TSE’S BROTHERS CO LTD v. KINGHALL DEVELOPMENT LTD AND ANOTHER

HCA 1341/2012

[2018] HKCFI 1197

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1341 OF 2012

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HCA 2401/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2401 OF 2012

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(Heard Together)

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J U D G M E N T

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Introduction

1.  The present two actions concern essentially a dispute over the beneficial ownership of a property between two brothers.

2.  The property is known as Workspace G, 16 floor and portion of roof G in Wong King Industrial Building at Choi Hung Road/Tai Yau Street in San Po Kong, Kowloon (together referred to as “Unit 16G”).

3.  The two actions will be referred to herein respectively as the 1^st Action and the 2^nd Action, the 1^st Action being filed first in time.

4.  The two brothers are Tse Chong Sang/謝壯生 (“Chong Sang”) and Tse Tai Wing/謝大穎 also known as 謝壯群 (“Tai Wing”) and their camps will be respectively referred to as CS Camp and TW Camp.

5.  Their mother (“Mother”) had four sons and one sister.  Their eldest brother had passed away, and Tse Tai Chi/謝大智 also known as 謝壯展(老二) (“Tai Chi”), who ranks 2^nd in the family has since become the de facto eldest brother.  Chong Sang (老三) and Tai Wing (老四) rank respectively 3^rd and 4^th of the sons.  Their sister Tse Chong Ngo/謝壯娥 (“Sister”) is aged between Chong Sang and Tai Wing.

6.  In the 1^st Action, the registered owner of Unit 16G, namely a company called Tse’s Brothers Company Limited/謝氏兄弟有限公司 (“Tse’s Brothers”), now part of TW Camp, sued two companies in CS Camp, namely Kinghall Development Limited/群豪發展有限公司 (“Kinghall”) and Skygift (Kinghall) Company Limited/天賦 (群豪) 有限公司(“Skygift”) for vacant possession of Unit 16G.  The defence and counterclaim of Kinghall and Skygift was essentially based on an alleged trust that Tse’s Brothers held Unit 16G in trust for Chong Sang and Tai Wing in equal shares (“Trust”) and also that there were various agreements between Chong Sang and Tai Wing pursuant to which Chong Sang or such persons nominated by him including Kinghall and Skygift were allowed to occupy Unit 16G on a rent-free basis.  

7.  In the 2^nd Action, Chong Sang sued Tse’s Brothers and Tai Wing based on the same allegations as in the defence and counterclaim of Kinghall and Skygift in the 1^st Action and seeking similar relief mirroring the counterclaim of Kinghall and Skygift in the 1^st Action.

8.  The parties have agreed that Chong Sang, namely the plaintiff in the 2^nd Action, and the defendants in the 1^st Action, were to open the case first.

9.  Counsel Mr Jenkin Suen appeared for Chong Sang, Kinghall and Skygift at the trial whereas Mr Ross Yuen appeared for Tai Wing and Tse’s Brothers.

Background

10.  In about 1981, the three brothers Tai Chi, Chong Sang and Tai Wing set up a business of reprocessing of plastic products under a company called Tse’s Basket Ball Products Limited/謝氏籃球製品廠有限公司[1] (“Tse’s Basketball”).  At all material times, Tai Chi owned 40%, and Chong Sang and Tai Wing owned the remaining 60% in Tse’s Basketball, each 30%.  It was not really disputed that the three brothers had all along worked together to build up their family businesses up until the division in 1994 as set out later.

11.  Kinghall was established on about 4 June 1985[2]. 

12.  According to Chong Sang, he was mainly in charge of the production side of their business, whereas Tai Chi and Tai Wing were respectively in charge of finance and sales. 

13.  Further, according to Chong Sang, in 1987, the factory for the production arm was relocated from Hong Kong to 寶安縣坑梓鎮沙田工業區/Sha Tin Industrial Area in Bao’an and the production factory then known as “謝氏製品廠” was set up by Tse’s Basketball there.

14.  Chong Sang had produced copy of a lease dated 7 September  1987 which he entered on behalf of Tse’s Basketball for the leasing of a piece of land for building of factory premises thereon (“1^st Shenzhen Land”)[3], for a period of 25 years commencing from 1 October 1987 and the factories were later respectively registered as “深汕公路1149號” (“No 1149 Factory”) and “深汕公路1151號” (also referred to as “金沙村廠房” (“No 1151 Factory”).  The lease was later varied or terminated by agreement upon the signing of a new lease on 20 October 1991 in the name of Kinghall for the 1^st Shenzhen Land for a period of 50 years from 1 January 1992[4].

15.  In about 1990, a company called Double Faith Industrial Limited/再誠實業有限公司 (“Double Faith”)[5] was acquired by Tai Wing, with him and another third party, each holding one of two issued shares[6]. Tai Chi was initially the company secretary[7] and later by April 1991 Chong Sang had become the company secretary[8].  The business of Double Faith included the further processing works in sound speakers/loudspeakers and hi-fi/喇叭及音響加工 (“Loudspeaker Business”) and the Loudspeaker Business was since early 1990s operated by Double Faith, initially through a sino-foreign entity set up in the Mainland called 海音電子有限公司/ Haiyin Electronic Company Limited (“Haiyin”), with the Mainland shareholder holding 51% and Double Faith holding 49%.

16.  As for the subject property of the present two actions, Unit 16G, this was purchased in the name of Tse’s Basketball on 21 January 1993 at a consideration of HK$1,530,000.  Although it appeared from the land search record the property was purchased without a mortgage, subsequently on 12 May 1993, Unit 16G was mortgaged to HSBC to secure general banking facilities[9].

17.  It was the evidence of Chong Sang at the trial that that since purchase, Unit 16G had been used as an office for Kinghall and still is.  

18.  It would appear that in a shareholders’ meeting held on 1 October 1993[10], there was already mention of Tai Chi splitting his business interest from that of Chong Sang and Tai Wing. 

19.  On 13 March 1994, Kinghall (signed by Tai Wing on behalf of Chong Sang) entered into a “co-operation agreement” with 坑梓鎮沙田村上廖經濟合作社, now known as 深圳市坑梓沙田股份合作公司上廖分公司 (“Cooperative”)[11], for the use of a piece of land of about 12,000 square metres in Sha Tin village in Shenzhen (“2^nd Shenzhen Land”).  Under this co-operation agreement, (“Co-operation Agreement”), the Cooperative leased to Kinghall the 2^nd Shenzhen Land for an initial payment of RMB700,000, RMB400,000 of which was to be paid before 30 December 1994 and the balance to be paid before 30 June 1995, and thereafter, from 1 January 1996, an annual sum of RMB40,000 payable twice a year at end of June and end of December (with an increase of 10% every 10 years) for a period of 50 years from 18 April 1994.  Kinghall was entitled to use the land and to build factory premises thereon during the 50 year period.  Apart from the land, for each transformer installed on the land, Kinghall had to pay the Sha Tin Village the connection fee of RMB50,000 and other related expenses.

20.  Construction of factory premises on the 2^nd Shenzhen Land took place by various stages between 1999-2007 and resulted in about 8 factory buildings being built[12].  The 2^nd Shenzhen Land was divided into east and west, respectively known as “彩田路西面21號” (“No 21 Land”) and “彩田路東面22號” (“No 22 Land”) and the factory buildings and/or workers dormitories constructed thereon will be referred to in this judgment as “No 21 Factory” and “No 22 Factory”.  Further, as one side of No 22 Factory was on another road and that part of the No 22 Factory has also been called 新康二路7號 (“No 7 Factory”).  It was also in about October 1994, that the Mainland company/factory called 深圳市龍崗區坑梓沙田群豪製品廠 (“Kinghall Mainland Company”) was set up by Kinghall which then occupied No 22 Factory.  Part of No 21 Factory was occupied by the Loudspeaker Business which has also been referred to as the “Loudspeaker Factory”.

21.  In December 1994, the three brothers decided to formally divide up the businesses and properties of Tse’s Basketball and Kinghall (分家), Tai Chi on one part, and Chong Sang and Tai Wing jointly on the other part.  There was a settlement agreement titled “謝氏籃球製品廠有限公司－分股協議書” dated 28 December 1994 entered into by Tai Chi as Party A and Tai Wing and Chong Sang jointly as Party B (“1994 Agreement”)[13].

22.  It was Chong Sang’s case that pursuant to the 1994 Agreement, Unit 16G was to be beneficially owned by Tai Wing and Chong Sang in equal shares.

23.  I will consider the effect of the 1994 Agreement later.  Suffice to say at this stage, it was stated in the 1994 Agreement that upon the terms therein being complied with, Party A agreed to transfer his shareholding/interest in Kinghall to Party B and thereafter Kinghall was to be operated solely by Party B and Party B agreed to transfer their shareholding/interest in Tse’s Basketball to Party A and thereafter Tse’s Basketball was to be operated solely by Party A.

24.  The date of incorporation of Tse’ Brothers was 29 December 1994, one day after the signing of the 1994 Agreement.  Chong Sang and Tai Wing were the only two directors of Tse’s Brothers, with Tai Wing registered as holding 51% of the issued shares and Chong Sang holding the remaining 49%.  It was common ground that Chong Sang and Tai Wing were equal shareholders of Tse’s Brothers despite the slight variance in their registered shareholding[14].

25.  On 30 January 1995, the three brothers signed a further agreement in relation to the share transfers in the two companies[15].  Subsequent thereto, the three of them executed a deed on 10 March 1995[16] in relation to the transfer of shares in the presence of a solicitor at the firm of Tai, Tang Chong.

26.  The day before the execution of the deed, on 9 March 1995,  an agreement for sale and purchase and an assignment was entered into between Tse’s Basketball and Tse’s Brothers under which Unit G was transferred by Tse’s Basketball to Tse’s Brothers at a stated consideration of HK$2,750,000, and further on the same day, the mortgage to HSBC for general banking facilities to Tse’s Basketball was discharged[17].

27.  After the division, Tai Chi went on to run his own businesses including Tse’s Basketball.

28.  It was Chong Sang’s case that after 1994 Agreement, he and Tai Wing agreed to conduct their respective businesses together and that they had been doing so since 1995 [18] until the later split between them in 2007. 

29.  In particular, Chong Sang said he was invited by Tai Wing to invest in Double Faith.  However, this was denied by Tai Wing.

30.  It was Tai Wing’s case that Chong Sang was all along his nominee in Double Faith.  The company registration record showed that  on 17 November 1995, Chong Sang was transferred 6,666 of the 10,000 issued shares of HK$1 each from two other shareholders, whilst the remaining 3,334 of the issued shares were held by Tai Wing[19].  Tai Wing said this was because the other two shareholders wanted to withdraw and he arranged for Chong Sang to hold their shares as nominee and in trust for him.  Then, later, Tai Wing said he found another Taiwanese shareholder Mr Lee Chien Kang (“Mr Lee”) to hold the shares as nominee and therefore on 25 May 1996, Chong Sang transferred 2,000 of his shares to Mr Lee and 4,666 shares to Tai Wing as a result of which Chong Sang held no shares, Tai Wing held 8,000 shares and Mr Lee held 2,000 shares[20]. 

31.  However, on 18 March 1997, Tai Wing transferred 4,000 of his 8,000 shares to Chong Sang[21].  Tai Wing again said Chong Sang was only a nominee and the transfer was because at the time the Mainland shareholder of Haiyin requested Double Faith to appoint one additional director, so that there would be 4 directors from the Mainland shareholder, and 3 from Double Faith.  It was under such circumstances that that he transferred 4,000 shares to Chong Sang as nominee and appointed Chong Sang as a director to Haiyin.  According to Tai Wing, later in October 1999, the Mainland shareholder again requested Double Faith to appoint one further director, and Mr Lee then transferred 1,000 shares to a Ms Lai Liu Bin[22] (“Ms Lai”). 

32.  Tai Wing’s case was that Chong Sang, Mr Lee and also Ms Lai were all nominees holding their shares in trust for Tai Wing. However, it was Chong Sang’s case that he held the beneficial interest as well as the legal title in the 4,000 shares in Double Faith registered in his name, and denied holding his shares as nominee for Tai Wing.  Further, he had said both Mr Lee and Ms Lai were key staff of Haiyin and the Loudspeaker Factory and that was why he and Tai Wing agreed to give 10% of the shareholding in Double Faith and DHY (SZ) to them as an incentive.

33.  Anyway, subsequent to 1995, another company called Shinwoo Electronics Company Limited/信宇電子有限公司(“Shinwoo”) was established[23]. According to Tai Wing, this company was established by him and a Korean investor to set up a Mainland factory for plastic coating on fabrics, and when the Korean investor withdrew, Tai Wing then asked Chong Sang to hold the shares as nominee for him and later in about 1998/1999, they used Shinwoo to invest in properties and there had been no business operation since.  

34.  Chong Sang’s evidence was on the other hand it was the agreement and understanding between him and Tai Wing that they owned equal stake in their businesses and properties.  In particular, they owned or held equal shares in the following 4 Hong Kong companies (“4 Companies”) up until the 2007 Share Transfers (as defined later):

(i)  Tse’s Brothers

(ii)  Kinghall

(iii)  Double Faith

(iv)  Shinwoo

35.  In respect of the 4 Companies: -

(i)  Tse’s Brothers was responsible for trading business of metal and plastics in Hong Kong and also held investment properties;

(ii)  Kinghall was responsible for the production side of Tse’s Brothers through Kinghall Mainland Company, and also held investment properties;

(iii)  Double Faith, as mentioned earlier, operated the Loudspeaker Business, initially through Haiyin and later through DHY (SZ) mentioned below;

(iv)  Shinwoo was a company holding investment properties.

36.  The businesses of Chong Sang and Tai Wing appeared to flourish.  On 1 July 2001, Kinghall entered into another lease for a piece of land in Sha Tin (“3^rd Shenzhen Land”) held by Zhang Feng Factory長豐厰房 (“Zhang Feng Factory”) for a period of 50 years from 1 July 2001[24]. It was Tai Wing’s evidence that the Zhang Feng Factory was adjacent to the No 1151 Factory (or Jinsha Factory) and that this was purchased by him and Chong Sang jointly[25].

37.  On 8 January 2002, Double Faith further entered into a lease for a piece of land in Long Tin Village龍田村for a period of 50 years from 1 May 2002[26] and the factory premises built thereon (“Long Tin Factory”), were also for the use of the Loudspeaker Business.

38.  On about 22 January 2003, 大海音電子 (深圳) 有限公司 (“DHY (SZ)”) was established in Shenzhen as a wholly foreign owned enterprise of Double Faith[27], for operating and/or taking over the Loudspeaker Business from Haiyin.  According to the articles of incorporation signed on 8 July 2002, the original registered capital of DHY (SZ) was HK$5m[28], but such was later increased to HK$8.5m on 31 December 2004, being cash of HK$5m and equipment being HK$3.5m[29].

39.  In respect of the 2^nd Shenzhen Land, after construction, No 21 Factory was mainly occupied/used by the Loudspeaker Factory and/or DHY (SZ), but part of it , as seen later was also used as a warehouse by Kinghall Mainland Company, whereas No 22 Factory was occupied/used by Kinghall Mainland Company, although there were about 4 buildings on No 22 Land with iron sheet roofs/鐵皮屋 (“Iron Roof Buildings”) and two of which were used by the Loudspeaker Factory/DHY (SZ) for production of the covering cloth for the exterior of the loud speakers (布車間) (“Cloth Factory”)[30].

40.  It was Tai Wing’s evidence that all along as he was single, he had treated Chong Sang’s 3 children as his own and his relationship with Chong Sang was very close until 2004 when he had a girlfriend, since when Chong Sang began to become suspicious and there were disputes between them over their businesses.

41.  According to Chong Sang, in February 2006, he discovered that without his prior knowledge and consent, Tai Wing had transferred or procured the transfer of Double Faith’s interest in DHY (SZ) to a company called Kingswell Investments Limited/海音投資有限公司(“Kingswell”), incorporated in Hong Kong on 17 November 2005 by Tai Wing without Chong Sang’s knowledge.  Further, on the same day, Chong Sang was removed as a director of DHY (SZ) without his knowledge and consent and replaced by one Ng Siu Ho (“Ng”). Ng is the son of the Sister.

42.  The transfer agreement was dated 20 December 2005 (notarised by Shenzhen Attesting Office on 28 December 2005)[31] and was signed by Mr Lee as director of Double Faith and Tai Wing on behalf of Kingswell and the transfer was said to be at a consideration of HK$100,000[32] (“DHY (SZ) Transfer”).  It was Chong Sang’s allegation that the DHY (SZ) Transfer was without his authorisation and that his signatures on two Double Faith minutes dated 17 November 2005[33] approving the transfer and the replacement of himself as a director and N’s appointment as director of DHY (SZ) were forged (“Forged Minutes”).

43.  Tai Wing had admitted that Chong Sang’s signatures on the Forged Minutes were signed by him on behalf of Chong Sang, and his explanation was that this was because Chong Sang never had any beneficial interest in Double Faith and was only holding 4,000 share as his nominee, and that Chong Sang was only appointed as a director of DHY (SZ) because he was a registered shareholder of Double Faith[34].

44.  Thereafter, two brother’s relationship deteriorated and Chong Sang proposed to Tai Wing to split up their businesses.  In the process, Tai Chi was asked by Mother to assist Chong Sang and Tai Wing in their separation.  According to Chong Sang, Tai Chi was the agent of Tai Wing, and on his behalf had entered into 4 agreements (“4 Agreements”) which formed part and parcel of a composite agreement (“Composite Agreement”). The 4 Agreements will be set out later in this judgment.  Suffice to say, it was Chong Sang’s case that under the Composite Agreement, amongst other things, Unit 16G was agreed to be owned by Chong Sang and Tai Wing equally.

45.  It was also Chong Sang’s case that Tai Chi had taken the 4 Agreements to a solicitor Mr Tai Wai Yin Howard (“Mr Tai”) of the firm of solicitors Messrs Tai, Tang & Chong, and that subsequently there were various share transfers effected in 2007 (“ 2007 Share Transfers”), and that shortly before the execution of the relevant transfer documents, an oral agreement was also reached between Chong Sang and Tai Wing (through Tai Chi) whereby it was confirmed and agreed that, amongst other things,  Unit 16G was to be owned by Chong Sang and Tai Wing equally and that Chong Sang and/or persons nominated by him could occupy Unit 16G rent free for as long as Tai Wing/Loudspeaker Factory and/or persons nominated by him could occupy No 21 Factory /Loudspeaker Factory pending further resolution on or after 31 December 2011 (“Oral Agreement”).

46.  On the other hand, Tai Wing’s evidence was that, save for the Share Distribution Agreement (as defined later), it was only in May 2007 when he, Tai Chi and Chong Sang went to Mr Tai’s office that he first saw the other 3 of the 4 Agreements, namely the 1^st Agreement, the 2^nd Agreement and the Addendum (all as defined later and collectively referred to as “3 Disputed Agreements”).  It was Tai Wing’s case that he had never authorised Tai Chi to enter into the 3 Disputed Agreements on his behalf and that he had never agreed to the terms thereof.  Tai Wing denied there was the Oral Agreement.

47.  Further, according to Tai Wing, Mr Tai had advised those present that he was unable to assist regarding the transfer of assets in the Mainland and that notwithstanding this, there was a final agreement reached at the office of Mr Tai in May 2007 between him and Chong Sang that Chong Sang’s shareholding in Tse’s Brothers and Double Faith (together with their respective holding assets which were situated in Hong Kong including Unit 16G ) be transferred to Tai Chi as nominee of Tai Wing and Tai Wing’s shareholdings in Kinghall and Shinwoo (together with their respective holding assets which were situated in Hong Kong) be transferred to the children of Chong Sang and the ownership of the holding assets of the 4 Companies which were situated in the Mainland should be negotiated in future[35] (“Final Agreement”).

48.  It was Tai Wing’s case that the 2007 Share Transfers were effected pursuant to the Final Agreement.  Chong Sang denied there was the Final Agreement. 

49.  The 2007 Share Transfers were effected by Instruments of Transfer and the Bought and Sold Notes all dated 5 July 2007 but as seen later, they were not actually signed by all the transferors and transferees on that day.

50.  Prior to the 2007 Share Transfers, the registered shareholdings of the 4 Companies were :

(i)  Tse’s Brothers – Tai Wing held 51,000 out of 100,000 issued shares or 51% and Chong Sang held 49,000 shares or 49%;

(ii)  Double Faith – Tai Wing held 4,000 shares out of 10,000 issued shares or 40%, Chong Sang held 4,000 shares or 40%, Mr Lee 1,000 shares/10% and Ms Lai 1,000 shares/10%;

(iii)  Kinghall – Tse Wing held 101,000 shares out of 200,000 issued shares or 50.5%, and Chong Sang held 99,000 shares or 49.5%;

(iv)  Shinwoo – Tai Wing held 40,000 shares out of 100,000 issued shares or 40% and Chong Sang held 60,000 shares or 60%.

51.  Pursuant to the 2007 Share Transfers :

(i)  Tse’s Brothers – Chong Sang transferred his 49,000 shares to Tai Chi, to hold as nominee for Tai Wing;

(ii)  Double Faith – Chong Sang transferred his 4,000 shares to Tai Chi, to hold as nominee for Tai Wing;

(iii)  Kinghall – Tai Wing transferred his 101,000 shares to Chong Sang’s 3 children, namely 35,350 shares to each of Chong Sang’s two sons and 30,300 to Chong Sang’s daughter, and Chong Sang himself also transferred his 99,000 shares to his 3 children, namely 34,650 shares to each of his 2 sons and 29,700shares to his daughter;

(iv)  Shinwoo – Tai Wing transferred his 40,000 shares to Chong Sang’s 2 sons, namely 20,000 share each.

52.  Thus, as a result of the 2007 Share Transfers, Tai Wing (through himself and Tai Chi) became the sole owner of Tse’s Brothers and Double Faith, and Chong Sang and/or his children became the sole owner/s of Kinghall and Shinwoo.

53.  After the 2007 Share Transfers, according to Tai Wing, every one carried on as before peacefully for awhile, namely he/DHY (SZ) continued to occupy the Loudspeaker Factory/No 21 Factory, and Chong Sang/Kinghall Mainland Company continued to occupy part of No 21 Factory and No 22 Factory, and also Unit 16G[36]. However, not long thereafter Chong Sang started to complain that he received less than Tai Wing from the division, and that Mother asked Tai Chi to mediate again. It was Tai Wing’s and Tai Chi’s evidence that a further agreement was then reached between Tai Wing and Chong Sang through the mediation of Tai Chi (“Mediated Agreement”).  This was denied by Chong Sang.

54.  Anyway, it was not disputed that the Cloth Factory was soon vacated by Tai Wing/DHY (SZ) in about 2007/2008[37].  Afterthe Cloth Factory was vacated, the Iron Roof Buildings on No 22 Land were demolished and a new 4 floor factory was then built thereon.  

55.  Mother sadly passed away in September 2011.

56.  Not long after, the conflict between Chong Sang and Tai Wing flared up again.

57.  It was Tai Wing’s evidence that by early 2012, Chong Sang/Kinghall Mainland Factory had already vacated No 22 Factory and that in 2011, No 22 Factory was rented out by Kinghall to a tenant and that later it was Kinghall who evicted the tenant and voluntarily vacated No 22 Factory.

58.  However, according to Chong Sang, the Sister had telephoned him to ask him for permission to use No 22 Factory for a few days and he agreed and then later, Sister telephoned him saying that Tai Wing had given her No 22 Factory and she demanded Chong Sang to vacate No 22 Factory.

59.  There were reports made to the Mainland police/security bureau by Chong Sang, and it would appear that by about September 2012, both No 21 Factory and No 22 Factory were taken over by Tai Wing/TW Camp and they had rented the factories out to tenants[38].

60.  The disputes between the two brothers had led to Chong Sang/Kinghall demanding the return of No 21 Factory and No 22 Factory and Tai Wing/Tse’s Brothers demanding the return of Unit 16G.

61.  Tse’s Brothers instructed solicitors to write to Kinghall and Skygift, initially on 2 June 2012 a “without prejudice subject to contract” letter (“WP Letter”)[39], demanding vacant possession of Unit 16G or alternatively that the two companies enter into a tenancy agreement to pay rent as from 1 July 2012, and having received no response thereto, a letter  dated 4 July 2012 was sent to Kinghall and Skygift demanding the two companies to deliver up vacant possession of Unit 16G (“Notice to Quit”)[40]. Kinghall and Skygift did not do so and further denied Tse’s Brothers’ entitlement to such demand.  As a result, Tse’s Brothers issued the 1^st Action on 31 July 2012 against Kinghall and Skygift seeking vacant possession of Unit 16G.

62.  This was followed by Chong Sang issuing the 2^nd Action on 28 December 2012.

63.  The two actions also sparked off litigations in Mainland China (“Mainland Litigations”).

64.  In early 2013, Kinghall issued a claim against Tai Wing, with the Cooperative being third party, in the People’s Court in Long Gang District in Shenzhen (Claim No 78/2013) in which Kinghall sought a confirmation that it had the right to occupy both No 21 Factory and No 22 Factory (including No 7 Factory) under the Cooperation Agreement.   

65.  Tai Wing had filed a defence and also a counterclaim seeking, amongst other things, a confirmation that the construction cost of No 22 Factory was funded by him and therefore Tai Wing was solely entitled to the right to occupy No 22 Factory, whereas the construction costs of No 21 Factory, No 7 Factory and No 1151 Factory were funded by Tai Wing and Chong Sang jointly, and therefore they would be jointly entitled to the right to occupy those factories.

66.  A decision was later handed down by the Long Gang People’s Court on 16 December 2013 (“78/13 Decision”)[41] dismissing both Kinghall’s claim and Tai Wing’s counterclaim on the basis that the construction of the factory buildings on No 21 Land and No 22 Land was without the approval of the relevant administration authority and therefore they were all unauthorised buildings and the parties’ respective claim and counterclaim was not within the jurisdiction of the People’s Court[42]. 

67.  Tai Wing lodged an appeal to the Shenzhen Intermediate People’s Court under Claim No 363 of 2014[43], but his appeal was later dismissed[44].

68.  During the period between December 2013 and January 2014, Chong Sang was discovered to have a brain tumour and had to undergo an operation and it was his allegation that during this period, TW Camp including Ng had used violence to force open the gate to No 22 Factory and damaged the car belonging to Kinghall Mainland Company[45].

69.  In 2014, Kinghall issued claims against the respective tenants of No 21 Factory and No 22 Factory, under Claims Nos 721 and 722 of 2014, but these were subsequently withdrawn by Kinghall[46].  

70.  In 2015, Kinghall issued another claim in the Long Gang People’s Court against Tai Wing, the Sha Tin District Residents’ Committee and the Cooperative under Claim No 570 of 2015, claiming, amongst other things, for the delivery up of No 21 Factory and No 22 Factory (including the No 7 Factory) to Kinghall.  Tai Wing had sought a dismissal of this claim[47].  A decision was eventually handed down by Long Gang People’s Court on 23 January 2018, just two months before the present trial (“570/15 Decision”)[48]. The Long Gang People’s Court ordered that Tai Wing had to deliver up both No 21 Factory and No 22 Factory to Kinghall, and to pay compensation of an amount equivalent to rent payable by the tenants of the two factory premises as from January 2013 (date of Kinghall’s Claim No 78/2013) until March 2015, totalling RMB3,700,606 over the 26 month period.  Kinghall’s other claims were dismissed.

71.  Although it was also an alternative pleaded case of Chong Sang in the 2^nd Action that under the Trust, Tse’s Brothers held Unit 16G on trust for Chong Sang entirely[49], it was confirmed by Mr Suen at the trial that Chong Sang would not rely on this alternative part of his pleading, and that his case at the trial was only that Tse’s Brothers held Unit 16G on trust for him and Tai Wing in equal shares.

The Composite Agreement

72.  As said earlier, the Composite Agreement relied on by Chong Sang consisted of 4 Agreements, as follows:

(i)  An agreement dated 11 April 2006 titled “分股協議書” (“Share Distribution Agreement”)[50];

(ii)  A document undated and titled “協議書<一>” (“1^st Agreement”)[51];

(iii)  A document undated and titled “協議書<二>” (“2^nd Agreement”)[52];

(iv)  A document undated (“1^st Addendum”) , with three versions,  the 1^st version (“1^st Version”) with no title and with 4 points therein and with the words “協議書修改部份” written by Chong Sang at the bottom[53] and the 2^nd version (“2^nd Version”) with the title “協議附件<一>” added and with the remarks “以上是老三要求增加條文，交戴律師處理，但後來戴律師說以上條文在法律上之相矛盾，不能成文” (“Remarks”) written by Tai Chi  below the 4 points, and there were also 3 words “交二兄” written by Chong Sang[54], and the 3^rd version (“3^rd Version”) was the same as the 2^nd Version, save that there was Chong Sang’s signature at the bottom right hand corner[55].

The Share Distribution Agreement

73.  The Share Distribution Agreement was a typed agreement dated 11 April 2006 and signed by Chong Sang on the one part and on the other part signed by Tai Chi on behalf of Tai Wing, and further signed by Tai Wing as a witness.  It set out 4 points in relation to the division of the shares of 3 companies, DHY (SZ), Kinghall and Tse’s Brothers, namely:

(i)  DHY (SZ)’s shares to be in accordance with the original shareholding of Double Faith, namely Chong Sang 40%, Tai Wing 40%, Taiwan shareholder (ie Mr Lee) 10% and Ms Lai (10%), but the amount of capital invested and the manner of how the capital was invested, or any investment by Kinghall, would have to be supported by evidence;

(ii)  The accounts to be verified and certified by Shen Boamin (ie the Mainland accountant) (“Shen”) and Tai Chi, including the amounts paid by Chong Sang and Tai Wing respectively and the accessory items and sponges taken by DHY (SZ) from Kinghall, all such accounts to be verified;

(iii)  After the accounts being verified, Chong Sang to transfer his 40% in DHY (SZ) to Tai Wing and Tai Wing to transfer his 50% in Kinghall to Chong Sang, and both at a consideration/price to be fixed (“二家公司都要作價”);

(iv)  The amounts withdrawn by Chong Sang and Tai Wing respectively and the consideration/price of the two companies to be added together to see who would have more and who would have less, and the difference to be adjusted at the distribution of the properties (at prices to be fixed), so that each would receive an equal share (“…各人所拿取的金額及二家公司的作價，合起來看誰多誰少，再在物業作價，然後分配各人，使其各人所得的平均，平等”).

The 1^st Agreement

74.  1^st Agreement was undated and handwritten by Tai Chi who wrote that according to the information provided by the two sides, he had summarised 5 points, namely:

(i)  Chong Sang had withdrawn a total of HK$21,836,626.14 (HK$5,460,000 to his two sons), and the net was HK$16,376,626.14; Tai Wing had withdrawn HK$17,051,797.00;

(ii)  According to the information from Shen and Tai Wing, Tai Wing withdrew HK$2,704,848.00;

(iii)  According to the information, Tse’s Brother did not invest any capital into DHY (SZ) as the remittance advices indicated that the capital was invested not by Tse’s Brothers but by Double Faith, and those remittance advices produced by Chong Sang could only be said to be shareholders’ transfers (股東往來) and Tai Wing had also said a part of the remittances were for exchange into RMB on behalf of Kinghall Mainland Company.  In the accounts prepared by Shen in relation to the RMB receipts by Kinghall Mainland Company from Tse’s Brothers, there was no record of whether the remittances were from Tai Wing or from the company, and in the accounts prepared by the cashier Ms Li Hung, there was record of the remitter for part of the remittances only.  Thus, for the payments to Kinghall Mainland Company, the payers of part of these payments were unknown;

(iv)  As for the shareholding of DHY (SZ), according to Chong Sang, it was jointed owned by him and Tai Wing.  But according to Tai Wing, he only promised Chong Sang, that after DHY (SZ) started to generate profits and after the capital invested by Tai Wing had been repaid to him, then DHY (SZ) would be jointly owned;

(v)  Tai Chi would list out the information provided by each side, namely the assets and liabilities of DHY (SZ), Tse’s Brothers and Kinghall, pending further discussion between Chong Sang and Tai Wing on how to deal with the same.

The 2^nd Agreement

75.  The 2^nd Agreement was undated and handwritten by Tai Chi setting out in the opening sentence that “現在在壯生，大穎，兄弟在互相互讓及兄弟之情誼，作出以下的協議”, namely that “Chong Sang and Tai Wing made the following agreement with mutual concessions and brotherly friendship”, and thereunder Tai Chi set out the following terms:

(1)  In relation to the arrangements of the businesses and the Mainland assets:

A.  The business of Kinghall in Jinsha, machinery and tools and factory premises, including the original Jingsha Factory[56], the original Zhang Feng Factory, the factory premises on the east side of the 2^nd Shenzhen Land (No 22 Factory) to belong to Chong Sang;

B.  The business of DHY (SZ)in Hang Tze town, machinery and tools and factory premises, including the Long Tin Factory, and part of the factory premises on the west side of the 2^nd Shenzhen Land (Loudspeaker Factory/No 21 Factory), to belong to Tai Wing;

Remark: the two brothers discussed amicably for Tai Wing to lend the dormitory, the 4^th and 5^th floors of No 21 Factory for use of Chong Sang for 5 years, and then to discuss further as to who would have a greater need for those premises; at the same time Tai Wing had to vacate the Cloth Factory on the east side of the 2^nd Shenzhen Land within 2 years;

C.  In relation to the assets in Hong Kong, the brothers agreed to take out Unit 16G for the use of Chong Sang, but the title not to be transferred in the interim and only to be transferred when the matter of No 21 Factory is resolved.

(No need for valuation of all the assets and properties under A, B, C under item (1) above (均不作價))

(2)  In relation to the shareholding and assets of Kinghall, Tse’s Brothers, Shinwoo:

A.  Tai Wing agreed to transfer his shareholding in Kinghall and Shinwoo to Chong Sang, including all assets (listing out all properties held by Kinghall and Shinwoo) which would belong to Chong Sang;

B.  Chong Sang agreed to transfer his shareholding in Tse’s Brothers to Tai Wing, including all assets (listing out all properties held by Tse’s Brothers, except Unit 16G) which would belong to Tai Wing.

All the properties in A, B under item (2) had to be valued/at a price (要作價), and the valuation to be carried out by solicitors Messrs Tai Tang Chong (Mr Tai’s firm), and the transfer of the shares and the properties after valuation, would be distributed to Chong Sang and Tai Wing in equal shares, and any differences would be paid at the solicitors’ office.

The 1^st Addendum

76.  As mentioned earlier, there were three versions of the 1^st Addendum but the main body of all 3 versions consisted of the same 4 points :

(1)  Regarding the Loudspeaker Factory (No 21 Factory), the factory premises and dormitory on 1^st 2^nd, and 3^rd floors to be used by Tai Wing and the dormitory on the 4^th and 5^th floors to be used by Chong Sang, until 31 December 2011, and the parties would discuss again depending on the production need of the parties at that time;

(2)  Regarding the Cloth Factory, Tai Wing to borrow for use until 31 December 2008 when it would be vacated and returned to Chong Sang;

(3)  Regarding Unit 16G, this to remain jointly owned by the parties until 31 December 2011[57] (mistakenly typed as 2001) pending the resolution of  the Loudspeaker Factory (No 21 Factory);

(4)  Until 31 December 2011, if No 21 Factory were to go to Chong Sang for his use, then Unit 16G’s ownership would be each 50%, but if No 21 Factory were to go to Tai Wing, then Unit 16G would be 100% owned by Chong Sang.

Disputed Issues

77.  The disputed issues which can be gathered are summarised as follows[58]:

(1)  Whether there was the alleged Trust, namely Tse’s Brothers was holding Unit 16G in trust for Chong Sang and Tai Wing in equal shares;

(2)  Whether Tai Chi was the agent of Tai Wing in the negotiation of division of businesses and assets between Chong Sang and Tai Wing;

(3)  Whether Chong Sang and Tai Wing had entered into the 3 Disputed Agreements, or the Oral Agreement or the Final Agreement or any agreement in respect of Unit 16G;

(4)  Whether the case of proprietary estoppel was established.

The witnesses

78.  Chong Sang, Tai Wing and Tai Chi had each made two witness statements, the main one and a supplemental one, and attended the trial for cross examination.  Chong Sang’s son Tse Kwong Hom (“Kwong Hon”) also made a witness statement and had attended trial to give evidence on behalf of Chong Sang.

79.  Mr Tai attended the trial to give oral evidence after being served with a subpoena from Tai Wing and/or Tse’s Brothers.

Issue (1) - Whether there was the alleged Trust

80.  Mr Yuen had taken a pleading point in relation to the alleged Trust.  He submitted that the trust pleaded was not the same trust as the one arising from the 1994 Agreement and that there was no pleading as to how the “new trust” with Tse’s Brothers holding Unit 16G as trustee came into pleading.  There was no pleading on the intention of the parties or the circumstances when Unit 16G was transferred to Tse’s Brothers so as to support a case of constructive trust.  Nor was there any pleading on the lack of intention to give rise to a resulting trust.  He submitted that the Court was left in the dark as to whether Chong Sang was relying on constructive trust or resulting trust or both.

81.  On the other side, Mr Suen submitted that Chong Sang had pleaded an express agreement since 28 December 1994 (date of the 1994 Agreement) for Chong Sang and Tai Wing to become beneficial owners of Unit 16G and that Chong Sang’s pleaded case was that such agreement had continued all along  through the period of 1995 (when Tse’s Brothers became registered owner) and the 2007 Share Transfers and up until today[59], and that Chong Sang had pleaded that Unit 16G was agreed as being paid for by Chong Sang and Tai Wing. Mr Suen submitted that Chong Sang pleaded both the payment of property price as well as the intention throughout for him and Tai Wing to remain as beneficial owners of Unit 16 G and that resulting trust was a possible consequence arising from the material facts pleaded.

82.  Mr Suen had referred this Court to the case of Suen Shu Tai v Tam Fung Tai HCA 1466/2010, 15.08.13 where Recorder H Wong SC had held, in relation to the pleadings point raised therein, that although the term ‘resulting trust’ was never used or pleaded, the plaintiff had pleaded that the transfers were made without consideration (which was not disputed) and that this would be sufficient to give rise to a resulting trust, unless it could be shown that the transfers were made by way of gift, and the burden of proving which rested with the defendant[60]. Subsequently, both Court of Appeal[61] and Court of Final Appeal[62] rejected the pleadings point.

83.  Having considered the pleadings, although the term “resulting trust” was not pleaded specifically by Chong Sang/Kinghall/Skygift and although the pleadings could be improved, I am of the view that sufficient material facts had been pleaded and that in any event, Tai Wing/Tse’s Brothers should be fully aware of what Chong Sang’s case was and what case to respond to.   

84.  There was also a submission from Mr Yuen that Chong Sang’s case had changed and/or was not consistent from his pre-action letters.  Chong Sang ( on behalf of Kinghall and Skygift ) had instructed solicitors to send a letter dated 6 July 2012[63] in reply to the Notice to Quit, and that in this reply letter, Chong Sang  referred to a “family arrangement” made in 2007 by the three brothers, namely he, Tai Wing and also Tai Chi, in relation to the distribution of family assets and/or business and that under this agreement, Chong Sang was entitled to (i) half the interest in Unit 16G and its use right and (ii) full ownership of the Loudspeaker Factory.  Then when CS Camp was asked what family arrangement/agreement in 2007, in response, CS Camp’s solicitors had on 18 July 2012 sent copies of the Share Distribution Agreement, the 2^nd Agreement and also a fax dated 8 June 2012 sent by Tai Chi to Chong Sang (“08.06.12 Fax”)[64].  There was no mention of the Trust or the 1994 Agreement.

85.  Although the Trust/1994 Agreement was not referred to in the pre-action letters, in the defence and counterclaim in the 1^st Action filed in September 2012, Kinghall and Skygift had already pleaded that Tse’s Brothers held Unit 16G in trust for Chong Sang and Tai Wing and that the documents set out as proof thereof were stated to be “without being exhaustive”.

86.  Chong Sang’s pleadings in both the 1^st Action and the 2^nd Action had been amended a number of times.  Chong Sang did not rely on the 1994 Agreement as evidence of the Trust initially and it was only in those amendments on 7 April 2016 that he had pleaded and relied on the 1994 Agreement to prove the Trust.

87.  However, in the 26 May 2015 amendments to his pleadings, Chong Sang had pleaded that Tse’s Brothers held Unit 16G in trust for him and Tai Wing since 9 March 1995 when Tse’s Brothers became registered owner, and further in his 1^st witness statement of December 2015, Chong Sang had referred to the division of family business assets and properties under the 1994 Agreement and that he and Tai Wing were each entitled to 50% beneficial interest in Unit 16G and that they nominated Tse’s Brothers as their nominee to acquire the legal title of Unit 16G. 

88.  Having considered the above, I do not find Chong Sang’s subsequent reliance on the 1994 Agreement to be inconsistent with his pre-action letters or his initial pleadings.

89.  Mr Suen submitted that the “status quo” in respect of the ownership of Unit 16G was that pursuant to the 1994 Agreement, Chong Sang and Tai Wing became equal beneficial owners of Unit 16G and since the date of the 1994 Agreement, Tse’s Basketball and later Tse’s Brothers merely held Unit 16G on trust for them equally and that this was the status quo throughout unless varied by any subsequent agreement, of which there was none.

90.  The 1994 Agreement was in effect a shareholders’ agreement entered into between Tai Chi as Party A and both Chong Sang and Tai Wing as Party B.  Tse’s Basketball was not a party to the agreement, nor was Kinghall.  Having said this, as seen in the 1994 Agreement and the other agreements later mentioned in this case, all three brothers have treated the landed properties of the companies as their own properties[65].  It was also not the case of Tse’s Brothers/Tai Wing that Tse’s Basketball or Kinghall were not bound by the 1994 Agreement.

91.  Clause 1 of the 1994 Agreement provided for the division of landed properties, namely:

(i)  In relation to Unit 16G, according to the bank and the property agent’s valuation, the value be fixed at HK$2.75m[66] and the amount be treated as having been withdrawn (or paid for) by Party B and that Party B be entitled to the ownership of the property/“全部樓款當乙方支取，然後業權由乙方全部占有”;

(ii)  In relation to 1^st Shenzhen Land, the agreed value of the land was RMB1,000,000; the buildings with cement roof thereon @RMB420 and the buildings with iron roofs @RMB100 (both valuation per square meter) were to be treated as having been withdrawn (or paid for) by Party A and Party B; as for the transformer, this was for the joint use of Party and Party B and each to install their own electricity meter and be responsible for their respective charges[67].

92.  It was not disputed that the factory building that Tai Wing and Chong Sang subsequently received pursuant to the division in Clause 1 (ii) above was No 1151 Factory (Jin Sha Factory), whereas No 1149 Factory went to Tai Chi.

93.  As for Clause 1 (i), it was Chong Sang’s evidence in his witness statement that pursuant to the 1994 Agreement, as the three brothers had agreed that Unit 16G was to be treated to be withdrawn or paid for by him and Tai Wing and therefore pursuant to the 1994 Agreement, namely on 28 December 1994, he and Tai Wing already acquired joint beneficial interest in Unit 16G, and that a few months later, on 9 March 1995, he and Tai Wing merely nominated Tse’s Brothers as their nominee to acquire the legal title of Unit 16G from Tse’s Basketball and to hold Unit 16G on behalf of them equally[68].  

94.  During the trial, Mr Yuen, Counsel for Tai Wing, accepted the 1994 Agreement created a trust in respect of Unit 16G, and that pursuant thereto, Tse’s Basketball had held Unit 16G in trust for Chong Sang and Tai Wing since the dated of the 1994 Agreement but submitted that the 1994 Agreement was at most an express trust and that after Unit 16G was transferred to Tse’s Brothers, the original trust arrangement of Tse’s Basketball ceased to exist.

95.  First of all, as submitted by Mr Suen, Counsel for Chong Sang, and which I accept, there was an agreed valuation for Unit 16G in the 1994 Agreement of HK$2.75m, which was regarded as being withdrawn or having paid for by Chong Sang and Tai Wing and thus the two brothers had chosen to receive payment in kind in lieu of payment in cash during the division of assets with Tai Wing.  This was also confirmed by Tai Chi during cross examination as he had said “呢份野計數，嗰陣時我攞過錢，物業估咗價，就俾兩兄弟”.   

96.  Mr Yuen had relied on Saunders v Vautier [1841] EWHC Ch J82 for his submission that after Unit 16G was transferred to Tse’s Brothers, the original trust arrangement of Tse’s Basketball ceased to exist. However, as I understand it, Saunders v Vautier merely laid down the rule of equity which provides that, if all of the beneficiaries in the trust are of adult age and under no disability, the beneficiaries may require the trustee to transfer the legal estate to them and thereby terminate the trust.  I do not find this case would assist Tai Wing since in the present case, there was no evidence that Chong Sang and Tai Wing had required Tse’s Basketball to terminate the trust, nor was this Tse’s Brothers’/Tai Wing’s case.

97.  Mr Yuen also submitted that if there was a new trust, then Chong Sang had failed to plead how the new trust came into being, and there was no plea on the intention of the parties or the circumstances at the time when Unit 16G was transferred to Tse’s Brothers, nor was there any plea on the lack of intention so that a resulting trust arose.  

98.  It was however not Mr Suen’s submission that there was a new trust.  What Mr Suen submitted was that Tse’s Basketball merely transferred the legal title to Tse’s Brothers, and there was no payment by Tse’s Brothers of the consideration.  As such, there was only the change in the trustee, and the transfer from Tse’s Basketball to Tse’s Brothers was subject to the beneficial interest being held for Chong Sang and Tai Wing, and that as it was common ground that Tse’s Brothers did not pay any consideration and thus the company only held Unit 16G as trustee.

99.  Unit 16G was transferred out of Tse’s Basketball to Tse’s Brothers the day before Chong Sang and Tai Wing transferred their shares in Tse’s Basketball to Tai Chi.  As seen in the subsequent audited financial statements of Tse’s Brothers, Unit 16G was recorded as an asset of the company and all rates and related expenses of Unit 16G were paid by Tse’s Brothers.  I accept that there was nothing in writing the time of the transfer of Unit 16G to reflect that the transfer to Tse’s Brothers was of legal title only and normally the assignment would be of both legal and beneficial interest. Notwithstanding this and further in his 1^st witness statement Tai Wing had said Unit 16G was sold to Tse’s Brothers at the division in 1995, it was common ground that Tse’s Brothers never paid the consideration of HK$2.75m stated on the assignment of 9 March 1995.  

100.  In the pleadings, Tse’s Brothers/Tai Wing simply denied that there was the Trust as alleged by Chong Sang/Kinghall/Skygift.  It was also pleaded by Tse’s Brothers/Tai Wing that if which was denied, Unit 16G was ever jointly owned by Chong Sang and Tai Wing, the joint ownership came to a halt at the time when the shareholdings of Tse’s Brothers were transferred by Chong Sang to Tai Wing pursuant to the Share Distribution Agreement and the Final Agreement[69].

101.  It was not the case of Tse’s Brothers, nor that of Tai Wing, that Chong Sang and Tai Wing had transferred their beneficial interest to Tse’s Brothers at no consideration.  In any event, there was no evidence that any actual consideration was paid by Tse’s Brothers, whether to Tse’s Basketball, or to Chong Sang and Tai Wing.  Further, as pointed out by Mr Suen, Chong Sang was not cross examined on his evidence that he and Tai Wing nominated Tse’s Brothers to hold Unit 16G on their behalves.

102.  In his Reply Submissions, Mr Yuen seemed to suggest that Unit 16G was capital injected by shareholders into Tse’s Brothers[70].  This was not the pleaded case of Tai Wing/Tse’s Brothers, nor was there any evidence to support that this was the case, since Tai Wing had said it was a sale.

103.  The burden was on Chong Sang to prove that Tse’s Brothers held Unit 16G in trust for him and Tai Wing in equal shares notwithstanding the company was/is the registered owner.  As it was common ground that no consideration was actually paid by Tse’s Brothers as stated in the assignment, this would give rise to a resulting trust unless Tai Wing or Tse’s Brothers could show it was a gift or otherwise.  As pointed out in Suen Shu Tai, and set out earlier, it would then be for Tai Wing or Tse’s Brothers to show that Unit 16G was a gift to Tse’s Brothers, or capital injection or otherwise.  There was no such sufficient evidence.  There was also no sufficient evidence from Tai Chi or Tai Wing to contradict Chong Sang’s evidence that he and Tai Wing merely nominated Tse’s Brothers to hold Unit 16G in trust for them. 

104.  Having considered the above, I find that Chong Sang had discharged the burden on him, that the transfer of Unit 16G by Tse’s Basketball to Tse’s Brothers was only of legal title and subject to the trust of the beneficial interest being held for Chong Sang and Tai Wing.  I accept Chong Sang’s evidence that Tse’s Brothers was only nominated by him and Tai Wing to hold Unit 16G in trust for them equally.  As there was no consideration paid by Tse’s Brothers, I find Tse’s Brothers has held Unit 16G as resulting trust for Chong Sang and Tai Wing in equal shares since 9 March 1995, when Tse’s Brothers became the registered owner.

105.  In his pleadings, Chong Sang/Kinghall/Skygift had also relied on a number of “instruments in writing signed and/or hand written by Tse’s Brothers or its agent creating, manifesting and/or proving the Trust”[71]. These instruments in writing included, not only the 1994 Agreement but also  the 2^nd Agreement, the 1^st Addendum, the 08.06.12 Fax from Tai Chi to Chong Sang in which Tai Chi acknowledged that Unit 16G was owned by Chong Sang and Tai Wing jointly, and a memorandum dated 11 June 2012 (“11.06.12 Memorandum”)[72] sent by Tai Chi to Chong Sang in which Tai Chi acknowledged that Unit 16G was owned by Chong Sang and Tai Wing jointly.  Chong Sang/Kinghall/Skygift further relied on, amongst other things, the entering into of the Oral Agreement as alleged by Chong Sang, the alleged deposit of title deeds of Unit 16G with Chong Sang and various other oral admissions in 2012[73].  

106.  The above instruments in writing, the Oral Agreement, the deposit of title deeds and oral admissions will be considered in further detail later in this judgment, and also Tai Wing’s/Tse’s Brothers’ allegation that that if there were indeed the Trust as alleged by Chong Sang, the joint ownership of Chong Sang and Tai Wing came to a halt at the time of the the 2007 Share Transfers and the Final Agreement between him and Chong Sang.

Issue (2) - Whether Tai Chi was the agent of Tai Wing in the negotiation of division of businesses and assets between Chong Sang and Tai Wing

107.  It was Chong Sang’s pleaded case that at all material times since around 2005 Tai Chi acted and was held out as agent for Tai Wing, in respect of, amongst other things, matters and/or dealings concerning assets held by family companies including Unit 16G[74].  The particulars Chong Sang pleaded in support of the agency relationship between the two brothers included that, with the consent of Mother, they “agreed to appoint Tai Chi as their agent to deal with the distribution on their behalf”.  As seen from the pleadings, Chong Sang’s case was that the 3 Disputed Agreements were handwritten by Tai Chi on behalf of Chong Sang and Tai Wing[75].  What seemed to be pleaded by Chong Sang was that Tai Chi was not only the agent of Tai Wing but also of Chong Sang.                                                       

108.  Tai Chi’s case was that he was only a mediator. It was not disputed that Tai Chi became involved at Mother’s request.  Tai Chi’s own evidence in his witness statement was that he was not an agent of either of his two brothers, and that in their division of businesses and assets, he was only trying to understand their disputed issues and to mediate between them, and that ultimately they themselves had to agree, and he was not in a position to agree on behalf of either party. 

109.  Further, Tai Chi said that in 2006 Tai Wing was mostly in the Mainland whilst he and Chong Sang were mostly in Hong Kong.  As his office and Chong Sang’s office were next to each other’s, and Chong Sang would often go to his office to tell him his views on the division and that after digesting the same, he would write them down and upon Chong Sang’s agreement, he would then inform Tai Wing.  According to Tai Chi, it was Chong Sang’s practice that all documents had to be signed by him before being effective, and thus if the two brothers were to reach an agreement, he would ask them to sign on the agreement.

110.  In short, according to Tai Chi, the 3 Disputed Agreements were all drafts prepared by him based on views/proposals of Chong Sang, and the only agreement Tai Wing had agreed and that Tai Chi was authorised to sign on behalf of Tai Wing was the Share Distribution Agreement.

111.  Tai Chi had referred to two faxes sent by Chong Sang to Tai Wing in his 1^st witness statement[76] and he had said it was at about the time that he started to assist in mediating between his two brothers to mediate.  The first fax was dated 16 March 2006 which indicated that Chong Sang was proposing for him to withdraw from Double Faith and Tai Wing to withdraw from Kinghall[77] (“16.03.06 Fax”). 

112.  The second fax was dated 8 April 2006 and sent by Chong Sang to Tai Wing (“08.04.06 Fax”) setting out 3 proposals[78], namely, briefly, as follows:

(i)  Chong Sang to withdraw from Double Faith (DHY (SZ)), and Tai Wing to withdraw from Kinghall (no problem if give to Kwong Hon), but the Loudspeaker Factory and the Cloth Factory to be returned to Kinghall, and the rest of the assets to be dealt with by Tai Chi (or simply divided equally);

(ii)  alternatively, everything to be handed over to Mother for her (with Tai Chi as her agent) to distribute;

(iii)  as accounts had to be clear according to Tai Wing and Tai Chi, this would be left for Tai Chi to handle.

113.  Tai Chi had said in his 1^st witness statement that initially the focal point of his two brothers’ disputes was over Double Faith and/or DHY (SZ), namely it was Chong Sang’s case that he and Tai Wing held equal shares in DHY (SZ) but Tai Wing’s case was that he was the one who had invested the capital in DHY (SZ) and therefore the Loudspeaker Factory and the Cloth Factory should not be included in the division of assets, and that this was why the 1^st proposal in the 08.04.06 Fax was not accepted by Tai Wing.

114.  However, notwithstanding his above evidence in his 1^st witness statement, Tai Chi’s evidence during the trial appeared to be that he did not see the two faxes at the time since it was before Mother had asked him to be the “middle man”. 

115.  Tai Chi’s evidence was rather confusing and in my view, he must have already been asked by the Mother to assist his two brothers at the time when Chong Sang sent those two faxes; otherwise, Chong Sang would not have mentioned Tai Chi in the faxes, and further, 3 days after the 08.04.06 Fax, Tai Chi had drawn up the Share Distribution Agreement.

116.  Anyway, Tai Chi’s evidence was that as a result of his two brothers’ respective case, he proposed that each of them to produce evidence to support his own case before proceeding to any division, and it was under such circumstances that he drew up the Share Distribution Agreement and after obtaining the authorisation from Tai Wing, he signed on his behalf before asking Chong Sang to go to Mother’s home to sign, as at that time Tai Chi was often staying overnight at Mother’s home at Welcome Gardens, Broadcast Drive in Kowloon (“Broadcast Drive Home”), which was also their family home.

117.  Notwithstanding Tai Chi’s evidence that the 1^st proposal in the 08.04.06 Fax was not acceptable to Tai Wing, the provisions in the Share Distribution Agreement were clearly in the direction of the Chong Sang’s 1^st proposal in the 08.04.06 Fax.  This was in fact also what was put to Chong Sang by Tai Wing’s own counsel Mr Yuen.  I find the Share Distribution Agreement was also in line of what Chong Sang had said in his earlier 16.03.06 Fax.

118.  There was no dispute that Tai Chi was authorised by both Chong Sang and Tai Chi to prepare the Share Distribution Agreement.  It was further not disputed by Tai Wing that he had authorised Tai Chi to agree and to sign on the Share Distribution Agreement.  Although the opening paragraph of the Share Distribution Agreement referred to the shares and properties of 3 companies, namely DHY (SZ), Kinghall and Tse’s Brothers, paragraphs 1-3 therein concerned the transfer of shares in relation to DHY (SZ) and Kinghall, and it was only in paragraph 4 that it was mentioned that any adjustment was to be made when distributing the properties.

119.  I find that by signing the Share Distribution Agreement, both Chong Sang and Tai Wing had agreed in principle to work towards Chong Sang withdrawing from Kinghall and Tai Wing withdrawing from DHY (SZ), and that there was to be a valuation of the two companies and an account taken of the parties’ respective payments/investments of capital and withdrawal of stock, with adjustments to be made when distributing the properties of the three companies including those of Tse’s Brothers, in order for Chong Sang and Tai Wing to each receive an equal share.  

120.  It was also not disputed that both Chong Sang and Tai Wing had agreed to provide evidence of their respective payments and injection of capital and/or withdrawal of stock for verification (“見証”) by Shen and Tai Chi.  

121.  There was no dispute that after the signing the Share Distribution Agreement, Tai Chi had continued to handle the matters stated in the Share Distribution Agreement and the division and Tai Chi clearly had the authority and agreement from both his brothers to continue to handle those matters and to work out the division and distribution for his two brothers in order for each to end up with an equal share.

122.  The issue was whether Tai Chi had any actual/apparent authority to act as agent or to act on behalf of Tai Wing and to enter on behalf of Tai Wing into any legally binding agreement with Chong Sang.

123.  Mr Yuen submitted that no material facts were pleaded as to how Tai Chi was appointed by Tai Wing as his agent, nor was there any evidence in this respect, and that Chong Sang’s case was one of apparent authority by relying on the alleged facts that Tai Wing had through Tai Wing entered into those questionable agreements.

124.  Mr Yuen referred the Court to Thanakharn Kasikorn Thai Chamkat v Akai Holdings Ltd (20100 13 HKCFAR 479, apparent authority is a specie of estoppel by representation[79], and that the representation would have to be clear and unequivocal.

125.  Further, Mr Yuen submitted that Chong Sang’s case would put Tai Chi in an impossible position where he could have agreed on behalf of both Tai Wing and Chong Sang.  In any event, it was Mr Yuen’s submission that Tai Wing could not be bound by the acts or representations of Tai Chi as Tai Wing had never given any, or any clear and unequivocal, representation that Tai Chi had the unqualified authority. 

126.  Chong Sang’s evidence was that after he discovered the Forged Minutes, he did not speak to Tai Wing face to face and although he had sent Tai Wing the two faxes mentioned earlier, Tai Wing did not reply to him, and instead entrusted Tai Chi to deal with Chong Sang.  Further, after the Share Distribution Agreement was signed, there was no further direct communication (not even in writing) between him and Tai Wing and that all communications Chong Sang had were with Tai Chi.

127.  Chong Sang further relied on the following:

(i)  An undated note written by Tai Wing to Tai Chi (to be forwarded to Kwong Hon)[80], indicating in the 1^st line thereof that he completely respected Tai Chi’s fair handling in the matter of division of assets with Chong Sang which was entrusted to Tai Chi (“Undated Note”);

(ii)  A fax bearing a date 15/12 (15 December) but with a header of a fax date of 26 August 2006 but with both sides agreeing to be 15 December 2010 (“15/12 Fax”), written and sent by Tai Wing to Tai Chi (to be forwarded to Kwong Hon) in which he had said the matter of division had not yet been completely dealt with, as the Mainland properties needed to be set out and in Hong Kong, the only remaining property of Unit 16G, and Tai Wing was proposing to Tai Chi to sell Unit 16G, with the sale proceeds to be handled/dealt with by Tai Chi[81];

(iii)  The 11.06.12 Memorandum mentioned earlier, sent by Tai Chi to both Chong Sang and Tai Wing, in which Tai Chi reiterated to both Chong Sang and Tai Wing that he was entrusted by them to handle the division of the assets held by Tse’s Brothers and Kinghall, each to hold 50%;

(iv)  A typed memorandum from Tai Wing to Tai Chi dated 1 July 2012 and signed by Tai Wing, stating that he and Chong Sang had authorised Tai Chi to handle the division of assets when Mother was alive and that it was almost 10 years ago and yet Chong Sang had continued to make trouble, and therefore he had set out various suggestions for Tai Chi to consider, and stating that Tai Chi had the right to decide or Chong Sang could also choose first[82] (“01.07.12 Memorandum”).

128.  Chong Sang also relied on Mr Tai’s following evidence:

(i)  Mr Tai said he was aware of the negotiation on the division of assets in 2006 and 2007, and that Tai Chi was responsible: “牽涉老二，因為佢負責處理” ;

(ii)  “老二俾我印象就係佢負責處理佢地” ;

(iii)  It was Tai Chi who produced the 1^st Addendum to him;

(iv)  It was also Tai Chi who gave Mr Tai all the instructions on the 2007 Share Transfers: “老二再俾instructions”; “因為呢份全部係老二既字，後來因為第一行本來係老三既，後來話俾兩個細路，呢個都係老二指示佢俾我秘書”;

(v)  Mr Tai also passed all the documents in relation to the 2007 Share Transfers to Tai Chi to arrange for execution: “準備好後俾老二等佢地去簽”.

129.  Tai Chi had agreed to verify the accounts and information provided by Chong Sang and Tai Chi, and to work out an equal division of the businesses and landed properties between Chong Sang and Tai Wing as authorised by them, and on his own evidence during the trial, he had said he would not relay the requests of Chong Sang to Tai Wing if such requests were unreasonable.  I find that the evidence showed that Tai Chi had considered himself to be in an authoritative role.

130.  Having considered all the evidence, in particular the Undated Note, the 15/12 Fax, and the 01.07.12 Memorandum sent by Tai Wing himself, I find that at the time, due to the 3 brothers’ respect to the Mother, and as it was the Mother who asked Tai Chi to assist, and Tai Chi being the eldest of the brothers, Tai Chi’s role was more than that of a mere mediator and in my view, his role was an arbiter, or more akin to an arbitrator or an adjudicator, namely that he was authorized by his two brothers to handle and to decide on how to achieve an equal division of businesses and assets between them.  I further find that out of respect for the Mother and for Tai Chi at the time, both Chong Sang and Tai Wing had accepted Tai Chi’s authority and had agreed to abide by Tai Chi’s decision in the handling of the equal division of businesses and assets.  

131.  Having said the above, I do not however find that there was any sufficient, or clear and equivocal evidence that Tai Chi was an agent of Tai Wing in the manner as pleaded by Chong Sang.

Issue (3) - Whether Chong Sang and Tai Wing had entered into the 3 Disputed Agreements, or the Oral Agreement, or the Final Agreement, or any agreement in relation to Unit 16G

The Share Distribution Agreement

132.  Although there was no dispute that the Share Distribution Agreement was entered into by Chong Sang and Tai Wing, an issue arose as to when Tai Chi and Tai Wing learnt that Chong Sang had discovered the Forged Minutes and the DHY (SZ) Transfer and the appointment of Ng in his place as director of DHY (SZ). This was because in the Share Distribution Agreement the shareholding of DHY (SZ) was stated to be in accordance with the original shareholding of Double Faith, namely Chong Sang 40%, Tai Wing 40%, Mr Lee 10% and Ms Lai 10%, rather than in accordance with the shareholding post DHY (SZ) Transfer.  There was no mention of the DHY(SZ) Transfer at all. 

133.  It was Chong Sang’s evidence in his 1^st witness statement that since about 2004 there were already differences between him and Tai Wing, and that coupled with his aging and deteriorating health and his discovery of the Forged Minutes in about 2005/2006, he then proposed to Tai Wing in late 2005/early 2006 about the division.  During the trial, Chong Sang had said it was in February 2006 that he discovered the Forged Minutes and the DHY (SZ) Transfer and that when he sent his 16.03.06 Fax and the 08.04.06 Fax, he had already discovered about the alleged forged minutes and the DHY (SZ) Transfer.  According to Chong Sang, although he had sent the two faxes to Tai Wing, by that time, they were already not speaking to each other.   

134.  Chong Sang’s case was that as the minutes were forged, the DHY (SZ) Transfer and also the appointment of Ng as a director/removal of Chong Sang as a director of DHY (SZ) were invalid and ineffective, and further unlawful, and therefore what was reflected in the Share Distribution Agreement correctly reflected the true situation.

135.  On the other hand, Tai Chi’s evidence was that he was not told about the Forged Minutes or the DHY (SZ) Transfer at the time he prepared the Share Distribution Agreement.  Tai Chi had further said in his 1^st witness statement that even though Chong Sang knew at the time, Chong Sang did not tell him, and that this indicated that Chong Sang knew he had nothing to do with DHY (SZ) and was only using the fact that Double Faith was holding DHY (SZ) as an excuse to obtain the Loudspeaker Factory.  Tai Chi claimed that he only found out about the Forged Minutes or the DHY (SZ) Transfer, or Chong Sang’s discovery of the same, in 2012.

136.  Having said the above in his 1^st witness statement, in his supplemental witness statement, Tai Chi then admitted that Mother had telephoned him in September/October 2006 about Chong Sang’s complaints in relation to Ng being appointed as director of DHY (SZ) and that Chong Sang had threatened to sue Ng.  According to Tai Chi, even though Chong Sang did complain at that time about Ng being unlawfully appointed as director of DHY (SZ), Chong Sang did not mention that his interest in DHY (SZ) had been “stolen” by Tai Wing[83].  Tai Chi said he had asked Chong Sang for proof that Ng was appointed and Chong Sang had shown him the registration record at the Mainland Industry and Commerce Information Bureau, but Tai Chi maintained that Chong Sang did not show him the Forged Minutes or the DHY(SZ) Transfer at the time, and Tai Chi continued to maintain that he only found out in 2012.

137.  As for Tai Wing, it was his evidence that he did not realise until the Mainland Litigations at end of 2012 that Chong Sang had found out about the Forged Minutes and/or the DHY(SZ) Transfer in early 2006. Further, Tai Wing’s explanation for the DHY(SZ) Transfer was that he arranged for the transfer to avoid Chong Sang’s interference in DHY(SZ)  as Chong Sang had never invested in the business[84].

138.  It would appear from Tai Wing’s evidence that he did not deny that the DHY(SZ) Transfer was carried out by him without the knowledge or consent of Chong Sang.

139.  Chong Sang had produced two documents which he said he had faxed to Mr Lee in September 2006, namely (i) a copy of the Forged Minutes approving the DHY (SZ) Transfer and Ng’s appointment bearing a note written thereon by Chong Sang dated 12 September 2006 to Mr Lee, in which Chong Sang demanded an explanation of the minutes[85]; and (ii) another handwritten note dated 13 September 2006 sent by Chong Sang to Mr Lee referring to what he had faxed to Mr Lee on 12 September 2006, and complaining about the Forged Minutes and demanding rectification of the registration records at the Mainland Industry and Commerce Information Bureau[86].  Tai Wing however said during the trial that Mr Lee was his subordinate and that Mr Lee never reported the faxes to him. 

140.  It was all along Tai Wing’s case that Mr Lee was holding his shares only as nominee for Tai Wing.  Mr Lee was also a director of Double Faith at the time, and he was the manager of the Loudpseaker Factory at the time.  I do not find it probable that Mr Lee would not have reported to Tai Wing about what Chong Sang had faxed to him or what had been written thereon.  In fact, there was also another fax from Tai Wing to Tai Chi on about 16 June 2010[87].  On this fax, which was produced by TW Camp, it bore Chong Sang’s handwritten words to the effect that the matter of the DHY (SZ) Forged Minutes should be dealt with in a just manner. 

141.  Going back to April 2006 when the Share Distribution Agreement was signed, as Tai Wing’s own evidence showed, Chong Sang had found out from the registration record at the Mainland Industry and Commerce Information Bureau in early 2006 about Ng’s appointment and/or the DHY(SZ) Transfer.

142.  In my view, once Chong Sang found out about his removal/Ng’s appointment as director of DHY(SZ), he would have found out about the DHY(SZ) Transfer at about the same time.  I accept Chong Sang’s evidence that he discovered the Forged Minutes, the DHY(SZ) Transfer and his removal as director/Ng’s appointment in about February 2006 and prior to his above two faxes to Tai Chi.

143.  I do not find it probable that Chong Sang would have kept quiet upon discovery.  As Chong Sang had said, this was one of the reasons why he was seeking a division/separation of his businesses and properties from Tai Wing, and further as said earlier, Tai Chi admitted that Mother had told him in September/October 2006 that Chong Sang was threatening to sue Ng. 

144.  Having considered the above, I do not find the evidence of Tai Chi and Tai Wing that they only learnt of Chong Sang’s discovery in 2012 to be credible. 

145.  Further, irrespective of when Chong Sang discovered the Forged Minutes and the DHY (SZ) Transfer, Tai Wing himself must be fully aware of the DHY (SZ) Transfer as he and Mr Lee had signed the Forged Minutes and the relevant transfer documents in December 2005.

146.  As it was stated in the Share Distribution Agreement that the shareholding of DHY (SZ) was in accordance with the shareholding of Double Faith as if the DHY(SZ) had not taken place, I find that Tai Wing by authorising Tai Chi to sign the agreement on his behalf had accepted at the time of signing of the Share Distribution Agreement that the purported transfer of DHY (SZ) by Double Faith to Kingswell was invalid or ineffective.

147.  As said earlier, Tai Wing’s evidence was that he only transferred the 4,000 shares or 40% in Double Faith to Chong Sang to hold as nominee because at the time the Mainland Shareholder of Haiyin required an additional director from Double Faith.  Even if initially Chong Sang had held any shares in Double Faith as nominee for Tai Wing, as mentioned earlier, on 18 March 1997, Tai Wing had transferred back to Chong Sang the 4,000 shares.  If all Tai Wing wanted was to appoint Chong Sang as director of Haiyin, then all Tai Wing needed to do was to transfer to Chong Sang 1,000 or 2,000 shares to hold as nominee, as he said he did with Mr Lee, or Ms Lai.  I therefore do not find Tai Wing’s explanation why he transferred the 4,000 shares to Chong Sang credible, and I do not find that Chong Sang was merely a nominee shareholder of his 4,000 shares in Double Faith for Tai Wing.

148.  There was also no sufficient evidence to support Tai Wing’s later allegation that he only agreed to Chong Sang having equal shares in Double Faith/DHY (SZ) after repayment of the initial capital invested by Tai Wing was repaid to Tai Wing.   

149.  To summarise, I find that pursuant to the Share Distribution Agreement, Chong Sang and Tai Wing had in principle agreed to an equal division of their businesses and properties including DHY(SZ) subject to the valuations of DHY (SZ) and Kinghall and verification of the amounts of their withdrawals and capital injection and that the division was to be handled by Tai Chi after verifying the accounts and information provided to him by his two brothers.  As said earlier, the two brothers agreed to abide by Tai Chi’s decision.

The 1^st Agreement

150.  The 1^st Agreement was the first of the 3 Disputed Agreements. Tai Chi had said in his 1^st witness statement that in order for him to be clear about the disputes between his brothers, both Chong Sang and Tai Wing had provided information to him, including monthly bank statements of their  jointly held bank account and those monthly bank statements of Tse’s Brother’s account, both accounts at HSBC, the financial statements of DHY (SZ) and Kinghall Mainland Company, and in about August/September 2006, he sorted out the information and set it out in the 1^st Agreement.

151.  It was Tai Chi’s evidence that there had been various discussions between him and Chong Sang and that there were several drafts, but as Chong Sang kept revising the drafts, these drafts were eventually thrown away and he had not kept them. 

152.  It was also Tai Chi’s evidence that the respective titles to the 3 Disputed Agreements, namely “協議書 <一>”/“1^st Agreement”, “協議書<二>”/the “2^nd Agreement” and “協議附件 <一>”/“1^st Addendum” were only added by him to those drafts prior to visiting Mr Tai’s office for identification purposes[88].

153.  What could be seen from the 1^st Agreement was that Tai Chi had stated the information received by him indicated that amongst other things (i) the capital of DHY (SZ) was invested by Double Faith and (ii) there was a variance between Chong Sang’s case and Tai Wing’s case in relation to DHY (SZ), namely Chong Sang’s case was that they both held equal shares therein but Tai Wing’s case was that they would only have equal shares after the capital injected by him had been repaid to him.  

154.  For (i), Tai Chi had further stated in his witness statement that there was no evidence to prove that Chong Sang had injected any capital into DHY (SZ), whether personally or through Tse’s Brothers, and that the remittance advices produced by Chong Sang could only be said to be shareholders’ transfers/股東往來, and as for the HKD remittances from Tse’s Brothers to DHY (SZ), the destinations were unclear.  Chong Sang alleged they were withdrawn by Tai Wing from DHY (SZ) for his personal use whereas Tai Wing said they were withdrawn for converting into RMB to pay the various expenses of Kinghall Mainland Company, as DHY (SZ) being a foreign owned enterprise was permitted to carry out foreign currency exchange into RMB. 

155.  Anyway, it was Tai Chi’s evidence in his 1^st witness statement that the 1^st Agreement was prepared by him around August/September 2006 but that Chong Sang was not happy about it.  He had asked Tai Chi not to disclose it to Tai Wing to avoid disputes and thus Tai Chi did not. 

156.  Tai Chi then went on to say that shortly thereafter, from the information provided, he proceeded to prepare a list of their companies, properties, amounts withdrawn and their Mainland assets and wrote down the figures[89] and that after he wrote out his summary of the information provided he had a “rough proposal” of the division based on the factories his two brothers were operating from, namely (i) Chong Sang would get Kinghall and he could continue to operate Kinghall Mainland Company, and Tai Wing to get Double Faith and he could continue to operate DHY (SZ)  (Tai Chi being then under the impression that Double Faith held DHY (SZ)); (ii) all the assets in Hong Kong, including all the landed properties in Hong Kong held by the 4 Companies and the monies in their joint bank account and the amounts withdrawn by them respectively from the companies to be divided equally, by their each taking one of the two remaining of the 4 Companies (ie Tse’s Brothers and Shinwoo) and for adjustments to be made after valuations of all the landed properties; (iii) all assets, machinery, and land in Mainland to be divided equally (“Rough Proposals”)[90].  Tai Chi said he orally conveyed his Rough Proposals to Chong Sang and that Chong Sang initially had agreed and then showed him some valuations of the Hong Kong landed properties for reference[91].   According to Tai Chi, after he wrote down the Rough Proposals to show Chong Sang and that he had proposed No 21 Factory to go to Tai Wing, but Chong Sang again disagreed saying that there was no need to convey his draft proposals to Tai Wing.

157.  It would appear from Tai Chi’s above evidence that the Rough Proposals were made by him after the 1^st Agreement. In any event, the fact that Tai Chi had not been able to produce any other “drafts” in the present two actions would seem in my view to indicate that the rest were indeed drafts, or the fact that the 1^st Agreement was kept and typed would indicate it was not a draft.  Further, as Tai Chi himself had said the Share Distribution Agreement and the 3 Disputed Agreements were taken by him to Mr Tai’s office and Tai Wing had admitted seeing them at Mr Tai’s office, in my view the 1^st Agreement, and indeed the 3 Disputed Agreements, could not have been simply drafts.   

158.  During the trial, Chong Sang admitted he was not happy with what was summarised in the 1^st Agreement by Tai Chi, in particular that the capital of DHY (SZ) was invested from Double Faith, and Chong Sang had said that those figures should be subject to further proof or investigation.  

159.  As mentioned earlier, the capital of DHY (SZ) was increased to HK$8.5m only at the end of December 2004, of which HK$5m was to be in cash and HK$3.5m was machinery and equipment.  The accounting records appeared to show that the cash sum of HK$5m was injected by several payments between April to August 2003 from “Mr Tse” without  indicating whether it was from Chong Sang or Tai Wing[92]. The information said to be provided to Tai Chi indicated that from 1994 to 2004, there were some HK$62m and RMB 20m paid into DHY (SZ), or a total of about HK$82m[93]. Anyway, according to Chong Sang, the accounting records indicated that the total amount injected by Tse’s Brothers  as at April 2006 was a total of HK$21,732.180.75 and consisted of 3 categories, namely, stock, remittances, and amounts paid on behalf of RHY (SZ) by Tse’s Brothers[94] and there were also remittances from Tse’s Brothers, Kinghall and Double Faith between 2000-2005 which would need to be verified.  Chong Sang had also said there were vouchers/advices produced in the Mainland litigations which had not produced to Tai Chi in about April 2006, which would indicate that further funds had been received/withdrawn by Tai Wing from 21 May 2001 – 27 May 2002[95].

160.  The major disputes between the two brothers thus appeared to be over the source of the capital/amounts injected into or paid on behalf DHY (SZ), and also the various withdrawals by Chong Sang and Tai Wing.  Whether Chong Sang was happy or not, he had said during the trial that the 4 Agreements formed part and parcel of an entire agreement, namely the Composite Agreement between him and Tai Wing and that it was not a question as to whether he had accepted each individual term or individual agreement, and that after the Composite Agreement had been reached then Tai Chi was authorised to take to the solicitors to prepare the necessary legal documents for signing.  

161.  I do not find that Chong Sang’s evidence during the trial that he was not happy with the 1^st Agreement was any departure from his pleaded case.  In fact, the 1^st Agreement although called an agreement, was not conclusive as it was stated to be pending further discussion between Chong Sang and Tai Wing, and it only set out information summarised by Tai Chi for the way forward.  Having said this, as said earlier, I do not find that the 1^st Agreement was only a draft document.  In my view, what was written in the 1^st Agreement was part of the follow up matters or work which Tai Chi was authorised to do and should be doing after the Share Distribution Agreement.   

162.  As also said earlier, Tai Chi’s case was that he did not send or convey what he had written in the 1^st Agreement to Tai Wing because Chong Sang had rejected the 1^st Agreement and had requested Tai Chi not to send it. 

163.  As Tai Chi had regarded himself as a mediator and he said he would not relay to Tai Wing any unreasonable requests/proposals from Chong Sang, this would mean he should relay anything which was reasonable. Thus, unless he himself was also of the view that the information provided to him and summarised by him at the time was unreasonable or incorrect, one would have thought he should convey to Tai Wing what he had summarised whether Chong Sang had agreed or not. 

164.  Chong Sang had produced a note sent by Tai Chi to his two brothers which was undated[96] (“TC Note”).  The TC Note had referred to figures set out in two attachments.  Attachment (1)[97] appeared to set out the value/amounts of cash and Hong Kong properties taken by Chong Sang and Tai Wing respectively, and attachment (2)[98] appeared to set out the value of the Mainland land and factories of Tse’s Brothers and Kinghall.  All these 3 documents bore a fax date of 9 January 2004 and appeared to be part of a 5 page fax.  However, the fax date clearly was wrong, since attachment (1) was prepared up to 30 April 2006[99]. 

165.  The TC Note or its attachment (1) purported to set out the division as at 30 April 2006 or what each of the two brothers had taken or were distributed as at 30 April 2006 and that Unit 16G was part of what was taken by or distributed to Tai Wing.

166.  When it was put to Tai Chi that the TC Note was only prepared at end of 2012, he said he could not recall and said it was when Chong Sang complained he was being unfair.  However, in his 1^st witness statement, Tai Chi himself had said that the TC Note was sent by him at end of 2012 and that he was proposing a final proposal to his two brothers based on 2006 valuations.  Tai Chi had also said the TC Note was sent by him to all his relatives, since Chong Sang had been complaining to everyone that he was unfair in his division in 2006. 

167.  In any event, I find it more probable than not that the TC Note was prepared and sent by Tai Chi towards end of 2012, namely after the writ in the 1^st Action had been issued, and thus the contents of that note had to be read in that light.

168.  During the trial, Mr Suen had referred to another undated note signed by Tai Chi which stated that Unit 16G was “carved out” and together with part of the old Tse’s production factory[100], the old Zhang Feng Factory and No 21 Factory, and that all these should be 50/50[101].  It was put to Tai Chi by Mr Suen that the division referred therein to be at July 2006 should in fact be at July 2007, but Tai Chi claimed he was referring to the division in July 2006. 

169.  I find that this could not have been right, since according to Tai Chi’s own evidence in his 1^st witness statement, the 1^st Agreement was prepared by him in August or September 2006 and in the 1^st Agreement, there were no valuations of the Hong Kong properties or the stock withdrawn set out, only the amounts of cash withdrawals by Chong Sang and Tai Wing from their joint account.

170.  There was in any event no sufficient evidence that in July 2006, a division had been achieved.    

171.  The 1^st Agreement was only a preliminary summary by Tai Chi prepared from the then information provided to him.  According to Tai Chi’s evidence in his 1^st witness statement, the valuations of the Hong Kong properties as set out in TC Note were provided to him by Chong Sang at end of 2006, and that the valuations of the Mainland land and factories were based on his own “rough calculations”[102].  Thus, the valuations of the Hong Kong properties were received by Tai Chi after the 1^st Agreement.  This was also Chong Sang’s evidence.  This would mean whether Chong Sang was happy or not with what was written in the 1^st Agreement, Chong Sang had proceeded to provide Tai Chi with further valuations for handling the distribution.    

172.  I do not find there was sufficient evidence that Chong Sang had rejected the 1^st Agreement or that he had asked Tai Chi not to show Tai Wing the 1^st Agreement.  In light of this, I do not find that Tai Chi’s explanation as to why he had not conveyed to Tai Wing the contents of the 1^st Agreement credible.  In fact, I find there was no reason why Tai Chi would not convey to Tai Wing the contents of the 1^st Agreement and in my view he did.  

173.  The evidence from Tai Wing and Tai Chi seemed to be that they had no communications after the Share Distribution Agreement and Tai Wing said he only became aware of the contents of the 3 Disputed Agreements at Mr Tai’s office.  However, both items 3 and 4 of the 1^st Agreement in fact indicated that Tai Chi did have communications with Tai Wing and further Tai Chi had obtained Tai Wing’s instructions on the remittances produced by Chong Sang and also on the shareholding of DHY (SZ).  In particular, item 4 could only have written by Tai Chi in accordance with Tai Wing’s instructions to Tai Chi.  I therefore do not find that the evidence of Tai Chi and Tai Wing that they had not communicated with each other over the division after the Share Distribution Agreement to be credible. 

174.  Further, item 4 could not have been a proposal from Chong Sang.  In any event, what was set out in the 1^st Agreement was only Tai Chi’s own summary and Tai Chi stated that he was awaiting the two brothers to jointly discuss.  I do not find it credible that Tai Wing was not aware of what was written by Tai Chi in the 1^st Agreement at the time.

175.  The figures set out in items 1 and 2 of the 1^st Agreement were  relied on by Tai Wing in his subsequent claim against Chong Sang of an alleged shortfall of HK$6,666,569.06 as set out in his solicitors’ letter of 8 January 2013[103]. Item 3 of the 1^st Agreement was partly based on Tai Wing’s then instructions to Tai Chi and the information provided to Tai Chi appeared to support Tai Wing’s case about the capital injection into DHY(SZ).  Item 4 of the 1^st Agreement was clearly based on Tai Wing’s instructions.  In my view, not only that Tai Wing was fully aware of what was written in the 1^st Agreement, what was written was accepted and agreed by Tai Wing at the time.

The 2^nd Agreement and the 1^st Addendum

176.  Chong Sang had said in his supplemental witness statement that after the 1^st Agreement, he had requested the figures set out therein be verified by the relevant documents and accounts from DHY (SZ) but such supporting documents were not provided by DHY (SZ).  However, after discussion with Tai Chi, he then agreed to adopt a broad brush approach and accepted the division as set out and written by Tai Chi in the 2^nd Agreement although later he had sought a variation as set out in the 1^st Addendum.

177.  According to Tai Chi, not long after the 1^st Agreement, Chong Sang had sent him a fax proposing that he was to take both the Kinghall and also DHY (SZ) factories but Tai Chi claimed he did not keep a copy of this fax.

178.  There was however a fax/note produced by Tai Wing/Tse’s Brothers which would appear to have been sent by Chong Sang after May 2006, and in this note, what Chong Sang was saying was, amongst other things, that the Kinghall factory should go to him as Tai Wing would not able to use all the space, and Chong Sang had set out the area of the DHY (SZ) factory to be 25,000 square meters and Kinghall’s to be 15,600 square meters[104] and that all Hong Kong properties 50/50.  As seen in the fax/note, at that time Chong Sang was not proposing for him to take both the Kinghall and DHY (SZ) factories.

179.  Anyway, according to Tai Chi, after the 1^st Agreement, Chong Sang often went to his office to ask Tai Chi to write down his various proposals and to send them to Chong Sang, but upon receipt of what he had written, Chong Sang would then ask him to revise what he had written.  Thus, Tai Chi said he would throw away the previous drafts, and that this went on for several rounds, and in the end, Tai Chi said he had told Chong Sang to think carefully first before asking him to write the proposals down.  According to Tai Chi, Chong Sang then threatened to tell Mother if Tai Chi refused to write them down. 

180.  Tai Chi’s case appeared to be that it was under the above circumstances that Tai Chi had no alternative but to write down the terms of  the 2^nd Agreement in accordance with what was proposed by Chong Sang, including that Unit 16G was to be carved out and given to Chong Sang, and because there was not sufficient space in the Kinghall factory (No 22 Factory), Chong Sang needed to borrow the 4^th and 5^th floor of Tai Wing’s Loudspeaker Factory (No 21 Factory) for use, and that this was for a period of 5 years, and that after 5 years, when the division was to be completed, Unit 16G was to be formally transferred to him.  However, after he had written the 2^nd Agreement and faxed it to Chong Sang, he received another fax from Chong Sang asking him to add 4 points to the 2^nd Agreement, and as Tai Chi did not know how to add those 4 points, he decided to write out those 4 points on a separate piece of paper on which he later added the title of the 1^st Addendum.

181.  Chong Sang did not deny that after the 2^nd Agreement, he had explored the possibility of varying the 2^nd Agreement with Tai Chi and that after further discussions with Tai Chi, he put forward the terms of 1^st Addendum for consideration by Tai Wing, and that his case was after Tai Wing had agreed, Tai Chi wrote out the 1^st Addendum and took the 4 Agreements to Mr Tai for preparation of legal documents.

182.  What Tai Chi said in his 1st witness statement was that in November 2006, he was going to see Mr Tai anyway in relation to a mortgage of his own property, and as Mr Tai had always dealt with the legal matters for the three brothers, including those matters pursuant to the 1994 Agreement, Tai Chi took with him all the 4 Agreements to show to Mr Tai and to seek his opinion.  Tai Chi’s evidence in his 1^st witness statement was that Mr Tai’s opinion was that the contents of the 4 Agreements were contradictory in law and further the Mainland properties had to be dealt with in Mainland China[105]. Tai Chi said he then wrote the Remarks as seen on the 2^nd Version of the 1^st Addendum.

183.  Tai Chi said he had told Chong Sang about Mr Tai’s opinion and that he had also telephoned to tell Tai Wing about Mr Tai’s opinion. 

184.  First of all, I do not find it probably that Tai Chi would have taken all the 4 Agreements to seek Mr Tai’s opinion in the first place without Chong Sang and Tai Wing having both in principle accepted and agreed to the terms therein.  Secondly, if according to Tai Chi and Tai Wing, that Tai Wing was not even sent or told or aware of the contents of the 3 Disputed Agreements, then there was no reason why Tai Chi would tell Tai Wing about Mr Tai’s opinion in relation to those agreements.

185.  Chong Sang had said he was not aware of Mr Tai’s opinion about any contradiction in the terms and only saw the Remarks in the 2^nd and 3^rd Version in or about 2009.

186.  Since the 2^nd and the 3^rd Versions bore no dates thereon, it was unclear when the Remarks were added or when Chong Sang’s signature or words were written thereon.  In any event, irrespective of whether Chong Sang saw the Remarks in 2007 or in 2009, so far as Tai Chi’s own case as to Mr Tai’s opinion was concerned, it was rather confusing and not consistent. 

187.  It was the pleaded case of Tse’s Brothers that Tai Chi was advised by Mr Tai that the 2^nd Agreement and the 1^st Addendum were invalid since the terms of the 1^st Addendum contradicted with the 2^nd Agreement[106].  However, in Tai Chi’s 1^st witness statement, his evidence was that “當戴律師看過文件後，他告訴我各份協議的條文，在法律上互相矛盾，不能成文” namely, the terms of each of the 4 Agreements were contradictory in law (emphasis added) and not that the 1^st Addendum contradicted the 2^nd Agreement[107].  But then, the Remarks written by Tai Chi himself on the 2^nd or 3^rd Version only stated that the 4 points in the 1^st Addendum were contradictory to each other.

188.  Further, as seen later, there was no evidence from Mr Tai nor anything in his May 2007 Note or his handwritten remarks on the two page memorandum (as referred below) to indicate that he had found the terms of the 1^st Addendum or any of the 4 Agreements contradictory or not workable as alleged by Tai Chi.  In fact, the only agreement Mr Tai seemed to be able to recall was the 1^st Addendum.  He did not recall seeing the others of the 4 Agreements.

189.  According to Tai Chi, after he obtained Mr Tai’s advice and conveyed the same to his brother, there was no further discussion about the division until end of 2006/early 2007 when he received a telephone call from Chong Sang telling him that he had prostate cancer and that Chong Sang requested for the transfers of the 4 Companies to proceed and he wanted the shares from Tai Wing be transferred to his children.  According to Tai Chi, Chong Sang had said that as the assets of Kinghall and Shinwoo were more or less the same as Tse’s Brothers’ assets, and Double Faith was always Tai Wing’s, Chong Sang had suggested that he was to transfer his shares in Tse’s Brothers and Double Faith to Tai Wing and that Tai Wing was to transfer his shares in Kinghall and Shinwoo to his children, and any further adjustments could be made when dividing the deposits and assets in the Mainland.

190.  This time, Tai Chi did convey what was proposed by Chong Sang to Tai Wing , and Tai Chi said Tai Wing agreed to the arrangement[108] and as two shareholders were required for a Hong Kong company at the time, Tai Wing asked Tai Chi to hold the shares transferred out from Chong Sang.  Tai Chi said he then faxed his instructions to Mr Tai to prepare the necessary documents.  They later attended Mr Tai’s office in May 2007 to sign the documents, and on that occasion, Mr Tai returned copies of the 4 Agreements to him.  Mr Tai had also written on a piece of blank paper 4 points under the title “謝氏兄弟公司股权轉讓”/“Tse’s Brothers’ Share Transfer”[109] (“May 2007 Note”).

191.  Mr Tai’s evidence was not really helpful to Tai Wing/Tse’s Brothers notwithstanding he was their witness having been served with a subpoena issued by them.  There was no written witness statement from Mr Tai.  Mr Tai’s evidence was that in early 2007, Tai Chi’s secretary telephoned Mr Tai’s secretary to make an appointment for all 3 brothers to meet with Mr Tai.  He said the meeting did take place but he recalled it was only attended by Tai Chi and Chong Sang and that Tai Wing did not turn up, but Mr Tai had said that he could not recall the details of the discussion since it was too long ago.  However, he had said at least twice that he did not recall seeing Chong Sang and Tai Wing both attending his office at the same time.

192.  Mr Tai recalled Tai Chi had brought documents to show him.  When shown the Share Distribution Agreement, 1^st Agreement and 2^nd Agreement, Mr Tai said he could not recall these documents, but said he seemed to recall seeing the 1^st Addendum, and that it was brought to him by Tai Chi and was shown to Chong Sang, and that Tai Chi gave him the impression that he was responsible to handle the matter, and Mr Tai said he had walked away to let the two of them discuss.

193.  Mr Tai recalled he told them that he would not deal with Mainland matters and that they would need to instruct a Mainland accountant or Mainland lawyer, and the conclusion was first to transfer the shares in the Hong Kong companies and then the Mainland matters to be dealt with later. 

194.  Mr Tai confirmed that the May 2007 Note was the only note prepared by him and was prepared by him after the meeting.  There were no other attendance notes/records produced by him.  The 4 points on the May 2007 Note were briefly (i) transfer of shares only; (ii) all matters concerning Mainland would be dealt with by the brothers and that had nothing to do with the solicitors’ firm; (iii) new directors’ names and addresses (iv) stamping and filing – recent company’s profits and loss accounts (2 years if possible). 

195.  Mr Tai further said after the meeting, Tai Chi asked someone to send to him a two page memorandum on Tse’s Brothers letterhead containing the names, identity card numbers, percentage and number of shares of the transferees of the 4 Companies[110].  There were some handwritten remarks of Mr Tai on the two page memorandum including words “New Directors”– (i) names (ii) addresses etc (iii) only transfer of company’s shares (iv) some terms not yet agreed.”[111].  Mr Tai explained that (iv) of his handwritten remarks referred to some terms regarding the matters in the Mainland, and that he wrote the remarks as instructions to his secretary to carry out the follow up work.

196.  Mr Tai also confirmed that the 4 board minutes dated 23 May 2007[112] approving the transfer of the shares of the 4 Companies were prepared by him and that after they were prepared, they were handed to Tai Chi to arrange for signing.  There was a further board minute of Kinghall dated 4 July 2007 in relation to the transfer of the shares in Kinghall[113] which bore the same contents of the one dated 23 May 2007 except the May one stated Tai Wing took chair of the meeting and was signed by Tai Wing as chairman and Chong Sang signed as being present, whereas the July one stated Chong Sang took chair and signed as chairman.  Mr Tai explained that normally the Stamp Duty Office would require the latest audited accounts and therefore the transfer documents would usually be signed first with blank dates and then dated later when presented to the Stamp Duty Office.

197.  When it was pointed out to Mr Tai that the instrument of transfers and the bought and sold notes had different stamping dates on them by the Stamp Duty Office, from August 2007 to February 2008, Mr Tai explained that this was because they were waiting for the audited financial statements before presenting the transfer documents to the Stamp Duty Office. 

198.  Although Mr Tai’s evidence was vague, he did confirm that none of the 3 brothers had instructed him to carry out any valuations of the companies or the landed properties although he said he had advised them that they should consult their auditors for the valuation of the shares as they needed to calculate the figures/“因為佢地要計數”.  According to Mr Tai, Tai Chi then told him he would take care of this.

199.  Mr Tai said he did recall that the transfer documents had to be signed by Chong Sang’s children in the summer when the children would be in Hong Kong and so the “transferor” part had been signed first, and later the children signed the “transferee” part.

200.  When asked whether any of the 3 brothers had asked him about to whom the assets of the companies belonged, whether before or after the 2007 Share Transfers, Mr Tai only referred to a telephone call which he initially said was from Chong Sang’s son who telephoned him a few months after the 2007 Share Transfers to ask him whether a vehicle which was registered in Kinghall’s name and held a Hong Kong – Mainland cross border vehicle licence should belong to Kinghall or not, as Tai Wing wanted to take the vehicle back saying that he was the one who paid for it.  Mr Tai told the male caller that if the vehicle was registered under name of the company, then it should be an asset of that company.  Under cross examination by Mr Suen, Mr Tai accepted that the male caller could be the son of Tai Chi, rather than Chong Sang’s son.  Mr Tai said he could not recall the name of the caller.  The vehicle was a subject of another dispute between the CS Camp and the TW Camp. I do not find it necessary to go into the details of that dispute although it would appear that notwithstanding Mr Tai’s advice to the caller the vehicle continued to be used by Tai Chi or TW Camp until May 2013 even though it was registered under the name of Kinghall[114].

201.  The above telephone conversation was after the 2007 Share Transfers.  Mr Tai did not mention a meeting with Tai Chi when he had brought the 4 Agreements to show him in November 2006 when Tai Chi went to deal with his own mortgage matters and as said earlier, Mr Tai only mentioned a meeting in early 2007 with Tai Chi and Chong Sang.  Mr Tai was not asked whether he had advised all three brothers in May 2007 that upon transfer of the shareholdings in a company the assets held by the company would be transferred at the same time as Tai Chi and Tai Wing had alleged[115].  However, Mr Tai’s clear evidence was that he did not recall having seen all three brothers, or Tai Wing and Chong Sang, attending his office together at the same time.

202.  Mr Tai was also not asked about his opinion as to whether the terms of the 1^st Addendum were contradictory or about the Remarks.  There were no detailed attendance notes kept by Mr Tai, and he often said he could not recall as the matters took place too many years ago.  In any event, Mr Tai did not seem to have provided any opinion or advice as alleged by Tai Wing or Tai Chi, and apart from the telephone call after the 2007 Share Transfers, and apart from saying that he would not deal with Mainland matters, there was no sufficient evidence that Mr Tai had given any advice or opinion on the share transfers or the 3 Disputed Agreements at the time of the transfers. 

203.  So far as Kwong Hon was concerned, it was Kwong Hon’s evidence in his witness statement that he had attended Mr Tai’s office with his father, Tai Chi and Tai Wing for execution of the transfer documents in respect of the 4 Companies and he also mentioned attending Mr Tai’s office again to collect the share transfer documents with his father and Tai Chi and that on the 2^nd occasion, after collecting the documents, they visited the Broadcast Drive Home to collect the title deeds of Unit 16G as security of his beneficial interest in the property.

204.  What Kwong Hon said above was also the evidence of Chong Sang.  After hearing what Mr Tai said, both Chong Sang and Kwong Hon amended their statements to their meeting Mr Tai once.  Mr Yuen had criticized Kwong Hon, namely that he was simply prepared to modify his evidence to suit his father’s case.

205.  Kwong Hon said he moved to Singapore in 1997 when he was about 12 or 13 years and was educated in Singapore and he started working after Form 4 for about 6 months before commencing his two year military service in Singapore.  He returned to Hong Kong in 2007 to help his father in his business.  When he went to Mr Tai’s office, he had only just returned to Hong Kong and he did not know the details of the division of businesses/assets between his father and his uncle.  He explained that he at first mentioned attending Mr Tai’s office for two meetings as he saw two dates on the documents, one in May and one in July 2007.  He admitted that it was after hearing Mr Tai’s evidence during the trial that he recalled there was only one meeting.

206.  Kwong Hon was only about 22 or 23 years old in 2007.  He made his witness statement in 2015 and I do not think his failure to recall whether it was one meeting or two meetings 9 years ago would necessarily mean that he was an unreliable witness. 

207.  Kwong Hon had produced a recording of his conversation with his uncle Tai Wing when Kwong Hon and his wife went to visit Tai Wing at the Broadcast Drive Home on 27 July 2012 and a transcript of part of the recording was prepared by Chong Sang’s solicitors[116] (“Transcript”).  When asked why he made the recording, Kwong Hon had said it was because Tai Wing’s solicitors had sent them the WP Letter and he had asked Tai Wing why he sent the letter, and Tai Wing had asked him to ask Tai Chi.  Then when he telephoned Tai Chi, he was told by Tai Chi as Unit 16G was 50/50, and thus he/his father had to pay rent.

208.  Kwong Hon admitted that his uncle Tai Wing was very good to him and that at the time his relationship with his uncle was “OK” and he would not necessarily tell his father every time he went to meet with Tai Wing and that he only told his father of the recording in early 2013.

209.  Kwong Hon said it was his wife who suggested him to record his conversation with Tai Wing, and that it was much later when Tai Wing occupied the factories and his father was pushed onto the ground that he decided to disclose the recording to his father.  Kwong Hon had said during the trial that this could be end of 2013 or early 2014 and that it was him who produced the recording to the solicitors for CS Camp.  Kwong Hon had also said his father was angry with what he had done and refused to listen to the recording.

210.  During the trial, Chong Sang’s solicitors confirmed that they received the tape recording from Kwong Hon in November 2012.  Mr Yuen complained that there was deliberate delay on the part of CS Camp in disclosing the tape recording.  

211.  Kwong Hon is the son of Chong Sang and naturally he would support his father.  Even though Kwong Hon’s evidence was rather vague as to when he produced the recording to his solicitors or when he told his father about it, there was no sufficient evidence that the recording was edited save that the Transcript was not of the entire conversation and only the relevant part of it. 

212.  In the Transcript, Tai Wing had said to Kwong Hon all those years he had kept quiet and had handed all the accounts to Tai Chi to work out with Chong Sang and that Tai Chi had said he would be responsible for the division and that all the accounts were kept in his former office at Unit 16G which was not locked and Chong Sang could go and inspect. He alleged that it was Chong Sang who had evicted TW Camp out of No 21 Factory and cut the electricity supply.  Kwong Hon however pointed out that this was only after Tai Wing’s solicitors had sent the WP Letter but Tai Wing insisted it was before.  

213.  Anyway, Kwong Hon had pointed out to Tai Wing it was him who had sent the WP Letter first, Tai Wing then responded “……我……出律師信我係，但開始呢，就係咁諗，阿老二呢，點傾點好個時話，旺景既一人一半，姐係姐係未分好哂，係咪？……”[117]. Tai Wing then went on to say that according to normal case, this should be given back to him and as to why it should be given to him, this was because Chong Sang had taken so much money, and he referred to the accounts and the figures set out by Tai Chi, and later repeated that “……開始呢就咁諗，都係一人一半，吓，俾你老豆，俾你地啦，但係你老豆做到咁衰呢，我就唔會啦，我就同阿老二話，唔要，原來幾多就計幾多，吓”[118].

214.  When Kwon Hon pointed out that in the earlier month Tai Chi was still telling them Unit 16G was 50/50, Tai Chi then replied that Chong Sang was trying to take away what belonged to him in the Mainland and that this was  why he was retracting, “……所以呢我依家呢，我都反口啦，我唔俾佢啦，有幾多就計幾多”[119].

215.  Although there were other properties in the same building as Unit 16G held by Tse’s Brothers, it was clear that Tai Wing was referring to Unit 16G.

216.  During the trial, Tai Chi had admitted that he was the one who made the decision to carve out Unit 16G as set out in the 2^nd Agreement (“揸主意……同意抽出來”).

217.  Having considered the Transcript, I am of the view that although Tai Wing sounded emotional, he was fully aware of Tai Chi’s then decision of Unit 16G being “carved out” as stated in the 2^nd Agreement and the 1^st Addendum.  

218.  Tai Wing had also produced his own mobile telephone chats with Kwong Hon which took place on 13 September 2012[120] (“Chats”).

219.  In the Chats, Kwong Hon had referred Tai Wing to what was written in the agreements by Tai Chi, namely Unit 16G was 50/50 and Tai Wing’s 50% in Unit 16G was lent to CS Camp for use and No 21 Factory (Loudspeaker Factory) was lent to TW Camp to use.  Tai Wing said this was Chong Sang’s idea and it was not Tai Chi’s idea nor any agreement.  When Kwong Hon pointed out to Tai Wing that Tai Chi had referred to what was stated the agreement in faxes sent to them in June, Tai Wing did not respond directly and referred instead to those deposits and other assets which had taken by Chong Sang and complaining that Chong Sang was being greedy.

220.  According to the 2^nd Agreement, Unit 16G was to be 100% Chong Sang’s but the title was not to be transferred until the matter of the occupation of the No 21 Factory had been resolved in 5 years time.  That Unit 16G was 50/50 was in fact part of the 4 points stated in the 1^st Addendum.  Chong Sang had explained that the 5 year period was sought by Tai Wing due to his business needs of No 21 Factory.

221.  Although Tai Chi’s case was that the 2^nd Agreement was also a draft, I do not find this probable as he had clearly not thrown it away as with those other drafts mentioned by him.  In any event, if it was indeed only a draft and that according to him Tai Wing was not aware of the terms therein, there was no reason why Tai Chi could not simply thrown it away and rewrote the entire document when Chong Sang wanted to add the 4 points in the 1^st Addendum.  I do not find Tai Chi’s evidence credible, that he only wrote the 4 points in the 1^st Addendum separately because he did not know how to include them in the 2^nd Agreement.  In my view, more probable than not, he wrote the 4 points separately since these were subsequent additions/variations, and that there had already been acceptance and agreement by both Chong Sang and Tai Wing of the terms of the 2^nd Agreement.

222.  Further, in my view, even if for identification purposes the titles to the 3 Disputed Agreements were only added by Tai Chi later, the fact that he had called them what he had, in particular the 2^nd Agreement and the 1^st Addendum, was in my view also an indication that in his mind the terms of 1^st Agreement and the 2^nd Agreement had been accepted and agreed by his brothers.  Otherwise, for example, those documents could simply be called “draft no 1” or “draft no 2”.

223.  As said earlier, had the 3 Disputed Documents been only drafts, there was no reason why Tai Chi would need to bring them to show Mr Tai as Tai Chi himself had said he did.  

224.  Mr Suen pointed out that there was a lapse of a period of several months between late 2006 and early 2007 of inaction which was not explained by Chong Sang and that this supported Tai Chi’s evidence that he had informed Chong Sang Mr Tai’s advice after he took the 4 Agreements to show Mr Tai around end of November 2006 and thereafter, although Chong Sang still went to his office with new proposals but such proposals were all inconsistent and there was no progress, and that the matter of the division between the two brothers was left in abeyance until end of 2006/early 2007 when he received a telephone call from Chong Sang informing him of his prostate cancer and his request for the transfers of the 4 Companies[121].

225.  As mentioned earlier, Tai Chi had said that the valuations of the Hong Kong properties were provided to him by Chong Sang at end of 2006 and it was thereafter that he wrote out the 2^nd Agreement, followed by the 1^st Addendum.  It was common ground that the 3 Disputed Agreements were all written by Tai Chi before end of 2006.  Chong Sang was not specifically asked about any lapse of several months but his evidence had been that after the 4 Agreements had been agreed by him and Tai Wing, then Tai Chi was authorised to contact solicitors for preparation of legal documents.  All in all, the so called inaction was not that really that long.

226.  I do not find that there was sufficient evidence that Chong Sang had requested Tai Chi for the share transfers to be effected as soon as possible because Chong Sang was suffering from prostate cancer, as alleged by Tai Chi and Tai Wing.

227.  Although Chong Sang had in his 1^st witness statement referred to his own deteriorating health in 2005/2006, he had clarified during the trial, that his health problem in 2006 was his back pain which he had for some time.  He was then in his early 60s[122].  In his witness statement, he said the trigger off to him seeking a division of the businesses and assets then was not simply due to his health but also the discovery of the alleged fraud and forged minutes on the part of Tai Wing.    

228.  The above was in 2005/2006.  Chong Sang had said that although his doctor’s letter of reference to the consultant at the urology clinic was dated 30 May 2007[123], which referred to an ultrasound report and his PSA blood test, the diagnosis that he had prostate cancer came out only on 17 July 2007, and that he had an operation in Singapore at about end of 2007.  Mr Tai’s evidence was that it was in early 2007 that Tai Chi telephoned for an appointment.  Having considered all the evidence, I find there was no sufficient evidence that Chong Sang had pressed Tai Chi for the share transfers of the 4 Companies due to his cancer diagnosis.  In any event, even if Chong Sang did press Tai Chi to proceed with the division, there was no sufficient evidence that he was pressing Tai Chi to proceed with only the share transfers of the 4 Companies first with no other agreement reached between him and Tai Wing, as alleged by Tai Chi.

229.  Tai Wing’s evidence during the trial appeared to be that he only knew he was going to Mr Tai’s office to sign some documents.  As said earlier, Tai Wing’s case, and also Tai Chi’s, was that there had been no agreement on the part of Tai Wing to the terms, nor was he even aware of the terms of the 3 Disputed Agreements prior to attending Mr Tai’s office.  If this were the case, then the only agreement Tai Wing had entered into at that time would be the Share Distribution Agreement, which was in relation to the transfers of only two Hong Kong companies, namely Kinghall and Double Faith/DHY (SZ).  I do not find it probable that suddenly because Chong Sang had requested for the share transfers of the 4 Companies, Tai Wing would immediately agree to the share transfers of Tse’s Brothers and Shinwoo as well, without even seeing any valuations.  I simply do not find Tai Wing’s, and Tai Chi’s, evidence credible.

230.  Mr Suen submitted that Tai Wing did agree to the terms of the 2^nd Agreement and 1^st Addendum could be also supported by a number of documents and matters after the signing of the relevant documents of the 2007 Share Transfers.  Such matters and documents included:

(i)  The title deeds having been collected by Chong Sang and remained in his possession after the signing the relevant documents for the 2007 Share Transfers;

(ii)  The earlier mentioned 15/12 Fax[124];

(iii)  The earlier mentioned 08.06.12 Fax;

(iv)  The earlier mentioned 11.06.12 Memorandum;

(v)  The earlier mention 01.07.12 Memorandum;

(vi)  The oral admissions by Tai Chi during a family gathering on around 23 June 2012, and the oral admissions by Tai Wing on 27 July 2012.

(i) Title Deeds of Unit 16G and (ii) the 15/12 Fax

231.  Whether it was one meeting or two meetings with Mr Tai, the evidence of Chong Sang and Kwong Hon was that after attending Mr Tai’s office for the signing of the documents for the 2007 Share Transfers, they had attended the Broadcast Drive Home to collect the title deeds of Unit 16G. 

232.  In his 1^st witness statement, Chong Sang had said that he took possession of the title deeds as security of his beneficial interest in Unit 16G.  Similarly, Kwong Hon had said in his witness statement that the title deeds were taken as security but during the trial he said he did not really know the purpose.

233.  When Chong Sang was asked during the trial, he said it was Tai Chi’s idea that he took the title deeds first and then later they could deal with the transfer of the title at the same time as No 21 Factory/Loudspeaker Factory.

234.  Mr Yuen submitted that Chong Sang’s evidence was inherently improbable in that if Tai Chi or Tai Wing was minded to hand over the title deeds to Chong Sang for whatever purpose, there was no reason why they had not done so formally at the office of Mr Tai where there could be an acknowledgment of receipt or at least asking Mr Tai to be a witness.

235.  As seen from the 2^nd Agreement, there were in fact a number of landed properties in Hong Kong held by the 4 Companies. Tai Wing himself had agreed during the trial that the title deeds of units 13B and 15E of the same building as Unit 16G and other properties listed in Part A of the 2^nd Agreement were also not “formally” handed over to Chong Sang at Mr Tai’s office, nor there was any “formal” handing over of the title deeds of those properties listed in B of the 2^nd Agreement by Chong Sang to Tai Wing. 

236.  Tai Wing’s evidence during the trial was that he had kept all the title deeds in an unlocked drawer in the wardrobe in his unlocked bedroom in the Broadcast Drive Home.  Although Chong Sang had moved out of the Broadcast Drive Home by the time of the 2007 Share Transfers, Chong Sang had keys to the Broadcast Drive Home as Chong Sang was often visiting Mother.

237.  Tai Wing denied that on the day after signing of the documents for the 2007 Share Transfers at Mr Tai’s office, Tai Chi had arranged for Chong Sang to collect the title deeds of not only Unit 16G, but also of units 13B and 15E.  Tai Wing said he only found out that the title deeds of Unit 16G were missing when litigation started in 2012.  He admitted that he had sold units 8E and 9B of the same building as Unit 16G in 2008 and that the title deeds of units 8E and 9B were placed in the same drawer.  However, he said he only retrieved the title deeds of units 8E and 9B from the drawer in the wardrobe at the time of sale and he did not discover the loss of the title deeds of Unit 16G at that time. 

238.  Tai Wing admitted during the trial that he had sent the 15/12 Fax[125] to Tai Chi stating that so far as the Hong Kong properties were concerned, only Unit 16G had not been dealt with and suggested that Unit 16G be sold first and that the distribution of the proceeds to be decided by Tai Chi.  Tai Wing maintained that at the time of sending the 15/12 Fax, he did not look for the title deeds of Unit 16G and when it was put to him that he knew at the time, his answer was that he knew they had been taken by Chong Sang when he could not find them.  I find his answer evasive as it was not clear whether he had looked for them or not at the time of sending the 15/12 Fax which was in about 2010.  

239.  Tai Wing’s case was that Unit 16G belonged to Tse’s Brothers after the 2007 Share Transfers.  He thought the title deeds were in his drawer, and if this was the case then there would not be anything to stop him/Tse’s Brothers from selling Unit 16G in about 2009/2010, in the same way as he/Tse’s Brothers had sold units 8E and 9B in 2008[126].

240.  Having considered the evidence, I do not find it probable that Tai Wing was not aware that after the 2007 Share Transfers, Chong Sang had collected the title deeds of Unit 16G, as well as those of units 13B and 15E.  I reject his evidence, as well as that of Tai Chi’s evidence in this respect and accept Chong Sang’s evidence that after the 2007 Share Transfers, Tai Chi had gone with him and Kwong Hon to the Broadcast Drive Home to collect the title deeds to Unit 16G, which had remained in his possession since.

241.  It was further not disputed that after 2007 Share Transfers, Tai Wing had moved out everything from his office at Unit 16G to a new office in San Po Kong.  When asked about why he moved out of Unit 16G, Tai Wing had said he had a business with a partner, and that it was his partner who rented the San Po Kong premises.  Tai Wing and Tai Chi further alleged there was another oral agreement after the 2007 Share Transfer which is set out below.  Anyway, the fact remained that Tai Wing had moved out of his office at Unit 16G after the 2007 Share Transfers.  Further, after the 2007 Share Transfers, the expenses of Unit 16G, such as rates and government rent, management fees, electricity bills, maintenance and repairs (“Related Expenses”) had been paid by Chong Sang/CS Camp from July 2007 onwards[127].

242.  In my view had there be no agreement on the part of Tai Wing to the terms of the 2^nd Agreement and the 1^st Addendum, and had there been only 2007 Share Transfers and/or the Final Agreement as alleged by Tai Wing/Tse’s Brothers, this would mean that Chong Sang had transferred out all his shares in Tse’s Brothers and all assets held by Tse’s Brothers.  If this was the case, there would not have been any need for Tai Wing to request Tai Chi for the sale of Unit 16G in about 2010 and then for the distribution of the proceeds to be dealt with by Tai Chi as seen in 15/12 Fax.

(iii) The 08.06.12 Fax, (iv) 11.06.12 Memorandum, and (v) 01.07.12 Memorandum

243.  It was clear from the 08.06.12 Fax that Tai Chi had acknowledged to Chong Sang that Unit 16G was 50/50 between Chong Sang and Tai Wing, and further in the 11.06.12 Memorandum, Tai Chi had explained further, he said again that Unit 16G belonged to his two brothers jointly.

244.  When being cross examined, Tai Chi had tried to explain that what he said in the 08.06.12 Fax about Unit 16G being 50/50 was not correct and that he had sent another fax to Chong Sang on 15 June 2012[128] which had omitted the reference to Unit 16G being 50/50. 

245.  Chong Sang said he never received the above fax.  There was no fax header indicating when this fax was sent.  Whether Tai Chi had sent this fax or not, he was trying to retract what he had earlier said in the 08.06.12 Fax about Unit 16G being 50/50, but instead of stating openly and clarifying that he made a mistake, it would appear that he went about it in a rather indirect manner, namely by sending the same fax again with certain words omitted and not drawing the same to the recipient’s attention.  

246.  In any event, Tai Chi had acknowledged it again in the 11.06.12 Memorandum that Unit 16G was jointly owned by his brothers. When this was pointed out to him, Tai Chi tried to explain that when he made the reference to Unit 16G being jointly owned by his two brothers, he was referring to the time in June 2006. 

247.  Tai Chi’s explanation and/or evidence did not seem to make sense.  In my view, what he had stated in the 08.06.12 Fax and the 11.06.12 Memorandum clearly indicated that, as decided by Tai Chi, Unit 16G was “carved out” as it was 50/50.

248.  As for the 01.07.12 Memorandum[129], Tai Wing was making certain points to Tai Chi amongst which he had mentioned that 100% of Unit 16G was to be returned to him, it would appear the percentage “100%” had been amended and that originally, it was “50%”.  On the version which Tai Chi then sent to Chong Sang, Tai Chi had written a note thereon to the effect that Tai Wing was seeking an equal division of the “remaining” landed properties and assets and Tai Chi was asking Chong Sang’s comments[130].  It was clear from that memorandum that Unit 16G was part of the “remaining” landed properties.

249.  Tai Wing and Tai Chi had referred to a note sent by Chong Sang to Tai Chi dated 25 June 2012[131]. In this note, Chong Sang had thanked Tai Chi for arranging the 2007 Share Transfers and that he had brought Kwong Hon along to seek the opinion from Mr Tai so that he could follow up on the properties of the companies and that there were no other disputes.  He went on to say that as Tai Chi had told him that what was written previously was to be cancelled, there would be no further need for Tai Chi to write any more.   

250.  Chong Sang had explained that he wrote the above after receiving the WP Letter and he had attended Tai Chi’s office to confront him, but Tai Chi told him all the agreements previously written by him had been cancelled, and out of anger Chong Sang had then sent his fax on 25 June 2012 in a cynical manner quoting what Tai Chi himself had said and asked him not to write any more. 

251.  At the time when the WP Letter was sent, the 5 year period stated in the 2^nd Agreement had already elapsed, and it was also over 5 months after the deadline of 31 December 2011 stated in the 1^st Addendum.  By then there was hostility between the two brothers and they were heading towards litigation, and if there had been any discussion in relation to the occupation of the No 21 Factory and No 22 Factory, such discussion clearly had not brought about any resolution and both those factories appeared to have been occupied by TW Camp.  Chong Sang’s fax was thus sent under such circumstances, and in my view, the most it would show was that he was resigning to the fact that whatever agreements written out by Tai Chi were considered cancelled by then and the fax further indicated that he/or his son would follow up on the matter of the properties of the companies. This however did not mean that Chong Sang and Tai Wing had not agreed to those agreements in the first place.   

(vi) The oral admissions

252.  Chong Sang had also relied on oral admissions by Tai Chi during a family gathering on around 23 June 2012, and the oral admissions by Tai Wing, during the meeting on around at7 July 2012.

253.  On around 23 June 2012, there was a family gathering organized by Tai Chi and him and other family members for paying respect to Mother’s memorial tablet at the Broadcast Drive Home and on this occasion, Kwong Hon had a conversation with Tai Chi. According to Kwong Hon, Tai Chi had orally admitted that Kinghall and Skygift should pay the whole of the rent first and that half of the rent would be returned to Chong Sang after one year, namely that the rent would be equally distributed between Chong Sang and Tai Wing.  Tai Chi said he had no recollection of this conversation.

254.  As for the oral admissions on about 27 July 2012, as mentioned earlier, these were recorded and as seen from the Transcript, Tai Wing had said he was reneging on what he had agreed in relation to Unit 16G.

255.  Having considered all the above, I find that not only was Tai Wing fully aware of what was written in the 2^nd Agreement and the 1^st Addendum, Tai Wing had at the time accepted and agreed to the terms written by Tai Chi in the 2^nd Agreement and the 1^st Addendum.

Oral Agreement and Final Agreement

256.  It was also Chong Sang’s further and/or alternative pleaded case that shortlybefore the meeting with Mr Tai for the signing of the transfer documents, an oral agreement was reached between all the then shareholders and directors of Tse’s Brothers, namely Chong Sang and Tai Wing (acting through Tai Chi) which was also binding on Tse’s Brothers under the Duomatic principle, whereby it was confirmed and agreed that Unit 16G was owned by Chong Sang and Tai Wing equally and hence held on trust by Tse’s Brothers accordingly) and would be used by Chong Sang or such persons nominated by him on a rent-free basis for as long as the No 21 Factory was used by Tai Wing or such persons nominated by him on a rent-free basis pending resolution as to the entitlement to the right to use the No 21 Factory on or after 31 December 2011[132].

257.  On the other hand, Tse’s Brothers/Tai Wing had pleaded that in around May 2007 the three brothers attended a meeting at Mr Tai’s firm for further discussion with an aim to giving instructions, if necessary, to Mr Tai for preparing further legal documents including the minutes of the board of directors to execute the 2007 Share Transfers and that Mr Tai had advised that upon transfer of the shareholdings in a company, the holding assets of the company would be transferred at the same time and that he was unable to assist regarding the transfer of assets in the Mainland. 

258.  Tse’s Brothers/Tai Wing then pleaded that notwithstanding this, the Final Agreement was reached between Tai Wing and Chong Sang that  Chong Sang’s shareholdings in Tse’s Brothers and Double Faith together with their respective holding assets in Hong Kong including Unit 16G be transferred to Tai Chi as nominee of Tai Wing; and Tai Wing’s shareholdings in Kinghall and Shinwoo together with their respective holding assets in Hong Kong be transferred to the children of Chong Sang and that ownership of the holding assets of the 4 Companies in the Mainland should be negotiated in future. 

259.  As I have said earlier, I do not find that there was sufficient evidence that Mr Tai had advised all the three brothers in a meeting that upon the transfer of the shareholdings in a company the holding assets would be transferred as well, as Mr Tai did not recall that Tai Wing and Chong Sang had ever attended a meeting at the same time with him.  It was Mr Tai’s evidence that he was not present at the signing of the transfer documents.

260.  The Mainland assets were either held by Kinghall or by Double Faith (DHY (SZ)).  Tai Wing’s case in relation to the Final Agreement would mean that all the Mainland assets were to be “carved out”.  Tai Wing’s case throughout was that he was not bound by the 3 Disputed Agreements as there was nothing signed by him.  This being his case, then one would have thought he would have made sure that the Final Agreement would be reduced in writing and signed by him and Chong Sang prior to the 2007 Share Transfers.  Further, as Tai Chi had been authorised by Chong Sang and him under the Share Distribution Agreement to deal with the division, Tai Wing could also have asked Tai Chi to write out the Final Agreement for Chong Sang and him to sign.  If the Final Agreement was indeed reached during the meeting at Mr Tai’s office, he could have asked Mr Tai to prepare something in writing then and there for him and Chong Sang to sign.

261.  In fact, Double Faith did not own any properties in Hong Kong and it held DHY (SZ) /Loudspeaker Business, and also a 50 year lease for the land where the Long Tin Factory stood.  If according to Tai Wing, the Final Agreement was to deal with the Hong Kong properties only, there was no need to execute any share transfers in respect of Double Faith since Tai Wing’s position was that the Mainland assets were to be separately negotiated.

262.  In any event, Chong Sang had said during the trial when he went to sign the transfer documents at Mr Tai’s firm, he did not speak to Tai Wing at all.  Tai Wing had also said that as the time of signing, he did not discuss with Chong Sang any matters regarding the division.

263.  Having considered all the above, I do not find there was any sufficient evidence that there was the Final Agreement reached between Tai Wing and Chong Sang.

264.  As for the Oral Agreement alleged by Chong Sang, it was Chong Sang’s evidence in his 1^st witness statement that the agreement was reached between him and Tai Wing (through Tai Chi) shortly before the meeting with Mr Tai and during the trial he had said it was right before going up to Mr Tai’s office.  It was Kwong Hon’s evidence that on the way to Mr Tai’s office for signing of documents, he and his father Chong Sang met Tai Wing who happened to be in the same MTR train but there was no exchange between them.  Mr Yuen submitted that it was not probable that Chong Sang would enter into an oral agreement with Tai Chi without engaging Tai Wing.

265.  Throughout, it was Chong Sang’s case that he only communicated with Tai Chi after the two faxes he sent to Tai Wing in March/April 2006.  That there was no exchange between Chong Sang and Tai Wing was consistent with Chong Sang’s case that he had no communications with Tai Wing.

266.  It was not disputed that Unit 16G had been occupied by Chong Sang/CS Camp without any interference or disruption since around 2007 up until at least 2 June 2012 (date of WP Letter) and that there had been no demand for vacant possession or rent by Tse’s Brothers since around 2007 up to at least 2 June 2012.  It was also not disputed that No 21 Factory had been used by Tai Wing on a rent-free basis since around 2007 up to at least 31 August 2012 (when Chong Sang demanded him to vacate) and Tai Wing/TW Camp had continued to occupy No 21 Factory on a rent-free basis until as ordered by the Long Gang People’s Court pursuant to the 570/15 Decision. Further, there was an admission in a letter dated 20 July 2012 from TW Camps’ solicitors[133] that Kinghall and Skygift was previously granted a licence to remain in occupation of Unit 16G rent free.

267.  The above were consistent with Chong Sang’s case of there having been the Oral Agreement.  I accept his case and found that there was the Oral Agreement as pleaded by Chong Sang.  

Mediated Agreement

268.  It was also Tai Wing’s/Tse’s Brothers’ case that after the Final Agreement, Chong Sang kept spreading the allegation among family members and relatives that the value of the assets distributed to him according to the Share Distribution Agreement and the Final Agreement was less than the value of the assets distributed to Tai Wing, the Mother had asked Tai Chi to mediate again. During the mediation, Chong Sang requested to occupy Unit 16G and that in order to comfort as well as ease the worries of their aged and bed-ridden Mother, Tai Wing had no alternative but to adopt a temporary measure of allowing Chong Sang to occupy Unit 16G on conditions that (i) Chong Sang to pay the Related Expenses and (ii) Tai Wing/Tse’s Brothers was entitled to demand vacant possession any time they think fit[134].  Further, during that mediation, Chong Sang requested to occupy part of No 22 Factory and No 1151 Factory and to use the machines and stock inventory on a rent free basis, to which Tai Wing all agreed.

269.  As said earlier, throughout, Tai Wing’s case was that he was not bound by the 3 Disputed Agreements as there was nothing signed by him, if there was indeed the Mediated Agreement, then he and Tai Chi should have prepared a written agreement for Chong Sang to sign.  There was nothing. I find there was no sufficient evidence of the Mediated Agreement as alleged by Tai Chi and Tai Wing.  

証明協議書/ Certificate of Agreement

270.  Tai Wing’s case was that in about 2007 or 2008 and probably after the Mediated Agreement was reached that Chong Sang had by telephone called him to tell him that he did not want either No 21 Factory or No 22 Factory and that an agreement titled証明協議書was left at Broadcast Drive Home whereby Chong Sang/Kinghall agreed therein that both No 21 Factory and No 22 Factory belonged to Tai Wing ( “Certificate of Agreement”)[135].  

271.  The above document was said to be found by Tai Wing in 2014 and Tai Wing had produced it in defending Kinghall’s 2015 claim in the Mainland Litigations.  The document was purported to be issued by Kinghall to the Villagers Committee of Sha Tin and was undated.  It had referred to the Co-operation Agreement, and stated that although Party B in the Co-operation Agreement was Tai Wing and Kinghall, but the actual party was Tai Wing and that the right to occupy the 2^nd Shenzhen Land should belong to Tai Wing, and as the factories on the 2^nd Shenzhen Land was built at the expense of Tai Wing, the right to occupy the factories (both No 21 Factory and No 22 Factory) should belong to Tai Wing and that it had nothing to do with Kinghall or Kinghall Mainland Company.  The right to occupy the factory built by Kinghall Mainland Company on the 1^st Shenzhen Land (No 1151 Factory) should belong to Chong Sang.  As for the machinery of Kinghall Mainland Company, 50% belong to Tai Wing but lent for the use of Kinghall Mainland Company, but all rights should belong to Tai Wing.

272.  The authenticity of the Certificate of Agreement was disputed and Chong Sang had reported the matter to the police.  The document was disclosed by Chong Sang in the present actions.  Although Mr Yuen later informed this Court that Tai Wing no longer intended to rely on this document, this was a document Tai Wing had produced in the Mainland Litigations and Chong Sang was also cross examined on it by Mr Yuen.  I am of the view that even though Tai Wing no longer relied on it, Mr Suen was entitled to cross examine him on this document as this was a matter which would go towards Tai Wing’s credibility.

273.  Having regard to his evidence, I have to say Tai Wing’s evidence about this document was not credible at all for reasons including the following:

(i)  He did not go to look for it until 2014 notwithstanding his evidence was that Chong Sang had told him in 2007/2008, and notwithstanding litigations in both Hong Kong and Mainland had started in 2012;

(ii)  He did not mention it in his pleadings in the present actions, and his explanation during the trial was that it was irrelevant;

(iii)  He never mentioned in his witness statement that it was Chong Sang who did not want the 2^nd Shenzhen Land or No 21 Factory and No 22 Factory, nor did he mention the document in his witness statement, and in fact his evidence in his witness statement was quite inconsistent with there having been the alleged Certificate of Agreement[136];

(iv)  Under cross examination, he had said according to the 2007 agreement, No 22 Factory belonged to him, but he would “lend” it to Chong Sang to use.  When asked by this Court which agreement, he referred to the Certificate of Agreement, but there was no mention of any lending of No 22 Factory to Chong Sang in the Certificate of Agreement, and all it stated was that “lending” 50% of the machinery to Kinghall Mainland Company;

(v)  He only produced the document for the first time in Kinghall’s 2015 claim in the Mainland Litigations and that he did not even produced it in the earlier 2013 claim in the Mainland and further his own case in the Mainland Litigations was also inconsistent.

274.  The authenticity of the Certificate of Agreement was hotly disputed in the 2015 claim, and there had been a forensic examination ordered by the Mainland Court, which was inconclusive as Kinghall’s chop thereon was the same as used by Kinghall in July 2003, but not the same as the one in 2008 or 2015. 

275.  Notwithstanding the above, I do not find it probable that Kinghall or Chong Sang had ever issued the Certificate of Agreement or that Chong Sang had ever agreed to give up the 2^nd Shenzhen Land or both No 21 Factory and No 22 Factory to Tai Wing.  In particular, it was not disputed that Tai Wing had delivered up vacant possession of the Cloth Factory to Chong Sang/Kinghall and that the evidence showed that after the Cloth Factory was vacated in 2007/2008, Kinghall had constructed a new 4 floor factory on No 22 Land.

276.  Although there was no ruling on the authenticity of the Certificate of Agreement in the 570/15 Decision, the Mainland Court found that Tai Wing did not produce sufficient evidence that the right to occupy No 21 Factory and No 22 Factory had belonged to him, and therefore the Court ruled in favour of Kinghall and ordered Tai Wing to deliver up both factories to Kinghall together with paying compensation.

My views on Issue (3)

277.  To sum up and as said earlier, I find that Tai Wing was fully aware of what was written in the 3 Disputed Agreements and had at the time accepted and agreed to what was written therein, even though there was no written or formal agreement signed by both Chong Sang and Tai Wing.  I find that the 4 Agreements formed part and parcel of the Composite Agreement as pleaded. I also find that there was the Oral Agreement between Chong Sang and Tai Wing.  I find there was no Final Agreement or the Mediated Agreement, or Certificate of Agreement, as alleged by Tai Wing and/or Tai Chi.

278.  The present actions were not over whether the Composite Agreement and/or the Oral Agreement was enforceable. Neither side was seeking any specific performance or damages for breach of contract. The issue was whether there was any agreement that had affected the beneficial interest of Unit 16G or the Trust.

279.  In light of my findings on the agreements, I am of the view that “carving out” of Unit 16G as stated in the 2^nd Agreement and the 1^st Addendum and confirmed by the Oral Agreement was consistent with Chong Sang’s case that he and Tai Wing had remained beneficial owners throughout since Tse’s Brothers became registered owner.  Further, as I have found that there was no Final Agreement, the 2007 Share Transfers was subject to the joint ownership of Chong Sang and Tai Wing, and that the joint ownership of Chong Sang and Tai Wing did not come to a halt at the time of the 2007 Share Transfers as alleged by Tai Wing/Tse’s Brothers.

280.  In light of the Oral Agreement, Chong Sang or his nominees was entitled to occupy Unit 16G on a rent-free basis for as long as No 21 Factory was used by Tai Wing or his nominees on a rent-free basis. 

Issue (4) – proprietary estoppel

281.  It was also Chong Sang’s further and/or alternative pleaded case that the 2^nd Agreement, the 1^st Addendum and the Oral Agreement constituted a representation by Tse’s Brothers (“Representation”)[137] as follows :

(i)  Unit 16G was owned by Chong Sang and Tai Wing equally and/or held by Tse’s Brothers on trust for Chong Sang and Tai Wing equally;

(ii)  Unit 16G would be used by Chong Sang or such other person nominated by him on a rent-free basis for as long as the No 21 Factory was used by Tai Wing or such other person nominated by him on a rent-free basis.

282.  It was further pleaded by Chong Sang that, Kinghall and Skygift occupied Unit 16G since around 2007 and Tse’s Brothers never demanded them to vacate Unit 16G or any payment of rent for a period of 5 years up to 2 June 2012 and thus Tse’s Brothers so conducted itself between 2007 and 2012 which led Chong Sang to believe that Tse’s Brothers had admitted Kinghall’s and Skygift’s right to occupy Unit 16G pursuant to the 2^nd Agreement, the 1^st Addendum, the Oral Agreement and/or the Representation (“Further Representation”)[138].

283.  Chong Sang also pleaded that he had relied on the Oral Agreement, the Representation and/or the Further Representation to his detriment including the following:

(i)  Having transferred his shareholding in Tse’s Brothers to Tai Chi;

(ii)  Having procured Kinghall to allow Tai Wing or his nominee to use the No 21 Factory on a rent-free basis since around 2007 up to the present;

(iii)  Having procured Kinghall and Skygift to incur the Related Expenses.

284.  Thus, it was Chong Sang’s pleaded case that Tse’s Brothers was estopped and precluded from denying his right and entitlement to 50% of the beneficial interest in Unit 16G. 

285.  There were no further submissions made by Mr Suen in his Closing Submissions.  However, in light of my earlier findings on the Trust, the 4 Agreements and also the Oral Agreements and in light of the faxes and memoranda and various matters mentioned earlier, I find that there had been Representation and Further Representation on the part of Tse’s Brothers through Tai Chi and Tai Wing and I further accept Chong Sang’s evidence that he and persons nominated by him had acted in reliance upon the Representation and the Further Representation to their detriment and that Tse’s Brothers was estopped and precluded from denying Chong Sang’s right and entitlement to 50% of the beneficial interest in Unit 16G.

Conclusion

286.  Having regard to all the above, I am prepared to make a declaration that Tse’s Brothers has since 9 March 1995 held and still holds one equal half share of the beneficial interest in Unit 16G in trust for Chong Sang.

287.  Further, I am prepared to make a declaration that Chong Sang or such persons nominated by him were entitled and/or were authorised to occupy Unit 16G on a rent-free basis for as long as the No 21 Factory was used by Tai Wing or persons nominated by him on a rent-free basis, subject to Chong Sang paying all the Related Expenses.

288.  As said earlier, pursuant to the 570/15 Decision, the Long Gang People’s Court has ordered Tai Wing to deliver up and return both No 21 Factory and No 22 Factory to Kinghall and to pay compensation to Kinghall calculated by reference to rent from the tenants as from January 2013 onwards.

289.  In other words, as from January 2013 onwards, Tai Wing’s occupation of the factories on a rent-free basis had ended.  This would mean that the arrangement under the Oral Agreement was brought to an end by January 2013.  As Chong Sang is only 50% owner of Unit 16G, I am of the view that he will have to pay 50% of the mesne profits to Tai Wing/Tse’s Brothers, and 50% of the Related Expenses as from January 2013 onwards.   

290.  The mesne profits have been agreed to be HK$29,000 per month as from 1 August 2012[139]. I will leave the parties to work out the calculations and to submit a draft order for my approval.

291.  Finally, in light of the above, and save as ordered above, I dismiss all Tse’s Brother’s claims against Kinghall and Skygift in the 1^st Action and all the counterclaims of Tse’s Brothers and Tai Wing in the 2^nd Action.

292.  As for costs, Chong Sang/Kinghall/Skygift are overall the successful parties in the 1^st Action and also the 2^nd Action.  I therefore order Tse’s Brothers to pay the costs of Kinghall and Skygift of the 1^st Action, and Tse’s Brothers and Tai Wing to pay jointly and severally the costs of Chong Sang in the 2^nd Action.  This is an order nisi which will be made final after 21 days.