WONG KAM SAN AND OTHERS v. ZHAO KAI INVESTMENT LTD AND OTHERS

CACV 166/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 166 OF 2006

(ON APPEAL FROM HCA NO. 1653 OF 2004)

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J U D G M E N T

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Hon Tang VP (giving the judgment of the Court):

Introduction

1.  The principal protagonists in this action are the 1^st plaintiff and the 2^nd defendant.  The 2^nd defendant is a bankrupt, and was not represented at the trial and did not appear as a party.  Only the 1^st, 5^th, 6^th and 7^th defendants were represented at the trial.  The 2^nd defendant was, however, the only witness for the defence. The appellants are the 1^st, 5^th and 7^th defendants, and they are represented by Mr Horace Wong SC, who did not appear below.  The 5^th defendant is the wife and the 7^th defendant the sister of the 2^nd defendant.  The 1^st plaintiff was the only witness for the plaintiffs.

2.  The 2^nd defendant holds a MBA degree from the University of California at Santa Barbara, and at the material time, controlled two companies, which were listed on the Main Board in Hong Kong.  On the other hand, the 1^st plaintiff was a county level government official in the Mainland with only junior secondary education.

3.  The dispute is over the beneficial ownership of 75 shares in the 8^th defendant, Hawkins Development Limited (“Hawkins”).

4.  At the material time, Hawkins had an issue capital of 100 shares of $1 each.  They were held as to 80 shares by the 2^nd plaintiff, Wong Lai Ching, who is the 1^st plaintiff’s wife, in trust for the 1^st plaintiff.  The remaining 20 shares were held by Liu Yong, the 3^rd plaintiff, an employee, in trust for the 1^st plaintiff.

5.  Hawkins, in turn, owned 80% of a joint venture company, Liaoyang Shunfeng Iron and Steel Company Limited (“the JV Company”).  The JV Company had interests in an iron mine in Liaoning Province.  Hawkins had invested over RMB¥28.8 million in acquiring and running the JV Company.

6.  On or about 27 March 2000, the 100 shares in Hawkins were transferred to the 1^st defendant, Zhao Kai Investment Limited, the 2^nd defendant and the 4^th plaintiff, Trengei Development Limited, as follows:-

(a) 1 share to the 2^nd defendant;

(b) 74 shares to the 1^st defendant;

(c) 25 shares to the 4^th plaintiff.

7.  The trial judge’s (Deputy Judge Louis Chan) summary of the parties’ respective cases are uncontroversial:

“5. The 1st plaintiff said that the 75% shares of Hawkins were transferred to the 1st and 2nd defendants for them to hold in trust for him.  He said the purpose was for the 2nd defendant to procure the listing of Hawkins in the GEM Board in the Hong Kong Stock Exchange.  If the 2nd defendant should succeed in this task, the 1st plaintiff would give him 1% of the shares of Hawkins as his remuneration.  The 1st plaintiff further said that since the 2nd defendant had breached this agreement, he therefore asked for the return of the 75% shares.

6. The 2nd defendant said that the 75% shares were transferred to him and the 1st defendant for them to hold on trust for an investor called Zhao Ahping.  He further said that the 1st plaintiff procured the transfers of the 75% shares to him and the 1st defendant in return for Zhao’s assumption of the funding obligations for the mining operation of the joint venture and of the listing of Hawkins in the GEM Board and also for the advancement of a loan of HK$4.2 million to the plaintiff.  He also said that the plaintiff had promised him 1% of the shares of Hawkins as his remuneration if he could procure the listing of Hawkins.”  paras. 5 and 6 of the judgment.

8.  After a trial which lasted 3½ days, the judge delivered his judgment in the afternoon of the fifth day.

9.  The judge found in favour of the plaintiffs and made the necessary declarations and ordered the transfer of the 75 shares to the 1^st plaintiff or his nominee.

10.  He also made an order that:

“6.     each of the 2^nd to 7^th Defendants be retrained (sic) whether by themselves, their servant(s) or agent(s) or otherwise howsoever from interfering with the business of Hawkins or the business of Liaoyang Shunfeng Iron and Steel Company Limited (遼陽順鋒鋼鐵有限公司) and/or the operation of the mining project in Denta Municitality (燈塔巿) in Liaoning Province (遼寧省).”

The appeal on fact

11.  The appeal concerns both the beneficial ownership of the 75 shares as well as the injunction order against the 5^th and 7^th defendants.

12.  The judge accepted and preferred the evidence of the 1^st plaintiff.

13.  It was part of the 1^st plaintiff’s case that the 2^nd defendant told him that it was important to make the 2^nd defendant the registered major shareholder of Hawkins because of his reputation in the financial market.  But that when asked for a declaration of trust, the 2^nd defendant told him that it “was inadvisable to confirm the trust relationship in writing because of the listing rules”.  The 1^st plaintiff accepted the explanation because he trusted the 2^nd defendant (see para. 17 of the judgment).

14.  The case of the 2^nd defendant, the judge described as “inherently improbable” (para. 61 of the judgment), and the judge also described part of the 2^nd defendant’s evidence as “lies” or “a blatant lie” (paras. 62 and 65 of the judgment).

15.  Although Mr Wong submitted that the judge in rejecting the evidence of the 2^nd defendant, made no express reference to his demeanour, it does not follow that demeanour or credibility played no part in his finding.

16.  That being the case, both Mr Warren Chan SC, who appeared for the plaintiffs, and Mr Horace Wong cited a number of authorities on the jurisdiction and power of this court in such circumstances.  In particular, Mr Wong reminded us of the well-known words of Kirby J in Whisprun Pty Ltd v Dixon [2003] 200 ALR 447, at paras. 90 to 100 of his judgment.  The judgment of Kirby J provides helpful guidance and we accept that findings of fact, even when based on credibility of witnesses, does not mean that we could “close the appeal books”.

17.  We find guidance also from the authorities surveyed by Bokhary PJ in Ting Kwok Keung v Tam Dick Yuen & Others [2002] 5 HKCFAR 336, and in particular, what he said in para. 42:

“… The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong.”

18.  Bearing those authorities in mind, we say at the outset that far from being satisfied that the judge is plainly wrong, we are of the view that the decision is plainly right.

Discussion

19.  An important aspect of the 2^nd defendant’s case, the “main theme” as Mr Wong called it, is that the 1^st plaintiff was in direful straits in March 2000 because his attempts to raise capital had failed, there were arrears of wages of about RMB¥3.8 million and the workers were about to strike.  This is what the 2^nd defendant said in para. 22 of his affirmation (the parties’ affirmations were used in lieu of witness statements):

“22.   In the said meeting, the 1^st Plaintiff told me that as he has failed to remit money to Shunfeng pursuant to the Joint Venture Agreement, the salaries of the Employees were in arrears and there would be a strike of the Employees. The PRC Party has already threatened to treat Hawkins had breached the Joint Venture Agreement and would terminate the same accordingly. In such event, all his previous investments in Shunfeng would be lost once and forever.”

20.  However, the judge did not accept that the workers were about to go on strike, at para. 49 of his judgment, he said:

“It seems that the joint venture had been owing wages to the workers for years.  On the suggestion of a possible strike by the workers, the only evidence was an assertion by the 2^nd defendant.”

21.  The evidence of the 1^st plaintiff was that the situation was not desperate, or that there was a strike was imminent.  Indeed, he said, owing wages was common in the Liaoning Province.  At page 111 of the transcript, he said:

「問： 咁當時係咪即係搞到差唔多 -- 即係因為冇人工 -- 即係畀喇，咁搞到差唔多要罷工咁滯，咁大件事？

答： 唔係。

問： 唔係。咁係咩嘢情況呢？

答： 佢冇工資畀呢，呢個係習以為常嘅，即係整個遼陽呀。

官： 吓？整個.......

答： 遼陽嗰邊嘅。

官： 你講呢間公司吖，抑或係嗰區？

答： 即係嗰區欠人嘅工資呢，就經常都係咁喇，就唔係凈係我哋一間順鋒公司欠人哋嘅錢。」

22.  He then explained that wages were owed to those who had ceased working, but that those workers who continued to work were paid.  That the workers who continued working were being paid off slowly, he would “pay off some and owe some”:

「問： 咁又點樣還法呢？如果-- 點樣慢慢還呢？年年都一路蝕錢喇，咁就只會愈積愈大嘅啫，嗰個 -- 即係爭人哋個人工數目，係咪？

答：  佢因為開工嗰啲呢，佢本身就有錢畀嘅，即係開工嗰啲呀，就唔開工嗰啲呢就冇錢畀嘅，咁凈係唔開工嗰啲就欠錢嘅啫，開工嗰啲就冇欠佢錢嘅。

官：  即係有啲人係長期出糧放假？

答：  係呀，即係話畀150鈫一個月佢，咁佢就返去休息，咁嗰啲有嘢做嗰啲呢，佢就每個月都有工資畀，冇係欠佢哋嘅。

問：  即係話你需要佢嚟做嗰啲，你就找住數先？

答：  唔係，佢一邊做，一邊就有錢賺喇，一邊做事，佢就一邊有錢喇，咁唔需要我哋畀。

問：  咁但係如果係咁，你 -- 但係你都仲係爭咗人哋好多工資嘛。

答：  我就係爭呢，就爭冇開工嗰部分啲工人。

官：  有幾多工人喥呀，嗰度？

答：  二百零人喥。

……

問：  佢出去有 -- 佢出去搵錢做其實同你哋公司完全冇關呀，呢啲係佢工人自己。

答：  咁佢有錢賺呢，咁我哋每個月就唔係話一路欠佢嘅，就一路咁褪咁褪嘅啫，唔係話一路咁即係保留番嗰二百四十幾萬，咁我就畀啲又欠啲，畀啲又欠啲咁樣囉。」Transcript page 114F-115F.

23.  The evidence showed a deplorable state of affairs, but they did not show that the workers were about to go on strike.

24.  As for the risk of the joint venture partners closing down the mines, he said in transcript page 113 R to U that they had no power to do so.  Also, as will be seen although no operation funding was provided by the 2^nd defendant after March 2000, the mines had not been closed.

25.  It was on the basis of such evidence that the judge asked at para. 50 of the judgment:

“Even though the 1^st plaintiff was not in a very enviable position, the question remains whether the position was so bad that he had to give away 75% of Hawkins in the hope that Hawkins could be listed in the GEM Board and he could then benefit from it.”

26.  At para. 60, the judge concluded:

“… I think [the 1^st plaintiff] is an honest witness.  I find that he has discharged the burden of proof on a balance of probabilities.”

27.  The 2^nd defendant’s evidence on the agreement is tenuous.  Essentially, there was only his bare statement.  We are not surprised that the judge found the 2^nd defendant’s version inherently improbable.

28.  There was no evidence from the 2^nd defendant on how much money the listing at the GEM Board could raise.  Nor what would happen if the listing was unsuccessful.  As for the future operation costs of the JV Company, there was no evidence on the duration or size of such funding.

29.  That led the judge to say in para. 61:

“61.   Regarding the 2^nd defendant, I think his story is inherently improbable.  I have already referred to some of the incredible features above.  I now continue.  Zhao has not appeared at all, whether personally or by document.  I doubt his existence.  I do not think a genuine investor would plunge into this deal as deposed to by the 2^nd defendant without doing a due diligence exercise.  If he had no idea as to the financial status of the joint venture, I do not know on what basis he would commit to all past and future debts; that is simply ridiculous.”

30.  We should add that it was the 2^nd defendant’s case that the agreement summarised in para. 6 of the judgment and quoted in para. 7 above, was the result of a counter-offer by the 1^st defendant.  The initial offer he made on behalf of Zhao was that, Zhao “agreed to bear the said listing expenses in return for acquiring 75% of the shares of Hawkins and 60% of the shareholdings of (the JV Company).”  Para. 13(k) Defence and counterclaim.

31.  In the 2^nd defendant’s first affirmation, he said:

“23.   I relayed the Counter Offer to Zhao and Zhao only agreed to give the 1^st Plaintiff a loan in the sum of HK$4,200,000.00 so as enable the 1^st Plaintiff to pay the arrears of the salaries of the Employees and be responsible for paying the daily operation costs of Shunfeng including the salaries of the Employees after the Transfer of the Shares (‘Revised Offer’).”

32.  That makes the supposed agreement to the counter-offer all the more surprising since there was no evidence that there was any consideration of the likely size or duration of the future operation costs.

33.  As for the 2^nd defendant’s claim that the plaintiff was in urgent need of funds to pay the continuing operation costs of the JV Company, the evidence was that apart from a loan of HK$4.2 million for the wages in arrears, no further payment was made in relation to the future operation costs of the JV Company.  Thus the judge said:

“62.   It is also incredible that the joint venture, which, under the helmsmanship of the 1^st plaintiff, had been suffering losses throughout the years, would suddenly turn into profit or no loss after the making of the listing agreement in March 2000.  There was no change in the management of the joint venture.  I find this allegation that the joint venture stopped making any lossa blatant lie.  It was a lie fabricated by the 2^nd defendant in the witness box as he could not explain why Zhao had injected no money into the joint venture for years despite his allegation that Zhao had assumed the funding obligation.  But his lie could not change the picture painted by the joint venture accounts produced by the 1^st defendant in December 2004, against which he had made no challenge.”  para. 62 of the judgment.

34.  The judge was also rightly sceptical about the 2^nd defendant’s evidence on the likely listing expense.  The 2^nd defendant asserted that the listing expenses “may cost over HK$5 million to HK$10 million”.  Para.13(h) Defence.

35.  The 2^nd defendant purported to support the listing expenses by relying on a payment of HK$5 million to one Robert Lee.  The judge said at para. 55:

“… Regarding the HK$5 million paid to Robert Lee, not a sheet of paper has been produced to prove what Lee had done to earn this sum.  When questioned about this, the 2^nd defendant suddenly said that the HK$5 million were paid to Lee not for any valuation, but for him to negotiate a discount of certain fees for some design work.  I just wonder why this had not come out in any of his eight affirmations made at different times for use in injunction applications.  If Robert Lee had indeed been paid the HK$5 million, I do not accept that such sum had anything to do with the listing of Hawkins.”

36.  Mr Wong, rightly in our view, did not contend that the judge’s criticism of the evidence of the 2^nd defendant was entirely misplaced.  He had to accept that insofar as the judge rejected the evidence of the 2^nd defendant, he could not show that the judge was plainly wrong.

37.  However, Mr Wong submitted that the judge was wrong to have accepted the evidence of the 1^st plaintiff.  Since the 1^st plaintiff had the burden of proof that there was an express trust relating to the 75 shares, the 1^st plaintiff should fail.

38.  We do not agree.  As Mr Wong accepted, the 1^st and 2^nd defendants would be holding the 75 shares on a resulting trust for the 1^st plaintiff unless they had given value for those shares.  Their case on value having been rejected by the judge, and in our view, rightly so, the judge was correct to declare that they held the shares on trust for the 1^st defendant and order their transfer.

39.  In any event, we do not believe the judge was wrong to find that the 1^st plaintiff has proved his case.

40.  Mr Wong pointed to the cross-examination of the 1^st plaintiff, where he seemed to have said at one stage, that the negotiation was conducted not by him with the 2^nd defendant, but by the 3^rd plaintiff.  However, we do not believe that to be a fair reading of the 1^st plaintiff’s evidence.  We accept that in many parts, his evidence was unclear.  That may be the result of his age and lapse of time.  (Para. 60 of the judgment)

41.  But the 1^st plaintiff, in chief, adopted what he had said in para. 20 of his first affirmation:

“20.   Initially, I was worried about transferring 75% of Hawkins to the 2^nd Defendant. I did not feel too comfortable about the idea to transfer 75% to the 2^nd Defendant without any document to prove my beneficial ownership in the shares. Accordingly, I asked the 2^nd Defendant whether he could sign some documents to prove my beneficial interest in the shares. However, the 2^nd Defendant replied that it was inadvisable to have the trust relationship in written form because of the listing rules and he comforted me by saying that I should trust him because we had known each other for so many years.”  Para. 20 of the 1^st plaintiff’s first affirmation.

42.  Under cross-examination, his evidence was to similar effect.  For example, at page 126E of the transcript.  He said he had asked the 2^nd defendant to give him a receipt as evidence that he was holding the 75 shares for him.

「問：   點解呢，如果你咁信佢，又使乜寫番張白紙黑字為證據？

答：    咁當時我諗住需要辦呢種咁嘅手續吖嘛，咁佢應該要辦番呢個手續畀我，咁佢話辦唔到囉，咁我咪信佢囉。

問：    嗱，好喇，咁你就話呢個 -- 即係呢個就係喺3月份傾喇，3月份電話傾喇？

答：    唔。」

43.  Mr Wong also relied heavily on what the 1^st plaintiff had written on a fax sent by the 2^nd defendant to him in New York.  The fax sent was in Chinese:

「			順勤
			舊
董事 -	黃錦新	股東       -	黃麗貞	80
	黃麗貞		劉詠	20
	劉詠
			新
董事 -	黃錦新	股東        -	(1) 海外公司   -	楊庚霖       75
	劉詠		(2) 海外公司   -	黃錦新       25
	楊庚霖
	邱惠芬
	簡瑞雲
				」

44.  The fax was about the restructuring of Hawkins.  The new shareholders were to be two overseas companies.  One associated with the 2^nd defendant holding 75 shares, and another overseas company associated by the 1^st plaintiff owning 25 shares.

45.  Mr Wong made the valid point that as a result of the restructuring the 1^st plaintiff would be in the minority on the board as well as being a minority shareholder.  But that is not inconsistent with the 1^st plaintiff’s case.

46.  However, Mr Wong’s strongest point arose out of the words written by the plaintiff on the fax, in particular the following:

“…had to give up 75% shareholding, in return for 25% of the benefit.”

47.  That was followed by a calculation by the 1^st plaintiff of the benefit in monetary terms, which seemed to have put a notional value on the JV Company of $1.5 billion.  Hence, Hawkins’ 80% share was equivalent to HK$1.2 billion, thus, 25% of HK$1.2 billion was HK$300 million, and 75% was HK$900 million.  It is not clear from the evidence of the 1^st plaintiff, whether he was then thinking in terms of RMB or US dollars.

48.  Mr Wong submitted that these remarks of 1^st plaintiff were inconsistent with any trust over the shares to be transferred.  They were consistent only with the 2^nd defendant’s case that the plaintiff had agreed to give up 75% of the shareholdings of Hawkins.

49.  The 1^st plaintiff’s evidence on what he had written on the fax is confused and confusing.

50.  In para. 22 of his first affirmation, he said:

“The 2^nd defendant immediately fax a restructuring plan of Hawkins to my hotel in the Untied States.  I read the fax and wrote down my opinion.  I discussed my opinion with the 3^rd plaintiff.”

51.  He explained his handwritten remarks in his evidence-in-chief.  He was cross-examined extensively, the judge also asked him questions.  In paras. 21 and 59 of the judgment, this is what the judge said:

“21.   He explained in oral evidence that he was referring to the US currency and he was relying on a valuation of the joint venture made by a firm of accountants in the Mainland.  He also explained in cross-examination that the 75% shares were supposed to be sold to the investment public upon listing so as to raise the US$900 million for development of the joint venture.  Since the 2nd defendant said the matter was urgent, he therefore asked the 3rd plaintiff to assist the 2nd defendant and sign the documents on his behalf and on behalf of the 2nd plaintiff to effect the transfer of shares.  At that time he was in the United States, his wife was in Shunde and only the 3rd plaintiff was in Hong Kong.

……

59.    Mr Chow also referred to the final comment written by the 1st plaintiff on the fax of 27 March 2000 and his explanation that the US$900 million was to be obtained for the joint venture by selling 75% of Hawkins to the public.  Mr Chow said that it would not be possible for a 75% shareholder to sell all his shares upon listing, but I do not think the 1st plaintiff would have realised this given his modest knowledge and understanding of the financial market and his reliance on the 2nd defendant.”  Paras. 21 and 59 of the judgment.

52.  The remarks on the fax were not in complete sentences.  The language used was not so clear and unambiguous, that the 1^st plaintiff’s explanation must be rejected as being incompatible with it.  Nor do they invalidate the judge’s conclusion on the credibility of the 1^st plaintiff’s case.

53.  Mr Anderson Chow SC, who appeared for the defence below made all possible points against the 1^st plaintiff arising out of the fax with great force and clarity.  The judge had them fully in mind.  The judge was entitled to put such weight on the fax as he considered appropriate.

54.  So far, Mr Wong’s criticism of the judge’s judgment are concerned with the weighing of the evidence.  The weighing of the evidence is quintessentially the task of the trial judge.  In any event, we see no reason to disagree.

55.  Mr Wong then submitted that the 1^st plaintiff never satisfactorily explained why there was no written record that the 2^nd defendant would hold the shares in trust for the 1^st plaintiff.  We do not agree.  The 1^st plaintiff had an explanation.  The explanation made sense.  He said he was told that that in order for the listing to be successful, the 2^nd defendant had to be shown to be the beneficial owner of a majority of the shares in Hawkins.  That being the case, there should be no written record that the 2^nd defendant was not the beneficial owner, but was the trustee of the 1^st plaintiff.  Nor do we believe that fact that he agreed to appoint the 2^nd, 5^th and 7^th defendants onto the board of Hawkins inconsistent with the 1^st plaintiff’s case.  If he trusted the 2^nd defendant with the 75 shares, it was not unnatural for him to agree that the 2^nd defendant should appear to control the board as well.

56.  The 1^st plaintiff explained why he trusted the 2^nd defendant, and why he was satisfied with the answer of the 2^nd defendant to his request for written evidence, and the judge believed him.  We see no reason to differ.  Indeed, we regard the 1^st plaintiff’s explanation to be highly probable.

57.  On the other hand, we share the judge’s scepticism as to why there was no written record of the 2^nd defendant’s case.  Mr Wong accepted there is no documentary record in support of the 2^nd defendant’s case, that the 1^st plaintiff had agreed to transfer the beneficial interest of the 75 shares in Hawkins to the 1^stand 2^nd defendants.

58.  One would have thought that the 2^nd defendant being a person who, according to the judge and we agree, was much more sophisticated in financial matters, would have required a written record of the agreement he said he had reached with the 1^st plaintiff.

59.  As it was, all the 2^nd defendant had, were the instruments of transfer of the 75 shares and related board meetings, showing the transfer of the shares for “value received” which had been backdated to January 1998, presumably to facilitate listing, together with an untrue statement to the stamp duty office that Hawkins had no trading and assets since incorporation.

60.  Furthermore, there was no or no sensible explanation from the 2^nd defendant why, if his version be true, he should not have asked for the transaction to be recorded in writing.

61.  Moreover, the agreement relied on by the 2^nd defendant is woefully incomplete, for example, whether the obligation to fund the operation cost was open-ended, or that it would end if the listing was successful.  It was so vague that it was probably unenforceable. We are not concerned with enforcement.  However, the incompleteness of the alleged agreement casts doubt on whether there was ever such an agreement.

62.  Moreover, as the judge has pointed out, when in May 2004, the 1^st plaintiff instructed the solicitors to ask for the re-transfer of the 75 shares on the basis that the shares were held in trust for the 1^st plaintiff, there was no reply from the 2^nd plaintiff.  The explanation by the 2^nd defendant as to why there was no reply was rightly rejected by the judge.

63.  Anyway, all these go to the weighing of the evidence and we see no reason to disagree with the judge.

64.  Another attack made by Mr Wong on the judge’s findings, related to what the judge said in paras. 51 and 52 of his judgment, namely that the 1^st plaintiff had continued to make capital injections into the JV Company, in the sum of RMB¥3.3 million between September and December 2003, and RMB¥4.14 million between January and May 2004.  The judge took the view that such evidence was inconsistent with the defendant’s case, as there was no reason why the 1^st plaintiff should have continued to inject capital into the JV Company after the share transfer.

65.  Mr Wong said the judge made two important mistakes in relation to this finding.

66.  First, there was no reliable evidence of injection of funds by the 1^st plaintiff after March 2000.  The document (document C100, according to the designation at trial), which was produced to support such injection, was of extremely doubtful reliability.  We must say that the transcript of evidence of the cross-examination of the 1^st plaintiff, in relation to document C100, supported Mr Wong’s submission.

67.  Secondly, the judge wrongly thought that this evidence of capital injection by the 2^nd plaintiff “has not been challenged and the 1^st plaintiff was not cross-examined on it” (para. 52 of the judgment).

68.  We believe this criticism of the judgment is justified.  However, that was just one of the many reasons given by the judge for preferring the 1^st plaintiff’s evidence.

69.  The judge gave his judgment the day following the conclusion of the trial, when the impression of the witnesses was fresh on his mind.  This single lapse does not invalidate his overall conclusion.

Injunction

70.  Mr Wong submitted that since the 5^th and 7^th defendants had been properly appointed as directors of Hawkins, the fact that the 1^st and 2^nd defendants held those shares on trust for the 1^st plaintiff, does not mean that the 5^th and 7^th defendants should be restrained from acting as such directors.  Mr Wong also made the point that the 5^th and 7^th defendants were not parties to any trust.  From the records available to us, it is not known whether the 5^th and 7^th defendants are still directors of Hawkins.

71.  Mr Wong, however, does not rely on the fact that in July 2005, that is about 1 year after the commencement of this action, Hawkins purported to issue 9,900 further shares.  It is not known whether the allottees were bona fide purchasers without notice.  The validity of this allotment is the subject of separate proceedings.  Having regard to the result of this action, it is probable that the allotment was made in breach of trust.

72.  In any event, Mr Wong does not rely on the allotment of 9,900 shares, so we are entitled to proceed on the basis that the 1^st plaintiff is the beneficial owner of all the shares in Hawkins.  There was no evidence from the 5^th and 7^th defendants on why they should be allowed to carry on as directors of Hawkins.  Nor that they were not aware that they were appointed to facilitate the listing of Hawkins.  Since there is a continuing risk that the 5^th and 7^th defendants would purport to act as directors of Hawkins, we see no good reason not to uphold the injunction.

73.  Mr Wong did not make any separate submission regarding the restraint in relation to the JV Company.  We see no reason to disagree with the judge, especially having regard to the reasons given by him on 31 August 2006 when refusing to stay the injunction pending the appeal.

Disposition

74.  For the above reasons, we dismiss the appeal.

75.  We also make an order nisi that the plaintiffs are to have the costs of the appeal, to be taxed if not agreed.