Case Detail

HCA 1131/2015

[2021] HKCFI 149

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1131 OF 2015

________________________

BETWEEN
	MEGA HONOUR HOLDINGS LIMITED	Plaintiff
and
	李森田	1st Defendant
	LU HSIAO-HWA(盧曉華)	2nd Defendant
	NEW ACME HOLDINGS LIMITED	3rd Defendant
	DROSTAN INVESTMENTS LIMITED	4th Defendant

________________________

Before: Deputy High Court Judge Bernard Man SC in Court

Dates of Trial: 4-11 and 13 January 2021

Date of Judgment: 28 January 2021

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JUDGMENT

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Introduction

1. This dispute concerns an agreement (“the Agreement”) dated 11 November 2011 between the plaintiff and the 2^nd defendant. The subject matter of the Agreement is the sale and purchase of shares in the 3^rd defendant.

2. As the preamble of the Agreement states, the 3^rd defendant is a company incorporated in Hong Kong. The 2^nd defendant was the sole shareholder in the 3^rd defendant. The 3^rd defendant was stated to be the owner of 5,058,400 shares in a Taiwan company called 華旭環能股份有限公司 (“the Target Company”). There is no dispute that 5,058,400 shares (“the Target Shares”) in the Target Company was a 20% shareholding.

3. The preamble goes on to state that the plaintiff was desirous to invest in the Target Company, and was therefore willing to purchase the entire share capital in the 3^rd defendant held by the 2^nd defendant. There is no dispute that the preamble accurately states that the purpose of the sale and purchase of the shares in the 3^rd defendant was to enable the plaintiff to indirectly own the Target Shares.

4. Under clause 1.2.2 of the Agreement, the purchase price of the shares in the 3^rd defendant was USD4,390,000. Under clause 1.2.3, the purchase price was to be paid at least two working days before the 股權買賣基準日 – that later date was stated in clause 2 to be 20 December 2011.

5. Clause 3 of the Agreement provides that the shares in the 3^rd defendant should be transferred by 31 December 2011.

6. The Target Company was a member of the group of Taiwan companies referred to as the “Arima Group”. There seems to be no dispute that the 1^st defendant was at all material times the person at the helm of the Arima Group, although the pleas of his official positions within the Arima Group in the Amended Statement of Claim are not admitted.

7. There is also no dispute that the 2^nd defendant was, at the time of the Agreement, an assistant of the 1^st defendant. His unchallenged evidence is that he had previously worked in the Arima Group and rejoined it in September 2011; he then left again in September 2012 and returned to assist the 1^st defendant in another capacity in 2015.

8. The Target Shares were, at the time of the Agreement, owned by 3 companies within the Arima Group (“the Original Shareholders”).

9. By virtue of the fact that the Target Company was involved in the business of the manufacture of solar cells and modules, it is common ground that:

(1) From the date of the Agreement to 30 March 2012, as a matter of Taiwan law, it was not possible for a 20% interest in the Target Company to be directly or indirectly owned by any Mainland person or entity.
(2) After 30 March 2012, approval from the Investment Commission of the Ministry of Economic Affairs of Taiwan (“the Investment Commission”) would have to be sought and obtained before an acquisition of a direct or indirect 20% interest in the Target Company would be permissible under Taiwan law.

10. It is not entirely clear what rules governed the acquisition of the Target Shares by a Hong Kong company in which there was no Mainland interest in end 2011. Be that as it may, it is common ground that on 5 December 2011, approval was given by the Investment Commission for the 4^th defendant to acquire the Target Shares from the Original Shareholders. Pursuant to that approval, the 4^th defendant acquired the Target Shares on 30 December 2011.

11. The 4^th defendant is and was at all material times a company incorporated in Hong Kong. Further, at all material times, the entirety of the shares in the 4^th defendant was held by one R&K Nominees Limited. R&K Nominees Limited executed a Declaration of Trust dated 20 October 2011, declaring that it held the entirety of the shares in 4^th defendant on trust for the 3^rd defendant.

12. R&K Nominees Limited is also a company incorporated in Hong Kong. There is no dispute that on the registered records, it would be not be possible to see any declaration of trust in respect of the shares of the 4^th defendant. There is also no dispute that on the face of the registered records, there would be no indication that the shares of the 4^th defendant were held, or were to be held, by any Mainland interest.

13. On the plaintiff side, the registered shareholder of all the shares in the plaintiff is and was at all material times Mr Wang Yanke (“Mr Wang”). There is a heated dispute about whether Mr Wang held the shares in the plaintiff on his own behalf or whether he held them for 山西南燁集團有限公司 (“Nanye”). The chairman of Nanye was one Mr Li Jianming (“Mr Li JM”).

14. It is common ground that Nanye and the Arima Group had a pre-existing commercial relationship by the time of the Agreement. According to Mr Wang whose evidence was not disputed in this regard, eventually the relationship between Nanye and the Arima Group deteriorated significantly and ended in disagreement.

15. One major complaint by the plaintiff in the present action is pleaded in paragraph 12 of the Amended Statement of Claim. It is said that at various meetings that took place in Changzhi, Shanxi during the period “from, inter alia, July to November 2011”,the 2^nd defendant, acting in his personal capacity and for and on behalf of the 1^st and the 3^rd defendants, made certain representations and/or assurance to Mr Wang acting for and on behalf of the plaintiff, that:

(1) Under the laws of Taiwan, it was impermissible for PRC (meaning Mainland) entities and/or investors to hold the shareholdings and/or interests in Taiwanese companies involved in the manufacture of equipment in connection with solar electric systems. However, although the Target Company carried on a business of manufacturing equipment in connection with solar electric systems, Mr Wang and/or the plaintiff “might” still acquire the shares and/or interests in the Target Company indirectly through layers of Hong Kong companies and it was “possible” to own and/or control the shares and/or interests in the Target Company indirectly through the Hong Kong companies without triggering the prohibitions and/or restrictions under Taiwanese laws (“the 1^st Representation”).
(2) The 3^rd defendant was indirectly holding the Target Shares. Therefore, by acquiring the 100% shareholding in the 3^rd defendant, the plaintiff would be indirectly holding the Target Shares and become an ultimate shareholder of the Target Company (“the 2^nd Representation”).

16. Mr Kwong, counsel for the plaintiff, made clear in oral closing submissions that he would not pursue the complaint based on the 2^nd Representation.

17. It is further pleaded that around the time when the Agreement was signed and before the plaintiff made payments to the 3^rd defendant, the 1^st defendant repeated the Representations to Mr Wang on an occasion when they met in Hong Kong.

18. The plaintiff says that the 1^st Representation was false, and it was made dishonestly and/or recklessly.

19. The other complaint of the plaintiff is that the 2^nd defendant had failed and/or refused to transfer the shares in the 3^rd defendant to the plaintiff on or before 31 December 2011. It is said that this amounted to a repudiation of the Agreement, which repudiation was accepted by the plaintiff’s then solicitors’ letter dated the 27 November 2014. It is contended that the result of this is that the Agreement was discharged by breach, and the plaintiff is entitled to restitution of the amounts paid under the Agreement, on the ground of total failure of consideration.

20. For completeness, I should also record that the Amended Statement of Claim also contained a plea, at paragraph 16, that there was an implied term in the Agreement to the effect that the 2^nd defendant warranted that the 3^rd defendant should ultimately own and control the Target Shares. On day 1 of the trial, Mr Kwong accepted that this pleaded implied term would not be breached if the 3^rd defendant had, at a point in time later than the Agreement, become the indirect owner of the Target Shares. After seeing the original share certificates of the Target Shares produced by Mr Wong (for the defendants) on day 2 of the trial, Mr Kwong confirmed that he would no longer take issue with the fact that the 4^th defendant had become the owner of the Target Shares in December 2011. Since there is no dispute that the 3^rd defendant, through R&K Nominees Ltd and the trust arrangement outlined above, indirectly owned the shares in the 4^th defendant since at least December 2011, I believe it is plain that even if this pleaded implied term exists, it is clearly not breached.

21. There was also a plea of a Quistclose trust in the Amended Statement of Claim which Mr Kwong abandoned at the beginning of the trial.

22. In opening, Mr Wong contended that, notwithstanding the large number of legal arguments raised by Mr Kwong, this is essentially a case to be resolved on the facts. It will be apparent from the analysis below that I am in agreement with that submission. In my judgment, once the facts are found, the legal result is straightforward.

23. Accordingly, in the next few sections of this judgment I will discuss the following factual issues and state my findings in those regards.

(1)  Whether Mr Wang was holding the shares in the plaintiff and conducting this transaction in the name of the plaintiff on his own behalf, or whether he was doing so on behalf of Nanye.
(2)  Whether the 1^st Representation had been made.
(3)  Whether, on 27 November 2014 (i.e. the date of the plaintiff’s solicitors’ letter purporting to accept the repudiation of the Agreement by the 2^nd defendant), the 2^nd defendant was evincing an intention not to be bound by the Agreement.

24. In the final section of the judgment, I will set out what I hold to be the legal result which should follow from the facts as I find them.

25. I should also record here that the plaintiff called two factual witnesses, i.e. Mr Wang and Mr Li JM. The defendants, on the other hand, called the 2^nd defendant and Ms Elaine Lin of the Arima Group to give factual evidence. Ms Elaine Lin assisted in the administrative matters concerning this transaction.

26. I have generally found the witnesses of the defendants credible and reliable. There are occasions where they could not remember, or even misremembered, details of the relevant events. In my view this is understandable given that the material events happened a long time ago. I also note that the defendants have provided extensive discovery of contemporaneous emails and documents. I am satisfied that the defendants’ witnesses have tried their best to truly recollect the events by reference to the contemporaneous emails and documents.

27. On the other hand, I am afraid I am of the view that the evidence given by the witnesses of the plaintiff is generally not reliable. As will be apparent from the next section, I have come to the view that both Mr Wang and Mr Li JM gave incorrect evidence as to identity of the person acting through the plaintiff in this transaction. I regard this aspect to be a major matter which the witnesses could not have forgotten. Also, I do not think they harboured any misunderstanding as to whether Nanye or Mr Wang was the person who owned and controlled the plaintiff.

28. The plaintiff and the defendants have each called an expert witness on Taiwan law. I am grateful for the experts’ assistance, and I am satisfied that they have applied their best endeavours to assist the court. However, with no disrespect to them, as will be apparent from the analysis below, I do not regard that there is any disputed Taiwan law issue that requires determination by me.

Was Mr Wang acting on his own behalf or on behalf of Nanye

29. For the reasons I shall endeavour to state, I am of the view that Mr Wang held the shares in the plaintiff, and conducted the transaction in the name of the plaintiff for Nanye, rather than on his own behalf.

30. First, I accept Mr Wong’s analysis that the Agreement was not a standalone document. It was plainly made in the context of an indirect investment by Nanye. The negotiations for such indirect investment had been ongoing for some time before the execution of the Agreement. These negotiations were all conducted by or on the instructions of Mr Li JM. Indeed, it is plain that even after the execution of the Agreement, the involvement of Mr Li JM and Nanye continued in the implementation of the Agreement.

(1)  It is common ground that the investment into the Target Company was at first a subject of discussion between Mr Li JM on behalf of Nanye and the Arima Group.
(2)  The gist of the evidence of Mr Li JM and Mr Wang is that Mr Li JM lost interest in the proposed acquisition in around June or July 2011, and he then introduced his friend Mr Wang to take up the opportunity.
(3)  It is not necessary for me to recite all the documents evidencing the negotiations between Mr Li JM and the Arima Group leading up to the execution of the Agreement, and all the documents showing that Mr Li JM and Nanye continued to be involved even after the execution of the Agreement. I would only highlight the following.
(4)  There is an authorisation dated 6 October 2011 executed by Mr Li JM on behalf of Nanye. The terms of this authorisation note that Nanye was dealing with the investment in the Target Company, and could not directly handle matters concerning its shareholding. It also provides that Nanye appointed the 2^nd defendant as its agent to, inter alia, take up the positions of natural person shareholder and chairman of the board of directors of the 3^rd defendant, and to execute trust and indemnity agreements on behalf of the 3^rd defendant with R&K Nominees Ltd.
(5)  Mr Wang’s evidence is that he did not know that Mr Li JM had signed this authorisation, and Mr Li JM had never told him about it. I reject that evidence as being incredible. There was no reason why Mr Li JM would have signed such a document behind the back of Mr Wang on the plaintiff’s version of events.
(6)  There is another authorisation dated 20 October 2011, again signed by Mr Li JM on behalf of Nanye, appointing the 3^rd defendant to sign an indemnity agreement with RK Directors Limited.
(7)  Mr Wang’s evidence is likewise that he had never seen this authorisation, which I likewise reject as being unbelievable.
(8)  I note that Mr Li JM’s evidence on these authorisations was that they were signed on certain preconditions involving some investments to be made by the Arima Group. Suffice to say that I have no difficulty rejecting that evidence. It finds no support in the contemporaneous documents, and indeed in the very terms of the authorisations themselves.
(9)  In my view, the plain reason why Mr Li JM, rather than Mr Wang, signed these authorisations was that it was obviously understood by all concerned that it was Nanye, not Mr Wang himself personally, who was behind the plaintiff and undertaking the acquisition of the Target Shares.
(10)  It is also telling that in the minutes of the Taiwan meeting of 13 November 2011, it was clearly stated that the draft of the Agreement was to be vetted by the legal department of Nanye. It was also clearly contemplated that it was Nanye who was going to undertake the application to remit the funds out of the Mainland to complete the purchase.
(11)  Another cogent indication that Mr Wang was working as a member of staff of Nanye was the email dated 23 December 2011. That email dealt with the investment into the Target Company, and it also dealt with another investment into one 香‌港建宜公司, which was a cooperation between the Arima Group and Nanye.

31. Secondly, I agree with Mr Wong’s submission that the evidence of Mr Wang concerning the amount of investigation or analysis he did on the Target Company militates strongly against Mr Wang’s case.

(1)  Mr Wang’s evidence is that he was not familiar with the business of solar energy.
(2)  Mr Wang accepted in cross-examination that he knew nothing about how the investment structure and how the price were arrived at.
(3)  He further accepted that he did not do any financial due diligence on the Target Company.
(4)  This is to be considered in the context of his evidence that this transaction was not a small investment for him. I do not find it credible that a seasoned businessman, as Mr Wang claims to be, would enter into such a transaction on his own behalf without properly understanding the financial position of the Target Company and without proper due diligence on it.

32. Thirdly, in my view it is significant that Mr Li JM was one of the two joint signatories of the bank accounts of the 3^rd defendant and the 4^th defendant after the execution of the Agreement. The other signatory of those bank accounts was the 1^st defendant.

(1)  The practical effect of this arrangement was that the consent of both Mr Li JM (not Mr Wang) and the 1^st defendant would have to be obtained before any funds could be paid out of the bank accounts of the 3^rd defendant and the 4^th defendant.
(2)  It seems to me to be overwhelmingly likely (and I so find) that this arrangement was put in place such that Mr Li JM, on behalf of Nanye, not Mr Wang, would be able to control the outflow of funds from the 3^rd defendant and the 4^th defendant.
(3)  That, in my judgment, was because it was Nanye rather than Mr Wang who was truly interested in the transaction.
(4)  Mr Wang and Mr Li JM’s evidence is that Mr Li JM was appointed as a signatory because he was the person who introduced Mr Wang to the Arima Group, such that somehow if anything went wrong, Mr Wang could have some recourse against Mr Li JM. Mr Wang’s evidence is also that after the litigation commenced, he appreciated that this view had no legal foundation. I am afraid I am unable to accept this evidence, which I find incredible.

33. Fourthly, it is also significant to note the common ground that at the material time, there was a name card printed for Mr Wang stating that he was a member of the Nanye Group.

(1)  On the copy of this name card before the court, there is a handwritten marking of a date “11/10/11”. The 2^nd defendant’s evidence (which is unchallenged and I accept) is that this date was marked by the 2^nd defendant on the first occasion he met Mr Wang, which was 10 November 2011.
(2)  Mr Wang did not accept that this was the date on which he first met the 2^nd defendant, nor did he accept that he handed over the name card on that date. But he accepted that he did give this name card to the second defendant.
(3)  Mr Li JM also accepted that he had caused the staff of Nanye to print this name card for Mr Wang. His evidence is that this was to increase the confidence of the Arima Group.
(4)  I find that the reason why there was a name card of Mr Wang printed under the name of Nanye, and handed over to the staff of Arima, was simply that Mr Wang was indeed acting for Nanye at the material time.

34. Fifthly, I accept Mr Wong’s submission that it is significant that in numerous emails, members of the Arima Group had addressed Mr Wang as “王秘書”, which demonstrates their understanding at the time to be that Mr Wang was the secretary to Mr Li JM, and was acting on behalf of Nanye. There is no evidence that Mr Wang ever sought to correct that impression. I find it extremely unlikely that if Mr Wang was not indeed a secretary or assistant to Mr Li JM, that mode of address would have persisted for so long.

35. Mr Kwong asked me to consider whether there was any commercial reason why Mr Li JM would want to hide behind Mr Wang. I do not think that this argument assists the plaintiff.

(1)  First, I do not think it is right to describe the arrangement as I believe to be the truth as Mr Li JM “hiding behind” Mr Wang. Nanye and Mr Li JM’s involvement in the transaction was transparent, and was fully known and understood by the Arima Group.
(2)  It would appear that the arrangement was simply that Mr Li JM arranged one of his members of staff to register himself as the shareholder and director of the plaintiff, such that that member of staff would be the person signing the requisite documents. There is nothing uncommon or extraordinary about such an arrangement.
(3)  In any case, for the reasons discussed above, I believe it is clear that the person behind the plaintiff was Nanye rather than Mr Wang, and it is unnecessary for me to speculate or find the reason why Nanye chose to put such an arrangement in place.

Whether the 1^st Representation was made

36. I do not think that the plaintiff has proved, on the balance of probabilities, that the 2^nd defendant or the 1^st defendant had made the 1^st Representation.

37. In coming to this conclusion, I take into account my views on the relative credibility of the witnesses of the plaintiff and the defendants as mentioned above.

38. Morever, as stated above, I accept the evidence of the 2^nd defendant that Mr Wang gave him his name card on 10 November 2011. I accept Mr Wong’s argument that this means that in all likelihood that was the first time that the 2^nd defendant met Mr Wang. There is no dispute that the meeting on 10 November 2011 took place in Taiwan. Accordingly, I reject the pleaded allegation that the 1^st Representation was made from “inter alia, July to November 2011” by the 2^nd defendant in Shanxi.

39. I also note that there was no indication in the terms of the Agreement, or any contemporaneous documents, that the 2^nd defendant or the Arima Group was to exclusively assume the risk of the indirect investment structure not being permitted under Taiwan law.

40. Ms Elaine Lin’s evidence, which is supported by the contemporaneous documents and which I accept, is that the suggestion of an indirect investment structure was first suggested by a third party adviser, i.e. Ms Jane Deng of UHY L&C Company, a firm of accountants practising in Taiwan. This indirect investment structure was suggested because there was a prohibition in Taiwan at the time of Mainland interested entities purchasing the Target Shares; and this structure was proposed as an attempt to sidestep this prohibition.

41. I do not think it is necessary for me to form a view as to whether this structure would succeed to legally sidestep the restriction if it was fully disclosed and known to the Investment Commission. Suffice it to say that I believe it is likely that the parties would have proceeded on the assumption that this structure could possibly factually enable Nanye to invest in the Target Company, because the entire truth might not be revealed to the Investment Commission.

42. Ms Elaine Lin’s evidence, which I accept, is also that at the meeting of 10 November 2011 in Taiwan attended by Mr Li JM, Mr Wang, the 1^st and 2^nd defendants and others, the indirect structure and the restrictions it was seeking to sidestep were explained to Mr Li JM. This is also supported by a flow chart bearing a printed date of 10 November 2011.

43. I think it is inherently likely that Mr Li JM would have understood the indirect structure, and why such a structure was deemed desirable and necessary, i.e. as an attempt to sidestep the Taiwan restrictions. This, as Mr Wong pointed out, is also supported by the preamble in the authorisation dated 6 October 2011, which states that the reason for the authorisation was that Nanye could not directly handle the share sale and purchase (“不能直接辦理股權買賣事宜”).

44. I believe it is inherently unlikely that where Mr Li JM understood that there was a Taiwan restriction against a Mainland interest acquiring the Target Shares, he would readily believe that such a restriction could be easily sidestepped by simply interposing some Hong Kong companies in between (if the true relationships were to be fully disclosed to the Investment Commission).

45. Likewise, I think it is unlikely that either the 1^st or 2^nd defendant would make any promises or assurances to Mr Li JM or Mr Wang that there was any degree of certainty or any likelihood that this structure would pass muster with the Investment Commission. Hence I think it is unlikely that either the 1^st or 2^nd defendant would have made the 1^st Representation to either Mr Li JM or Mr Wang.

46. I accept Mr Wong’s submission that what most likely happened was that the parties understood they were to be on their own lookout, and both parties appreciated that there was a risk that this structure might not work.

47. Ultimately, Nanye was a substantial group of companies, and Mr Li JM was a seasoned businessman. It would be natural for the parties to proceed on the basis that they would be on their own lookout.

48. It is also clear from the minutes of the meeting of 13 November 2011 that Nanye’s legal department would vet the terms of the Agreement. Although Mr Kwong pointed out that there is no evidence that Nanye’s legal department had ever been involved in investments in Taiwan, this still tends to show that Nanye was a substantial undertaking which would rely on its own legal department on legal matters, rather than just act on the oral say-so of a counterparty.

49. Mr Kwong has invited me to draw an adverse inference from the fact that the 1^st defendant, being a “crucial witness”, was not called to give evidence. I am of the view that I should not do so, because the quality of the evidence in support of the allegations of the 1^st Representation is weak, and that the 2^nd defendant (who was the primary person whom is alleged to have made the representation) has given evidence that I accept.

50. In closing submissions, Mr Kwong advanced an argument of implied representation, in the event that his case on express representation failed. But he fairly accepted that this is not a part of his pleaded case. In my judgment, a plea of implied representation is one of material fact, hence the absence of a plea would be a sufficient reason for me to say no more about it. In case it is relevant for any purpose, I would state my conclusion that I do not think it is at all clear, or in any way implied, that the Arima Group side would exclusively assume the risk of the contemplated indirect investment not receiving the requisite approval from the Taiwan authorities.

Whether, on 27 November 2014, the 2^nd defendant had evinced an intention not to be bound by the Agreement

51. The plaintiff’s case is that there was an extant repudiation of the Agreement on 27 November 2014 which was capable of acceptance by its solicitors’ letter on that date.

52. In oral closing submissions, Mr Kwong drew my attention to Spar Shipping AS v Grand China Logistics (Group) Co Ltd [2017] Bus LR 663 §21, where Gross LJ sets out three types of situations where an innocent party can treat the contract as at an end. Mr Kwong made clear that he relies on situation (ii), i.e. an actual breach of an innominate term where the consequences are such as to entitle the innocent party to treat the contract as at an end.

53. He accepted that the test of whether there was such repudiatory breach was whether, by 27 November 2014, the 2^nd defendant had evinced an intention not to be bound by the Agreement.

54. It is common ground that the plaintiff had not paid over the entire purchase price by 31 December 2011. It is fair to say, however, that by that time, the majority of the purchase price (i.e. EUR2,600,000) had already been paid. It would appear from two emails of the 2^nd defendant to Mr Wang of 21 December 2011 and 23 December 2011 that the inability to make full payment was due to Nanye’s inability to obtain timely approval from the Mainland authorities to approve the payment out of the Mainland.

55. It is also be common ground that the entirety of the purchase price was paid finally on 20 March 2012.

56. Mr Kwong submitted that after 20 March 2012, there was no reason for the 2^nd defendant not to transfer the shares in the 3^rd defendant to the plaintiff.

57. However, for the reasons which follow, I am of the view that the 2^nd defendant had not, at any rate on or before 27 November 2014, evinced an intention not to transfer the shares in the 3^rd defendant to the plaintiff.

58. In my judgment, the documents show that the 2^nd defendant did initiate the process of transfer of shares in the 3^rd defendant to the plaintiff, at least from 30 April 2012 onwards. On that date, there was an email from the 2^nd defendant to Mr Li JM copying, among others, Mr Wang, stating that the Target Shares had been transferred to the 4th defendant, and the 2^nd defendant would be transferring the shares in the 3^rd defendant to the plaintiff, and would appoint Hong Kong accountants to handle the process. There is nothing to indicate that these efforts were disingenuous.

59. By email dated 10 May 2012, the 2^nd defendant asked Mr Wang to provide the address and identity of the new company secretary. It is not entirely clear from that email whether he was asking for such information of the plaintiff, or the 3^rd defendant.

60. By an email from the 2^nd defendant to Ms Elaine Lin on 11 May 2012, the 2^nd defendant recorded a conversation he had with Mr Wang that morning, confirming that the address and company secretary of the 3^rd defendant were to be changed to the address and company secretary of the plaintiff. That seems to confirm the necessity of seeking the address and company secretary information (I presume) of the plaintiff.

61. A good deal of time was spent at the trial on an email sent by Mr Wang to the 2^nd defendant on 4 June 2012.

(1)  That email was entitled “誠興資料” . 誠興 is the Chinese name of the plaintiff. That email, however, has no content.
(2)  It would appear that the email from Mr Wang attached certain information, because there was an email on the same day from the 2^nd defendant to Ms Elaine Lin apparently forwarding some attachments to Mr Wang’s email to Ms Elaine Lin. The 2^nd defendant’s email to Ms Elaine Lin states “香港誠興公司資料詳加附件”.
(3)  However, there is no evidence on what those attachments were.

62. There was no meaningful discussion in the subsequent emails between the 2^nd defendant and Ms Elaine Lin as to whether the attachments were sufficient or relevant. Although by an email of 12 June 2012, the 2^nd defendant relayed a request from Mr Wang to confirm whether the information previously supplied was correct (“正確”), there was no substantial response from Ms Elaine Lin. Nor was there any indication that this request for confirmation had been meaningfully followed up by either the 2^nd defendant or Mr Wang.

63. Most tellingly, on 1 August 2012, the 2^nd defendant sent another email to Mr Wang referring back to his email of 10 May 2012, saying that by that time (i.e. 1 August 2012) he had not received a formal reply; and requesting Mr Wang for further confirmation.

64. Notably, Mr Wang’s reply was not to say that he had previously provided the requisite information, or that there was an outstanding request from him for confirmation that the information he supplied was correct or sufficient. Nor did he say, as Mr Kwong now submits, that the information was all public record and could have been obtained by the plaintiff.

65. It is clear to me that the 2^nd defendant’s email of 1 August 2012 did not evince an intention not to perform the Agreement. There was nothing which indicated that his request was in any way disingenuous or contained a refusal to perform the Agreement.

66. Mr Wang replied by email of 2 August 2012, and stated that:

“各股東意見是必須把華旭的股權轉到誠興公司，如不能各股東要求退股。”

67. It is curious that Mr Wang referred to shareholders in the plural. It is not clear why he did so, or to whom he was referring. But I do not think this matters.

68. The germane point is that by this email, Mr Wang requested a different mode of performance of the Agreement, i.e. for the Target Shares to be directly transferred to the name of the plaintiff, rather than for the transfer of the shares in the 3^rd defendant to the plaintiff.

69. This obviously raised a number of different regulatory issues in Taiwan.

(1)  The original arrangement under the Agreement was for the Mainland interest to be introduced at the stage of the transfer of shares in the 3^rd defendant to the plaintiff.
(2)  There were some indications in the evidence that the original contemplation was that the trust arrangement pursuant to which the 3^rd defendant owned shares in the 4^th defendant would not be disclosed to the Investment Commission.
(3)  There were also some indications in the evidence that it was possible for the Investment Commission not to keep track of the change of ownership of the 4^th defendant after the approval for its acquisition of the Target Shares had been given in December 2011, such that the transfer of shares in the 3^rd defendant to the plaintiff would not be disclosed to the Investment Commission.
(4)  I do not think it is necessary for me to come to a definitive view as to how the defendants intended to put through the original transaction.
(5)  Suffice it to say that obviously if the Mainland Interest was to be introduced by a direct investment by the plaintiff in the Target Company, different steps in Taiwan would have to be taken to seek the requisite approval.

70. The 2^nd defendant emailed Mr Wang on 3 August 2012 stating that he and the legal department of the Arima Group would investigate into the viability of transferring the Target Shares directly into the name of the plaintiff.

71. A number of emails then passed between Ms Elaine Lin and the Arima Group’s advisers exploring precisely what steps had to be taken.

72. By an email to Mr Wang of 13 November 2012, the 2^nd defendant informed him that it was possible for the Target Shares to be directly transferred to the plaintiff, but a number of steps had to be taken to obtain the requisite approval from the Taiwan government, and this could not be done within a short period of time.

73. One of the steps that had to be taken to effect a direct transfer of the Target shares into the name of the plaintiff would be to amend the constitution of the Target Company, so as to bring its scope of business in line with what was then permissible for Mainland interests to invest in. This was actually done pursuant to approval by the shareholders in the Target Company on 17 December 2012, and such amendment was approved by the Taiwan authorities on 22 December 2012. This indicates, in my view, that the Arima Group was earnestly preparing for a direct transfer of the Target Shares into the name of the plaintiff.

74. By email of 8 January 2013 to Ms Elaine Lin, in reply to a request from her for further information necessary for approval from the Taiwan authorities, Mr Wang stated that he would still have to consider the situation on the Mainland, undertake further discussions, and would reply to Ms Elaine Lin after a decision was made.

75. The discussions concerning how to put through the direct investment of the plaintiff in the Target Shares continued for the best part of 2013.

76. It would appear that the parties were ultimately unable to reach final agreement on exactly how to effect the direct investment. In paragraph 87 of Mr Kwong’s Closing Submissions, he listed three areas on which the parties could not reach consensus.

(1)  First, the plaintiff was not agreeable to sign a blanket power of attorney drafted by the Arima Group. But Ms Elaine Lin did point out in an email to Mr Wang of 4 November 2013 that he could appoint anyone as his attorney for this purpose, and there was no necessity to appoint someone in the Arima Group. It was also accepted by Mr Wang in evidence that he had never suggested any amendments to the power of attorney. Hence, I am unable to accept that the disagreement over the contents of the power of attorney was the reason why the direct investment structure was not implemented in the end.
(2)  Second, the parties were unable to agree on the arrangement for a Taiwan notary to notarise the relevant documents to be submitted to the Taiwan authorities for approval. This does not appear to me to be a major disagreement.
(3)  Third, there was a disagreement on the terms of the new agreement to be executed, as evidenced by an email of 16 April 2013. Likewise, this disagreement does not appear to me to be a major disagreement.

77. It is clear to me that none of these reasons assists the plaintiff in showing a repudiation. The most important point, it seems to me, is that whilst the parties were unable to reach agreement on the above issues, there is nothing which indicated that the 2^nd defendant refused to perform the Agreement on its terms. Further, at no point before 27 November 2014 did the plaintiff demand a reversion to the original Agreement for the transfer of the shares in the 3^rd defendant to the plaintiff. In opening, Mr Kwong accepted that there was no evidence of any such demand.

78. It is clear to me that from August 2012 onwards, the parties were working towards a different way of effecting the sale and purchase, i.e. by the transfer of the Target Shares directly into the name of the plaintiff. It is clear that the parties were ultimately unable to reach a final accord on how exactly that could be done. Whether this is because Nanye and the Arima Group had fallen out on other matters of cooperation is something unclear on the present evidence, nor should it matter.

79. What matters, in my judgment, is that there was no demand for the performance of the Agreement on its terms and no indication by the 2^nd defendant of an intention not to perform. There were certain demands in 2014 for the return of the purchase price, but not the performance of the Agreement on its terms. Hence, I do not think it is right to say that by 27 November 2014, there was a refusal to perform the original Agreement “despite the plaintiff’s repeated requests and enquiries” as alleged in paragraph 19 of the Amended Statement of Claim.

80. Whilst it is true that by 27 November 2014, there was no transfer of the shares in the 3^rd defendant to the plaintiff, that, in my judgment, was not because of any refusal by the 2^nd defendant to do so, but rather because the plaintiff was asking for something else at the time.

81. I make clear that I do not hold, and I do not think I have to hold, that the parties had agreed to vary or amend the Agreement. It would suffice to hold, as I do, that the parties were exploring another option to transfer the interest in the Target Shares and there was no request, and no refusal, to perform the terms of the Agreement. I conclude that that the events before 27 November 2014 do not support a suggestion that there was an evinced intention by the 2^nd defendant not to perform the Agreement.

82. There is a letter of 10 February 2015 from the defendants’ solicitors tendering a number of documents for the plaintiff’s execution, apparently to effect the transfer of shares in the 3rd defendant to the plaintiff. I do not think I should take this into account in deciding whether there was an extant repudiation on 27 November 2014, as the letter of 10 February 2015 came afterwards.

The legal result

83. It follows from my finding that the 1^st Representation was never made by the 1^st or 2^nd defendant that I will dismiss the complaints based on misrepresentation.

84. There is a further reason why the misrepresentation complaints should be dismissed.

(1)  I have held that Mr Wang did not hold the shares in the plaintiff on his own behalf, and the shares in the plaintiff were in truth owned by Nanye.
(2)  I do not think there is sufficient plea or proof that on that factual scenario, Mr Wang was still the person whose act, knowledge, or state of mind was intended to count as the act, knowledge or state of mind of the plaintiff. Hence, I do not think it is sufficiently pleaded or proved that Mr Wang’s reliance on any representation would be attributable to the plaintiff.
(3)  There is also no plea that Mr Li JM had relied on any representation made by the 1^st or 2^nd defendant.
(4)  Accordingly, I do not think there is any valid plea of reliance by the plaintiff on the 1^st Representation. That is another reason why the misrepresentation complaints must fail.

85. It also follows from my holdings above that there was no repudiation capable of acceptance by 27 November 2014. Accordingly, I hold that the Agreement has not been discharged by breach as claimed by the plaintiff. It follows that I should dismiss the claim based on total failure of consideration.

86. For the above reasons, I will dismiss the plaintiff’s claim.

87. Mr Wong indicated in oral closing submissions that if I were to dismiss the claims of the plaintiff, he would invite me to make a declaration that the Agreement has not been validly terminated. Mr Kwong indicated that he would take a neutral stance on such relief. I am prepared to make the declaration sought and will do so accordingly.

88. I also make a costs order nisi that the plaintiff do pay the costs of the defendants in this action, to be taxed if not agreed.

89. It remains for me to register my gratitude to the legal representatives for conducting this trial with courtesy, proportion and professionalism.

	(Bernard Man SC)
	Deputy High Court Judge

Mr Alan Kwong and Mr Sakinah Sat, instructed by Zhong Lun Law Firm, for the Plaintiff

Mr Samuel Wong and Mr Edward K H Ng, instructed by Sit, Fung, Kwong & Shum Solicitors, for the 1^st and 4^th Defendants

HCA 1131/2015

[2018] HKCFI 1631

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1131 OF 2015

________________________

BETWEEN
	MEGA HONOUR HOLDINGS LIMITED	Plaintiff
	and
	李森田	1^st Defendant
	LU HSIAO-HWA (盧曉華)	2^nd Defendant
	NEW ACME HOLDINGS LIMITED	3^rd Defendant
	DROSTAN INVESTMENT LIMITED	4^th Defendant

_______________________

Before: Hon B Chu J in Chambers

Date of Hearing: 21 March 2018

Date of Plaintiff’s Written Submissions: 24 May 2018

Date of Defendants’ Written Submissions: 1 June 2018

Date of Plaintiff’s Reply Submissions: 11 June 2018

Date of Decision: 18 July 2018

__________________________

D E C I S I O N
(Variation of Costs Order Nisi)

____________________________

Introduction

1. This Court handed down a decision on 29 March 2018 (“Decision”) in relation to the plaintiff’s appeal against the decision of Mr Registrar Lung dismissing its application for specific discovery. I will follow the same abbreviations in the Decision, unless otherwise stated.

2. In the Decision, I made an order nisi for P to pay 90% of D’s costs, to be summarily assessed and paid within 21 days from date of assessment (“Order Nisi”).

3. P applied for a variation of the Order Nisi, seeking either no order as to costs or costs be in the cause.

Documents obtained by P

4. P sought 5 classes of documents in its Discovery Summons. As set out in the Decision, the main dispute at the hearing was over the Class A Documents.

5. For Class B Documents, essentially what was sought by P was all relevant documentations showing the chain of ownership of the Target Shares from 2011 to the date of issue of the Discovery Summons. After preliminary indications from this Court at the appeal hearing on 21 March 2018, Ds agreed to provide copies of the share certificates showing that the Target Shares were registered in the name of D4 after the execution of the 3 Stock Purchase Agreements and relevant documents to show that D4’s entire shareholding was held in trust for D3 at the date of the Agreement.

6. As Ds had rightly pointed out at the appeal hearing, the range of the Class B documents originally sought in the Discovery Summons was too wide. Further, Ds did disclose the Declaration of Trust which appeared to have slipped the attention of P.

7. At the appeal hearing, P decided not to pursue Class C and D documents at the appeal hearing. In any event, for the Class C Documents, they should be available on public records.

8. As for Class E Documents, the M&A of Arima EcoEnergy have been amended so that the “Business Items” stated therein would not fall within the restrictions imposed by the Taiwanese law on foreign/Mainland investors. Ds were willing to provide a copy of the amended M&A and confirmation that it has not been changed since the amendment. Again, the original range of documents sought by P was too wide.

9. The Class A Documents were the only disputed item at the appeal hearing. P did not succeed in obtaining all the audited financial statements accounts of Arima EcoEnery for the period of some 7 consecutive years as sought in the Discovery Summons, and only succeeded in obtaining the latest set of audited financial statements.

Exercise of discretion

10. The matter of costs is in the unfettered discretion of the Court and costs normally follow the event. There are also special matters set out in Order 62 rule 5 of RHC which the Court shall take into account to such extent if any as may be appropriate in the circumstances of the case. In particular, whether there has been any written offer, the conduct of the parties and whether a party has succeeded on part of his case, even if he has not be wholly successful.

11. Looking at the pre-application letters between the parties’ respective solicitors, in particular, the letter dated 27 April 2017 from P’s solicitors to Ds’ solicitors, P did set out that the purpose for seeking Class A Documents was in relation to whether Ds would be entitled to the counterclaim for the relief of specific performance. Even though P had revised their scope a couple of times and that they had indicated that they were trying to resolve the matter amicably, the short responses from D on each occasion with no constructive proposals were unhelpful.

12. Although I accept that the scope of some classes of the documents sought by P was wide, in the end P did obtain, whether by agreement or by order, some documents. As I have said in the Decision, these documents are largely relevant to Ds’ counterclaim that the Agreement has not been validly terminated and further seeks specific performance thereof after some 7 years.

13. Having considered the circumstances of this case and in light of D’s pre-application responses to this interlocutory application, and that P had to come to this Court before obtaining some documents. I am prepared to reconsider the matter of costs. Having said this, I am still of the view that Ds are largely successful in resisting a greater part of the Discovery Summons and I am only prepared to vary the Order Nisi to the extent that P is to pay 80% of Ds’ costs. As for the costs of this application, I will similarly order P to pay Ds’ costs to reflect P’s limited success.

14. I will ask Ds to submit a further statement of their costs of this application within 7 days, and P to submit list of objections within 7 days thereafter.

	(Bebe Pui Ying Chu)
	Judge of the Court of First Instance High Court

Mr Alan Kwong, instructed by Zhong Lun Law Firm, for the plaintiff

Mr Samuel Wong, instructed by Sit Fung Kwong & Shum for the 1^st to 4^th defendants

HCA 1131/2015

[2018] HKCFI 687

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1131 OF 2015

________________________

BETWEEN
	MEGA HONOUR HOLDINGS LIMITED	Plaintiff
	and
	李森田	1^st Defendant
	LU HSIAO-HWA (盧曉華)	2^nd Defendant
	NEW ACME HOLDINGS LIMITED	3^rd Defendant
	DROSTAN INVESTMENT LIMITED	4^th Defendant

_______________________

Before: Hon B Chu J in Chambers

Date of Hearing: 21 March 2018

Date of Decision: 29 March 2018

_____________________

D E C I S I O N

_____________________

Introduction

1. This is an appeal against the decision of Mr Registrar Lung for dismissing P’s application for specific discovery.

2. The Registrar has handed down his reasons for dismissing P’s application on 5 December 2017 (“Reasons”).

3. P is a limited company incorporated in Hong Kong and wholly owned and controlled by Mr Wang Yangke, a Mainland Chinese citizen (“Wang”).

4. At all material times D1 was/ is the substantial shareholder, a director and chairman of a Taiwanese company Arima EcoEnergy Technologies Corp/華旭環能股份有限公司 (“Arima EcoEnergy”).

5. Arima EcoEnergy is one of a group of companies in the fields of trading and/or manufacturing products for generating, storing or transmitting energies/powers (collectively “Arima Group”).

6. D2 was at all material times a consultant working in the Arima Group under and/or reporting to D1, and D2 was at all material times also the sole director and shareholder of D3, a limited company incorporated in Hong Kong.

7. D4 is also a limited company incorporated in Hong Kong, and its registered office was/is the same as that of D3.

P’s claim

8. P’s claim arose out of an agreement dated 11 November 2011 between P and D2 pursuant to which P agreed to purchase and D2 agreed to sell 100% of his shares in D3 (“New Acme Shares”), with the understanding that P was to end up ultimately holding 5,058,400 shares (or 20% of the entire shareholding) in Arima EcoEnergy (“Target Shares”) through D3 (“Agreement”)[1]. The consideration for the acquisition was USD4,390,000 (“Consideration”).

9. The Consideration was paid by P by two sums (collectively “Sums”) :

(i) €2.6m (equivalent USD 3,469,700) transferred into D3’s bank account on 9 December 2011;
(ii) The balance of USD 847,200 transferred into D3’s bank account on 20 March 2012.

10. It is P’s case that the Sums were paid into D3’s bank account pursuant to the terms of the Agreement and that the Sums paid into D3’s bank account were later transferred by D3 to D4 and then by D4 to 3 companies within the Arima Group, which are simply referred to as Arima P&O, Acmesoft and Rioworks (collectively “3 Companies”).

11. It is further P’s case that despite P’s repeated requests and enquiries, D2 had all along failed and/or refused to transfer the New Acme Shares to P. P had accepted D2’s repudiatory breach of the Agreement by a letter dated 27 November 2014 sent by P’s solicitors and P demanded repayment of the Sums.

12. Further, P claims it is entitled to restitution of the Sums on the basis that the Sums had been received by Ds and/or there was unjust enrichment, there being total failure of consideration and/or failure of consideration and/or mistake.

13. P also alleged that there had been certain representations made by D1, D2 and D3 (“Representations”), upon reliance of which P had entered into the Agreement, and that the Representations were made dishonestly and fraudulently, and that Ds held the Sums as constructive trustees for P and P is entitled to trace and recover the Sums. P’s amended statement of claim has now also included a claim based on quistclose trust and that P is entitled to claim repayment and/or account of the Sums, equitable compensation as well as tracing, and an account and/or enquiry in respect of the Sums.

Ds’ defence and counterclaim

14. Ds’ case is that in about 2011 a Mainland company called 山西南燁集團有限公司 (“Nan Ye Group”), of which a Li Jian-ming (“JM Li”) was/is the Chairmen, was interested in investing in Arima EcoEnergy. However, at the time, there were restrictions in Taiwan which prohibited Mainland investors from directly investing in power and energy equipment manufacturers in Taiwan such as Arima EcoEnergy.

15. In view of the Taiwanese restrictions, an investment structure was set up, under which the Nan Ye Group would indirectly acquire the Target Shares through P acquiring the New Acme Shares, and that the Agreement formed part of this investment structure.

16. However, due to P’s/Nan Ye Group’s/JM Li’s refusal to cooperate and to produce the necessary notarized documents as required by the Taiwan authority for the transfer of the New Acme Shares, D2 was unable to complete the transfer, and that Ds remain ready and willing to effect transfer of the New Acme Shares to P. Ds counterclaim for seek specific performance of the Agreement.

P’s application for specific discovery

17. P issued its summons for discovery on 6 June 2017 (“Discovery Summons”), some 10 months ago.

18. There were 5 classes of documents sought by P, and briefly they were as follows:

(1)   Class A – audited financial statements and accounts of D3 and Arima EcoEnergy (i) from 2011 to 2013; and (ii) from 2014 up to the latest financial year;
(2)   Class B – all relevant documentations showing (a) Target Shares were directly or indirectly held by D3; and (b) the shareholders of Arima EcoEnergy, D4 and the 3 Companies, for (i) the period from 2011 to 2012 and (ii) from 2013 up to the date of issue of P’s Summons
(3)   Class C – all relevant documentations showing (a) whether D1 and D2 were directors of the Arima EcoEnergy, D4 and the 3 Companies; and (b) all directors for those 5 companies (i) from 2011 to 2012; and (ii) from 2013 up to the date of issue of P’s Summons;
(4)   Class D – all relevant documentations showing the whereabouts of the Sums paid by P to D3 and/or their traceable proceeds;
(5)   Class E – relevant documentations showing the registered business items of Arima EcoEnergy (i) from 2011 to 2012 and (ii) from 2012 up to the date of issue of P’s Summons.

19. Ds have filed their 1^st list of documents on 6 April 2016 (“1^stList”). After the Discovery Summons was issued, Ds filed two further supplemental lists of documents, one filed on 8 June 2016 (“2^ndList”) and one on 31 August 2017 (“3^rdList”). Parties have also since filed their respective listing questionnaires.

The Legal principles

20. It is trite that an appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time[2].

21. There was also no dispute on the legal principles in relation to specific discovery. The burden is on P to establish that the documents sought are relevant to the pleaded issues in dispute, that Ds are in possession, custody or power of those documents and the discovery is necessary either for disposing fairly of the cause or matter or for saving costs.

The issues

22. According to P’s listing questionnaire, the main issues to be tried include the following:

(i) whether P is entitled to recover the Sums paid under the Agreement which was entered into by P in reliance on the Representations and Ds’ failure to deliver up and/or transfer the New Acme Shares;
(ii) whether the Agreement is still operative.

23. According to D’s listing questionnaire, the main issues to be tried include the following:

(i)   what was the agreement between the vendors of the Target Shares and JM Li representing the Nan Ye Group;
(ii)   Whether P was and is in breach of the Agreement?
(iii)   Whether Nan Ye Group as represented by P is obligated to acquire the Target Shares either indirectly through D3 or directly by acquiring all the shares of D4;
(iv)   Whether the refusal of P (representing the Nan Ye Group) to procure the signing and execution of documents required for the Indirect Investment Scheme[3] or alternatively the Direct Investment Scheme[4] constitutes a breach of the Agreement.

24. The Representations pleaded by P are in essence: (i) although under the laws of Taiwan, it was impermissible for Mainland investors to hold interests in Taiwanese companies involved in the manufacture of equipment in connection with solar electric system, P could still acquire the Target Shares indirectly through layers of Hong Kong companies; (ii) D3 was indirectly holding the Target Shares and therefore by acquiring 100% of D3, P would be indirectly holding the Target Shares and become an ultimate shareholder of Arima EcoEnergy.

25. The Class A, B, C, E Documents in the Discovery Summons are in relation to two periods, from 2011 to 2012 (save for the Class A Documents, 2011 to 2013) and from 2012 (or 2013 for Class A Documents) up to the date of the Discovery Summons.

26. So far as can be seen, the time for payment of the Consideration and completion provided in the Agreement were as follows:

(i)   The Consideration was to be paid immediately upon signing of the Agreement and at least 2 working days prior to the completion date for the sale and purchase of the New Acme Shares (Clause 1.2.3);
(ii)   The completion date for the sale and purchase was stated to be 20 December 2011 (or such date as the parties have agreed in writing) whereupon the vendor was to deliver to the purchaser the New Acme Shares together with transfer documents and evidence of tax payments etc (Clause 2);
(iii)   The completion date for the transfer of the New Acme Shares was stated to be on or before 31 December 2011 (or such date as the parties have agreed in writing) (Clause 3) (“Completion Date”).

27. However, the Consideration was not fully paid until 20 March 2012. It appears from the 1^st List, there were numerous email communications between the two sides, among which only some has been placed before this Court. Anyway, it would appear from the 1^st List that relevant emails between the two sides in relation to the transfer of the New Acme Shares/Targe Shares would range from about 26 December 2011 until 4 November 2013.

28. For present purposes, it would appear that the documents are said to be relevant in relation to broadly 3 areas:

(i)   Whether D3 was/is indeed holding the Target Shares at the material times (“Chain of Ownership Issue”);
(ii)   What were/are the “business items” of Arima EcoEnergy at the material times, since whether there was permission for a Mainland investor to invest in the Target Shares would depend, amongst other things, on whether the registered “business items” of Arima EcoEnerby would fall within the scope of permissible investments under the Taiwanese law (“Business Items Issue”);
(iii)   whether Arima EcoEnery was at all material times/is still carrying on business as an on-going concern; and whether Ds have caused D3/Arima EcoEnergy adverse financial consequences (“Financial Situation Issue”).

29. At the end of the hearing, the parties’ main dispute concerned the Class A Documents. P also decided not to pursue the Class C and D Documents.

30. I will first consider the Class B and Class E Documents.

31. Counsel Mr Alan Kwong and Mr Joseph Wong appeared for P and Counsel Mr Samuel Wong appeared for Ds.

Class B Documents

32. These are submitted by Mr Kwong to be relevant to the Chain of Ownership Issue.

33. First of all, P, D3, and D4 are all companies incorporated in Hong Kong.

34. From the documents disclosed by P, as well as Ds, P was incorporated on 7 July 2011 and it would appear that Wang acquired the company and became its sole shareholder on 12 October 2011[5].

35. As for D3 and D4, it would appear neither side had disclosed any incorporation/acquisition documents in their respective lists of documents, but these should all be available from the Companies Registry.

36. In Ds’ 1^st List, Ds had disclosed, amongst other things:

(i)   copy of a power of attorney dated 6 October 2011, signed by JM Li on behalf of the Nan Ye Group, authorizing D2 on behalf of D3 to sign a declaration of trust and an indemnity agreement with RK Nominees Limited[6];
(ii)   copy of a power of attorney dated 20 October 2011, signed by JM Li on behalf of the Nan Ye Group, authorizing D2 on behalf of D3, to further authorize D4 to enter into a stock purchase agreement with each of the 3 Companies to purchase the Target Shares (“Stock Purchase Agreements”)[7];
(iii)   copy of a power of attorney dated 20 October 2011, signed by D2 on behalf of D3, authorizing RK Directors Limited to sign the 3 Stock Purchase Agreements on behalf of D4[8];
(iv)   Copies of the 3 Stock Purchase Agreements duly signed by RK Directors Limited on behalf of D4 with the 3 Companies[9].

37. Then in Ds’ 3^rd List that they disclosed a copy of a declaration of trust between RK Nominees Limited (Trustee) and D3 (beneficiary) (“Declaration of Trust”).

38. Since a copy of this Declaration of Trust has not been produced to the Court, the contents of this document are unknown to this Court. Although this document was disclosed by Ds at end of August 2017, and P’s solicitors should have had ample time to inspect and/or obtain a copy and yet, it would appear that Mr Kwong was not quite clear about the contents of this document either.

39. In any event, at the hearing, Ds’ Counsel Mr Wong informed the Court that Ds would be prepared to provide copies of the share certificates showing that the Target Shares were registered in the name of D4, after the execution of the 3 Stock Purchase Agreements. Mr Wong also informed this Court that the Declaration of Trust would show that RK Nominees Limited were holding the shares in D4 in trust for D3 (beneficiary) at the time of the Agreement.

40. To allay P’s concerns over the Chain of Ownership Issue, Mr Wong indicated to this Court that Ds would be willing to provide:

(i) relevant share certificates of the Target Shares to show when they were acquired by D4 and/or registered in the name of D4;
(ii) relevant documents to show that D4’s entire shareholding was held by RK Nominees Limited in trust for D3 as at the date of the Agreement.

41. Mr Kwong indicated that if Ds could provide the register of shareholders and the above ownership documents in relation to the Target Shares, P would not press for the Class B Documents.

42. As Ds are counterclaiming that the Agreement has not been validly terminated and further seeks specific performance thereof, in my view, Ds should also confirm that there has been no change in the ownership of the Target Shares since the date of the Agreement todate.

Class E Documents

43. Mr Wong informed the Court that the Memorandum & Articles of Association (“M&A”) of Arima EcoEnergy have been amended so that the “Business Items” would not fall within the restrictions imposed by the Taiwanese law on foreign/Mainland investors, in order for the acquisition of the Target Shares by Nan Ye Group through P to take place.

44. Again to allay P’s concerns, Ds are willing to provide a copy of the amended M&A and if necessary to provide confirmation that the Business Items as contained in the amended M&A have not been changed since the amendment todate.

45. Mr Kwong indicated that the provision of the amended M&A and the confirmation would be sufficient for P’s purpose for the time being, and upon this, P would not pursue Class E Documents.

Class A Documents - Financial Situation Issue

46. Under Class A, P sought the audited financial statements of D3 and Arima EcoEnergy for (i) from 2011 to 2013 (“1^st Period”) and (ii) from 2014 up to date (“2^nd Period”).

47. In P’s skeleton submissions, Mr Kwong argued that the Class A documents for the 1^st Period are directly relevant to the issues (a) whether the Representations (if made) were false in that D3 had never held any shares in Arima EcoEnergy; and (b) whether there was a breach of an implied term in the Agreement that D2 had warranted that D3 should ultimately own and control the shareholding in Arima EcoEnergy.

48. As for the 2^nd Period, namely from 2014 todate, Mr Kwong argued that the audited accounts would show (i) whether Arima EcoEnergy is still carrying on business as an on-going concern; and (ii) whether Ds have caused D3/Arima EcoEnergy adverse financial consequences, and that these matters are relevant to the Court’s exercise of discretion in considering whether the specific performance sought by Ds should be granted.

49. So far as the 1^st Period is concerned, as mentioned earlier, Ds have now agreed to provide (i) relevant share certificates of the Target Shares to show when they were acquired by D4 and/or registered in the name of D4; (ii) relevant documents to show that D4’s entire shareholding was held by RK Nominees Limited in trust for D3 and (iii) the register of shareholders in relation to the Target Shares.

50. As I have indicated earlier, there should be a confirmation or evidence that there has not been any change from date of Agreement todate.

51. The audited financial statements of D3 and Arima EcoEnergy would not be relevant to the Chain of Ownership Issue. In any event, so far as the audited financial statements of Hong Kong companies are concerned, the names of owners/shareholders would not normally appear on the audited financial statements.

52. I note that under clause 5.2 of the Agreement, the vendor/D2 warranted that prior to the transfer of the New Acme Shares, the New Acme Shares were not subject to any charges/mortgages and further under clause 5.3 of the Agreement, the vendor/D2 warranted that prior to the transfer of the New Acme Shares, D3 had no other liabilities.

53. Although the above warranties are only in relation to the New Acme Shares and D3, it is not really disputed that the intention under the Agreement was for P (or on Ds’ case, the Nan Ye Group/JM Li represented by P/Wang) to acquire ultimately the Target Shares through acquiring the New Acme Shares. This is also clear from the “Introduction” of the Agreement.

54. However, it was not specifically pleaded by P that Ds were in breach of the above warranties in the Agreement.

55. What was pleaded by P is that wrongfully and in flagrant breach of the Agreement, D2 had, amongst other things, failed and/or refused to show that no adverse changes were caused to Arima EcoEnergy’s business and operation[10]. Ds had on the other hand had averred that P had not asked whether there were adverse changes to Arima EcoEnergy’s business and operations[11]. P then responded in its amended reply and defence to counterclaim, that Wang had repeatedly raised enquiry with D2 as well as staff working for D1 in the Arima Group about accounts , financial information, corporate information and/or operation status of Arima EcoEnergy, as well as D3 and D4 but despite the enquiry, Wang and/or P was not provided with any information[12]. P further averred that after the Completion Date, D2 still wrongfully, continuously and repeatedly failed and/or refused to, amongst other things, perform the Agreement by, amongst others, showing that there was no adverse changes to the business and operation of Arima EcoEnergy.

56. It was however not clear whether P had obtained any financial information from D2 in relation to Arima EcoEnergy prior to entering into the Agreement, nor was it clear from P’s pleadings as to over what period P was referring to “adverse changes”, namely from when to when.

57. Anyway, Ds have voluntarily disclosed the balance sheet of Arima EcoEnergy as at 30 September 2011 in their 1^st List and also the profit and loss accounts of Arima EcoEnergy for one month, from 1 September to 30 September 2011. The profit and lost accounts appeared to show that for the month of September 2011, the net loss was some NTD 2.9m and the accumulated net losses some NTD 47.7m. The balance sheet appeared to show a negative value for the net shareholders’ equity of about NTD 46m.

58. By disclosing the above, it would appear that Ds have taken the view that the above financial statements of Arima EcoEnergy would be relevant or related to a matter in question between them and P in the present action.

59. However, as pointed out by Mr Wong, which this Court accepts, the financial statements of D3 and/or Arima EcoEnergy would not be relevant to the Chain of Ownership Issue, namely whether the Representations were false and/or whether there was any breach of an implied term that D2 warranted that D3 would ultimately own and control the Target Shares, as pleaded by P.

60. At this stage, P has not provided any other reason for seeking the financial statements for the 1^st Period. Thus, I am of the view that P’s application for the Class A Documents for the 1^st Period must fail.

61. As for the 2^nd Period, Mr Kwong submitted that the documents are relevant to the court’s exercise of discretion in considering whether specific performance of the Agreement should be ordered in case the court finds in favour of Ds in this action.

62. Specific performance is a discretionary remedy and equity will not grant specific performance if it would be futile to do so and Mr Kwong had referred this Court to Goal Upward Investment Ltd v Osmand Mohammed Arab & Anor [2016] 5 HKLRD 158[13]. In his judgment, DHCJ Cooney SC had referred to a passage in Snell’s Equity, 33^rd Ed 2015:

“… specific performance will be refused where the contract gives the defendant the right to terminate it, since it is assumed he would exercise the right and render the order for specific performance nugatory[14].”

63. In the Goal Upward case, it was held, amongst other things, that although the purported notice of termination given by the defendants was too short and null and void, it was open to the defendants to issue a fresh termination notice, which would thus render any order for specific performance nugatory.

64. As pointed out by Mr Registrar Lung in his Reasons, the circumstances of the present case are different from those in the Goal Upward case.

65. However, as pointed out by the author of Snell’s Equity, the court is entitled to have regard to the practical consequences of granting or refusing an order for specific performance[15]. This passage was not referred to Mr Registrar Lung by the parties.

66. Mr Kwong has referred to a very recent decision, after the Reasons were handed down, Thiess Mongolia LLC v Mongolia Energy Corporation Ltd HCA 31 & 34 of 2016, 4/12/17 where DHCJ Kent Yee, citing Pacific Link Communications Ltd v Wong Man Him Melvyn [1996] 1 HKC 474[16], stated[17]:-

“First, Mr Smith highlights that the Company only has to show a prima facie case for relevance. The Court of Appeal found it sufficient even if the contents of the purportedly relevant document can only be said to be “at the most of marginal relevance”: Pacific Link Communications Ltd v Wong Man Him Melvyn [(supra)]

67. DHCJ Kent Yee went on to state[18]:-

“The Peruvian Guano test remains applicable and the definition of “relevance” is framed in the widest possible terms: Mariner International Hotels Ltd v Altas Ltd & Anor, unreported, HCA10714,10752 & 10821/1988, 18.1.2002 at §5 citing with approval the dictum of Sir Thomas Bingham MR (as he then was) in Taylor v Anderton [1995] 1 WLR 447 at p 460C.”

68. Mr Kwong further referred to Tullett Prebon (Hong Kong) Ltd v Chan Yeung Fong Nick & Ors HCA 2197/2009 (09.06.11) where To J had said:

“Once a prima facie case is established, the Court has a discretion to order disclosure. It is for the party who resists discovery to satisfy the Court that the discovery is not necessary either for disposing fairly of the cause or matter or for saving costs”

69. Ds have only disclosed financial statements as at 30 September 2011, prior to the Completion Date (31 December 2011) but the Consideration was not fully paid by P until 20 March 2012, and it was P’s case that by its solicitors’ letter dated 27 November 2014 that P accepted D2’s repudiatory breach of the Agreement. In any event, there has now been a lapse of over 6 years since Ds’ September 2011 financial statements.

70. Having considered this, I have come to the view that P has satisfied this Court there is a prima facie case for relevance and/or the discovery is necessary for disposing fairly of the matter or for saving costs, in that whether Arimo EcoEnergy is still an on-going concern and the present financial situation of D3 and Arima EcoEnergy may be practical consequences the court will take into consideration in exercising its discretion as to whether to order specific performance in the event of Ds being successful in this action.

71. There was no evidence that the audited financial statements of D3 and ArimaEcoEnergy are not in the possession custody or power of Ds.

72. I am therefore prepared to order that Ds do produce the latest available audited financial statements and accounts of D3 and Arima EcoEnergy.

Conclusion

73. Having regard to the above, I will allow P’s appeal to the extent as indicated and upon Ds agreeing to provide those documents as stated earlier.

74. I will allow Ds to provide the documents within 28 days from the date of this order, unless otherwise agreed by the parties.

75. The parties are to submit an agreed draft order for approval.

76. So far as costs are concerned, on an overall basis P has only succeeded to a limited extent. I order P to pay 90% of Ds’ costs, to be summarily assessed and paid within 21 days from the date of assessment. Ds to provide their statement of costs within 14 days and P its list of objections within 7 days thereafter. This is an order nisi, which shall become final after 21 days.

	(Bebe Pui Ying Chu)
	Judge of the Court of First Instance High Court

Mr Alan Kwong and Mr Joseph Wong, instructed by Zhong Lun Law Firm, for the plaintiff

Mr Samuel Wong, instructed by Sit Fung Kwong & Shum for the 1^st to 4^th defendants

[1] B2:87-90

[2] Para 58/1/2 Hong Kong Civil Procedure 2018, Vol 1, pg 1118

[3] As defined in Ds’ listing questionnaire

[4] As defined in Ds’ listing questionnaire

[5] B2:41, see also descriptions of items 27, 28 of the 1^st List

[6] B2: 40

[7] B2: 42

[8] B2:43

[9] B2:72-86

[10] See para 18, B1:6

[11] Para 26, B1:53

[12] See para 19(1) and (2), B1:88

[13] See para 37, Goal Upward Investment Ltd v Osmand Mohammed Arab & Anor [2016] 5 HKLRD 158, and also Snell’s Equity, 33^rd Ed 2015, para 17-020

[14] At para 17-020

[15] At pg 439, para 17-007

[16] At A-B, pg 479, per Power VP

[17] At para 21

[18] At para 22

HCA 1131/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1131 OF 2015

________________________

BETWEEN
	MEGA HONOUR HOLDINGS LIMITED	Plaintiff
	and
	李森田	1^st Defendant
	LU HSIAO HWA (盧曉華)	2^nd Defendant
	NEW ACME HOLDINGS LIMITED	3^rd Defendant
	DROSTAN INVESTMENTS LIMITED	4^th Defendant

________________________

Before: Mr Registrar K. W. Lung in Chambers

Date of Hearing: 5 December 2017

Date of Decision: 5 December 2017

_______________

D E C I S I O N

_______________

THE APPLICATION

1. By Summons dated 6 June 2017, the Plaintiff (“P”) seeks specific discovery of 5 classes of documents against the Defendants (“Ds”). The classes of documents sought are set out in the Summons.

2. The application is contested and the parties are legally represented.[1]

THE FACTUAL BACKGROUND

3. The facts of this matter are very much in dispute at trial by the parties. However, it will be of assistance for this application to set out the salient facts as alleged by the parties. I shall first set out the facts as submitted by counsel for P in his written submissions below.

P’s alleged facts

4. P is a company wholly owned and controlled by Mr. Wang Yangke, who is a PRC national/citizen (“Wang”).

5. Wang was interested in acquiring 20% shareholding in a Taiwanese company named “Armia EcoEnergy” that manufactured solar energies equipment.

6. It is P’s case that D1, D2 and/or D3 had made representations to Wang that:

(a) D3 (which was a HK company) was holding the 20% shareholding in Arima EcoEnergy.
(b) Hence, P could indirectly hold the shares in Arima EcoEnergy by acquiring the shareholdings. Under this arrangement, the restrictions against PRC citizens/nationals under Taiwanese laws could be circumvented.

7. P and D2 entered into the agreement dated 11 November 2011 (the “Agreement”) for acquiring the 100% shareholding in D3 at the consideration of US$4,390,000. The underlying purpose of the transaction was to enable P to acquire 20% shareholding in Armica EcoEnergy via D3.

8. Pursuant to the Agreement, P had fully paid up the consideration in two tranches. As per D2’s instructions, P did pay the sums of EUR2,600,000 and US$847,2000 (which were all together equivalent to US$4,390,000) to D3.

9. However, wrongfully and in breach of the Agreement, D3 never transferred the shareholding in D3 to P. Further, P never acquired any shareholding in Arima EcoEnergy at all. P further pleaded that on 27 November 2014, P had accepted D2’s repudiatory breach of the Agreement and demanded restitution of the monies paid. See §21 of the Amended Statement of Claim.

10. P therefore claims against Ds for restitution of the money paid. However, because P has also pleaded misrepresentation by D1, D2 and D3 (it is not easy how D3 can have made misrepresentations by itself); fraud by D1, D2 and D3 as pleaded in §28 of the Amended Statement of Claim, P has now claimed against Ds as trustees of the money received under constructive trust and quistclose trust. P has pleaded that there was evidence to show that money paid by P to D3 had been transferred to D4 and then by D4 to other companies within the Acrima Group, of which Arima EcoEnergy is a part. See §31 of the Amended Statement of Claim.

11. From P’s pleadings, what appears to be a simple monetary claim for money had and received by D3 for breach of the Agreement by D2 has turned into various claims for fraud, breach of constructive and breach of quistclose trust. When P claims against D2 and D3 for constructive trust, it is a claim further to the contractual claim. See §29 of the Amended Statement of Claim. When it turns to claim for breach of quistclose trust, it is a claim further or alternative to the contractual claim. See §34A.

Ds’ defences and counterclaim

12. Briefly speaking, Ds deny having breached the Agreement. They maintain throughout the pleadings that the Agreement remains valid. The reason for it being unable to complete is that P had failed to cooperate with Ds in that it had failed to procure the notarized documents as required by the Taiwan authority for the transfer of the shares directly to P. Ds deny any misrepresentation or trust relationship with P.

13. Ds Counterclaim against P for specific performance of the Agreement. P contends that since specific performance is a discretionary equitable remedy, no specific performance should be ordered as the whole exercise proposed by P is just futile and meaningless, relying upon Goal Upward Investment Ltd v. Osmand Mohammed Arab & Anor [2016] 5 HKLRD 158, §37 (DHCJ Cooney SC).

THE RELEVANT LEGAL PRINICPLES

14. The legal principles on the issues are trite. The court should be expected to exercise its case management powers with a view to tailoring an appropriate discovery regime for the case at hand. See Proposal 29 of the Final Report on CJR. The burden is on P to establish that those documents are relevant to the pleaded issues in dispute, that Ds are in possession, custody or power of the documents and discovery is necessary either for disposing fairly of the cause or matter or for saving costs. Full Range Electronics Co Ltd v General-Tech Industrial Ltd & Another [1997] 1 HKC at 544C-E. Relevance should be defined flexibly in accordance with the nature of the issues in dispute instead of the details pleaded. Billion Lead Investment Ltd v Union Joyce Ltd & others (unrep. HCMP 2145/2011, 14 December 2012 at §16. “Fishing expeditions” arise where what is sought is not evidence but information which may lead to a line of inquiry which would disclose evidence. It is the search for material in the hope of being able to raise allegations of fact, as opposed to the solicitation of evidence to support allegations of fact, which have been raised bona fide with adequate particularization: C v C (unreported, CACV 410/2005, 28 July 2006, §8). K & L Gates v Melco Crown Gaming (Macau) Ltd (unreported, HCA 349/2012, Au-Yeung J., 20 May 2016 at §64).

DISCUSSION

15. It will be convenient to set out the general outlines of Ds’ grounds of objection to P’s application here. Paragraph 13 of Ds’ written submissions says:

“For this application for specific discovery, the questions are: (i) whether the five categories of documents are relevant to the Plaintiff’s pleaded case, (ii) whether discovery is necessary; (iii) whether scope of the application is too wide both in terms of its definition as to categories and in terms of the number of years and (iv) whether discovery would save costs. It is the Defendant’s case is that all the necessary contemporaneous documents have been discovered.”

Class A: Audited accounts of D3 and Arima EcoEnergy for (i) periods from 2011 to 2013; and (ii) 2014 up to latest financial Year

16. For this category, Ds say that the documents are not relevant to the issues in dispute. The main issue is relevancy.

17. I agree with P that Ds’ reason that P had not given further and better particulars is not good defence to P’s application.

18. P’s reasons for the audited accounts between 2011 to 2013 are that they will show whether the representations (if made) were false in that D2 had never held any shares in Arima EcoEnergy. This can be done by way of interrogatory. It only requires a simply answer, saving costs and time, whereas by way of discovery, more time and costs will be unnecessarily incurred.

19. P’s second reason is whether there was a breach of an implied term in the Agreement that D2 had warranted that D3 should ultimately own and control the shareholdings in Arima EcoEnergy. Whether there was an implied term in the Agreement is subject to the finding by the trial court. It is difficult to see how the documents requested will show the implied term. The answer to the interrogatory on the fact whether D2 had shares in Arima EcoEnergy will be sufficient even if the implied term as alleged is found by the court.

20. As regards the audited accounts between 2014 up to date, they are irrelevant because under the contractual claim, whether Arima EcoEnergy is an on-going concern is neither here nor there. As to whether specific performance order should be made, it is clearly not relevant. This case can easily be distinguished from Goal Upward Investment Ltd. The documents will not assist the court to determine whether an order for specific performance should be made. From the Counterclaim, there is no pleading that Ds have suffered damage and that damages cannot compensate the loss by Ds. If P succeeds in its claim against Ds, Ds’ claim for specific performance will not be considered. If Ds succeed in their Counterclaim, that information or evidence as sought by P will be irrelevant as P will be compelled to complete irrespective of the ongoing of the business or otherwise.

21. This category is rejected.

Class B: the documentations showing the shareholders/shareholdings of the named companies within the Arima Group (i.e. Arima EcoEnergy, D4, Arima P&Q, Acmesoft and Rioworks) for (i) the period from 2011 to 2012; and (ii) from 2013 up to today)

22. Ds’ objections are that they are irrelevant, too vague or too wide and fishing exercises only.

23. P has given three reasons in support of its application. It is clear that what P is requesting Ds to disclose are not evidence, but rather information that will lead to allegation of facts against Ds.

24. As P pleaded constructive trust and fraud relating to the other parties, it is for P to prove, by prima facie evidence, their relationships and the fact that the monies transferred by D3 to them were the monies belonging to P. The requests simply demonstrate that P does not have the information in support of its case and is now seeking discovery of the information. This is impermissible as held in K & L Gates, supra.

25. As regards the documents from 2013 up to date under this category, for the same reasons I have given for category A documents, I reject P’s argument.

26. I hold that the requests are fishing exercise. They are not for a fair trial or saving costs. This category is rejected.

Class C: all relevant documentations showing the directors of the named companies within the Arima Group (i.e. Arima EcoEnergy, the 4^th Defendant, Arima P&O, Acmesoft and Rioworks) for (i) the period from 2011 to 2012; and (ii) from 2013 up to today)

27. They are the documents and information to show whether D1 and D2 were the directors of the above companies. As submitted by P, the information is for the purpose “such that there would be evidence or an inference showing that D1 and D2 are liable as constructive trustees by having knowingly received the sums of EUR2,600,000 and US$847,2000 and/or dishonestly assisted in dissipation of the same. They are also for the relief of constructive/Quistclose trust and tracing”.

28. This is clearly a fishing exercise and should be rejected at once.

Class D: the documentations showing the whereabouts of the sums of EUR2,600,000 and US$847,2000 and their traceable proceeds)

29. P supports its application by saying that the documents will show whether the monies were used by D bona fide or otherwise in order to support its claim for constructive trust and Quistclose trust and to trace the proceeds.[2]

30. It is quite clear that the documents and information are not relevant to P’s contractual claim. The property of the monies belongs to D2 and the way the monies were used has nothing to do with Ds.

31. When P pleaded its case against Ds on fraud and breach of trusts, P should have prima facie evidence in support of its claims, in which case, P should not make the requests for the purposes above. Such exercise is clearly fishing. As such, it is not permissible.

Class E: the relevant documentations showing the registered business of Arima EcoEnergy (a) 2011 to 2012; and (ii) from 2012 up to the date when the present summons was taken out)

32. In support of P’s application, P submits that such documents will show

(a) whether the Representations were false in that P could not have acquired any shareholdings of Arima EcoEnergy whether directly or indirectly in any event due to the Taiwanese restrictions in or around 2011 to 2012;
(b) whether there were / are any registered business items in Arima EcoEnergy which would cause it to be barred from being invested in by PRC investors and hence rendering specific performance impossible.

33. Ds’ objections seem to be that the issue of whether P could acquire the business under the Taiwanese law has been dealt with by expert reports. The requests are fishing.

34. The purpose under 32.a is obviously fishing, the scope being too wide and P is attempting to collect information in order to substantiate its claim for misrepresentation and fraud.

35. For the reasons given for category A, the reasons under 32.b is irrelevant as far as P’s case is concerned.

CONCLUSION

36. P’s application is dismissed.

COSTS AND ORDER

37. As to the costs of this application, including the costs reserved and for today’s hearing with a counsel certificate, the costs should follow the event. The costs will be assessed under O.62, r.9A RHC to be $75,000 to be paid by P within 21 days from the date hereof.

38. The Court shall now make an order in terms as follows:

(a) P’s application is dismissed;
(b) Costs be as per paragraph 37 above.

	(K. W. Lung)
	Registrar, High Court

Mr. Alan Kwong and Mr. Joseph Wong, instructed by Zhong Lun Law Firm, for the Plaintiff

Mr. Samuel Wong, instructed by Sit, Fung, Kwong & Shum for the 1^st to 4^th Defendants

[1] See at the end of this Decision

[2] §49 of written submissions

MEGA HONOUR HOLDINGS LTD v. 李森田 AND OTHERS

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