given by CYCLLY.   On 9 July 2018, I ordered, amongst others, that judgment (“the Judgment”) be entered against the 1^st and 2^nd Defendants with reasons provided in my decision which was handed down on the same day (“the Decision”).

2.  In short, the Plaintiff’s claim is based on various agreements (including the First Agreement and the Supplemental Agreement) whereby the 1^st and 2^nd Defendants allegedly promised to buy back certain shares (“the Target Shares”) in a listed company (“the Company”) after the Plaintiff first purchased the same.  There has never been any dispute that the Plaintiff had purchased the Target Shares.  Under the Supplemental Agreement, the 1^st and 2^nd Defendants agreed to pay the Plaintiff the price for buying back such shares by 2 instalments i.e. HK$20,000,000 being the 1^st instalment and HK$40,000,000 being the 2^nd instalment, and also a sum of HK$5,000,000 as consideration for the Plaintiff’s agreement to extend the time for the buy-back.   All along, the defence of the 1^st and 2^nd Defendants was that the First Agreement was unenforceable for want of consideration and hence the Supplemental Agreement (which was based on the First Agreement) was similarly unenforceable.  This defence was rejected in the Decision.  Further, according to the pleadings, the 1^st and 2^nd Defendants did not deny that apart from the 1^st Instalment in the sum of HK$20,000,000, they did not make any payment for either the 2^nd Instalment (i.e. HK$40,000,000) or the consideration for the Plaintiff’s agreement to extend the time for the buy-back (i.e. HK$5,000,000).

3.  By a letter dated 16 July 2018, the 2^nd Defendant wrote to the Registrar of the High Court:-

(1)   stating that (a) she was sentenced to imprisonment as a result of a criminal trial in June 2016 and remained detained in Lo Wu Correctional Institution; (b) someone she knew came to know about the Decision and a copy of the same was delivered to her on 13 July 2018, as a result of which  she had knowledge of the outcome of this action; (c) her “recollection” of the matter was that the total amount of HK$60 million had been paid to the Plaintiff (apparently according to the Supplemental Agreement) but the Plaintiff failed to transfer the Target Shares to the 1^st Defendant; and

(2)   asking the court to let her know about the procedures regarding how to set aside the Judgment.

4.  On 19 July 2018, the Resource Centre for Unrepresented Litigants of the Judiciary replied to the 2^nd Defendant informing her of her right to apply to set aside the Judgment under Order 35 rule 2 of the Rules of the High Court, the time limit within which such application should be made, her right to apply for extension of time and the steps which need to be taken for the application (including filing a summons and an affirmation in support thereof), etc.

5.  On 2 August 2018, the 2^nd Defendant made an affidavit (“the Affidavit”).   In the Affidavit, apart from what she said in her letter dated 16 July 2018 to the Registrar of the High Court, the 2^nd Defendant added that (1) she has been a New Zealand citizen for approximately 30 years; (2) the notice of hearing of this action was not served on her; (3) the criminal case in which she was convicted and sentenced to imprisonment related to the Company (the shares of which formed the subject matter of the dispute in this action); (4) the outcome of the criminal case was within the realm of “public knowledge” such that the Plaintiff ought to have known about the same and hence the Plaintiff should not have proceeded with this action in her absence.

II.  THE APPLICATION TO SET ASIDE JUDGMENT

6.  On 22 August 2018, a summons and the Affidavit were filed with the Court for an application to set aside the Judgment.   Although the Affidavit was stated to be “AFFIDAVIT FOR 1^st and 2^nd Applicants”, I will only consider the position of the 2^nd Defendant for present purposes since no leave has been sought for the 1^st Defendant, a limited company, to act in person.  Hence, I will treat the application to set aside the Judgment is one made by the 2^nd Defendant only.  If the Court takes the view that the application should be granted, there is no reason why the Judgment against both the 1^st and 2^nd Defendants should not be set aside altogether.  Alternatively, if the Court takes the view that this application has no substance and should be dismissed, the materials now adduced by the 2^nd Defendant do not seem to suggest that the Judgment against the 1^st Defendant should be treated differently.

7.  Prior to the hearing of the application on 18 September 2018, the Court was informed that the 2^nd Defendant had applied for legal aid in respect of this action.  Upon hearing submissions from the parties at the hearing on 18 September 2018, the following direction was made:-

“The Court will reserve its decision until the expiry of the stay pending the 2^nd Defendant’s application for legal aid. It is hoped that the Director of Legal Aid (“DLA”) will make [a] decision on the 2^nd Defendant’s application for legal aid before the expiry of the stay period. If legal aid is not granted, the Court will proceed to inform parties of its decision on the 2^nd Defendant’s application to set aside the Judgment. Alternatively, if legal aid is granted, the Legal Aid Department (or solicitors assigned to represent the 2^nd Defendant) should inform the Court, within 28 days from the date of DLA’s decision, as to whether a further hearing is required.”

8.  On 2 October 2018, a Memorandum was issued on behalf of DLA refusing the 2^nd Defendant’s application for legal aid.  Hence, the Court now proceeds to give its decision on the 2^nd Defendant’s application to set aside the Judgment.

9.  Mr Anthony Cheung, counsel for the Plaintiff, has helpfully summarised the following principles which are relevant to the application:-

(1)   There is a public interest in there being an end to litigation in general.

(2)   In considering justice between the parties, the conduct of the person applying to set aside the judgment has to be considered.  Where a party with notice of proceedings has disregarded the opportunity of appearing at and participating in the trial, he or she will normally be bound by the decision.  Where a party has failed to comply with orders of the court, the court will be less ready to exercise its discretion in his or her favour.  Delay in making the application to set aside the judgment is also relevant, particularly if during the period of delay, the successful party has acted on the judgment or rights of third parties have been affected.

(3)   If an absent party seeks to set aside a judgment (which is entered after the facts have been investigated by the court), he or she is required to provide very strong reasons and the court is required to closely scrutinize the reasons provided.  In particular, it is incumbent on the applicant to demonstrate a real prospect of success.

10.  Having considered all the circumstances, I conclude that there are no valid grounds for the 2^nd Defendant to set aside the Judgment for the following reasons.

11.  The Defendants were all along represented by their then solicitors, CYCLLY, until, as mentioned above, only a few days before the trial commenced.  In support of their application to cease to act for the Defendants (which was filed on 6 April 2018), CYCLLY stated that they had difficulties in contacting their clients “during the past months”.  At the hearing of that application, it was admitted by CYCLLY that the application could have been made earlier; but they somehow harboured some hopes that the Defendants might eventually turn up. It is, nonetheless, rather inconceivable as to why no mention was made by CYCCLY at that time regarding the 2^nd Defendant’s criminal conviction and imprisonment.

12.  It was incumbent upon CYCLLY (when they were on record still acting for the Defendants) to inform their clients of the steps which had been taken and would be taken in these proceedings.  Meanwhile, during the course of doing so, the Defendants would be required to give all necessary instructions to their solicitors.   Since the 2^nd Defendant was jailed (and until CYCLLY took out the application to cease to act on 6 April 2018), CYCLLY attended on behalf of the Defendants two hearings before the Registrar and also the hearing of the Pre-trial Review before Lisa Wong J.  Had reasonable enquiries been made, it would have been known to CYCLLY that the 2^nd Defendant was imprisoned as a result of the conviction.   Assuming that CYCLLY did not know about the imprisonment, there was obviously a serious breakdown in communication between the Defendants and CYCLLY for a substantial period of time, during which CYCLLY still chose to continue to act for the Defendants.   Whether such a breakdown was attributable to the fault of CYCLLY or that of the 2^nd Defendant is a matter between them.  This is not something for the Court to determine in this context.   However, if CYCLLY had applied to cease to act for the Defendants earlier, the 2^nd Defendant might have been able to state her position well before the commencement of the trial, which would probably have an impact on what directions the Court would give before the trial.

13.  However, since CYCLLY continued to act for the Defendants until a few days before the trial commenced, it was only natural and reasonable for the Plaintiff to assume that the Defendants would have been informed of the proceedings by their solicitors on record.   There is no reason why the Plaintiff’s interest should be prejudiced by any miscommunication or misunderstanding between the Defendants and their then legal team.  In these circumstances, the Plaintiff had every legitimate reason to ask the Court to proceed to hear the trial in the absence of the Defendants and the Court so did.

14.  Moreover, as mentioned above, according to the Defendants’ pleadings, their defence has always been that (1) the First Agreement was not supported by any valid consideration and was therefore unenforceable; and (2) since the Supplemental Agreement was made on the basis of the First Agreement, the Supplemental Agreement was likewise unenforceable. The same line of defence was set out in the 2^nd Defendant’s witness statement which was filed on 19 April 2016 (i.e. less than 2 months before she was convicted and imprisoned).  The 2^nd Defendant now asserts (for the first time) that she had made payment for the whole of the buy-back price in the sum of HK$60 million in accordance with the Supplemental Agreement. This is wholly inconsistent with the Defendants’ pleaded case and also the 2^nd Defendant’s witness statement.    Neither is the 2^nd Defendant able to provide any concrete or credible proof in support of this new allegation which, I think, contains little substance and fails to show any reasonable prospect of success.

15.  Finally, the Judgment has been entered after trial in which each party’s pleaded case, oral testimony and documents have been considered and analysed.  The Plaintiff should be at liberty to enjoy the fruits of judgment or, if necessary, take steps to enforce the same.  Substantial prejudice would be caused to the Plaintiff if the Judgment were to be set aside at this stage such that the parties would have to conduct the trial all over again. 

III.   THE ORDER

16.  By reason of the above matters, I now order that (1) the 2^nd Defendant’s application (by summons filed on 22 August 2018) to set aside the Judgment be dismissed; and (2) costs of and occasioned by the 2^nd Defendant’s application be to the Plaintiff, to be taxed if not agreed.

HCA 1043/2012

[2018] HKCFI 1577

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1043 OF 2012

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______________________________________

R E A S O N S   F O R   D E C I S I O N

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1.  By Summons dated 6 April 2018 (ie about 2 days before the trial of this action was about to commence), Messrs Charles Yeung Clement Lam Liu & Yip, solicitors which were then on record acting for the 1^st and 2^nd Defendants (“the Defendants”), applied to cease to be the solicitors acting for the Defendants pursuant to O 67 r 6 of the Rules of the High Court (Cap 4A).

2.  Order 67 rule 6(1) of the Rules of the High Court provides:-

“ Where a solicitor who has acted for a party in a cause or matter has ceased so to act and the party has not given notice of change in accordance with rule 1, or notice of intention to act in person in accordance with rule 4, the solicitor may apply to the Court for an order declaring that the solicitor has ceased to be the solicitor acting for the party in the cause or matter, and the Court or the Court of Appeal, as the case may be, may make an order accordingly …”

3.  At the end of the hearing of the above application, I granted the application and ordered as follows:-

“ Upon the undertaking given by the Defendants’ solicitors that an affirmation of service of the Summons dated 6 April 2018 and the Affirmation of Wong Chi Kau dated 6 April 2018 be filed by 4 pm on 11 April 2018, the following order be made:-

1. Messrs Charles Yeung Clement Lam Liu & Yip cease to be the solicitors acting for the 1^st and 2^nd Defendants in this action.

2. In any event, service of the Summons dated 6 April 2018 on the 1^st Defendant be dispensed with.

3. There be no order as to costs of this application.”

4.  I now give my reasons for the above decision.

5.  The reason for the application has been provided in paragraph 2 of the Affirmation of Wong Chi Kau of Messrs Charles    Yeung Clement Lam Liu & Yip (“Mr Wong”) which reads:-

“ The trial of the Action will take place on 10^th April 2018. There has been a difficulty on my part to contact the person-in-charge of the 1^st Defendant and the 2^nd Defendant during the past months so that I am not in a position to prepare for the trial for the 1^st Defendant and the 2^nd Defendant. I have tried to reach the person-in-charge of the 1^st Defendant and the 2^nd Defendant including through their latest telephone numbers but in vain. I have tried my best to contact the person-in- charge of the 1^st Defendant and the 2^nd Defendant but in vain.”

(emphasis added)

6.  The Law Society’s Circular No. 98‑128 (PA) issued on 11 May 1998 (referred to in Aqua‑Leisure Industries Inc & Anor v Aqua Splash Ltd (No 1) [1999] 3 HKC 338) reads:-

“ The Registrar [of the High Court] has advised the Law Society that a substantial number of applications pursuant to Ord 67 r 6 are made ‘very shortly before the date fixed for a substantive hearing’. The Registrar has stated that, in future, solicitors may encounter difficulties in obtaining orders to withdraw … if the application is made less than 2 working weeks before the date fixed for a substantial argument.”

7.  At the hearing, Mr Wong admitted that the application could have been made earlier, in view of the difficulties in locating the 1^st and 2^nd Defendants for “months”.  He, however, explained that despite such difficulties, his firm still maintained some hope that the Defendants might eventually show up so that they would be able to continue with the preparation for trial.

8.  In a situation like the present one (which is not uncommon), solicitors acting for their clients have to exercise judgment and common sense in order to form a realistic view on whether and when they should make an application to cease to act, particularly in the light of the fact that a substantive hearing or a trial is approaching.  In the present case, it appears to be wishful thinking if one were to expect that the Defendants would be located after their disappearance for months.  Any late application to cease to act will likely cause unnecessary expenditure of time, costs and also judicial resources.  Further, as a matter of fairness, if an application for withdrawal is timeously made, it will also enable the parties (ie the clients) to have sufficient opportunities to dispute (if necessary) their solicitors’ assertions, prior to the commencement of the upcoming substantive hearing or trial.

9.  Notwithstanding the above, Mr Wong confirmed at the hearing that given the difficulties encountered, his firm’s relationship with the Defendants had already been terminated when they filed the application.  In the circumstances, I am satisfied that the requirement for withdrawal under O 67 r 6 has been fulfilled.  I also bear in mind that in this context, it is not for the Court to consider whether the relationship of solicitor and client should continue or be terminated.  According to the views expressed by the High Court of Australia in Plenty v Gladwin (1986) 67 ALR 26 and also referred to by Keith J (as he then was) in Aqua-Leisure Industries Inc (above), 341B‑F:-

“ … The purpose of the rule [i.e. equivalent of O.67 r.6] is quite different. Its concern is with the record of the Court and with the service of documents. It comes into play when, rightly or wrongly, a solicitor has ceased to act and the party has not given notice of change of solicitor or notice of intention to act in person. The solicitor may then take steps to have his name removed from the record. The first step is by applying to the Court or a Justice for an order declaring that the solicitor has ceased to be solicitor acting for the party in the proceeding. As we have noted the court has a discretion whether or not to make the order, but unless there are special circumstances which render it expedient to retain the solicitor on the record the order will generally be made as a matter of course upon proof that the solicitor has in fact ceased to act for the party and that no steps have been taken to take the solicitor’s name off the record. Order 7 rule 7(4) [i.e. equivalent of O.67 r.6(3)] makes it plain that an order made under the rule does not affect the rights or liabilities of a solicitor and a party as between themselves.”

10.  Further, an application under O 67 r 6(1) shall be made by summons which must, unless the Court otherwise directs, be served on the party for whom the solicitor acted (see O 67 r 6(2).   This, as mentioned above, gives the party an opportunity to dispute, in the interest of fairness, his solicitors’ assertion that their instructions have been withdrawn (see Aqua‑Leisure Inc (above), 341I‑342A). There was no evidence as to how service of the Summons for the present application was effected.

11.  At the hearing, Mr Wong informed me of the details of service and also the fact that the 1^st Defendant was apparently struck off from the Register of Companies recently.  However, such details ought to have been properly set out in an affirmation of service, which Mr Wong then undertook to affirm by 4 pm on 11 April 2018.  In any event, since the history of these proceedings shows that the 1^st and 2^nd Defendants have been absent for a substantial period of time, I also ordered that service of the Summons be dispensed with, as permitted under O 67 r 6(2).

12.  Even after an order declaring that the solicitor has ceased to act for a party is made, he or she shall still be considered as the solicitor for that party unless and until the order is served on every party to the cause or matter, according to O 67 r 6(1).  I believe that this constitutes another reason why such applications should be made in good time.  In the present case, however, since the trial was scheduled to start immediately after the hearing of the Summons, I do not think the continuous attendance of the Defendants’ solicitors will serve any meaningful purpose since the Defendants had terminated their instructions.  I therefore allowed that the attendance of the Defendants’ solicitors be dispensed with.

13.  Finally, in the Summons, the Defendants’ solicitors asked for an order that costs of this application be paid by the 1^st and 2^nd Defendants and that such costs be summarily assessed at HK$8,000.  Quite apart from the lack of particulars regarding the sum of HK$8,000 claimed, I am unable to see any reason why such a costs order should be made, particularly in view of the reasons provided in paragraphs 6 to 10 above.  I therefore made an order that there be no order as to costs of this application.

HCA 1043/2012

[2018] HKCFI 1578

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1043 OF 2012

________________

________________

_____________________

D E C I S I O N

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I.  BACKGROUND

1.  In this action, the Plaintiff’s claim is based on various agreements whereby the 1^st and 2^nd Defendants allegedly promised to “buy back” certain shares in a listed company, which had been purchased in the first place by the Plaintiff from the 2^nd Defendant (or her corporate vehicles which will be referred to below).

2.  The Plaintiff resides in Foshan, Guangdong.  The 1^st Defendant is a limited company incorporated in the British Virgin Islands.  The 2^nd Defendant is the majority shareholder of Natural Dairy (NZ) Holdings Ltd (Stock Code: 462) (“the Company”) listed on the Hong Kong Stock Exchange (“the HK Exchange”).  The trading of the shares of the Company has however been suspended since September 2010.  The 2^nd Defendant holds the shares of the Company through corporate vehicles including the 1^st Defendant and another 2 companies, namely, Earn Cheer Limited and Flying Max Limited.

3.  The Plaintiff’s case is that shortly before 18 November 2010, the Plaintiff and the 2^nd Defendant (acting both for herself and also on behalf of the 1^st Defendant) orally agreed as follows:-

(1)  The Plaintiff shall acquire from the 2^nd Defendant (or her corporate vehicles) 24,000,000 shares of the Company at a total consideration of HK$40,000,000 (ie at a unit price of HK$1.67);

(2)  In return, the 1^st and 2^nd Defendants shall guarantee that the Plaintiff could resell the shares at an aggregate sum of at least $60,000,000 (ie at a minimum unit price of HK$2.50).

4.  According to the Plaintiff’s case, on 18 November 2010, the Plaintiff and the 2^nd Defendant had a meeting at the latter’s office and the 2^nd Defendant produced a draft agreement for the intended “buy-back” of shares (which contained the provisions which had previously been orally agreed) on the following terms (“the First Agreement”):

(1)  The Plaintiff shall purchase 17,700,000 shares of the Company from Earn Cheer Limited at HK$29,500,000, and 6,300,000 shares of the Company from Flying Max Limited at HK$10,500,000 (ie a total of 24,000,000 shares of the Company (“the Target Shares”) at HK$40,000,000 (see Preamble §(甲), Clause 2.1).

(2)  As a pre-condition (先決條件) for the above purchase by the Plaintiff, the 1^st Defendant agrees that it shall buy back the Target Shares at a later date (see Preamble §(乙), Clauses 2.1 and 2.2).

(3)  Upon full payment of HK$40,000,000, the Plaintiff shall have a one‑month period (“the Guarantee Period”) to sell the Target Shares on the HK Exchange.  The Plaintiff shall have the right to require the 1^st Defendant to buy back the Target Shares (or the remaining portion held by the Plaintiff) on the last day of the Guarantee Period at HK$2.50 per share, provided that the following conditions are met:

(a) The average closing price of the shares of the Company on the HK Exchange in the last five consecutive days of the Guarantee Period is less than HK$2.50 per share or public trading is not resumed within the Guarantee Period.

(b) The Plaintiff issues a written buy-back notice to the 1^st Defendant within 14 days upon the expiry of the Guarantee Period (“the Buy-back Notice”).

(c) The Plaintiff provides the 1^st Defendant with reasonably satisfactory proof (such as the Plaintiff’s trading record of the Target Shares) that the shares of the Company for the buy-back transaction are the Target Shares.

(d) The Plaintiff produces to the 1^st Defendant a complete trading record of the Target Shares from the day of purchase to the day of buy-back.

(e) Upon receipt of the Buy-back Notice from the Plaintiff, the 1^st Defendant shall buy back the Target Shares (or the remaining portion) at HK$2.50 per share.

5.  As alleged by the Plaintiff, at the same meeting on 18 November 2010, prior to execution of the First Agreement, the 2^nd Defendant indicated to the Plaintiff that the shares of the Company would resume trading in a few months’ time and she therefore requested to have 6 months (instead of 1 month) for the Guarantee Period, to which the Plaintiff agreed.  It is the Plaintiff’s case that the parties then agreed to post-date the written agreement to 5 months later (ie 18 April 2011), so that the 1^st Defendant would have a total of 6 months to buy back the shares from the Plaintiff, upon the Plaintiff’s acquisition of the same.  With the other terms remaining unchanged, the parties then signed on the postdated First Agreement.

6.  The Plaintiff has pleaded in the alternative that there was an oral agreement between the Plaintiff and the Defendants on the same terms.  However, given that the First Agreement was made in writing, the alleged oral agreement does not seem to be of any great significance.

7.  There is no dispute that upon signing the First Agreement on 18 November 2010, the Plaintiff issued and delivered to the 1^st Defendant 2 cheques in the total sum of HK$40,000,000 for the acquisition of 24,000,000 shares of the Company.  Two additional cheques were delivered by the Plaintiff for payment of the relevant stamp duty for the purchase of the Target Shares.  All four cheques were dated 19 November 2010 (ie the day after the First Agreement was allegedly made).  Hence, the transfer of shares to the Plaintiff was completed.   On pleadings, it is admitted by the 1^st and 2^nd Defendants that on the photocopies of the first two cheques, there was a note written and signed by the 2^nd Defendant that if the Target Shares could not be transferred to the Plaintiff under his name, the amount paid by the Plaintiff had to be refunded to him.

8.  On the last day of the Guarantee Period (ie 18 May 2011), the shares of the Company still did not resume trading.  The Plaintiff continued to hold the entire lot of the Target Shares.   The Plaintiff claims that the 1^st Defendant had failed to buy back any part of the Target Shares or pay for any part of the buy-back price of HK$60,000,000 (being 24,000,000 shares x HK$2.50) (“the Buy-back Price”).

9.  According to the Plaintiff’s case, instead of proceeding to execute the buy-back transaction, the 2^nd Defendant (on her own behalf and on behalf of the 1^st Defendant) asked for more time.  The 2^nd Defendant proposed to pay the Buy-back Price by 2 instalments and to pay the Plaintiff an additional sum of HK$5,000,000 for his agreement to extend the time.  As alleged by the Plaintiff, the parties then entered into a Supplemental Agreement dated 22 June 2011 (“the Supplemental Agreement”) on the following terms:-

(1)  The 1^st and 2^nd Defendants shall pay the Plaintiff the Buy-back Price by 2 instalments.  The 1^st instalment in the sum of HK$20,000,000 was to be paid by the 1^st and 2^nd Defendants to the Plaintiff on 21 June 2011 (“the 1^st Instalment”) and the 2^nd instalment in the sum of HK$40,000,000 to be paid by the 1^st and 2^nd Defendants to the Plaintiff on 30 September 2011 (“the 2^nd Instalment”) (Clause 1).

(2)  The 1^st and 2^nd Defendants shall in addition pay the Plaintiff HK$5,000,000 as consideration for the Plaintiff’s agreement to extend the time for the buy-back (Clause 2).

(3) In the event that the Company could be relisted on the HK Exchange on or before 30 September 2011 and that the Plaintiff would be able to sell all the Target Shares on or before the said day, the balance of the Buy-back Price mentioned in Clause 1 of the Supplemental Agreement shall be adjusted accordingly, subject to the terms stated therein (Clause 3).

(4)  Should the 1^st and 2^nd Defendants fail to pay any part of the Buy-back Price of HK$60,000,000 and the consideration for the extension in the sum of HK$5,000,000, the 1^st and 2^nd Defendants should be liable to pay interest on the amount due and unpaid at a rate of 12% per annum from the date when the same became due until payment (Clause 6).

(5)  Should the 1^st and 2^nd Defendants fail to pay any of the 2 instalments of the Buy-back Price in accordance with the time limits set out therein, the remaining balance of the Buy-back Price shall become due and payable forthwith (Clause 5).

10.  The shares of the Company did not resume trading on or before September 2011 and such trading remained suspended up to the date of the trial.

11.  The 1^st Instalment in the sum of $20,000,000 has been paid by the Defendants to the Plaintiff. However, despite the letter of demand from the Plaintiff (through his then solicitors Messrs. Foo, Leung & Yeung) to the Defendants dated 17 October 2011, the 2^nd Defendant failed to pay any part of the 2^nd Instalment or the consideration for the extension of time of HK$5,000,000, which became due and payable on 30 September 2011.

12.  The Plaintiff asks for, amongst others, specific performance (or damages in lieu or in addition to specific performance) of the Supplemental Agreement, interest on the sum of HK$45,000,000 as well as costs.

13.  The Defendants do not dispute that the Plaintiff had in fact purchased the Target Shares at the price of HK$40,000,000 and had issued and delivered the cheques to the 1^st Defendant.

14.  However, the Defendants deny that there was any meeting on 18 November 2010.  The Defendants do not agree that any draft agreement was provided to the Plaintiff on the same date or that the parties reached any oral agreement.

15.  The Defendants contend that the First Agreement was in fact signed on 18 April 2011 (as opposed to 18 November 2010 as the Plaintiff contends).  The First Agreement is, as alleged by the Defendants in their pleadings, unenforceable for the following reasons:

(1)  The transfer of the Target Shares to the Plaintiff from Flying Max Limited and Earn Cheer Limited was completed in November 2010.

(2)  The First Agreement was not signed by the Plaintiff and the 1^st Defendant until 18 April 2011.

(3)  The Plaintiff therefore did not provide any consideration in support of the 1^st Defendant’s alleged promises under the First Agreement.

(4)  Alternatively, the consideration (if any) moving from the Plaintiff to support the First Agreement was a past consideration (as the Plaintiff’s purchase of the Target Shares was completed well before 18 April 2011) which is not sufficient in law to support the First Agreement.

16.  In relation to the Supplemental Agreement, the Defendants have failed to provide any explanation as to why and how this document came into existence. The Defendants however contend that the Supplemental Agreement is unenforceable against them because:-

(1)  the Supplemental Agreement was signed by the parties purportedly to regulate the rights and liabilities of the Plaintiff and the 1^st Defendant under the First Agreement;

(2)  since the 1^st Defendant does not have any obligation to fulfill any of the terms of the First Agreement (including to buy back any part of the Target Shares) which is unenforceable against them, there is also no obligation on their part to fulfill any of the terms of the Supplemental Agreement which is made supplemental to the First Agreement.

II.    ISSUES

17.  In view of the above factual background and each party’s position, the issues in this case can be summarised as follows:

(1)  When was the First Agreement entered into?  Was it signed on 18 November 2010 (as the Plaintiff contends) or 18 April 2011 (as the Defendant contends)?

(2)  Was there any consideration in support of the First Agreement?

(3)  The enforceability of the Supplemental Agreement which turns on the Court’s decisions in respect of the above two issues.

(4) There are also questions arising from the relief sought by Plaintiff (in the event that liability is established against the Defendants.

II(A):  When was the First Agreement entered into?

18.  On 6 April 2018 (ie about 2 working days prior to the commencement of the trial), solicitors then acting for the 1^st and 2^nd Defendants on record applied to cease to act.  On 10 April 2018, shortly before the trial began, I granted the order sought.

19.  Both the 1^st and 2^nd Defendants were absent at trial.  There was no reason why the trial should not proceed in their absence.  The Plaintiff was the only witness who provided oral testimony and his evidence was not challenged.  The Plaintiff’s evidence has sufficiently dealt with the circumstances in which the First Agreement and the Supplemental Agreement were entered into between the parties and also the fact that the Defendants failed to perform their obligations set out therein.  I have no hesitation in accepting the Plaintiff’s case in respect of the issues outlined above.

20.  On the question regarding the date of the First Agreement, I find the Defendants’ case unbelievable.  It is clear that the Plaintiff’s purchase of the Target Shares and the intended buy-back arrangement were closely connected and the two must be treated as a “package deal”.  Otherwise, there is no reason for the First Agreement to state that the Plaintiff agreed to and shall purchase the Target Shares without mentioning at all that such purchase had in fact been completed (as alleged by the Defendants).   Further, as mentioned above, the First Agreement emphasises that the buy-back arrangement was a “pre-condition” for the Plaintiff’s agreement to purchase the Target Shares.  Had the purchase already been completed on its own before the signing of the First Agreement, the parties would not have considered it necessary to specify such a “pre-condition”.  Further, as submitted by Mr Anthony Cheung (acting for the Plaintiff), it would make little commercial sense for the Plaintiff to agree to buy the Target Shares at the time when the trading of the Company had been suspended by the HK Exchange without the assurance provided by the buy-back arrangement.  I agree. This is another reason why the Defendants’ case that the First Agreement was signed on 18 April 2011 (well after the Plaintiff’s purchase of the Target Shares) cannot be accepted.  In any event, the Defendants have failed to adduce any evidence to establish their case.

II(B):    Lack of consideration/past consideration

21.  Given my ruling above that the First Agreement was entered into in November 2010, the Defendants’ pleaded case on lack of consideration or past consideration will inevitably fall apart since it is clear that the First Agreement was supported by a valid consideration. In any event, the Defendants’ argument in this regard is wholly untenable. Even assuming that the Plaintiff’s purchase of the Target Shares had been completed before the First Agreement was signed by the parties, he still provided valid consideration by agreeing to sell such shares to the 1^st Defendant. Further, there is no doubt that the parties all along treated the First Agreement as a valid and binding agreement; otherwise, it would not have been necessary for them to come up with the Supplemental Agreement which contained revised terms for the purpose of implementing the buy-back arrangement and also the Defendants’ promise to pay the Plaintiff a sum of HK$5,000,000 for the extension of time granted for the completion of the buy-back arrangement.  In particular, it is stated in the Supplemental Agreement that the Defendants had failed to pay the buy-back price of HK$60,000,000 in accordance with the First Agreement and the parties therefore entered into a new set of arrangements (including the time extension granted).

II(C):    Validity and enforceability of the Supplemental Agreement

22.  Since the Defendants’ argument on the validity and enforceability of the Supplemental Agreement turns primarily on the outcome of the above two issues, it has now become wholly academic and has no substance at all, given my rulings above.  Further, as mentioned above, the Supplemental Agreement clearly sets out the reasons for such an additional agreement and also the obligations of each party with a view to implementing the unfinished buy-back arrangement.  Further, the Defendants have already paid the 1^st Instalment in the sum of HK$20,000,000 in accordance with the Supplemental Agreement.

23.  Moreover, in view of the evidence provided by the Plaintiff, I am therefore satisfied that the 1^st and 2^nd Defendants were in breach of the Supplemental Agreement.

II(D):  Relief sought

24.  Apart from the payment of the 1^st Instalment in the sum of HK$20 million, the Defendants have failed to pay any part of the balance of the remaining HK$40,000,000 to buy back the Target Shares under the Supplemental Agreement.  Further, they have also failed to pay the sum of HK$5,000,000 for the time extension granted under the Supplemental Agreement. The Plaintiff therefore asks for the following relief:-

(1)  judgment in the sum of HK$5,000,000 with interest from 30 September 2011 at 12% per annum (which has been agreed under the Supplemental Agreement);

(2)  specific performance or damages in lieu of specific performance (to be assessed); and

(3)  costs.

25.  Specific performance is not generally ordered in respect of contracts for shares in a listed company, which are readily available in the market as damages are considered to be an adequate remedy in these circumstances (see Chitty on Contracts, 32 Ed, Vol 1, §27‑010). However, I agree with Mr Cheung that although the Target Shares are shares of a listed company, the Company’s trading has been suspended and, as a result, such shares were not readily available in the market at the time when the parties entered into the First Agreement and the Supplemental Agreement.

26.  Although specific performance was sought in both the Statement of Claim and the Plaintiff’s Opening Submissions, Mr Cheung in his closing submissions asked for damages in lieu, apparently because it was contemplated that it would be extremely difficult to compel the Defendants to perform the Supplemental Agreement, in view of the fact that their former solicitors did not manage to take instructions from them and that the Defendants did not attend the trial.

III.  ORDER

27.  I therefore make the following order:-

(1)  judgment in the sum of HK$5,000,000 be entered against the 1^st and 2^nd Defendants;

(2)  an order nisi that interest from 30 September 2011 be paid by the 1^st and 2^nd Defendants at 12% per annum until payment;

(3)  an order that the 1^st and 2^nd Defendants shall pay damages in lieu of specific performance, to be assessed; and

(4)  an order nisi that costs of this action be paid by the 1^st and 2^nd Defendants.

28.  For the avoidance of doubt, the 1^st and 2^nd Defendants shall be jointly and severally liable for what has been ordered above.  The orders nisi shall become absolute upon the expiry of 14 days from the date of this judgment.