ZHANG JIZHI v. HONG KONG TV INTERNATIONAL MEDIA GROUP LTD AND ANOTHER

HCA 624/2019

[2022] HKCFI 308

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 624 OF 2019

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J U D G M E N T

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I.  INTRODUCTION

1.  The 1^st defendant (“D1”), a licensed broadcasting non-domestic television programme service provider, was a Hong Kong company incorporated on 19 December 2008. The 2^nd defendant (“D2”)  was (a)  a director of D1 from 18 November 2009 to 25 August 2018, and (b)  a shareholder of D1 currently holding about 23.12% shareholding.[1] In 2018, D2 changed his name from Gao Hongxing (高洪星)  to Ko Hong Sing (高宏興).

2.  The disputed contract was a written Chinese 投資入股協議書 dated 19 April 2016 (“Agreement”). It was common ground that the plaintiff (“P”)  was a contracting party (ie Party B (乙方))  to the Agreement. The identity(ies)  of the other contracting party (ie Party A (甲方))  was/were in dispute. For convenience, the relevant express terms of the Agreement are set out in the schedule to this judgment (“Schedule”), and I adopt the abbreviations used in the Schedule.

II.  P’s CLAIM

3.  P claimed that on 19 April 2016 (a)  D2 on behalf of D1 and himself (as representative shareholder and chairman of the board of directors of D1 (“D1 Board”))  and (b)  P entered into the Agreement by which P agreed to acquire 4,632,200 shares of D1 (“Shares”)  at a consideration of HK$11,904,754. P relied on inter alia Recitals 1-2, Clause 1(2), Clause 2(2), Clause 3, Clause 4(1)(1), Clause 5(2), Clause 6 and Clause 9.

4.  From 28 April to 18 May 2016, P made 12 payments to D1 in the total sum of HK$11,904,754 (“Sum”)  for acquiring the Shares pursuant to the Agreement. On 18 May 2016, D1 issued a receipt to P to acknowledge receipt of the Sum (“Receipt”).

5.  P’s Statement of Claim claimed that in breach of the Agreement neither D1 nor D2 allotted or transferred the Shares or any shares in D1 to P at all. On 8 January 2019, P by his then solicitors issued a statutory demand against D1 alleging a debt of HK$11,904,754 that D1 owed P.[2] By a letter dated 23 January 2019 from D1’s solicitors to P’s then solicitors (“23/1/19 Letter”), D1 denied it was party to the Agreement and claimed the statutory demand was inappropriate:

“2. First and foremost, [D1] disputes that it is a party to the Agreement. The Agreement was entered into between 2 parties, namely [D2], being the representative of the shareholders of [D1] (as Party A)  and [P] (as Party B);

3. Your attention is drawn to, inter alia, clauses 1(2), 2(5), 2(6), 2(7)  and 9 which set out the true nature of the Agreement is one of a shareholders’ agreement for the transfer of shares between shareholders of [D1];

4. [D1] is not a party to the Agreement and therefore is not bound by its terms;

5. Further, clause 5 is a term of default. Even if [D1] is a party to the Agreement (which is denied), the liability and quantum of the damages under clause 5 are disputed;

……”

P’s solicitors by their letter dated 5 March 2019 (a)  accepted wrongful repudiation by D1 and D2 (collectively, “Ds”), (b)  terminated the Agreement, and (c)  demanded repayment of the Sum (“5/3/19 Letter”):

“3. In breach of the Agreement, [Ds’] have never allotted or transferred any Shares to [P].

4. By the letter from the solicitors of [D1], LCP Lawyers to [P] dated 23 January 2019, [D1] denied that it is a party to the Agreement.

5. By [Ds’] conduct referred to in paragraphs 3 and 4, both of [Ds] have evinced an intention no longer to be bound by the Agreement and both of [Ds] have wrongfully repudiated the same. On behalf of [P], we hereby give [Ds] formal notice that [Ds’] wrongful repudiation of the Agreement is hereby accepted and the Agreement is hereby terminated forthwith.

……”

P claimed Ds wrongfully failed/refused to return the Sum or any part thereof, so he was entitled to claim against Ds for breach of the Agreement (but without mention in the 5/3/19 Letter of any claim for breach of trust and/or for restitution).

6.  P claimed that further or alternatively, even if D1 were not party to the Agreement (which P denied), and without prejudice to the above matters, D1 still held the Sum received from P as a constructive/ resulting trustee for P on proprietary basis, which funds remained as P’s funds in D1’s hands. But this cause of action did not feature in the applications before this court, so I do not elaborate further on the same.

7.  Further or alternatively, P claimed D1 and/or D2 were enriched by receipt of the Sum, which constituted unjust enrichment at P’s expense. P further claimed retention of the Sum by D1 and/or D2 was unjust in that (a)  neither had any right to the Sum or part thereof following termination of the Agreement, and (b)  consideration for payment of the Sum had wholly failed or alternatively Ds had had/ received the Sum to P’s use, so (c)  P was entitled to return/restitution of the entire Sum and any interest thereon, but Ds wrongfully failed/refused to repay the Sum or any part thereof to P.

8.  Thus, on 9 April 2019, P issued the Writ of Summons herein claiming:

(a)	against D1 for (i)  a declaration that D1 held the Sum as constructive/resulting trustee for P, and (ii)  an account to P in respect of the Sum;
(b)	against Ds for (i)  the sum of HK$11,904,754, (ii)  further/ alternatively, damages, restitution and/or equitable compensation, and (iii)  interest and costs.

III.  D1’s DEFENCE AND P’s REPLY

9.  On 28 June 2019, D1 filed its Defence that denied (a)  D2 on its behalf entered into the Agreement with P and/or (b)  it was party to the Agreement. D1 claimed the Agreement was entered into between (i)  D2 as representative of the then existing shareholders of 香港衛視 (“HKTV”)  as Party A (甲方)  and (ii)  P as Party B (乙方). D1 referred to the Recital Preamble in which (1)  D1 was specifically defined as HKTV and not referred to as Party A, and (2)  the Agreement was stated to be between Party A and Party B on a voluntary, fair and just basis as to the matter of investing in HKTV.

10.  D1 relied on the Recital Preamble, Clause 1(2), Clause 2(1), Clause 2(5)-(8), Clause 4(3)(1)  and Clause 9 to aver that (a)  the Agreement was executed by D2 as representative of the then existing shareholders of D1/HKTV, (b)  D1 did not execute the Agreement or authorise D2 to execute the Agreement on its behalf, and (c)  D1 was not Party A or party to the Agreement, which agreement was a shareholders’ agreement entered into between the then existing shareholders of D1 through D2 as their representative on the one part and P as the intended new shareholder of D1 on the other part. Consequently, D1 pleaded it (i)  did not agree to any clause of the Agreement, and (ii)  was not bound by the terms of the Agreement, which terms were not applicable to or enforceable against it. D1 also denied any breach of the Agreement, and further denied P was entitled to claim against it for breach of the Agreement.

11.  D1 admitted the matters in paragraph 4 above, and averred (a)  P made payments in respect of the Sum to D2 as representative of the then existing shareholders of D1/HKTV being Party A of the Agreement, (b)  D1 received such payments on behalf of D2 and/or D1’s/HKTV’s then existing shareholders, and (c)  the Sum was subsequently transferred by D1 and/or through D1’s agent/nominee to D2’s assistant/servant/agent Zheng Hao Yun (“Zheng”)  on behalf of D2 by 6 transfers of HK$2,000,000 each on 17 May, 2 June, 15 June, 7 July, 11 July and 11 July 2016 (“Transfers”), which transfers were approved by D2 in his capacity as the chairman of D1, so at all material times D1 did not retain, it had not retained and it no longer held the Sum in its bank account. Thus, D1 denied any constructive/resulting trust.

12.  D1 also denied any unjust enrichment, and specifically denied it retained the Sum (see paragraph 11(a)-(c)  above). Without prejudice to its denial of P’s claim, D1 (insofar as necessary)  would rely on the defence of change of position:

(a)	D1 received the Sum on behalf of D2 without knowledge of any alleged breach or wrong (if any)  on the part of D2 or any parties involved;
(b)	D1 changed its position bona fide by subsequent Transfers of the Sum between 17 May and 11 July 2016 to Zheng on behalf of D2, which Transfers were approved solely by D2 in his capacity as the chairman of D1;
(c)	in the circumstances it would be inequitable to require D1 to make restitution, whether in full or in part.

13.  In his Reply to D1’s Defence filed on 23 September 2019, P claimed that even though D1 was defined as HKTV (香港衛視)  in the Recital Preamble rather than as Party A in the Agreement, it was not inconsistent with P’s case that D2 on behalf of himself and D1 entered into the Agreement. At the execution page of the Agreement, it was stated inter alia 甲方:  香港衛視國際傳媒集團有限公司 (蓋章)  股東代表: (簽字), and the affixation of D1’s company “seal” along with the signature of D2 as representative shareholder signified both D1 and D2 entered into the Agreement with P.

14.  P averred the Sum was paid to D1 for Party A pursuant to the Agreement, which did not have any provision (a)  stating D1 was to receive the Sum on behalf of D2 and/or the then existing shareholders of D1 and/or (b)  requiring D1 and/or its agent/nominee to transfer the Sum to D2 and/or any other persons. Further, on 18 May 2016, D1 acknowledged receipt of the Sum by issuing the Receipt to P. P claimed he had no knowledge of the alleged Transfers of the Sum to Zheng, and to his understanding Zheng was merely secretary to the D1 Board responsible for handling shareholders’ relationship. Still further, the total sum of the Transfers allegedly transferred by D1 and/or through its agent/ nominee to Zheng was HK$12,000,000, which was more than the Sum (HK$11,904,754)  P paid to D1. P claimed that in any event the alleged Transfers by D1 and/or through its alleged agent/nominee to Zheng had no effect on D1’s obligations under the Agreement.

IV.  D2’s DEFENCE AND P’s REPLY

15.  On 24 July 2019, D2 filed his Defence. D2 denied he was party to the Agreement:

(a)	the Agreement was prepared by D1’s administrative staff and not by any qualified lawyer or legally qualified person;
(b)	at the execution page of the Agreement, the 2 parties were expressly identified as D1 being Party A (甲方)  and P being Party B (乙方);
(c)	D1’s company “seal” was affixed at the signature space for Party A (甲方);
(d)	D2 signed the Agreement below D1’s company “seal” as representative of D1 and not in any personal capacity;
(e)	as P himself pleaded, the Agreement was for subscription of shares in D1;[3]
(f)	at the material time of the Agreement and as expressly mentioned in discussions/negotiations between P and D2 (acting on behalf of D1)  leading up to the Agreement, D1 was engaged in a re-financing exercise whereby it was repurchasing the shares of some of its existing shareholders (“Repurchased Shares”);
(g)	the substantive terms of the Agreement reflected that the contracting parties were D1 and P only, and there were no terms that provided for rights/duties of D2 in his personal capacity.

16.  Further, D2 claimed that pursuant to the terms of the Agreement he did not receive any funds/benefit in his personal capacity, especially in view of the following clauses of the Agreement:

(a)	Clause 1(2)  provided that P would be subscribing for shares of D1, which shares were to originate from allotment by D1 or “transfer from existing shareholders” [4] (that in the context referred to the Repurchased Shares);
(b)	Clause 3 provided that monies payable by P were to be paid into the bank account of D1 or a bank account designated by D1, and a HK$ bank account of D1 and a RMB bank account of an associated PRC company were specifically identified;
(c)	Clause 2(9)  made clear Party A was D1 by providing that “if Party A’s main body or associated subsidiary failed to list within 2 years, the shares [purchased by P] would be repurchased with interest at the deposit rate of Hong Kong banks”;
(d)	Clause 6 provided that the Agreement would come into effect upon the parties affixing a “seal” or upon signing by an authorised representative.

17.  D2 averred the Sum was fully received by D1 and not by him. D2 claimed that as a non-party to the Agreement he could not have breached and he did not breach the Agreement. D2 further claimed that by 23 January 2019 he was no longer a director of D1 and was not privy to D1’s day-to-day affairs, so he did not know about the 23/1/19 Letter.

18.  D2 averred that P’s pleas as to constructive/resulting trust did not concern him, but he denied P’s pleas as to unjust enrichment as P paid the Sum to D1 and at no time was he ever in receipt of the Sum, so he was never enriched at P’s expense and could not be held liable to make restitution.

19.  In P’s Reply to D2’s Defence filed on 23 September 2019, P averred that both Ds were identified as Party A at the execution page of the Agreement, ie 甲方: 香港衛視國際傳媒集團有限公司 (蓋章)  股東代表:  (簽字). P noted that D1’s company “seal” was affixed at the execution page of the Agreement, and averred that D2 entered into the Agreement on behalf of himself and D1 as Party A.

V.  PROCEDURAL HISTORY

20.  Pursuant to P’s summons filed on 5 August 2019 and a Consent Summons filed on 23 August 2019 (collectively, “Discovery Summonses”), Master H Au-Yeung granted an order by consent dated 28 August 2019 (“Discovery Order”)  that D1 do on/before 25 September 2019:

(a)	file and serve an affirmation, stating whether it had or had at any time had in its possession, custody or power any of the documents or class(es)  of documents specified/indicated under the schedule thereto, and if such documents had been but were not in its possession, custody or power, stating when it parted with the same and what had become of the same;
(b)	if D1 had in its possession, custody or power any of the documents or class(es)  of documents specified/indicated under the schedule thereto, produce to P true copies of such documents.

21.  The categories of documents set out in the schedule to the Discovery Summonses were:

(a)	all relevant documents relating to the 6 Transfers of the Sum, including but not limited to bank statements of the relevant account(s)  evidencing receipt of the Sum and the Transfers;
(b)	all relevant documents relating to the alleged capacity of Zheng as the assistant/servant/agent of D2;
(c)	all relevant documents relating to the Debit Advice (reference no.: “6xxxxxxx6”)  concerning the transfer of HK$2,000,000 from account no “0xx-xxx-xxxxxxxx0” held by Hong Kong TV International Energy Group Limited (“HKTVEG”), including but not limited to (i)  documents showing the relationship between HKTVEG and D1, and (ii)  documents showing such sum of HK$2,000,000 represented P’s funds.

22.  On 9 October 2019, D1 filed the affirmation of Yang Zhang (secretary of the D1 Board, “Yang”)  pursuant to the Discovery Order (“Yang 1^st Aff”), which disclosed documents referred to in paragraph 21(a), (b), and (c)(i)  above, and claimed D1 did not have the documents referred to in paragraph 21(c)(ii)  above.

23.  On 27 November 2019, P filed a summons to seek summary judgment against Ds (“O14 Summons”)  as follows:

(a)	as against D1, (i)  a declaration that D1 held the Sum (HK$11,904,754)  as constructive/resulting trustee for P, and (ii)  an account to P in respect of the Sum (HK$11,904,754);
(b)	as against Ds jointly and/or severally, (i)  the Sum (HK$11,904,754); (ii)  alternatively to (i)  above, such part of P’s claim for the Sum (HK$11,904,754), (iii)  further/alternatively, damages, restitution and/or equitable compensation, and (iv)  interest and costs.

24.  On the same day, P filed his 1^st affirmation in support of the O14 Summons (“P 1^st Aff”).

25.  On 11 December 2019, by consent Master Kot granted case management directions for the O14 Summons (“Kot Order”)  inter alia as follows:

(a)	leave be granted for Ds to file/serve their affirmations in opposition within 28 days from the date thereof;
(b)	leave be granted for P to file/serve his affirmation in reply, if so advised, within 21 days thereafter;
(c)	no further affirmation evidence shall be filed without leave of the court, and such application for leave, if any, shall be taken at least 21 days before the substantive hearing;
(d)	the O14 Summons be adjourned to a date to be fixed with 3 hours reserved.

26.  On 9 and 16 January 2020, D1 filed Yang’s 2^nd affirmation (“Yang 2^nd Aff”)  and D2 filed his own affirmation (“D2 1^st Aff”)  to oppose the O14 Summons. P prepared the affirmation of his solicitor Yuen Hoi Ying (“Yuen Aff”)  that exhibited P’s 2^nd affirmation. The Yuen Aff and the finalised/notarised version of P’s 2^nd affirmation (“P 2^nd Aff”)  were filed on 9 March 2020.

27.  The substantive hearing of the O14 Summons was scheduled to be heard by a master on 2 March 2020, but was adjourned due to public health considerations. It was eventually scheduled to be heard by Master Sabrina Ho (“Master”)  on 3 August 2020 (“Master Hearing”).

28.  On 23 July 2020, D1 filed a summons for leave to file the affirmation of its solicitor Wong Chi Man dated/affirmed on 21 July 2020 (“Wong Aff”)  notwithstanding the Kot Order (see paragraph 25(c)  above)  (“New Aff Summons”). The Wong Aff exhibited Yang’s 3^rd affirmation that had been affirmed/notarised on 16 July 2020 (“Yang 3^rd Aff”). The New Aff Summons was returnable before the Master at the Master Hearing.

29.  On 30 July 2020, P filed the affirmation of his solicitor Cheung Kwok Kit (“Cheung Aff”)  that exhibited P’s 3^rd affirmation signed/dated 29 July 2020 (but not yet affirmed/notarised)  to oppose the New Aff Summons (“P 3^rd Aff”). The P 3^rd Aff was finalised/notarised on 4 August 2020, and filed on 29 June 2021.

30.  At the Master Hearing on 3 August 2020, after hearing submissions by counsel for the parties, the Master:

(a)

dismissed D1’s New Aff Summons, and ordered D1 to pay costs of and incidental to such application to P to be taxed if not agreed (“New Aff Order”);

(b)

granted summary judgment in favour of P against D1 and D2 on the following terms: (i)  Ds do jointly and severally pay P damages for breach of the Agreement in the sum of HK$11,904,754, (ii)  alternatively, D1 do pay P restitution of the sum of HK$11,904,754 on the ground of unjust enrichment, (iii)  Ds do jointly and severally pay to P interest on the sum of HK$11,904,754 at prime rate plus 1% pa from 5 March 2019 to the date of judgment and thereafter at judgment rate until full payment, and (iv)  costs of the present action and of the O14 Summons (including any costs reserved)  be paid by Ds jointly and/or severally to P with certificate for one counsel to be taxed if not agreed (“O14 Judgment”).

31.  On 14 August 2020, D2 filed his Notice of Appeal against the O14 Judgment to seek the following reliefs on appeal: (a)  P’s O14 Summons against D2 be dismissed, (b)  costs of P’s O14 Summons be to D2 with certificate for one counsel, and (c)  costs of the appeal be paid by P to D2 (“D2 Appeal”).

32.  On 17 August 2020, D1 filed its Notice of Appeal against the New Aff Order and the O14 Judgment to seek the following reliefs on appeal: (a)  D1’s New Aff Summons for leave to file the Wong Aff be allowed, (b)  P’s O14 Summons against D1 be dismissed with costs of such application to D1, and (c)  costs of the appeal be paid by P to D1 (“D1 Appeal”).

33.  The D1/D2 Appeals (collectively, “Appeals”)  were scheduled to be heard by this court on 19 July 2021 (“Appeal Hearing”).

34.  On 3 September 2020, Master Winnie Tsui granted a garnishee order to show cause against China Construction Bank (Asia)  Corporation Limited (“CC Bank”)  over the judgment debt owed by D1 to P under the O14 Judgment (“Garnishee Order Nisi”). On 5 February 2021, Master Dick Ho adjourned the Garnishee Order Nisi to be heard at the same time as the Appeals, and extended the validity of the Garnishee Order Nisi to 19 July 2021 with costs reserved.

35.  On 13 January 2021, D2 filed a summons for (a)  leave to amend D2’s Defence as per the draft Amended Defence and Counterclaim annexed thereto (“Draft D2 AD&C”)  and to file such amended pleading within 7 days from the date of the order to be made, with (b)  liberty for P to consequentially amend his Reply and to file his Amended Reply and Defence to Counterclaim within 28 days, and (c)  costs of and occasioned by D2’s application be to P in any event (“D2 Amendment Summons”). On the same day, D2 filed his 2^nd affirmation to support the D2 Amendment Summons (“D2 2^nd Aff”).

36.  On 30 June 2021, D1 filed a summons for (a)  leave to amend D1’s Defence as per the draft Amended Defence annexed thereto and to file such amended pleading within 7 days from the date of the order to be made, with (b)  liberty for P to consequentially amend his Reply and to file his Amended Reply within 28 days, and (c)  costs of and occasioned by D1’s application be to P in any event (“D1 Amendment Summons”). But at the Appeal Hearing, Mr Khaw SC (and Mr Law with him), counsel for D1, handed up a revised draft Amended Defence. For the present purpose, I shall refer this draft as D1’s finalised draft Amended Defence (“Draft D1 AD”).

37.  At the Appeal Hearing, Mr Khaw SC and Mr Ho SC (and Mr Lau with him), counsel for P, agreed that the court could defer consideration of the Garnishee Order Nisi until after the disposal of the Appeals and the D1 / D2 Amendment Summonses, so I granted the following order:

(a)	the validity of the Garnishee Order Nisi be extended until further order of the court;
(b)	P or D1 be at liberty to restore the hearing of the Garnishee Order Nisi before a master within 14 days after the final disposal of the D1 Appeal;
(c)	costs be reserved.

38.  At the Appeal Hearing, upon hearing submissions by Mr Khaw SC, Mr Chain (and Ms Sat with him), counsel for D2, and Mr Ho SC, I (a)  decided to deal with the Wong / Yang 3^rd Affs (upon re-hearing of the New Aff Summons on the D1 Appeal against the New Aff Order – see paragraphs 28, 30(a)  and 32(a)  above), the Cheung / P 3^rd Affs (that P relied on to oppose the New Aff Summons – see paragraph 29 above)  as well as the Draft D1 AD and the Draft D2 AD&C (under the D1 and D2 Amendment Summonses)  on de bene esse basis, and (b)  urged counsel to rest their addresses for the D1/D2 Appeals firstly on the existing evidence/pleadings and then on the de bene esse materials because the admissibility or otherwise of the latter might have effect on the outcome of the Appeals, which in turn might have impact on the incidence of costs.

VI.  O14 SUMMONS – D1’s AFFIRMATION EVIDENCE

39.  D1’s affirmation evidence for opposing the O14 Summons was essentially the Yang 2^nd Aff. Yang claimed D1’s defence was two-fold, ie (a)  D1 was not party to the Agreement, and (b)  D1 received the Sum on behalf of D2 and/or the then shareholders of D1, which Sum was subsequently transferred from D1 to D2 through the latter’s servant/ agent/nominee.

40.  For (a)  above, Yang believed D1 was not Party A or party to the Agreement, which agreement was a shareholders’ agreement and/or a transfer of shares agreement entered into between the then existing shareholders of D1 through D2 on the one part and P as the intended new shareholder on the other part (as supported by the following terms in the Agreement), so Yang believed D1 was not bound by the terms of the Agreement and did not agree to any clause therein:

(a)	the Agreement was entered into between 2 parties, ie D2 as representative of the then existing shareholders of D1/HKTV being Party A (甲方)  and P being Party B (乙方);
(b)	in the Recital Preamble, D1 was specifically defined as HKTV (香港衛視)  and not Party A, and the Agreement was stated to be between Party A and Party B on a voluntary, fair and just basis in relation to the matter of investing in HKTV instead of subscribing for shares; [5]
(c)	by Clause 1(2), it was agreed that 4,632,200 Shares in D1/HKTV to be acquired by Party B would be transferred from the existing shareholders or through capital increase;
(d)	by Clause 2(1), Party A was to provide Party B information and introduction of D1’s/HKTV’s registration and/or licensing matter;
(e)	by Clause 2(5), P’s acquisition of the Shares was intended to be carried out by share transfer[6] which was chargeable with stamp duty (but subscription of shares[7] from D1 was not chargeable with stamp duty as evident from the Inland Revenue Department’s stamp duty rates table);
(f)	Clauses 2(6)-(8)  set out the rights of Party B as a shareholder;
(g)	Clause 4(3)(1)  reiterated that P’s acquisition of the shares was intended to be carried out by way of share transfer[8] in accordance with the relevant legal procedural requirements and regulations, and stated that Party A and Party B had already reached mutual understanding as to matters of investment, profitability, risk, vision and way of operation and management of D1/HKTV;
(h)	Clause 9 explicitly stated that the purpose of the Agreement was to set out and explain the rights and obligations amongst the shareholders of D1/HKTV;
(i)	the “Investment Agreements” were executed by D2 in his capacity as the representative of the then existing shareholders of D1/HKTV;
(j)	D1 did not execute the Agreement or authorise D2 to execute the Agreement on its behalf as alleged or at all.

41.  As further support for such defence, Yang pointed out D2 as transferor and P as transferee had in fact signed an Instrument of Transfer (“IoT”)  and Bought and Sold Notes (“B/S Notes”)  (collectively, “Transfer Documents”)  for 4,632,200 shares in D1 at the consideration of HK$11,904,750. Although the Transfer Documents were undated and D2’s/P’s signatures thereon were not witnessed, Yang claimed they showed both P and D2 knew/intended the Shares to be purchased and transferred from D2 (either in D2’s own capacity as owner of 23.12% shareholding in D1 or as representative of the then shareholders of D1)  to P. Yang said the Agreement was for the purpose of such share transfer between P and D2 instead of a share subscription from D1, who was simply not involved in such share transfer and not party to the Agreement.

42.  For (b)  above, Yang said D1 merely received the Sum (HK$11,904,754)  being consideration for the Shares on behalf of D2 and/ or the then shareholders of D1. Yang explained that shortly after receipt of the Sum it was transferred by D1 and through its agent/nominee HKTVEG to D2 through D2’s assistant/agent/nominee Zheng by way of the Transfers, ie (a)  5 Transfers of HK$2,000,000 each on 17 May, 2 June, 15 June, 7 July and 11 July 2016 from D1’s account no 1xxxxxx8 with CC Bank to Zheng,[9] and (b)  1 Transfer of HK$2,000,000 on 11 July 2016 from D1 through its agent/nominee HKTVEG to Zheng, which Transfers were approved solely by D2 in his capacity as the chairman of D1 and/or HKTVEG.[10]

43.  Yang explained that (a)  Zheng was at all material times the secretary of D2,[11] and (b)  there was no reason for D1 to effect the 5 Transfers to Zheng in such substantial amounts other than to transfer the Sum to D2. Yang further said it was most telling that all Transfers by D1 to Zheng were approved solely by D2 himself in his capacity as the chairman of D1.

44.  As for HKTVEG, Yang said it was D1’s related company, and at all material times D2 was its chairman and authorised signatory.[12] The Transfer of HK$2,000,000 from HKTVEG to Zheng (which was approved by D2)  was apparently for the purpose of transferring the Sum to D2.

45.  In the circumstances, Yang believed D1 did not retain and had not retained the Sum, and it would be inequitable to require D1 to make restitution whether in full or in part.

46.  Yang said D1’s defence case and supporting evidence had been disclosed to P at an early stage. By the 23/1/19 Letter to P’s then solicitors, D1’s solicitors (a)  claimed that D1 was not party to the Agreement, and (b)  pointed out the Agreement was made between D2 as the representative of the then shareholders of D1/HKTV (Party A)  and P (Party B)  (see Clause 1(2), Clause 2(5)-(7)  and Clause 9). Yang also noted that by the Yang 1^st Aff D1 had disclosed to P the supporting evidence for the Transfers, so Yang considered that P should not have taken out the O14 Summons when he knew he was not entitled to claim against D1 who had a bona fide defence, and that the O14 Summons against D1 should be dismissed.

VII.  O14 SUMMONS – D2’s AFFIRMATION EVIDENCE

47.  D2’s affirmation evidence for opposing the O14 Summons was essentially the D2 1^st Aff. D2 claimed that, as pleaded in his Defence, only D1 was party to the Agreement, and D2 signed the Agreement on behalf of D1 in his capacity as a director and the chairman representing D1. D2 further claimed that in such capacity he was duly authorised by D1 at all material times to handle/decide all matters in relation to bringing in investors, increasing D1’s share capital, and approving/handling all matters in relation to change in D1’s shareholding. D2 claimed such authority was conferred on him by D1 pursuant to duly signed board resolutions dated 5 May 2010,[13] 8 November 2010,[14] and 8 June 2012.[15]

48.  D2 claimed that from February to April 2016 he on behalf of D1 and pursuant to such authority engaged in negotiations with P for P’s intended investment in D1, especially as follows:

(a)	in February 2016, D1 was looking for new investors, so D2 reached out to friends and business contacts to see if they or anyone they knew would be interested, including Mr Wu Changbing (“Wu”)  who informed D2 his contact P might be interested in investing in D1;
(b)	Wu then brought P to the Shenzhen offices (“Shenzhen Office”)  of D1’s subsidiary 深圳香江文化傳播有限公司 (“Shenzhen XJ”)  to introduce P to D2, and to hold a preliminary meeting for D2 to introduce D1 to P (“2/16 Meeting”);
(c)	the 2/16 Meeting lasted about 2-3 hours and was attended by D2, P, Wu, and 2 employees of D1 / D1 subsidiaries, and in particular:
	(i)	D2 introduced himself to P as the chairman of D1, and gave P his business card;
	(ii)	a promotional video of D1 was shown to P, and D2 supplemented with D1’s corporate/business information;
	(iii)	D2 explained to P the broad terms of investment offered by D1 (as reflected by Clause 1 and Clause 2),[16] in particular that (1)  the investment would be by way of share subscription at a price of HK$2.57 per share with repurchase obligation by D1, (2)  D1 had gone through a 1st round investment in 2012 at a price of HK$2.57 per share, and (3)  D1 was then undergoing a 2nd round investment and refinancing exercise, so P’s Shares would either be newly allotted by D1 or repurchased by D1 from existing shareholders (which D1 might then arrange to transfer from existing shareholders)[17];
	(iv)	D2 provided a draft subscription agreement for P to review after the 2/16 meeting, which draft was prepared by D1’s administrative staff based on a template agreement generally used by D1 for such subscription;[18]
(d)	after the 2/16 Meeting, P and D2 had further discussions via WeChat and telephone on P’s intended investment, and P and D2 also met in Shenzhen for dinner to further discuss D1’s business and P’s own work, but due to the lapse of time D2 was unable to locate any record of such WeChat communications;
(e)	in/about early April 2016, P decided to invest RMB10,000,000 (approximately equivalent to HK$11,904,754)  for 4,632,300 Shares in D1;
(f)	P informed D2 he wished to pay the Sum by tranches in HK$, and he instructed D2 to amend the terms of the agreement accordingly, which was done as reflected in Clause 3;
(g)	it was clear all along the entire course of negotiations from February to April 2016 that D2 in his capacity as the chairman of D1 was negotiating on behalf of D1 for investment in D1 and not in any personal capacity.

49.  D2 said it was under such circumstances/context that the Agreement was signed on 19 April 2016 between P and D1 at the Shenzhen Office. D2 recalled this meeting was also attended by Wu and at least 3 administrative staff of D1 / D1’s subsidiaries. D2 signed the Agreement inhis capacity as a director and the chairman representing D1 (and not in any personal capacity).

50.  D2 claimed it must be borne in mind when reading the Agreement that it was not a professionally drafted document, but its terms were on their face consistent with D2 not being party to such agreement in any personal capacity:

(a)	Clause 1(2)  provided that P was to subscribe for Shares in D1, and such Shares were to originate from allotment of new shares by D1 or transfers from existing shareholders;[19]
(b)	Clause 2(9)  provided that if the “main body” or associated subsidiary of Party A failed to list within 2 years, the Shares P purchased under the Agreement would be repurchased with interest, and D2 claimed such provision made clear Party A had to be D1;
(c)	Clause 3 provided that monies to be paid by P were to be paid into the bank account of D1 or a bank account designated by D1, and a HK$ bank account of D1 and a RMB bank account of an associated PRC company were specifically/expressly identified;
(d)	the 2 parties to the Agreement were expressly identified as D1 (being Party A (甲方))  and P (being Party B (乙方))  at the execution page of the Agreement without any Party C, but D1’s company “seal” was affixed to the signature space for Party A (甲方)  and D2’s signature was appended below D1’s company “seal” as representative of D1 rather than in his personal capacity.

51.  D2 further claimed the conduct of the parties after the execution of the Agreement and its implementation were also consistent with D2 not being party to such agreement in any personal capacity. There was no dispute (a)  D2 was never paid any monies pursuant to the Agreement, (b)  between 28 April and 18 May 2016 P paid the Sum (HK$11,904,754)  directly/entirely to D1 as per the terms of the Agreement, and (c)  D1 acknowledged receipt of the Sum on 18 May 2016 (see D1’s Receipt dated 18 May 2016 and issued to P).

52.  In/about April 2017, D2 ceased to be the chairman of the D1 Board. On/about 25 August 2018, D2 ceased to be a director of D1, and since then D2 was no longer involved in any of D1’s operations, management and/or affairs.

53.  D2 noted D1 made certain allegations against him in D1’s Defence and the Yang 2^nd Aff. D2 considered it was strictly unnecessary to fully ventilate the matters between D2 and D1 for the present action and the O14 Summons, but he would give some brief response to D1’s allegations for the sake of completeness.

54.  D2 claimed D1’s allegation that it merely received the Sum from P on D2’s behalf as it was subsequently transferred to Zheng who (as D2’s employee)  received it on D2’s behalf was untrue on the face of contemporaneous documents:

(a)	Zheng was at all material times and currently remained (to the best of D2 knowledge)  an employee of D1’s subsidiary and seconded to D1:
	(i)	D1 had a wholly owned subsidiary Shenzhen XJ in Mainland China;[20]
	(ii)	Shenzhen XJ was expressly held on trust for D1 by its affiliates;[21]
	(iii)	Shenzhen XJ was openly/expressly recognised by D1 as its subsidiary in D1’s audited accounts;[22]
	(iv)	whilst Zheng at one point held the title of chairman’s assistant and did work closely with D2 when D2 held the role of the chairman of D1, Zheng did so in his capacity as an employee of Shenzhen XJ seconded to D1, and was not at any time employed by D2 personally;[23]
(b)	whilst Zheng did receive 6 Transfers of HK$2,000,000 each from D1 between 17 May and 11 July 2016 totalling HK$12,000,000, such Transfers had no correlation with the Sum and were received by Zheng in his capacity as employee of D1, and Zheng immediately forwarded the funds back for the benefit of D1:
	(i)	D1’s wholly owned subsidiary Shenzhen XJ had a further wholly owned subsidiary香江文化傳播有限公司 (“Beijing XJ”)  in Mainland China;[24]
	(ii)	like Shenzhen XJ, Beijing XJ was also openly/expressly recognised by D1 as its sub-subsidiary in D1’s audited accounts;[25]
	(iii)	an extract of Zheng’s bank statement showed that, upon his receipt of the Transfers totalling HK$12,000,000, he forwarded a corresponding total sum of RMB10,173,000 to Shenzhen XJ and Beijing XJ (at the then exchange rate of approximately RMB1 : HK$1.18);
		Transfers from D1 to Zheng		Corresponding transfers from Zheng to Shenzhen XJ and to Beijing XJ
		Date	Amount (HK$)	Date	Amount (RMB)
		17 May 2016	2,000,000	19 May 2016	1,668,000 (to Beijing XJ)
		2 June 2016	2,000,000	3 June 2016 6 June 2016	1,000,000 686,000 (both to Shenzhen XJ)
		15 June 2016	2,000,000	21 June 2016	1,689,000 (to Shenzhen XJ)
		7 July 2016	2,000,000	8 July 2016	1,710,000 (to Shenzhen XJ)
		11 July 2016	2,000,000	12 July 2016 12 July 2016	1,000,000 710,000 (both to Shenzhen XJ)
		11 July 2016	2,000,000	13 July 2016 13 July 2016	1,000,000 710,000 (both to Shenzhen XJ)
	(iv)	D2 reiterated he never benefited from and was never personally enriched by the Sum or any part thereof;
	(v)	as for the B/S Notes signed by D2, to the best of D2’s recollection and without access to D1’s records/documents, this was done in the context of potentially facilitating transfer of shares between the existing shareholders (whose shares would be repurchased by D1)  and P as new shareholder, who would otherwise be strangers to one another.

55.  In the premises, D2 believed he had (at least)  a reasonably arguable defence to P’s claim against him under the Agreement in that he was simply was not party to such agreement at all.

VIII.  O14 SUMMONS – P’s AFFIRMATION EVIDENCE

56.  P’s affirmation evidence for supporting the O14 Summons was essentially the P 1^st and 2^nd Affs whereby P verified the facts pleaded in his Statement of Claim to be true.

57.  P claimed that on 19 April 2016 he (as Party B)  entered into the Agreement with D1 and D2 (collectively as Party A). At all material times, D2 was the chairman of the D1 Board and a shareholder of D1. P referred to Clause 1(2)  that provided inter alia “現在乙方投資入股香港衛視, 認購肆佰陸拾叁萬貳仟貳佰股股份 (此部分股份從原股東轉讓或增資), 按照原每股價格2.57元港幣, 以現金出資港幣壹仟壹佰玖拾萬肆仟柒佰伍拾肆元整, 按2016年4月19日匯率0.8400折合人民幣壹仟萬元整”, and noted the Agreement was stamped with D1’s company “chop” and signed by D2 as Party A, and signed by P as Party B.

58.  P paid the Sum (HK$11,904,754)  to acquire 4,632,200 Shares in D1 pursuant to the Agreement (which fact Ds admitted in their respective Defence). On 18 May 2016, D1 issued an official Receipt to P to acknowledge receipt of the Sum (said to be “RMB¥10,000,000.- @ 0.8400 轉帳香港帳戶”)  in payment of 股權投資款. But neither D1 nor D2 allotted/transferred or procured allotment/transfer of any shares in D1 to him, which, P claimed, amounted to breach of the Agreement on Ds’ part, so P was surprised that D1’s solicitors sent the 23/1/19 Letter to his then solicitors to deny D1 was party to the Agreement. On 5 March 2019, P instructed his solicitors to issue the 5/3/19 Letter to accept Ds’ wrongful repudiation, to terminate the Agreement, and to demand Ds to repay the Sum. But neither D1 nor D2 repaid the Sum (or any part thereof)  despite demands, so P commenced the present action to seek refund of what he had paid Ds under the Agreement. P believed Ds had no defence, and asked for summary judgment against Ds.

59.  In response to the D2 1^st Aff that purported to give an account of the negotiations since about February 2016 that led to signing the Agreement on 19 April 2016, P claimed he was advised that pre-contractual negotiations were not admissible evidence, so “[P does] not propose to deal with each and every allegation made by [D2] with respect to the pre-contractual negotiations”. In any event, P claimed D2’s conclusion that he negotiated only in his capacity as the chairman of D1 was self-serving and untrue; rather, P claimed it was clear from the Agreement that D2 was acting in his personal capacity and as representative of D1. But P agreed with D2’s allegation in paragraph 48(c)(iv)  above that set out how D2 provided the Agreement to him.

60.  As for various terms of the Agreement highlighted (a)  in the Yang 2^nd Aff for supporting D1’s stance that it was D2 who contracted to transfer the shares in D1 to P and (b)  in the D2 1^st Aff for supporting D2’s stance that it was D1 who contracted to allot shares to P, P believed the Agreement should be read as a whole, and D1/D2 could not escape from its/his contractual obligations by “cherry-picking”.

61.  P noted both Ds accepted Clause 1(2)  was material/germane, but claimed such clause expressly provided that the 4,632,200 Shares in D1 would “be transferred from existing shareholder[s] or through capital increase” (see paragraph 4(3)  of the Yang 2^nd Aff), would “originate from allotment of new shares by [D1] or transfer from existing shareholder[s]” (see paragraph 12(a)  of the D2 1^st Aff), or 轉讓或增資 (original Chinese provision). P claimed he paid the Sum for the Shares in D1 to be transferred by D2 or allotted by D1, and the Agreement contained specific terms relating to transfer (as D1 sought to highlight)  and allotment (as D2 emphasised), which were entirely consistent with the contractual bargain and the commercial reality that both D1 (under D2’s control)  and D2 (personally)  were bound by the Agreement.

62.  There was no dispute D1 received the Sum that P paid according to the Agreement, and D1 issued an official Receipt. Yang alleged D1 “merely received the same on behalf of [D2] and/or the then shareholders of [D1]”, but P claimed that if (as D1 alleged)  the Agreement was a contract just between D2 and P, it made little commercial sense for D2 to designate D1’s corporate bank account (instead of D2’s personal bank account)  for receiving P’s payments, and to keep such money in D1’s bank account when D2 was not any majority shareholder of D1 (see D1’s annual return for the period up to 19 December 2016).[26] Anyway, if D1 merely received the Sum for D2 and the then other shareholders of D1 (whoever they were), P could not understand why there was no evidence of onward transfers to D2 and other shareholders of D1.

63.  In this regard, Yang sought to rely on (a)  5 Transfers by D1 and (b)  1 Transfer by HKTVEG all to Zheng, and claimed Zheng was “at all material times the secretary of [D2]”, but P said this was a sham defence. P claimed the contemporaneous documents produced by D1 showed that, contrary to Yang’s assertion, Zheng was not D2’s secretary at all material times (ie from May to July 2016). P claimed the employment contract between Shenzhen XJand Zheng dated 24 August 2013 (exhibited to the Yang 1^st Aff filed pursuant to the Discovery Order)  expressly provided that until 23 August 2016 Zheng was employed as 地產專員 (real estate specialist)  at 文化地產部 of Shenzhen XJ, and it was only after 24 August 2016 that Zheng was employed as secretary to the chairman at 集團辦公室 of Shenzhen XJ pursuant to an employment contract dated 24 August 2016. Thus, all alleged Transfers to Zheng were effected when he was still a real estate specialist of Shenzhen XJ and before he became secretary to the chairman in late August 2016.

64.  Further, P claimed there was evidence that Zheng was still an employee of D1 and could have given evidence for D1,[27] so if D1 had a bona fide defence, there was no reason why it chose not to adduce evidence from Zheng (now D1’s employed journalist), who would have been in a position to confirm (as D1 alleged)  he received the Sum for D2 “and/or the then shareholders”. P said Yang’s assertion that “[there] was no reason why [D1] had to make the [Transfers] to Zheng in such a substantial amount other than being the transfer of the Sum to [D2]” was disingenuous because Yang avoided the real issue that underlied D1’s purported defence, ie whether Zheng actually transferred the money to D2.

65.  P pointed out Yang was never a director of HKTV (ie D1). At all material times in 2016/2017 when P dealt with D1/D2, P never heard of Yang. P claimed the Yang 1^st/2^nd Affs did not suggest Yang held any position in D1 at the material time or had any personal knowledge of the assertion that the Transfers to Zheng (indisputably an employee of a subsidiary of D1)  in 2016 were related to the Agreement. Yang did not purport to identify his source of information or grounds of belief, but there was no valid reason why members of the D1 Board or senior management of D1 could not have given evidence to support D1’s purported defence.

66.  P noted D2 produced bank records that showed Zheng transferred monies to Shenzhen XJ and Beijing XJ being subsidiaries of D1, and D2’s evidence was that Zheng (a)  received HK$ from D1 and HKTVEG, and then (b)  paid RMB to Shenzhen XJ and Beijing XJ. To date D1 had not adduced evidence to rebut D2’s evidence as supported by bank records, so P believed D1 had no defence to his claim for restitution.In any event, D1’s evidence was that it transferred a total sum of HK$10,000,000 to Zheng, but it indisputably received HK$11,904,754 from P, so it still had no answer to P’s claim for restitution to the extent of HK$1,904,754.

67.  As for D2 signing the Transfer Documents, P claimed no shares in D1 were allotted/transferred to him despite his payment of the Sum. Upon his repeated demands for performance of the Agreement, P had a meeting with D2 in/about September 2017 when they signed documents whereby (according to D2)  P would become the owner of 4,632,200 Shares in D1. In any event, the Transfer Documents indisputably signed by D2 as transferor evidenced that D2 was to transfer 4,632,200 Shares in D1 to P at the total price of HK$11,904,754. D2 claimed this was “in the context of potentially facilitating the transfer of shares between old shareholders …… and [P] as a new shareholder who were otherwise strangers to each other”, but P said such explanation was invalid because D2 signed as transferor without mention of other “old shareholders”, so there was no question of P dealing with any other “old shareholders” or “strangers”. P further claimed D2 obviously understood his contractual obligations under the Agreement, otherwise he would not have signed the Transfer Documents as transferor.

68.  P noted from the Yang 2^nd Aff that D1 sought to rely on the Transfer Documents to argue only D2 was bound by the Agreement. P disagreed because the bottom line was that pursuant to the Agreement P should have the Shares which he paid for, whether by transfer from D2 or allotment by D1. P therefore sought summary judgment against Ds.

IX.  WONG AFF AND YANG 3^RD AFF

(a)  Wong Aff

69.  The Wong Aff explained that Yang (then residing in Shenzhen)  was unable to travel to Hong Kong due to prevailing public health considerations, so Wong explained the full text of the Yang 3^rd Aff to Yang who confirmed to Wong that he understood and agreed with the contents thereof, and that he had been authorised by the D1 Board to execute the same. Yang then executed the Yang 3^rd Aff at the Notarial Office of Shenzhen on 16 July 2020. Wong confirmed that if leave were granted for D1 to file the Wong / Yang 3^rd Affs, Yang would file the original Wong Aff and also file/re-file the original Yang 3^rd Aff or the Yang 3^rd Aff to be re-affirmed in Hong Kong when quarantine measures for travel between Hong Kong and Mainland China eased.

(b)  Yang 3^rd Aff

70.  The Yang 3^rd Aff explained that due to (a)  prevailing COVID-19 lockdown and quarantine measures for travel/communications within and between Mainland China and Hong Kong, and (b)  nearly all staff members of D1’s finance/accounting department had left upon/after D2’s departure, it took Yang a great deal of time/effort to unearth and gather relevant information to respond to the P 2^nd Aff.

71.  In reply to P’s allegation in paragraph 63 above, Yang stressed Zheng become D2’s assistant/servant/agent soon after he joined D1’s real estate department, and believed Zheng and D2 became acquainted as they both hailed from Zhejiang Province. Yang said Zheng was formally appointed as secretary to the chairman in August 2016 after having served D2 for a long time before he attained the title.

72.  Yang claimed that at the time when D2 was to leave D1, most staff of D1’s finance/accounting department also left, so D1 had to employ new team of auditors and accounting staff to tie up loose-ends, but the new auditors reported that most accounting materials concerning D2 were missing. The D1 Board understood Zheng was the key person for keeping D2’s records. Since Zheng was the most important source of information about D2’s anomalies, D1 continued to retain Zheng as its employee. But despite D1’s various attempts to extract relevant information from Zheng, he remained evasive and uncooperative throughout.[28]

73.  Yang claimed it was reported to him that each time D1’s new auditors asked Zheng to produce records/information concerning D2, Zheng did so in a perfunctory/fragmented manner. Upon receipt of the P 2^nd Aff, Yang personally tried to contact Zheng with a view to ask Zheng to come to his office for a meeting. After several postponements, they met on 25 February 2020, and Zheng said he would give Yang copy documents relevant to P’s claim and to the transfer of funds to D2, but on 26 February 2020 Yang received from Zheng only some copy account documents containing incoherent/indecipherable materials. Although Yang followed up with Zheng by telephone and Zheng promised to give further documents/explanations the following day, Yang did not receive any further document from Zheng. Yang asked but Zheng declined to give affirmation/statement to explain the fund movements / whole matter. In fact, Zheng asked Yang to get information from D2, and further indicated he would resign any time if D1 kept pushing him (and Yang understood that if that happened, D1 would never see D2’s financial/accounting materials).

74.  Yang believed Zheng and D2 were still closely connected because Zheng was amenable to D2’s request for Zheng’s partially redacted personal bank statements from 6 December 2014 (circa 3 months after Zheng joined D1 as staff member)  to 5 December 2019 (circa 1 month before the D2 1^st Aff was filed)  as exhibited to the D2 1^st Aff. But Zheng still refused to provide complete set of those bank statements for D1’s examination despite D1’s repeated demands.

75.  Apart from seeking Zheng’s assistance, Yang also made his own investigations by asking Beijing XJ and Shenzhen XJ to provide documents relevant to the transfers of P’s funds. Beijing XJ informed Yang that just 4 days (including a weekend)  after it received the alleged sum of RMB1,668,000 (equivalent to HK$2,001,600)  from Zheng on 19 May 2016 (ie on 23 May 2016), such sum was transferred to a Shenzhen subsidiary called 深圳市香港卫视前海运营总部有限公司 (“Shenzhen Qian Hai”).[29] When Yang asked why the funds were routed in such a roundabout way in such short period to Shenzhen Qian Hai, the staff of Beijing XJ told him the responsible financial officer had already left the company, and she did not know why D2 could not deposit the funds directly into Shenzhen Qian Hai instead of routing such funds through Zheng and Beijing XJ, but she thought the former accounting staff was only following D2’s instructions.

76.  Upon searching the financial records of Shenzhen Qian Hai, Yang found out Shenzhen Qian Hai transferred a sum of RMB1,660,000 (said to be out of the sum of RMB1,668,000 it received from Beijing XJ)  to Shenzhen XJ by 3 tranches, ie RMB560,000 on 25 May 2016, RMB600,000 on 26 May 2016 and RMB500,000.00 on 17 June 2016.[30] Yang’s enquiry revealed that in September/October 2016 D2 had caused Shenzhen XJ to re-transfer a total sum of RMB7,000,000 (equivalent to HK$8,400,000 at the exchange rate in 2016)  back to Zheng, but D2 did not mention this nor exhibit Zheng’s bank statement to evidence such “backward transfers” in the D2 1^st Aff.[31] Yang asked Zheng about the subsequent movement of such total sum of RMB7,000,000, and his reply was that since D2 “had the responsibilities toward [P], [D2] should know better the movements of the funds and the current status” and Yang should ask D2.

77.  Yang claimed he asked D2 in 2018 if D2 had settled his liabilities to P, and D2 told him he had already returned RMB3,000,000 to P and would properly deal with the remaining balance. Yang said when P issued a statutory demand against D1 in January 2019 (which was subsequently withdrawn), he again asked D2 who re-confirmed he had paid RMB3,000,000 to P (see copy screen capture of messages between Yang and D2 on 9 January 2019 on an instant messaging service as set out below), but both P and D2 concealed the fact that D2 had made some partial repayment to P:

“[D2]: 高主席你好, 今天我委托的律師已經向[D1]送達法定償債書, 想必[D1] 的董事們很快會知道此事, 21天後將啟動清盤程序。請知會, 謝謝! [P]

[D2]: [Yang], 這是表外股東[P] 發給我的

[Yang]: 已轉給香港律師了, 您退過他三百萬嗎

[D2]: 是的, 去年他急用, 我朋友借給他三百萬”

X.  CHEUNG AFF AND P 3^RD AFF

(a)  Cheung Aff

78.  The Cheung Aff stated (a)  P resided in Shenzhen, Mainland China, (b)  P confirmed he understood/approved the contents of the P 3^rd Aff, (c)  due to public health considerations and Hong Kong’s quarantine measures, P was unable to come to Hong Kong to sign/affirm the P 3^rd Aff, (d)  P undertook to sign the P 3^rd Aff before a notary in Mainland China and to send the original notarised P 3^rd Aff to his solicitors for filing with the court as soon as practicable.

(b)  P 3^rd Aff

79.  P made the P 3^rd Aff to oppose the New Aff Summons, which summons was served in the afternoon of 24 July 2020 (Friday)  when the O14 Summons was to be heard at the Master Hearing on 3 August 2020 (Monday).

80.  P noted the Kot Order directed inter alia that “[no] further affirmation evidence shall be filed without leave of the Court and such application, if any, shall be taken out at least 21 days before the substantive hearing” (see paragraph 25(c)  above). There was no application for leave to file new evidence for the original substantive hearing of the O14 Summons on 2 March 2020 (which hearing was generally adjourned), and D1 lodged written submissions on 27 February 2020 without suggesting it had further evidence. P further noted that prior to 24 July 2020 there was never any suggestion that D1 intended to seek leave to file further evidence.

81.  P noted that the Yang 3^rd Aff claimed Yang allegedly had discussions with D2 “in 2018” and “in January 2019” (see paragraph 77 above), but P claimed he was not aware of nor privy to such alleged discussions. P claimed if these alleged discussions in 2018/2019 and the messages in January 2019 were relevant to D1’s defence, D1/Yang could/ should have included these matters in (a)  D1’s Defence filed on 28 June 2019 and (b)  the Yang 2^nd Aff filed on 9 January 2020.

82.  In any event, P claimed Yang’s assertion (ie D2 had told Yang that D2 had “returned” RMB3,000,000 to P)  flatly contradicted the instant messages in January 2019 between D2 and Yang (see paragraph 77 above), which clearly stated D2 told Yang “我朋友借給[P] 三百萬”. P explained that as a matter of fact Shao Weibin (邵瑋斌, “Shao”)  through D2’s introduction (D2 having told P that Shao was his friend)  lent a total sum of RMB3,000,000 to P in 2018, but contrary to Yang’s assertion, no partial repayment had been made whether by D2 or D1.

83.  As regards the allegations in the Yang 3^rd Aff in paragraphs 71-72 above that concerned Zheng (employee of D1 or its subsidiary)  and his “explanatory note” dated 30 June 2017 about certain entertainment expenses allegedly incurred by D2, P claimed such allegations were quite irrelevant, and anyway there was no reason why D1/Yang could not have produced such 2017 document earlier. Further, P considered the allegations in the Yang 3^rd Aff in paragraphs 73-74 above (ie P alleged that communications with Zheng on/after 25 February 2020 showed Zheng had not provided anything to support D1’s defence)  were also irrelevant.

84.  P explained the background to the allegations in the Yang 3^rd Aff (see paragraphs 75-76 above)  as to certain transfers by Beijing XJ and by Shenzhen XJ as follows:

(a)	While D1 admitted it did receive the Sum (HK$11,904,754)  from P, D1 claimed that between 17 May and 11 July 2016 a total sum of HK$12,000,000 was transferred to Zheng, who was D2’s assistant/ servant/agent. D1’s Defence pleaded that at all material times it did not retain and had not retained the Sum.
(b)	In compliance with the Discovery Order made on 28 August 2019 pursuant to the Discovery Summonses, D1 disclosed records of (i)  Transfers of a total sum of HK$10,000,000 by D1 to Zheng, and (ii)  Transfer of HK$2,000,000 by HKTVEG (instead of by D1)  to Zheng.
(c)	The Yang 2nd Aff filed for opposing the O14 Summons asserted there was no reason why D1 had to make the Transfers to Zheng in such substantial amount “other than being the transfer of the Sum to [D2]” (my emphasis).
(d)	In the D2 1st Aff filed for opposing the O14 Summons, D2 asserted that immediately or very shortly after Zheng received HK$12,000,000 from D1 and HKTVEG, he made back-to-back RMB transfers to Beijing XJ and Shenzhen XJ, which were D1’s wholly-owned subsidiaries in Mainland China, and for this D2 exhibited extract of the transaction records of Zheng’s bank account with the CCBank.

85.  P believed there was no justification for D1 to file further evidence because:

(a)	As the Yang 3rd Aff admitted, Zheng was/is an employee of D1, and Beijing XJ and Shenzhen XJ were all along wholly-owned subsidiaries of D1. There was no valid reason why D1/Yang did not conduct the alleged “investigation” earlier, and P could not understand how D1/Yang, without taking steps to ascertain the true position, could have reasonably suggested in D1’s Defence and in the Yang 2nd Aff that D1 did not retain P’s money or that the entire Sum went to D2’s pocket.
(b)	Yang did not say he only “discovered” such alleged transfers after the D2 1st Aff in opposition and/or the P 2nd Aff in reply were filed.
(c)	As regards the alleged transfer by Beijing XJ to Shenzhen Qian Hai and by Shenzhen Qian Hai to Shenzhen XJ for a total sum of RMB1,660,000, Shenzhen Qian Hai and Shenzhen XJ were both D1’s wholly-owned subsidiaries, so P could not understand how such transfers would advance D1’s defence.
(d)	As regards the alleged transfers by Shenzhen XJ, (i)  its alleged transfers to Zheng were effected in September/October 2016 (see paragraph 76 above), but as D1/Yang chose not to exhibit Shenzhen XJ’s bank statements, there was no evidence of any connection between Shenzhen XJ’s receipts and its alleged transfers to Zheng a few months later, and (ii)  Shenzhen XJ admittedly received RMB8,505,000 (RMB10,173,000 - RMB1,668,000)  from Zheng in June/July 2016 (see paragraph 54(b)(iii)  above), so even if the Yang 3rd Aff were to be taken at face value, Shenzhen XJ still retained at least RMB3,165,000 (RMB1,660,000 + RMB8,505,000 - RMB7,000,000)  (see paragraph 76 above).

86.  P claimed D1’s late application was unfair to him as he and his legal representatives would not have sufficient time to respond to such allegations, but without prejudice to his opposition to the New Aff Summons and notwithstanding the time constraint, P explained the background to his loan from Shao in 2018 as follows:

(a)	As neither D1 nor D2 allotted or transferred (or procured allotment or transfer of)  any shares in D1 to P, P kept demanding for a refund.
(b)	In response to P’s repeated demands, D2 in May 2018 suggested he would ask his friend Shao to lend P some money (about RMB3,000,000)  and P could repay Shao when he received the Sum in full, and according to D2, Shao (because of D2’s relationship with him)  agreed not to charge P interest as long as P would make prompt repayment immediately after he received the Sum.
(c)	So P agreed to borrow from Shao as follows:
	(i)	On/about 30 May 2018 (Wednesday), P visited D1’s offices when D2 presented to him a pre-prepared 借據[32] for his borrowing RMB2,000,000 from Shao, and requested him to write down the particulars of his bank account and to sign the same so D2 could pass the document to Shao.[33] When preparing the P 3rd Aff, P noted such 借據 referred to 香港衛視股份回購款, but at that time he did not pay attention to the words 回購款. “When [P] demanded refund (回款), [P] mentioned the fact that [D1] did not manage to list on the stock exchange despite a lapse of 2 years and the Agreement contained a provision (Clause 2(9))  on obligation to repurchase”.
	(ii)	As such 借據 was signed at D1’s offices during usual business hours, P believed D1 was aware of his borrowing from Shao.
	(iii)	Thereafter, Shao transferred 2 sums of RMB1,000,000 each to P’s account with China Merchants Bank on 30 May and 4 June 2018 respectively.
	(iv)	Later on 27 and 31 July 2018, P received from Shao 2 loan sums of RMB500,000 each.
(d)	Thus, P borrowed a total sum of RMB3,000,000 from Shao, and he still owed Shao such sum, but Shao’s loans were not in any way repayment by D2. P denied the allegation that he “concealed the partial repayment”.

XI.  DRAFT D1 AD&C

87.  The proposed amendments to D1’s Defence in the Draft D1 AD essentially concerned 2 aspects. First, D1 proposed to add the following further averments that set out the Election Defence referred to in paragraph 117 below:

“9a. Without prejudice to paragraphs 5 to 9 above, on the assumption that the Agreement was a tripartite agreement made between [P], [D1] and [D2] (which is denied), [D1] avers that the terms and conditions of the Agreement, properly construed, should carry the following meanings and effects:-

(a)  [P’s] intended acquisition of 4,632,200 shares (“Shares”)  in [D1] would be effected either by allotment of new shares or by transfer of existing shares from shareholder(s).

(b)  [P] shall have the right to elect between either allotment of new shares or transfer of existing shares from shareholder(s), which are two inconsistent rights available to [P].

9b. Further, without prejudice to paragraphs 5-9 above, on the assumption that the Agreement was a tripartite agreement made between [P], [D1] and [D2] (which is denied), by reason of business efficacy, it was an implied term/condition of the Agreement that [P] shall give a reasonable notice to [D1] and/or [D2] on whether he would opt for allotment of new shares or transfer from the existing shareholder(s)  for the purpose of the intended acquisition of the Shares.

c. Further, [D1] avers that:

(a)  In or around September 2017, pursuant to the Agreement, [D2] (as transferor)  and [P] (as transferee)  executed an instrument of transfer (“IOT”)  and bought and sold notes (“BS Note”)  in which [D2] (as transferor)  transferred or sought to transfer the Shares to [P].

(b)  Upon the execution of the IOT and the BS Note and by reason of the contractual commitment of [D2], the beneficial interest in the Shares passed from [D2] to [P] and [D2] held the Shares on trust for [P] pending the completion of the transaction for the transfer of the Shares.

(c)  Neither [D2] as transferor nor [P] as transferee lodged the IOT or BS Note with [D1] for registration pursuant to section 151 of the Companies Ordinance (Cap. 622).

(d)  By reason of sub-paragraph (c)  above, the intended transfer of the Shares from [D2] to [P] has never been registered. At all material times, [D1] was otherwise ready, willing and able to cause the intended transfer to be registered.

9c. By reason of the above, without prejudice to paragraphs 5 to 9 above, on the assumption that the Agreement was a tripartite agreement made between [P], [D1] and [D2] (which is denied):-

(a)  [P] has exercised his right to make an election for the intended acquisition of the Shares to be effected by transfer of existing shares from [D2] (as opposed to allotment of new shares), thereby waiving his right to ask for the latter.

(b)  [D1] has never received any request from [P] for allotment of new shares in respect of [P’s] intended acquisition of the Shares under the Agreement.

(c)  In the premises, [D1] has never been under any obligation to allot new shares or cause new shares to be allotted for [P’s] intended acquisition under the Agreement and it is denied that [D1] was in breach of the Agreement as alleged in the Statement of Claim or at all.

(d)  Alternatively:-

(i)  it was the common understanding/ assumption between [P], [D1] and [D2] that [P’s] intended acquisition of the Shares would be affected by the transfer of the same from [D2] and that [D1] would not be required to allot new shares or cause new shares to be allotted under the Agreement;

(ii)  the parties, at all material times, relied on the above common understanding/ assumption, as a result of which [D1] proceeded on the basis that [P] had elected for transfer of existing shares (as opposed to allotment of new shares), thereby waiving his right to seek allotment of new shares;

(iii)  it would therefore be unjust and [D1], having been made a party to this action, has suffered (or would suffer a detriment)  if [P] is now allowed to elect for his rights against [D1]; and

(iv)  in the premises, [P] is or should be estopped from asserting or exercising his rights against [D1] under the Agreement as alleged in the Statement of Claim or at all.”

88.  Secondly, D1 proposed to amend paragraph 16 of its Defence to plead specific denial of P’s claim for restitution as follows:

“For the matters pleaded hereinabove, paragraph 17 to 19 are denied. It is specificallty denied that [D1] retains the Sum. It is further denied that [P] is entitled to claim restitution against [D1] by reason of the matters pleaded in paragraphs 9b and 9c above.”

XII.  DRAFT D2 AD&C

89.  The D2 2^nd Aff claimed (a)  the proposed amendments to D2’s Defence in the Draft D2 AD&C concerned the context/ circumstances/negotiations leading up to the Agreement that were the subject matter of the present action, (b)  the material facts pleaded in the Draft D2 AD&C (the truth of which was verified by D2’s statement of truth)  were derived from what had been set out in the D2 1^st Aff which should not come as a surprise to P, and (c)  the proposed amendments were necessary to ensure fair disposal of this matter. Such proposed amendments concerned essentially 4 aspects.

90.  First, the proposed amendments to paragraph 6(e)  of D2’s Defence were said to be for making clear the context/circumstances of the Agreement:

“At the material time of the Agreement, the objective factual matrix and context (and also as expressly mentioned and/or commonly understood in discussions and negotiations between [P] and [D2] (acting on behalf of [D1])  leading up to the Agreement), were that:-

(i)  [D1] was engaged in a re-financing exercise whereby it was repurchasing shares of some of its existing shareholders (“Repurchased Shares”); and

(ii)  there was never any shareholders’ agreement signed between shareholders of [D1].”

91.  Secondly, the Draft D2 AD&C added a new paragraph 6(f-1)  on the pre-contractual negotiations for the Agreement as follows:

“(f-1)  Further, during the pre-contractual negotiations for the Agreement which were conducted between [P] and [D2] from February to April 2016, the clear understanding throughout was that [D2] was acting all along on behalf of [D1] and not in his personal capacity. In particular:-

(i)  [P] as a potential investor in [D1] was first introduced to [D1] at a meeting held at the Shenzhen offices of [D1’s] subsidiary 深圳市香江文化傳播有限公司 (“Shenzhen Office”)  in around February 2016 (“February 2016 Meeting”).

(ii)  The February 2016 Meeting was attended by inter alios [D2], who introduced himself to [P] as chairman of [D1], and several employees of [D1] and/or its subsidiaries.

(iii)  [P] was shown a promotional video of [D1], which was supplemented by [D2] with [D1’s] corporate and business information.

(iv)  [P] was informed of the broad terms of investment offered by [D1], including inter alia, the fact that [D1] had gone through a first round of investment in around 2012 and was now undergoing a second round investment and refinancing exercise which involved repurchasing shares from existing shareholders, as a result of which [P’s] shares would either be newly allotted shares by [D1] or shares repurchased by [D1] and/or directly transferred from existing shareholders.

(v)  A draft subscription agreement, which had been prepared by [D1’s] administrative staff and was based on a template agreement generally used by [D1] for such subscription, was provided to [P] for him to review after the February 2016 Meeting.

(vi)  Further discussions ensued between [P] and [D2] (on behalf of [D1]), pursuant to which [P] decided in around April 2016 that he would invest RMB 10,000,000 in [D1] (approximately equivalent to HK$11,904,754)  for 4,632,300 shares, and the terms of the draft subscription agreement were amended to allow [P] to pay the subscription funds in tranches in Hong Kong dollars, as reflected by Clause 3 of the executed Agreement.

(vii)  The Agreement was then signed on 19^th April 2016 by [P] and [D1] (represented by [D2] in his capacity as the chairman and a director of [D1])  at the Shenzhen Office, in the presence of, inter alios, administrative staff of [D1] and/or its subsidiaries.”

92.  Thirdly, the proposed amendments in paragraph 6(g)  of the Draft D2 AD&C appeared to be for the purpose of clarifying what D2 perceived to be the proper interpretation of the Agreement:

“The substantive terms of the Agreement reflect that the parties to the Agreement are [D1] and [P] only. T Properly interpreted, there are no terms of the Agreement which provide for rights or duties of [D2] in his personal capacity. Further, pursuant to the terms of the Agreement, [D2] does not receive any funds or benefit in his personal capacity. ……”

93.  Fourthly, the Draft D2 AD&C proposed to add a new counterclaim that set out the Rectification Defence referred to in paragraph 118 below:

“Counterclaim

15. The Defence hereinabove is repeated in its entirety.

16. If (which is denied)  the proper interpretation of the Agreement is not as pleaded at paragraph 6 above (i.e. that the parties to the Agreement are [D1] and [P] only), it is averred in the alternative that the terms of the Agreement were misstated by oversight common to the parties and do not reflect the parties’ true agreement and continuing common intention.

17. For the reasons as pleaded at paragraph 6 above, it is averred that it was the parties’ true agreement and continuing common intention that the Agreement would be made between, and would provide for the rights and duties of, [P] and [D1] only.

18. In the premises, the Agreement should be rectified to reflect the true agreement and continuing common intention of the parties as follows:-

(a)  All references to the phrase “representative of the shareholders” (股東代表)  be removed and/or replaced by the phrase “chairman of the Company” (董事局主席), including references in the preamble and the signature page of the Agreement, as [D2] had all along been acting in his capacity as director and chairman of [D1], on behalf of [D1], and not in any other capacity;

(b)  The duplicated defined term for [D1] in the Agreement, namely “HKTV” (香港衛視), be removed and/or all references to “HKTV” be replaced by “Party A”; and

(c)  Clauses 2(7)  and/or 9 of the Agreement be struck as being objectively meaningless, or alternatively be rectified to reflect the objective fact that the “rights and duties between the shareholders” (股東之間權利和義務)  were simply governed entirely by [D1’s] articles of association as no shareholders’ agreement had ever been entered into between the shareholders of [D1].

AND [D2] COUNTERCLAIMS AGAINST [P] AND [D1]:-

(1)  An order for rectification of the Agreement, in terms as pleaded in paragraph 18 hereinabove;

(2)  Costs; and

(3)  Further and/or other relief.”

XIII.  MASTER’s DECISION

94.  At the Master Hearing, after hearing submissions from Mr Ho SC for P, Mr Law for D1 and Mr Chain for D2, the Master granted the New Aff Order and the O14 Judgment, and she delivered her oral reasons for the O14 Judgment as follows:

“……

Having read the Agreement as a whole and considered the parties’ submissions, it is in my view that it is clear from the Agreement that both [D1] and [D2] are parties to it. The Agreement is an investment agreement for [P] to invest into [D1] by way of subscribing for new shares to be allotted by [D1] or, alternatively, by acquiring shares from the existing shareholder.

Party A comprises [D1] and [D2]. While ideally, the two names stated in the name of the parties should be separated by a common or linked by a word “及”, but considering the terms of the Agreement, I come to the conclusion that Party A comprises two entities: [D1] and [D2].

Clause 1(2)  provides that the investment shall be made by acquiring shares by existing shareholders or by allotment. Hence, both [D2] as the shareholders’ representative or [D1] would be obliged to give the shares to [P] upon receipt of his investment funds.

Clause 2 sets out the parties’ rights and obligations. It should be pointed out that most of the time in the Agreement, whenever references are made specifically to [D1], [HKTV] would be used instead of Party A, for example under Clause 2(1), Clause 2(2)  and Clause 2(3). This shows that Party A comprises HKTV, [D1] and [D2], not only [D1].

While it is noted that in Clause 2(9), “甲方” was a reference to [D1] only, I accept Mr Ho’s submissions that not all the clauses in the Agreement means that the obligation has to fall on both parties, and under this clause, the obligation falls on [D1].

Clause 9 also clearly shows that the Agreement has the effect of a shareholders’ agreement with [D2] as the shareholders’ representative being bound by the Agreement. But on the other hand, it does not mean that only by reason of this clause, [D1] could avoid liability under the Agreement because it is not uncommon for the company to also be a party to a shareholders’ agreement.

Lastly, the execution of the agreement. [D1] with the chop and the chop on the side of each page of the Agreement shows clearly that it is a party to the Agreement. I accept Mr Ho’s submissions that [D2] was signing both as representative of [D1] and in his personal capacity.

On behalf of [D1], Mr Law pointed to the undated [IoT] and [B/S Notes] and said that these documents show that the obligation of providing shares to [P] under the Agreement has already been performed.

I cannot accept these submissions, First of all, this is not part of [D1’s] pleaded case. It is never suggested that the Agreement has been performed by reason of the [B/S Notes] and the [IoT]. Secondly, this submission is contradicted by the provisions in the Agreement, for example, Clause 2(1)[34] which shows that Party A’s obligation is to complete the transfer. Mere signing of the [B/S Notes] and [IoT] does not amount to performance of the Agreement.

As to [D1’s] defence of change of position against [P’s] restitution claim, given that I have rejected [D1’s] submission that the signing of the [B/S Notes] and the [IoT] means performance of the Agreement, there is an unjust element in the transfer. Further, when [D1] transferred the money out, it was not acting in bona fide as it knew that it has not fulfilled the obligations under the Agreement. So [D1] is liable to repay the Sum to [P] on the ground of unjust enrichment.

On behalf of [D2], Mr Chain invited this court to take into account the pre-contractual negotiations of the parties and relied on the principle that where the identity of the parties to a written agreement is unclear from the document itself, extrinsic evidence is admissible to show who the parties are.

As I have explained earlier on, interpreting the Agreement objectively, it is clear that the Agreement provides that both [D1] and [D2] are parties to it. Hence, extrinsic evidence is not admissible for the purpose of reopening the issue of who the parties to the Agreement are. For these reasons, neither [D1] nor [D2] manages to raise any triable issues or arguable defences against [P’s] claim.

……”

XIV.  LEGAL PRINCIPLES

95.  Appeal against master’s decision  I have set out the relevant principles in paragraph 51 of my judgment in Ng Ting Kwok v Ng On Kwok & anor,[35] which I adopt but do not repeat here.

96.  Summary judgment I have also set out the relevant principles in paragraphs 52-54 of my judgment in Ng Ting Kwok, which I also adopt but do not repeat here.

97.  Leave to adduce late affirmation evidence  Order 32 rule 11A(4)  of the Rules of the High Court (“RHC”)  provides as follows in respect of an interlocutory application before a master who has given directions for the exchange of evidence (see eg the Kot Order at paragraph 25 above):

“Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.” (my emphasis)

98.  It has been said the Ladd v Marshall conditions are relevant in the court’s consideration as to whether the exceptional circumstances envisaged under Order 32 rule 11A(4)  of the RHC exist.[36] The Ladd v Marshall conditions are: (a)  the evidence could not have been obtained with reasonable due diligence for use at the hearing below, (b)  the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c)  the evidence must be such as is presumably to be believed.

99.  In Jose Miranda da Costa Junior & anor v Lorenzo Yih, also known as Yu Chuan Yih & ors,[37] DHCJ Le Pichon said in the post-CJR era, it was inconceivable for leave to be granted for filing further evidence “in the absence of genuine extenuating circumstances, for example, that the evidence was not available at the date of the earlier affidavit or only came into existence after the date of the filing of that affidavit. In other words, they would be exceptions that normally would fall within the rule in Ladd v Marshall” (paragraph 9). The learned judge explained as follows:

“12. It will be seen that the rationale of O 32, r 11A (4)  is to ensure that a case is dealt with as expeditiously as is reasonably practicable and to ensure fairness between the parties (those being the objectives of the CJR stated in O 1A, r 1 (b)  and (d)): Fortune Assets Development Ltd v De Monsa Investments Ltd, HCA 167/2009, (unrep)  21 August 2009 at §§10-11 and the annotation in Hong Kong Civil Procedure 2014 at 32/11A/3 which states that the sort of “exceptional circumstances” envisaged are likely to be along the lines of the exceptions laid down in Ladd v Marshall [1954] 1WLR 1489.

13. “Special circumstances” are not made out if a proper review of the potential issues that might arise in proceedings ought to have resulted in the information contained in the affidavit being filed within the time limits imposed: Fortune Assets at §12.  I agree with that approach which is in line with the rationale underlying O 32, r 11A (4)  and furthers the CJR objectives identified above.”

100.  In Yifung Properties Limited & anor v James Nicholas Barrie Smith & anor,[38] DHCJ Kent Yee considered/applied Jose Miranda da Costa Junior & anor (see paragraphs 23 and 26), and said as follows:

“26. …… I agree with the deputy judge entirely. O.32, r.11A(4)  has to be adhered to and leave should not be lightly granted. Exceptional circumstances are expressly required in the provision. Any objection based on the lack of such circumstances cannot be taken to be technical ground only. The CJR can never be effective by payment of lip service alone.

27. In my view, the rule in Ladd v Marshall is indeed relevant factors that the court should take into account in the course of its consideration of the whole circumstances when dealing with an application under O.32 r.11A(4).”

101.  Neither Jose Miranda da Costa Junior & anor nor Yifung Properties Limited & anor concerns application for summary judgment. Mr Khaw SC referred to Dutfield International Group Co Ltd v Nine Dragon Investment Ltd[39] in which directions were given for the filing of evidence for an application for summary judgment. After the plaintiff filed affirmation in reply that raised a new allegation, the 1^st and 3^rd defendants applied for leave to adduce further affirmation evidence a day before the adjourned Order 14 hearing. The judge found such affirmation contained evidence responding to the plaintiff’s new allegation, and was relevant to the issues to be ventilated at the Order 14 hearing.

102.  The issue in that case was whether Order 32 rule 11A(4)  of the RHC applied so that no leave to adduce further evidence should be granted to the 1^st and 3^rd defendants save in exceptional circumstances. Bharwaney J held the exercise of discretion in that case was not constrained by Order 32 rule 11A of the RHC, which only applied to proceedings commenced before a master who has given directions for the exchange of evidence (which was the scenario for the O14 Summons in the present action but not in Dutfield International Group Co Ltd). But Bharwaney J concluded on obiter basis that if Order 32 rule 11A(4)  of the RHC were applicable, he would only have granted leave for the 1^st and 3^rd defendants to rely on certain parts of the new affirmation on the ground of exceptional circumstances as it would have been a denial of natural justice if such leave had not been granted (page 290):

“The 1^st and 3^rd defendants would have been denied their right to be heard if they were unable to respond to the new allegation raised in the affirmation in reply filed by the plaintiff. A party ought to be permitted to adduce relevant proportionate evidence to rebut a new case raised by the opposite party, if the grant of leave to do so does not jeopardise milestone dates. In this case, the grant of leave to rely on paragraphs 7 to 26 of the affirmation in question would not result in any adjournment of the substantive hearing.” (my emphasis)

“Natural justice” became relevant because the plaintiff in that case raised new factual allegations in its affirmation in reply, which would therefore attract a response by the 1^st and 3^rd defendants. But still, they were only allowed to adduce proportionate affirmation evidence in response, and subject to the caveat that it would not result in adjournment of the substantive hearing.

103.  In my view, in relation to the Ladd v Marshall conditions in paragraph 98(b)-(c)  above, by drawing analogy with the judicial approach in respect of an application to admit fresh evidence on appeal to the Court of Appeal from a summary judgment,[40] these conditions will be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on application for summary judgment, to raise a triable issue or arguable defence, but with the caveat that there is still no injustice in requiring a defendant to use diligence as is reasonable in the circumstances to put before the judge/master on the hearing of the Order 14 summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce evidence which was readily available upon the original exchange of evidence pursuant to court directions but was not then produced (ie the Ladd v Marshall condition in paragraph 98(a)  above).

104.  Amendment of pleadings  Mr Khaw SC and Mr Chain submitted that since a defendant is not bound by his own pleadings when showing cause against an application for summary judgment,[41] the D1/D2 Amendment Summonses, the Draft D1 AD and the Draft D2 AD&C were strictly not necessary for the D1/D2 Appeals when (according to Mr Khaw SC and Mr Chain)  the proposed amendments rested on existing affirmation evidence already before the Master, but such proposed amendments were put forward for convenience to clarify D1’s/D2’s respective case for opposing the O14 Summons and for supporting the D1/D2 Appeals.

105.  Mr Chain submitted that amendment to pleadings will readily be allowed at any stage of the proceedings if they are for the purpose of identifying for determination the real questions in controversy between the parties and/or necessary for disposing fairly of the cause or matter,[42] and any concern for the opposite party can be alleviated by appropriate order as to costs. In my view, the courts adopt a more nuanced approach in the post-CJR era, and I adopt the broad principles for pre-judgment amendment of pleadings that I have set out in Chen Yusheng v Wo Ming Engineering Limited & anor.[43]

106.  Here, the D1 Amendment Summons and the D2 Amendment Summons were respectively filed almost a year and almost half a year after the O14 Judgment (although the D1 and D2 Appeals against the O14 Judgment had been filed shortly after the O14 Judgment).

107.  Mr Ho SC submitted that an application for amendment of pleadings made after judgment and on appeal must be viewed in context. In Chan Chi Wai v Chan Sau Wah,[44] after judgment had been given at first instance against all defendants and while the case was under appeal, the applicants (ie the 1^st and 3^rd defendants by original action and the 2^nd plaintiffs by counterclaim)  applied to the Court of Appeal for leave to amend their Re-Amended Defence and Counterclaim to raise a new case and to withdraw a concession by their former trial counsel. The Court of Appeal dismissed the application. Kwan VP explained as follows (pages 340-341):

“26. First, the application to amend the defence is made after judgment has been given in favour of the plaintiffs and this must be subject to a stringent scrutiny than is the usual case of amending a pleading before judgment (Mak Shiu Tong v Yue Kwok Ying (CACV 199/2002, [2004] HKEC 1188, 30 September 2004, [20]). Moreover, as stated by Neuberger J (as he then was)  in Charlesworth v Relay Roads Ltd [2000] 1 WLR 230, 238G-H:

… because it is inherently contrary to the public interest and unfair on the other side that an unsuccessful party should be able to raise new points or call fresh evidence after a full and final judgment has been given against him, it would generally require an exceptional case before the court was prepared to accede to an application where the applicant could not satisfy the three requirements in Ladd v Marshall.

27. These quotations in Charlesworth v Relay Roads Ltd at pp.237H-238A apply aptly to the present situation:

When a litigant has obtained a judgment … he is by law entitled not to be deprived of that judgment without very solid grounds: Brown v Dean [1910] AC 373 at 374.

It is a duty of every litigant ‘to bring forward his whole case at once and not to bring it forward piecemeal as he found out the objections in his way’: In re New York Exchange Ltd (1888)  39 Ch D 415 at 420.”

108.  The 3 Ladd v Marshall conditions for the admission of new evidence on appeal (see paragraph 98(a)-(c)  above)  were not satisfied in that case. As there was no suggestion that the evidence to support the new case could not have been obtained with reasonable diligence for use at trial, there was a strong presumption against letting the applicants have a second chance. It was held there were no exceptional circumstances to warrant the exercise of discretion in their favour (paragraph 28).

109.  In Nam Kwong Medicines & Health Product Co Ltd v China Insurance Co Ltd and People’s Insurance Co Ltd (Third Party),[45] 4 months after the plaintiff’s claim was dismissed, the defendant sought to amend its defence to add a counterclaim for repayment of a sum on the basis that it assumed the plaintiff would repay the sum when its claim was dismissed (but the plaintiff did not), and that it was a small matter to be cleared up cost-effectively by way of amendment. The plaintiff said it was too late. Stone J, citing Wing Han Trading Co Ltd v Tang Yan Kit & anor,[46] held that a court would require an exceptional case before acceding to such request, and rejected the application. The defendant had been fully aware of the issue at the very outset of the case some 4 years ago, and there was no reason why the counterclaim could not have been pleaded at the appropriate time and adjudged as part of the trial. There was a public interest in the finality of litigation, and it would be inappropriate to allow the case to be re-opened on no other basis than the defendant consciously chose not to mount the claim, only to return to court because it had guessed incorrectly what the plaintiff was likely to do in terms of repaying the money when faced with an adverse result (page 348).

110.  But Mr Chain drew attention to Leung Wai Ling Isewesg v Success Base Engineering Limited,[47] and suggested this case showed the Court of Appeal to be amenable in allowing pleadings to be amended even after summary judgment had been entered. In that case, the plaintiff landlord applied for summary judgment against the defendant tenant for possession, arears of rent, mesne profits and damages (paragraph 10). The master granted conditional leave to defend, but on appeal the judge gave summary judgment to the plaintiff for forfeiture of the deposit, arears of rent and mesne profits with leave for the plaintiff to re-amend the statement of claim to add a prayer for forfeiture (which plea had been put forward in the original statement of claim), and dismissed the defendant’s counterclaim (paragraphs 10-11). The re-amended statement of claim was filed 10 days later (paragraph 11). The defendant appealed, but the Court of Appeal dismissed such appeal (paragraph 12).

111.  The defendant complained on appeal that the judge erred in allowing the plaintiff to amend the statement of claim after decision on summary judgment had been given (paragraph 37). It transpired that the judge had offered the defendant’s solicitor opportunity to address the court on the proposed amendment and on the construction of the forfeiture clause, but the defendant’s solicitor had nothing further to say (and did not say he needed further time or the defendant required to file opposing evidence)  even though he disagreed with the claim, so the judge was entitled to form the view that the defendant was not prejudiced by the late amendment and that the amendment should be allowed (paragraphs 38-39).

112.  I do not find Leung Wai Ling Isewesg to be of assistance for its context was a far cry from the situation in the present case:

(a)	since the master in that case allowed conditional leave to defend and declined to grant summary judgment, when the Order 14 application came before the judge for re-hearing on appeal, the legal action was merely ongoing without any judgment against the defendant to speak of (but here the Master granted the O14 Judgment against both Ds);
(b)	the relevant plea was already pleaded in the existing pleading in that case, and the proposed amendment (upon appeal to the judge)  was merely to add a prayer of relief based on an existing plea (but here the proposed amendments in the Draft D1 AD and the Draft D2 AD&C had not been pleaded in D1’s Defence and D2’s Defence);
(c)	the defendant in that case did not really resist the proposed amendments despite opportunity granted for doing so (but here P opposed the proposed amendments).

113.  That said, the present case was still somewhat different from Chan Chi Wai and Nam Kwong Medicines & Health Product Co Ltd in that the judgments in those cases were entered after trial, so the exceptional nature of re-opening the litigation after full trial and final judgment as well as the significant public interest of finality of litigation were underlined. Here, the Order 14 Judgment was subject to de novo re-hearing on appeal, so it would be as if the Order 14 Summons came before this court for the first time. Thus, in dealing with the D1/D2 Amendment Summonses, whilst this court would not ignore the timing (or Mr Ho SC would describe as the lateness)  of the D1/D2 Amendment Summonses vis-à-vis the O14 Judgment and the D1/2 Appeals (eg considerations as to why these applications could not have been made earlier), this court would bear in mind that the O14 Judgment under appeal was subject to re-hearing and would not have the same quality of finality as a judgment after trial.

XV.  ISSUES

114.  The applications before this court were (a)  the D1 Appeal against the O14 Judgment against D1, (b)  the D2 Appeal against the O14 Judgment against D2, (c)  the D1 Appeal against the New Aff Order, (d)  the D1 Amendment Summons, and (e)  the D2 Amendment Summons.

115.  The O14 Judgment granted summary judgment in the amount of the Sum in favour of P against D1 and D2 jointly and severally for breach of contract (see paragraph 30(b)(i)  above)  or alternatively against D1 solely for restitution on the ground of unjust enrichment (see paragraph 30(b)(ii)  above)  with interest and costs. Mr Ho SC informed this court P had confirmed to the Master that should he succeed on the causes of action for breach of contract and for restitution on the ground of unjust enrichment, he would not pursue any proprietary remedy based on constructive/resulting trust, so the Master did not deal with the latter cause of action in the O14 Judgment. At the Appeal Hearing, Mr Ho SC fairly stated P would not rely on such cause of action to oppose the D1/D2 Appeals.

116.  The broad issue was whether D1/D2 could show there was a triable issue or an arguable defence. There was no dispute that P as Party B to the Agreement (a)  paid the Sum as consideration for purchase of the Shares to invest in D1, but (b)  despite P and D2 having signed the Transfer Documents P did not obtain title to any shares in D1. Given such common ground, the battle among the parties as to P’s claim for breach of contract essentially turned on (i)  the true nature of the bargain under the Agreement (ie whether there was any breach of contract by reason of (a)-(b)  above), and (ii)  the identity of Party A to the Agreement (ie who would be liable to P if breach of contract was established).

117.  In respect to (i)  above, D1 argued (even on the basis of P’s case that Party A to the Agreement comprised both D1 and D2)  P was given a right under the Agreement to elect between 2 alternative but inconsistent ways of acquiring the Shares, ie by transfer of shares from D1’s existing shareholders or by capital increase from allotment of new shares by D1, and P elected to acquire the Shares by way of transfer of existing shares from D2 and waived his right to (and he had never asked for)  allotment of new shares by D1, so there was no breach of the Agreement by D1 (“Election Defence”). On the other hand, P claimed the “true bargain” or the “nub of the deal” under the Agreement was that P would pay the Sum to acquire the Shares, ie to obtain title to the Shares (so P could exercise his rights/obligations as a shareholder of D1), and P never abandoned, waived or traded off such obligation on Ds’ part for some other “option” by P. In short, P contended there was no question of election.

118.  In relation to (ii)  above, D1’s and D2’s respective case for resisting P’s claim / O14 Summons and for pursuing the D1/D2 Appeals contradicted each other. In the words of Mr Ho SC, both Ds “are seeking to evade liability by “fingering” the other as the party solely liable to P for the Sum”: (a)  D1 claimed it was not party to the Agreement, which agreement was made by D2 as representative on behalf of the existing shareholders of D1 as Party A and by P as Party B (“D1 Capacity Defence”), but (b)  D2 claimed he was not party to the Agreement, which agreement was made by D2 (not in any personal capacity)  on behalf of D1 as Party A and by P as Party B (“D2 Capacity Defence”). D2 claimed that if the Agreement could be interpreted in such a way that D2 was party to the Agreement in his personal capacity (which D2 denied), the Agreement should be rectified to reflect the common intention of the parties (ie that only P and D1 were parties to the Agreement)  (“Rectification Defence”). On the other hand, P claimed Party A of the Agreement comprised both D1 and D2.

119.  On P’s cause of action against D1 for restitution on the ground of unjust enrichment, D1 claimed (a)  the Sum it received from P had been transferred to Zheng for the benefit of D2, (b)  there was no total failure of consideration because P by the Transfer Documents acquired beneficial interest in the Shares which were held by D2 on trust for P, (c)  D1 changed its position by transferring the Sum it received from P to Zheng on behalf of D2 shortly thereafter, and (d)  P had right to enforce/ claim against D2 as the Agreement was made between P and D2 (“Unjust Enrichment Defences”). Not unnaturally, P disagreed with these contentions.

XVI.  ELECTION DEFENCE

120.  D1’s Election Defence assumed both D1 and D2 together were Party A of the Agreement (which D1 disagreed), so the discussions in this Part rested on such assumed premise (which was in line with P’s case)  unless otherwise stated.

(a)  Trilateral or bilateral Agreement?

121.  Mr Khaw SC’s written/oral submissions assumed P’s case was to the effect that “the Agreement was a tripartite one made between P, D1 and D2” (my emphasis), but I find this did not properly characterise P’s case. Although P contended P, D1 and D2 were all contracting parties, and D2 contended P and D1 were the contracting parties, I agree with Mr Ho SC and Mr Chain that on its face (and on proper construction)  the Agreement was a bilateral and not a trilateral agreement. After all, Party A suggested a single party, and there was no Party C. Indeed, Clause 2(6)  and Clause 4(3)  respectively referred to 雙方 and 甲乙雙方, which also bolstered such conclusion. Further, the execution page of the Agreement only had Party A on the left side and Party B on the right side with no signing space for Party C.

(b)  D1’s case

122.  Mr Khaw SC strongly relied on Clause 1(2)  which he said contemplated P’s purchase of the Shares under the Agreement was to be effected either by transfer of shares (轉讓)  (which obligation fell on the existing shareholders of D1 of which D2 was one)  or by capital increase (增資)  (which obligation fell on D1 in the form of allotment of new shares in D1). He drew support from Mr Ho SC’s written submissions that confirmed “[there] is no doubt that only D2, as “原股東” (existing shareholder), could “轉讓” (transfer)  his shares”, and “[it] is equally obvious that only D1 would be in a position to “增資” (increase the share capital)  to allot new shares to P”.

123.  Mr Khaw SC submitted that Clause 1(2), properly construed, gave P a right to elect between 2 alternative ways of acquiring the Shares, ie by transfer of shares from existing shareholders or through capital increase by allotment of shares. Mr Khaw SC relied on the italicised parts of the following passage from Chitty on Contracts[48]for the relevant legal principles governing “promises in the alternative”:

“Promises in the alternative Where a contractual promise is in the alternative, in that the promisor agrees to do one or more things, the legal effect of the promise depends on the kind of alternative involved: there may be a promise to perform in one of two or more alternative ways, where the form of the promise requires an election to be made; or there may be a primary or basic obligation to perform in one way unless the party who holds the “option” chooses to substitute another way. Under the first kind of alternative promise, there is no primary or basic obligation and there must be an election of an alternative by one of the parties.  The contract may provide which party may choose the alternative to be performed; in the absence of such a provision, the right to elect the alternative is impliedly vested in the promisor, the rule being that the party who is obliged to perform the first act may choose which alternative he wishes to perform. If the promisee is entitled to elect between the alternatives, he must give notice of his election, and until such notice has been given the liability of the other party does not arise. Once the person entitled to elect chooses the alternative to be performed, he is absolutely bound by his choice even though the chosen mode of performance afterwards becomes impossible to carry out.” (my emphasis)

Mr Khaw SC reminded that where a contractual promise is in the alternative and the promisee is entitled to elect between the alternatives, “he must give notice of his election, and until such notice has been given the liability of the other party does not arise”.[49]

124.  Mr Khaw SC submitted that P as the promisee had elected to acquire the Shares by transfer from D2 as an existing shareholder (as opposed to by allotment of new shares by D1):

(a)	at the time of the Agreement, D2 held 23.12% shareholding (ie 231,201,504 shares)  in D1,[50] so D2 alone had more than enough shares in D1 for P’s intended acquisition of the Shares under the Agreement;
(b)	at a meeting in/about September 2017 (ie about 1½ years after execution of the Agreement), P and D2 signed the Transfer Documents.[51]

Mr Khaw SC argued that the Transfer Documents (which, albeit undated, (i)  gave the exact number of shares in D1 to be transferred as the Shares that P intended to acquire under the Agreement, (ii)  gave the names of the transferor (D2)  and the transferee (P), and (iii)  were signed by D2 and P)  demonstrated that at all material times P looked towards D2 and not D1 for his intended acquisition of the Shares.

125.  Mr Khaw SC submitted it did not matter that P/D2 did not adduce affirmation evidence to explain why, despite having signed the Transfer Documents, the share transfer transaction was not completed because P had obviously elected to acquire the Shares by transfer of existing shares from D2 (as opposed to allotment of new shares by D1), and D1 therefore had a valid and credible defence of waiver by election.[52] Mr Khaw SC further submitted it would be unjust and D1, having been made a party to the present action, would suffer detriment if P were allowed to now elect for his rights against D1.[53]

126.  On the principles of waiver by election, Mr Khaw SC referred to Trafalgar House Construction (Asia)  Ltd & anor v The Owners and/or Demise Charterers of MV “Thor Scan”.[54] In that case, a vessel was chartered from her shipowner for sending cargo to the respondents, and a clause in the bill of lading stated that any dispute arising thereunder shall be decided in the country where the carrier had its principal place of business, and the law of such country shall apply. The shipowner exercised lien over the cargo, so the respondents secured its release by giving a guarantee under protest and they then sued the shipowner in Hong Kong. In the course of negotiations, the shipowner sent a fax to the respondents asserting the dispute should be resolved according to the law of the shipowner’s principal place of business (ie the Netherland Antilles)  pursuant to the clause in the bill of lading, but proposed the Netherlands as a compromise. The shipowner then sued the respondents in the Netherlands and applied to stay the Hong Kong proceedings, which application was adjourned. The Dutch court declined jurisdiction (because the shipowner’s principal place of business was in the Netherland Antilles and not the Netherlands), so the shipowner restored the stay summons in Hong Kong but applied to amend it in favour of the Netherland Antilles. The applications were refused/ dismissed on the ground that the shipowner had waived its right to seek a stay in favour of the Netherland Antilles by suing in the Netherlands, but in any event the court would not have granted a stay. The shipowner appealed, and Chan CJHC (as he then was), citing the observations of Lord Goff on the principles of waiver in The Kanchenjunga[55] with approval, explained as follows:

“It is clear from what Lord Goff said that for the principle of waiver to operate, at least in the context of the present case, it must be shown that: (1)  a party has a right under a contract or by operation of law; (2)  he knows of the existence of the right or the facts giving rise to such right; and (3)  he has, by conduct, clearly and unequivocally abandoned his right or indicated that he is not exercising such right. Where he has a number of alternative and inconsistent courses of action open to him, his right can be waived or abandoned by making an election. If he chooses one particular course of action, he can be taken to have waived his right or rights under the other courses of action. Where, instead of having several alternative inconsistent options, he has a right under a contract or by operation of law, such right can be waived by his choosing not to exercise it. In one sense, it can be said that he has also made an election by choosing one of two options: the option to exercise the right and the option not to do so.

In my view, waiver does not operate only where a party has two or more alternative inconsistent options available to him, but can also operate in other situations. Whether there is a waiver depends on what a party has done or what he has failed to do in circumstances where he is expected or obliged to do something to assert or exercise his right. If what he has done or failed to do amounts to a clear and unequivocal indication that he has chosen not to pursue or exercise his right, then in law, he is taken to have waived his right. The choice of one option rather than the others merely illustrates his intention to waive his rights under the other options”. (my emphasis)

127.  It was held on appeal in The “Thor Scan” that the right under the clause was a right to litigate exclusively in the shipowner’s place of business, which was fixed at the time of contract to be in the Netherland Antilles (pages 142, 150 and 152). The shipowner’s fax showed it was well aware of such right, so its informed conduct to litigate in the Netherlands was inconsistent with such right. Since it had made a final election (that was not dependent on reliance by the respondents)  and waived its right to litigate exclusively in the Netherland Antilles (pages 151-152), it was not open for the shipowner to claim mistaken belief by its lawyers as to its correct principal place of business for contending it had not abandoned its right to enforce the clause (page 152).

128.  Turning back to the present case, Mr Khaw SC suggested that P knew the existence/execution of the Transfer Documents posed difficulty for his claim against D1, so despite the matters in paragraphs 124-125 above, (a)  P merely complained D1 failed to “allot” new shares whereas D2 failed to “transfer” existing shares to him, and the 5/3/19 Letter,[56] P’s Statement of Claim[57] and the P 1^st Aff were silent on the Transfer Documents, and (b)  when the Yang 2^nd Aff referred to the Transfer Documents, the P 2^nd Aff merely replied as follows:

“25. It is noted from paragraphs 6 and 7 of [the Yang 2^nd Aff] that [D1] seeks to rely on the [IoT] and [B/S Notes] to argue that only [D2] is bound by the Agreement. I disagree. The bottom line is that pursuant to the Agreement I should have the shares which I have indisputably paid for, whether by way of transfer by [D2] or allotment by [D1]”.

129.  Mr Khaw SC submitted the existence/execution (by P and D2)  of the Transfer Documents raised the following questions:

(a)	whether P, by entering into the Transfer Documents with D2 and signing the same, had elected the right to acquire the Shares by way of transfer of existing shares from D2 (rather than by way of allotment of new shares by D1);
(b)	if the answer to (a)  above was in the affirmative, whether P by such election had waived his right to acquire the Shares by allotment of new shares;
(c)	why, despite execution of the Transfer Documents, P and D2 failed to complete the share transfer transaction;
(d)	whether and, if at all, when P requested for allotment of new shares for his intended acquisition of the Shares;
(e)	whether and how D1 in the circumstances could be said to be in breach of the Agreement.

130.  Mr Khaw SC complained that “[up] till now P has failed to address [these] questions” (especially (c)-(d)  above)  or to provide any concrete evidence (say, any request P had made for allotment of new shares under (d)  above), so in the circumstances P failed to explain why/how D1 could be liable for breach of the Agreement (ie (e) above). Mr Khaw SC therefore submitted P’s claim against D1 raised patently triable issues, which warranted further/full investigation at trial, and which made it unsuitable to grant summary judgment against D1.

131.  Mr Khaw SC further complained that the Master (a)  merely dealt with the D1 Capacity Defence but failed to consider how D1 could be held liable for breach of the Agreement especially in view of the Transfer Documents, and (b)  erred in (i)  brushing aside the Transfer Documents (when such documents were not disputed)  on the basis that they had not been referred to in D1’s Defence and (ii)  failing to consider at all the effects of the Transfer Documents.

(c)  Discussion

132.  Taking the last point first, I agree with Mr Ho SC that D1’s criticisms against the Master was unfair when the Election Defence (ie that P had “elected” to acquire the Shares by transfer of shares from D2 and “abandoned” the right to acquire the Shares by allotment of shares from D1, which thereby gave rise to the defence of “waiver by election”)  had not been pleaded in D1’s Defence and was not raised at the Master Hearing. But despite such handicap, the Master did refer to Clause 2(1)  (should be Clause 2(2))  in relation to the Transfer Documents when she gave the following oral reasons for the O14 Judgment (see paragraph 94 above):

“Clause 1(2)  provides that the investment shall be made by acquiring shares by existing shareholders or by allotment. Hence, both [D2] as the shareholders’ representative or [D1] would be obliged to give the shares to [P] upon receipt of his investment funds.

Clause 2 sets out the parties’ rights and obligations. ……

……

On behalf of [D1], Mr Law pointed to the undated [IoT] and [B/S Notes] and said that these documents show that the obligation of providing shares to [P] under the Agreement has already been performed.

I cannot accept these submissions. First of all, this is not part of [D1’s] pleaded case. It is never suggested that the Agreement has been performed by reason of the [B/S Notes] and the [IoT]. Secondly, this submission is contradicted by the provisions in the Agreement, for example, Clause 2(1)  [should be Clause 2(2)] which shows that Party A’s obligation is to complete the transfer. Mere signing of the [B/S Notes] and [IoT] does not amount to performance of the Agreement.

……” (my emphasis)

133.  Two matters are of note from the Master’s oral reasons for decision:

(a)

At the Master Hearing, D1’s submissions focused on Party A’s performance of the Agreement by the execution of the Transfer Documents by P and D2 such that there was no breach of the Agreement (“Performance Defence”)  rather than on any Election Defence, ie election by Party B to look towards D2 and not D1 for performance of the Agreement which therefore gave rise to a defence of waiver by election such that Party B could not resile from his election to now claim against D1, which defence was not dependent on performance of the contractual obligations.

(b)

The Master answered and rejected the Performance Defence by saying it (i)  was not pleaded in D1’s Defence, and (ii)  could not stand given the “true bargain” under the Agreement was for Party A to “complete the transfer” of the Shares to Party B such that mere existence/execution of the Transfer Documents would not amount to sufficient performance of the Agreement. The Election Defence was not touched upon at the Master Hearing by either the bar or the bench.

134.  In my view, the Master could not be faulted for (1)  not considering the Election Defence as it was not even raised before her, and (2)  having reservations about the Performance Defence as it was not pleaded. On (2)  above, I bear in mind the following:

(a)	D1’s Defence (filed on 28 June 2019, ie more than 2 months after P’s Writ of Summons with Statement of Claim indorsed thereon)  made no reference to the Transfer Documents at all (see paragraphs 9-12 above). As Mr Ho SC submitted, it is trite that on an application for summary judgment, the court should not take any alleged defence at face value, and should consider inter alia whether a defence is “only recently raised despite opportunity being given to the defendant to respond earlier”.[58]
(b)	The Yang 2nd Aff (filed on 9 January 2020)  made clear D1’s defence were essentially two-fold: (a)  D1 was not party to the Agreement and did not authorise D2 to enter into the Agreement on its behalf (ie the D1 Capacity Defence), and (b)  D1 received the Sum on behalf of D2 and/or the then shareholders of D1 (see paragraph 39 above). The Yang 2nd Aff referred to the Transfer Documents to support the D1 Capacity Defence (see paragraph 41 above).
(c)	The Performance Defence was neither pleaded in D1’s Defence nor raised in the Yang 2nd Aff, and was only first mentioned in Mr Law’s written submissions (lodged on 27 February 2020)  for the initial substantive hearing of the O14 Summons on 2 March 2020 (which was eventually generally adjourned). The Performance Defence argued that (i)  once the Transfer Documents were signed (which was not disputed), P as transferee and D2 as transferor equally bore statutory obligation to lodge the documents with D1 to register P as a shareholder of D1, but D1 must not register any transfer until delivery of such documents to D1,[59] (ii)  there was no evidence that either P or D2 delivered the Transfer Documents to D1 for registration, (iii)  there was no evidence that D1 failed/refused to register such transfer, (iv)  although such transfer was not registered, P acquired beneficial interest in the shares by P’s and D2’s execution of the Transfer Documents,[60] (v)  D2’s obligation under the Agreement to transfer the Shares to P had been performed by execution of the Transfer Documents, and (vi)  it was P’s and/or D2’s default that resulted in failure to have P registered as a shareholder of D1. On such basis, Mr Law submitted to the Master that D2’s contractual obligation under the Agreement had been performed, but there was no contractual obligation upon D1 under the Agreement, so even on P’s case there was no prima facie case of breach of contract on the part of D1 and/or D2.

135.  That said, the Performance Defence did not feature in the Draft D1 AD (even though the Election Defence pleaded therein harnassed similar material facts as for the Performance Defence set out in paragraph 134(c)  above)  and/or in Mr Khaw SC’s submissions for the Appeal Hearing. Instead, the Election Defence surfaced post-judgment in the Draft D1 AD annexed to the D1 Amendment Summons (filed in June 2021, ie some 2 years after the filing of D1’s Defence and almost a year after the O14 Judgment)  and elaborated in Mr Khaw SC’s written submissions (lodged in July 2021).

136.  Given the above metamorphosis of D1’s defence contentions, it would not have been unexpected for the Master or even for this court to cast a vigilant if not jaundiced eye over the Election Defence against Mr Ho SC’s submissions that D1’s “no breach” argument premised on such defence by D1 was no more than an afterthought.

137.  With his usual skill, Mr Khaw SC sought to persuade the court that all factual elements of the Election Defence were in the affirmation evidence before the court, and that P’s election and waiver upon such election were merely the legal effects of the affirmed facts already placed before the court. Mr Ho SC fairly accepted it might not necessarily be controversial for a defendant to raise new defence contentions (without formally pleading them)  to resist a summary judgment application so long as they put forward reasonably credible or bona fide defences supported by affirmation evidence, but he argued the Election Defence now pleaded in the Draft D1 AD deserved further scrutiny for it raised factual allegations not supported by affirmation evidence available at the Master Hearing (including the Wong / Yang 3^rd Affs which the Master eventually disallowed by the New Aff Order).

138.  Having carefully considered Mr Khaw SC’s and Mr Ho SC’s submissions, I find the Election Defence did not simply raise legal consequences arising from the affirmed facts already placed before the court. Rather, the Election Defence made factual allegations beyond the existing affirmation evidence (including the Wong / Yang 3^rd Affs on de bene esse basis), and I give the following illustrative examples from the Draft D1 AD (see paragraph 87 above):

(a)	Paragraph c(c): There was no affirmation evidence from D1 to verify that D2 (as transferor)  and P (as transferee)  did not lodge the Transfer Documents with D1 for registration under section 151 of the Companies Ordinance Cap 622.
(b)	Paragraph c(d): There was no affirmation evidence from D1 to verify that D1 “was otherwise ready, willing and able to cause the intended transfer [of the Shares from D2 to P] to be registered”.
(c)	Paragraph 9c(b): There was no affirmation evidence from D1 to verify that it had never received any request from P for allotment of new shares in respect of P’s intended acquisition of the Shares under the Agreement.
(d)	Paragraph 9c(d)(i): There was no affirmation evidence from D1 to verify (i)  the existence of the alleged “common understanding/ assumption between [P], [D1] and [D2] that [P’s] intended acquisition of the Shares would be effected by the transfer of the same from [D2] and that [D1] would not be required to allot new shares or cause new shares to be allotted under the Agreement”, (ii)  how such “common understanding/assumption” came about, (iii)  who on behalf of D1 reached such “common understanding” with P and D2 (or any person(s)  on their behalf), and (iv)  what were the underlying facts that gave rise for such “common assumption”.
(e)	Paragraph 9c(d)(ii): There was no affirmation evidence from D1 that “[the] parties, at all material times, relied on the above common understanding/assumption, as a result of which [D1] proceeded on the basis that [P] had elected for transfer of existing shares (as opposed to allotment of new shares), thereby waiving his right to seek allotment of new shares” (my emphasis). D1 did not by affirmation evidence condescend upon the facts/particulars as to how all P, D1 and D2 “relied on” the alleged common understanding/assumption and/or how D1 “proceeded on the basis” of P’s alleged election.

139.  For the fresh averments in (a)-(c)  above, there was no positive statement and/or confirmation in D1’s affirmation evidence as to those allegations, and all that could be said was the absence of affirmation evidence on those matters. Indeed, I refer to Mr Law’s submissions in paragraph 134(c)(ii)-(iii)  above that merely contended there was no evidence that P or D2 delivered the Transfer Documents to D1 for registration and/or that D1 refused to register such transfer. But in my view, P (and/or D2)  could not be criticised for not addressing these matters in their affirmation evidence when they were unaware of any Election Defence at the time when P filed the P 1^st/2^nd Affs (and put forward the P 3^rd Aff on de bene esse basis)  and when D2 filed the D2 1^st/2^nd Affs.

140.  For the fresh averments in (d)-(e)  above, if it were said (as Mr Khaw SC appeared to say)  that the existence and execution (by P and D2)  of the Transfer Documents gave rise to any common understanding/ assumption (among P, D1 and D2 as averred in the Draft D1 AD), D1 did not so state/verify in the Yang 2^nd Aff (and/or in the Wong / Yang 3^rd Affs on de bene esse basis), and I note with interest that paragraphs 7-8 of the Yang 2^nd Aff merely stated that both P and D2 (rather than P, D1 and D2)  “knew and intended that the subject shares were to be purchased and transferred from D1 ……”, and that “[D1] simply was not involved in the share transfer and was not a party to the Agreement” (see paragraph 41 above). Again, the Election Defence (see conclusion in paragraph 9c(d)(iv)  of the Draft D1 AD that “[P] is or should be estopped from asserting or exercising his rights against [D1] under the Agreement as alleged in the Statement of Claim or at all” – see paragraph 87 above)  was not D1’s case before the Master (see D1’s two-pronged defence in paragraph 3 of the Yang 2^nd Aff and paragraph 39 above, and the Performance Defence in paragraphs 133(a)  and 134 above).

141.  The aforesaid elements of D1’s new Election Defence obviously required factual support, but they were not foreshadowed in the Yang 2^nd Aff (or even in the Yang 3^rd Aff on de bene esse basis), and D1 could hardly look to P’s/D2’s affirmation evidence because the Election Defence, quite simply, was not their respective case. In my view, such evidential lacuna not only weakened the vitality of the Election Defence, it also fed Mr Ho SC’s concern that the Election Defence was no more than an afterthought.

142.  More importantly, as Mr Khaw SC fairly acknowledged at the Appeal Hearing, the anterior question to the issues of alleged election and alleged waiver under the Election Defence was this: what was the “true bargain” or the “nub of the deal” between Party A and Party B under the Agreement, which question would turn on the construction of the Agreement. In my view, the Election Defence might arguably raise a triable issue/defence only if the Agreement, properly construed, meant the contractual promise thereunder (a)  was in the alternative (ie Party A as the promisor agreed to perform in two alternative and inconsistent ways), and (b)  required the party entitled to elect (ie Party B)  to choose the alternative to be performed. I pause here to note that for the purpose of the D1/D2 Capacity Defences and the Rectification Defence canvassed in Part XIX below, the discussion, analysis and conclusion in paragraphs 143-156 below as to the “true bargain” or the “nub of the deal” in respect of the Agreement remain relevant since they would not turn on (and were quite irrespective of)  whether Party A was D1, D2 or both Ds. But in considering the Election Defence which was premised on P’s case, I have conveniently referred to Party A as comprising both Ds.

143.  P’s simple/straightforward position on the “true bargain” or the “nub of the deal” which Party A (ie D1 and D2)  and Party B (ie P)  contracted for under the Agreement was this: upon payment of the Sum (ie the full purchase price for the Shares)  by Party B to Party A (and P undisputably paid the Sum into D1’s bank account), Party B would become owner of and acquire title to the Shares whether by way of transfer of existing shares or by way of allotment of new shares (see paragraph 25 of the P 2^nd Aff and paragraph 128 above). Thus, the contractual promise by Party A was to pass ownership of and to give title to the Shares to P (so P would become a shareholder of D1 with rights/ obligations as such), which sole/primary contractual promise on the part of Party A was never abandoned, waived or traded off for any other alleged “option” by P. Thus, on proper construction/analysis, there was no “contractual promise in the alternative” and consequently no question of election.

144.  Mr Khaw SC submitted this could not be right because (a)  P never complained D1 failed to allot new shares for him, (b)  P did not provide concrete evidence to show whether/when he ever requested for allotment of new shares for P’s intended acquisition of the Shares, and (c)  Mr Ho SC incorrectly focused on the matter of registration of the Shares in P’s name. In my view and for the reasons explained in paragraphs 145-149 below, such submissions missed the point.

145.  For (a)-(b)  above, I reiterate the evidential concerns set out in paragraphs 138-141 above. Further, if P’s position in paragraph 143 above were correct, then it would not be for Party B (ie P)  to dictate how Party A (ie D1 and D2)  would choose to perform their sole/primary contractual promise. Rather, it would be for Party A (ie D1 and D2)  as the promisee who contracted to perform their sole/primary contractual obligation in 2 alternative ways to decide between themselves on how to pass ownership of and to give title to the Shares to Party B (ie P). In short, there was no reason on P’s case for P to complain to D1 about any failure by D1 to allot new shares in contra-distinction to transfer existing shares to him, or for P to notify/require Party A to satisfy his acquisition of the Shares by alloting new shares.

146.  As explained in Chitty on Contracts:[61]

“Normally, no request or demand for performance is necessary and the promisor is bound to perform its contractual obligation without being requested to do so …… A request to perform is essential to complete the promisee’s cause of action only if the contract expresses requires such a request, or the nature of contract shows that it is an implied condition precedent to the promisor’s liability that a request for performance should be made ……”

Even turning to the passage from Chitty on Contracts on “promises in the alternative” cited by Mr Khaw SC (see paragraph 123 above), the learned authors made clear that the legal effect of “promises in the alternative” in the first place rests on whether or not the contractual promise is in the alternative such that “the promisor agrees to do one or more things”. This, in my view, will turn on construction of the Agreement.

147.  Here, P claimed that the “true bargain” or the “nub of the deal” was for the promisor (ie Party A being D1 and D2)  to carry out only one primary/basic promise (which was not in any alternative), ie to pass ownership of and to give title to the Shares to the promisee (ie Party B being P)  upon his payment of the Sum, and alleged that D1’s contentions failed to focus on this core matter but irrelevantly strayed to discuss the means by which the promisor (ie Party A)  would perform such aforesaid primary/basic promise in order to satisfy the “true bargain” or the “nub of the deal”.

148.  Mr Ho SC illustrated P’s contentions by a colourful example. If X agrees to pay $10,000,000 for the purchase from Y of either a Picasso painting or a Rolls Royce car, then X may arguably have a right to nominate whether he would receive a Picasso painting or a Rolls Royce car because there is no primary/basic promise or obligation until a party elects an alternative, and which party (either X or Y)  will have the right to elect will turn on the construction of the agreement. But this was not the scenario under the Agreement for Party B agreed to only one thing, ie to purchase the Shares, and not to purchase either the Shares or some other thing.

149.  Taking Mr Ho SC’s illustration further, if X agrees to pay $10,000,000 for the purchase of a particular Picasso painting from Y, there is a primary/basic promise on the part of Y to deliver that particular Picasso painting, and normally X will not be concerned to see whether Y satisfies such primary/basic promise by delivery of such painting from (a)  Y’s private collection, (b)  Y’s acquisition from a gallery or from another’s private collection, or (c)  Y’s purchase through an auction house. Generally, if the contract provides for 2 or more alternative ways to perform (ie (a)-(c)  above)  and further provides which party (either X or Y)  may choose which alternative means of performance, then the right to elect will vest in the specified party. However, if the contract provides for 2 or more alternative ways to perform (ie (a)-(c)  above)  but is silent on which party may choose which alternative means of performance, “the right to elect the alternative is impliedly vested in the promisor [ie Y in the above example], the rule being that the party who is obliged to perform the first act may choose which alternative he wishes to perform”.[62]

150.  Thus, the real question (as Mr Khaw SC was constrained to accept at the Appeal Hearing)  boiled down to a matter of contractual construction of the Agreement, ie whether the “true bargain” or the “nub of the deal” among the parties was that as alleged under the Election Defence or as alleged by P in paragraph 143 above, and the answer to this question would clarify whether it was for Party B (as Mr Khaw SC suggested)  or Party A (as Mr Ho SC suggested)  to choose how to perform the relevant contractual promise.

151.  Having carefully considered Mr Khaw SC’s following submissions in (a)-(c)  below, I do not find they raised any triable issue or arguable defence:

(a)	the Agreement intended P’s acquisition of the Shares to turn on P’s election for 1 of 2 alternative ways that were contractually available to him (ie by transfer of existing shares or by allotment of new shares);
(b)	someone had to decide how P’s acquisition of the Shares in the manner provided for in Clause 1(2)  was to be effected;
(c)	P by executing the Transfer Documents made the election to acquire the Shares by way of transfer whilst D1 never made any allotment of shares, so what was bargained for was matched by how it was performed.

152.  In my view, upon reading the Agreement as a whole, the Agreement (and I highlight the following clauses)  pointed clearly towards the construction that the nub of the parties’ “true bargain” was for P to acquire ownership of and title to the Shares (which, as explained in paragraph 156 below, would include completion of the registration of P as a shareholder of D1 to enjoy his rights and to discharge his obligations as such shareholder), and there was no express or implied provision in the Agreement that required P to elect between transfer and allotment in respect of his acquisition of the Shares:

(a)	Clause 1(2): This sub-clause envisaged 2 ways for P to acquire the Shares as set out in paragraph 122 above (see also paragraphs 259-262 below), so in the overall context of the Agreement as a whole, 股權變更, 股權轉讓 and 變更登記 in Clause 2(2), Clause 2(6), Clause 4(3)(1)  and Clause 7(1)  (see (b), (c), (e)  and (g)  below)  referred to change in shareholding in D1 pursuant to P’s acquisition of the Shares in the manner as provided in Clause 1(2)  (see also footnotes 3 and 16 above).
(b)	Clause 2(2): The Master in her oral reasons referred to Clause 2(2)  as an answer to the Performance Defence (see paragraph 132 above). Mr Khaw SC’s submissions did not deal with Clause 2(2)  at all, but I find such clause clearly showed the Election Defence to be quite unarguable. Clause 2(2)  provided that the duty was on Party A (ie D1 and D2)  rather than on Party B to 向香港政府相關機構報送有關法律手續，及時完成有關股權變更手續，以確保乙方的利益 (my emphasis). Plainly, the bargain intended by the parties was for Party A to complete all relevant procedures for effecting change of shareholding (完成有關股權變更手續)to protect Party B’s interests.
(c)	Clause 2(6): Pursuant to such obligation on the part of Party A (ie D1 and D2)  under Clause 2(2)  to complete all relevant procedures for effecting change of shareholding, the parties contractually contemplated that upon 雙方完成股權轉讓後，乙方有權 …… 按香港公司條例的規定享有股東的權利和義務. In light of the legal principles discussed in paragraph 156(a)-(c)  below, the contractual bargain intended by the parties must be for Party B (ie P)  to be able to exercise his rights and discharge his obligations as registered shareholder after completion of the relevant procedures, which was Party A’s obligation under Clause 2(2)  (see (b)  above).
(d)	Clause 2(7)-(9): Clause 2(7)-(9)  set out P’s rights and obligations as a shareholder of D1 after completion of the relevant procedures for effecting change in shareholding being the obligation of Party A (ie D1 and D2)  under Clause 2(2)  (eg (如果香港衛視後續進行增資擴股或上巿時)  乙方享有對新股東而言的原股東的一切權利和義務, 乙方享有合作項目的股東優先權and 回購協議: 若甲方主體或其關聯子公司兩年內未能上市, 按照香港公佈的同期存款利率計算回購股份), which necessarily demonstrated P must have ownership/title of the Shares upon completion of such investment transaction. After all, if P were not to become owner of or to acquire title to the Shares, P would not be able to exercise his rights and discharge his obligations as shareholder of D1 under Clause 2(7), and there could not be any re-purchase of the Shares from P under Clause 2(9).
(e)	Clause 4(3)(1): By Clause 4(3)(1), Party A (ie D1 and D2)  and Party B (ie P)  had common understanding to 保證根據相關法律程式要求和規定, 完成股權轉讓和資金到位. Thus, Party B confirmed he would pay the Sum, and Party A confirmed they would complete the change in shareholding in accordance with legal requirements and regulations, and I reiterate the principles in paragraph 156(a)-(c)  below.
(f)	Clause 5(1)  provided that 各方均有義務誠信、全面遵守本合同 (my emphasis), and Clause 5(2)  provided that 任何一方如果沒有全面履行其按照本合同應承擔的責任與義務, 應當賠償由此而給非違約方造成的一切經濟損失 (my emphasis), which placed emphasis on full compliance and full performance of Party A’s and Party B’s contractual obligations.
(g)	Clause 7(1)  provided that 自各方就本合同所述與香港衛視股權投資事宜進行溝通和商務談判始, …… 以及本合同簽訂和履行, 完成香港註冊署的變更登記手續 ……, which again emphasised completion of relevant procedures.
(h)	Clause 9 provided that the Agreement would serve as basis for interpretation of the rights and obligations inter se amongst the shareholders of D1 (本合同作為解釋香港衛視股東之間權利和義務的依據).

153.  In my view, the obligation of Party A (ie D1 and D2)  under the Agreement was not any “contractual promise in the alternative”, and I agree with Mr Ho SC that when correctly interpreted/analysed, there was clearly no question of election by P (ie Party B), and hence no abandonment, waiver or trading off for some other “option” by him. Moreover, in my view, Party B was not bound under the Agreement to acquire the Shares by choosing either transfer of existing shares or allotment of new shares as inconsistent and/or mutually exclusive alternatives. After all, given that P’s contractual bargain under the Agreement was to acquire title/ownership of the Shares upon payment of the Sum, it mattered not to P whether the Shares he bought came from (a)  transfer of existing shares, (b)  allotment of new shares, or (c)  partly from transfer or partly from allotment, ie the 2 modes of performance could in fact co-exist. This, again, showed the Election Defence was untenable.

154.  At the Appeal Hearing, Mr Khaw SC orally submitted that the Agreement contractually provided for 2 alternative means of performance because the parties contemplated there might be difficulty for P to acquire the Shares by transfer, eg D2 or other existing shareholder(s)  might be unwilling to transfer their shares in D1 to P. But there was no affirmation evidence that verified or supported such allegation. Anyway, such allegation would not detract from my view in the above paragraph that the Agreement did not contemplate inconsistent or mutually exclusive promises for election by P.

155.  Further, it made little logical/commercial sense for Party B (ie P who was an outsider to D1)  to elect/choose the means by which the Shares would be given to him under the Agreement (ie by transfer or by allotment)  when there was no suggestion P knew at the time of contract that as between D1 and D2 whether or not (a)  D2 was willing to transfer his own shares in D1 (and, if so willing, to transfer how many of his own shares in D1)  to him, and/or (b)  the D1 Board was able and willing to pass resolution to allot new shares in D1 (and, if so able and willing, to allot how many new shares in D1)  to him, especially when at the the time of contract Clause 1(2)  left open 2 modes of performance, ie by transfer or by allotment. Rather, it made logical/commercial sense for Party A (ie D1 and D2)  with relevant corporate/personal knowledge to decide which one or both means would be feasible/adopted for giving the Shares to P.

156.  Mr Khaw SC in his oral submissions complained that P’s present focus on D1’s failure to take steps to register P as a shareholder was not pleaded. First, I see nothing sinister in P’s alleged focus on registration, especially as the matter of registration was first raised not by P but by D1 in relation to the Performance Defence (see paragraph 134(c)(i)-(vi)  above). Secondly, this did not raise any independent point, but was in fact part of P’s contentions that the “true bargain” or the “nub of the deal” under the Agreement was for him to become owner of and to acquire title to the Shares upon payment of the Sum. In International Credit and Investment Co (Overseas)  Ltd & anor v Adham & ors,[63] Harman J held that as a matter of law title to shares is based on entry in the company’s share register, and he went on to say as follows:

“…… it is an inevitable conclusion of law that the shares …… are therefore chose in action situate within England and Wales. It is trite law and unarguably the case that title to shares is based upon entries in the share register of the company. Certificates of holdings of shares are merely prima facie evidence of the existence on a share register of entries at the date on which the certificate is given. A share certificate is not in any sort of sense conclusive evidence at a later date of the proper title to shares at that later date. In order to prove title to shares one must go to the share register.” (my emphasis)[64]

Thirdly, it was also trite (and Mr Khaw SC did not seek to dispute)  that:

(a)	“…… section 112(3)  of the Companies Ordinance Cap 622 …… provides that a person becomes a member (shareholder)  of a company when he so agrees and his name is entered in the company’s register of members. Thus, a legal owner of shares is a person in whose name the shares were registered with the company. If a person is not a registered shareholder, he is not the legal owner irrespective whether he has any other interests (including equitable/beneficial interests)  in the shares”;[65]
(b)	company law takes no notice of any trust or beneficial interest attaching to shares;[66]
(c)	“[a] shareholder must be registered in order to be a member …… and to exercise the rights attached to that status under the articles and the Companies Ordinance (Cap 32)” (now Companies Ordinance Cap 622).[67]

So, in my view, P’s so-called focus on registration was not so much about the act of registration (or more accurately, the absence of such act of registration), but about the necessity for Party A (D1 and D2)  to effect registration so as perform their contractual promise/bargain under the Agreement to pass ownership of and to give title to the Shares to Party B (ie P)  by completing the relevant procedures to effect change of shareholding (see discussions in paragraph 152 above). Fourthly, for the same reasons, the signing of the Transfer Documents that remained undated and that were not completed by actual transfer and registration did not sufficiently show Party A had 完成有關股權變更手續 and/or 完成股權轉讓, and certainly did not suffice to demonstrate any clear/ unequivocal election by P and/or any clear/unequivocal abandonment of possible allotment of the Shares to him. Indeed, given Party A’s contractual bargain/promise as explained above, D1’s references to sections 150-151 of the Companies Ordinance Cap 622 (see paragraph 134(c)(i)  above)  would not take D1’s case further.

157.  For all of the above reasons, the Election Defence had no merit and did not raise any arguable or triable issue that would justify leave to defend.

XVII.  UNJUST ENRICHMENT DEFENCES

(a)  D1’s case

158.  D1 contended P’s reliance on D1’s receipt of the Sum to raise claim on the basis of unjust enrichment for the purpose of the O14 Summons was misconceived.

159.  First, D1 agreed it received the Sum, but noted there were factual disputes on who was the intended recipient of the Sum and on how the Sum was dealt with in the existing affirmation evidence (even if one did not refer to the Wong / Yang 3^rd Affs on de bene esse basis).

160.  D1 claimed it received the Sum from P on behalf of D2, and shortly thereafter transferred the Sum to Zheng on behalf of D2. D1 further claimed that D2 caused a total sum of HK$12,000,000 to be transferred by D1 and HKTVEG (of which company D2 was also a director)  to D2’s secretary Zheng for and on behalf of D2 by 6 Transfers, all of which were approved solely by D2 in his capacity as D1’s chairman (see paragraph 42 above). Mr Khaw SC submitted P’s argument that Zheng was yet to be D2’s secretary (under his formal employment contract)  at the time of the 6 Transfers to Zheng (see paragraph 63 above)  was untenable as (a)  D2’s affirmation evidence did not even challenge the correctness of Zheng’s status as his secretary at the time of the Transfers, (b)  D2 did not appear to dispute the Transfers to Zheng were made according to his directions/instructions, and (c)  D2 admitted he did work closely with Zheng[68], so if D1’s case were accepted at the end of the day, P could not say D1 was unjustly enriched. Further, Mr Khaw SC pointed out D2 did not give any explanation for the substantial transfers to Zheng other than to assert (i)  Zheng “immediately forwarded the funds back to the benefit of [D1]” and (ii)  he “never benefitted from and was never personally enriched by the [Sum] or any part thereof” (see paragraph 54(b)(iv)  above).

161.  D2 denied he was even in receipt of the Sum (see paragraph 17 above), and claimed he never benefited from and was never personally enriched by the Sum (see paragraph 54 (b)(iv)  above). Mr Khaw SC argued that (a)  had D2 not taken any benefit of the Sum, he should have asked for an additional amount for the intended transaction by way of the Transfer Documents signed after transfer of the Sum to Zheng, and (b)  there was no evidence from D2 that he could not make use of the Sum already paid by P or that he had to seek additional payment for completion of transfer of the Shares. Mr Khaw SC submitted that on this reason alone D2’s assertion that he did not take any benefit from the Sum was simply unbelievable. As for D2’s allegation that Zheng subsequently transferred the funds he received from D1 and HKTVEG to Shenzhen XJ and Beijing XJ, Mr Khaw SC submitted it only helped to establish D2 had taken benefit from the Sum when he was a substantial shareholder in Shenzhen XJ that wholly owned Beijing XJ.

162.  Mr Khaw SC submitted that in any event the above disputes could not be resolved on the affirmation evidence and could only be decided at trial.

163.  Secondly, Mr Khaw SC submitted that by reason of D2’s contractual commitment upon execution of the Transfer Documents, the beneficial interest in the Shares passed from D2 to P, so D2 held the Shares on trust for P pending completion of the transfer of the Shares (see paragraph c(b)  of the Draft D1 AD and paragraph 87 above). In Xiamen Xinjingdi Group Co Ltd v Eton Properties Ltd,[69] Lord Sumption NPJ explained as follows (page 410):

“174.   …… The principle …… is that “the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold”: Lysaght v Edwards (1876)  2 Ch D 499, 506 (Jessel MR). This well known statement of principle related to land. It gives rise to a true proprietary interest in equity, arising from the fiduciary character of the relationship between vendor and purchaser under an executory contract of sale. The basis of the rule in both cases, and the essential condition for its operation, is that the contractual obligation to transfer the property should be specifically enforceable. This means that the purchaser’s beneficial interest arises as soon as the contract is made or (if later)  as soon as a relevant promissory condition precedent to the transfer has been satisfied.” (my emphasis)

Mr Khaw SC therefore submitted that P failed to establish any total failure of consideration, and P’s present focus (as seen in paragraph 156 above)  on failure to register the transfer of shares under the Transfer Documents (which P did not aver in his pleadings)  would not overcome D1’s above contentions.

164.  Thirdly, D1 relied on change of position[70] as defence to P’s unjust enrichment claim. It has been said such “defence generally applies where the benefit transferred from the claimant to the defendant has been irretrievably lost so that the courts must choose which of the parties should bear this loss. In making this choice, the courts must strike a fair balance between the claimant’s interest in restitution and the defendant’s interest in making spending decisions freely, without fear that a claim in unjust entitlement might later invalidate his assumptions about the means at his disposal. When undertaking this exercise, the courts can reduce a defendant’s liability pro tanto where his position has only partly changed, and can be made restitutionary orders on terms”.[71] Mr Khaw SC submitted as it was not P’s pleaded case (and there was no affirmation evidence)  that D1 received the Sum with knowledge of any alleged breach/wrong on the part of D2 or any parties involved, so D1 changed its position bona fide by transferring the Sum to Zheng on behalf of D2 (as approved by D2 in his capacity as the chairman of D1)  shortly thereafter (see paragraph 12(a)-(c)  above), and P’s Reply did not plead any substantive response to D1’s defence of change of position or allege any lack of good faith on the part of D1 (see paragraphs 13-14 above). So even if the details/purposes of the Transfers to Zheng might be subject to dispute and/or might warrant further investigation, Mr Khaw SC, upon citing the following observations by Recorder Eugene Fung SC in Zief Incorporated v Tekchandani Ajai Mohan (t/a D’Ziner Collections (Hong Kong))  & ors,[72] submitted that in all the circumstances it would have been inequitable to require D1 to make restitution to P:

“35. It is well-established that the defence of change of position is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full (Lipkin Gorman (a firm)  v Karpnale Ltd [1991] 2 AC 548 at 580F (Lord Goff)). Further, there must be a causal link between the receipt of the benefit by the defendant and his/her change of position, and the appropriate test of causation is at least the ‘but for’ test (Scottish Equitable plc v Derby [2001] 3 All ER 818 at §31 (Robert Walker LJ); Credit One Finance Ltd v Yeung Kwok Chi [2020] HKCFI 2450, [2020] HKCU 3323 at §§66-70).”

165.  Fourthly, Mr Khaw SC suggested P’s claim against D1 based on unjust enrichment was barred because the Agreement was made between P and D2 (see also the Transfer Documents executed by P and D2),[73] so P should sue D2 under the Agreement. D1 claimed that to permit any unjust enrichment claim against D1 would undermine (a)  the contractual arrangement between P and D2, and (b)  the absence of contract relationship between P and D1.

166.  In MacDonald Dickens & Macklin (a firm)  v Costello & ors,[74] the claimant builders entered into a contract with the 3^rd defendant company (owned by the 1^st and 2^nd defendants as its only shareholders/ directors)  for construction of houses on land owned by the 1^st and 2^nd defendants, who told the builders they were using the company to make the contracts for tax reasons. The builders sued the defendants on outstanding invoices. The English Court of Appeal held the general rule was that restitutionary relief for unjust enrichment was not available against a defendant who had benefited from the claimant’s services rendered pursuant to a contract to which that defendant was not a party. So although the 1^st and 2^nd defendants were enriched by the work done on their property by the builders, the general rule applied as the builders with full knowledge of the facts entered into contracts with the company and not with the 1^st and 2^nd defendants, and the builders’ restitutionary claim failed. Etherton LJ said as follows (page 251):

“23. I am clear …… that the unjust enrichment claim against [the 1^st and 2^nd defendants] must fail because it would undermine the contractual arrangements between the parties, that is to say the contract between the [claimants] and [the 3^rd defendant] and the absence of any contract between the [claimants] and [the 1^st and 2^nd defendants]. The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non-performance. That general rule reflects a sound legal policy, which acknowledges the parties’ autonomy to configure the legal relations between them and provides certainty, and so limits disputes and litigation.”

(b)  Discussion

167.  In Zief Incorporated, Recorder Eugene Fung SC explained the framework for determing the validity of a claim in unjust enrichment as follows: (a)  was the defendant enriched? (b)  was the enrichment at the plaintiff’s expense? (c)  was the enrichment unjust? (d)  are any of the defences available? If (a)-(c)  above are established by the plaintiff, it is then for the defendant to prove that there is a defence (pages 76-77).

168.  Here, D1 received the Sum from P, so D1 was enriched by the sum of HK$11,904,754, and such enrichment was at P’s expense. But the issue was whether P’s payment of the Sum to D1 was “unjust”.

169.  A defendant’s enrichment is unjust if it is caused by a mistake of fact or law made by the plaintiff since it is prima facie unjust for a recipient of money to retain the payment when, if the payer had known the true statement of affairs, he would not have paid.[75] But as Recorder Eugene Fung SC explained in Zief Incorporated (pages 77-78), the defendant’s enrichment will also be unjust if there is failure of consideration:

“25. ‘Consideration’ in the context of a claim in unjust enrichment is different from that in the law of contract. ‘Consideration’ for the purposes of the law of unjust enrichment does not mean the quid pro quo for there to be a binding contract as it is used in the law of contract. In the law of unjust enrichment, ‘consideration’ refers to the condition which formed the basis of the plaintiff’s transfer to the defendant of the benefit in question. In Shanghai Tongji (above)  §79, Ribeiro PJ referred to it as ‘the anticipated performance for which the money was paid, or the ‘basis or purpose’ of the payment’.

26. Where total failure of consideration is relied upon as the ‘unjust factor’, it is crucial to correctly identify and characterise the transaction providing the basis for the defendant’s enrichment, and it is only then can one identify the relevant anticipated performance and ascertain whether it has totally failed: see Shanghai Tongji (above)  §80 (Ribeiro PJ).

27. In the law of unjust enrichment, the usual consideration that fails which gives rise to restitution is the promised counter-performance. If money was paid to secure performance and if performance fails, the inducement which brought about the payment is not fulfilled: see Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 48 (Viscount Simon LC); Shanghai Tongji (above)  §79 (Ribeiro PJ).” (my emphasis)

170.  I have in paragraphs 150-156 above concluded that the “true bargain” or the “nub of the deal” under the Agreement was for P to become owner of and to acquire title to the Shares, which as a matter of law entailed registration of the Shares in P’s name in D1’s share register (see paragraph 156 above), and which duty contractually fell on Party A (see paragraphs 152-156 above). Bearing in mind that “consideration” in the law of unjust enrichment refers to “the condition which formed the basis of the plaintiff’s transfer to the defendant of the benefit in question”, it is unsurprising that it has been generally held that “[where] the parties have envisaged that title will be transferred in exchange for a payment, a failure to transfer title will typically be regarded as a total failure of the basis for retaining that payment”.[76]

171.  Goff & Jones, The Law of Unjust Enrichment, also reminded that “where a transfer may have more than one basis, …… total failure of any one of those bases is sufficient to give rise to a claim. The best examples are provided by situation where the basis for the transfer has been expressed in terms of the achievement of certain legal effects (such as the conferral of certain legal rights), and, although there has been physical performance, the envisaged legal consequences have not been realised”.[77] This echoed what Recorder Eugene Fung SC said in Zief Incorporated, ie “consideration” for the purpose of the law of unjust enrichment does not mean the quid pro quo for there to be a binding contract as it is used in the law of contract (see paragraph 169 above). Bearing in mind that the Shares (or any part thereof)  had not been allotted or transferred to P (and consequently had not been registered in P’s name in D1’s share register), and given the nature of the “true bargain” or the “nub of the deal” under the Agreement and the legal effect/consequences thereof (see paragraphs 150-156 above), I am not persuaded D1’s contentions that P had beneficial interest in the shares in D1, which shares were the subject matter of the Transfer Documents (see paragraph 163 above), would be any arguably sufficient answer. As the Master explained in her oral reasons for the O14 Judgment (see paragraph 94 above), once D1’s contentions under the Performance Defence (ie the signing of the Transfer Documents equated to performance of the Agreement)  were rejected (as I also did in paragraph 156 above), there would necessarily be an “unjust” element in P’s payment of the Sum to Party A, so D1’s contentions would not have amounted to any arguable/triable answer to P’s claim for unjust enrichment based on total failure of consideration.

172.  As for the defence of change of position (see paragraph 164 above), given my conclusion above that there was no arguable/triable answer to P’s claim for unjust enrichment based on total failure of consideration (ie Party A failed to satisfy the “true bargain” or the “nub of the deal” under the Agreement to pass ownership of and to give title to the Shares to Party B (ie P)), such alleged defence would not have amounted to any arguably sufficient answer. As the Master explained in her oral reasons for the O14 Judgment (see paragraph 94 above), when D1 transferred the money out to Zheng (as D1 alleged), it was not acting bona fide as it knew Party A had not fulfilled the obligations under the Agreement.

173.  Anyway, D1 did not dispute P actually paid the Sum into D1’s bank account for which D1 gave the Receipt. But D1 alleged the Sum was paid to Zheng on behalf of D2 by 5 Transfers of HK$2,000,000 each by D1 and 1 Transfer of HK$2,000,000 by HKTVEG as D1’s agent/ nominee. Despite such allegations,

(a)	D1 did not explain why, on its case, HK$12,000,000 was paid by D1 or HKTVEG on behalf of D1 to Zheng on behalf of D2 when D1 only received a total sum of HK$11,904,754 (ie the Sum)  from P;
(b)	the suggestion that HKTVEG was D1’s agent/nominee appeared to be nothing more than a bare assertion as there was no evidence before the Master and/or this court (when objective supporting evidence should have been with D1 and therefore should have been forthcoming)  that (i)  HKTVEG was part of D1’s group of companies,[78] and/or (ii)  D1 did reimburse HK$2,000,000 to HKTVEG from the Sum it received from P;
(c)	given the suggestion in (b)  above was not evidentially supported, D1 did not explain why it only transferred HK$10,000,000 and not the Sum (HK$11,904,754)  to Zheng (even assuming Zheng received the 5 Transfers from D1 on behalf of D2), and/or he did not answer P’s claim for restitution of at least $1,904,754 (see paragraph 66 above).

Thus, even if it were necessary to consider such defence of change of position, the above concerns and evidential lacuna undermined the arguability of such defence, and, as Mr Ho SC put it, the sums simply did not add up to provide a coherent explanation.

174.  As for the factual disputes between D1 and D2 as to what became of the Sum and to whom it was ultimately transferred (see paragraphs 159-162 above), I am not persuaded those factual disputes took D1’s case any further because they could not overcome the analysis/ conclusions in paragraphs 167-171 above. I also refer to the discussions in the above paragraph, and find D1’s contentions in (a)-(c)  below, which did not sit well with the available objective evidence, did not amount to any credible bona fide defence (whether on alleged change of position by the transfers to Zheng or otherwise)  that would deserve investigation/ resolution at trial:

(a)	D1 claimed (i)  Zheng was at all material times the secretary of D2, (ii)  Zheng admitted he worked closely with D2, (iii)  D2 did not dispute the Transfers were effected when Zheng was his secretary, (iv)  D2 did not dispute the Transfers were effected according to his directions/instructions, and (v)  there was no reason for D1 to effect the Transfers in substantial amounts to Zheng unless it was to transfer the Sum to D1 (see paragraph 160 above). But on the available evidence: (1)  The Yang 2nd Aff did not claim Yang (who was never a director of D1)  held any position in D1 in 2016 when the Agreement was signed and/or when D1 and HKTVEG made the Transfers to Zheng, and did not say Yang had any personal knowledge of the Transfers and the reasons therefor. Even though the P 2nd Aff queried this (see pargraph 65 above), and even if one were to acknowledge that Zheng (still an employee of D1)  was unhelpful (see paragraphs 72-74 above), the Yang 3rd Aff (on de bene esse basis)  did not fill this evidential lacuna by identifying Yang’s source of information and belief and/or by adducing affirmation evidence from then members of the D1 Board or then senior management of D1. This gave pause for concern as to the bona fides of D1’s alleged defence. (2)  Zheng’s employment contracts disclosed under the Yang 1st Aff showed he was employed by Shenzhen XJ as 地產專員 (real estate specialist)  until 23 August 2016, and he became secretary to the chairman after that date (which was well after the Transfers by D1 to him)  (see paragraphs 43(a)  and 63 above). (3)  Apart from D1’s bare assertion in respect of (i)  and (iii)  above, all that was said was D2 did not by the D2 1st Aff challenge the correctness of Zheng’s status as secretary to D1 at the time of the Transfers (see paragraph 160 above). In my view, there was no merit to this contention because although D2 made some brief response to D1’s allegations in the D2 1st Aff, the D2 1st Aff made clear there was no lis between D1 and D2 that required D2 to ventilate the matters between them for the purposes of the present action and the O14 Summons (see paragraph 53 above). (4)  I am unable to see how (iv)  above of itself would assist D1’s contentions. It must be remembered that D2 had an official capacity within D1 as a director and the chairman of the D1 Board, and it did not follow that when he gave directions/instructions for the Transfers he necessarily did so on a personal rather than corporate basis. (5)  I find (ii)  above read the D2 1st Aff out of context. Whilst it was correct that D2 admitted Zheng did work closely with him, D2 made clear this was when Zheng “held the title of chairman’s assistant” (ie after 23 August 2016)  and Zheng “did so in his capacity as employee of Shenzhen XJ seconded to [D1], and was not employed at any time by [D2] personally”. The whole tenor of D2’s affirmation evidence was that his close corporate (rather than personal)  working relationship with Zheng came into being when Zheng as company employed staff took up title as chairman’s assistant within the corporate structure. (6)  In light of the difficulties posed by (1)-(5)  above, it was therefore unsurprising that D1 by the Yang 3rd Aff (on de bene esse basis)  tried to explain away why its employee / seconded employee Zheng did not give evidence to refute D2’s/P’s case, and to allege that Zheng was de facto secretary to the chairman D2 for a long time before he attained that title (see paragraph 71 above). But such allegations, even if I were to acknowledge Zheng’s alleged unhelpful recalcitrance (see paragraphs 72-74 above), were nothing more than belated bare assertions in face of the objective evidence of Zheng’s employment contracts and D2’s affirmation evidence. (7)  In relation to (v)  above, D1 complained that D2’s thin allegations that he did not benefit from and was not personally enriched by the Sum and that Zheng immediately forwarded the funds back for the benefit of D1 were insufficient. But such complaint did not take D1’s case any further because, as Mr Ho SC submitted, there was little to show that the Sum or any part thereof ended up with D2. Indeed, notwithstanding the Yang 2nd Aff and Yang 3rd Aff (on de bene esse basis)  that purported to trace various transfers of funds, there was no evidence of onward transfer(s)/payment(s)  to D2 of the monies Zheng received by way of the Transfers. (8)  Mr Khaw SC’s submissions that there was no evidence from D2 that he could not make use of the Sum (see paragraph 161(b)  above)  was incorrect for D2 pleaded and affirmed he was not in receipt of, did not have the benefit of, and was not enriched by the Sum or any part thereof (see paragraphs 18 and 54(b)(iv)  above). I also reiterate the nature of the D2 1st Aff in (3)  above. (9)  As Mr Ho SC submitted, it was questionable whether (as D1 alleged)  the Transfers made by D1 to an employed staff of one of its subsidiaries would support D1’s contention that it had transferred the Sum to D2 (and thereby changed its position). Anyway, there were nothing to show that the Transfer of HK$2,000,000 from HKTVEG to Zheng came from the Sum (eg transfer/ reimbursement of HK$2,000,000 from D1 to HKTVEG which should be evident from D1’s and/or HKTVEG’s bank statements).
(b)	The D2 1st Aff produced bank records to show Zheng transferred the sum of HK$12,000,000 he received from D1 and HKTVEG by way of transfers to D1’s subsidiary Shenzhen XJ and D1’s sub-subsidiary Beijing XJ in RMB in May-July 2016 (see paragraph 54(b)(iii)  above). The Yang 3rd Aff (on de bene esse basis)  acknowledged that on 19 May 2016 Beijing XJ received a transfer of RMB1,668,000 (equivalent to HK$2,001,600)  from Zheng, 4 days later on 23 May 2016 Beijing XJ transferred RMB1,668,000 to another subsidiary Shenzhen Qian Hai, and in May/June 2016 Shenzhen Qian Hai by 3 tranches transferred HK$1,660,000 to Shenzhen XJ (see paragraphs 54 and 75-76 above). I am unable to see how Zheng’s transfers of funds to Shenzhen XJ and Beijing XJ would be helpful in establishing D2 had taken benefit from the Sum (see paragraph 161 above). The fact D2 was a substantial shareholder in Shenzhen XJ that wholly owned Beijing XJ could not equate monies transferred to these companies as monies that personally belonged to a substantial shareholder when D2 held the shares in Shenzhen XJ on trust for D1 (see footnote 21 above), and both Shenzhen XJ and Beijing XJ were direct and/or indirect subsidiaries of D1 (see footnotes 20-22 and 24-25 above). Further, even taking into account D1’s de bene esse materials, D1 was unable to explain why (i)  the sum of HK$1,660,000 (if it were, as D1 alleged, part of the Sum intended for D2)  had to be routed through Beijing XJ and not paid directly to Shenzhen Qian Hoi / Shenzhen XJ, and (ii)  later in September/October 2016 Shenzhen XJ transferred a total sum of RMB7,000,000 (equivalent to HK$8,400,000)  to Zheng (see paragraph 76 above). More importantly, (1)  the transfer from Beijing XJ to Shenzhen Qian Hai / Shenzhen XJ would not take D1’s case any further because these companies were all subsidiaries of D1 rather than companies owned by D2 (see paragraph 85(c)  above); (2)  D1’s allegation in (ii)  above remained a bare allegation because notwithstanding the lapse of time from the Wong Aff Summons until the Appeal Hearing, D1 made no attempt to produce clear copy records of the transfers purportedly from Shenzhen XJ to Zheng in September/October 2016 (see footnote 31 above), so the allegation that after various transfers the Sum (or part thereof)  was returned to Zheng was nothing more than a bare assertion; (3)  by failing to disclose Shenzhen XJ’s bank account statements or ledger records for the intervening few months, there was simply no evidence to demonstrate the correlation between the receipts of funds by Shenzhen XJ from Zheng (see paragraph 54(b)(iii)  above)  and from Beijing XJ in May/June 2016 (see paragraph 76 above)  and the alleged transfers of a total sum of RMB7,000,000 purportedly to Zheng in September/October 2016 (see paragraph 76 above)  (see paragraph 85(d)(i)  above); (4)  D1 had no arguable answer to P’s analysis in paragraph 85(d)(ii)  above, and as Mr Ho SC submitted, D1’s sums did not add up to provide a coherent explanation.
(c)	As regards Mr Khaw SC’s suggestion that if D2 did not have the benefit/use of the Sum paid by P, he would have asked for payment of an additional amount from Zheng when he signed the Transfer Documents for transfer of the Shares to P (see paragraph 161(a)  above), such argument missed the point. It was D1’s case that it received the Sum on behalf of D2 and D1’s then existing shareholders. If that were correct, then P had paid the Sum to D2 via his agent for such purpose (ie D1 who actually issued the Receipt to P), so it would be for D2 to demand payment from his agent D1 if he failed to receive the Sum from D1. Even on P’s case that Party A comprised both D1 and D2, P discharged his obligation under the Agreement by paying the Sum to Party A by deposit into the designated bank account of D1, and how the Sum was then dealt with would be an internal matter within Party A (ie between D1 and D2)  and of no concern to P. In either case, D2 would not be in a position to demand P to pay over the Sum again.

175.  Further, upon discussion, analysis and conclusion in relation to D1’s Capacity Defence in Part XIX below, I am not persuaded such defence was arguable or triable, and I find D1 was plainly party to the Agreement (ie together with D2 as Party A). That being the case, Mr Khaw SC’s arguments in paragraph 165 above fell away.

176.  For all of the above reasons, D1 had no arguable/triable defence to P’s claim for restitution based on unjust enrichment.

XVIII.  D1 AMENDMENT SUMMONS

177.  P opposed the D1 Amendment Summons that was filed almost a year after the O14 Judgment. The proposed amendments in the Draft D1 AD (see paragraphs 87-88 above)  largely concerned the Election Defence and the Unjust Enrichment Defences. Given my rejection of such defences in Parts XVI and XVII above, it followed there was little reason to allow the proposed amendments. Further, for reasons discussed in Part XIX below that also led to my rejection of the D1 Capacity Defence, there was no reason to disturb the O14 Judgment against D1. Having considered D1’s various defence contentions (including the fresh assertions in the Draft D1 AD and in the Wong / Yang 3^rd Affs on de bene esse basis)  and rejected them, I find no justification to allow the proposed amendments in the Draft D1 AD. The D1 Amendment Summons must be dismissed.

XIX.  D1/D2 CAPACITY DEFENCES AND D2’s RECTIFICATION DEFENCE

(a)  Legal principles: contractual interpretation

178.  General principles  The principles of contractual construction are trite. The construction of a contract, especially a commercial contract, involves ascertainment of the meaning that the language used in such contract as will convey to a reasonable person having the background knowledge available to the parties in the situation in which they were at the time of such contract would have understood the parties to have meant. The court reads the contract as a whole, giving the words their natural and ordinary meaning, and depending on the nature, formality and quality of the drafting of the contract, giving more or less weight to the context of the contract, the parties’ relationship and all relevant surrounding circumstances known to them, in reaching its view as to the objective meaning of the language used.[79]

179.  When the language used in a contract gives rise to difficulties of construction, the process of interpretation does not require the court to formulate some alternative form of words which approximates as closely as possible to that of the parties.[80] As Lord Hoffmann NPJ in Jumbo King Ltd v Faithful Properties & ors made clear, the exercise of construction of a document is an attempt to discover what a reasonable person would have understood the parties to mean.[81] It is this objective meaning which is conventionally called the intention of the parties.[82] None of the principles of construction would justify a construction that purports to re-write the contract by flying in the face of clear words.[83] Indeed, the court has no power to improve upon the contract it is to construe. After all, the court is only concerned to discover what the instrument means, and that meaning is not necessarily or always what the parties to the contract would have intended.

180.  But sometimes the court may to have to express the objective meaning of the contract in language quite different from that used by the parties, but that is no reason for not giving effect to what they appear to have meant.[84] As Lord Hoffmann NPJ said in Jumbo King Ltd (page 296):

“…… The construction of a document is not a game with words. …… Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other.[85] …… the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

181.  When it comes to considering the centrally relevant words to be interpreted, the less clear they are or the worse their drafting, the more ready the court will properly depart from their natural meaning, which is the obverse that the clearer the natural meaning the more difficult it is to justify departure from it.[86] It was also said that the more unreasonable the result the more unlikely it is that the parties could have intended it, and if they do intend it, the more necessary it is that they make that intention abundantly clear.[87] If there are 2 possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.[88] “However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve”.[89]

182.  Mr Chain, referring to the “contextual” approach, cited Ma CJ’s observations in Fully Profit (Asia)  Ltd v Secretary for Justice that summarised the principles on construction of contracts as follows:[90]

“15. We have been referred to the very well-known statement of principle regarding the construction of contracts contained in the speech of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society, to which can be added the judgment also of Lord Hoffmann NPJ in Jumbo King Ltd v Faithful Properties Ltd. What emerges from these cases – and other authorities on contractual interpretation – is the overall importance of context when construing contractual terms.  The statements of principle in Investors Compensation Scheme and in Jumbo King refer time and again to the relevant background against which the relevant contract and contractual terms must be viewed.  It is in my view not particularly helpful in most cases to refer to the “ordinary and natural meaning” of words because, as very often experience tells us, there can be much debate over exactly what is the ordinary or natural meaning of words.  The surer guide to interpretation is context.  Here, I would just add that in the area of statutory and constitutional interpretation, it is context that is key; context is the starting point (together with purpose)  rather than looking at what may be the natural and ordinary meaning of words.”

183.  Mr Ho SC, referring to the “textual” approach, cited First Shanghai Enterprises Ltd v Dahlia Properties PTE Ltd[91] in which Yeung JA (as he then was), upon referring to Ford v Beech,[92] observed that a contract “ought to receive that construction which its language will admit, and which will best effectuate the intention of the parties, to be collected from the whole agreement, and that greater regard is to be had to the clear intention of the parties than to any particular words which they may have used in the expression of their intent”. Thus, it is said the task of construction is to read the contract as a whole rather than to focus (or, in Mr Ho SC’s words, cherry-pick)  on individual words. Indeed, in The North Eastern Railway Company v Lord Hastings, Lord Davey said as follows:[93]

“It cannot be denied that there are provisions in this instrument which read literally are not in harmony with other provisions to be found in it, and at one not unimportant respect, namely, the proviso against the payment of double rents under this deed and the previous way-leave lease of 1853, it is impossible to make the words fit what was agreed on both sides of the bar to have been the real intention. The principle on which an instrument of this description should be construed is not doubtful. It is …… that the deed must be read as a whole in order to ascertain the true meaning of its various clauses, and that the words of each clause should be so interpreted as to bring them in harmony with the other provisions of the deed if that interpretation does not violence to the meaning of which they are naturally susceptible, or …… you may disregard the literal meaning of the words and give them another meaning if the words are sufficient flexible to bear that interpretation ……” (my emphasis)

184.  But as Madam Recorder Lam SC reminded in Lam Kit Ieng v Wise Empire Investments Limited,[94] textualism and contextualism are not conflicting paradigms[95] as some contracts may be successfully interpreted principally by textual analysis,[96] but the correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix,[97] so “[the] extent to which each tool will assist the Court in its task will vary according to the circumstances of the particular agreement” (paragraph 22(3)).

185.  Popplewell J in Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte)  (The “Ocean Neptune”) helpfully summarised the principles as follows:[98]

“…… Interpretation is a unitary exercise; in striking a balance between the indications given by the language and the implications of the competing constructions, the court must consider the quality of drafting of the clause and it must also be alive to the possibility that one side may have agreed to something which with the benefit of hindsight did not serve his interest;[99] similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. It does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.” (my emphasis)

186.  This is echoed locally in the observations by Lam VP (as he then was)  in Law Ting Pong Secondary School v Chen Wai Wah[100] when he cited the guidance of the Court of Final Appeal in Eminent Investments (Asia Pacific)  Ltd v DIO Corp[101] as follows (pages 199-201):

“47. One starts with the basic principle of interpretation as stated in Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896, 912H-913F. It is that interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. In Jumbo King Ltd v Faithful Properties Ltd at p.296D-I, Lord Hoffmann pointed out that “the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean”, and this “involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve”.

48. The process of interpretation is thus a unitary exercise and the Court does not consider the words in a vacuum but always in the context of the background, even if the words are unambiguous and sensible. The focus is on the meaning which the three documents would reasonably have conveyed to the parties in the situation in which they were at the time of the making of the contract.

49. These principles of interpretation of contracts have recently been reiterated by the Court of Final Appeal in Eminent Investments (Asia Pacific)  Ltd v DIO Corp (2020)  23 HKCFAR 487, [43]-[46], as follows:

[43] It is a truism that the starting point is the ordinary and natural meaning of the words of the contract, and of course in the vast majority of cases that is the ending point also. But, as Ma CJ pointed out in Fully Profit (Asia)  Ltd v Secretary for Justice, in the more difficult cases it is not particularly helpful to refer to the ‘ordinary and natural meaning’ of words because in such cases there can be much debate over exactly what is the ordinary or natural meaning of words; and in those cases the surer guide to interpretation is context.

[44] In Wood v Capita Insurance Services Ltd, Lord Hodge JSC reviewed the many cases on interpretation and emphasised that interpretation was a unitary exercise. That is why, where there are conflicting interpretations, account should be taken of the natural and ordinary meaning of the provision in question, the purpose of the contract and of the provision, other relevant provisions, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense.

[45] The following points emerge from the judgment of Lord Hodge JSC:

(a)  it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the Court balances the indications given by each;

(b)  the Court must be alive to the possibility that one side may have agreed to something which with hindsight did not serve its interest, or that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms;

(c)  some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals, whereas the correct interpretation of contracts which are marked by informality, brevity or the absence of skilled professional assistance may be achieved by a greater emphasis on the factual matrix;

(d)  but negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement; and

(e)  commercial common sense and surrounding circumstances should not be used to undervalue the importance of the language of the provision which is to be construed,[102] and the mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one of the parties, is not a reason for departing from the natural language.

[46] In our view, there is no substance to Eminent’s criticism of the Court of Appeal. The Court of Appeal plainly rejected the notion that there was a conflict between a “textual” and a “contextual” approach, specifically relying on Lord Hodge’s judgment in Wood v Capita Insurance Services Ltd. It is true that on one reading of [7.4], the Court of Appeal may be taken to have suggested that, in the case of professionally drafted documents, the context was relevant only to dealing with inconsistencies or gaps. There is no such limitation, but a fair reading of the judgment as a whole shows that the Court of Appeal was not excluding context in the whole process of interpretation.”

187.  Matrix of fact The above principles show that the courts will, in principle and if required, look at all the circumstances surrounding the making of the contract and available to the parties[103] (usually referred to as the “factual matrix” or “available background”)  which will assist in determining how the language of the contract would have been understood by a reasonable person in their position.

188.  I start with the well-established exclusionary rule that whilst evidence about the fact that the parties were negotiating is admissible to assist in interpretation of the contract, pre-contractual negotiations (ie what the parties said or did whilst the matter was in negotiation)  for the purpose of drawing inferences about what the contract means are inadmissible (see Prenn v Simmonds[104] and Chartbrook Ltd & anor v Persimmon Homes Ltd & anor).[105]

189.  Lord Wilberforce in Prenn (pages 1384-1385)  explained this was because pre-contractual negotiations are usually unhelpful as being irrelevant to the question that the court has to decide, ie what the parties could reasonably be taken to have meant by the language they have finally adopted to express their agreement. After all, “the court is concerned with discovering the parties’ objectively ascertained contractual intention, and not with their “declarations of subjective intent””.[106] As the Court of Appeal said in Da Shing Group Limited v Rich Promise Limited,[107] citing Mason J’s observations in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales,[108]“the contruction of contract is centred on the presumed, rather than the actual, intention of the parties. So when the issue is which of two or more possible meanings is given to a contractual provision, the court looks, “not to the actual intention, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts which the contract came into existence, and to the parties’ presumed intention in this setting”.

190.  In Chartbrook Ltd, Lord Hoffmann recognised that pre- contractual negotiations raise peculiar difficulties, and concluded there is no clearly established case for departing from the exclusionary rule (pages 1120-1121):

“…… pre-contractual negotiations seem to me capable of raising practical questions different from those created by other forms of background. Whereas the surrounding circumstances are, by definition, objective facts, which will usually be uncontroversial, statements in the course of pre-contractual negotiations will be drenched in subjectivity and may, if oral, be very much in dispute. It is often not easy to distinguish between those statements which (if they were made at all)  merely reflect the aspirations of one or other of the parties and those which embody at least a provisional consensus which may throw light on the meaning of the contract which was eventually concluded. ……” (my emphasis)

191.  But Lord Hoffman agreed (a)  it will not be inconsistent with the English objective theory of contractual interpretation to admit background evidence to throw light on what is meant by the language used, (b)  there are no conceptual limits on what can be properly regarded as background (pages 1117-1118), and (c)  the exclusionary rule “…… does not exclude the use of such evidence for other purposes: for example, to establish a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel. These are not exceptions to the rule. They operate outside it” (page 1121).

192.  As seen above, Lord Hoffmann in Chartbrook Ltd drew a distinction between “the surrounding circumstances [which] are by definition, objective facts, which will usually be uncontroversial” and “statements in the course of pre-contractual negtiations which will be drenched in subjectivity and may, if oral, be very much in dispute” (see paragraph 190 above). Lord Wilberforce in Prenn also said “previous documents may be looked at to explain the aims of the parties” and in a limited sense “the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact”, but it is “[far] more, and indeed totally, dangerous …… to admit evidence of one party’s objective – even if it is known to the other party” because “[however] strongly pursued this may be, the other party may only be willing to give it partial recognition, and in a world of give and take, men often have to be satisfied with less than they want” (page 1385).[109]

193.  The above principles in paragraphs 185-189 above were cited with approval by the Court of Appeal in Channel Green Ltd v Huge Grand Ltd.[110] DHCJ Le Pichon in Re Estate of Kong Wing Hong reminded that it is important not to lose sight of the fact that after revisiting the exclusionary rule, the House of Lords in Chartbrook Ltd reaffirmed it, and “[in] my view, the defendant’s evidence as to intention or objective at the pre-contractual negotiating stage is inadmissible as background and context under Chartbrook”.[111]

194.  In Urban Renewal Authority v Agrila Ltd, a dispute arose over the propriety of the plaintiff’s application for a certificate of compliance in respect of a property development. The defendants alleged that after the parties met and had some serious discussions, they agreed “let’s have an agreement that ends the financial relationship once and for all and we’ve got no money was owing one way or the other” so that the plaintiff “would not ask for any further payment ……” (ie the statement). A settlement agreement was later concluded. There was an issue over whether the defendant’s undertaking to complete outstanding works under the settlement agreement (ie the indemnity)  discharged the 1^st defendant’s obligation (if any)  to make certain payments (page 581). Le Pichon JA held as follows:

“17. In the present case, as an objective fact, what led or gave rise to the Indemnity was the dispute over the propriety of the plaintiff’s action in obtaining the certificate. While that is a surrounding fact which, if relevant, may be taken into account when considering the meaning and effect of the Indemnity, I do not consider that Lord Wilberforce’s observations go further than that. They do not support or establish some wider or independent basis for admitting evidence of pre-contractual negotiations so long as they could be characterised as showing the aim or object of entering into the agreement, still less the aim or object of one party.

……

20. In my view, the statement falls squarely within the exclusionary rule and the Deputy Judge was correct in ordering that it be struck out.”

195.  Non-professionally drafted contract Further, as explained above, the intention of the actual draftsperson is inadmissible. But it is common ground among Mr Ho SC, Mr Khaw SC and Mr Chain that the court can take into account the fact that an agreement is made between legally unsophisticated laymen and not drafted by lawyers,[112] and any linguistic issue on the language of such agreement is to be viewed through the prism of lay drafting. Also it has been said that the correct interpretation of a contract prepared without the involvement of skilled professionals may be achieved by greater emphasis on the factual matrix.[113] In an appropriate case, a court may acknowledge that the contract has been prepared by / concluded between lay persons where exactitude of language may not be expected, and in such a case a court may give greater weight to the commercial sense of the agreement as a whole than to the syntax of a particular term.[114]

(b)  Legal principles: identity of contracting party

196.  An issue as to the identity of a party to a contract is a question of fact that may be established by evidence, and in a written contract one starts with a party’s signature and the accompanying statement which describes the capacity of the party signing. In Homburg Houtimport BV & ors v Agrosin Private Ltd & anor,[115] the House of Lords were concerned with the issue of identity of the parties to certain bills of lading. Lord Millett at page 794 said as follows:

“175. The identity of the parties to a contract is fundamental. It is not simply a term or condition of the contract. It goes to the very existence of the contract itself. If it is uncertain, there is no contract. Like the nature and amount of the consideration and the intention to create legal relations it is a question of fact and may be established by evidence. Such evidence is admissible even where the contract is in writing, at least so long as it does not contradict its express terms, and possibly even where it does: see Young v Schuler (1883)  11 QBD 651; Chitty on Contracts, 28^th ed (1999), Vol 1, para 12-112, p 633 ……” (my emphasis)

197.  In Hamid v Francis Bradshaw Partnership,[116] Jackson LJ observed that where the identity of a contracting party was unclear, it was legitimate to give objective consideration to what was said/done at the pre-contract period, and went on to summarise the principles as follows:

“50.  A discrete body of case law has developed concerning contracts in which the identity of parties is in controversy. Such cases constitute an exception to the parol evidence rule. Extrinsic evidence may be admitted to establish the correct identity of a party: see Fung Ping Shan v Tong Shun [1918] AC 403 at pages 406-407.

[Jackson LJ then referred to F. Goldsmith (Sicklesmere)  Ltd v Baxter [1970] 1 Ch 85, Badgerhill Properties Ltd v Cottrell [1991] BCC 463, Internaut Shipping GmbH v Fercometal SARL [2003] 2 Lloyds LR 430 and Shogun Finance Ltd v Hudson [2004] 1 AC 919 in paragraphs 51-55]

56.  In Estor Ltd v Multifit (UK)  Ltd [2009] EWHC 2565 (TCC)  an issue arose as to which company within a group of companies known as Ginger Group was the employer under a building contract. Akenhead J took as his starting point the passage in Lord Hoffmann's speech in Investors Compensation Scheme which I have quoted above. He then stated that where the identity of a contracting party was unclear, it was legitimate to consider what the parties said to each other in the period leading up to the offer and acceptance. He added that the correct approach was an objective one. The court would take into account facts known to both parties, but not their private thoughts. I agree with that analysis.

57.  In my view the principles which emerge from this line of authorities are the following:

i)  Where an issue arises as to the identity of a party referred to in a deed or contract, extrinsic evidence is admissible to assist the resolution of that issue.

ii)  In determining the identity of the contracting party, the court’s approach is objective, not subjective. The question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts of the protagonists concerning who was contracting with whom are irrelevant and inadmissible.

iii)  If the extrinsic evidence establishes that a party has been misdescribed in the document, the court may correct that error as a matter of construction without any need for formal rectification.

iv)  Where the issue is whether a party signed a document as principal or as agent for someone else, there is no automatic relaxation of the parol evidence rule. The person who signed is the contracting party unless (a)  the document makes clear that he signed as agent for a sufficiently identified principal or as the officer of a sufficiently identified company, or (b)  extrinsic evidence establishes that both parties knew he was signing as agent or company officer.

58.  In my fourth proposition the phrase ‘sufficiently identified’ is not a happy one. It is intended to include cases where there is an inconsequential misdescription of the entity on behalf of whom the individual was signing. This is exemplified by Badgerhill Properties.” (my emphasis)

198.  But Mr Chain drew my attention to Fung Ping Shan v Tong Shun[117] that was cited by Jackson LJ in Hamid, and suggested that the principles have been put somewhat differently in Fung Ping Shan. In that case, the respondent lived in Chicago whilst his nephew lived in Hong Kong. They had names that rendered in English as Tong Shun but differed when written in Chinese characters. The nephew signed a deed with the name (in Chinese characters)  of the uncle in Chicago to convey land to a purchaser named as “Tong Shun, of Victoria, in the Colony of Hong Kong” therein, which deed witnessed that the “purchaser” had paid the consideration (and the nephew paid such consideration with money supplied by the uncle). Lord Parker of Waddington said as follows (page 406):

“There can be no doubt that parol evidence as to the identity of a party is always admissible, but in considering such evidence it is of paramount importance to bear in mind the indicia of identity afforded by the deed itself. In the present case these indicia are as follows: the person to be looked for is a person who (1.)  is named as Tong Shun; (2.)  resides at Victoria in the Colony of Hong Kong; (3.)  is a trader; (4.)  has paid the vendor 25,600 dollars; and (5.)  enters into a covenant with the vendor by signing, sealing, and delivering the indenture itself ……” (my emphasis)

199.  Mr Chain argued that even though later authorities, eg Hamid and cases cited in Hamid (such as Estor Ltd),[118] suggest the identity of the contracting party may be established by extrinsic evidence where it is not clear from the written instrument, Fung Ping Shan provides that (a)  extrinsic or parol evidence (including the pre-contractual context)  is always admissible for ascertaining the identity of the contracting parties regardless of the terms of the contract, and (b)  the clarity or ambiguity of the terms of the contract simply goes to the weight to be given to such admissible extrinsic evidence, which is a matter to be assessed at trial. Mr Chain further reminded that since Fung Ping Shan is a decision of the Judicial Committee of the Privy Council on appeal from a decision of the Hong Kong Court of Appeal, such Privy Council decision is binding on this court,[119] so this court must always admit extrinsic evidence (including evidence of pre-contractual matters)  for identifying the contracting party (even if the written instrument is clear).

200.  If one follows the logic of Mr Chain’s aforesaid submissions, the effect of his contentions would be that the pre-contractual context is always admissible for identifying the contracting party (even if the description, language and signing of the contract is clear as to who that is), so determination as to who that is will inevitably require a trial for the necessary weighing exercise to be done (even if the express provisions of the contract are clear). Bearing in mind that ascertaining the identity of a contracting party is an objective exercise in construction/interpretation, I do not accept such broad proposition as put forward by Mr Chain. In my view, Fung Ping Shan did not say the pre-contractual context is always admissible to ascertain the identity of the contracting party(ies)  (ie even when the language of the contract is clear as to such identity).

201.  Rather, Lord Parker of Waddington made clear that one should start with “the indicia of identity” afforded by the written instrument itself, and the pertinent extrinsic evidence concerns those indicia (pages 406-407):

“…… The uncle’s Chinese name may properly be rendered in English as Tong Shun, and he may, no doubt, be properly described as a trader. He also seems to have provided the 25,600 dollars paid to the vendor. But he was not resident in Hong Kong when the indenture was executed. On the contrary he resided at Chicago, his only connection with Hong Kong being that he was or had been a partner in certain businesses carried on in the Colony. He certainly did not either personally or by a properly constituted attorney sign, seal or deliver the indenture, or thereby enter into any covenant with the vendor. The nephew, on the other hand, had a Chinese name which may properly be rendered in English as Tong Shun: he resides in Victoria in that Colony; he is a trader. He paid the 26,500 dollars, though out of money provided by the uncle; he personally signed, sealed and delivered the indenture, and he is the only person who could possibly be sued by the vendor on the covenant on the part of the purchaser therein contained.

The facts above stated taken alone would, in their Lordships’ opinion, established beyond controversy that the person in the indenture described as the purchaser was the nephew, and not the uncle ……”

202.  Significantly, Lord Parker of Waddington noted “there is one additional fact …… which is said to outweigh the other evidence, or at least to create such an ambiguity as to admit evidence of intention” (ie extrinsic or parol evidence)  (my emphasis). In that case, ambiguity arose because even though the English names of the uncle and the nephew might properly be rendered as Tong Shun, they had distinct Chinese names. The Judicial Committee rejected the nephew’s argument that using Chinese characters appropriate to the uncle’s name in signing the deed was sufficient to identify the uncle as the purchaser described in the deed. It was held that a person who executed a deed cannot avoid personal liability by signing a name which he represents as (but which is not)  his own or saddle liability on the person whose name he has used unless he is the duly constituted attorney of that person, and evidence can be adduced in such case to elucidate intention (pages 407-408).

203.  In my view, Fung Ping Shan does not depart from the well- established principle that in a suitable case extrinsic evidence may be relied upon to identify the contracting parties where any of them have been inadequately or ambiguously described in the contract.

204.  Indeed, Mr Slater SC in Fairstate Limited v General Enterprise & Management Limited & anor,[120] citing Newell v Radford[121] and Shogun Finance Ltd v Hudson,[122] followed such principle, and said “the use of extrinsic evidence for this purpose has a long history”.[123] This is also confirmed by Judge Thornton QC in OTV Birwelco Ltd v Technical and General Guarantee Co Ltd when he said a rule of contractual construction is “the rule that is applicable when the identity of one of the parties to the deed is unclear from the words of the deed (see Chitty, para 12-120 and the authorities set out in footnote 17 of that paragraph). In such cases, extrinsic evidence is admissible to establish to whom the deed refers”.[124]

205.  Locally, Fung Ping Shan was followed by Le Pichon J (as she then was)  in Sunluck International Development Limited v Hing King Development Limited[125] in which the vendor company (assignee of an assignment of property made pursuant to a contract)  was identified by its English and Chinese names and its registered office, but was unaware that its company chop and common seal in the execution clause of the assignment and the references to the company in the contract contained 2 erroneous Chinese characters, so that the only correct reference to the company was in the body of the assignment. The learned judge referred to Emmet on Title 19^th ed at paragraph 11.006 that cited the observations of Lord Parker of Waddington in Fung Ping Shan, and held the indicia to be derived from the contract/assignment in that case included the company’s registered address and (more importantly)  its business registration number. The business registration certificate and the records at the Companies Registry clearly showed it was the company, which left no room for doubt as to the identity of the purchaser. In light of the analysis in paragraphs 200-203 above, it was unsurprising that Le Pichon J (as she then was)  did not see conflict between the guidance in Fung Ping Shan and her statement of legal principle that “[where] a difficulty of identification arises under a deed, evidence is admissible to identify the person mentioned in the instrument” (my emphasis).

206.  Interestingly, Jackson LJ in Hamid also did not see any conflict when he cited Fung Ping Shan with approval (paragraph 50)  and at the same time agreed with the analysis of Akenhead J in Estor Ltd that “where the identity of a contracting party was unclear, it was legitimate to consider what the parties said to each other in the period leading up to the offer and acceptance” and that the correct approach was an objective one (paragraph 56)  (see paragraph 197 above).

207.  Again, this was how G Lam J (as he then was)  understood the effect of Fung Ping Shan when he said in China Finance & Assets Management Limited v Lafe Properties (Hong Kong)  Limited as follows:[126]

“81. Where the identity of a party to a written contract is not clear from the document itself, it is clear that extrinsic evidence is admissible to establish it: Fung Ping Shan v Tong Shun [1918] AC 403, 406; Chitty on Contracts (31^st ed), vol.1, §12-122. ……” (my emphasis)

In paragraph 84 of the same judgment, he also cited Jackson LJ’s summary of the principles in Hamid (see paragraph 197 above)  with approval.

208.  In my view, there is no conflict or difference between Fung Ping Shan and the later English and Hong Kong authorities as to the approach of the courts for ascertaining the identity of a party to a written contract, and they sit well with the following summary in Bowstead & Reynold on Agency:[127]

“Where it is clear from the terms of a written contract made by an agent that the agent is contracting personally, extrinsic evidence is not admissible to show that, notwithstanding the terms of the contract, it was the intention of the parties that the agent should not be personally liable on it, because such evidence would be contradictory to the written contract.”

“It is sometimes said that parol or other extrinsic evidence may not be admitted to add to, vary or contradict a deed or written contract. …… this reasoning is only appropriate where the contract is exclusively contained in a document or documents ……”

209.  The rationale for the exclusion of parol evidence where the identity of the party to a written contract is clear has been succinctly explained by Lord Hobhouse of Woodborough in Shogun Finance Ltd (pages 943-944):

“49. …… But it is different where the party is, as here, specifically identified in the document: oral or other extrinsic evidence is not admissible. …… The rule that other evidence may not be adduced to contradict the provisions of a contract contained in a written document is fundamental to mercantile law of this country; the bargain is the document; the certainty of the contract depends on it …… This rule is one of the greatest strengths of English commercial law and is one of the main reasons for the international success of English law in preference to laxer systems which do not provide the same certainty. Hector v Lyons 58 P & CR 156 is simply an application of this basic and long established principle. The father claimed to be able to enforce a contract of sale of land. The father had conducted the negotiations. Woolf LJ said, at pp 160-161:

“In this case there is no dispute as to who, according to the written contract, are the parties. The son was described in the contract as one of the parties. He does exist and, in so far as there was a contract at all, it was between him and the other party identified in the contract, Mrs Pamela Doris Lyons.”

Sir Nicholas Browne-Wilkinson V-C delivered a judgment to the same effect. He referred, at p 159, to the cases “entirely concerned with transactions between two individuals face to face entering into oral agreements”, saying:

“In my judgment the principle there enunciated has no application to a case such as the present where there is a contract and wholly in writing. There the identity of the vendor and of the purchaser is established by the names of the parties included in the written contract.”

Mr Hudson submitted, as he had to, that this decision was wrong and should be overruled. In my opinion the Court of Appeal’s decision was clearly correct and correctly reasoned in accordance with well-established principles.”

210.  Where there is, as Lord Parker of Waddington said, “ambiguity as to admit evidence of intention” (ie where the identity of the contracting party has been inadequately or ambiguously described in the written contract, and extrinsic evidence is admissible for ascertaining the identity of such contracting party), the guidance in Fung Ping Shan is to start with the indicia of identity afforded by the written contract. This is consistent with Lord Millett’s observations in Homburg Houtimport BV & ors at page 794 which made clear that whilst the exercise of ascertaining the identity of the parties may require interpretation/construction, it is not of the same order as the process of construing the detailed terms and conditions of the contract; rather it was to construe the “factual evidence of the identity of the party” (ie the indicia of identity as referred to in Fung Ping Shan)  in the contract:

“176. Where a contract is contained in a signed and written document, the process of ascertaining the identity of the parties and the capacity in which they entered into the contract must begin with the signatures and any accompanying statement which describes the capacity in which the persons who append their signatures did so. This may require interpretation, and to this extent the process may without inaccuracy be described as a process of construction. But it is not of the same order as the process of construing the detailed terms and conditions of contract. These describe the incidents of the contract and the nature and extent of the parties’ obligations to each other. But the identity of the parties themselves is not an incident of the contract. Where a signature is accompanied by a description of the capacity in which the signatory has appended his signature the description is not a term of condition of the contract. It is part of the signature and so part of the factual evidence of the identity of the party which is undertaking contractual liabilities under the contract.” (my emphasis)

211.  Plainly, the “relevant” pre-contractual surrounding circumstances (subject to usual limitations, eg the exclusionary rule)  are those that pertain to the “indicia of identity”. But, as starting points,[128]

(a)	If a contract is signed by the agent personally without qualification, the agent is deemed to have contracted personally unless a contrary intention plainly appears from other portions of the document.
(b)	If the agent adds to a signature words indicating that he or she signs as agent, or for and on behalf or on account of a principal, the agent is deemed not to have contracted personally, unless it is plain from other portions of the document that, notwithstanding such qualified signature, the agent is intended to be bound.

212.  Likewise, Hamid and Robert Purbrick v Mark Cruz & anor[129] adopted the same approach. Hamid concerned a partly oral and party written contract that was made during discussions between H and the defendant’s representatives with written terms contained in a letter headed “Moon Furniture”. H was the director and sole shareholder of a limited company that traded under the name of “Moon Furniture”. H signed on the letter right above the words “Moon Furniture”. The English Court of Appeal held that H contracted on his own behalf since (a)  he had not effectively qualified his signature or made it plain the contract should not bind him personally,[130] (b)  the test was the same whether the individual contended he was the principal or signed as agent or company officer, and (c)  the extrinsic evidence did not help the defendant because no one told the defendant Moon Furniture was a limited company before the contract was concluded, ie private thoughts/assumptions of the defendant’s representatives as well as inquiries that could have been but were not made were irrelevant and inadmissible.

213.  Robert Purbrick concerned a building dispute in which the employer obtained a mareva injunction against the builder (1^st defendant)  who was the sole shareholder and director of the 2^nd defendant company. The builder resisted the continuation of the injunction on the ground of material non-disclosure in relation to the question of whether he was the contracting party, and claimed the company was the contracting party. Julian Knowles J held the employer had a good arguable case that the builder had contracted personally and continued the injunction, and after referring to Homburg Houtimport BV and Hamid, he explained as follows:

“86. That is because, first, Mr Cruz personally was named as the Contractor.[131] If the company was intended to be the Contractor there was no need to name Mr Cruz. The Contractor would have been unambiguously named as the company. Further, he was not identified as an officer of the company but just ‘of MM Cruz Developments Ltd’, which could have meant anything. The documents did not say he was signing as an agent of the company.

87. Second, the two contractual documents referred to meetings between the Contractor and the Employer: ie, between Mr Cruz and Dr Purbrick, and that is what happened.

88. Third, the company was not named at the foot of the contracts as the Contractor. Whilst the squiggles in question against ‘Name on behalf of the Contractor’, and ‘Signed on behalf of the Contractor’ are illegible, as I have already said, they must be Mr Cruz’s name and signature. He personally had been named as the Contractor at the top of the document. Thus, if my conclusion is correct – and it is at least strongly arguable that it is not least because Dr Purbrick says it is - he was naming himself, and signing on behalf of himself. He did not qualify his signature to make clear he was not intending to bind himself or that, for example, he was signing on behalf of the company in his capacity as its director. This dictum from Internaut Shipping GmbH v Fercometal SARL [2003] EWCA Civ 812, [53], is accordingly relevant here (emphasis added):

“Prima facie a person does not sign a document without intending to be bound under it, or, to put that thought in the objective rather than subjective form, without properly being regarded as intending to be bound under it. If therefore he wishes to be regarded as not binding himself under it, then he should qualify his signature or otherwise make it plain that the contract does not bind him personally.”

214.  Similar approach has been adopted locally by DHCJ Leung in Fu Woo International Limited v Fu Woo Group Limited & ors upon citing the principles set out in Bowstead & Reynolds on Agency (earlier edition)  and Hamid.[132]

215.  Mr Chain drew my attention to China Finance & Assets Management Limited, but I do not think that such case detracted from the above well-established principles. After all, G Lam J (as he then was)  in that case allowed extrinsic evidence because it was a different kind of case from that of Shogun Finance Ltd.

216.  In Shogun Finance Ltd,a finance company signed a written hire purchase agreement with a fraudster who used the name of Mr Patel with a stolen driving licence as proof of his identity. The fraudster took the car and sold it to an innocent purchaser. The issue was whether the fraudster was the “debtor” under the hire-purchase agreement within the meaning of section 29(4)  of the (UK)  Hire Purchase Act 1964 so that good title passed to the purchaser from the fraudster. The purchaser sought to argue by reference to extrinsic material that the finance company intended to deal with the fraudster and not the real Mr Patel. Thus, the issue in that case was merely to identify the party to the contract without any argument based on mutual/common mistake, which therefore led to the observation by Lord Hobhouse of Woodborough at paragraph 209 above.

217.  In China Finance & Assets Management Limited, there was a Hong Kong company (registration number 1316714)  and a Samoa company (registration number 4650)  in exactly the same name (“China Finance”), which gave rise to a dispute over the true identity of the payee of a cheque (paragraph 4). In that case, the defendant wished to raise funding for the development of certain land in Mainland China, and a middleman (who held himself out as a senior vice president of China Finance)  introduced certain lenders to the defendant. Negotiations became fairly advanced (paragraphs 7-10). Steps were taken to formalise the defendant’s engagement of China Finance for procuring loans, so the latter provided a form of mandate agreement (stating company number 4650)  to the former’s representative, and after making some amendments the mandate agreement was signed on behalf of the defendant and returned to the middleman (paragraph 11). The defendant then discovered there was China Finance Hong Kong and China Finance Samoa, and upon query it was told by the middleman that China Finance Hong Kong was the counterparty to the mandate agreement (paragraphs 12-13).

218.  The defendant then undertook to grant a second mortgage on certain Hong Kong properties and signed further mandate agreement with board resolution (paragraphs 14-16), and still later the defendant’s Hong Kong and Guangzhou companies signed revised mandate agreements with China Finance (stating company number 4650)  (paragraphs 17-18). The defendant and the middleman liaised to finalise the loan (paragraphs 19-24), and eventually the defendant’s Hong Kong company signed a supplemental agreement and a joint letter with China Finance to solicitors, and gave a cheque to the solicitors (paragraphs 25-27). Later, the cheque was returned, and the defendant’s Hong Kong and Guagzhou companies signed a further set of mandate agreements (paragraphs 28-33), and still later the defendant’s Hong Kong company signed a further supplemental agreement and a joint letter with China Finance to solicitors, and gave a cheque to the solicitors (paragraphs 38-41). Disputes arose, so the defendant countermanded the cheque (paragraphs 43-65), and eventually obtained a loan through connection disclosed by China Finance (paragraph 66).

219.  An issue in dispute in that case was whether China Finance Samoa or China Finance Hong Kong entered into the mandate agreement and supplemental agreement with the defendant’s Hong Kong company (and which of them was the payee of the cheque)  (paragraph 73(1)). China Finance argued it was clear to both parties that China Finance Hong Kong was the true party to the agreements, so reference to company 4650 in the agreements should be construed as reference to China Hong Kong. G Lam J (as he then was)  saw such argument not as mere effort to interpret and ascertain the identity of the contracting party, but as “akin to a plea of rectification”[133] based on common/mutual mistake (paragraph 83), which rendered the case before him different from Shogun Finance Ltd where there was no argument based on mutual mistake. So, upon citing the principles enunciated by Jackson LJ in Hamid (see paragraph 197 above), the learned judge held that (a)  extrinsic evidence is admissible “[in] this kind of case” to establish the true identity of the parties to the contract, and (b)  correction of the error (ie misdescription of the contracting party in the contract)  can be made as a matter of ordinary construction of contract without any need for formal rectification when (i)  there is a clear mistake on the face of the written instrument when read by reference to its background or context, and (ii)  what correction ought to be made to cure the mistake is clear, ie what a reasonable person would have understood the parties to have meant (paragraphs 84-86). Such inquiry as to what the parties have agreed proceeds from an objective perspective, and it was for China Finance to show that both sides intended the defendant’s Hong Kong company to contract with China Finance Hong Kong and not China Finance Samoa (paragraph 86).

220.  In the circumstances, China Finance & Assets Management Limited was not a case of ordinary construction of contract to identify the party to a written agreement. The agreements in that case described the contracting party as Chinese Finance with company no 4650. Purely on construction of contract, by drawing analogy with Sunluck International Development Limited, the indicia of identity to be derived from the agreements included the company name of China Finance and the company number of 4650, which together with extrinsic evidence as to the company records at the relevant registries in Samoa and in Hong Kong would have pointed towards China Finance Samoa rather than China Finance Hong Kong. Thus, China Finance had to go further to assert there was clear common/mutual mistake or error on the face of the written instrument when read by reference to its background or context (which was therefore “akin to a plea of rectification” and different from Shogun Finance Ltd), and that such clear common/mutual mistake ought to be cured. It was in the particular context of such allegation of clear common/mutual mistake (akin to a claim for rectification for which extrinsic evidence is generally admissible – see paragraph 191 above and Part XIX(c)  below)  that extrinsic evidence beyond “the indicia of identity” was admissible in China Finance & Assets Management Limited. I refer to paragraph 229 below which set out the differences in considering evidence between a claim for rectification and a case based on interpretation.

221.  Subsequent acts  Mr Khaw SC submitted that the courts are entitled to take into account post-contractual conduct for the purpose of construction of contract. I cannot see how Taylor v Van Dutch Marine Holding Ltd & ors[134] cited by Mr Khaw SC can support such broad proposition. In that case, Arnold LJ merely “assumed” for reasons given by counsel that post-contractual conduct was admissible on the interpretation of a contractual provision, but the learned judge held that the attempt to rely on the post-contractual loan agreement was shortly answered by the fact it was never concluded (pages 1499-1500), and it was not necessary for him to come to any conclusion on related submissions (page 1500).

222.  Instead, the English position as to admissibility of subsequent acts on the meaning of a contract or for the purpose of construing a contract is succinctly summarised in Chitty on Contracts which cited the House of Lords decision in James Miller & Partners Ltd v Whitworth Street Estates (Manchester)  Ltd[135] that “has decisively rejected this extension and has held that: “… it is not legitimate to use as an aid in the construction of contract anything which the parties said or did after it was made.””. The cases cited in footnote 638 in the learned textbook showed such guidance has since been followed in the English courts.

223.  This is also the position in Hong Kong.[136] Mortimer NPJ in Marble Holdings Ltd v Yatin Development Ltd said as follows:

“22. Also post-agreement conduct and statements of the parties are not generally relevant. This is the position in England and Australia. See James Miller & Partners Ltd v Whitworth Street Estates (Manchester)  Ltd [1970] AC 583 at p.603 per Lord Reid and Ku v Song (2007)  63 ASCR 661 at para.53. Recently, however in Wholesale Distributors Ltd v Gibbons Holdings Ltd [2008] NZLR 277, there are dicta in the judgments of the New Zealand Supreme Court favouring the admission of evidence of post-contract conduct. If such a stance is confirmed in the future it will be controversial in other common law jurisdictions: see (2008)  124 LQR 6.”

The Hong Kong courts (including the Court of Appeal)  regarded such guidance as affirming the principle that post-contractual conduct and statements of the parties are not generally relevant.[137]

224.  But Mr Khaw SC cited Nurisvan Investment Limited & anor v Anyoption Holdings Limited,[138] a decision by the Court of Appeal in Victoria, Australia, which states that whilst “[the] authorities make it plain that post-contractual conduct is not admissible on the question of the meaning of a contract, and for the purpose of construing a contract …… there is no settled view in the authorities whether post-contractual conduct may be relied on to found or support an inference as to the identity of a party to the contract” (paragraph 77).

225.  In that case, N and A were companies registered in Cyrpus. N was the sole shareholder of another company F. The parties entered into negotiations with a view for A to purchase N’s shares in F, and for such purpose A and F signed a “Binding Heads of Agreement”. Although N was named as a party, it did not sign the heads of agreement. The heads of agreement provided for the parties to subsequently enter into a share sale agreement. After lengthy negotiations, N advised A it did not regard itself as being bound by the heads of agreement. A sought specific performance of either the heads of agreement or a draft version of the subsequent share sale agreement. One of the questions on appeal was whether N was bound by the terms of the heads of agreement even though it had not signed that document. The Victoria Court of Appeal referred to 2 earlier authorities that only gave tententative views (paragraphs 78-80),[139] but found greater support from Tomko v Palasty[140] (paragraphs 81-82)  and Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd[141] (paragraphs 81 and 83)  where post-contractual conduct by an alleged party was regarded as an admission by such party that it was in fact a party to the contract. The Victoria Court of Appeal considered “the post-contractual conduct of the parties was relevant to the issue, not only of the identity of the parties to the contract, but also, necessarily, to the existence of the contract itself …… in a case such as this, the question whether a contract was formed necessarily involves the question whether it was formed between [A] and [N], since the contracts do not exist in the abstract” (my emphasis)  (paragraph 84).

226.  The Victoria Court of Appeal affirmed the lower court decision that on analysis of the heads of agreement there was sufficient basis to conclude N was a party thereto, ie F could not sell its own shares, F was wholly owned by N who was therefore the only party who could sell F’s shares, the heads of agreement named N as the vendor and A as the purchaser, the clauses in the heads of agreement listed various rights and obligations both of A as purchaser and N as vendor, and it was necessary for N to be a party to the heads of agreement to give it business efficacy (paragraph 86). Additionally, a “strong inference” existed that N was a party and agreed to be bound since “no sale of the shares in [F] could be possible without [N’s] agreement” (paragraph 87). The court identified a number of emails passing between the N (and F)  and A during the negotiations for the share sale agreement (ie post-contractual conduct)  to infer that N was a party to the heads of agreement (paragraphs 88-89).

227.  But this case was peculiar on its own facts in that (a)  the question of whether N was a contracting party was the exact mirror of (b)  the question of whether there was a contract at all. This was because N (being the sole shareholder of F)  was the only party who could have sold the shares in F to A, and F (who signed the contract)  could not have sold its own shares to N. As accepted by the Victoria Court of Appeal (paragraph 77), it has always been recognised as an exception to the inadmissibility of subsequent actions to interpret a written document to consider post-contractual conduct on the question as to whether there was a contract.[142] Thus, the admissibility of extrinsic evidence in that case was not any departure of the well-established principle for construction of contract (and identifying the contracting party is a matter of contractual construction even though not of the same order as the process of construing the detailed terms and conditions of contract – see paragraph 210 above)  that post-contractual conduct is not generally relevant. But here the existence of the Agreement was not in doubt, and the dispute only concerns the identity of Party A.

(c)  Legal principles: rectification defence

228.  Although pre-contractual negotiations are generally not admissible for the purpose of construction of contract, they are admissible to support a claim for rectification of contract.[143] Rectification is a process by which the document is made to conform to what was actually agreed between the parties, or what the law, applying the objective principle, treats as being their agreement. As explained by Lord Hoffmann NPJ in Kowloon Development Finance Ltd v Pendex Industries Ltd,[144] rectification can be for correcting a common/mutual mistake or for correcting a unilateral mistake, but I shall focus on the former since D2 relied on alleged common/mutual mistake in the Draft D2 AD&C (pages 345-346):

“19. …… In the case of mutual or common mistake …… the mistake is about whether a written document correctly reflects what the parties had, on an objective assessment, agreed it should contain. As Denning LJ said in the well known case of Frederick E Rose (London)  Ld v William H Pim Jnr & Co Ld [1953] 2 QB 450, 461: “Rectification [for mutual mistake] is concerned with contracts and documents, not with intentions”. In Lovell & Christmas Ltd v Wall (1911)  104 LT 85, 88 Cozens-Hardy MR described rectification for common mistake as “a branch of the doctrine of specific performance”. By this he meant that if parties have agreed to execute a document in certain terms and by mistake it contains different terms, the court can specifically perform the prior agreement by rectifying the document. …… the concept of rectification for common mistake involves carrying into effect what the parties appear to have actually agreed that the document should say. And in deciding what the parties have agreed, the common law adopts its usual objective stance, looking at what a reasonable observer would have understood the parties to mean and not concerning itself with their uncommunicated states of mind: Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101.

……

23. …… the important difference between mutual and unilateral mistake lies in what the mistake must be about.  In mutual mistake, the mistake is about whether the document correctly reflects the terms previously agreed.  In unilateral mistake, it is about the mistaken belief of one of the parties, known to the other, about what the contract said or meant.”

229.  The Master of the Rolls in Daventry District Coucil v Daventry & District Housing Ltd[145] noted 3 differences in the consideration of evidence between a claim for rectification and a case based on interpretation:

(a)	in a rectification claim the antecedent negotiations are admissible: they are normally of central reference;
(b)	even in relation to written contracts, some subjective evidence of intention or understanding is not merely admissible, but is normally required in a rectification claim: the party seeking rectification must show that he indeed made the relevant mistake when he entered into the contract;
(c)	rectification is an equitable remedy and is therefore subject to somewhat different rules from interpretation.

230.  Common/mutual mistake  In Chartbrook Ltd, Lord Hoffmann (page 1123)  said the requirements for rectification for common/mutual mistake had been “succinctly summarised” by Peter Gibson LJ in Swainland Builders Ltd v Freehold Properties Ltd as follows:[146]

“The party seeking rectification must show that: (1)  the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2)  there was an outward expression of accord; (3)  the intention continued at the time of execution of the instrument sought to be rectified; (4)  by mistake, the instrument did not reflect that common intention.” (my emphasis)

Johnson Lam J (as he then was)  at the Court of Appeal in Kowloon Development Finance Ltd v Pendex Industries Ltd[147] adopted such legal requirements for rectification of common mistake.[148] On appeal to the Court of Final Appeal, Lord Hoffmann NPJ at page 349 said he “entirely agree with the reasoning and conclusion of the Court of Appeal on the question of common mistake”.

231.  For requirement (1), there must be either an antecedent concluded contract or a continuing common intention. Whilst the common intention should be clear, communicated and continuing,[149] “the exact form of words in which the common intention is to be expressed is immaterial if, in substance and in detail, the common intention can be ascertained ……”[150]

232.  For requirements (2)  and (3), it must be shown the common intention of the parties continued unaltered up to the time of the execution of the contract.[151] Johnson Lam J (as he then was)  in Kowloon Development Finance Ltd (pages 24-25)  noted that Lord Hoffmann in Chartbrook Ltd placed emphasis on the objective nature of the inquiry as to the existence of a continuing common intention (page 1126):

“60. …… rectification is also available when there was no binding antecedent agreement but the parties had a instrument to be rectified …… the authorities suggest that in both cases the question is what an objective observer would have thought the intentions of the parties to be …..”

Johnson Lam J (as he then was)  further noted Etherton LJ’s observations in Daventry District Coucil[152] that the 2^nd requirement, ie “an outward expression of accord”, and the 3^rd requirement, ie “common continuing intention” are not separate conditions, but 2 sides of the same coin since an uncommunicated inward intention is irrelevant (page 25). Thus, Etherton LJ suggested that Peter Gibson LJ’s statement of the requirements for rectification for mutual mistake be rephrased as follows (page 1354):

“(1)  the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2)  which existed at the time of execution of the instrument sought to be rectified; (3)  such common continuing intention was to be established objectively, that is to say by reference to what an objective observer would have thought the intentions of the parties to be; and (4)  by mistake the instrument did not reflect that common intention.”

233.  Lord Hoffmann NPJ in the Court of Final Appeal (pages 347-348)  also emphasised that “in claims for rectification of contracts for mutual mistake, it is necessary for the court to be confident that the formal document does not reflect what was previously agreed. As Denning LJ said in Rose v Pim, 461, “if you can predicate with certainty what their contract was, and that it is, by common mistake, wrongly expressed in the document, then you rectify the document; but nothing less will suffice”.” Likewise, Johnson Lam J (as he then was)  in Kowloon Dvelopment Finance Ltd said (at page 25)  “one should examine the evidence …… to see whether to a reasonable objective observer the parties had a continuing common intention that the defendants would continue to be liable for the loan after the payment of the instalment in 2004 and 2005 ……”

234.  In that case, the plaintiff moneylender settled a mortgage action against the 1^st defendant as debtor and the 2^nd and 3^rd defendants as guarantors of a loan by Tomlin orders in 2004/2005. By the 2004 order, the defendants would pay 12 monthly instalments to the moneylender with annual review of the instalments thereafter if they paid the instalments and agreed costs. By the 2005 order, the defendants were to pay 12 further instalments in 2005 and all further proceedings be stayed, but the clause for annual reviews in the 2004 order was not repeated. The defendants defaulted payment under the 2005 order, and the moneylender sought to recover the entire loan. Subsequently, the defendants paid the instalments and claimed the loan was discharged under the 2005 order. The moneylender claimed the 2004/2005 orders did not discharge the loan, or alternatively, such orders should be rectified for mistake to make clear that the loan was not discharged. It was held on proper construction the agreement under the 2004 order was a truce such that if the defendants failed to comply with the terms, the moneylender would revert to annual reviews of the instalments, so it was improbable for a reasonable observer to come to the view that payment of the 2005 instalments would have discharged the loan. Thus, the 2005 order would have been construed as to have carried the truce forward to 2005, but to have substituted the new instalment amounts, and, as regards the 2004 order, to have left the outstanding loan to be paid off according to subsequent annual reviews. In that case, Lord Hoffmann NPJ found inter alia ample evidence to demonstrate there was a common mistake, and an objective assessment of what the parties had agreed did not include any term that the post-2005 debt was to be discharged.

235.  Proof of mistake  The burden of proof is on the party seeking rectification to produce “convincing proof” not only that the contract to be rectified is not in accordance with the parties’ true intentions at the time of its execution, but also that the contract in question in its proposed form does accord with their intentions. The extent of the rectification should be clearly ascertained and defined by evidence contemporaneous with or anterior to the contract. The denial of one of the parties that the deed as it stands is contrary to his intention ought to have considerable weight. It must be shown that the written contract was actually contrary to the intention of the parties.[153]

(d)  D1 Capacity Defence

236.  In a nutshell, D1’s case was (i)  the Agreement was entered into and made by P as Party B and D2 (as representative of the existing shareholders of D1)  as Party A, and (ii)  it was not a contracting party to the Agreement. D1 claimed this was borne out by the terms of the Agreement[154] as properly construed, especially in light of the more significant indicia of how the parties were described in the Agreement and how they executed the Agreement:

(a)	The description of Party A as 香港衞視國際傳媒集團有限公司Hong Kong TV International Media Group Ltd (以下簡稱 “香港衛視”)  股東代表並董事局主席高洪星先生 did not stop with the name of D1, but went on with 股東代表並董事局主席高洪星先生, which clearly showed Party A was D2 being the chairman of D1 representing the existing shareholders of D1. This was contrasted to the definition of D1 as 香港衞視 (and not as Party A)  in the Recital Preamble, which, according to Mr Khaw SC, was adopted “throughout the whole Agreement”[155] so that HKTV/D1 and Party A were 2 distinct parties.
(b)	The Recital Preamble that provided for inter alia 甲乙雙方 …… 對入股香港衞視進行股權投資事宜達成協議如下 (my emphasis)  drew a distinction between Party A and HKTV/D1 in relation to the matter of investing in HKTV.
(c)	Clause 1(2)  provided that the source of the Shares to be acquired by Party B was 從原股東轉讓或增資. Mr Khaw SC submitted that for transfer from existing shareholders the obligation would fall on D2 as an existing shareholder himself and as representative of the existing shareholders, and for capital increase the obligation would still fall on the shareholders (not D1 or the directors)  under sections 140-141 of the Companies Ordinance Cap 622,[156] and there was no suggestion that any pro rata allotment (for which shareholders’ approval was not required)[157] was then envisaged.
(d)	D1 was frequently referred to as 香港衛視 (HKTV)  instead of Party A, eg Party A was to provide Party B information and introduction of HKTV’s (D1’s)  registration/licensing matter (Clause 2(1)), each of Party A and Party B shall bear 50% of the stamp duty fee for share transfer (Clause 2(5)), and Party B had various rights as shareholder in D1 (Clause 2(6)-(8)).
(e)	Clause 4(3)(1)  provided that 甲乙雙方基於對投資、收益、風險、前景、以及經營管理方式等等事項均已進行了充份的瞭解並在取得共識的基礎上, 自願簽署本協議書, 並保證根據相關法律程式要求和規定, 完成股權轉讓和資金到位.
(f)	Clause 9 provided that 本合同作為解釋香港衛視股東之間權利和義務的依據, 長期有效, 除非各方達成書面合同修改; 本合同在不與香港衛視章程明文衝突的情況下, 視為對香港衛視股東權利和義務的解釋並具有最高效力.
(g)	Mr Khaw SC submitted that the execution clause in the Agreement for Party A (香港衞視國際傳媒集團有限公司 (蓋章)  股東代表 (簽字))  did not state D2 would sign as D1’s agent, and suggested that D2 executed the Agreement as representative of the existing shareholders without any express qualification that he did not intend to bind himself or that he signed on D1’s behalf in his capacity as D1’s chairman/director,[158] which was in line with the Yang 2nd Aff that alleged D1 neither executed the Agreement nor authorised D2 to execute the Agreement on its behalf.

237.  Mr Khaw SC also submitted it was not open for P or D2 to say D2 signed the Agreement on behalf of D1 because the board resolutions that D2 adduced and relied on (see paragraph 47 above)  (a)  were made years before the Agreement, and (b)  did not expressly authorise D2 to enter into the Agreement on behalf of D1. As for apparent/ostensible authority, Mr Khaw SC agreed the issue as to whether D2 had apparent authority to commit D1 to the Agreement depended on (i)  the state of mind required to establish P had “justifiably relied” on D2’s authority, (ii)  the extent, if any, to which P (third party)  who claimed to have dealt with D2 (alleged apparent agent)  could rely on the terms of the Agreement and the way the Agreement was executed by Party A to commit D1, and (iii)  the evidence required from P (third party)  to show it relied on D2’s apparent authority,[159] but he argued that any allegation based on apparent/ostensible authority was contradicted by the fact that (1)  the Agreement clearly named D2 as acting for and on behalf of the shareholders of D1 (not on behalf of the D1 Board)  (and for such purpose one could not look at the D1’s name in the execution clause in isolation), (2)  there was no qualification by D2 that he did so on behalf of D1 (as one would have expected to see)  when he signed the Agreement, and (3)  P signed such Agreement without making any enquiry as to D2’s capacity. Mr Khaw SC submitted there was insufficient evidence to show D2 signed the Agreement on behalf of D1.

238.  Mr Khaw SC further argued that (a)  stamping the company “chop” in contra-distinction to affixing the common “seal” on a contract does not automatically bind a company to it, and (b)  the company “chop” is not the equivalent of the common “seal” and does not have legal significance under the Companies Ordinance Cap 622:

“The chop is, as a matter of custom, used to show that the person signing a document has authority to sign on behalf of the company, and so where a company allows a person to use the company chop, the stamping of the chop could be relevant to matters relating to the apparent authority of the person. In England, there is a suggestion in some cases that the imprinting of a rubber-stamped name of the company by a duly authorised person can be regarded as a signature of the company (although not with the same effect as a common seal); however, doubts have also been expressed whether this view is correct.”[160]

But in the course of his oral submissions, Mr Khaw SC argeed that it all depended on how D1’s company “chop” was imprinted on the Agreement. Nevertheless, he argued that even though the above passage from the learned textbook showed D1’s company “chop” on the Agreement might suggest D2 signed for and on behalf of D1 (which went to the matter of apparent/ostensible authority), in reality D2 was never authorised to act for D1 when he signed the Agreement for himself. Mr Khaw SC further submitted that insofar as there were ambiguities arising from the terms of the Agreement, the court should consider the factual matrix and all relevant surrounding circumstances for the purpose of ascertaining the intention of the parties, especially as the Agreement was not professionally drafted/prepared.

239.  In summary, Mr Khaw SC contended that the Agreement was plainly, as the Yang 2^nd Aff put it, “a shareholders’ agreement and/or transfer of shares agreement entered into between the then existing shareholders through [D2] being their representative on the one hand, and [P] being the intended new shareholder on the other hand”. Given D2’s alleged authority to act for all shareholders of D1 and the fact D2 was holding more than 23% shareholding in D1, D1 argued it was most likely that P was only looking to D2 for the intended acquisition of the Shares being the subject matter of the Agreement.

240.  Mr Khaw SC submitted this conclusion was further reinforced by post-contractual conduct (which he suggested the court could take into account), ie P and D2 signed the Transfer Documents, and there was no evidence D1 had ever been requested to take any steps to effect P’s intended acquisition of the Shares by allotment of shares or otherwise. Thus, it was said the D1 Capacity Defence at the very least raised a triable issue as to whether D1 was party to the Agreement.

(f)  D2 Capacity and Rectification Defences

241.  In a nutshell, D2’s position was that he was not party to the Agreement, and he only signed the Agreement on behalf of D1 as Party A, so P could not claim against him for breach of the Agreement:

(a)	D2 argued that on proper interpretation of the Agreement when read against the relevant matrix of facts, he was not a party to the Agreement (ie the D2’Capacity Defence);
(b)	even if (which D2 denied)  the Agreement could be interpreted in a way such that D2 was party to the Agreement in his personal capacity, the Agreement should be rectified such that the parties to the Agreement were only P (Party B)  and D1 (Party A)  to reflect the true intention of the parties (ie Rectification Defence).

242.  Mr Chain submitted that extrinsic evidence (including the pre-contractual context)  was admissible for either the D2 Capacity Defence or the Rectification Defence to identify the true parties to the Agreement and the true intention of the parties, especially as the Agreement was prepared by laymen and not lawyers. It was said the pre-contractual context as broadly set out in paragraphs 48-49 above (“Pre-Contractual Context”)  showed that throughout the entire course of negotiations among the parties from February to April 2016 that led to the Agreement dated 19 April 2016, D2 in his capacity as chairman/director of D1 acted on behalf of D1 and not in any personal capacity (see paragraph 6(f-1)  of the Draft D2 AD&C and paragraph 91 above on de bene esse absis).

243.  Mr Chain further submitted there was no evidence of any shareholders’ agreement entered into by any of the shareholders of D1, including between P and other shareholders of D1, which went to show D2 was not party to the Agreement (see paragraph 6(e)(ii)  of the Draft D2 AD&C and paragraph 90 above on de bene esse basis).

244.  Mr Chain in his oral submissions helpfully set out D2’s key contentions as follows:

(a)	the Pre-Contractual Context (now pleaded in paragraphs 6(e)(i)  and 6(f-1)  of the Draft D2 AD&C on de bene esse absis – see paragraphs 90-91 above)  was uncontroversial and substantially unchallenged, and P did not by the P 2nd/3rd Affs (filed after the D2 1st Aff)  “put forward any denial, even a bare denial, of the Pre-Conractual Context”;
(b)	the Pre-Contractual Context was admissible for D2’s claim for rectification of the Agreement which D2 was entitled to run;
(c)	the Pre-Contractual Context was admissible for proper construction/ interpretation of the Agreement;
(d)	if the Pre-Contractual Context were admissible, it was clearly arguable that D2 was not Party A, a member of Party A or party to the Agreement.

245.  For (a)  above, Mr Chain noted that even though the P 2^nd Aff claimed to be made in reply to the Yang 2^nd Aff and the D2 1^st Aff, all that was said about the Pre-Contractual Context was that (a)  P was legally advised “the pre-contractual negotiations were not admissible evidence”, so he did “not propose to deal with each and every allegation made by [D2] with respect to the pre-contractual negotiations”, and (b)  D2’s conclusion in the D2 2^nd Aff that he negotiated only in the capacity as chairman of D1 was “self-serving and not true” as it was “clear from the Agreement, [D2] was acting as the representative of [D1] and in his personal capacity”. Mr Chain suggested P’s carefully worded disagreement with D2’s conclusion failed to substantially challenge D2’s factual statements.

246.  For (b)  above, the proposed counterclaim based on the Rectification Defence that was newly pleaded in paragraphs 15-18 of the Draft D2 AD&C rested on the Pre-Contractual Context, which Mr Chain submitted was (a)  admissible for the purpose of the Rectification Defence and (b)  fully set out in the D2 1^st Aff that was already available at the Master Hearing. Mr Chain submitted that as the factual basis for the Rectification Defence had been set out in the D2 1^st Aff before the Master, it was open for D2 to argue the Rectification Defence on appeal in any event (ie even without the D2 Amendment Summons and/or the Draft D2 AD&C), so whether the D2 Amendment Summons was allowed or not would not make any substantive difference to the D2 Appeal, but it helped to put things in good and proper order.

247.  Mr Chain cited El Vince Ltd v Wu Wen Shing[161] in support of his above contentions. In that case, the master refused to set aside a default judgment on the ground of irregularity (ie the plaintiff company’s name had been struck off the register of companies under section 290A of the Companies Ordinance Cap 32 at the time of the issue of the writ even though its name was later restored to the register), and on appeal the defendant sought to rely on the merits of defence as an additional ground. Kwan J (as she then was)  held there was no irregularity in the default judgment, but exercised her discretion to allow the defendant to raise the merits of defence as a new point on appeal that was by way of re-hearing (page 450):

“10. I am mindful of the fact that this is an appeal from the decision of a master and such appeals are by way of rehearing and it is very common for new points to be taken on appeal of this kind. A party to an interlocutory hearing before a master is not entitled to rely on the other party’s conduct of the case as an implied representation that the case will be conducted in the same way on an apopeal to the judge in chambers and that no new point will be taken ……”

In that case, it was said “[this] ground on merits of the defence was not a point that had never been raised before and only raised for the first time on appeal”. But Kwan J also considered the question of prejudice to the plaintiff. Noting that the registrar gave directions that no further affirmation be filed without leave of the court after the defendant had filed evidence in reply, the learned judge made enquiry with the plaintiff as to what evidence it proposed to file to answer the defendant’s affirmations in reply, but she considered the evidence the plaintiff would wish to file “would not have assisted the plaintiff’s case in the appeal in any significant way”, so the defendant was allowed to rely on the merits of defence as an additional ground to set aside the default judgment (pages 450-451).

248.  Turning back to the Pre-Contractual Context as D2 alleged, Mr Chain noted Mr Ho SC’s submissions that the Master should not be criticised for not dealing with the Pre-Contractual Context more fully when the Rectification Defence was not raised before her, but disagreed with Mr Ho SC’s submisisons that there was insufficient evidence before the court to support the arguability of the Rectification Defence and the proposed amendments in the Draft D2 AD&C. Mr Chain reminded that the court should look at the substance of the factual allegations in relation to the Pre-Contractual Context set out in the D2 1^st Aff (which made clear D2’s case all along was that the Agreement was between P and D1)  rather than to search for “buzzwords” of “common mistake” and/or “continuing common intention”.

249.  Mr Chain claimed the Pre-Contractual Context clearly reflected the common intention of the parties that the true parties to the Agreement were P and D1, which was similar to the argument ran by the plaintiff in China Finance & Assets Management Ltd, and G Lam J (as he then was)  held that an argument of mutual mistake over the identity of the contracting party was “akin to a plea of rectification”, which ultimately was a question of construction for which extrinsic evidence was admissible to establish the true identity of the parties to the contract (see paragraphs 217-220 above). Mr Chain submitted that in considering the requirements for establishing common/mutual mistake for a claim of rectification, it ultimately boiled down to a question of fact, and if D2’s evidence on the Pre-Contractual Context was to be believed, there would be evidential basis to show common continuing intention by the parties that D2 was not party to the Agreement.

250.  Mr Chain further submitted that given the vitality of the Rectification Defence raising at least an arguable or triable issue, an order should be made in terms of the D2 Amendment Summons.

251.  For (c)  above, in relation to the D2 Capacity Defence, Mr Chain highlighted the following terms of the Agreement which, he suggested, showed there was no provision within the Agreement on the rights/duties of D2 in his personal capacity, and he argued that Clause 1(2)  must be considered together with the Pre-Contractual Context, which extrinsic evidence was admissible for proper interpretation of the Agreement to ascertain the identity of Party A, so the Master erred in holding the Pre-Contractual Context was inadmissible on the ground that the terms of the Agreement were sufficiently clear to show D2 was a party thereto:

(a)	The name and logo of D1 on the cover page as well as the company “chop” affixed to the margin of each page of the Agreement showed D1 was Party A.
(b)	The header of the Agreement that described Party A only gave a commercial address that was D1’s registered address, but did not give any personal address for D2.
(c)	The Agreement on its face appeared to be a bilateral contract between Party A and Party B, and the plain and ordinary meaning of “Party A” suggested a single party.
(d)	The execution clause of the Agreement described Party A as D1 only with D1’s “seal” (or company “chop”)  affixed and D2 signed his signature on top of D1’s “seal” (or company “chop”)  explicitly as representative of D1 (股東代表). D2 in his personal capacity was not separately described in the execution clause (ie there were no qualifying or additional words), and there was no separate signature for D2 in his personal capacity. Mr Chain submitted it was plain D2 signed on behalf of D1, but he “so happened to be a shareholder”. Mr Chain noted that neither P nor D1 suggested other shareholders of D1 were affected by the present dispute, so it was incorrect to say D2 was a representative of the shareholders of D1. He submitted D2’s case that he signed on behalf of D1 accorded with how the Agreement was signed.
(e)	Clause 1(2)  set out the essence of the Agreement, ie P’s investment in D1 was by way of subscribing for shares in D1. Mr Chain submitted such clause must be read against the Pre-Contractual Context, which showed that 原股東轉讓或增資 referred to the Shares being transferred to P under D1’s arrangement from the 1st round of share repurchases by D1 (ie D1 would buy back its own shares from its existing shareholders)  or from direct allotment by D1. Mr Chain in his written submissions claimed that “[in] this connection, [D2] in his capacity as director of [D1] did subsequently act as a middleman to facilitate the share transfer from existing shareholders to P, so as to avoid the inconvenience arising from the various administrative steps necessary for [D1] to repurchase its own shares from existing shareholders, and to then allot new shares to P”. Mr Chain also submitted this would avoid P having to deal with strangers.
(f)	Clause 2(9)  referred to a “share repurchase” obligation should “Party A” or “its subsidiaries” fail to list, which would not make sense if “Party A” was not a reference to D1 alone because D2 as an individual could not list and would not have subsidiaries. Further, the Agreement was titled as a subscription agreement (投資入股協議書)  and the Shares were to be allotted to P by D1, so only D1 (and not D2)  could “repurchase” the Shares from P.
(g)	According to Clause 3, the consideration for the Shares was to be paid (and in fact was paid)  by P to D1, and a HK$ bank account of D1 and a RMB bank account of D1’s associated PRC company were specifically identified. D2 claimed he would receive no direct personal benefit from the Agreement under its terms.
(h)	Clause 2(7)  and Clause 9insofar as they could be read to refer to pre-existing rights/duties of shareholders must be read in the context of (i)  there being no shareholders’ agreement signed by the shareholders of D1 and (ii)  the relationship among such shareholders was governed merely by D1’s articles of association.

252.  For (d)  above, Mr Chain submitted that when such terms of the Agreement were considered together with the undisputed Pre-Contractual Context (which Mr Chain accepted should be viewed objectively in light of the terms of the Agreement), it must be at least arguable/triable that D2 in his personal capacity was not party to the Agreement whether under the D2 Capacity Defence or the Rectification Defence, which after all was a factual dispute for the court at trial (see Homburg Houtimport BV & ors at paragraph 196 above).

(g)  Discussion

253.  I have carefully considered Ds’ arguments against the threshold for raising a triable issue / arguable defence in an Order 14 context, and I have come to the view that the O14 Judgment must stand. I find that having studied the Agreement by reference to its object and the whole of its terms (ie without dwelling too much upon individual words/ clauses to the neglect of the contract as a whole), and giving the language used their natural and ordinary meaning in the context of its nature, quality and drafting, a reasonable person having the knowledge available to the parties at the time of contract in the situation and circumstances discussed below, the inevitable objective conclusion (ie disregarding the subjective evidence of the parties’ intentions)  is that Party A comprised both D1 and D2 whether on the existing pleadings/evidence or on the de bene esse materials. In coming to such view, I also bear in mind that one should adopt a construction that accorded with business common sense and that would validate the instrument/clauses rather than one that would frustrate the agreement or render it ineffectual unless the latter was how a reasonable person with knowledge of the purpose/background of the transaction would have understood. I also do not forget that Ds only needed to raise a triable issue or an arguable defence under the O14 Summons.

254.  It is interesting that the D1 Capacity Defence and the D2 Capacity Defence respectively tried to shift blame to the other defendant:

(a)

D1 claimed it was not Party A, it never authorised D2 to enter into the Agreement, and it was D2 representing the existing shareholders of D1 who was Party A, so the Agreement was a shareholders’ agreement or transfer of shares agreement entered into between the then existing sharheolders of D1 through D2 as their representative on the one part and P as the intended new shareholder on the other part (see paragraphs 9-10 and 40 above). D1 claimed the Agreement was signed/executed by D2 in his capacity as the representative of the then existing shareholders of D1/HKTV (see paragraph 40(i)  above).

(b)

D2 claimed he was not Party A and instead D1 was Party A, so the Agreement was made by him (not in any personal capacity)  on behalf of D1 as Party A and by P as Party B (see paragraph 47 above). D2 claimed he signed the Agreement in his capacity as a director and the chairman representing D1 and not in any personal capacity (see paragraph 49 above).

255.  Given there was indisputably a contract with P as Party B (and P had actually paid the Sum for acquisition of the Shares pursuant to the Agreement), D1 and D2 could not both be right. As the existence of the Agreement was not in doubt, the best place to start to objectively deduce the intention of the parties as to who Party A was would be the Agreement itself. I bear in mind the principles of construction / identification of a contracting party discussed in Part XIX(b)  above and summarised in paragraph 253 above, and adopt a unitary and iterative approach, checking Ds’ contentions against the contractual provisions and investigating the commercial consequences. I will endeavor to place the clauses in the context of the Agreement as a whole, but recognising that it might not be possible to achieve complete reconciliation or perfect consistency, and that it might well be necessary to adapt the language in order to give effect the intention of the parties. The discussions below clearly demonstrated that P’s stance, ie Party A comprised both D1 and D2 with reference to the object/terms of the Agreement, accorded with both commercial logic and inherent consistency that was unmatched by D1’s and/or D2’s respective stance that suffered from commercial unreality and contractual incoherence.

256.  In coming to the above view, I also took into account the fact that the Agreement was in fact negotiated at the Shenzhen Office and via WeChat communciations, prepared by D1’s administrative staff based on a template generally used by D1 for such purpose, and signed in the Shenzhen Office (see paragraphs 48-49 above). Thus, the Agreement necessarily had a flavour of linguistic and contractual style found in Mainland China.

257.  Although all parties reminded that the Agreement was made without the professional assistance and any infelicitous drafting must be read objectively against the Agreement as whole, it must be remembered there is no rigid divide between professionally drafted and lay prepared contracts.[162] In my view, the Agreement clearly lay somewhere in between since the Agreement, albeit not professionally drafted, was prepared by commercial men who had past experience in dealing with similar transactions (see Recital 1 and Clause 1(1)), and who had previously prepared similar agreement and had access to a template document.

258.  It was common ground that the Agreement was executed on 19 April 2016, and that the Agreement concerned P’s investment in D1 by acquisition of shareholding in D1. This was borne out by references in the cover page of the Agreement to HKS 香港衛視 and 香港衛視國際傳媒集團有限公司  投資入股協議書 (see footnote 3 above). I cannot see how the name and logo of D1 on the cover page would have meant D1 alone was Party A. All it showed was that the Agreement was an agreement concerning investment in D1 through acquisition of shares.

259.  I have explained that the “true bargain” or the “nub of the deal” was for P to become owner of and to obtain title to the Shares so that P as new shareholder of D1 would be able to exercise his rights and discharge his obligations as such. This was plainly obvious from Clause 2(2)  (see paragraph 152(b)  above and the other reasons set out in Part XVI(c)  above). As explained in paragraph 142 above, although I drew such conclusion upon analysis of D1’s Election Defence that was premised on P’s case that Party A comprised D1 and D2, such analysis/ conclusion remained relevant for the D1/D2 Capacity Defences and the Rectification Defence because the “true bargain” or the “nub of the deal” was between Party A (be it D1, D2 or Ds)  and Party B. Such analysis/ conclusion lent weight to my view (as discussed below)  that the provisions of the Agreement (particularly the description of the parties and the execution provisions therein)  amply showed the parties intended Party A to comprise both D1 and D2.

260.  Party A was expressly described in the header as 香港衛視國際傳媒集團有限公司 Hong Kong TV International Media Group Ltd (以下簡稱 “香港衛視”)  股東代表並董事局主席高洪星先生. The Master held that such description meant D1 (香港衛視國際傳媒集團有限公司 Hong Kong TV International Media Group Ltd (以下簡稱 “香港衛視”))  and D2 (股東代表並董事局主席高洪星先生), and explained that “[while] ideally the two names stated in the name of the parties should be separated by a comma or linked by a word “及”, but considering the terms of the Agreement, I come to the conclusion that Party A comprises two entities: [D1] and [D2]”. I agree.

261.  The fact that the Agreement was a bilateral contract between Party A and Party B did not logically mean Party A was therefore only 1 person/company. Insofar as Party A contracted to give the Shares to P upon receipt of the Sum, Party A could be more than 1 person/company, especially in light of of 2 modes of performance of Party A’s primary/ basic obligation under Clause 1(2)  (see paragraph 266-269 below). Indeed, if Party A was D1 alone, then it would have been sufficient to describe D1 (香港衛視國際傳媒集團有限公司 Hong Kong TV International Media Group Ltd)  as Party A (甲方)  without need to give an acronym for D1 (以下簡稱 “香港衛視”)  in the header / Recital Preamble. In my view, D1 was given an acronym HKTV within the description of Party A in the header because Party A was more than D1/HKTV, and the description that followed (股東代表並董事局主席高洪星先生)  clearly indicated that D2 was also a member of Party A.

262.  On the other hand, if Party A meant D2 alone in his personal capacity as an existing shareholder with sufficient shares in D1 for potential transfer to P, then referring to D2 as 股東代表 would have been sufficient, and there would have been no need to also name him (as the description in the header did)  as the chairman of the D1 Board (董事局主席), which was a corporate role and not a personal role. Such description of D2’s capacity as a corporate officer of D1 within the overall description of Party A showed D2 had both personal and corporate capacities as representative shareholder and D1’s representive. I do not accept Mr Khaw SC’s suggestion that 董事局主席 could ordinarily and naturally be understood to mean chairman of D1 representing existing shareholders in their personal capacities given the express reference to the D1 Board (see paragraph 236(a)  above).

263.  Given the personal and corporate roles of D2, the fact only D1’s registered address was given for Party A would not point towards D2 not being a member of Party A. In any event, D2 at the material times was a shareholder and a director of D1, and he was also the chairman of the D1 Board. Plainly, D1’s registered address was also D2’s business address, and the Agreement was very much a commercial contract for investment in D1. Further, there was nothing untoward in a composite Party A (ie D1 and D2)  using D1’s registered address as a unitary address for communications with Party B (Clause 8).

264.  Mr Khaw SC put emphasis on the distinction between Party A and D1/HKTV in the Recital Preamble when read together with the header. Not only do I not see anything sinister in this, I find this to be a clear pointer that Party A comprised D1 and D2 so that Party A and D1/ HKTV were not used interchangeably. This explained why, for example, Clause 1(1)  provided “…… 香港衛視現股本為港幣10億元 ……”. But this did not mean that Party A was, as D1 contended, necessarily D2, and that D1/HKTV was not a member of Party A. Rather, this was consistent with D1/HKTV being the company in question in contra-distinction (according to P)  to D1 and D2 as Party A. But as seen in the discussion below on various clauses of the Agreement, certain obligations of Party A fell on D1/HKTV.

265.  I now turn to the Recital Preamble, Recital 1 and Recital 2. In my view, it was the very distinction in the above paragraph that explained why in the Recital Preamble (a)  D1 (香港衛視國際傳媒集團有限公司是一家由香港特區政府2008年12月19日批准的國際衛視電視臺)  was given the acroynm HKTV (簡稱香港衛視)  (same as the acronym for D1 in the description for Party A in the header – see paragraph 261 above)  and (b)  it was provided that 甲乙雙方本著自願、公平、公正的原則, 經友好協商, 對入股香港衛視進行股權投資事宜達成協議如下. In my view, the fact the Recital Preamble gave full descriptions of D1 (see (a)  above)  and D2 (董事局主席高洪星博士是資本運作投資專家和資深金融專家及管理專家)  again reflected D1 in its corporate capacity and D2 in his personal capacity together constituted Party A, and it was such composite Party A (in contra-distinction to D1/ HKTV or D2 alone)  that negotiated and agreed with Party B (ie P)  on a voluntary, fair and just basis for Party B 通過股權投資的方式入股 D1 (see Recital Preamble and Recital 2). Such provisions, which explained the nature of the Agreement being P’s investment in shareholding of D1, did not dictate (as D2 suggested)  or preclude (as D1 suggested)  acquisition of shares by allotment (see footnote 3 above).

266.  All 3 counsel agreed Clause 1(2)  was the essence of the Agreement, and such clause provided that P shall acquire the Shares he paid for either by way of 轉讓 (transfer)  or by way of 增資 (capital increase / allotment). Thus, Clause 1(2)  itself expressly recognised 原股東 (existing shareholder)  to 轉讓 (transfer)  shares in D1 as a contractual means for P to acquire the Shares. This clearly pointed to D2 (representative shareholder who could potentially transfer his own shares in D1 to P)  as a member of Party A when D1 could not have effected such transfer (see similar considerations in Nurisvan Investment Limited & anor in paragraphs 225-226 above). It was equally obvious that only D1 (with relevant powers exercisable by the D1 Board)  could 增資 (increase capital)  ie issue and allot new shares to P.

267.  This is reinforced by Clause 4(1)(1)  by which the parties represented they had the necessary power/authority to sign and perform the Agreement “…… 直至本合同所述股權轉讓擴股完成” (my emphasis). In my view, such sub-clause that envisaged 股權轉讓擴股 echoed Clause 1(2)  that provided for Party A’s contractual promise of giving the Shares to P (being Party B)  by means of share transfer by D2 (轉讓)  or capital increase (增資 / 擴股)  (and hence share allotment)  by D1.

268.  This was further reinforced by Recital 1 that explained the background to P’s investment, ie HKTV was a large scale media group with substantial share capital (香港衛視是以經營電視傳媒為主和進行其他文化傳媒產業投資及經營文化產業基金的大型傳媒集團, 註冊資本為壹拾億元港幣), and to increase its strength and to grow its business (為增強香港衛視實力, 儘快做大做強)  D1’s/HKTV’s 1^st shareholders’ meeting in 2012 had already passed resolution authorising the D1 Board to handle matters relating to changes in D1’s shareholdings (經2012年度香港衛視第1次股東會決議, 通過了授權董事局處理股權變動事宜的決議). Such resolution at shareholders’ meeting in 2012 was complemented by written board resolution in 2012 by which the chairman of the D1 Board (ie D2)  was authorised 可根據具體情況批准處理股權變動事宜 (see paragraph 47 and footnote 15 above). Mr Khaw SC tried to brush this aside by saying the written resolutions by the D1 Board were made years ago, and did not authorise D2 to enter into the Agreement on D1’s behalf. But there was no affirmation evidence from D1 (even if one were to also consider on de bene esse basis the Yang 3^rd Aff that was affirmed after the D2 1^st Aff and thus after P/Yang sight of the 2010/2012 written resolutions of the D1 Board – see footnotes 13-15 above)  to show such written resolutions were no longer effective and/or the D1 Board had withdrawn the authority granted to D2 as its chairman. Indeed, the explicit reference in the Agreement to the resolution of D1’s shareholders in meeting in 2012 (Recital 1)  and the adoption of “2012年第1次增資擴股時價格為每股2.57港幣” as the price for the Shares (Clause 1(1))  strongly suggested the written resolution of the D1 Board in 2012 was still applicable and effective to cloth D2 with authority to enter into the Agreement on D1’s behalf. I will deal with the matters of Party A’s warranty of authority under Clause 4(1)(1)  for entering into the Agreement in paragraph 267 above and D2’s apparent/ostensible authority to act on behalf of D1 in paragraphs 288-289 below.

269.  In my view, reading the Recital Preamble, Recital 1, Recital 2, Clause 4(1)(1)  and Clause 1(2)  together, it was plain that the object of the Agreement was for P to invest in D1 by acquiring the Shares so that D1 could “增強 …… 實力, 儘快做大做強”, and this was to be achieved by 從原股東轉讓 (Clause 1(2))  and/or by 增資擴股 (Clause 1(2)  and Clause 4(1)(1)).

270.  Given such clear reference to and wording of transfer from existing shareholder, it is difficulty to see how (as D2 contended)  that would mean P would acquire the Shares merely from allotment by D1, ie D1 would allot to P either new shares or shares repurchased by D1 from existing shareholder(s). On such contention, as between Party A and Party B, P as Party B would only be receiving allotted shares from Party A, so the express reference to 從原股東轉讓 in Clause 1(2)  would have no practical meaning for P. It was therefore unsurprising that D2 would try to bolster his case by relying on the Pre-Contractual Context (see Part XIX(f)  above)  and by postulating a post-contractual scenario of D2 becoming embroiled only because “…… [D2] in his capacity as director of [D1] did subsequently act as a middleman to facilitate the share transfer from existing shareholders to P, so as to avoid the inconvenience arising from the various administrative steps necessary for [D1] to repurchase its own shares from existing shareholders, and to then allot new shares to P” and in such context saving P as new shareholder from having to deal with the existing shareholder(s)  (whose shares would be repurchased by D1), who would otherwise be strangers to one another. I will discuss these matters below, but suffice to state here I am not persuaded they met the threshold of raising a triable issue or arguable case for the D2 Capacity Defence and/or Rectification Defence.

271.  D1’s contentions can be dealt with shortly. The commercial object for Party A was to “增強[HKTV]實力, 盡快做大做強”, and the Agreement plainly contemplated P would invest in D1 and acquire the Shares by inter alia potential capital increase with share expansion (增資擴股), ie allotment of new shares, and not necessarily limited to share transfer from existing shareholder. Mr Khaw SC suggested that for capital increase the obligation would still fall on the shareholders (not D1 nor the directors)  under sections 140-141 of the Companies Ordinance Cap 622 (see paragraph 236(c)  above). Section 140(1)  of the Companies Ordinance Cap 622 provides that “[except] in accordance with section 141, the directors of a company must not exercise any power – (a)  to allot shares in the company ……”, and section 141 of the Companies Ordinance Cap 622 provides that “[the] directors of a company may exercise a power – (a)  to allot shares in the company …… if the company gives approval in advance by resolution of the company” (section 141(1)), and “[approval] may be given for a particular exercise of the power or for its exercise generally, and may be unconditional or subject to conditions” (section 141(2)). Recital 1 expressly stated that D1’s shareholders in meeting in 2012 resolved to generally authorise the D1 Board 處理股權變動事宜. Even though such approval might have expired by the time of the Agreement in 2016 (see sections 141(3)-(5)  of the Companies Ordinance Cap 622), I see no merit in Mr Khaw SC’s contentions when sections 140-141 of the Companies Ordinance Cap 622 made clear it was the directors who would have to exercise the power to allot shares (although they themselves would require shareholder approval), so D1 was a proper party to the Agreement (being an inter partes agreement between Party A and Party B)  for inter alia allotment of shares to P. It was not P’s concern as to how D1 would internally arrange shareholders’ approval if Party A were to eventually decide to give the Shares or part thereof to P by way of allotment and not by transfer, and P could rely on the warranty on the part of Party A in Clause 4(1)(1)  that “其有完全的民事權利能力和民事行為能力參與、訂立及執行本合同, 或具有簽署與履行本合同所需的一切必要權力與授權, 並且直至本合同所述股權轉讓擴股完成, 仍將持續具有充分履行其在本合同項下各項義務的一切必要權力與授權”.

272.  In my view, the recital and clauses discussed above clearly pointed towards Party A comprising both D1 and D2 because the absence of either of them would render 1 of the 2 contracted means for performance of Party A’s contractual promise to give the Shares to P quite impossible. It was necessary for D1 and D2 to be Party A to give the Agreement business efficacy.

273.  In relation to the sub-clauses in Clause 2, Mr Khaw SC again emphasised that D1 was frequently referred to as HKTV rather than as Party A. For reasons set out in paragraphs 260-271 above and as discussed below, I am not persuaded this would show D1 was not a member of Party A. As explained in paragraphs 261 and 265 above, drawing a distinction between D1/HKTV and Party A suggested (contrary to D2’s contentions)  Party A meant more than just D1/HKTV, but did not necessarily mean (as D1 contended)  D2 alone was therefore Party A. In my view, Party A comprised both D1 and D2.

274.  Clause 2 dealt with inter alia Party A’s duties and obligations. Under Clause 2(1), 甲方應向乙方提供香港衛視有開註冊資料及相關情況介紹, the contractual obligation was on Party A (ie D1 and D2)  and not just D1/HKTV to give relevant information/materials about D1 to Party B (ie P). Had Party A meant D1/HKTV alone, there would not have been any need to draw the distinction between Party A and HKTV. In my view, this suggested Party A was not merely D1/HKTV but included D2. This was echoed in Clause 2(2)  which placed the contractual obligation on Party A (not just D1/HKTV or D2)  to complete the procedures for change in shareholding and 向香港政府相關機構報送有關法律手續 to protect Party B’s interests (eg in the case of transfer of shares it would be for D2 to lodge transfer documents with D1 and for D1 to register P as shareholder, and in the case of allotment of shares it would be for D1 to secure relevant shareholders’ and/or D1 Board’s approval / action and to register P as shareholder, and then in both scenarios for D1/D2 to submit notification to the Companies Registry), and in Clause 2(4)  which required Party B to provide genuine information/materials to Party A (not just D1/HKTV or D2)  as party to the Agreement. These sub-clauses, in my view, went a long way to show Party A comprised D1 and D2, and not just either D1 or D2.

275.  Mr Khaw SC next submitted that because Clause 2(5)  showed each of Party A and Party B shall bear 50% of the stamp duty fee upon transfer of shares, so Party A could not include D1 because Clause 2(5)  contemplated P’s acquisition of the Shares would be carried out by share transfer that was chargeable with stamp duty (but allotment of shares was not so chargeable as evident from the Inland Revenue Department’s stamp duty rates table). Of course, transfer of shares in D1 (from existing shareholder)  to P would be subject to stamp duty, so this sub-clause would reinforce the view that D2 as an existing shareholder was a member of Party A. Mr Chain did not address Clause 2(5)  in his submissions, and D2 shied away from such contractual provision by relying on the Pre-Contractual Context. I will return to discuss the Pre-Contractual Context below (and particularly Clause 2(5)  in paragraphs 291-297 below), but suffice to state here I am not persuaded it sufficiently raised any triable issue or arguable defence.

276.  In my view, Mr Khaw SC’s submissions in the above paragraph, which were no more than an attempt by D1 to shy away from being a member of Party A, flied against the plain wording of Clause 1(2)  and the common understanding of the parties that there were 2 contractual modes to give P the Shares, ie by transfer or by allotment. As explained in Part XVI above, the Agreement did not require Party B to select a particular means to give the Shares to P,[163] and the express clauses would not have prevented Party A from satisfying their contractual promise to P by transfer of existing shares, by allotment of new shares or a combination of both. Given such provision in Clause 1(2)  for potential transfer of shares from existing shareholder, it was plainly necessary to also contractually provide which party was to bear the stamp duty chargeable by the Stamp Duty Office where stamp duty was involved (涉及的厘印稅費)  in the course of transfer of shares (在股權轉讓過程中), ie if P were to acquire all or some of the Shares by way of transfer from existing shareholder as permitted under Clause 1(2). The fact it was contractually agreed that Party A would bear 50% and Party B would bear 50% of such stamp duty fee was not any contra-indication against Party A as including both D1 and D2 because such provision merely meant on inter partes basis Party A vis-à-vis Party B would bear 50% of such stamp duty. How Party A would internally arrange for 50% of such stamp duty to be sourced would be a matter for Party A. Thus, the wording of Clause 2(5)  would not detract from P’s proposition that Party A comprised both D1 and D2 for it would simply mean (a)  D1 and D2 as Party A agreed to bear 50% of such stamp duty vis-à-vis party B, but (b)  it would be an internal matter as between D1 and D2 as to who should bear such 50% stamp duty, which matter would not concern Party B and need not be a subject matter for the inter partes Agreement between Party A and Party B, but which would turn on Party A’s choice of how they would give the Shares to Party B (ie by transfer or by allotment), a matter that was as yet undecided at the time of the Agreement.

277.  Clause 2(6)-(8)  spelled out various rights that Party B would have as a shareholder in D1 upon acquisition of the Shares. In my view, these sub-clauses read as a whole did not point to only D1 or only D2 (as Mr Chain and Mr Khaw SC respectively contended), but rather they pointed towards both D1 as company (eg 乙方有權對香港衛視的經營情況進行瞭解和監督, 並按香港公司條例的規定享有股東的權利與義務 in Clause 2(6))  and D2 as shareholder (eg 乙方享有對新股東而言的原始股東的一切權利與義務 in Clause 2(7)  and 乙方享有合作項目的股東優先權 in Clause 2(8)).

278.  Mr Chain submitted that Clause 2(7)  insofar as it could be read to refer to pre-existing rights/duties of shareholders must be read in context of (a)  there being no shareholders’ agreement signed by the shareholders of D1 and (b)  the relationship among such shareholders was governed merely by D1’s articles of association. But apart from such averments in paragraph 6(e)  of the Draft D2 AD&C (see paragraph 90 above), there was no affirmation evidence to such effect in support of such contention. In any event, I am not persuaded Clause 2(7)  referred to pre-existing rights/duties of shareholders. Rather, such sub-clause provided that if D1/HKTV were to subsequently 增資擴股或上市, then Party B who was the then new shareholder would at such future time have the same rights and obligations as those of the original shareholders. This dealt with Party B’s prospective and not pre-existing rights and obligations, and in a nutshell the agreement was that even though there might be future new shareholders if D1/HKTV were to subsequently 增資擴股或上市, P who was the then new shareholder would in that future scenario be treated as one of the original shareholders (with rights/ obligations as such)  vis-à-vis the future new shareholders. This sub-clause pointed towards D2 being 股東代表 as member of Party A.

279.  I agree with Mr Ho SC and Mr Chain that Clause 2(9)  made clear that Party A necessarily included D1 because it stated that in the event 甲方主體或其關聯子公司兩年内未能上市 (and only D1 had subsidiary(ies)  and would be in a position to list), then 按照香港銀行公佈的同期存款利率計算回購股份 (and only D1 could in future repurchase the Shares that P would acquire under the Agreement). But I do not accept D2’s contention that this meant Party A was merely D1. In my view, considering the Agreement as a whole, such provision was not inconsistent with Party A being D1 and D2. Interestingly, unlike Clause 2(1), 2(2)  and 2(5), Clause 2(9)  did not refer to Party A as 甲方 simpliciter, and instead referred to 甲方主體或其關聯子公司 (my emphasis), which, in my view, suggested the subject matter of such sub-clause was just the main body (主體)  out of Party A and its (其)  subsidiary(ies)  (ie D1 and its subsidiaries), which in turn pointed towards P’s proposition that Party A was more than just D1 (ie it also included D2). This echoed Mr Ho SC’s submissions (adopted by the Master in her reasons for decision – see paragraph 94 above)  that not all contractual obligations for Party A would fall on both D1 and D2, and under Clause 2(9)  the obligation of Party A fell on D1.

280.  Mr Chain then submitted that in relation to the Pre-Contractual Context, in the course of negotiations for the Agreement D2 had explained to P inter alia that P’s Shares would either be (a)  newly allotted shares by D1 or (b)  shares repurchased by D1 from existing shareholders (which D1 might arrange for transfer from existing shareholders), and suggested this was consistent with the repurchase obligation (ie 回購協議)  under Clause 2(9). I disagree. I am unable to see any correlative logic between (i)  the alleged pre-contractual understanding that P’s Shares would be newly allotted shares or the Repuchased Shares from other existing shareholders and (ii)  the possible post-contract scenario of 甲方主體或其關聯子公司兩年内未能上市 (which might or might not come to pass)  when P’s Shares would then be repurchased.

281.  Clause 3 provided that P should pay the Sum into the HK$ bank account of D1 or the RMB account of D1’s PRC associated company. I agree with Mr Ho SC and Mr Chain that such provision for D1 or its associated company to receive the consideration from P was indicative that D1 was a member of Party A. As Mr Ho SC submitted, there was no reason why D1’s bank account would be used if it were not party to the Agreement. But would the fact that there was no contractual designation of personal bank account of D2 to receive the Sum mean D2 was not Party A? In my view, the answer would be no. Again, I reiterate the rationale in paragraphs 275-276 above mutatis mutandis. The Agreement contractually provided inter partes between Party A and Party B that there was a designated HK$ or RMB bank account for Party A’s receipt of the Sum from Party B, and there was no need in such inter partes contract between Party A and Party B to provide for how the received Sum would be dealt with, distributed or paid out once it was received in the designated account from Party B. After all, Clause 3 only concerned Party B’s payment of the investment Sum (投資到位), and the designation of bank account was for receipt of the Sum as sufficient discharge of P’s contractual promise rather than for identification of whose pockets the Sum would ultimately end up. Indeed, it was alleged in the Yang 1^st/2^nd Affs and D2 1^st Aff (and also the Yang 3^rd Aff on de bene esse basis)  that the Sum went through many hands, and P as Party B was not concerned once he paid the Sum into the designated bank account. After all, at the time of contract, it was unknown how the Shares would be given to P as Party B, ie whether by allotment or by transfer, and only Party A would know whether and how much of the Sum would properly be kept by D1 (for allotment of shares)  or D2 (for transfer of shares). In my view, the agreement for the Sum to be paid into the agreed designated bank account of D1 or its associated company would not have precluded D2 from also being a member of Party A, and neither the Agreement nor Party B had to be concerned about how the Sum would be dealt with (if at all)  by D1 upon receipt.

282.  Clause 9 provided that 本合同作為解釋香港衛視股東之間權利和義務的依據, 長期有效, 除非各方達成書面合同修改; 本合同在不與香港衛視章程明文衝突的情況下, 視為對香港衛視股東權利和義務的解釋並具有最高效力. In my view, the parties by such clause plainly intended to deal with matters as among shareholders (ie shareholders’ rights and obligations insofar as they did not conflict with the provisions of D1’s articles of association)  and not vis-à-vis D1 as company.

283.  Mr Chain again submitted that Clause 9insofar as it could be read to refer to pre-existing rights/duties of shareholders must be read in context of (a)  there being no shareholders’ agreement signed by the shareholders of D1 and (b)  the relationship among such shareholders was governed merely by D1’s articles of association. But the wording of this clause was plainly intended to be prospective (本合同作為解釋香港衛視股東之間權利和義務的依據, 長期有效 ……)  rather than pre-existing in nature. Anyway, I have explained in paragraph 278 above that apart from paragraph 6(e)  of the Draft D2 AD&C (see paragraph 90 above), there was no affirmation evidence to support such contentions.

284.  Mr Khaw SC submitted this showed that the Agreement was a shareholders’ agreement and/or transfer of shares agreement between the existing shareholders through D2 as their representative and P as the intended new shareholder (see paragraph 254(a)  above). I disagree for such contention flied against the various provisions in the recital and other operative clauses discussed above that pointed towards D1 as a member of Party A. Further, Clause 9 did not state that 本合同 was a shareholders’ agreement or transfer of shares agreement; rather it referred to the Agreement as 依據 for considering rights and obligations among D1’s shareholders inter se, and 視為 highest authority for interpretation of such rights and obligations if there was no conflict with the articles of association.

285.  In my view, when considering the whole of the Agreement, and reading the clauses against the entirety of the Agreement rather than cherry-picking on individual clauses/wording that were considered to favour 1 defendant’s contention and ignoring those that were considered to be unfavourable to its/his contentions, the tenor of the Agreement plainly and obviously pointed towards both Ds as Party A. This was also bolstered by the execution of the Agreement by Party A.

286.  D1’s company “chop” was also affixed on the right margin of each page of the Agreement.[164] In my view, affixing D1’s company “chop” at the margin of each page of the Agreement demonstrated quite abundantly that D1 was a contracting party. If this was merely a personal agreement by D2 alone, there would have been no need to affix the corporate “chop” on each page of the Agreement to identify it with D1.

287.  The execution page showed that for Party A (甲方)  D1’s company “chop” was affixed on top of the printed words 香港衛視國際傳媒有限公司 (蓋章)  and D2’s signature was appended against the printed words 股東代表 (簽字). In my view, the execution clause echoed the description of Party A in the header (see paragraphs 260-262 above)  in that it clearly contemplated Party A would comprise both D1 in its corporate capacity as subject company (香港衛視國際傳媒有限公司 (蓋章))  and D2 in his personal capacity as representative shareholder (股東代表 (簽字)). Clause 6 of the Agreement provided that 本合同于各方蓋章或授權代表簽字之日起生效 (my emphasis), and D1 was required to and did 蓋章 (affix its company “chop”)  and D2 duly signed (授權代表簽字). But, importantly, D2’s signature was against the printed words 股東代表 (簽字), so plainly D2 was also signing in his personal capacity as representative shareholder. Even if I were wrong on this, given the printed words 股東代表 (簽字)  and the provisions of Clause 6 that allowed D1 to execute the Agreement either by 蓋章 or 授權代表簽字, it would only show D1 executed the Agreement by affixing its company “chop” (蓋章), and D2 did not have to sign as representative of D1 and only did so personally when he appended his signature against 股東代表 (簽字). Indeed, there were examples of PRC contract (eg P’s employment contract dated 24 August 2016 executed by 深圳市香江文化傳播有限公司 by affixing its company “chop” to the execution page and at the margin of all pages of the contract – see paragraph 63 above)  and legal document (eg the declaration of trust dated 10 October 2015 executed by 深圳瑞華秀江投資有限公司 by affixing its company “chop” without any signature – see footnote 21 above).

288.  Mr Khaw SC drew a distinction between affixing a company “chop” and a company “seal” (see paragraph 238 above), but there was no suggestion that the Agreement must be signed by D1 with its company “seal”. In the end, Mr Khaw SC conceded the imprint of D1’s company “chop” might suggest D2 signed for and on behalf of D1, which would go to the issue of ostensible/apparent authority, but in reality D1 never actually authorised D2 to act for D1 when he signed the Agreement (see paragraph 238 above). But such argument would not help D1 unless D1 could show P had actual knowledge of D2’s alleged lack of authority or P’s belief that D2 had authority was dishonest or irrational.[165] D1 did not suggest P was dishonest or irrational. In Thanakharn Kasikorn Thai Chamkat (Mahachon), Lord Neuberger of Abbotsbury NPJ dealt with the issue as to whether the defendants should have appreciated that the party with whom they had contracted was an agent for the plaintiff rather than a principal, and said as follows (page 507):

“54.  …… Lord Edmund Davies (sitting in the English Court of Appeal with Viscount Dilhorne and Lord Scarman)  in By Appointment (Sales)  Ltd v Harrods Ltd (unrep., Court of Appeal, 1 December 1977)  said at the end of his judgment that “there was possibly constructive notice but not actual notice, and actual notice is required”.

55.  Millett J took the clear view that constructive notice did not involve “the proper approach” in a normal commercial case, on the basis that “[u]nless and until they are alerted to the possibility of wrongdoing, [account officers] proceed, and are entitled to proceed, on the assumption that they are dealing with honest men”. He continued by saying that they were entitled to do so until “the facts … [make] it imperative for [them] to seek an explanation because in the absence of an explanation it was obvious that the transaction was probably improper” – Macmillan Inc v Bishopgate Investment Trust Plc (No 3) [1995] 1 WLR 978, 1014G-H.”

Here, given the discussion, analysis and conclusion as to the terms/ clauses in the Agreement above, the contractual provisions only served to bolster P’s belief that D1 was a member of Party A,[166] and there was no call for P to make enquiry as to D2’s capacity as Mr Khaw SC suggested (see paragraph 237 above)  when Party A executed the Agreement with D1’s company “chop” and the signature by D2 who apart from being 股東代表 was also described as 董事局主席 in the Agreement.

289.  Mr Khaw SC next argued there were no qualifying words in the execution page that D2 signed as agent for and on behalf of D1 (see paragraph 236(g)  above). But if D2 executed the Agreement merely as representative of the existing shareholders as D1 contended, there would not have been any need for the execution page to specify by printed terms 香港衛視國際傳媒有限公司 (蓋章), ie for D1 to affix its company “chop”, which D1 did, and not only at the execution page but also at the margin of each page of the Agreement. D1 had no credible explanation for this.

290.  On the other hand, D2 sought to argue that he signed the Agreement only in his capacity as the chairman of D1 on behalf of D1 and not in his personal capacity, but he “so happened to be a shareholder” (see paragraph 251(d)  above). Such contention flied against the header, recital and clauses as discussed/analysed above. Further, if D2’s contention were correct, then the execution clause for Party A would have expressly provided for 董事局主席 (授權代表簽字)  or similar words rather than 股東代表 (簽字). D2 had no explanation why, on his case (apart from the Pre-Contractual Context), the execution clause made no mention of his proper capacity as chairman of the D1 Board but expressly referred to his allegedly by-the-way role as representative shareholder. In my view, given 1 of the contracted means to give the Shares to P was by transfer of shares from existing shareholder (從原股東轉讓), D2 as the largest shareholder in D1 clearly signed the Agreement as representative shareholder to give effect to such core contractual promise on the part of Party A.

291.  It is perhaps appropriate to turn to the Pre-Contractual Context which D2 now relied on strongly for the D2 Appeal as it related to Mr Chain’s 4 propositions in paragraph 244 above. However, I cannot see how D2 could criticise P for not dealing with the Pre-Contractual Context in his affirmation evidence when there was not even a whiff of the Rectification Defence or allegation of construction of the Agreement to identify Party A based on common/mutual mistake even up to the time when P made the P 3^rd Aff and at the Master Hearing. This had significance for Mr Chain’s suggestion that Pre-Contractual Context was admissible for the Rectification Defence and for construction of the Agreement “akin to” the Rectification Defence, which contentions were to be considered on de bene esse basis unless, at the very least, they were supported by existing affirmation evidence.

292.  Thus, the key question was whether D2’s affirmation evidence (filed for the purpose of D2’s opposition of the O14 Summons that did not rely on the Rectification Defence or common/mutual mistake)  would be sufficient to meet the Order 14 threshold requirement to support such contention/defence that D2 now proposed to run. I refer to the 4 criteria summarised by Peter Gibson LJ in Swainland Buildings Ltd (see paragraph 230 above)  as rephrased by Etherton LJ in Daventry District Council (see paragraph 232 above), and bear in mind that the burden was on D2 to produce “convincing proof” to raise a triable issue or arguable case that the Agreement was not in accordance with the parties’ true intention at the time of its execution (see paragraph 235 above), and the proposed rectification of the Agreement in paragraphs 15-18 of the Draft D2 AD&C (see paragraph 93 above)  would accord with their intention.

293.  Thus, D2 had to show there was clear and communicated antecedent common intention/understanding (to be ascertained objectively)  that Party A was only D1 and not D2, and such common intention/understanding continued unaltered up to the time of execution of the Agreement. Johnson Lam J (as he then was)  in Kowloon Development Finance Ltd admonished that one should examine the evidence to see whether to a reasonable objective observer the parties had a continuing common intention (see paragraph 233 above). Here, all that was stated in the D2 1^st Aff was that (a)  during the negotiations that led up to the Agreement D2 was negotiating in his capacity as the chairman of the D1 Board on behalf of D1 with P for investment in D1, and in particular D2 (i)  gave P his business card and (ii)  showed P a promotional video of D1, and (b)  D2 explained to P the broad terms of investment offered by D1, in particular that (i)  the investment would be by way of share subscription at a price of HK$2.57 per share with repurchase obligation by D1, (ii)  D1 had gone through a 1^st round investment in 2012 at a price of HK$2.57 per share and (iii)  D1 was then undergoing a 2^nd round investment and refinancing exercise, so P’s Shares would either be newly allotted by D1 or repurchased by D1 from existing shareholders (which D1 might then arrange to transfer from existing shareholders)  (see paragraph 48(c)  above).

294.  In my view, (a)(i)-(ii)  and (b)(i)-(ii)  above were neutral factors because D2 as the chairman of the D1 Board was authorised under board resolution in 2012 to deal with matters of change of shareholding and D1 was at that time looking for new investors. Thus, irrespective of who was Party A, it would come as no surprise for D2 as chairman of the D1 Board to introduce D1 to P being a prospective investor and to give some background information to P. But even if (b)(iii)  above described how Party A might wish to procure the Shares to give to Party B, the court would need to objectively distill the parties’ true intentions at the time of execution of the Agreement, and disregard subjective evidence of parties’ intentions. In my view, there was, quite simply, no sufficient affirmation evidence of mistake on the part of D2 let alone common mistake on the part of both D1 and P, and the eventual contractual provisions (and not merely the manner of execution by the parties)  of the Agreement pointed towards D2 also being a member of Party A. D2 said a draft template agreement was used, but there was no evidence from him that he did not read the draft and/or the Agreement, misunderstood them or was mistaken about their contents. The draft agreement prepared by D1’s administrative staff was not available before the Master and/or this court.

295.  Rather, D2’s evidence was that there were subsequent negotiations and P made suggestions that led to the alteration of the draft before it was finalised and executed (see paragraph 48(c)-(f)  above). This was hardly consistent with P being mistaken about the contents of the Agreement or the identity of Party A.

296.  In my view, even if there was some discussion as to possible sourcing of the Shares from the Repurchased Shares (as the D2 1^st Aff seemed to suggest), by the time the Agreement was drafted, revised, finalised and/ or executed it had moved on pursuant to negotiations and agreement by the parties such that there was no cogently triable or arguable issue of common/mutual mistake. The parties expressly agreed in Clause 1(2)  that one of the means for P to get the Shares was 從原股東轉讓 to P and not merely (as D2 suggested)  from allotment by D1 upon D1 securing the Repurchased Shares from existing shareholders. This tied in with Clause 2(5). If, as Mr Chain submitted, D2 as a director of D1 merely acted as middleman to facilitate share transfer from existing shareholders to P so as to save D1 from having to undertake inconvenient administrative steps to repurchase its own shares from existing shareholders and then (presumably to retire them and)  allot new shares to P, there would have been no reason to make provision on liability for payment of stamp duty at all. Under such alleged scenario, insofar as P was concerned, he would be getting the Shares by way of allotment by D1, ie completely new allotment of shares (share expansion or 擴股)  or allotment after D1 acquired the Repurchased Shares, and the provision for P as Party B to bear 50% of the stamp duty fee would have been commercially illogical. Insofar as D2 was saying that D1 was notionally repurchasing shares for allotment to P but for administrative convenience (although this was not specifically mentioned in the D2 1^st Aff)  would arrange direct transfer from existing shareholders (or from existing shareholders via D2)  to P, I cannot see any business sense for P to bear 50% of the stamp duty fee when in such alleged scenario stamp duty arose from Party A’s obligation to acquire shares to satisfy its contractual promise to let P have the Shares under the Agreement, and direct transfer of the Shares from existing shareholders was just an indulgence to help D1 avoid administrative inconvenience. In my view, Clause 2(5)  in prescribing Party B to bear 50% of the stamp duty fee would only make sense if (as expressly contemplated under Clause 1(2))  one of the contracted means for P to acquire the Shares was by direct transfer to P from existing shareholder, in which case both Party A (of whom D2 was a member)  as transferor and Party B as transferee would share the liability for the stamp duty fee. I also note that in the proposed counterclaim under the Draft D2 AD&C, there was no proposal to rectify Clause 2(5)  (see paragraph 93 above).

297.  In my view, the tenor of the D2 1^st Aff was that the Agreement reflected what was agreed (as alleged by D2 though disputed by P), ie that D1 was Party A and D2 in his personal capacity was not party to the Agreement, rather than any clear assertion of continuing common/mutual mistake. In my view, and even taking into account Mr Chain’s reminder that the court should look at the substance of the evidence and not to merely search for “buzzwords” of common / mutual mistake, the allegation of common/mutual mistake and/or the Rectification Defence went further than what the D2 1^st Aff could support on the affirmed facts.

298.  In my view, there were no arguable or triable merits to the D1/D2 Capacity Defences and the Rectification Defence, whether on the basis of the existing affirmation evidence and/or on the de bene esse materials. The indicia of identity and the surrounding circumstances (assuming that they would be taken into account)  strongly pointed to D1 and D2 being Party A, which also accorded with commercial or business logic, and the suggestion that either D1 or D2 was Party A suffered from difficulties that were impossible to explain away. For completeness, I round this up by discussing in paragraphs 229-305 below some post-contractual conduct (assuming that they would be taken into account), and say that they reinforced the aforesaid conclusion.

299.  If post-contractual conduct were to be considered, one had to start with the fact that the Sum was paid into the designated account of D1 with the CCBank, and D1 issued the Receipt to P, which naturally pointed towards D1 as a member of Party A. Mr Khaw SC reminded there was no evidence that D1 had even been requested to allot the Shares to P (see paragraph 240 above). But as I have explained in paragraphs 145-146 above, there was no call for P to notify Party A to allot the Shares.

300.  Then, there were the Transfer Documents of which the B/S Notes were signed by D2 as transferor of the shares in D1 under his name (in the exact quantity as the Shares)  to P as transferee (without any qualification that D2 did so on behalf of other existing shareholder(s)). Mr Ho SC asked rhetorically why D2 would sign such documents more than a year after the Agreement was made, ie in September 2017, if D2 was not party to the Agreement. In my view, the Transfer Documents pointed obviously towards D2 being a member of Party A with contractual obligation to give the Shares to P being Party B.

301.  Since the Transfer Documents did not refer to anyone except D2 as transferor and P as transferee, D2 had to pray in aid the Pre-Contractual Context to allege it had been communicated to P that the Shares would be given to him either (a)  from shares directly allotted by D1 or (b)  “from shares repurchased by [D1] from existing shareholders (which [D1] may arrange to be transferred from existing shareholders)”. D1 further asserted he subsequently signed the B/S Notes “in the context of potentially facilitating the transfer of shares between old shareholders (whose shares would be repurchased by [D1])  and [P] as a new shareholder, who were otherwise strangers to each other”.

302.  Mr Ho SC submitted the aforesaid explanation by D2 made no sense, and was “actually flatly contradicted by the [Transfer Documents] because D2 was stated to be the transferor and there was no mention of any unnamed “old shareholders” at all”, which therefore also cast doubt D2’s allegation of common/mutual mistake.

303.  Under Clause 1(2), 增資 (ie direct allotment by D1)  and 從原股東轉讓 (ie direct transfer by existing shareholder(s))  were the 2 contractually permissible ways to perform Party A’s promise under the Agreement. But D2 countered to say his signature as that of the transferor on the B/S Notes must be read in line with the Pre-Contractual Context (which context, in my view, at best described how Party A might wish to procure the Shares to give to Party B, but which was insufficient to raise any arguable or triable case of common / mutual mistake - see paragraphs 294-295 above). What was said to have been contemplated in the Pre-Contractual Context was inter alia that instead of D1 buying back the shares from willing existing shareholder(s)  and re-allotting them to P, D1 might purchase the shares from the willing existing shareholder(s)  and cause such shareholder(s)  to directly transfer the Repurchased Shares in his/their names to P. Mr Chain’s written submissions explained this arrangement was for avoiding “the inconvenience arising from the various administrative steps necessary for [D1] to repurchase its own shares from existing shareholders, and to then allot new shares to P” even though the D2 1^st Aff (in paragraphs 10-11 thereof)  did not precisely put forward such detailed explanation as part of the Pre-Contractual Context allegedly among P, D1 and D2 (see paragraphs 48-49 above).

304.  Thus, the Transfer Documents (in which D2 signed as transferor of the Shares)  when read in light of D2’s case on the Pre-Contractual Context would at best suggest D1 having repurchased the Shares from D2 as a willing existing shareholder then caused D2 to arrange transfer of such Repurchased Shares in D2’s name directly to P. But this did not sit well with D2’s case that he did not receive any benefit from the Sum and never sold or transferred his own shares in D1 to P whether directly or via repurchase by D1. So in relation to D2’s signature on the B/S Notes in September 2017 (ie more than a year after the Agreement was made), paragraph 16(e)(v)  of the D2 1^st Aff (see paragraph 54(b)(v)  above)  had to go further to assert that “this was in the context of potentially facilitating the transfer of shares between old shareholders (whose shares would be repurchased by [D1])  and [P] as a new shareholder, who were otherwise strangers to each other”. But there was no suggestion in the D2 1^st Aff that it was contemplated and communicated among P, D1 and D2 within the Pre-Contractual Context D1 would cause transfer(s)  of the Repurchased Shares from willing existing shareholder(s)  to P (“who were otherwise strangers to each other”)  through D2 (who did not let D1 repurchase shares of D1 in his own name). Indeed, Mr Chain in his written submissions claimed that “in this connection, [D2] …… did subsequently act as middleman to facilitate the the share transfer from existing shareholders to P ……” (my emphasis).

305.  In my view, the fallacy of D2’s contention was evident from the fact that such explanation as to how the Transfer Documents came into being and as to why he signed the B/S Notes as transferor (without qualification)  was not even contemplated/communicated in the alleged Pre-Contractual Context, and it was not even suggested P was expressly told about this alleged subjective arrangement among D1, D2 and other existing shareholder(s)  for routing the Repurchased Shares through D2 for transfer to P. More importantly, there was no affirmation evidence and/or supporting documents (eg the share register or transfer documents)  that the other existing shareholder(s)  who were strangers to P but whose shares were repurchased by D1 had caused such Repurchased Shares to be transferred to D2 to feed the B/S Notes whereby D2 purported to onward transfer such Repurchased Shares transferred by other existing shareholder(s)  into his own name (the same quantity as the Shares)  to P. No transfer documents as between D2 (as transferee)  and other existing shareholder(s)  (as transferor(s))  in relation to the latter’s shares that had been allegedly repurchased by D1 were adduced, but alternatively D2 did not credibly explain why he would sign the B/S Notes to transfer shares in D1 in his own name (of the same quantity as the Shares)  to P in the absence of back-to-back transfer documents for transfer to D2 of an equal block of shares that had been repurchased by D1 from other willing existing or “old” shareholder(s). In any event, the commerciality of such arrangement was highly doubtful for it made no commercial sense for the willing existing shareholder(s)  to transfer their shares that had been repurchased by D1 to D2 and then for D2 to transfer the Shares in his own name to P, and thereby incur stamp duty fees perhaps twice over merely for the purpose of enabling D1 to avoid having to allot shares to P and enabling P to avoid having to deal with strangers. I find D2’s case on the Transfer Documents inherently incredible, which also served to undermine his allegations as to the Pre-Contractual Context and allegation of common/mutual mistake.

306.  In my view, there was no arguable/triable merit to the D1/D2 Capacity Defences and the Rectification Defence whether on the basis of the existing affirmation evidence or on the de bene esse materials. Further, “‘[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism’ (per Megarry V.-C. in Lady Anne Tennant v. Associated Newspapers Group Ltd [1979] F.S.R. 298)””[167]

XX.  D1’s APPEAL AGAINST THE NEW AFF ORDER

307.  Shortly before the Master Hearing, D1 by the New Aff Summons sought leave to file the Wong Aff that exhibited the Yang 3^rd Aff, and P filed the Cheung Aff that exhibited the P 3^rd Aff (then not yet affirmed/notarised)  in opposition. The Master dismissed D1’s application by the New Aff Order, and D1 appealed against such order.

308.  It was not disputed that the New Aff Order was an exercise of case management discretion on the part of the Master. In relation to an appeal against a case management decision made by a master, it has been said that a judge should not “lightly interfere” with such decision of the master and should only do so for “good reason”.[168]

(a)  D1’s case

309.  Mr Khaw SC submitted that the contents of the Yang 3^rd Aff were admissible, relevant and probative to the issues in dispute even though the affirmed matters occurred before the Yang 2^nd Aff was filed, eg it set out (a)  D1’s further findings as to the whereabouts of the Sum, including Shenzhen XJ’s re-transfer of RMB7,000,000 to Zheng after Zheng’s transfers to Shenzhen XJ, which further transfers D2 did not disclose, (b)  money dealings between P and D2 (including the return of RMB3,000,000 from D2 to P, which D2 and P did not disclose),[169] and (c)  D1’s inability to adduce evidence from Zheng given his unwillingness to cooperate with D1 and his close connection with D2.

310.  Mr Khaw SC argued that prejudice to P would be minimal as P had already prepared the P 3^rd Aff last year in response to the Yang 3^rd Aff, and P even filed the P 3^rd Aff on 29 June 2021 (ie just before the Appeal Hearing)  without the court’s leave, so there was no basis for P to complain about the contents of the Yang 3^rd Aff. Referring to the emphasis in Dutfield International Group Co Ltd on natural justice (see paragraphs 101-102 above), Mr Khaw SC urged the court to allow D1 to file and rely on the Yang 3^rd Aff so D1 could be heard on D2’s allegations as to the movement of funds.

(b)  Discussion

311.  I start with D1’s complaint against P filing the P 3^rd Aff on 29 June 2021 without leave. There is no merit to this argument because the Cheung / P 3^rd Affs were filed for opposing the New Aff Summons, and no leave was required for P to file affirmation evidence to oppose such summons. What P should have done was to file the finalised/ notarised P 3^rd Aff as soon as practicable after the Master Hearing since the Cheung Aff exhibiting the draft P 3^rd Aff had been deployed at such hearing to oppose the New Aff Summons. Since D1 lodged the D1 Appeal against the New Aff Order, D1 could hardly complain against P using the P 3^rd Aff when its draft version had been successfully deployed by P at the Master Hearing to resist the New Aff Summons. In any event, no prejudice was caused by the late filing of the P 3^rd Aff for D1 was well aware of the contents of the P 3^rd Aff ever since the Cheung Aff was served on D1 before the Master Hearing.

312.  However, there would have been forensic prejudice to P if the Master had granted leave for D1 to file/serve the Yang 3^rd Aff that was disclosed under the Wong Aff 11 days before the Master Hearing (see paragraphs 27-28 above). Not only would such affirmation (if allowed)  derail P from proper preparation in the imminent run up for the Master Hearing by diverting efforts to deal with such evidence, it was of no answer for D1 to point to the P 3^rd Aff to allege that P had opportunity to respond to the matter. I note that at that time P was residing in Mainland China and could not come to Hong Kong to confer with his legal representatives (see paragraph 78 above), and the P 3^rd Aff was what he could scramble up as an urgent but incomplete response to D1’s allegations in the Yang 3^rd Aff (see paragraph 86 above), which meant the Master Hearing might have to be adjourned if he were to put forward a full response to the Yang 3^rd Aff. I am of the view that if D1 were allowed to rely on the Yang 3^rd Aff, P would suffer forensic prejuidice that would not be compensatable by costs.

313.  Next, since I have considered the Wong / Yang 3^rd Affs on de bene esse basis and found the de bene esse materials did not sufficiently advance the arguability of D1’s defence contentions for resisting the O14 Summons and/or setting aside the O14 Judgment against D1, there was no viable reason for allowing the Wong / P 3^rd Affs to be filed.

314.  In any event, the New Aff Summons was undoubtedly late and neither the Wong Aff nor the Yang 3^rd Aff sufficiently raised exceptional circumstances that might have justified such late application. It must be remembered D1 did not perceive any need for further affirmation evidence when written submissions for the scheduled hearing of the O14 Summons (on 2 March 2020)  was lodged on 27 February 2020 well after sight of the D2 1^st Aff and the P 2^nd Aff (see paragraph 80 above). Yang himself must have known of his alleged discussions with D2 in 2018/2019 (see paragraph 81 above), and there was nothing to suggest the documents in 2014, 2017 and 2019 referred to in the Yang 3^rd Aff could not have been obtained with reasonable diligence. Indeed, most of the documents exhibited to the Yang 3^rd Aff purported to be accounting records kept by D1 or telephone messages kept by Yang himself. Even the allegation that Zheng was recalcitrant and unhelpful in providing relevant information must have been known by the time of preparation of the Yang 2^nd Aff. In short, it was not suggested that the information/documents in the Yang 3^rd Aff only became available to D1 in July 2020.

315.  As explained in footnote 31 and paragraph 174(b)  above, the purported transfer slips in respect of alleged transfers from Shenzhen XJ to Zheng in September/October 2016 exhibited to the Yang 3^rd Aff were quite blurred and illegible, and yet despite the lapse of time until now D1 made no attempt to produce clear copies.

316.  As regards the telephone messages between D2 and Yang in 2019 (see paragraph 77 above), Yang claimed D2 re-confirmed RMB3,000,000 had been paid to P, and accused P and D2 of concealing such partial repayment to P. But, as Mr Ho SC submitted, notwithstanding P’s fair disclosure of the relevant pre-prepared 借據 that he signed without notice of (and with explanation given for)  the reference to 回購款therein (see paragraph 86(c)  above), D1 had no explanation or answer to the express reference in D2’s telephone message in reply to Yang’s query that “我朋友借給[P] 三百萬”, ie it was not any repayment by D2 to P but a loan by D2’s friend to P, which was consistent with P’s explanation in the P 3^rd Aff (see paragraph 86 above). Further, it was very telling that even in the Draft D1 AD, which D1 put forward as the latest draft version of D1’s defence pleading that presumably captured all the defence averments that D1 wished to rely on, there was no plea or no alternative plea of any material fact that P had been partially refunded in the sum of RMB3,000,000. As Mr Ho SC submitted, “[it] is hard to see how the further evidence could be of any significance”.

317.  For all the above reasons, upon re-hearing of the New Aff Summons, the New Aff Order was unassailable, and the D1 Appeal against the same must be dismissed.

XXI.  CONCLUSION

318.  In the circumstances, in respect of D1, the D1 Appeal against the New Aff Order and the O14 Judgment as well as the D1 Amendment Summons are dismissed. There is no reason why costs should not follow event. I grant a costs order nisi that D1 shall pay P costs of and occasioned by (a)  the D1 Appeal against the New Aff Order and the O14 Judgment and (b)  the D1 Amendment Summons to be taxed if not agreed with certificate for two counsel.

319.  In respect of D2, the D2 Appeal against the O14 Judgment as well as the D2 Amendment Summons are dismissed. There is no reason why costs should not follow event. I grant a costs order nisi that D2 shall pay P costs of and occasioned by (a)  the D2 Appeal against the O14 Judgment and (b)  the D2 Amendment Summons to be taxed if not agreed with certificate for two counsel.

Schedule

HKS

香港衛視

香港衛視國際傳媒集團有限公司

投資入股協議書

2016年4月

香港衛視國際傳媒集團有限公司

投資入股協議書

甲方:

香港衛視國際傳媒集團有限公司 Hong Kong TV International Media Group Ltd (以下簡稱 “香港衛視”)  股東代表並董事局主席高洪星先生

地址: 香港紅磡海濱廣場一座17字樓1703-1705

……

乙方: 張繼志

……

監於:

香港衛視國際傳媒集團有限公司是一家由香港特區政府2008年12月19日批准的國際衛視電視臺(簡稱香港衛視), 由有關機構和股東以香港衛視將有的特許經營權等無形資產和現金投入, 董事局主席高洪星博士是資本運作投資專家和資深金融專家及管理專家。香港衛視註冊資本為10億元港幣, 依據香港特區政府相關法律法規, 甲乙雙方本著自願、公平、公正的原則, 經友好協商, 對入股香港衛視進行股權投資事宜達成協議如下 [“Recital Preamble”]:

1、香港衛視是以經營電視傳媒為主和進行其他文化傳媒產業投資及經營文化產業基金的大型傳媒集團, 註冊資本為壹拾億元港幣。為增強香港衛視實力, 儘快做大做強, 經2012年度香港衛視第1次股東會決議,通過了授權董事局處理股權變動事宜的決議。[“Recital 1”]

2、乙方同意按照本合同約定的條款和條件通過股權投資的方式入股。[“Recital 2”]

第一條投資入股方案內容

1、每股價格的計算: 香港衛視現股本為港幣10億元, 2012年第1次增資擴股時價格為每股2.57港幣

2、現在乙方投資入股香港衛視, 認購肆佰陸拾叁萬貳仟貳佰股股份 (此部分股份從原股東轉讓或增資), 按照原每股價格2.57元港幣, 以現金出資港幣壹仟壹佰玖拾萬肆仟柒佰伍拾肆元整, 按2016年4月19日匯率0.8400折合人民幣壹仟萬元整。[“Clause 1(2)”]

第二條甲乙雙方的責任與義務

1、甲方應向乙方提供香港衛視有開註冊資料及相關情況介紹; [“Clause 2(1)”]

2、甲方有義務在乙方轉讓款到達指定帳戶的五個工作日內向香港政府相關機構報送有關法律手續, 及時完成有關股權變更手續, 以確保乙方的利益。[“Clause 2(2)”]

……

5、在股權轉讓過程中涉及的厘印稅費(按千分之二計)  由甲乙雙方各負擔百分之五十。[“Clause 2(5)”]

6、雙方完成股權轉讓後, 乙方有權對香港衛視的經營情況進行瞭解和監督, 並按香港公司條例的規定享有股東的權利與義務; [“Clause 2(6)”]

7、如香港衛視後續進行增資擴股或上市時, 乙方享有對新股東而言的原始股東的一切權利與義務; [“Clause 2(7)”]

8、乙方享有合作項目的股東優先權; [“Clause 2(8)”]

9、回購協議：若甲方主體或其關聯子公司兩年内未能上市，按照香港銀行公佈的同期存款利率計算回購股份。[“Clause 2(9)”]

第三條投資到位期限

  乙方保證在合約簽訂後十日內將50%投資港幣伍佰玖拾伍萬貳仟叁佰柒拾柒元整, 折合人民幣伍佰萬元整匯入香港衛視賬戶或其委託收款的銀行賬戶; 餘下50%投資款港幣伍佰玖拾伍萬貳仟叁佰柒拾柒元整, 折合人民幣伍佰萬元整於2016年5月15日之前匯入香港衛視賬戶或其委託收款的銀行賬戶。

一、港幣賬戶

開戶公司名稱：HONG KONG TV INTERNATIONAL MEDIA GROUP LIMITED香港衛視國際傳媒集團有限公司

公司地址：ROOM 1705 17/F ONE HARBOURFRONT 18 TAK FUNG STREET HUNG HOM KLN HONG KONG

開戶銀行：China Construction Bank (Asia)  中國建設銀行(亞洲)

銀行地址：26/F., CCB Centre, 18 Wang Chiu Road, Kowloon Bay. 九龍灣宏照道18號中國建設銀行中心26樓

賬戶類型：SAVINGS ACCOUNT

賬戶號碼：0xx-xxx-xxxxxxxx4

二、人民幣帳戶

开户公司名称: 深圳巿香港卫视前海运营总部有限公司

公司地址: 深圳巿罗湖区莲塘仙湖路158号仙湖山庄会所

开户银行: 中国银行深圳巿分行莲塘支行

银行地址: 广东省深圳巿罗湖区莲塘罗沙东路5号一楼

账户号码: 7xxxxxxxxxx7[“Clause 3”]

第四條陳述、承諾及保證

1、本合同任何一方向本合同其他各方陳述如下:

(1)  其有完全的民事權利能力和民事行為能力參與、訂立及執行本同, 或具有簽署與履行本合同所需的一切必要權力與授權, 並且直至本合同所述股權轉讓擴股完成, 仍將持續具有充分履行其在本合同項下各項義務的一切必要權力與授權; [“Clause 4(1)(1)”]

2、本合同任何一方向本合同其他各方做出承諾和保證如下:

  (1)  本合同一經簽署即對其構成合法、有效、具有約束力的合同;

  (2)  其在合同內的陳述以及承諾的內容均是真實、完整且無誤導性的;

  (3)  其根據本合同進行的合作具有排他性, 在未經各方一致同意的情況下, 任何一方均不能與任何協力廠商簽訂類似的合作合同及 / 或進行類似的合作, 否則, 違約方所得利益和權利由香港衛視無償取得或享有。[“Clause 4(2)(3)”]

3、簽署協議書的相關聲明

(1)  甲乙雙方基於對投資、收益、風險、前景、以及經營管理方式等等事項均已進行了充份的瞭解並在取得共識的基礎上, 自願簽署本協議書, 並保證根據相關法律程式要求和規定, 完成股權轉讓和資金到位。[“Clause 4(3)(1)”]

第五條違約事項

……

2、任何一方如果沒有全面履行其按照本合同應承擔的責任與義務, 應當賠償由此而給非違約方造成的一切經濟損失。[“Clause 5(2)”]

第六係合同生效

  本合同于各方蓋章或授權代表簽字之日起生效。[“Clause 6”]

第八條通知

……

2、乙方須于本合同簽署當日將通信地址、電話號碼、傳真號碼及電子郵寄地址在香港衛視登記備案。如有變動, 須書面通知甲方及相關人員。[“Clause 8(2)”]

第九條合同的效力

  本合同作為解釋香港衛視股東之間權利和義務的依據, 長期有效, 除非各方達成書面合同修改; 本合同在不與香港衛視章程明文衝突的情況下, 視為對香港衛視股東權利和義務的解釋並具有最高效力。[“Clause 9”]

……