CHRISTIAN EMIL TOGGENBURGER AND OTHERS v. LUU, HUNG VIET DERRICK AND OTHERS

CACV 218/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 218 OF 2012

(ON APPEAL FROM HCA NO. 815 OF 2009)

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BETWEEN

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Hon Stock VP:

1.  I agree with the judgment of Barma JA.

Hon Yuen JA:

2.  I agree with the judgment of Barma JA.

Hon Barma JA:

3.  This was an appeal by the 1^st plaintiff, Christian Emil Toggenburger (“Mr Toggenburger”), against certain aspects of the judgment of Chung J dated 31 July 2012 by which the Judge dismissed the claims made by Mr Toggenburger and the 2^nd and 3^rd plaintiffs (companies owned and controlled by him) against the 1^st to 3^rd defendants, Luu, Hung Viet Derrick (“Mr Luu”), Zhong Yi (Hong Kong) C.P.A. Company Limited (“Zhong Yi”) and Tang, Ka Siu Johnny (“Mr Tang”).  By the judgment, the Judge also dismissed Mr Luu’s counterclaim against Mr Toggenburger, and made no order in relation to a claim by Zhong Yi for an indemnity or contribution from Mr Luu.

4.  Mr Toggenburger is an investor, who at the relevant times was involved in investing funds belonging to himself and his family.  The 2^nd and 3^rd plaintiffs were companies through which he made some such investments.  Mr Luu was an investor in various businesses and projects in Hong Kong and the Mainland.  He was introduced to Mr Toggenburger by Mr Tang, an accountant practising in Hong Kong with Zhong Yi, of which he was a shareholder and director.  During 2007 and 2008, Mr Toggenburger invested substantial amounts of money (totalling HK$111,702,670.40) in a number of projects in Hong Kong and the Mainland at Mr Luu’s suggestion.  Unfortunately, none of the investments proved to be successful.  By these proceedings, Mr Toggenburger sought to recover compensation from Mr Luu for losses suffered as a result of the investments.  Claims were also made against Zhong Yi and Mr Tang.  Although there were a number of different claims made by Mr Toggenburger against the various defendants (all of which were dismissed), this appeal is concerned only with two of them, both made against Mr Luu alone.

5.  These were:-

(1)   a claim for money had and received against Mr Luu, on the basis that Mr Luu had agreed to secure for Mr Toggenburger a 15% interest in a project called the Champ Car Racing Project (“the car racing project”), but that notwithstanding that Mr Toggenburger had paid to Mr Luu (by making payments in accordance with Mr Luu’s directions for Mr Luu’s benefit) some HK$38.702,670.40 million to acquire that interest, Mr Toggenburger did not in fact receive the promised 15% interest in the car racing project so that there had been a total failure of consideration, entitling Mr Toggenburger to the return of the HK$38,702,670.40 from Mr Luu; and

(2)   a claim for payment of HK$118,742,937.44 on the basis of an alleged settlement agreement made between Mr Toggenburger and Mr Luu in late June 2008, by which Mr Luu agreed to buy out Mr Toggenburger’s interests in two of the failed investments (one of which was the car racing project) at a price equal to the amount invested by Mr Toggenburger (HK$111,702,670.40) plus 10%, the uplift of 10% representing compensation to Mr Toggenburger for loss of interest and inflation (the amount claimed is arrived at after giving credit for HK$3,000,000.00 paid by Mr Luu to Mr Toggenburger in August/September 2008).

6.  The trial below extended over 28 hearing days, the evidence being heard in September and October 2011, with closing submissions in January 2012. Shortly after the conclusion of the trial, on 8 February 2012, Mr Luu was made bankrupt on a creditor’s petition.  In September 2012, Mr Toggenburger obtained leave from the court to pursue this appeal, at which he was represented by Mr Thomas Lee and Ms Joyce Leung, who had appeared for him at the trial.  So far as Mr Luu was concerned, his rights in relation to these proceedings formed part of his estate in bankruptcy and accordingly vested in his trustees.  Mr Arab, one of the trustees, appeared at the start of the appeal to inform us that having considered the position, the trustees did not wish to take part in the appeal.  It seems that Mr Luu was present during the appeal, but as he had no standing to make submissions (since his rights in relation to the proceedings vested in his trustees on his bankruptcy), we did not hear from him.

7.  Notwithstanding that the appeal was not opposed, it of course remained necessary for Mr Lee to establish that the Judge had erred in coming to the conclusions that he did in relation to the claims in respect of which the appeal was brought.

8.  Dealing first with the claim for total failure of consideration in relation to the car racing project, the claim can be summarised as follows:-

(1)   Mr Toggenburger and Mr Luu agreed that Mr Luu would secure for Mr Toggenburger a 15% interest in the car racing project at a price of US$4.95 million.

(2)   The car racing project involved the holding of a series of car races, under licence from an American company called Champ Car World Series LLC (“CCWS”), which were to be broadcast on television, with a view to deriving income principally from the exploitation of the television broadcasting rights through the sale of advertising air time, and from property development at or near the site of the proposed racetrack in Zhuhai.  The licensee was to be a British Virgin Islands company called New Energy Investment Limited (“New Energy BVI”).  The licence agreement between New Energy BVI and CCWS contained a term prohibiting the assignment of New Energy BVI’s rights under the agreement.

(3)   Mr Toggenburger’s 15% interest was to be held indirectly.  Rather than Mr Toggenburger directly acquiring a shareholding in New Energy BVI, he was to be given a 37.5% shareholding in a company called Fortune King Investment Limited (“Fortune King”), which held a 40% interest in a company called China Sport Culture Development Limited (“China Sport”).  China Sport was in turn said to be the beneficial owner of New Energy BVI, by virtue of a share entrustment agreement entered into by a Madam Bao Jimei, declaring that she held 100% of the issued shares of New Energy BVI on trust for China Sport.  Through this structure, Mr Toggenburger was to have an attributable interest in New Energy BVI and the car racing project of 15%.

(4)   Pursuant to his agreement with Mr Luu, Mr Toggenburger paid a total of HK$38,702,670.40 to Mr Luu, by making payments to agents or nominees of Mr Luu in accordance with Mr Luu’s directions.  Sums of HK$5,000,000.00 and HK$18,000,000.00 were paid to Messrs Stevenson Wong & Co (solicitors acting for Mr Luu, or companies controlled by him), and HK$15,702,670.40 was paid to Zhong Yi for Mr Luu’s account.

(5)   However, despite making the payments, and being allotted shares representing a 37.5% interest in Fortune King, Mr Toggenburger did not acquire a valid interest in New Energy BVI and the car racing project because:-

(a) At all material times, New Energy BVI had been struck off the BVI companies register for non-payment of registration fees, and therefore could not enter into the licensing agreement that it had purported to conclude with CCWS; and

(b) In any event, there was nothing to show that Madam Bao was in fact a shareholder of New Energy BVI at all, no evidence to this effect having been put forward at the trial, so that even if (which was not the case) New Energy BVI had validly entered into the licensing agreement, China Sport and, through it, Fortune King, did not appear to have any beneficial interest in New Energy BVI and the car racing project.

(It is fair to note that the first point mentioned above was the principal basis of the argument on total failure of consideration at trial, and that the second point, although mentioned in the plaintiffs’ closing submissions below, was given much more prominence in the arguments before us.)

(6)   In those circumstances, there had been a total failure of consideration, as Mr Toggenburger failed to obtain a valid interest in the car racing project, and Mr Luu was therefore obliged to repay to Mr Toggenburger the consideration received from him.

9.  Mr Luu did not dispute that Mr Toggenburger had paid sums totalling HK$38,702,670.40.  However, he denied being liable to Mr Toggenburger for the following reasons:-

(1)   Mr Toggenburger did in fact obtain a valid interest in the car racing project through the structure described in paragraph 8(3) above.

(2)   Alternatively, insofar as there was any problem with New Energy BVI (whether because of its having been struck off at the time it purportedly entered into the licensing agreement, or because there was nothing to show that Madam Bao was in fact a shareholder of New Energy BVI), this was not fatal since there was a “mirror company” of New Energy BVI – a company with the same name, but incorporated in Hong Kong (“New Energy HK”) of which Madam Bao was a shareholder (according to company search records which were in evidence), and CCWS was content to deal with New Energy HK as it was under the same ownership and management as New Energy BVI.

(3)   The payments made by Mr Toggenburger had been invested in the car racing project.

(4)   In any event, Mr Luu was not an owner of the car racing project, but was merely an investor alongside Mr Toggenburger.

10.  Mr Lee submitted that there were two broad questions to be considered:-

(1)   Whether Mr Toggenburger received a valid interest in the car racing project in exchange for the HK$38,702,670.40 he had paid, and if not, whether this amounted to a total failure of consideration.

(2)   Whether Mr Luu was an owner and/or promoter of the project, and not just a co-investor in it, and whether he received or obtained the benefit of Mr Toggenburger’s payments, so as to be obliged to make restitution of such payments to Mr Toggenburger.

11.  The Judge came to the conclusion that there had been no total failure of consideration, since, notwithstanding any problems that there might have been in relation to New Energy BVI (and in this regard his attention was, no doubt as a result of the emphasis in the arguments before him, focussed on the question of that company’s status at the time the licensing agreement was entered into), he was satisfied on the evidence he had heard (which included evidence from a representative of CCWS) that the precise identity of the company involved in the project was, regardless of the terms of the licensing agreement relating to non-assignability, not a matter of concern to CCWS, so long as the persons operating the project in the Mainland were the same as those with whom CCWS had dealt, and all relevant fees were paid.  Thus, the Judge did not regard it as being of particular importance that New Energy BVI had been struck off, and could not, on the agreed evidence as to BVI law, have been capable of entering into the licensing agreement as it purported to have done, so long as New Energy HK was available to operate the agreement in its place.

12.  Having come to the view that there had thus been no failure of consideration, the Judge did not deal in any detail with the second issue, saying only that he regarded this part of Mr Luu’s case as being “inherently more likely”.

13.  Mr Lee contended that the Judge was clearly wrong to conclude that it did not matter that New Energy BVI could not have entered into the licensing agreement, because of the existence of New Energy HK.  He pointed out that:-

(1)   It was clear from the expert evidence as to BVI law that New Energy BVI, having been struck off at the time that the licensing agreement was executed, could not validly have entered into that agreement so as to acquire any rights under it.

(2)   Further, and in any event, there was nothing in the evidence before the court to show that Madam Bao was in fact a shareholder of New Energy BVI.  Thus, even if the striking out of New Energy BVI could be treated as being of no consequence (which, in Mr Lee’s submission, would not be right), there was an unbridgeable gap in the evidence put forward by Mr Luu, since unless it could be demonstrated that Madam Bao was a shareholder of New Energy BVI, the document by which Madam Bao declared herself to be a trustee of the shares in that company for China Sport did not complete the chain of shareholdings and interests by which Mr Toggenburger was to have obtained his interest in the car racing project.  No relevant BVI company search demonstrating Madam Bao’s (legal) ownership of New Energy was adduced, nor were any share certificates to this effect produced to the court, nor was Madam Bao called to give evidence herself.

(3)   Further, the Judge was mistaken in thinking that the existence of New Energy HK provided a solution to this problem, having regard to the fact that the rights of New Energy BVI under the licensing agreement were expressly stated to be non-assignable.

(4)   In any event, even if the prohibition on assignment were overlooked, as having been somehow waived by CCWS, there would have remained a (different) gap in the chain of shareholdings, for while there was evidence (in the form of Hong Kong company search records) that Madam Bao was a shareholder of New Energy HK, there was no evidence to show that she had declared herself a trustee of that shareholding for China Sport (or Fortune King).  Thus, for New Energy HK to have had the benefit of the rights under the licensing agreement with CCWS would have been of no avail to Mr Toggenburger.

14.  With respect to the Judge, I think that Mr Lee is right as to the failure to secure for Mr Toggenburger a valid interest in the car racing project through the corporate and trust structure described by Mr Luu. In my view, the structure breaks down when one examines the position of Madam Bao in relation to New Energy BVI and New Energy HK.  As to New Energy BVI, although Madam Bao had apparently executed what would appear to be a declaration of trust of a shareholding in that company in favour of China Sport, there was no evidence to show that she was in fact a shareholder of New Energy BVI.  On the other hand, so far as New Energy HK is concerned, there was no evidence of any declaration of trust in respect of Madam Bao’s shareholding in the company for the benefit of China Sport.  Whichever of the two New Energy entities actually held the benefit of the rights obtained from CCWS under the licensing agreement, there was a breakdown in China Sport’s supposed beneficial entitlement to the New Energy entity concerned, and hence a breakdown in Fortune King’s indirect entitlement to that entity.

15.  I also think that Mr Lee’s complaint as to New Energy BVI having been struck off is a valid one.  Although it may have been a relatively simple matter to restore New Energy BVI to good standing by making the necessary payments to the BVI companies registry, thereby (according to the BVI legal opinion) retrospectively validating all acts done in respect of New Energy BVI during the period when it was struck off, this was never done.  Nor was there any evidence to show whether or not this could have been done at the instance of Mr Toggenburger.  Absent such evidence, it seems to me that it is open to Mr Toggenburger to complain that he did not receive what he bargained for – a valid interest in the car racing project through the corporate structure that had been put in place.  Had there been evidence to show that Mr Toggenburger could himself have paid the arrears of charges to effect the restoration of New Energy BVI to the register, the position (so far as this argument is concerned) might well have been different (since he could then have restored the company to good standing and sought to recover the cost of doing so, but could not have said that there had been a total failure of consideration).  But there was no such evidence.  In any event, given the gap in the evidence of Madam Bao’s shareholding in New Energy BVI, there would still have been a failure on Mr Luu’s part to show that Mr Toggenburger had obtained the benefit bargained for.

16.  It therefore becomes necessary to consider the second question in relation to this claim.  This is directed to whether or not Mr Luu must make restitution to Mr Toggenburger in respect of the amounts paid by Mr Toggenburger.

17.  Although this question was framed in terms of whether Mr Luu was an owner or promoter of the car racing project rather than a co-investor with Mr Toggenburger, I think that the correct approach would be to focus on whether or not Mr Luu entered into an agreement with Mr Toggenburger in respect of Mr Toggenburger’s participation in the car racing project, for which Mr Luu received consideration from Mr Toggenburger.  If so, the consequence of the failure to secure for Mr Toggenburger a valid interest in that project (for the reasons explained above) would be that Mr Luu would be obliged to return to Mr Toggenburger the consideration that he received from him.

18.  As I have noted, the Judge did not make any clear findings as to this.  There was, however, no dispute between the parties that Mr Toggenburger made payments totalling HK$38,702,670.40 to acquire the interests in the car racing project.  It was also not in dispute that throughout, Mr Toggenburger dealt directly (and only) with Mr Luu. The payments were made at Mr Luu’s direction, to agents of his.  Two sums of HK$5,000,000.00 and HK$18,000,000.00 were paid by Mr Toggenburger to Messrs Stevenson Wong & Co, solicitors who were then acting for Mr Luu, and were directed by Mr Toggenburger to be paid on by them in accordance with instructions received by him from Mr Luu.  The remaining HK$15,702,670.40 was paid by Mr Toggenburger to Zhong Yi, again at Mr Luu’s request.  Mr Luu subsequently gave instructions to Zhong Yi as to how to deal with those funds.  Indeed, Mr Luu admitted that he had signed a copy of an extract from Zhong Yi’s general ledger containing an account of transactions on his temporary account with Zhong Yi, which recorded the receipt of this payment (and others) and the disbursement of funds by Zhong Yi, to confirm that such receipts and payments had been effected on his behalf and were correct.

19.  This evidence is, in my view, strongly corroborative of Mr Toggenburger’s case that his dealings in relation to the car racing project were between him and Mr Luu personally.  It also demonstrates, I think, that Mr Luu did in fact receive those payments from Mr Toggenburger, and suggests that all such payments are also to be viewed as payments from Mr Toggenburger to Mr Luu, all of which payments Mr Luu is liable to return given that the consideration which Mr Toggenburger was to receive in exchange for them had wholly failed.

20.  This aspect of the appeal therefore succeeds.  Although Mr Toggenburger’s Amended Notice of Appeal only sought repayment of the sum claimed in paragraph 64A of the Amended Statement of Claim, which related to the HK$15,702,670.40 paid by Mr Toggenburger to Zhong Yi, Mr Lee clarified that it was in fact intended to seek repayment of the whole of the consideration provided by Mr Toggenburger, including the HK$23,000,000.00 paid via Mr Luu’s solicitors, which was claimed in paragraph 64B of the Amended Statement of Claim.  We gave leave at the hearing for the necessary further amendment to be made to the Notice of Appeal.  I would therefore make an order that Mr Luu should repay to Mr Toggenburger the sum of HK$38,702,670.40 in respect of this claim, with interest.

21.  I turn to consider the second part of Mr Toggenburger’s appeal.  This related to his claim that there had been an overall settlement agreement reached between Mr Luu and himself on 24 June 2008, as recorded by him in his email (and letter in identical terms) to Mr Luu and Mr Tang dated 25 June 2008.  This claim encompassed all of the other claims made by Mr Toggenburger, including that based on the total failure of consideration in relation to the car racing project that has just been considered.  Mr Luu denied that any such settlement had been agreed. Having considered the evidence in relation to this claim, paying particular regard to the correspondence between the parties (which I shall describe in more detail below), the Judge concluded that Mr Toggenburger had failed to establish that such a settlement agreement had been entered into.  The Judge also concluded that Mr Luu had failed to establish his counterclaim for sums totalling HK$3,000,000.00 which he said had been paid by him in anticipation of reaching an agreement with Mr Toggenburger, on the basis that such payments should be refunded if, as turned out to be the case, no agreement was finally reached.  There has been no cross-appeal against the dismissal of Mr Luu’s counterclaim.

22.  Mr Toggenburger’s case was that a concluded settlement agreement was reached at a meeting between him and Mr Luu (also attended by Mr Tang and Mr Littman, Mr Toggenburger’s adviser).  He said that the terms of the agreement were recorded in his letter and email dated 25 June 2008, and were as follows:-

(1)   Mr Luu agreed to “bail out” the investments which Mr Toggenburger had made in Mr Luu’s projects, totalling HK$111,702,670.40 (HK$38,702,670.40 in the car racing project, and HK$73,000,000.00 in another project known as China Oil) by the end of 2008, either himself, or by arranging other investors to buy out Mr Toggenburger’s positions.  The amount to be paid would include “appropriate interest and inflation compensation (no less than 10%)”.

(2)   Payment would be made as follows:-

(a) A “medium seven-digit” Hong Kong Dollar amount would be paid by Mr Luu to Mr Toggenburger before 4 July 2008;

(b) “Approximately 50%” of Mr Toggenburger’s position would be bailed out by Mr Luu before the end of August 2008, partly in cash (HK$10-30 million) and the rest in “immediately tradable shares of recoverable value”; and

(c) The outstanding amount would be bailed out by Mr Luu or investors arranged by him in order to reach final settlement before the end of 2008.

23.  The letter started by expressing satisfaction that Mr Toggenburger and Mr Luu were able to agree on the items mentioned above, and saying that this convinced Mr Toggenburger that they were “going to be able to come to a final settlement in the near future”.  It concluded by asking Mr Luu and Mr Tang to let Mr Toggenburger know immediately if they disagreed with any of the items mentioned.

24.  Neither Mr Luu nor Mr Tang responded to this letter.  However, nor did Mr Luu make any payment to Mr Toggenburger by 4 July 2008.  Instead, in the absence of such payment, Mr Toggenburger requested Mr Tang to release funds which he believed were held by Mr Tang in escrow to enable him to meet margin payments due to his other financiers.  This request resulted in Mr Tang emailing Mr Toggenburger on 4 and 5 July 2008, in terms which do not sit well with the notion of a concluded and binding settlement agreement.  The 4 July 2008 email referred to Mr Tang’s understanding that Mr Toggenburger had tried to agree with Mr Luu to have his investments repurchased by Mr Luu, and that Mr Luu would try to give Mr Toggenburger some money in August 2008, and asked whether Mr Toggenburger wanted Mr Tang to see if Mr Luu might be willing to lend some money to Mr Toggenburger until then.  The 5 July 2008 email referred to a sum of HK$3,000,000.00 being regarded as an advance payment “before [Mr Toggenburger and Mr Luu had] agreed on the price to buy back” the investments in question.

25.  On 7 July 2008, Mr Luu emailed Mr Toggenburger suggesting that he might be able to provide Mr Toggenburger with HK$1,000,000.00 in July 2008 and HK$2,000,000.00 in August 2008, as a refundable deposit for a proposed sale of Mr Toggenburger’s interest in the car racing project, at a price to be agreed.  The next day, Mr Tang emailed Mr Toggenburger expressing the view that this was worth considering, but that Mr Toggenburger might “need to think through the details of the buy-back or re-sale” of his shares in the investments.

26.  Mr Toggenburger, who was in hospital at the time, did not respond to any of these emails to point out that there had already been a settlement.

27.  On 10 July 2008, Mr Luu sent Mr Toggenburger a “Letter of Understanding”, which mentioned the investments which Mr Toggenburger had made with Mr Luu, stated that Mr Luu intended to buy out such projects (either himself or by arranging for others to do so) within 2008, and would make down-payments of HK$1,000,000.00 and HK$2,000,000.00 respectively by the end of July and the end of August 2008.  The letter went on to state that the parties would endeavour to agree a purchase price for the investments by the end of August, but that if this could not be achieved, the down-payments would be refunded to Mr Luu.  Although the letter appears to have been intended to be signed by Mr Toggenburger, he did not do so, and did not respond to it.

28.  There was then nothing further until 4 August 2008, when a different “Letter of Understanding” was signed by both Mr Luu and Mr Toggenburger. This referred only to the car racing project (and not to the other investment involving China Oil), and stated that Mr Luu intended to buy back Mr Toggenburger’s investment in the car racing project within 2008, and would make down payments of HK$1,000,000.00 and HK$2,000,000.00 within August 2008.  As with the earlier Letter of Understanding, it was stated that the parties would negotiate a price (and closing date) during August 2008, but this time adding that the price should be no lower than the original amount investment, and should take account of interest and inflation rates to calculate compensation for Mr Toggenburger. As with the earlier document, it was recorded that the down-payments were to be refundable deposits, repayable to Mr Luu in the event that no final price could ultimately be agreed.

29.  It was against the background of this correspondence that the Judge concluded that Mr Toggenburger had not made out his case.  Mr Lee contended that in so concluding, the Judge erred.  He submitted that:-

(1)   The fact that there had been no contemporaneous denial of the agreement set out in Mr Toggenburger’s letter and email of 25 June 2008 was strong evidence in favour of the agreement having been made as Mr Toggenburger asserted.

(2)  The correspondence during July 2008 was not inconsistent with such an agreement, as it should be seen as being no more than an attempt by Mr Luu to renegotiate, after he had failed to make the first payment due to Mr Toggenburger on 4 July 2008.

(3)   The Judge had failed to accord appropriate weight to Mr Tang’s evidence at the trial, which supported Mr Toggenburger’s case.

(4)   The Letter of Understanding dated 4 August 2008 was not inconsistent with Mr Toggenburger’s case, and was no more than part of the detailed arrangements for putting the settlement agreed in June 2008 into effect, and therefore should not have been relied upon by the Judge in rejecting the claim.

30.  With respect, I am unable to agree with Mr Lee’s submissions.

31.  The Letter of Understanding dated 4 August 2008 was clearly inconsistent with the settlement agreement alleged by Mr Toggenburger. First, it related to a different subject matter – the car racing project alone, as opposed to that project plus Mr Toggenburger’s investment in China Oil. Second, it no longer provided for a minimum uplift of 10% on the amount invested, but only for compensation for interest and inflation to be provided for.  Third, it provided for different terms of payment – instead of half the investment being paid back in August 2008, with the balance (including the uplift) to be repaid by the end of the year, it provided for the parties to negotiate further as to the price to be paid by Mr Luu for the car racing project.  Fourth, the payments that Mr Luu did agree to make were expressly stated to be refundable.  In each of these respects, the Letter of Understanding (which was signed by Mr Toggenburger) departed in a significant way from the agreement asserted by Mr Toggenburger, and therefore casts real doubt on whether or not such an agreement had ever been made.  Although Mr Toggenburger would appear by this time to have recovered from the health problems which had caused him to be hospitalised in early July, he did not protest that the terms proposed were inconsistent with the agreement he says had already been reached.  Nor did he communicate to Mr Luu the view he later espoused, that he regarded the arrangements in the Letter of Understanding of 4 August 2008 as being the mere working out of part of the alleged settlement agreement made earlier (a view which, for the reasons I have explained, is not a tenable one).  I am unable to accept that the differences can simply be explained away on the basis that Mr Toggenburger was acting without legal advice, and was using a language other than his first language.  This version of the Letter of Understanding is, in my view, strong evidence against the existence of the settlement agreement alleged to have been made in June 2008.

32.  Further, it seems to me that the correspondence in early July 2008 was also inconsistent with the existence of the settlement agreement alleged.  The tenor of both Mr Luu’s and Mr Tang’s emails is clearly inconsistent with there having been a finalised agreement between Mr Toggenburger and Mr Luu, but is, on the contrary, consistent with matters being still in the course of negotiation.  While it is fair to say that Mr Toggenburger may not have been able to respond at the time owing to his being hospitalised, it may be observed that he did not do so at any time up to and including early August 2008, when he signed the 4 August 2008 Letter of Understanding, which was inconsistent with his alleged settlement.  I do not think that Mr Tang’s apparent change of stance at the trial, where he sided with Mr Toggenburger, requires a different conclusion to be reached.

33.  Finally, it should be noted that Mr Toggenburger’s own letter and email of 25 June 2008 are at best inconclusive as to whether an overall settlement had been finally agreed upon.  As I have noted, they refer at the outset to his conviction that a settlement would ultimately be agreed upon at the end of the day.  In addition, the terms set out are vague and flexible. The amount of the deposit to be paid is described only as a “medium seven digit HK$ amount”.  The amount of compensation to be paid in respect of interest and inflation is left open for further discussion (albeit there is a statement that this should not be less than 10%).  The make-up of the first 50% payment is left open, in terms of how it is to be satisfied.  The identity of the purchaser of Mr Toggenburger’s investments (whether it is to be Mr Luu or some other investor) is not clear.  Having regard to all of these uncertainties, it seems to me that what transpired in June 2008 cannot be regarded as more than an agreement as to an outline or framework for further negotiations as to the basis on which Mr Toggenburger was to be extricated from his unsuccessful investments with Mr Luu.  It certainly cannot be said that it was more probable than not that a final and binding settlement agreement had been reached.

34.  For all of the foregoing reasons, I do not think that the Judge was in error in dismissing this claim of Mr Toggenburger’s.  On the contrary, I think that he was entirely justified in doing so, and this part of Mr Toggenburger’s appeal must be dismissed.

35.  I would therefore allow Mr Toggenburger’s appeal in part, and order that the judgment below be varied to the extent of entering judgment for Mr Toggenburger against Mr Luu in the sum of HK$38,702,670.40.  So far as interest and costs are concerned, these not having been the subject of submissions before us, I would propose that these matters be addressed by way of written submissions, following receipt of which the court will deal with them on paper, without a hearing.  To this end, Mr Toggenburger is to file written submissions on interest and costs within two weeks from the date of this judgment, Mr Luu’s trustees in bankruptcy are to file submissions in response (if any) within two weeks thereafter, and Mr Toggenburger is to file submissions in reply (if so advised) within one week after that.

Hon Stock VP:

36.  Accordingly, the appeal is allowed to the extent indicated in the judgment of Barma JA, and orders are made in the terms suggested by him in paragraph 35 above.