LIN REN XIANG v. GOLD GLORY HOLDINGS LTD AND ANOTHER

HCMP 557/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 557 OF 2014

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HCMP 1558/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1558 OF 2015

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HCA 1497/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1497 OF 2015

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BETWEEN

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HCA 632/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 632 OF 2015

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BETWEEN

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(Heard Together)

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J U D G M E N T

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Introduction

1.  There are altogether 4 actions which were ordered to be tried together.  Although the 4 actions are of rather different nature, they arose out of the same background facts.  In the order of their issue.  The 4 actions are respectively:

(i)   HCMP 557 of 2014 (“Gold Glory Action”) – issued by the plaintiff Lin Renxiang/林仁祥 (“Lin”) against Madam Ko Yin/高燕(“Ko”), a company Gold Glory Holdings Limited/金隆集團有限公司 (“Gold Glory”) and the Registrar of Companies (“Registrar”) for, among other things, that a resolution for the purported increase of share capital of Gold Glory to be declared invalid and an order directing that the Registrar to rectify and/or remove certain information relating to Gold Glory on the Companies Register;

(ii)     HCMP 1558 of 2015 (“Possession Action”) – issued by Lin, initially in the District Court (DCMP 870 of 2014) and transferred up, against his former secretary Madam Hui Kam Fong Wendy/許錦芳(“Hui”) and other unknown occupiers for possession of a property at 3805, Southorn Garden in Wanchai (“Property”);

(iii)  HCA 1497 of 2015 (“Loan Action”) – issued by Lin, initially in the District Court (DCCJ 1361 of 2014) and later transferred up, against Hui for repayment of a loan of HK$1m plus interest;

(iv)   HCA 632 of 2015 (“Charter Port Action”) – issued by Charter Port Limited/祥港有限公司 (“Charter Port”), a company said to be 100% beneficially owned by Lin, against Hui for, among other things, loss and damage as a result of allegedly wrongful acts in breach of her fiduciary duties and/or in breach of trust, and without the knowledge or consent of Charter Port.

2.  In the Gold Glory Action, the Registrar adopted a neutral position and was excused from attending the trial.

3.  So far as the Possession Action was concerned, judgment had already been obtained by Lin against unknown occupiers if any, leaving only his claim against Hui.

4.  The main protagonists in the Possession Action, the Loan Action, and the Charter Port Action are Lin and Hui.  During the trial, the 3 actions against Hui were dealt with together first, before the Gold Glory Action against Ko.  

5.  Mr William Wong SC appeared for Lin and Charter Port at the trial together with Ms Ebony Ling and Ms Ellen Pang.  Mr Jeremy Cheung and Ms Candy Tang appeared for Hui, Ko and Gold Glory.

6.  The parties’ respective Counsel have in their opening and closing submissions dealt with the 4 actions in different orders. In the plaintiffs’ opening submissions, Mr Wong dealt with the Possession Action first, followed by the Loan Action, then the Charter Port Action, and lastly the Gold Glory Action.  I shall follow this order[1].

7.  Although on the face of it, the 4 actions appear to be straightforward, according to Hui and Ko, there was a history of events which led to the matters alleged in the 4 actions.

8.  There was no real dispute on the relevant applicable law or legal principles and the main disputes were on the facts.

Brief Background

9.  Lin first came to Hong Kong from Mainland China with one Wang Jiansheng/王建生 in about 1985.  According to Lin, he knew Wang Jiansheng back in late 1970s, and they were and still are best friends and that it was through Wang Jiansheng that he later met Ko who was the girlfriend of Wang Jiansheng for over 20 years.  Ko denied she was ever the girlfriend of Wang Jiansheng and said she met Lin through the nonferrous metals business, but it was not really disputed that the three of them have known each other for a long time.  

10.  It was also not disputed that Lin used to work for the Mainland  stateowned enterprise China National Nonferrous Metals Import and Export Corporation/中國有色金屬進出口總公司(“CNIEC”)[2] and was sent to Hong Kong in 1985 to work for Da Hua Nonferrous Metals Company Limited (大華有色金屬有限公司) (“Da Hua”). Da Hua was a joint venture company then newly established by CNIEC and China Resources Minmentals Limited (華澗五礦有限公司).  Lin became a manager of the export department of Da Hua.

11.  According to Lin, in around 1987, he left Da Hua to set up his own business called Sure Resource Trading Company and he also set up Sure Resource Company Limited/融信有限公司which was incorporated in November 1987, and later changed its English name to Sure Resources Company Limited in October 1989 (“Sure Resources”).  

12.  It was in about 1987 that Hui was first employed by Lin, to work for Sure Resource Trading Company and Sure Resources as his personal secretary.  She left for USA in about January 1989 but a few months later returned to work for Lin at Sure Resources as a general secretary of his companies and to handle the miscellaneous and general matters[3].  It was in 1994 that Sure Resources purchased the Property, and thereafter Hui moved in to reside there.  The Property has been Hui’s residence since, and is the subject matter of the Possession Action.

13.  After setting up Sure Resources and throughout the years, Lin also set up no less than 14 other companies[4], but about half of those had been dissolved by the time of the trial.  Of those companies which are still in operation, 5 are Hong Kong companies and 2 are BVI companies.  Of the 5 Hong Kong companies, apart from Gold Glory and Charter Port, the others are City Effort Enterprises Limited/誠旭企業有限公司 (“City Effort”), Lucky Ocean Industrial Limited/瑞洋實業有限公司 (“Lucky Ocean”), and another company called Sure Resources (HK) Company Limited/融信(香港)有限公司[5] (“Sure Resources HK”).  The 2 BVI companies are Superway Group Limited (“Superway”) and Noble City Resources Limited (“Noble City”).

14.  Of those 7 companies which had been dissolved, apart from Sure Resources, there was in particular a company called Masen International Limited/美盛有限公司(“Masen”), which would become relevant in these actions. There was also a company called Max Union Limited (“Max Union”).

15.  Lin had said that Sure Resources and Lucky Ocean were the two main companies by which he used to trade in nonferrous metals/rare earth[6].

16.  So far as Sure Resources was concerned, there was a dispute between Lin on one side and Hui and Ko on the other as to whether the company was a subsidiary of CNIEC.  Lin had claimed that Sure Resources had throughout been his company, but this was disputed by both Hui and Ko.

17.  Lin had produced an agreement Sure Resources signed with CNIEC in Beijing on 28 January 1988 in which it was stated that Sure Resources was the agent in Hong Kong for CNIEC to carry out its business trading[7] (“28.01.88 Agreement”).  At that time, CNIEC had 2 subsidiary companies listed on the Stock Exchange of Hong Kong, namely Oriental Metals (Holdings) Company Limited/東方鑫源 (集團) 有限公司, now known as MMG Limited/五礦資源有限公司; and ONFEM Holdings Limited/東方有色集團有限公司, now known as Minmetals Land Limited/五礦建設有限公司[8].

18.  According to Lin, pursuant to the 28.01.88 Agreement, Sure Resources obtained a USD 20m facility from the Bank of China (“BOC”) in December 1988, which was later increased to USD 30m at about end of  January 1989 and secured by a letter of guarantee from CNIEC dated 13 February 1989[9].

19.  In about 1992, one Fang Dacheng/方大成became the general manager of CNIEC after replacing his predecessor鄭汝貴/Zheng Rugui  (or Cheng Yu Gui ) in 1992[10]. Fang Dacheng was said to be also a general manager and/or held offices in the two Hong Kong listed companies of CNIEC.

20.  It was Lin’s case that Fang Dacheng had liaised with him in relation to the suggestion of grouping Sure Resources into the CNIEC group of companies and that as a result a draft internal audit report內部審計報告was prepared by Fang’s subordinate Song Yun/宋蕓 (“Ms Song”) on 5 March 1993[11] (“Draft Audit Report”), but it was never used due to many inaccuracies therein.  The Draft Audit Report was produced by Hui in support of her case, and I will consider this report later in the judgment.

21.  Lin had produced another agreement dated 16 August 1996 and signed by CNIEC and Sure Resources to demonstrate that Sure Resources was not a subsidiary of CNIEC, in which Sure Resources was described as the organization authorized by CNIEC to carry out the designated business of CNIEC in Hong Kong[12] (“16.08.96 Agreement”). 

22.  It would appear that in about 1996, Sure Resources encountered problems in relation to a shipment of 42,000 tonnes of aluminum oxide (oxidized raw material) (“Goods”) purchased by Sure Resources from Australia for import into the Mainland.  It was Lin’s case that the Goods were sold to CNIEC and that CNIEC had delayed payment to Sure Resources.  According to Lin, this resulted in Sure Resources being unable to repay BOC the purchase price of some USD 14.4m paid from the loan facility.  By late 1997/ early 1998, BOC was chasing Sure Resources and also CNIEC for repayment of the loan plus interest under the guarantee signed by CNIEC.  This, according to Lin, led to the financial collapse of Sure Resources.  Hui had disputed this. 

23.  What seemed to be not disputed was in about late 1997, Fang Dacheng got into trouble.  He was said to be under the investigation of the Central Discipline Inspection Commission/中紀委 (“Central Commission”).  In early 1998, he was replaced by Shen Damin/沈大明 as general manager of CNIEC.  The new team later came to Hong Kong and invited Lin to a lunch during which Lin was handed a letter dated 11 May 1998 written to him from Fang Dacheng[13] (“11.05.98 Letter”).  In this letter, Fang notified Lin that a representative from CNIEC would be investigating, among other things, certain cheque payments between Fang Dacheng and Lin.  According to Lin, Shen Damin had asked him to assist in the investigation of Fang Dacheng, but Lin said there was never any money transaction between Fang Dacheng and him[14].  

24.  Anyway, according to Lin, Fang Dacheng had deliberately written the 11.05.98 Letter to let Lin know he was still alive, knowing that Lin would then contact Fang’s family to let them know Fang was still alive and was being isolated and under investigation. 

25.  1998 appeared to be quite an eventful year for Lin.

26.  First of all, on 17 April 1998, there was a purported increase of share capital of Gold Glory from HK$10,000 to HK$200,000 by a purported written resolution (“Purported Increase”), and 190,000 shares of HK$1 each were purported to be allotted to Ko (“Purported Allotment”).  Then there was a purported resignation of Lin and appointment of Ko as director of Gold Glory and the Form D2 was signed by Hui.  All these documents were filed in the Companies Registry on 28 May 1998.  It was Ko’s case that due to shortage of funds, Lin had wanted to sell Gold Glory, and that she had paid Lin HK$200,000 for the allotment of 190,000 shares to her, which was denied by Lin.  This is now the subject matter of the Gold Glory Action.

27.  Then around May 1998, Lin decided to emigrate to Australia and it was also at about that time that Lin decided to wind up Sure Resources by way of a creditors’ voluntary winding up which he said was advised by Ernst & Young.  Lin caused Sure Resources to fall behind in some of its payments, including the payment of the salaries of 2 employees, one of which was Hui and the other was one Shum Pan, in order that the creditors could then commence the winding up procedure for Sure Resources[15] (“Liquidation”).  Provisional liquidators were appointed on 27 May 1998 by the directors of Sure Resources and they later were appointed the liquidators. The provisional liquidators/liquidators were from the firm of Ernst & Young (“Liquidators”).

28.  In fact, earlier that year in January 1998, and prior to the Liquidation, Lin said he had acquired the company City Effort from Wang Jiansheng through transfer of shares, but the changes in shareholding and directorship in City Effort were not registered with the Companies Registry until July 2001.

29.  Upon acquiring City Effort, on 16 January 1998, Lin said he signed an agreement on behalf of Sure Resources transferring to City Effort all the share and interest of Sure Resources in an Inner Mongolian company said to be a subsidiary of Sure Resources, namely Hohhot Rongxin New Metal Swelting Co Ltd/呼和浩特融信新金屬冶煉有限公司(“Huhhot Company”) at a consideration of HK$500,000[16] (“Huhhot Agreement”).  

30.  According to Lin, the consideration was never paid.  Further, although Ko had signed the Huhhot Agreement on behalf of City Effort, she was never a shareholder nor director of City Effort and was only authorized by Wang Jiansheng to sign on behalf of City Effort.  The business licence of the Huhhot Company dated 16 July 1998 however indicated that the general manager was at that time Ko[17]. Lin’s case was Ko was a nominee only but Ko’s case that she paid HK$500,000 out of her own funds to Lin to acquire the Huhhot Company through City Effort, a company which Wang Jiansheng had agreed to transfer to her.

31.  Anyway, Lin denied that he was short of funds in 1998 as alleged by Ko.  Lin said that by 1998, he was holding various properties in Sydney, Beijing, Shenzhen, Zhuhai and Hong Kong, and that in Hong Kong alone, he had 5 properties all free from any mortgage, namely:

(i) An office at Tung Wai Commercial Building, Gloucester Road, Hong Kong purchased on 8 August 1989 in the name of Sure Resources and later transferred to Charter Port on 20 November 1995[18] (“Tung Wai Office”);

(ii) Another unit in Southorn Garden, apart from the Property,  first purchased on 6 October 1989 in the name of Sure Resources and later transferred to Charter Port on 20 November 1995 and sold on 7 February 2011[19] (“3502 Southorn Garden”);

(iii) An apartment in Regent on the Park purchased on April 1992 in the name of Lin’s company Masen International Limited (“Masen”) and sold on 2 May 2007 (“Regent on the Park ”)[20];

(iv) A unit in Elizabeth House, namely Flat B5 on 15 floor, Block B, purchased on 15 March 1994 in the name of Sure Resources and later transferred to Charter Port on 20 November 1995, and sold on 3 April 2008 (“15/F Elizabeth House ”)[21];

(v) The Property purchased by Lin on 18 October 1994 in his own name.

32.  It appeared also that in October 1989, Sure Resources had purchased another property at Elizabeth House, namely Flat A6, 17 floor with a mortgage which was subsequently discharged on 1 September 1993[22] (“17/F Elizabeth House”).

33.  In any event, by the time of the Liquidation, Sure Resources had little assets. Sure Resources was formally wound up on 23 June 1999.

34.  It was not really disputed that Hui was the one who was handling the Liquidation throughout and she was dealing with the enquiries from the Liquidators.  Lin said that after Sure Resources was wound up,  he had continued to employ Hui in his personal capacity as his secretary to handle the secretarial work as well as other work of his companies and that she was his nominee shareholder or nominee director and/or company secretary in some of his companies[23].  This was however denied by Hui.  Her case was after the Liquidation, she and Lin were co-directors and co-shareholders of some of the companies and that they were co-managing the same and she was entitled to share profits.

35.  It was not quite clear exactly when Lin moved to Australia in May 1998 or exactly when Lin moved back to Hong Kong from Australia.  He had mentioned 2000 and later he then said 2001[24], but according to Hui, it was about in 2002[25]. Lin had said he did return to Hong Kong for short visits during his 2 or 3 years in Australia.  By the time he moved back, the Liquidation had been completed.

36.  It would appear that although initially Lin was conducting trading in Hong Kong listed stocks and shares through the BVI company Superway, from 2007 onwards, he had carried out trading in rare earth through Superway and also the Huhhot Company.  It was Hui’s case that both she and Lin were shareholders and directors of Superway but this was denied by Lin. 

37.  It was Hui’s case that the amount of HK$1m, which was arranged by Lin to be transferred to her by two payments on 26 September 2011, was in fact her remuneration for her 13 years of service to Superway.  This was again denied by Lin who claimed that this sum was a loan to Hui, and this is the subject matter of the Loan Action.  Lin said he later found out that Hui had used the HK$1m for her purchase with her sister of an office at Max Share Centre on 28 September 2011.

38.  Whether the relationship between Lin and Hui was one of employer and employee, or co-managers/partners, it would appear that Hui had continued to carry out work in respect of various companies after Lin moved back to Hong Kong, and that it was only in the latter half of 2013 that the relationship between Lin and Hui took a turn for the worse.

39.  According to Lin, in August 2013, he accidentally came across a bounced cheque issued by Charter Port and signed by Hui on behalf of Charter Port (“Bounced Cheque”), and that he then instructed Hui that he should be the only authorized signatory for the bank account of Charter Port.

40.  Further in about October 2013, his daughter Vivian had come of age, and Lin said he therefore instructed Hui to tidy up the documents of his companies so that Vivian could replace Hui as nominee shareholder/director/secretary of some of the companies. It was Lin’s case that Hui then asked for the Property in return.  This resulted in a big argument between Lin and Hui (“Argument”) which led to the breakdown of their relationship.  As a result Lin said he orally terminated Hui’s employment in October 2013[26], although he later then said it was in December 2013.  Anyway, this was eventually followed by a formal letter of dismissal issued by his solicitors to Hui on 27 January 2014[27] (“Dismissal Letter”).

41.  In early December 2013 Lin said he asked Ko to transfer back to him all the shares she received under the Purported Allotment in Gold Glory.  There was a meeting between Lin and Ko on 5 December 2013 but it did not lead to any agreement between them.

42.  This eventually led to the issue of the Gold Glory Action by Lin against Ko, which was then followed by the Possession Action and the Loan Action against Hui.

43.  It was also Lin’s case that some time in 2014 he found out about withdrawals by Hui from Charter Port’s bank account without his knowledge or authorisation, and this then led to the Charter Port Action against Hui.

The witnesses

44.  Lin had filed a number of affirmations and witness statements in the 4 actions in support of his case. He had also called 4 witnesses to support his case, namely (1) his friend Mr Wang Sanhu/王三湖, the general manager of the Huhhot Company; (2) Mr Roger Lee King Chung, an accountant who had provided auditing and secretarial services to Charter Port; (3) Mr Lawrence Lo, who was with Wardley  Securities Limited (“Wardley”) at the time when securities accounts were opened for Lucky Ocean and Superway respectively in 1997 and 1998; (4) Mr Stephen Liu, an insolvency practitioner and partner of Ernst & Young and who had briefly assisted or overseen the process of the Liquidation.

45.  Apart from her affirmations and witness statements in the Gold Glory Action, Ko called herself and also Hui as a witness.  In the other 3 actions, Hui relied on her affirmations and witness statements in the 4 actions, and called no other witnesses apart from herself. 

Disputed Signatures

46.  In the 4 actions, the parties had respectively challenged the authenticity of certain documents produced by the opposite side, and I will deal with this later in the judgment

47.  Of those documents of which authenticity was challenged by Lin in that his purported signatures thereon were not his (“Disputed Signatures”), Hui had admitted that some of these was signed by her in Lin’s name, but said Lin had authorized her to do so (“Alleged Authorised Signatures”).  Lin denied that he had authorized Hui to sign those documents in his name.  A schedule of the Disputed Signatures including the Alleged Authorised Signatures was agreed[28] (“Schedule of Disputed Signatures”).

Sure Resources

48.  The beneficial ownership of Sure Resources, the reason for the Liquidation and pre-Liquidation matters were all contentious matters and they formed the general backdrop for the 4 actions and I will consider these matters first before dealing with each action.

The beneficial ownership

49.  Both Hui and Ko denied that Sure Resources belonged to Lin.  Ko’s case was that Sure Resources was a subsidiary of CNIEC, a Mainland state owned enterprise, and that Lin was sent to Hong Kong by the Mainland Government to make investments on their behalf.  Lin was thus a public servant who was required to remit part of his Hong Kong salary back to CNIEC[29].  Hui had also said was that Sure Resources was privately a subsidiary of CNIEC set up by CNIEC, a state owned enterprise, for foreign investment, and she had said “但私底下其實是當中國開始開放, CNIEC 在香港設立的一間子公司，用作對外投資的”[30].   

50.  A chronology of relevant events in the 4 actions and also of events of some of the companies was prepared on behalf of Lin and attached to Mr Wong’s Opening Submissions (“Chronology”).  There was no dispute by Mr Cheung as to the information in the Chronology relating to the companies which were obtained from public records.

51.  According to the Chronology, there had been a number of changes in the structure of Sure Resources since acquisition.  The 1^st annual return indicated that shortly after acquisition, there was an allotment of shares on 15 December 1987, and 4,898 shares out of 10,000 allotted shares were registered under Lin’s name and 5,100 allotted shares were registered under the name of Wang Jiansheng, while the 2 shares were held by what appeared to be secretarial companies.  Lin and Wang Jiansheng were appointed as directors and Lin was appointed the company secretary. 

52.  By 27 February 1988, there had been a further allotment and transfer of shares, as a result of which 735,000 of the total issued 1,500,000 shares were registered under the name of Lin, and 765,000 shares were registered under the name of one Xiao Tongying, who was appointed as director in place of Wang Jiansheng upon the latter’s resignation. 

53.  On 2 January 1990, Xiao Tongying resigned and鄭汝貴/Zheng Rugui was appointed in his place as director.  On 1 October 1991, Zheng Rugui resigned and Fang Dacheng was appointed as a director.  About a year later, on 21 October 1992, Fang Dacheng resigned, and a corporation Sino Century Limited (“Sino Century”) was appointed as director in place of Fang Dacheng.  There was also a transfer of shares as a result of which 765,000 shares were registered in the name of Sino Century, while 735,000 shares remained in Lin’s name.

54.  After the above transfers, there were two directors, Lin and Sino Century who were also the two shareholders, Lin holding 49% and Sino Century Limited holding about 51%.  This continued to be the position until 8 December 1995 when Lin became registered shareholder holding 1,499,999 shares out of 1,500,000 issued shares having been transferred 764,999 shares by Sino Century Limited, and the remaining 1 share was held by Ko[31].  Lin and Ko then became the two directors until 1 January 1998 when Max Union was appointed as a corporate director[32]. There were then 3 directors.  Ko later resigned on 1 April 1998.

55.  To summarise, from about 15 December 1987 until 8 December 1995, Lin was a registered shareholder of only about 49% of the issued shares whereas 51% or the majority of the shareholding was held by various shareholders, initially Wang Jiansheng, then Xiao Tong Ying, Zhang Rugui/Fang Dacheng and later on 21 October 1992 by Sino Century, and it was not until 8 December 1995 that Lin became on record holding some 99.9% of the shareholding of Sure Resources.  According to Lin, Sino Century was the company of Wang Jiansheng and Lin’s shares in Sure Resources were held through Sino Century[33].  Lin had described the various individuals who were directors to be “nominee” directors and the various other shareholders as “nominee” shareholders.

56.  Lin all along denied that Sure Resources was a subsidiary of CNIEC in Hong Kong.  He said he had always wanted CNIEC to become a shareholder of Sure Resources and that in around middle of 1988, he had suggested to Zheng Rugui, the then general manager of CNIEC, to let Sure Resources become a Hong Kong subsidiary or associated company of CNIEC.  According to Lin, although this was accepted by Zheng in principle, the formal procedures to group Sure Resources under the CNIEC group were never completed[34].  

57.  Then, after Zheng Rugui was replaced by Fang Dacheng in 1992 according to Lin, and as mentioned earlier, upon Zheng’s suggestion, Fang had sent Ms Song to liaise with him in relation to the suggestion of grouping Sure Resources under CNIEC, and that it was under such circumstances that the Draft Audit Report was prepared.

58.  Lin maintained that Draft Audit Report was only a draft and that Lin then felt uncomfortable about the draft as many of its contents were incorrect, and he then decided not to use the Draft Audit Report. Lin said this was agreed by Ms Song and that Lin had told Hui to dispose of the document.  Lin alleged that Hui was fully aware of this but behind his back, she did not follow his instructions and had kept documents belonging to the various companies including the Draft Audit Report and had produced some of those documents selectively.

59.  Hui had also produced a draft letter prepared by Lin himself dated 23 May 1997 addressed to CNIEC[35] (“Draft Letter”) and that in the Draft Letter, Lin had himself stated that Sure Resources was incorporated into the Public Security Bureau in 1994, namely “ 94年融信劃歸公安部後…”[36].

60.  Lin had denied that in 1994, Sure Resources was incorporated into the Public Security Bureau.  According to Lin, the Draft Letter remained a draft and was never sent to CNIEC.

61.  Lin relied on the 28.01.88 Agreement and the 16.08.96 Agreement as evidence of the relationship between Sure Resources and CNIEC. 

62.  The 28.01.88 Agreement was expressed to be an agreement reached through numerous friendly discussions during the period from November 1987 (which appeared to be prior to Lin being allotted shares)[37] and January 1988 between Sure Resources and CNIEC in relation to their co-operation.  It was stated therein that if necessary, CNIEC would provide capital to Sure Resources or to act as a guarantor for banks in Hong Kong, and the details were to be discussed separately.  Subsequently, as mentioned earlier, Sure Resources did obtain an overdraft facility from the Bank of China which was later increased to USD 30m in about January 1989 and which was secured by a letter of guarantee  provided by CNIEC[38].

63.  As for the 16.08.96 Agreement, it was stated therein that Sure Resources was appointed to be the “executive organization”/執行機構for CNIEC’s designated businesses, and that Sure Resources had to follow CNIEC’s arrangements for its particular businesses, and to render full co-operation in Hong Kong in order to achieve best economic and management benefits.

64.  The beneficial ownership of Sure Resources was however not reflected in either of the two agreements.

65.  When Lin was asked about Sure Resources and whether Sure Resources was CNIEC’s agent in carrying out CNIEC’s business, he did not answer the question directly, only replied that the relationship between Sure Resources and CNIEC was stated in the 28.01.88 Agreement, and he added that Sure Resources would be the agent, if there was any business.

66.  Lin is a clever and astute businessman.  He is well experienced in corporate matters having set up so many Hong Kong and offshore companies.  He was cautions when answering questions about Sure Resources.

67.  Whatever Lin’s allegations were about the accuracies of the contents of the Draft Audit Report and whether the same was in the end used or not, the Draft Audit Report was signed by both him and Ms Song and dated 5 March 1993 and it was nowhere stated therein to be a draft. 

68.  In his witness statement, Lin had admitted that it was upon liaising with him and obtaining the information about Sure Resources from him that Ms Song had prepared the Draft Audit Report[39].  However, during the trial, he said he did not know where some of the information in the Report came from.

69.  The information set out in the Report must have been provided to Ms Song by some one.  There was no evidence as to why Ms Song would want to fabricate the information therein.

70.  It was Lin’s evidence in his witness statement that the Draft Audit Report was prepared by Ms Song on the instructions of Fang Dacheng “with a view to painting a picture that Sure Resources was all along associated with CNIEC…”[40].

71.  Lin had not specifically denied the background of the setting up of Sure Resources, in particular the first half of Section 1 of the Draft Audit Report even though Hui had specifically referred to matters set out therein in support of her case.  Lin did however state in his witness statement that if he did not respond to any matter raised by Hui or Ko in their respective witness statements, it did not mean that he agreed to the same or that the same was true.  In any event, he did not deal specifically with those matters concerning the setting up of Sure Resources set out in Section 1 directly apart from denying the same and pointing out that there was no liquidation in 1992. 

72.  The Draft Audit Report could well be “painting a picture”, but in my view, it was painting a picture for other unknown purposes.  Even if the accounts sections may not be accurate, I do not find it credible that Ms Song would be painting a picture in relation to the background of the setting up of Sure Resources in Section 1.  One would have thought that the entities who would be fully aware of the connection between Sure Resources and CNIEC and/or the beneficial ownership of Sure Resource would be those two entities themselves and those in charge of those entities; otherwise, CNIEC would not have provided a guarantee of up to USD 30m for the benefit of Sure Resources shortly after it was set up.  

73.  It was stated in Section 1 of the Draft Audit Report that Sure Resources was set up by Lin pursuant to CNIEC’s instructions (受CNIEC總部的委托) and that the capital for setting up Sure Resources had come from other companies and that it began business in early 1988.  Further, it was stated that since incorporation until October 1988, the finances of Sure Resources were under the supervision of Da Hua and that from October 1988 until the date of audit in March 1993, the finances were under the supervision of東方鑫源公司.

74.  There was nothing in Section 1 to indicate that Sure Resources was Lin’s company as he had claimed or that the capital came from Lin presently or Lin was the sole beneficial owner of the company.  In any event, irrespective of what was stated in Section 1 of the Draft Audit Report and whether there was any actual “supervision” by 東方鑫源or not, by being a director, Zheng Rugui, and later Fang Dacheng would have access to the financial statements and accounts of Sure Resources during the time of their respective appointment.  Fang Dacheng was a director between October 1991 and October 1992 and it was about then that he became the general manager of CNIEC having taken over from Zheng Rugui, and he appeared to be also the general manager of the then Oriental Metals (Holdings) Company Limited/東方鑫源 (集團) 有限公司 and/or 有色 (香港) 控股有限公司 or at least had held office in those 2 listed companies.   

75.  Notwithstanding Lin’s case that Sure Resources was his company, he was never on record a majority shareholder until December 1995.  It was Lin’s case that all those individuals and Sino Century holding the 51% interest in Sure Resources were nominee shareholders holding their interest for him.  However, there was no supporting documentation such as declarations of trust produced by Lin in support of his case.  There was no supporting evidence at all from Lin’s long time good friend Wang Jiansheng, the first of those majority shareholders of Sure Resources.  It was also not quite clear what Lin meant by those individuals and Sino Century being “nominee” directors, since they were all directors on public record and would have independent duties as directors.  Anyway, I find there was no sufficient evidence as to the true beneficial shareholder or director for whom or which entity those alleged nominee shareholders or alleged nominee directors of Sure Resources represented, if they were indeed nominee shareholders/directors.  There was also no sufficient evidence that Sure Resources was Lin’s company as he claimed, until 8 December 1995.   

76.  Further, having considered the evidence, I find more probable than not, Sure Resources indeed was set up pursuant to instructions from CNIEC.  Having said this, however, I find that there was no sufficient evidence that Sure Resources ever became formally a subsidiary of CNIEC. Whatever the structure or ownership of Sure Resources was at the time of setting up, there had been a change in the shareholding in October 1992, when Sino Century came into the picture and became a shareholder and director on public record.

77.  There was little information on Sino Century save Lin’s own evidence that Sino Century was Wang Jiansheng’s company and that it was holding its shares in Sure Resources as nominee for Lin.  Again, there was no evidence from Wang Jiansheng.

78.  It was stated in the Draft Letter by Lin that notwithstanding in 1994 Sure Resources was incorporated into the Public Security Bureau Fong Dacheng agreed for CNIEC’s guarantee to the bank to continue to remain.  Lin later denied during the trial that Sure Resources was incorported into the Public Security Bureau in 1994.  Anyway, on 8 December 1995, there was a further restructuring in the shareholding of Sure Resources on public record.  On that day 1,499,999 shares of Sure Resources were transferred to Lin’s personal name.  Having considered the history of the shareholding of Sure Resources, I accept that at around that time, more probable than not, Sure Resources did become Lin’s company.

79.  There was another issue raised by Ko and/or Hui, namely that Lin was a public servant/中國公職人員/幹部 of a state owned enterprise and that his salary had to be the same level as a Mainland public servant, and as his salary from Sure Resources was at a level commensurate with Hong Kong salary levels, Lin had to remit or return part of his salary to CNIEC[41], or “工資回流” or “上繳 CNIEC”[42] as stated in the Draft Audit Report.

80.  Lin maintained that he was only a public servant when working for CNIEC in Beijing, but since 1987, he was no longer a public servant and that the references to “工資回流” or “上繳 CNIEC” in the Draft Audit Report were not correct.

81.  Lin had set out what he called examples of the “incorrect” contents of the Draft Audit Report[43]:

(i) He never received any director’s emolument or remuneration for acting as a director of Sure Resources, not to mention having to return part of it to CNIEC or any party;

(ii) Sure Resources never had any investment in Vietnam;

(iii) The properties, namely 3502 Southorn Garden, 17/F Elizabeth House and the Tung Wai Office, stated in the Draft Audit Report to have been all sold by Sure Resources together with the business for USD 1.2m on 28 October 1992, were in fact not sold at the time of the Draft Audit Report in March 1993.

82.  There was no sufficient evidence to contradict Lin’s evidence that Sure Resources never had any investment in Vietnam.

83.  In the Draft Audit Report, apart from the item in relation to investment in Vietnam, there was also an item in relation to investment in Thailand.  Hui had produced a name card bearing Lin’s name as being the “Chief Representative” of the Representative office of CNIEC in Thailand[44]. When questioned about Sure Resources’s investment in Thailand, Lin had explained that he was only assisting CNIEC to register an office in Thailand as he knew someone at the PRC Embassy in Thailand, but he did not draw any salary from this post/title, and that after he had rendered his assistance, he had left others to deal with the setting up of the office and he had no further involvement with that office.

84.  Of the properties mentioned in the Draft Audit Report to have been liquidated, as seen in the record of the Land Registry, the Tung Wai Office was not sold at the date of the Draft Audit Report.  As for 3502 Southorn Garden, again it was not sold at the date of the Draft Audit Report, although Sure Resources seemed to have sold it in June 1993 but then re-purchased it on 1 August 1994.  As for 17/F Elizabeth House which was purchased in October 1989 by Sure Resources, the mortgage was not discharged until September 1993 and thus appeared not sold in March 1993.  It was however stated by Ms Song that her instructions on the properties came from the head office or CNIEC.

85.  The Draft Audit Report had referred to the “winding-up” or “清盤整頓” of Sure Resources in 1992, and it was not clear what this referred to.  There was no formal liquidation in 1992 under the laws of Hong Kong.  The Draft Audit Report was however expressed to be an “internal audit report” and the reference could be to an internal reorganisation, in particular Lin had said in his witness statement that the purpose of the audit was with a view to group Sure Resources into CNIEC’s group of companies[45].

86.  “工資回流” and “上繳 CNIEC” were two different items in the Draft Audit Report.  The allegations of Ko and/or Hui were mainly in relation to “工資回流”.  It was not quite clear what “上繳CNIEC” represented or what the payments, if any, were of or for.  So far as “工資回流” was concerned, according to the Draft Audit Report, the amount of HK$826,522.93 was kept in Lin’s personal account and there had been no actual repayment or remittances to CNIEC, and the amount was merely recorded as part of the Liquid Assets in the Draft Audit Report.

87.  There were no explanatory notes or supporting documents attached to the Draft Audit Report for the accounts in Section 2. Having considered the inaccuracies therein in particular in relation to the properties, I do not find the Draft Audit Report contained any proper audit of the accounts of Sure Resources at that time, and I will not attach any weight to it as an audit report.  Further, I do not find there was sufficient evidence for this court to find whether by end of 1992 Lin was still a public servant of Mainland China or not.  

Reason for the Liquidation

88.  It was Hui’s evidence that from around the third quarter of 1995 to 1998, Lin through Sure Resources “made a huge loss on trading metal future trading and alumina business”[46].  In other words, Hui’s case was that Sure Resources was wound up because of Lin’s own investment losses.

89.  It was not disputed that the Goods were purchased by Sure Resources from a supplier in Australia in August 1995 and paid for by means of letters of credit issued by BOC and drawn from Sure Resources overdraft facility guaranteed by CNIEC. 

90.  Lin was cross examined in detail over this transaction and over what he stated in the Draft Letter which Hui relied on to support her case that there was never any sale of the Goods to CNIEC as alleged by Lin. 

91.  Lin had explained about the contents of the Draft Letter, namely that initially, the custom declaration was for import of the Goods from Australia for the purpose of processing, manufacturing and/or finishing, but after the Goods were imported in August 1995, the import document for processing, manufacturing or finishing of the raw materials/進料加工手册 (“Import Permit”) was lost by 煙台鑫海公司, a Yan Tai company.  This resulted in there being no custom clearance for the import of the Goods.  To resolve this, CNIEC later agreed to purchase the Goods and that the transaction became one of sale and purchase between Sure Resources and CNIEC.  He had explained that he prepared the Draft Letter with a view to remind CNIEC of its guarantee but in the end, he decided not to send it out.

92.  The Draft Letter was prepared by Lin himself. It would appear from the Draft Letter that CNIEC did take over the Goods in March 1996[47]. It further appeared from the Draft Letter that CNIEC had paid USD 2.2m to BOC in March 1997, and that by end of April 1997, Sure Resources still owed BOC about USD 15m, and BOC had issued a letter to CNIEC requesting compliance under its guarantee. 

93.  Lin had said under cross examination that the price of the goods sold to CNIEC was USD 320 per ton, and therefore Mr Cheung pointed out that the amount due from CNIEC should be USD 13.44m.  As the acquisition cost by Sure Resources as revealed in the Draft Letter was USD 14.4m, Mr Cheung thus submitted that the transaction was a loss from the outset, and not as Lin made it out to be, that he was planning to make a huge profit from this transaction.

94.  Lin had however explained during the trial that he was hoping to make a huge profit by importing the raw materials, and then selling them after further being processed or finished, and that it was only after the loss of the Import Permit that there was a change of plan, and CNIEC then agreed to purchase and take over the Goods.  Lin said by then, Sure Resources had incurred shipping insurance costs and there were also packing costs and custom duties incurred by Sure Resources, in addition to interests charged by BOC. By the time he prepared the Draft Letter, he said the total amount owed to BOC was about USD17m.

95.  Mr Cheung pointed out that Lin had failed to produce documentary evidence to the Liquidators as to the insurance, packing costs or custom duties, and also that the exact interest owed to BOC was not set out in the statement of affairs prepared by Sure Resources on 10 June 1998 for its affairs as at 27 May 1998 (“Statement of Affairs”)[48].  In the Statement of Affairs, Sure Resources only stated that the amount due by CNIEC was HK$92.2m, or about USD 11.8m. The BOC loan was stated to be some  HK$130 m, or about USD 16.7m[49].

96.  Lin’s evidence during the trial was that CNIEC did in the end pay all the outstanding amounts to BOC although initially CNIEC had taken a stance that its guarantee was not valid according to PRC regulations.  There was no sufficient evidence to contradict what Lin said.  In any event, CNIEC would thus appear to be the biggest “loser” in the Liquidation if it did pay BOC.  There was no sufficient evidence that CNIEC had ever raised any queries and carried out any investigations as to how the outstanding amounts to BOC were incurred. 

97.  Mr Cheung had put to Lin that there was no contract for CNIEC to purchase the Goods from Sure Resources and/or that CNIEC did not owe Sure Resources any payment for the Goods, and that the Draft Letter indicated that Lin was in fact trying to ask CNIEC to bail him out after his own investment losses.  This was denied by Lin.

98.  Hui also relied on a letter of 3 August 1998 sent by CNIEC to the Liquidators, in which CNIEC stated that it did not have any amount due to Sure Resources[50] and that it was Sure Resources which had a loan overdue for repayment to BOC which was seeking settlement from CNIEC under its guarantee[51] and which CNIEC regarded to be invalid (“CNIEC Letter”).

99.  Lin had admitted during cross examination that the Draft Letter was not really a letter to demand payment from CNIEC.  He said it was only a draft to “remind” CNIEC their liability under the guarantee to BOC.  He maintained however that there had been a contract between Sure Resources and CNIEC regarding the latter’s purchase of the Goods, and that in about May 1998, CNIEC did make a small part payment.

100.  The Draft Letter was clearly a draft, as it bore various hand-written amendments by Lin.  Whether it was eventually sent or not, Lin’s evidence at the trial was that the sale of the Goods to CNIEC was after the loss of the Import Permit.  I accept that on the face of the Draft Letter, it did not appear that Lin was demanding from CNIEC payment for the Goods under any contract of sale.  Whether there was a proper or genuine sale or not, and whether CNIEC owed Sure Resources any sums under a contract of sale or not, Hui did not really challenge the Import Permit was lost and there was no sufficient evidence that the loss of the Import Permit had anything to do with Lin or Sure Resources.

101.  Further, according to the Draft Letter which was relied on by Hui, the Import Permit appeared to be applied for by a company connected with CNIEC.  In any event, whether there was a proper or genuine sale or not, it was Hui’s own case that the Goods were subsequently taken over by CNIEC through the assistance of Fang Dacheng, although according to her, the Goods were useless by then[52]. There was however no evidence produced by Hui in relation to the value of the Goods when taken over by CNIEC.    

102.  I find there was no sufficient evidence that the winding up of Sure Resources was caused by Lin’s own trading of metal futures or the huge loss of Sure Resources was caused by Lin.  I accept that from the CNIEC Letter, CNIEC did not regard itself as a debtor to Sure Resources and the Liquidators had sought legal opinion over this issue[53], but decided not to take action.  Lin’s case was thus consistent with his then instructions given to the Liquidators, whether through Hui or not, that there was an outstanding amount from CNIEC to Sure Resources.

103.  Further, whether it was “investment loss” on the part of Lin through Sure Resources, whether there was a genuine sale to CNIEC, or whether CNIEC only agreed to “bail out” Sure Resources, it was not really disputed that Sure Resources had drawn on its overdraft facilities to pay for the purchase of the Goods and there was no sufficient evidence to contradict Lin’s evidence that there were various related expenses paid out of the overdraft facilities.  It was clear that ultimately Sure Resources was relying on CNIEC to repay the amounts due to BOC and Hui’s own case indicated that CNIEC did take over the Goods.  More probable than not, CNIEC did agree to pay.  Having considered all the evidence, it is my view that it was the subsequent failure on the part of CNIEC to pay on the due date/s for repayment to BOC, for whether reason, that eventually led to the Liquidation. 

Pre Liquidation Matters

104.  As seen earlier, Sure Resources transferred Tung Wai Office, 3502 Southorn Garden and 15/F Elizabeth House (“3 Properties”) to Charter Port on the same day, ie 20 November 1995.  It was not clear what had happened to 17/F Elizabeth House.  Anyway, it was Hui’s case that the transfers of the 3 Properties was to divest Sure Resources of its assets.  For the same reasons, Hui alleged that in January 1998, Sure Resources transferred all its shares and interests in the Huhhot Company to City Effort.

105.  Lin’s evidence was as all along Sure Resources was his company, the 3 Properties were his own properties and that the transfers of the 3 Properties from Sure Resources to Charter Port were only “internal transfers”/内部轉讓from one of his companies to another of his companies. 

106.  It was Hui’s case that no consideration was paid.  Lin’s evidence was that he believed it was paid but all arrangements were in fact made by Hui herself, as Hui was the one who instructed solicitors to deal with all the conveyancing matters related to the transfers.  Lin further said that if consideration was paid, then it would have been paid by Charter Port or from the account of Noble City, the majority shareholder of Charter Port.

107.  When asked why all the transfers of the 3 Properties took place on the same day, Lin explained that at the time he took the view that there should be re-organisation between those of his companies which were asset holding only and those of his companies which were carrying on businesses. Lin maintained that at that time Sure Resources had no financial problems and that all along he was hoping to make a lot of money. 

108.  It was not improbable that the transfers were due to some re-organisation, as on 8 December 1995, less than 3 weeks after the transfers of the 3 Properties, there was a change in the shareholding of Sure Resources, and Lin became the majority shareholder.

109.  The transfers of the 3 Properties took place 3 months after the purchase of the Goods.  Although it appeared from the Draft Letter that the goods had remained in the warehouse of the port of import since 12 August 1995, there was no sufficient evidence that Lin would know in November 1995 that CNIEC would later fail to pay notwithstanding taking over the Goods in March 1996.

110.  As for the transfer of the interest in the Huhhot Company, Mr Cheung pointed out that the Huhhot Agreement, or the alleged sale by Sure Resources of its interests in the Huhhot Company to City Effort was not reflected in the Statement of Affairs.  In the Statement of Affairs, City Effort was in fact stated to be a creditor with an amount due from Sure Resources of about HK$16.5m.

111.  Lin’s case was that the transfer of the interest in the Huhhot Company by Sure Resources to City Effort was again an “internal transfer” and he had described the transfer to be from his “left hand” to his “right hand”, namely from one of his companies to another of his companies.  Thus, on his case, the HK$16.5m owed to City Effort in the Statement of Affairs would then be owed to Lin.

112.  Lin’s witness Mr Wang Sanhu had admitted during the trial that the Huhhot Company was also a Mainland state owned enterprise. Wang Sanhu was the person who was managing the Huhhot Company.  When asked about the connection between the Huhhot Company and Sure Resources, Wang Sanhu had said it was an investment by Lin.  As mentioned earlier, it was Ko’s case that City Effort was her company and so was the Huhhot Company.  Wang Sanhu is Lin’s good friend.  He had said Ko was Lin’s nominee in relation to the Huhhot Company.

113.  In any event, as pointed out by Mr Wong, whether there was any impropriety in the transfers of the 3 Properties and/or the alleged sale of the Huhhot Company, this would be a matter which should be taken up by the Liquidators, or Mr Stephen Liu of Ernst & Young.

114.  Mr Liu had attended trial on Lin’s behalf.  He confirmed that according to the companies winding up provisions, it would be the duty of the directors to prepare a statement of affairs, and that the Statement of Affairs was prepared by the then directors of Sure Resources.

115.  Mr Liu had also said that if he had received information about the transfer/sale of any of the company’s assets at no consideration which took place less than 6 months before the winding up petition, he would have carried out investigation.  Further, if a company had transferred assets to another related company within 3 years prior to it being wound up, whether he would investigate would depend on whether the company was solvent, and also whether any information would be available.

116.  Mr Liu was not one of the named Liquidators, and it would appear from Mr Liu’s evidence that he was not aware of the transfer of the interest in the Huhhot Company or the transfers of the 3 Properties.  Nor would it appear that Mr Liu was aware that Lin had acquired City Effort in January 1998, in particular when Ko appeared on behalf of City Effort at the final creditors’ meeting.

117.  However, whether there was any “defrauding” or “dodging” the creditors, I agree with Mr Wong this is not really a matter for this court to determine in the present trial.

118.  There was another allegation by Hui that in 1998, Lin was anxious to leave Hong Kong after learning of the arrest of Fang Dacheng and of the then investigations although she had also said Lin was moving to Australia to avoid repaying the debts he incurred.  Hui said she herself had also left Hong Kong for the Philippines for a short while at Lin’s instructions so that she could not be a subject of investigation about Lin’s affairs by the ICAC and other authorities[54]. She later returned to Hong Kong in about 1999.

119.  As mentioned earlier, the Liquidation was handled by Hui.  Lin had admitted that Hui was provided by him with a list of questions/items for her to raise with the Liquidators (“Discussion Items”). There were in fact two slightly different versions of the lists of Discussion Items[55], one was said to be a draft by Lin.  When Lin was asked why he could not handle the Liquidation himself before going to Australia, he said he was told by the Liquidators that it was not necessary for him to remain in Hong Kong. 

120.  The opening paragraph of the final version of Discussion Items set out that (1) the only liability owed by Sure Resources was to BOC, all other liabilities (including the cost of Liquidation) would be responsible by Lin; (2) employees’ salaries - whether payable? (could also be paid by Lin); (3) only creditor sic was CNIEC.  Then there was a list of 6 Discussion Items set out, which appeared to be as follows:

Request	(i)	To comply with the laws of Hong Kong, whether the company and its shareholders (shareholders with no signed guarantees) could be pursued over any liabilities;
	(ii)	The guarantor for the company’s facilities was CNIEC: (A) what were the responsibilities of the guarantor? (B)  what were the rights of the guarantor? What responsibilities or rights CNIEC had as a guarantor;
	(iii)	whether the guarantor had the right to participate in the Liquidation in Hong Kong;
	(iv)	whether the Hong Kong Government would or could investigate all the accounts of Sure Resources since its incorporation;
	(v)	If there were any enquires made from anyone in person or in writing, whether the Liquidators would need to answer all questions and provide detailed accounts and supporting documents to the enquirers;
	(vi)	The assets of the company were only office items, fittings and furnishings etc of little value, and after the Liquidation, whether all the employees (including Lin) could be laid off and whether any queries thereafter could be answered by the Liquidators?

121.  It was put to Lin by Mr Cheung that the Discussion Items indicated that the matter he was most concerned during the Liquidation was whether the Liquidators would investigate into accounts of Sure Resources for the past two to three years.  Lin denied this.  Lin maintained that he would be responsible for any matters if required to do so under the law.

122.  The Discussion Items really speak for themselves.  Lin admitted that it was he who instructed Hui to raise them. He clearly had wanted the answers or clarifications from the Liquidators over all those 6 Discussion Items but there was no sufficient evidence that he was more concerned over any particular item.

123.  It was not disputed that Fang Dacheng was arrested by the Mainland authorities or went missing and that he was replaced CNIEC in early April 1998.  Lin met with the new CNIEC representatives who were investigating into the affairs of Fang Dacheng in May 1998 and Lin was provided with Fang’s 11.05.98 Letter.  I do not think Hui could have made up all those stories regarding the then investigations by CNIEC and/or the Mainland authorities and/or other authorities.  There was however no sufficient evidence that Lin ever became a subject of investigation.  Having said this, I accept Hui’s evidence that both Lin and she did become concerned in about April/May 1998 over the then investigations over Fang Dacheng, and Lin decided to leave Hong Kong, and moved to Australia in May 1998 for two to three years.  As for Hui, she went to the Philippines for several months.

124.  I now turn to consider the 4 actions. 

The Possession Action

125.  Lin’s case in the Possession Action was that Hui was allowed by him to reside in the Property at nil licence fee as part of her employment benefit and that the licence was a licence at will and terminable by reasonable notice[56].

126.  Hui’s defence and counterclaim was based on mainly[57]:

(i) Hui took possession of the Property on the basis of a licence granted by Lin to Hui, but subsequently the licence was terminated and Hui remained in the possession of the Property based on a proprietary interest for the benefit of Hui;

(ii) Further or alternatively, Lin was estopped from claiming possession of the Property by reason of an express representation and/or promise of Lin made to Hui with the intention of Hui should act on such representation and/or promise and which Hui did do.

127.  Hui counterclaimed, among other things, for a declaration that she is the absolute legal and beneficial owner of the Property.

128.  So far as her defence based on representation and/or proprietary estoppel, her case was Lin had orally represented or promised to gift to her the Property in 1998 (“Promise”) and further to reassure Hui of the Promise, Lin had signed a declaration during a meeting with Hui in Las Vegas USA  on 20 June 2001 (“Declaration”)[58].  Relying on the Promise, Hui pleaded that she had:

(i) waived her claim as a creditor in the Liquidation;

(ii) had on 23 August 2002 transferred her 779,999 shares in Lucky Ocean to Lin at nil consideration;

(iii) had in the capacity of a director managed the assets, investments and businesses of Gold Glory, Lucky Ocean, Dragon Future Development Limited and Sunny Centre Limited without receiving any director’s remuneration from those companies;

(iv) had made improvements to the Property.

129.  During the trial, under cross examination, Hui’s evidence changed somewhat.  She had said that Lin promised to gift the Property to her after she completed all the matters in relation to the Liquidation and she said this was the condition for the gift of the Property.  When challenged that this was different from her previous versions and was a “new case” on her part, Hui had said all was “caused” by the Liquidation, or “全部因是因為融信清盤”.

130.  Although the so called “new case” was somewhat different from her previous version, she had said that everything was a result of the Liquidation, I will consider this “new case” as part of her case that she waived her claim as a creditor in the Liquidation, in order for the Liquidation to be completed without further investigation by the Liquidators into the affairs of Sure Resources.  

Licence for free for life

131.  From the Land Registry record, Lin is and was at all material times the registered owner of the Property, which he acquired on 18 October 1994 at a stated consideration of HK $2.8m. Lin had said the Property was acquired from one of his debtors and the consideration was set off from the debt.  There was/is no mortgage loan.  Lin’s evidence was that after his acquisition, the Property was left vacant, although he did allow his guests from the Mainland to stay there on a few occasions before Hui moved in.

132.  It was not disputed that Hui moved into the Property sometime in 1995, and has resided there since.  Hui herself had said that Lin offered to let her stay in the Property as he appreciated her work and often told her that he treated her like a member of his family[59].

133.  Lin denied that he had treated Hui like a member of his family.  Whatever, I accept that the relationship between Lin and Hui was a good one at that time and they trusted each other.  As mentioned earlier, Lin’s case was that the licence was a licence at will which was not in writing and Hui was not required to pay any licence fee, and he could terminate the licence any time.  In March 2014, Lin instructed his solicitors to serve on Hui a notice of termination of the licence requesting delivery up of vacant possession on or before 25 March 2014[60].

134.  Upon receipt of the above demand letter, in a reply dated 25 March 2014[61], Hui’s then solicitors stated that :

(i) Lin had agreed that Hui could occupy and stay at the Property during her lifetime without paying any mesne profit;

(ii) In order not to incur unnecessary costs, she would give vacant possession of the property on or before 25 April 2014;

(iii) She would reserve her rights to claim against Lin for his breach of the agreement.

135.  Hui’s then case was thus there was a licence for her to reside in the Property for free for life.  Lin’s solicitors replied to deny the licence alleged by Hui, and sought delivery up of vacant possession by a deadline.  Having received no confirmation from Hui, Lin issued the Possession Action on 4 April 2014.

136.  After Lin issued the Possession Action, Hui filed an affirmation on 2 May 2014.  Her position had by then changed, in that her case  became one that Lin had made the Promise to her in 1998 in exchange for her to waive her claim as a creditor against Sure Resources in the Liquidation[62]. It was in this affirmation that Hui first produced a copy of the Declaration.

137.  Thereafter, her case had again varied in that she had also said the Property was gifted to her for her remuneration for her services to all the “Hong Kong companies” she managed[63].  She had also said Lin the Promise was with no condition attached, and relying on the Promise, she had made improvements to the Property using her own funds.

138.  In any event, it was Hui’s initial case that Lin had agreed to her occupying the Property for free for life.  There was no mention by Hui’s then solicitors at all of the Promise or the Declaration in their letter of 25 March 2014.

139.  When Hui was cross examined in relation to her then solicitors’ letter, her explanation was that she was very upset at the time, and that during the Argument, Lin had told her the Declaration was not stamped and was therefore useless.  She said she felt helpless.  Hui then became emotional and burst into tears.  She nevertheless confirmed that she understood the difference between a gift and a licence for life. 

140.  Anyway, Hui’s evidence during the trial was that as she had believed that the Declaration was useless, she therefore did not tell her then solicitors about the Promise or the Declaration, and instead she told them that there was an agreement that she could live in the Property for free for life. 

141.  What Hui said above was never mentioned in her affirmations/witness statements.  It was clear from Hui’s evidence that the initial case put forward by her then solicitors’ letter on 25 March 2014 was no longer her case, and she no longer pursued that line of defence.  Her subsequent case had been on the basis that she was entitled to the ownership of the Property based on the Promise.

142.  In any event, I find there was no sufficient evidence that Lin had agreed that Hui could reside in the Property for free for life.

The Promise

143.  According to Hui’s affirmation of 2 May 2014, she said as the huge loss of Sure Resources was caused by Lin, he did not want the Liquidators to inquire into Sure Resources’ financial affairs, and that shortly after the Liquidators were appointed as Provisional Liquidators, he promised her he would transfer his title to the Property to her in exchange for her to waive her claim as a creditor against Sure Resources[64].

144.  It was thus Hui’s case that the Promise was made on the condition that she would waive her claim as a creditor in the Liquidation in order that there would be no investigation by the Liquidators into the financial affairs of Sure Resources.

145.  Hui had said in her affirmation that there were only 2 creditors on record when the Provisional Liquidators were appointed[65], namely 2 employees she and another.  This was not correct.  At the time of the Liquidation, there were other creditors and the largest creditor of Sure Resources was BOC and whether Hui agreed to waive her claim as a creditor in the Liquidation would not have prevented BOC from requesting the Liquidators to investigate into Sure Resources’ financial affairs, had BOC wanted to.  Further, I have said earlier, the biggest “loser” in the Liquidation appeared to be CNIEC if in the end it did repay BOC in full under its guarantee.  As mentioned earlier and as seen in the CNIEC Letter, CNIEC had written to the Liquidators to deny any indebtedness to Sure Resources.  Whether Hui agreed to waive her claim or not would not have prevented CNIEC to make a claim against Sure Resources or to raise queries on the indebtedness. 

146.  Mr Liu had produced a copy of the Statement of Affairs in his witness statement.  As seen therein, the creditors apart from the employees, were BOC, City Effort and the landlord of the then office of Sure Resources.  There were 3 employees, namely Hui, Shum Pan, and Lin himself.  The amount owed to Hui was HK$180,808.17 and the amount owed to Shum Pan was HK$60.405.82, and the amount stated to be owing to Lin was HK$262,876.71 as at the date of the Statement of Affairs. 

147.  Mr Liu stated in his witness statement that Hui had received the amount of the employer’s contributions through her provident fund of HK$48,803.81.  It was not quite clear whether Shum Pan received any amount through her provident fund.

148.  It was Lin’s case that the balance of Hui’s and Shum Pan’s salaries, after deducting the relevant parts of their provident fund were fully paid him by pre-signed cheques.  So far as Hui was concerned, she was thus paid an amount of about HK$48,830.81 through her provident fund and the balance of HK$131,977.36 due to her from Sure Resources was said by Lin to have been fully paid by him. 

149.  Anyway, as stated by Mr Liu in his witness statement, and as seen in the Liquidators’ final statement of account dated 23 March 1999[66], after realization of the assets, there was insufficient money to settle all the creditors’ claims in the Liquidation.  Mr Liu had also produced the minutes of the 1^st meeting of the creditors on 19 June 1998 and also the minutes of  the final meeting of the creditors in March 1999[67].

150.  Hui was present at the 1^st meeting of the creditors and in fact acted as the chairman of the meeting, and as authorized representative of Max Union.  At the 1^st meeting, among the creditors, apart from Hui, Shum Pan, a representative from the landlord of the then office of Sure Resources at Gloucester Road, and also a representative from BOC were present.  The representative from BOC did raise certain queries in relation to the Statement of Affairs. Those creditors present agreed that a Committee of Inspection was not necessary. 

151.  At the final meeting, Ko was present on behalf of City Effort and Shum Pan was present representing herself and by proxy of Lin and Hui.  It was stated by the Liquidators at this meeting that CNIEC had denied that it owed Sure Resources any money and had raised an issue on the validity of the guarantee.  As mentioned earlier, the Liquidators had sought legal advice.  They reported at the final meeting that if CNIEC had repaid BOC then CNIEC would have a right to claim against Sure Resources or set-off against the amount owed to Sure Resources, and due to insufficient funds, the Liquidators decided not to take further action against CNIEC.  Thus, the Liquidators were fully aware of CNIEC’s rights.  No queries had been raised by CNIEC into the affairs of Sure Resources. 

152.  In the list of Discussion Items, Lin had indicated that he could pay the employees’ salaries and also be repayable for the other liabilities of Sure Resource save for the amount owed to BOC.  The other employee Shum Pan did attend the final meeting of the creditors.  If she had not been paid, one would have thought she might raise a query.  Hui had not in fact denied in her affirmation/witness statement what Lin said, namely all outstanding employees’ wages had been paid by his pre-signed cheques.  I find there was no sufficient evidence to contradict what Lin said that he had paid Hui and Shum Pan the balance of their salaries.    

153.  In any event, the Liquidators as professionals had an independent right and duty to investigate into Sure Resources irrespective of whether Hui had agreed to waive her claim or not and the Liquidators did seek independent legal advice in relation to CNIEC.  

154.  There was no sufficient evidence that the absence of Hui at the final creditors’ meeting had “smoothed the way” for the Liquidation, as alleged by Hui. 

155.  Mr Liu had said during the trial that to whether the Liquidators would enquire into the financial affairs of Sure Resources would also depend on whether there was any complaint from the creditors.

156.  As reflected in the Statement of Affairs, the two largest creditors were BOC and City Effort.  If the absence of any creditor would “smooth the way”, then in my view it would have been BOC or City Effort, there being no evidence that Lin had disclosed to the Liquidators that he had acquired City Effort by then.   In any event, neither Wang Jiansheng who was on public record the majority shareholder of City Effort or Ko representing City Effort at the final meeting raised any queries on the financial affairs of Sure Resources.

157.  There was no evidence that BOC had raised any complaint or any further queries in relation to the financial affairs of Sure Resources.  Indeed, there was no evidence that Shum Pan or other creditors raised any complaint or query.  There was also no evidence that CNIEC had made any claim against Sure Resources.

158.  Having considered all the evidence, I find that there was no sufficient evidence that relying on the Promise Hui had waived her claim as a creditor in the Liquidation in order that the Liquidators would not carry out investigations into the affairs of the company.

159.  As for her “new case”, all along it was Hui’s case was that the Property was gifted to her in 1998, but in accordance with her “new case”, the gift would be in 1999, as the Liquidation was not completed until then.  Her “new case” was not consistent with her previous version.  In any event, I find there was no sufficient evidence to support her “new case”. 

160.  In fact, I find Hui’s case regarding the circumstances under which the Promise was made was vague and inconsistent.

161.  According to Hui, Lin had reaffirmed in the Declaration in 2001 his promise to gift the Property to her “with no conditions attached”.  This was not consistent with her above case.  There was no dispute that the contents of the Declaration were hand written by Hui. The only dispute was whether the contents were written by Hui on a blank piece of paper pre-signed by Lin, as alleged by Lin.  After Hui produced a copy of the Declaration, Lin initially denied having even seen or signed the Declaration or meeting Hui in Las Vegas in 2001[68]. After inspection of the original of the Declaration, Lin then made his 2^nd supplemental witness statement stating that he believed the Declaration was “forged” by Hui mis-using one of the sheets of pre-signed blank papers from him[69] left with Hui when he moved to Australia.

162.  Hui had said that she arranged to meet Lin in Las Vegas in 2001 as she was concerned that Lin could deny having made the Promise.  When asked why she did not ask Lin to write down the contents, Hui’s explanation was that their relationship was amicable at that time and that Lin had said if she did not trust him, she could write it down herself.

163.  Although Lin had initially denied meeting Hui in Las Vegas in 2001, upon being shown a photograph bearing the date of 20 June 2001, he accepted having met Hui and her family in Las Vegas on that day.

164.  It was Lin’s evidence during the trial that he always had the practice of pre-signing on blank paper even prior to his emigrating to Australia, and that this idea had originated from Hui. Lin had produced copies of pre-signed blank papers[70].  He only disclosed these in September 2016 which he claimed to have unearthed by chance.  Hui denied that there had ever been such practice and that those pre-signed blank papers produced by Lin were fabricated by Lin.

165.  The Declaration stated that Lin promised on 20 June 2001 that in future upon his return to Hong Kong (“日後回港”) he would gift the Property to Hui unconditionally and that he further promised that from then on he was to co-manage various companies with Hui and they would treat each other like family members, and that Hui had the right to share profits.

166.  There was no mention in the Declaration that Lin promised to gift the Property to Hui in exchange of her waiving her claim as a creditor or upon her completing all matters in relation to the Liquidation. When cross examined, Hui merely agreed with Mr Wong that she did not write down any of the reasons/conditions.

167.  When cross examined as to why she did not seek legal advice and instruct lawyers to prepare a proper agreement for Lin to sign and to transfer the Property legally to her before she went to meet him in Las Vegas, her answer was that she was stupid.

168.  I accept Hui was not an experienced or astute businessman like Lin, and she appeared to be emotional and incoherent at times. However, she was not uneducated nor was she inexperienced in conveyancing matters.  By then, she had already dealt with at least the transfers of the 3 Properties from Sure Resources to Charter Port, as she had not denied that she was the one who contacted solicitors to arrange for the transfers for Lin.  She thus had contact with solicitors in dealing with property transfer matters. There was no reason why she could not have sought proper legal advice before meeting Lin in Las Vegas.

169.  Lin moved back to Hong Kong, according to Hui, in about 2002 and again when asked whether thereafter, she had asked Lin to effect the transfer of the Property to her, her answer was no.  She then said there were many “strange matters” which were taking place in 2004 and 2007 and there was no opportunity to ask Lin to transfer.  According to her, Wang Sanhu got into trouble in 2004 and later Lin was frequently going to Shenzhen between 2007 to 2009 and then from 2009 to 2013, Lin’s wife was applying for a one way permit to Hong Kong and was using the Property as her address.  She had also said she did not ask Lin to transfer as she wanted to save on stamp duty and again repeated that she was stupid.

170.  Hui did not mention any of what she said were “strange matters” in her written evidence.  I find Hui’s evidence extremely vague, confusing and incoherent and it was not clear why those “strange matters” alleged by her, even if true, would have prevented her from asking Lin to transfer the Property legally to her after he moved back or from seeking legal advice.

171.  It was Lin’s case that the Declaration was a sham and that Hui only demanded the transfer of the Property to her in the heat of the Argument in October 2013, and that the Declaration was fabricated by Hui after his demand of vacant possession of the Property.

172.  As mentioned earlier, Hui had explained the delay in disclosing the Declaration was because she had been told by Lin that the Declaration was useless as it was not stamped.  She had also said that it was only after subsequent consultation with a barrister that she was advised to disclose the same.  I do not find her explanation for her late disclosure credible.  Even if she was told that the Declaration was useless or not valid, there was no reasonable explanation why she could not at least have informed her then solicitors of the existence of the same or at least there was the Promise and that the Property had been gifted to her.  Instead she had agreed to vacate the Property. 

173.  When cross-examined as to why the Declaration had a folded line across the middle, similar to all those pre-signed blank papers produced by Lin, Hui had said she folded a blank paper to put in her handbag to bring from San Francisco to Las Vegas to meet with Lin.  What she said was not really believable.  The photograph taken on 20 June 2001 showed Hui was with her family members and yet she had not asked anyone to be her witness on the Declaration. 

174.  As Mr Wong had pointed out, on Hui’s case, Lin should have transferred the Property to her in 2002 after his return to Hong Kong from Australia.  As he had not done so from 2002 until 2013, he would have breached the Promise or the agreement with Hui since 2002.  Yet there had been no evidence of any action taken by Hui to enforce the Promise or the agreement as allegedly evidenced by the Declaration.  As mentioned above, Hui gave a number of explanations and/or “strange matters” at the trial.  Suffice to say, I do not find her explanations or what she said credible.

175.  I do not find Hui’s case reliable in respect of the Declaration.  I am not satisfied on a balance of probabilities that Lin had signed the Declaration under the circumstances as alleged by Hui and I am not prepared to give any weight to the Declaration.

176.  The burden was on Hui to satisfy this court of the existence of the Promise as alleged by her.  Having considered all the evidence, she failed to discharge the burden and I do not find there was the Promise or any promise to gift the Property to her as alleged by Hui.  Even if the Promise did exist, as I have said earlier, there was no sufficient evidence that relying on the Promise Hui had waived her claim in the Liquidation as pleaded by her.  Although I find the Promise did not exist, I will nevertheless consider Hui’s case in respect of other detriment allegedly suffered by Hui relying on the Promise.

Managing the companies as a director without receiving any director’s remuneration

177.  It was also Hui’s pleaded case[71] that in reliance on the Promise, she had in the capacity of a director managed the assets, investments and businesses of 4 companies, namely Gold Glory, Lucky Ocean and 2 companies Dragon Future Development Limited and Sunny Centre Limited which were dissolved in 2008[72] (collectively “4 Companies”) without receiving any director’s remuneration.

178.  Her case in her affirmation was however different[73]. She said she and Lin co-managed companies of which she was both a shareholder and a director and that she had a right to profits generated by those companies.  She then set out 5 companies she said she was co-managing with Lin at the time of the Declaration, ie 2001, namely the 4 Companies plus Superway.  Hui had also mentioned that she was a director of Charter Port of which Lin was the sole shareholder.  In this connection, Hui seemed to also include Charter Port as one of the companies she was co-managing.

179.  Hui’s evidence in her then affirmation was that Lin was seldom in Hong Kong, and that over the years, she was not remunerated for her services to all the Hong Kong companies she managed, and that she had continued to manage the companies because Lin promised to transfer the Property to her[74].

180.  Later, her evidence seemed to change somewhat. In her witness statement in the Loan Action[75], Hui had said she was involved in Lin’s companies in the capacity of either a shareholder or a director, and as a director, had received director’s remuneration.  She then listed out the 4 Companies.  She also listed Charter Port as the company she was involved as a director.

181.  In Hui’s witness statement in the Charter Port Action, she had also said Charter Port was one of the companies which she had managed all along and that Lin was not involved in the management[76].

182.  In short, Hui’s evidence as to which of the companies she was referring to, that she had in the capacity of a director managed without receiving any remuneration relying on the Promise, was not at all clear, nor was it clear as to what period she was referring to.

183.  Anyway, Superway and Charter Port were not among the 4 Companies pleaded.  Her case regarding Charter Port will be considered later in the Charter Port Action.  In so far as Superway was concerned, it was Hui’s case in the Loan Action that the sum of HK$1m was agreed by Lin to be a sum for her services to Superway over 13 years, from 1998 until 2011[77].

184.  In relation to the 4 Companies, Hui maintained during the trial that for the 2 dissolved companies of which she and Lin were co-directors and co-shareholders, she did not draw any remuneration.  So far as the Companies Registry records indicated, it was in June 1997 that Hui was transferred 1 share and Lin held 9,999 out of the 10,000 issued shares in both these 2 dissolved companies, and that both Hui and Lin were directors. However, it was not clear what assets or investments or businesses those companies had which were alleged to have been managed by Hui as a shareholder and/or director.  In any event, as the 2 companies were dissolved in 2008, there could not have been any management thereafter.

185.  Hui maintained that she did not withdraw any remuneration from Lucky Ocean or Gold Glory.

186.  So far as Gold Glory was concerned Hui had however said during the trial as she was a director, it did not matter whether she received any wages/remuneration.  In any event, Hui had supported Ko’s case in the Gold Glory Action that the majority of the shares after the Purported Increase were sold by Lin to Ko and so essentially on Hui’s case, Gold Glory had become Ko’s company and there was no reason for her to manage the company for Lin in reliance of the Promise.  Again Hui’s case was confusing and incomprehensible. As for Lucky Ocean, Hui’s evidence was that in 1996-2002, she had withdrawn sums from Lucky Ocean to pay her BOC credit card expenses.  It was therefore not quite correct that she had received no remuneration/benefits from this company even though she did not receive a fixed monthly by salary.  Further, between 1996-2002 Hui was holding the majority shares and according to her the shares were hers and thus on her case, there was no reason why she would co-manage the company or share profits with Lin, at least not within those years. 

187.  To conclude, I find Hui’s evidence on which of the companies she had managed as director without director’s remuneration and over what period inconsistent and confusing.  In any event, even if the Promise existed, I find there was no sufficient evidence that in reliance of the Promise she had managed the 4 Companies in the capacity of a director without remuneration as pleaded by her.  In fact, her case based on the Declaration was the Promise was unconditional as Lin had separately promised to share profits with her of those companies co-managed by them.

Transfer of shares in Lucky Ocean

188.  Hui in her affirmation had said she purchased the shares of Lucky Ocean in 1996 from Lin and Sure Resources[78].  According to her, in 2002 after Lin signed the Declaration, he requested her to transfer the shares of Lucky Ocean back to him for free, and that she was willing to oblige relying on the Promise[79].

189.  Lin’s case on the other hand was that he had never sold the alleged shares to Hui in the first place, and further he only found out about all the changes in the shareholding and directorship of Lucky Ocean after his solicitors conducted a search of the company at the Companies Registry in April 2014. 

190.  According to the Chronology, Lucky Ocean was incorporated on 23 January 1990.  It appeared that the company was acquired by Lin and others in March 1990.  After acquisition, Lin held 25% of shareholding with two others, and Lin was only one of 3 directors.  On 20 October 1992 (one day before Sino Century took over from Fang Dacheng as director and became majority shareholder of Sure Resources), Sure Resources was appointed as a director and together with Lin, became the only 2 directors. 

191.  On 9 February 1994, Lin and Sure Resources became the only 2 shareholders, each holding 50% or 390,000 shares, out of a total 780,000 shares.  This remained the position until the alleged unauthorized transfer of shares by Hui to herself on 14 June 1996.  On 5 July 1996, Sure Resources resigned as director and Hui was appointed in its place.  Then on 31 January 1998, Lin resigned as director and Ko was appointed as a director until she resigned on 30 April 2001 and Lin was re-appointed. It appeared that by 23 August 2002, all 780,000 shares were transferred back to Lin[80].

192.  According to the Companies Registry record, by a letter dated 12 February 1998 purportedly signed by Lin on behalf of Lucky Ocean (“12.02.98 Letter”)[81], the annual return made up to 23 January 1997 was amended to reflect that on 14 June 1996, 779,999 out of 780,000 shares were transferred to Hui, with the remaining 1 share being held by Lin.  Lin and Hui were the 2 directors.  The amended return for 1997 was filed on 6 February 1998 (“Amended 1997 Return”)[82]. Lin’s signature on the 12.02.98 Letter and his signature on the Amended 1997 Return were Disputed Signatures but fell into Hui’s category of Alleged Authorised Signatures.  Apart from these 2 documents, there was a total of 6 other documents on the Schedule of Disputed Signatures filed with the Companies Registry in respect of Lucky Ocean bearing Lin’s signatures which also fell into Hui’s category of Alleged Authorised Signatures making a total of 8 documents[83].

193.  Hui had produced the relevant copies of the (i) Instrument of Transfer and (ii) Bought and Sold Notes signed by Lin on behalf of him and/or Sure Resources, all dated 14 June 1996 in respect of the transfer of the total 779,999 shares to her[84] (“14.06.96 Transfer Documents”).  It was Hui’s case that these were signed by Lin personally but this was denied by Lin.

194.  During the trial, Lin was shown the originals of the 14.06.96 Transfer Documents[85]. When Lin was first asked about his signatures thereon, he had said he was not certain.  When asked by the court to clarify, Lin said he could not confirm whether those signatures were his or not, but maintained that if he had knowledge of the contents, he would not have signed.  However, subsequently, Lin appeared to change his mind and said they were not his signatures.  In any event, he maintained the transfers were without his knowledge and consent.

195.  During the trial, Hui had said under cross examination that the transfer of the shares in Lucky Ocean to her was a gift and when asked by Mr Wong about the consideration stated on the 14.06.96 Transfer Documents, Hui had answered that she could not recall whether the consideration was paid or not.

196.  Hui was further asked whether she knew whether Lucky Ocean had any assets or not, and she had replied that there were stocks and shares held by Lucky Ocean.  It was then put to Hui that Lucky Ocean held several millions of dollars of shares and Hui said she could not recall.

197.  According to Lin, Lucky Ocean had maintained various securities accounts with 2 securities/finance companies in 1996 and in particular, in March/April 1996, he had deposited several millions of dollars in these 2 securities accounts. Further, in 1997, Lucky Ocean also held a securities account at Wardley. 

198.  One of Lin’s witnesses Mr Lawrence Lo was working with Wardley in 1997 and it appeared from a copy of a memo dated 25 July 1997 produced by Mr Lo, Lucky Ocean had opened a securities account with Wardley and Mr Lo was referring to financial information of Lin[86].  It was clear from the memo that at that time Mr Lo was sending the same to Hui in her capacity as Lin’s secretary/assistant and not as the majority shareholder of Lucky Ocean. 

199.  According to Lin, the aggregate value of securities in all those securities accounts of Lucky Ocean was in 1997 to be over HK$8m. Hui had said Lucky Ocean was a company that was trading in nonferrous metal/rare earth and that she had managed all the transactions of Lucky Ocean since 1996.  Hui did not mention any securities accounts of Lucky Ocean in her written evidence.

200.  It would appear that at the time of the alleged “purchase” by Hui, the shares would be worth more than HK$1 per share, although there was no proper valuation or evidence of the shares in Lucky Ocean whether at the time of the alleged purchase by to Hui in 1996, or the transfer back to Lin in 2002.

201.  Anyway, I find Hui’s evidence regarding the transfers of the shares again confusing and inconsistent.  First she said she “purchased” the shares in Lucky Ocean from Lin and Sure Resources in 1996 and produced the 14.06.96 Transfer Documents to show the transfer at a stated consideration.  She thus claimed to be the majority shareholder after the purchase.  On the other hand, as mentioned earlier, Lucky Ocean according to her was one of the 4 Companies in 2001 that she had co-managed with Lin and that she had the right to share profits.  There was no explanation as to why she would need to co-manage Lucky Ocean or share profits with Lin in 2001 when on her case she was at that time the majority shareholder, having purchased 779,999 shares.

202.  More importantly, Hui herself could not even recall or be certain whether there was indeed any consideration paid by her for the “purchase”. 

203.  Having considered all the evidence, I am not satisfied that Hui did pay for or purchase the 779,999 shares transferred to her from Lin and Sure Resources on 14 June 1996.  In my view, those shares transferred to her name from Lin and Sure Resources were more probably than not held by her in trust or as nominee for Lin and/or Sure Resources.

204.  As mentioned earlier, Lin denied all knowledge of the transfers and the various documents filed with the Companies Registry said to be signed by him.  He had said in his 2^nd affirmation filed in June 2014 that before unveiling Hui’s wrongful acts, he was not aware of the 1996 and the 2002 transfers[87].  He had also said therein that it was through the recent assistance of a Ms Ellen Tsang of an accounting consultancy firm that he found out about the transfers.

205.  The “unveiling” of Hui’s wrongful acts would be in 2014 as according to the Chronology, Lin’s solicitors conducted a comprehensive search at the Companies Registry in about April 2014.  Not all the documents obtained by Lin’s solicitors had been produced, but the Chronology did set out some of the information obtained from the search.

206.  Although I do not accept Hui’s evidence that she had purchased these shares transferred to her, I have to say I do not find Lin’s denial of the transfers credible either.  Even if he was not aware of exactly what documents were filed with the Companies Registry, it is my finding that he did have knowledge of both the 1996 and the 2002 transfers, because if what he said was true, then he and Sure Resources would have remained the only 2 shareholders of Lucky Ocean in 1996 and would continue to remain thereafter until the present.  According to Lin’s evidence during the trial, Lucky Ocean had securities and cash at bank of over several millions of dollars in 1996 and/or a car.  Yet, there was no mention of the shareholding of Sure Resources in Lucky Ocean or the value of Sure Resources’s shareholding in the Statement of Affairs.  The Statement of Affairs was signed by Lin on behalf of Sure Resources, which signature he did not dispute was his. 

207.  Further, it was Ko’s evidence in the Gold Glory Action that she was asked by Lin to become a director of Lucky Ocean in January 1998.  She said she did not know when she was removed as a director.  

208.  Although Ko had denied to be Wang Jiansheng’s former girlfriend, her evidence was that she knew Lin well in 1998 as they were both involved in the non-ferrous metal business[88].  She said Lin often called her “阿妹”.  On the other hand, according to both Ko and Hui, the two of them were not well acquainted with each other in or before 1998 and that Ko only knew Hui as Lin’s secretary, and that it was only much later in about 2008 that they met each other when hiking and became good friends.  Ko had said that she only agreed to be the director and shareholder of Lin’s various companies upon the personal request by Lin.

209.  I find there was no sufficient evidence to contradict what Ko and Hui had said, and I accept Ko’s evidence that in January 1998, she had a much closer relationship with Lin than with Hui.

210.  It was on 16 January 1998 that Lin claimed to have acquired City Effort from Wang Jiansheng, and due to the close relationship among Wang Jiansheng, Ko and Lin, I do not find it credible that Ko could have been appointed as a director of Lucky Ocean on 31 January 1998 without the knowledge of Lin. I accept Ko’s evidence that she was requested by Lin personally to be a director of Lucky Ocean.

211.  To summarise, I do not find Lin’s evidence credible that he  had no knowledge of the 1996 and the 2002 transfers and it is my finding that even if he may not have signed the relevant company documents personally, he was fully aware of what went on and in my view, he had either personally signed or had authorized Hui to sign in his name the 9 documents in the Schedule of Disputed Signatures including the 14.06.96 Transfer Documents[89].  

212.  Lin had said Hui transferred the shares back to him in 2002 for fear that he might discover the earlier transfer.  In light of my above finding that Lin was aware of the transfers throughout, I do not find his evidence in this respect credible. 

213.  Hui said that in 2002, Lin had requested her to transfer the shares of Lucky Ocean back to him after signing the Declaration and that in reliance on the Promise, she did so.

214.  The Declaration was alleged to be made in 2001.  According to Hui, Lin’s request was made in 2002.  In light of my finding that she was only holding those shares as trustee or nominee for Lin, there was no sufficient evidence that even if the Promise existed, it was in reliance of the Promise that she had transferred back those shares in Lucky Ocean to Lin.  In my view, more probable than not, she simply transferred back those shares to Lin when requested by Lin, as she was all along only a nominee shareholder.  

Improvements

215.  It was also Hui’s pleaded case that in reliance on the Promise, she had made improvements to the Property using her own funds over those years when she remained in possession of the Property.  She then set out the particulars of her alleged improvements in a table (“Table”) as follows:

	Improvements	Amount in HKD
(i	Changed the windows, toilet bowl and wash basin	40,000-50,000
(ii)	Changed the air-conditioner	12,000
(iii)	Changed the ventilation system and stove in the kitchen	6,000
(iv)	Changed the refrigerator and TV	8,000
(v)	Changed the sofa	7,000-8,000
(vi)	Purchased a desk	2,500
(vii)	Changed the lamps of the Property	3,000
(viii)	Changed the water-heater	4,000
Total		$82,500-93,500

216.  In Hui’s answers to Lin’s request for further and better particulars, she had said item (i) in the Table was incurred in around April 2008 and paid to Wing Ming Water Electrical & Renovation Company (“Wing Ming”), item (ii) was incurred once in June 2004 and once in 2008 without specifying the respective amount.  Hui had also said the costs incurred in June 2004 were paid to Tai Lin Radio Services Limited and the other costs she could not recall[90].

217.  In her witness statement in the Possession Action, Hui had said she would not have used her own funds to pay for the improvements to the Property if she had not treated the Property as her own based on the Promise.

218.  The Charter Port Action was issued much later, and in that action, Charter Port had attached a schedule in the amended statement of claim (“P’s Schedule”)[91].  Under Part C thereof, a total of 6 cheques were set out as drawn on the BOC bank account of Charter Port and payable to Wing Ming of divers dates between 10 April 2008 to 25 August 2008.

219.  In Hui’s amended defence in the Charter Port Action, she had  attached her own schedule (“D’s Schedule”)[92] setting out the purpose of the withdrawals, transfer and payments from Charter Port, in which she had set out 2 out of the 6 cheques to Wing Ming, namely those dated 12 and 27 May 2008, were for the purpose of “ maintenance” for the benefit of Charter Port. 

220.  Hui’s evidence during the trial was that the other 4 cheques paid to Wing Ming by Charter Port were “partly” connected with the Property.  The 4 cheques she referred to were dated respectively 10, 17 April 2008, 30 June 2008 and 25 August 2008 and totalled HK$98,700[93].  She said during the trial that items (i) and (ii) in the Table were covered by a portion of those cheques.

221.  It was Hui’s evidence that as Charter Port was claiming a refund from her of those amounts in P’s Schedule, whether successful or not, this would mean the amount would be paid by her, and that she had suffered a detriment relying on the Promise.  However, in her witness statement in the Possession Action, she had never mentioned that items (i) and (ii) in the Table were paid by Charter Port against her director’s current account.

222.  Although I accept some of the items according to Hui took place some time ago, and she might not recall or be able to produce invoices/receipts or other documentary evidence.  However, her case was originally items (i) and (ii) in the Table were paid from her own funds. She now said they were in fact paid out of Charter Port’s BOC Account, and she then argued that as these amounts were against her director’s current account and therefore she had suffered a detriment.  There were however no contemporaneous records to show that those items (i) and (ii) in the Table were in fact charged against her then director’s current account, and in any event, they were clearly not paid from her own funds at the time. 

223.  The total amounts of items (i) and (ii) amount to between HK$52,000 to HK$62,000.  In April or May 2008, Charter Port still held 2 out of the 3 Properties, namely the Tung Wai Office and 3502 Southorn Garden after sale of 15/F Elizabeth House on 3 April 2008.  There was simply no sufficient evidence that the 4 cheques to Wing Ming not canvassed in D’s Schedule, or any portion thereof, were for items (i) and (ii) in the Table and/or relating to the Property at all.

224.  As for item (iii) in the Table, in her answer to the request for further and better particulars, Hui had said the works took place once in November 2004 and paid to Fortress, and once in February 2005 paid to Asia Gas & Engineering Co Ltd and the ventilation system was repaired in February 2007 and payment made to DCH Electrical Appliances Service Centre, and the other costs she could not recall[94].  During the trial, she had explained item (iii) was for the cooker and the hood above the cooker.

225.  When she was asked during the trial how she arrived at a total amount of HK$6,000 for item (iii), she had replied it would be based on the brand and the price she paid at the time.

226.  As for item (iv) in the Table, in her answer to request for further and better particulars, she had said she could not recall when that took place and was not sure if it was paid to Fortress or Broadway. For items (v), (vi) and (vii), Hui said she could not recall when these items were replaced, and that cost of items (v) and (vi) were paid to IKEA and item(vii) was paid to a company in Wanchai.  As for item (viii), Hui said it took place on one occasion in June 2006 and the amount paid to Towngas, and others she could not locate the invoices.

227.  In any event, for items (iii) to (viii) in the Table, I cannot see how these items could be said to be improvements to the Property.  As pointed out by Mr Wong, the payments of those items could well be equally payable by a tenant or an employee occupying the Property under a licence at will for free.  I agree.

228.  I do not find Hui had made out a case that, even if the Promise existed, relying on the Promise, she had paid for improvements to the Property out of her own funds. 

Licence at will

229.  As mentioned earlier, Lin’s pleaded case was Hui was allowed to reside in the Property free as part of her employment benefit and the licence was one at will and terminable by reasonable notice.

230.  It was not really disputed by Hui that she first moved to reside in the Property by reason of a licence as part of her employment benefit.  Hui then said the licence was later terminated by reason of her acquiring a proprietary interest because of the Promise.

231.  As I am not satisfied that the Promise existed, Hui did not acquire any proprietary interest and the licence at will simply continued. 

232.  In any event, I find there was no sufficient evidence to contradict Lin’s evidence that the licence was a licence at will and such licence was terminable by reasonable notice.  The licence was terminated by Lin on 25 March 2014.

Conclusion

233.  In light of the above, Lin has remained the sole owner of the Property.  I am prepared to grant Lin the relief sought by him in paragraph (1) of the statement of claim.  I order Hui to deliver vacant possession of the Property within 42 days from the date hereof.  The mesne profits have been agreed at HK$20,000 per month from 25 March 2014.  I order Hui to pay mesne profits at this rate from 25 March 2014 until delivery up of possession[95]. I do not see the necessity at this stage be make an order for post-judgment injunctions as sought by Lin.  Hui’s counterclaim is dismissed.

The Loan Action

234.  Lin’s case was on or shortly before 26 September 2011, upon Hui’s oral request, he lent her a sum of HK$1m, which was transferred to Hui’s bank account on 26 September 2011 as follows:

(i) HK$800,000 paid by Superway by way of bank transfer;

(ii) HK$200,000 was paid by Sure Resources HK by way of bank transfer.

235.  There was no dispute that an amount of HK$1m was paid as above and received by Hui.

236.  After Lin issued the Loan Action in the District Court, Lin applied for summary judgment.  Hui was at first granted unconditional leave to defend but on appeal, DDJ Catrina Lam allowed Lin’s appeal to the extent that Hui was only given leave to defend on condition that she paid HK$1 into court[96]. This Hui had paid.

237.  Hui’s defence was mainly that she had managed Superway’s investments in the Hong Kong stock market, and further since 2007 she had also managed Superway’s business in trading rare earth, but she was never remunerated for her services for Superway, and that she had raised this with Lin on about 26 September 2011.  As she was in need of money at that time, she “demanded” HK$1m as her remuneration for her services to Superway for over 13 years[97], and that Lin had orally agreed that Superway would pay her HK$1m as her remuneration for managing Superway.

238.  The main issue in the Loan Action was whether the HK$1m was a loan, or agreed by the parties to be Hui’s remuneration for her services to Superway.

239.  Mr Wong had referred this court to the letters between Lin’s solicitors and Hui’s then solicitors in March 2014 concerning this amount of HK$1m[98]. Lin’s solicitors had sent a letter of demand to Hui in March 2014 demanding repayment of the sum of HK$1m.  Hui’s then solicitors replied on 25 March 2014 denying that Lin had lent Hui the amount.  In this letter, there was no mention that the HK$1m was for Hui’s remuneration at Superway.  Lin’s solicitors had sent a further letter seeking clarification as to whether Hui was denying receipt of the sum or denying that the sum was a loan.  Apart from a holding letter, there was no proper reply to this letter from Hui’s then solicitors.

240.  In fact, it was not until after Lin applied for summary judgment in the Loan Action that Hui filed an opposing affirmation raising her allegation for the first time that the sum was her remuneration for 13 years of service at Superway.

241.  Hui was cross-examined as to why she did not inform her then solicitors that the sum was her remuneration for 13 years of service. She had initially responded that she did not know that this was what she should do.  She then explained that in September 2011 she was worried about money and when asked by Lin why, she told him she had bought an office and was unable to obtain a mortgage for a higher amount and needed money for the shortfall.  She went on to explain that the sum was not a loan, and she said “佢話俾我，佢話大不了當服務費出咗佢…”.

242.  She further said when she received Lin’s solicitors’ demand letter and learnt that Lin was demanding the sum to be repaid, she was very upset and she admitted that she did not inform her then solicitors what she had said in court, and at the time only instructed them to reply denying the sum was a loan and seeking documentary evidence that it was a loan.

243.  Hui’s evidence again was inconsistent, as it appeared from what she said during the trial that the sum was a gift from Lin to her, and that it was Lin’s idea to “deem” the sum to be her remuneration for accounting purpose.  This was not really put to Lin nor was he cross-examined on what was said by Hui.

244.  There was no evidence that Hui had ever raised any complaint with Lin in relation to her remuneration at Superway throughout her 13 years of service prior to September 2011.  There was no evidence that Hui or Superway had filed any tax returns with the Inland Revenue Department reporting that HK$1m was Hui’s remuneration.  When asked, Hui said there was no need for a BVI company to file any tax returns.  There was no documentary evidence indicating how the amounts were recorded in the books or accounts of Superway or Sure Recourses HK at the time of payment, but Hui had never herself filed salaries tax returns in respect of the sum of HK$1m.    

245.  Hui had maintained that both she and Lin were shareholders and directors of Superway and that she was in charge of the trading in shares[99]. She had said that from around 2007, Superway was also used to trade rare earth and that she was also in charge of all such business, and said that she was never given any share of the profits made from such trading.

246.  Hui had produced a copy of the Customer Information Statement submitted to Wardley dated 27 February 1998 for opening an account in the name of Superway[100] (“Customer Information Statement”).  In this statement, the shareholders of the Superway were stated to be Lin and Hui and was signed by Lin.  There was no dispute about Lin’s signature.  It was Hui’s case that she was in charge of utilizing funds of Superway to invest in Hong Kong’s stock market, and that she was never given any share of the profits made for and on behalf of Superway.

247.  Lin denied that Hui was a shareholder or a director of Superway. He had produced the register of members and directors of Superway which indicated that as at 13 January 1998 there were 50,000 shares of US$1 each which were registered in the sole name of Lin and that on the same day he was the sole director appointed[101]. He had further produced a bundle of documents relating to Superway opening a new bank account with HSBC in April 1998  which indicated that Superway was incorporated on 2 January 1998 with Lin as first director and sole shareholder on 13 January 1998and that the account was to be operated by Lin solely[102].

248.  Lin’s evidence that he was the sole shareholder and sole director of Superway throughout was not really challenged by Hui after Lin had produced the register of members and the HSBC account opening documents.

249.  Lin said the information on the Customer Information Statement was incorrect and that he did not know why it was stated thereon that Hui was a shareholder.  Further, it was his case that as the boss, he often signed documents presented to him by Hui without going through the documents line-by-line and verifying their details, and that he had great trust in Hui. He said he believed that the Customer Information Statement was one of many documents which were presented to him for signature and that he had signed trusting that everything was in order. 

250.  On the other hand, Hui’s evidence was that she was shocked to find out that she was not a shareholder on the company’s record, as all along she was under the impression that she and Lin were 50/50 equal shareholders of Superway.  She claimed that she had signed some documents to become a shareholder.  During the trial, Hui was shown a copy of memo with instructions from Lin to her in September 1997 to buy shares for another person surnamed Wang[103] which was produced by Lin to support his case that Hui was not a director nor shareholder and had to follow his instructions.  In response, Hui suddenly said that the securities held by Sure Resources were transferred to Superway after Superway was incorporated and that there were other people involved in the trading of the securities and that some of the securities in the Superway account had belonged to others including Fang Dacheng, and further that Lin had told her that if there were profits, she would have a share.  None of this was mentioned by Hui in her affirmations/witness statements although she did produce a copy of Fang Dacheng’s 11.05.98 Letter in which there was reference to share trading by Fang through Lin.  Further, Lin’s own evidence was that there were investments in shares made by Fang Dacheng’s family members through him[104].  However, Lin was not put or cross-examined on whether there were other people who had beneficial interest in the shares in the securities account of Superway.  Further, it was not Hui’s case that she herself had any beneficial interest in the shares in the securities account.

251.  She said Lin had locked up all the company documents of the BVI companies, including Superway and therefore she did not know what was registered, but she admitted that had she asked, Lin would have allowed her access to the documents.

252.  In any event, during the summary judgment proceedings, it was accepted by Mr Cheung who had appeared for Hui that Hui was never a director or shareholder of Superway[105]. Lin had produced a copy of Superway’s securities account statement for the month of August 1998, which indicated that at that time, Superway held securities of market value of about HK$2.2m.  It was not Hui’s case that she herself had injected any capital in Superway, or that she herself had paid any of her own funds to purchase any interest in Superway or shares held by Superway.  In any event, there was no claim or counterclaim by Hui for any declaration that she held beneficial interest in Superway, or any shares held in the securities account of Superway.

253.  Further, notwithstanding her allegation that Lin had agreed to share profits of Superway with her on 50/50 basis, what she had pleaded was she demanded from Lin “remuneration for her service” around 26 September 2011.  There was no evidence that Hui had ever asked or demanded Lin to account for profits of Superway.

254.  As for the “services” alleged by Hui, she said she was “in charge” of the buying and selling of shares and/or utilizing funds to invest.     Lin’s case was whatever buying and selling or share and/or investing of funds, even if instructions were given by Hui to the broker or finance company, such instructions had come from him and were given on his behalf.  Having considered the evidence, I find there was no sufficient evidence that Hui was making any decisions on her own as to what stocks to buy or sell and/or what funds to invest and the evidence showed that Hui was acting on instructions from Lin in respect of the share trading in the securities account held by Superway. 

255.  As for her alleged services in relation to the trading in rare earth, Hui had produced 2 invoices sent to Superway from the Huhhot Company, one dated 26 August 2008 and the other one dated 22 June 2009, a bank remittance instructions for payment to Huhhot Company, and a memo to her from Lin for to arrange insurance. 

256.  According to Lin, the actual trading was between the Huhhot Company and overseas buyers and Superway was only used as an “intermediate trading firm”, so that part of the profits could be distributed to Hong Kong and BVI for tax saving purposes and there was little work to be done by Superway. 

257.  One would have thought in the normal course of trading, there would be communications over price, quantity, placing of orders and/or delivery of orders etc.  There was no such evidence produced by Hui.  I find that there was no sufficient evidence to contradict Lin’s evidence that the actual business was conducted by the Huhhot Company and overseas buyers and that Superway was only used as an intermediate.

258.  Whether Hui had any knowledge of the elements of rare earth or not, those 2 invoices, the remittance forms and memo from Lin regarding insurance would equally be consistent with Lin’s case that she was a mere employee or secretary helping him with routine work of arranging payment of goods and/or insurance. Indeed, the memo regarding insurance showed that she was receiving instructions from Lin.

259.  Mr Lawrence Lo who was in 1997/98 working for Wardlay had attended trial to give evidence on behalf of Lin.  He said Hui was the contact person giving him instructions to open the securities accounts for Lucky Ocean and Superway and he had never met Lin at the time and that the impression he got throughout the years was that Hui was working for Lin as an employee and Mr Lo further claimed his attempts to meet Lin were always met with answers from Hui that Lin was not available for one reason or another[106].   

260.  I find Mr Lo a credible witness and there was no sufficient evidence to contradict his evidence.  However, I find there was no sufficient evidence that Hui’s responses that Lin was not available to meet or to talk to Mr Lo were not genuine.  Anyway, having considered all the above, I do not find there was sufficient evidence that Lin had agreed to Hui being a 50/50 shareholder of Superway, or to co-manage Superway with him or that Lin had agreed that Hui would be entitled to share the profits of Superway on 50/50 basis or whatever basis.   

261.  The evidence indicated that Hui needed the money urgently at the time.  It would seem odd that not having raised the matter of remuneration for some 13 years, then suddenly she raised it and Lin would immediately agree to pay her HK$1m on 26 September 2011 as remuneration for past services, and that even though Superway did not have enough cash, Lin would draw part of the sum from the funds of another company Sure Resources (HK).

262.  In fact, all this indicated that Hui had required funds urgently to complete the purchase of the office at Max Share Centre.  Lin had produced a copy of the Land Registry record of this property indicating that it was purchased jointly by Hui and her sister, and one could see that the purchase was completed on 28 September 2011[107].

263.  Mr Cheung pointed out there was no loan agreement/IOU, no repayment period or interest rate discussed or agreed, and no other documentary proof that it was a loan.

264.  From all accounts, the relationship between Lin and Hui at that time was a trusted one at the time, and the lack of a loan agreement or IOU did not mean that the sum of HK$1m was not a loan.  The lack of discussion of interest and loan period did not mean the amount would not be repayable.  In fact, as mentioned earlier, even on Hui’s case, the idea of treating or deeming the amount as remuneration came from Lin and was for accounting purpose.  There was no sufficient evidence of a gift and in any event, it was not Hui’s pleaded case.  Having considered all the evidence, on a balance of probability, I accept Lin’s evidence that the amount of HK$1m was a loan and repayable on demand.  In light of my findings on the facts, I do not need to deal with the legal principles on “past consideration” set out by Mr Wong.

265.  I order Hui to repay the sum of HK$1m to Lin within 42 days from the date hereof and with interest at judgment rate from date of judgment until payment.  I order interest at 1% over prime rate from date of demand, namely 11 March 2014 until date of judgement. 

The Charter Port Action

The parties’ respective case

266.  In this action, Charter Port alleged, among other things, that:

(i)   Hui had changed directorship and company secretary of Charter Port without the knowledge or consent of its shareholders or any valid resolution (“Unauthorised Appointments”);

(ii)     From 1996 to 2013, Hui had made withdrawals, payments and/or transfers (collectively “Withdrawals”) from the bank account of Charter Port totaling HK$1,926,138.50 as per P’s Schedule, which were not bona fide in the best interest of Charter Port and not for proper purpose in the exercise of Hui’s powers;

(iii)  Hui was in breach of fiduciary duties and/or breach of trust during her directorship with Charter Port (collectively “Breach of Fiduciary Duties”).

267.  It was the case of Lin and/or Charter Port that Hui had changed the signatory of Charter Port’s bank account behind his back and kept him in the dark (“Change of Bank Signatory”)[108], and that there was a “criminal plot” by Hui by removing Wang Sanhu as a director and appointing Yeung Shing Kun (“Yeung”) in his place, so that Hui could be appointed the sole bank signatory for the purpose of misappropriating Charter Port’s assets (“Criminal Plot”).

268.  The final amount claimed by Charter Port for the Withdrawals, as set in Mr Wong’s closing submissions, was a sum of HK$1,377,295, after taking into account two sums paid to Lucky Ocean.

269.  Hui’s defence was mainly that:

(i) It was Lin who requested Hui to appoint a new director in place of Wang Sanhu at the material time;

(ii) Lin was informed of the changes in the directorship and company secretary and Lin had consented and authorised Hui to effect those changes;

(iii) The Withdrawals before 30 March 2008 were accounted for by Hui in D’s Schedule and any of the Withdrawals after 30 March 2008 not canvassed in D’s Schedule were made for the purpose of her director’s fee.

270.  At the trial, it was also Hui’s case that the Change of Bank Signatory was at the request of Lin and with his knowledge and consent.

The company

271.  Charter Port was incorporated on 1 December 1994 and appeared to be acquired by Lin in April 1995 and after acquisition, further shares were allotted on 4 April 1995.  As seen from the 1^st annual return, as at 1 December 1995, 9,999 of the 10,000 issued shares were held by Noble City, a BVI company said to be beneficially owned by Lin, and the remaining 1 share by Wang Sanhu.  The only 2 directors as at that date were Wang Sanhu and Hui.  The company secretary was a secretarial company Smart Fortune Consultants Limited (“Smart Fortune”).

272.  According to Lin, Wang Sanhu and Noble City were nominee shareholders holding the shares for him, and that Wang Sanhu and Hui were “nominee” directors.  Hui denied she was a nominee director.

273.  As mentioned earlier, on 20 November 1995, about 6 months after the acquisition of Charter Port, the 3 Properties were transferred by Sure Resources to Charter Port.  Thereafter, it would appear that another property at Flat C1, 13 floor, Block C, Elizabeth House was acquired by Charter Port as there was a mortgage loan on 18 June 1996[109] (“13/F Elizabeth House”).  13/F Elizabeth House was also later said by Lin to be his daughter’s residence where the Bounced Cheque was returned[110]. As seen in the audit adjusted for the year ended 31 March 2006, there were also 2 carparks held by Charter Port in 2006, one at CP 120 Elizabeth House and one at CP 67 Kornhill[111]. Thus, there appeared to be a total of 6 properties held in the name of Charter Port at 31 March 2006, including the 2 carparks.

274.  It was not disputed that Charter Port was/is an asset holding company without any trade or business except leasing of its properties to others.

275.  After Lin’s acquisition, an account was opened by Charter Port with the then Kincheng Bank, now BOC on about 29 November 1995 (“BOC Account”).  For the purposes of opening an account, a form was submitted and was signed by Hui on behalf of Charter Port stating that Lin was the sole authorized signatory for the BOC Account.

The changes in 1998

276.  As mentioned earlier, Hui’s case was that in 1998 both she and Lin were concerned over the investigations over Fang Dacheng and Lin decided to leave Hong Kong.  According to Hui, Lin asked her to find someone whom he did not know and also unrelated to Hui to be a director of Charter Port, since a limited company in Hong Kong was required to have 2 directors in those days.  Hui said she then suggested the elder brother of her sister-in-law, namely Yeung, and Lin agreed.  Yeung was appointed on 22 May 1998.  Hui had said Yeung was only a nominee director or a director in name only and had not drawn any remuneration.  As for the company secretary being changed to Hui, Hui said this was at the suggestion of Lin, to save expenses.

277.  Lin said Hui was not a director nor a shareholder of Noble City, the 99.99% shareholder of Charter Port.  He had made Hui a nominee director of Charter Port in order for her to handle matters on his behalf whilst he was away[112]. 

278.  As mentioned earlier, in around August 2013, Lin said he accidentally came across the Bounced Cheque and this later led to the Argument, and the breakdown of relationship between Lin and Hui.

279.  It was Lin’ evidence that after the Argument, he had gone to BOC to find out what happened to the BOC Account, but was not able to as he was neither on record a shareholder nor a director.  Lin said he then sought assistance from Ms Ellen Tsang of C & T Associates CPA Limited (“C & T”) in November 2013[113] who obtained copies of the company documents filed with the Companies Registry whereupon he found out about the Unauthorised Appointments.

280.  Lin said he then asked Wang Sanhu who denied that he had ever resigned as a director of Charter Port at any time, and he was not aware of any termination of his directorship or the appointment of Yeung in his place.

281.  Thereafter, Lin and Wang Sanhu attended the office of C & T and signed shareholders resolutions on 2 December 2013 removing Hui and Yeung as directors of Charter Port and appointed Lin and his daughter Vivian in their place, and further Hui was also removed as company secretary[114]. He also arranged for Wang Sanhu to transfer to him the 1 share previously held by Wang Sanhu[115] as nominee.

Change of Bank Signatory

282.  Lin’s case in his witness statement was the Change of Bank Signatory was not authorized by him.  In particular, it was Lin’s case in Mr Wong’s closing submissions that immediately after the wrongful replacement of Wang Sanhu, a resolution was passed to appoint Hui herself as the sole signatory of the BOC Account, and this clearly facilitated Hui in the Criminal Plot.  Mr Wong further pointed out that in Hui’s witness statement she did not deny that she had changed the bank signatory without Lin’s consent.

283.  It was however not specifically pleaded by Lin in his statement of claim in March 2015 that Hui had changed the signatory of the BOC Account without his knowledge or consent.  This was despite Lin having made this allegation in his solicitors’ letter before action dated 16 January 2015. On the other hand, I accept there was no reply from Hui or her then solicitors to this letter. 

284.  Notwithstanding Hui’s lack of reply or denial, I do not find Lin’s own evidence quite convincing.  What Lin had said in his witness statement was when he accidentally came across the Bounced Cheque, which he said was in August 2013, he was surprised to see that the signature on the Bounced Cheque was not his and he therefore asked Hui who signed thereon but he claimed Hui did not answer, and when he pressed for an answer, she admitted that it was she who signed.  Lin then said “As a result, I instructed the Defendant to make sure that I should be the only authorized person for the Account”[116].

285.  If the Change of Bank Signatory was indeed made without Lin’s knowledge or authorisation, then on his case, he should have remained the only signatory of the BOC Account since 1995.  One would then have thought on seeing another person’s signature on the Bounced Cheque or when Hui admitted that it was she who signed, his reaction would be to ask her how or why the bank would accept her signature, rather than instructing Hui that he should be the only authorised person for the account. 

286.  In his witness statement, Lin had gone on to say that as Hui refused to carry out his instructions, he went to the bank to find out what happened to the BOC Account and to rectify the signing arrangement of the BOC Account but was shocked to find that BOC would not deal with him[117]. It was not clear when he went to the bank, but it would appear to be prior to his seeking assistance from Ms Ellen Tsang of C & T in November 2013.  In any event, when Lin went to BOC, he would have found out he was not the sole signatory to the BOC Account.  In fact, the transaction history of the BOC Account produced by Lin (“Transaction History”) was printed out on 22 December 2013[118].

287.  This was not consistent with Lin’s case that he only found out in about May 2014 regarding the Charge of Bank Signatory[119].  In any event, the letter before action was only sent in January 2015 and the Charter Port Action was only issued in March 2015.  It would therefore appear that notwithstanding alleged Lin’s first discovery of Hui’s signature on the Bounced Cheque in August 2013, it took him some 17 months to raise this matter.  There was no complaint made to the police immediately upon discovery.  Lin had alleged that Hui had taken away all his companies’ documents.  Even so, I do not find his reasons for delay convincing.

288.  The Change of Bank Signatory was effected by Hui on behalf of Charter Port with effect from 24 August 1998[120].  During the trial, Hui had said it was Lin who asked her to change the signatory and she had vehemently denied that she had changed the signatory without Lin’s consent.

289.  It is clear that so far as BOC was concerned, after 24 August 1998, the bank would not have accepted any cheques from Charter Port unless they were signed by Hui alone.

290.  Lin had said that all the cheques in relation to the utilities bills, government rates and management fees of Charter Port’s properties were paid by him from the BOC Account, and that for this purpose, he had always left a certain amount of pre-signed blank cheques to Hui for her to fill in the payee’s name and amount upon his instructions. Hui however said this was impossible as the only signatory was Hui herself.

291.  In relation to pre-signed blank cheques and blank paper, it was Lin’s evidence in his affirmation in the Gold Glory Action that before he emigrated to Australia, he had given Hui pre-signed blank cheques and blank paper and the purpose was to facilitate her daily work in respect of maintenance and leasing of his properties, the Liquidation, payment of her salary and other office expenses when he was not around[121].  Lin had further said that Hui had in her affirmation admitted to Lin having left with her some pre-signed blank cheques[122]. 

292.  What Lin had said in his affirmation in the Gold Glory Action was in fact rather general and vague, and it was not clear whether the pre-signed blank cheques he left with Hui before emigrating were in relation to Charter Port or not.  I do not find that Hui’s subsequent denial in her witness statement in the Charter Port Action that Lin had left with her pre-signed blank cheques in relation to Charter Port was contrary to her earlier evidence in the Gold Glory Action. 

293.  Further, Hui’s evidence in the Gold Glory Action was that the pre-signed blank cheques left by Lin were used in accordance with his instructions, including transferring funds to his family’s bank account in Australia or to deal with the family of Fang Dacheng, and after Fang Dacheng was released from prison, all the pre-signed blank cheques had been used.  Although Lin had denied all Hui’s allegations about having to deal with Fang Dacheng’s family, Hui’s case was clearly all pre-signed blank cheques left by Lin before he went to Australia had been used up and Lin did not seem to have denied this.

294.  Whether Hui had specifically denied in her witness statement or not Lin’s allegation that the Change of Bank Signatory was without his knowledge or consent, she was adamant during the trial that this was at the request of Lin and that Lin was fully aware of the change and the finances of the company. 

295.  Lin had said in his supplemental witness statement that all cheques in relation to the utilities, government rates and management fees of Charter Port’s properties were paid from his pre-signed blank cheques, but during the trial, Lin had also said that after his return to Hong Kong, cheques were presented by Hui for him to sign and he had left it to Hui to insert the name of payee and the date on the cheques.

296.  Hui’s evidence was also that she had signed cheques from the BOC Account to settle the credit card bills for Lin and his wife.  In 2008 Hui signed cheque for Lucky Ocean to buy a carpark.  Hui had also said in her supplemental witness statement of 20 January 2016 that after sale of a property, Lin had instructed her to transfer a sum of HK$4.2m out of the BOC Account to his designated bank account on 16 February 2011[123].  There was no dispute that the property referred to by Hui was 3502 Southorn Garden. 

297.  What Lin had said in his witness statement of 10 June 2016 was that in February 2011, he sold the 3502 Southorn Garden held by Charter Port at HK$4.38m and after the sale was completed, he withdrew HK$4.2m for himself out of the consideration received by Charter Port[124]. 

298.  The amount of HK$4.2m was withdrawn on 16 February 2011 by cheque of number 420125 from the BOC Account of Charter Port[125].

299.  Mr Wong pointed out that Lin was not cross examined on the cheque withdrawal for HK$4.2m nor was Hui’s case put to Lin, and he submitted that there could be other possibilities or explanations by Lin.    

300.  Even though Lin was not cross examined on the withdrawal by cheque, the Transaction History was produced by Lin himself.  The amount of HK$4.2m was not a small sum, and Lin never explained nor clarified how the sum was withdrawn from the BOC Account by him.

301.  Further, Hui’s evidence was that the quarterly car-parking maintenance fee at Elizabeth House was paid by cheques from Charter Port and that there were occasions when Lin accompanied Hui to settle the quarterly car-parking fee and to obtain the car park permit.  The car was owned by Lucky Ocean, and it was rented by Charter Port for company use.  Again, Mr Wong pointed out that Lin was never cross-examined on what Hui said. 

302.  As I have said earlier, Lin is an astute and experienced business man.  Charter Port’s properties according to him were worth more than HK$15m at the material time[126]. Some of the properties had been rented out and there would be rental income.  Having considered all the evidence, I do not find Lin’s evidence credible, that for all those 15 years, from May 1998 until 2013, he did not know that Hui had been the sole signatory of the BOC Account, or that he could be under any impression that those cheques placed before him by Hui to sign or any alleged pre-signed cheques had included Charter Port cheques.  I accept Hui’s evidence that the authorized signatory for the BOC Account was changed at the request of Lin and/or on instructions of Lin and/or with his knowledge, consent and/or authorisation.

Unauthorised Appointments

303.  As for the alleged Unauthorised Appointments, Wang Sanhu’s evidence in relation to his removal as a director was that:

(i)   He was not informed by Hui or Lin as to the fact that he had been removed as a director;

(ii)     He was not informed of any directors’ or shareholders’ meeting;

(iii)  He never signed any document for change of director or company secretary prior to 2013.

304.  The Consent to Act as Director of Charter Port dated 29 March 1995 bore the English signature of Wang Sanhu and his address was stated to be 3502 Southorn Garden.  Wang had said his usual signature would be Chinese but would sign in English if necessary, such as on a document when the other party would sign in English.  The Consent to Act was not such a document, but Wang said that the signature on the Consent to Act dated 29 March 1995 was his signature.  As for the address, he admitted that 3502 Southorn Garden was not his address at the time as he was living in Inner Mongolia where he still lives.  Under cross-examination, he had said the address was inserted by Lin who wanted him to be a director of Charter Port.  When asked, he said he could not recall whether he signed the Consent to Act in Hong Kong or in Inner Mongolia.

305.  It appeared to be Hui’s case during the trial that the Consent to Act was not signed by Wang Sanhu personally and that Wang Sanhu only found out he was appointed as a director of Charter Port in about 2013, but this was not pleaded in her defence and counterclaim. 

306.  Wang Sanhu admitted that he was not involved in the business of Charter Port and that all matters including any changes in personnel during the 18 years after his appointment until 2013 would all be dealt with by Lin with no prior notification to him.  He said he did not know whether Charter Port had any properties in Hong Kong.  However, all the BOC Account opening forms on 29 November 1995 appointing Lin as sole signatory were signed by Hui and Wang Sanhu in his English name.  There was no mention by Wang Sanhu at all in his witness statements of the signing of these bank account documents. All he said was he had “understood” that a bank account would be opened.  Wang Sanhu was however not asked specifically about his signature on of the BOC Account opening documents.    

307.  As I have mentioned earlier, Wang Sanhu is a good friend of Lin and his evidence has to be seen in that light.  There was no sufficient evidence to contradict Wang Sanhu’s evidence that he had no notice of his being removed as a director of Charter Port.  Wang Sanhu was clearly only a nominee shareholder and on his own evidence was a director in name only, and his own evidence was that he had left all matters to Lin to deal with.

308.  Hui was also asked about there was any board resolution to remove Wang Sanhu as a director and to appoint Yeung in his place, she answered that she could not recall as Mr Roger Lee King Cheung (“Lee”) of Smart Fortune was the then company secretary and he had handled this matter.

309.  The date of cessation of Wang Sanhu and appointment of Yeung was stated to be 25 May 1998 on the Notification of Changes of Secretary and Directors (Form D2) filed on 10 June 1998.

310.  25 May 1998 was 2 days prior to the petition for winding up of Sure Resources was filed, and it was at around the time that Lin was moving to Australia.  This was also not long after Lin’s meeting with the new team from CNIEC.

311.  Hui’s evidence in her witness statement was that Lin had asked her to find someone he did not know and who had no blood relationship with her[127]. She had gone on to say that Lin was hoping that on the company’s public record there was nothing to connect Charter Port to him.

312.  It was not disputed that Wang Sanhu had no blood relationship either whether with Hui or with Lin and in this respect, his position would appear to be the same as Yeung.  When this was put to Hui, she had answered that one was a Hong Kong person and the other was a public servant/幹部of Mainland China

313.  It was Mr Wong’s submission that it was not put to Wang Sanhu that he was replaced as a director because he was a public servant.  I accept Hui’s answer was somewhat incomprehensible but it seem from Hui’s evidence that the purpose of the change of directorship according to her was that Lin wanted an unrelated Hong Kong person to take the place of Wang Sanhu as director.

314.  I accept that on record, Lin had no connection with Charter Port at all as the major shareholder was Noble City, and there was nothing to connect Noble City to Lin.  Lin was never a director either.

315.  I also accept if Lin really did not wish to be seen to have any connection with Charter Port on its public record, then he should also have arranged for the 1 share held by Wang Sanhu be transferred to another nominee as well.  Mr Wong submitted that on Hui’s case she should also have been replaced as Hui was co-director with Lin on some of the companies.

316.  Anyway, as I have said, Hui’s evidence was somewhat incomprehensible but this would not in my view necessarily mean that Lin had no knowledge of the replacement of Wang Sanhu as director. 

317.  The removal of Wang Sanhu took place at about the time of Lin’s emigration and the petition for winding up.

318.  Even though Lin denied that he treated Hui as part of his family, the relationship between them was a close and trusted one. There was really no sufficient evidence as to why Hui would be planning the removal of Wang Sanhu and/or the Criminal Plot as alleged by Lin at that time, particularly when on Hui’s case, Lin had promised to gift to her the Property.

319.  Wang Sanhu has known Lin since 1980 and he was managing the Huhhot Company[128]. The Huhhot Company was a state owned enterprise of which Sure Resources had interest which was later said to be transferred to City Effect in January 1998, a company owned by Wang Jiansheng and said to be acquired by Lin at that time.  It was said by Ko that Wang Sanhu was also under investigation at the time although again this was not put to Wang Sanhu.  Having considered the evidence and the circumstances at the time, namely the connection among Wang Sanhu, Wang Jiansheng, Lin and Sure Resources, I find it more probable than not that at that time Lin did authorise Hui to appoint someone else to replace Wang Sanhu as a director.  In any event, I find there was no sufficient evidence that the removal of Wang Sanhu and replacement by Yeung was a part of the Criminal Plot as alleged by Lin.

320.  As for the change of the company secretary to save expenses, again, it was Hui’s evidence in her witness statement that the change to her in place of Smart Fortune was effected at the request of Lin.  Hui admitted that such change was without board resolution.  On the other hand, even though Lin maintained that Hui did not seek his consent at the time, he admitted that had Hui asked, he would have given his consent.

321.  The appointment of Hui as the company secretary would only mean the company secretarial matters would be handled by Hui directly instead of Smart Fortune being given instructions by Hui as director.  There was no evidence that Hui had anything to gain over this change and I accept what she said, this change was effected with the knowledge and authorisation of Lin.  In any event, I find no sufficient evidence that this was part of the Criminal Plot.

322.  To conclude, having considered all the evidence, it is my view that Lin did have knowledge, and had consented and/or authorized the alleged Unauthorized Appointments.

The Post Office Address

323.  Prior to the removal of Wang Sanhu, Hui had written a letter dated 22 April 1998 to Lee on behalf of Charter Port (“22.04.98 Letter”), informing him the correspondence address of Charter Port to be at a Post Office Box number (“Post Office Address”)[129].  Lin had alleged that this was an attempt by Hui to conceal her wrongful conduct.

324.  When asked why she had to provide the Post Office Address as correspondence address for Charter Port, Hui answered she and Lin were in fear as they did not know who would be coming to look for them. She then went on to say something to the effect of a confidentiality agreement “保密協議” and that she did not know what she could reveal in court and what she could not reveal. When this court asked her to clarify whether she had signed any confidentiality agreement, she said she did not.   

325.  I accept that Hui’s answer in so far as the confidentiality agreement was incomprehensible and she later withdrew what she had said.  On the other hand, she did say she and Lin were in fear as they did not know who would be coming to look for them.  The 22.04.98 Letter was sent before Lin’s meeting with the new team from CNIEC but Lin’s evidence indicated that Fang Dacheng got into trouble in late 1997 or early 1998 and in early April, Fan Dacheng was already replaced by the new team.

326.  In the 22.04.98 Letter, apart from informing Lee of the correspondence address of Charter Port being the Post Office Address, Hui had also given a telephone number, which was that of the office at Perfect Commercial Building on Sharp Street West (“Sharp Street Office”).  The Sharp Street Office was purchased by Gold Glory on 19 September 1986 and in 1998 was the office address of Gold Glory, Lucky Ocean, and also Masen.

327.  The registered office of Charter Port at the time of its acquisition by Lin in 1995 was at a rented office on 20 floor, Aubin House on Gloucester Road (“Gloucester Road Office”)[130] but on 22 April 1998, the same day of the 22.04.98 Letter there was a change of registered office to 1109, 11 floor, Yau Chau International Plaza, 118 Connaught Road West (“Connaught Road Office”). 

328.  The Connaught Road Office is and was in fact at all material times the office address of Smart Fortune and of Messrs Roger KC Lee & Co, Public Certified Accountants, in other words, Lee’s office.   

329.  Lin claimed that he only found out the Post Office Address when he obtained a copy of a rental debit note dated 1 January 2014 from the tenant of Tung Wai Office on which the address of Charter Port was stated to be the Post Office Address[131].  He said he then went to the Post Office to make enquiries and was informed by the Post Office that the Post Office Address was also used in relation to another of his company, Masen[132]. His case appeared to be that he did not know about the Post Office Address, nor that it was also used for Masen.

330.  Digressing here, Masen was one of the companies said to be Lin’s.  Hui was appointed as the company secretary of Masen on 28 September 1991.  As at 20 March 1992, Lin held 90% of the shareholding and his wife held the remaining 10% as nominee.  The Regent on the Park Property was purchased in the name of Masen on 20 April 1992.  In August 1997, the registered office was changed to that at the Gloucester Road Office.  On 31 December 1992, Hui was replaced by Lin as company secretary.

331.  On 19 May 1998, at about the time of the Liquidation and the time of Lin’s emigration, there was a purported allotment of 190,000 shares in Masen to a company Kimrich Investments Limited (“Kimrich”).  On about the same day, Lin and his wife resigned as directors and were replaced by Kimrich and Ko.  Lin also resigned as a secretary and he was replaced by Ko. The registered office was changed to the Sharp Street Office on the same day.

332.  It was Lin’s case in the Gold Glory Action that he and his wife never resigned as directors, never agreed to the allotment of shares, nor did he ever resign as a secretary of Masen.  He denied that the relevant return of allotments, written shareholder resolution and notice of increase of nominal capital all dated 19 May 1988 and filed on 21 May 1988 were signed by him or his wife.  He further claimed that he had never heard of Kimrich.  Lin had also alleged in the Gold Glory Action that what happened with respect to Masen was another example of Hui messing up his companies behind his back[133]. Lin had also claimed he went to see a Mr Yu Yan King of Mutual Faith Consultants Limited (“Mutual Faith”) to find out about Kimrich but Mr Yu refused to disclose to him who the owner of Kimrich was and said it did not[134] belong to him.

333.  During the trial, Hui said Kimrich was 100% owned by Lin and that the shares were registered under Lin’s name “Henley Lam” which was Lin’s English name on his South African passport and that that was the name signed by Lin on all the cheques drawn on Kimrich’s bank account.  Mr Wong said this was never put to Lin who denied what Hui said.  Even though this was never mentioned by Hui in her affirmations/witness statement/s and Lin was not cross examined on this, it seemed unlikely that Hui could have made up this story on the spot during the trial.  Even though Hui had signed on behalf of Kimrich on the annual return, I find that there was no sufficient evidence that Kimrich was holding the shares in Masen as nominee for Hui.

334.  Further as seen from those public documents produced by Lin, apart from a brief period in 1991/1992, Hui had not held any directorship at Masen, nor was she the company secretary.  Even though it was put to Hui that the increase of capital and allotment of shares in Masen was without Lin’s knowledge and consent and/or carried out by Hui to obtain benefit, there was no evidence as to what benefit Hui had obtained.  On the contrary, Lin was clearly aware of the Post Office address which was used as the correspondence address for Masen since two of Masen’s bank statements for January and February 2007 produced by Lin himself in his 3^rd affirmation of 15 May 2014 in the Gold Glory Action[135] bore the Post Office Address even though at the time the registered office of Masen was at the Sharp Street Office.  

335.  Masen sold Regent on the Park in 2007 for HK$26m and Lin’s evidence was that HK$23m of the net sale proceeds were paid to him or Superway or Noble City through bank transfers from Masen’s bank account[136].  Subsequently Lin applied in October 2012 for deregistration of Masen.  There was no evidence that the net sale proceeds ultimately went to anyone else but Lin himself.  In my view, Kimrich could only have held all its shares as nominee for Lin.  Otherwise, the majority of the sale proceeds should have gone to Kimrich.  I do not find Lin’s evidence that he had not heard of Kimrich or his denial that Kimrich was his nominee shareholder at all credible. 

336.  Turning back to the Post Office Address and Charter Port, the evidence before this court was that the Post Office Address was used for communication purposes for the management of the properties of Charter Port, namely with the tenant of the Tung Wai Office or for payment of service fees of the carpark at Kornhill.  The Post Office Box Address appeared to have been in use for a long time, some 15 years from 1998 until 2013.

337.  Lee was not someone unknown to Lin and his address would not be unknown to Lin.  Lin had bought BVI companies from him and Lin had gone to see Lee in December 2013.  Lee had made 3 witness statements on behalf of Lin, one in the Gold Glory Action and two in the Charter Port Action, and had attended trial to give evidence on behalf of Lin.  It was Lee’s evidence that in 2003, he was only the auditor for Charter Port and not the other of the companies but he was aware of a related company Lucky Ocean and also “Sure Resources”[137].  Lee had also mentioned there were BVI companies which Lin purchased from him, namely Noble City and another.

338.  Roger KC Lee & Co were the auditors of Charter Port for the year ended 31 March 1999 onwards up to the year ended 31 March 2008. Smart Fortune was the company secretary for Charter Port since Lin’s acquisition 1995 up to 2004, and Smart Fortune also provided its service as the registered office for Charter Port since 22 April 1998.

339.  There was no evidence that Lin had made any enquiry from Lee after Lin found out about the Unauthorised Appointments and the Post Office Address as to whether Lee had used the Post Office Address to communicate with Hui/Charter Port.  What Lee did say in his witness statement was that as Charter Port had used his address as its registered office, there were a few letters sent to his address for Charter Port, and they were taken away by Lin in or around 2014. 

340.  In my view, the evidence indicated that the Post Office Address, so far as Charter Port was concerned, was used mainly for communications with tenants and carpark management.  In light of the fact that bank statements of Masen had been sent to the Port Office Address, Lin must be fully aware of the Post Office Address being used as a correspondence address for both Masen and Charter Port.  Further, all along after 22 April 1998 the registered office of Chartered Port had been at the Connaught Road Office or Lee’s address.  There appeared to be no allegation in the statement of claim that the change of registered address to Lee’s address effected by Hui was without authorisation.

341.  Having considered all the evidence, I find there was simply no sufficient evidence that the use of the Post Office Box by Hui as a correspondence address for Charter Port was to conceal any information from Lin, let alone that it was part of the Criminal Plot or that Hui was attempting to cover up any of her wrong doings. 

342.  It was not disputed that the last audited financial statements for Charter Port were made up to 31 March 2008 only and thereafter, there had been no audit carried out as Hui had not instructed Lee to carry out the same.  Hui had explained that she thought Lee had advised her that as Charter Port was not carrying on any business, the company did not need to undergo an annual audit.  Lee denied he had ever told Hui this.  Whatever was the reason, Hui stopped instructing Lee to carry out audit.  However, I do not find this was evidence of the Criminal Plot.  Further, there was never any change by Hui to the shareholding.  All along, Lin remained 99.99% beneficial owner of Charter Port through Noble City.

The Withdrawals

343.  Hui had confirmed during the trial that Charter Port was not one of the companies which Hui said she had managed without remuneration relying on the Promise, and further she agreed was not entitled to share with Lin any profits of Charter Port or any of the shareholders’ funds.

344.  According to P’s Schedule, there were 5 categories of Withdrawals:

(A) Withdrawals by cheques payable to Hui herself;

(B) Payments by cheques to BOC Credit Card (International) Limited, which was Hui’s credit account;

(C) Payments by cheques to securities companies of which Hui was the account holder;

(D) Payments by cheques to various recipients;

(E) Cash withdrawals

345.  In D’s Schedule, Hui had provided explanations as follows:

Category (B)	items 9,10,14,15,17,18 for various expenses such as “Business Reception”, “Maintenance”, “Telephone”, Director’s fees”, “Advance to Lucky Ocean” “Magazine”, “Business trip”;
Category (D)	items 30, 31 for “Maintenance”; items 36, 37 for “Advance to Lucky Ocean for purchase of Carparking Space in Tung Chung”; item 40 for  being “sundry expenses”;
Category (E)	item 40 for “legal fees”.

346.  As mentioned earlier, Lin had later accepted items 36 and 37 under Category (D) to be advances to Lucky Ocean for purchase of a carparking space in Tung Chung for the benefit of Lin and/or his wife.

347.  It was Hui’s case that the Withdrawals not canvassed in D’s Schedule after 31 March 2008 were for the purpose of her director’s fees, and all Withdrawals before 31 March 2008 (ie items 1 to 38 of Category (E) of P’s Schedule was accounted for as reflected in the audited financial statements of Charter Port prepared by Lee.

348.  To summarise, according to Hui, the Withdrawals can be divided into:

(1) Withdrawals prior to 31 March 2008 which were accounted for in the audited financial statements;

(2) Withdrawals after 31 March 2008 which were for:

(i) Hui’s Directors’ fees;

(ii) Expenses incurred for Charter Port;

(iii) Advances to Lucky Ocean, or other expenses for Lin and/or his various companies.

Withdrawals prior to 31 March 2008

349.  The Withdrawals prior to 31 March 2008, namely items 1 to 38 under (E) on P’s Schedule, were all cash withdrawals.

350.  Lee had explained that all information for the purposes of auditing the account of Charter Port , such as vouchers and supporting documents would be provided by Hui to him when he was carrying out audit for Charter Port, and if there had been an incorrect entry of an item in the books of the company, he would raise this and would make adjustments, such as for the years ended 31 March 2005 -2008, he had made audit adjustments[138] (“Audit Adjustments”). 

351.  Lee further confirmed that if he saw any items unrelated to the company, he would transfer or record such items to “Director’s Current Account” and confirmed that this would be Hui’s director’s current account.  He had also said if there were no supporting documents, he would look at the overall picture and the amounts involved to see whether he would need to provide a “Qualified Opinion”, and he confirmed that he could not recall ever having given a “Qualified Opinion” in relation to Charter Port.  He also confirmed that for the year ended 31 March 2008, there was a director’s remuneration of HK$208,000 to Hui but could not recall whether the company actually issued cheque/s to Hui for such remuneration.

352.  Lee had confirmed that there was no employment contract for Hui, and the only supporting evidence of any alleged employment was the 2008 Employer’s Return.  Some of the vouchers produced by Hui bore the handwritten words of “Director C/A” and Lee said it was the company itself which had recorded those amounts under “Director C/A”.  He also confirmed that the Audit Adjustments were signed by Hui.

353.  Those cash withdrawals under items 1 to 38 under (E) from December 2006 until March 2008 appeared to be as follows:

(i)	Dec 2006	- total HK$4,000
(ii)	Jan – Dec 2007	- total HK$143,418
(iii)	Jan 2008	- total HK$18,100
	Total	- HK$165,518

354.  If one looks at the profit and loss account for the years ended 31 March 2006, 2007 and 2008[139], the total annual expenses were respectively $556,990.16, $606,831.20, and $604,254 (excluding director’s remuneration of HK$208,000).

355.  Thus, leaving aside the amount of $208,000, the annual expenses for those 3 years averaged more or less $600,000 out of which about $240,000 per annum was “depreciation”.  Thus, the actual expenses were only about $360,000 each year, of which cash withdrawals accounted for the most about 40%.  The annual rental income was respectively $368,400, $383,480 and $426,947.

356.  Lin returned to Hong Kong from Australia according to him in 2001 and it was not until January 2015 that he made the allegation on the Withdrawals to 2008 being unauthorised.  That Hui was not in 2015 able to provide all the vouchers and supporting documents would not mean that she did not have them at the time of the annual audit prior to 2008.  I do not find the lack of vouchers or supporting documents for expenses prior to 31 March 2008 would necessarily detract from Hui’s case.  Lin was the majority beneficial owner and that he should know what rental income was derived from the properties and the whereabouts of the rental income.  There was no complaint by him until 2015.  I accept Hui’s evidence that she had accounted for the expenses for audit at the relevant time.  I find no sufficient evidence that those cash withdrawals prior to 30 March 2008 under (E) were not expenses of the company or not bona fide incurred in the best interest of Charter Port or not for proper purpose.  The item for the “Director Remuneration” of $208,000 first appeared in the audited financial statements for the year ended 31 March 2008 and will be dealt with separately below.  

Director’s fees

357.  According to Lin, Hui’s salary when she was initially employed was about HK$8,000 per month which was subsequently increased to about HK$16,000 per month in 2013[140].  As seen in the Employer’s Return for the year ended 31 March 1995 filed by Sure Resources, Hui’s income was HK$269,250 and Lin had said for that year, Hui received 14 months’ salary, as that was a good year.  For the year ended 31 March 1996, Hui’s remuneration was HK$249,200, and for the year ended 31 March 1997, $249,250, namely average about $20,000 per month. 

358.  As mentioned earlier, it was Lin’s case that after Liquidation, he had continued to employ Hui in his personal capacity and that in this capacity she was responsible for handling the secretarial work of all the companies in Hong Kong and overseas.  There was no co-management with Hui of any of his companies and that Hui was not entitled to any director’s fee or director’s remuneration from Charter Port.

359.  As for the payment of her salary, Lin had said in his witness statement in the Charter Port Action that this was paid by “another company” owned by him[141], but it was not quite clear which company he meant.

360.  When asked during cross-examination from which of the companies was Hui’s salary paid after the Liquidation until 2013, Lin said he believed it would be from Lucky Ocean, Masen and Charter Port.  Lin had applied for deregistration of Masen in October 2012.  However, in my view, for both Lucky Ocean and Masen, Lin should be able to provide bank statements since at least 2002 in the case of Lucky Ocean.  Yet, there was no evidence of any payment of salary to Hui.  At the trial, Lin seemed to then say Hui’s salary was HK$16,500 per month, but he was unable to answer from which date that salary commenced. When asked that this would mean that Hui’s salary had remained the same amount for some 20 years, he had answered “她去拿，我無管她” or words to this effect.  Later, Lin then seemed to change his evidence and maintained that the amount was HK$16,500 per month and that it was not up to Hui to withdraw whatever amount she wished.

361.  Hui’s case was that she was entitled to director’s fees and in support thereof, she had produced copies of  the Employer’s Returns of Remuneration filed by her for Charter Port for the years ended 31 March 2009 and 2010 and also her own income tax returns for the year 2011/2012[142]. In the year 1 April 2008 to 31 March 2009 Employer’s Return, she filled in the amount of HK$208,000 for director’s fees, but for the year ended 31 March 2010, she filled in the amount of HK$202,800 only and in her personal income tax return, she had also filled in HK$202,800 for the year ended 31 March 2012.

362.  According to Hui, there was an oral agreement between Lin and her that she was entitled to HK$208,000 per annum for director’s fees both before and after 2008.  Mr Wong submitted that there was no board resolution or any employment contract to support Hui’s case. 

363.  On the other hand, there was also no employment contract or any documentary evidence to support Lin’s case either that Hui was employed by him personally after the Liquidation at HK$16,000 or HK$16,500 per month or that he had paid her a fixed monthly salary after Liquidation, or if he did pay, from which company he had paid the same.  The documentary evidence produced by Lin was all pre-Liquidation.  There were no employer’s salaries returns filed by Lin personally or any of the companies in respect of Hui’s salary after the Liquidation.  There was no evidence of any contribution made by Lin personally or any of the companies for MPF for Hui.  According to the Dismissal Letter, Hui was stated by Lin’s solicitors to be employed by Gold Glory, Charter Port, City Effort, Lucky Ocean and Sure Resources HK as a personal secretary.  When cross-examined over this, Lin seemed to think “personal secretary” meant Hui was personally employed by him as a secretary.  However, there was no claim or counterclaim by Hui against Lin and/or those companies for unpaid salaries and MPF contributions.

364.  Lee had confirmed that there was no record of director’s remuneration in the financial statements of Charter Port in 1999, nor in those financial statements from 2005-2007.

365.  Hui had said the director’s remuneration prior to 31 March 2007 was recorded as “entertainment fee”.  During the trial, Hui’s evidence was that her fees were recorded under 3 items in the financial statements, namely “entertainment”, “staff welfare” and “sundry expenses”.  These items however were only HK$39,491.80, HK$33,128.12 and HK$21,852.40 respectively for 2005-2007.  Hui had also said she could not recall how much her income was between 2000 and 2008. 

366.  Having considered Hui’s evidence, I find there was no sufficient evidence to support her case that she had withdrawn director’s fees of a fixed amount of HK$208,000 each year or of any fixed amount prior to the year ended 31 March 2007, although various amounts were withdrawn by her as her benefits.  The first time the amount of HK$208,000appeared was in the audit accounts for the year ended 31 March 2008, namely during the year 1 April 2007 to 31 March 2008.

367.  After 31 March 2008, Hui’s withdrawals did not seem to match HK$208,000 pa.  In fact, apart from a total sum of HK$497,413 of withdrawals in 2008, from 2009-2013, her withdrawals were considerable less than HK$208,000.  There was no clear explanation from Hui on this. 

368.  Whether Hui was entitled to a director’s fee or an employee’s salary would be a matter of agreement between Hui and Charter Port and/or Lin.  When it was put to Lin that he knew Hui was withdrawing amounts from Charter Port as director’s fees and not as salaries, Lin disagreed and claimed that he did not even know she was withdrawing monies.  I do not find Lin’s evidence in this respect credible. 

369.  According to Hui’s evidence in her witness statement, in about 2007/2008, she wanted to apply for a credit card or a club membership, and the application required income proof, and she decided to formally draw a director’s fee from Charter Port and to file tax returns to reflect this.  Her evidence was prior to that, although she was withdrawing various sums from Charter Port for her services to the company, she did not record these as director’s remuneration, but Lin was all along aware of this.

370.  During the trial, she again explained it was in 2007 that she started to draw HK$208,000 per annum as director’s remuneration and this was at the time when she was applying for an American Expenses credit card and that she needed a letter regarding her remuneration.  It was her evidence that she had raised this with Lin and that it was agreed by Lin that she was to receive HK$208,000 per annum as director’s fees, but she was not able to recall where and when exactly the discussion took place. 

371.  From the vouchers produced by Hui, there were in particular 3 vouchers dated respectively 29 October 2008, 30 December 2008, 20 January 2011, when the voucher indicated “director remuneration” of HK$15,600[143]. It was then put to her by Mr Wong that she in fact was withdrawing only HK$15,600 every month as “director remuneration” and she had denied this.

372.  There were two issues, (i) whether Lin agreed to Hui being paid director’s remuneration, and (ii) if so, the amount.  In my view, Lin had clearly allowed Hui a “free hand” in dealing with matters relating to the companies and Charter Port although he maintained that he was to be informed beforehand.  Anyway, as mentioned earlier, Lin himself had initially said at the trial “她去拿，我無管她”.  Having considered all the evidence, it is my finding that from 1998 to 2013, as the relationship between Lin and Hui was a trusted one, Hui was basically given a free hand to withdraw various sums from the companies for her service.  The available evidence did not indicate any exorbitant or unreasonably high amounts.  Notwithstanding there was no board resolution, having weighed up Lin’s evidence and Hui’s evidence and the tax return filed by Hui for the year ended 31 March 2008, I find it more probable then not that she did raise the matter of her director’s remuneration with Lin at the time and Lin had agreed to her withdrawing HK$208,000 per annum as her director’s remuneration for the year ended 31 March 2008 and thereafter.  I accept her evidence that HK$208,000 was the sum she was entitled to draw as director’s remuneration even though the evidence showed she did not in fact draw the full amount each of the following years. 

D’s Schedule

373.  Hui had set out in D’s Schedule explanations for certain amounts.  According to Hui, amounts after 31 March 2008 not canvassed in D’s Schedule were for the purpose of her director’s fees.

374.  She did not “canvass” or account for those items under Category (A) of P’s Schedule in her D’s Schedule and thus those items were on account of Hui’s director’s fees.

375.  6 of the Withdrawals under (B) namely items 9, 10, 14, 15, 17, 18 were payments to Hui’s BOC credit card and were described in D’s Schedule as “Business Reception”, or “Maintenance”, or “Telephone”, or “Magazine”, or “Business Trip”, or “Director’s fee”.  One amount of HK$487 in item 14 was described as “Advance to Lucky Ocean”.  Hui had provided various vouchers to support those items. 

376.  It was put to Hui she made up those vouchers, and that there were no supporting documents that those expenses were incurred on behalf of the company.

377.  I do not think that Hui could have made up all those vouchers and I accept her evidence that they were contemporaneous documents. However, there was no sufficient evidence that those items were the expenses of the company.  Further, Hui’s oral evidence at the trial was that they were her benefits paid by the company.  In light of her evidence, all items under Category (B) should also be regarded as payments to Hui on account of her director’s fees, save for the amount of $2,750 for item 9 and $487 for item 14.

378.  Although there seemed to be no other supporting documents, the amount of HK$2,750 under item 9 was marked “maintenance” on the relevant voucher dated 5 September 2008[144] on which it was stated “lighting in 3502”, which appeared to be related to 3502, Southorn Garden, and appeared to be an expense of Charter Port. I will accept this, which should not be to Hui’s account.  The amount of $487 in item 14 was marked “Advance to Lucky Ocean” and although there was no supporting document, I will accept this which again should not be to Hui’s account of director’s fees.

379.  As for items 30 and 31 under Category (D), totaling HK$150,000, Hui had produced 2 vouchers for the payment of these to Wing Ming.  As mentioned earlier under the Possession Action, there were altogether 6 cheques to Wing Ming.  Hui’s evidence was that items 30 and 31 were incurred for the 3502 Southorn Garden, and not for the Property in the Possession Action.  In light of my finding that there were no improvements to the Property paid by Hui and that the Property was Lin’s throughout, all 6 payments to Wing Ming including items 30 and 31 ought not be paid by Hui to Charter Port or to Hui’s director’s account.

380.  There were 3 items on D’s Schedule marked as advance to Lucky Ocean.  As mentioned earlier, Items 36 and 37 under (D) were accepted to be for Lucky Ocean’s purchase of a carpark space.  Item 14 under (B) for HK$487 was also on the relevant voucher marked “LO” and said by Hui to be advance to Lucky Ocean[145]. As mentioned earlier, I accept this amount should not be paid by Hui or to her account. 

381.  As for item 40 under (D), Hui had said during the trial, this was an amount paid to “Tai Chung Yin Calvin” or “Calvin Tai” by a cheque dated 15 December 2011 and this was for Lin’s transportation fees when he moved to House No 9, Beverley Hills.  There was nothing to contradict what Hui said and this amount ought not be paid by her.

382.  Item 40 under (E) for legal expenses of HK$8,747, such was said to be incurred by the company and this item was not really challenged by Lin.

Other Withdrawals after 31 March 2008

383.  As mentioned earlier, it was Hui’s pleaded ease that any amounts incurred after 30 March 2008 not canvassed in D’s Schedule were for the purpose of her director’s fee.  I understand that she was prepared to accept those to be to her director’s account.

384.  These would include all items under Category (C), which were paid to Hui’s own securities accounts.

385.  There were 2 cheques under Category D of P’s Schedule, one issued on 22 May 2008 in favour of “Chan Chi Wah” and one issued on 29 December 2009 in favour of one “Chan Men Wai”, namely items 34 and 39.  Hui had said these were also in relation to Lin’s property at House No 9 at Beverley Hills.  It is not clear when this property was purchased and whether Lin held this property personally or through one of the other companies.  However, there was no evidence to contradict what Hui said.  I accept her evidence and these amounts should not be paid by Hui or to her account.

Breach of Fiduciary Duties

386.  I have said earlier that there was no sufficient evidence of the Criminal Plot.  I have found that Lin had knowledge, consented and/or authorised the Unauthorised Appointments and the Change of Bank Signatory, and further Lin had authorised Hui drawing director’s remuneration of HK$208,000 a year.  Some of the Withdrawals on P’s Schedule were for the benefit of Charter Port and/or Lin’s other companies and/or Lin himself.

387.  Mr Cheung pointed out that from the Transaction History, the cheque withdrawals from the BOC Account between 3 April 2008 and 28 November 2013 totalled some HK$9m[146].

388.  Hui was only challenged on the Withdrawals of cheques and cash of about HK$1.9m in P’s Schedule in the amended statement of claim. 

389.  As it turned out, the HK$1.9m odd had even included the two cheque withdrawals of HK$443,939.50 and HK$104,904 for the purchase of a carparking space for Lucky Ocean and  related expenses[147].

390.  Having considered all the evidence, I find there was no sufficient evidence that Hui was in breach of her fiduciary duties nor was there any breach of trust, as alleged by Lin. 

Conclusion

391.  Mr Wong pointed out that there was no counterclaim by Hui for her director’s remuneration, nor any set-off pleaded. However, it was part of her defence that those payments not canvassed in D’s Schedule were for her director’s fees.  I accept this and in light of my findings, before I make the final order, I would direct the parties to submit within 28 days an agreed schedule of the amounts which should be repaid by Hui to Charter Port, if any, after taking into account my findings and Hui’s entitlement to director’s fees of HK$208,000 per annum commencing from the year ended 31 March 2008, or from 1 April 2007 until the date of her removal as director.

Gold Glory Action

The company

392.  Gold Glory was acquired by Lin in July 1996.  In accordance with the return of first director and secretary dated 22 July 1996, Lin and Hui were appointed as first directors[148].  

393.  As at 1 August 1996, the nominal share capital was HK$10,000 divided into 10,000 shares of HK$1 each, of which 9,900 shares were registered under name of Lin, and 100 shares under the name of Hui.  Lin said Hui was/is a nominee shareholder holding the shares for him but this was disputed by Hui.  In any event, Hui is not a party in this action.

394.  As seen in the annual returns made up to the years ended 16 April 1997 and of 1998, there was no change in the shareholders nor directors.  The company secretary was Hui, and the then registered office was at the Gloucester Road Office.

395.  On 28 May 1998, the following 5 documents all dated 17 April 1998 were filed with the Companies Registry:

(i) A written shareholders’ resolution to increase the capital of the company signed by Hui and Ko (“Registered Shareholders’ Resolution”)[149];

(ii) Notice of increase in nominal capital signed by Hui (“Notice of Increase”)[150];

(iii) A return of allotment allotting 190,000 shares of HK$1 each to Ko signed by Hui (“17.04.98 Return of Allotment”)[151];

(iv) A Notification of changes of secretary and directors indicating the resignation of Lin as director and the appointment of Ko as director and signed by Hui (“17.04.98 Notification”)[152];

(v) Consent of Ko to act as director signed by Ko (“17.04.98 Director’s Consent”)[153];

(collectively “28.05.98 Documents”)

396.  As seen from the Registered Shareholders’ Resolution, the Notice of Increase, and the 17.04.98 Return of Allotment, the above documents were presented for filing with the Companies Registry by Mutual Faith.

397.  On 27 August 1998, a notification of situation of registered Office dated 22 May 1998 and signed by Hui (“22.05.98 Notification of Registered Office”) was filed with the Companies Registry, indicating that the registered office of Gold Glory was changed to the Sharp Street Office[154].

398.  As at the date of annual return of 16 April 1999, Ko, Lin and Hui remained shareholders, holding respectively 190,000, 9,900 and 100 shares, and Ko and Hui remained the only two directors. Hui was the company secretary and the registered office remained at the Sharp Street Office.

399.  On 15 April 2001 Ko resigned as a director and Lin re-appointed in her place as seen on a Notification of Changes filed on 12 June 2001 (“15.04.01 Notification”)[155]. A Consent to Act as Director dated 15 April 2001 was also filed on the same day.  Both the 15.04.01 Notification and the Consent were admitted by Hui to have been signed by her in the name of Lin.  

400.  There were no further changes in the shareholding and directors until 2014.  On 24 January 2014, a Notification of Changes dated 16 December 2013 was filed by Smart Fortune (“16.12.13 Notification”). Then, another Notification of Changes was filed on 6 March 2014, this time by Mutual Faith indicating that Ko had been re-appointed as a director in place of Lin on 3 March 2014 (“03.03.14 Notification”)[156].

401.  It was not disputed that in April 1998, Gold Glory held two properties, the Sharp Street Office and a property in Shenzhen (“Shenzhen Property”).  The Sharp Street Office was acquired in August 1996 at a stated consideration of HK$1.78m and with a mortgage loan which was only discharged in September 2006[157]. The evidence of Lin was that the net value of the Sharp Street Office in April 1998 was estimated to be HK$930,000[158]. The Sharp Street Office is still held by Gold Glory. 

402.  As for the Shenzhen Property, the cost was stated to be RMB900,000 at the time of completion of the building in February 1993, and the Shenzhen Property was acquired by Gold Glory in October 1997.  It was later sold in late 2011.

The parties’ respective case

403.  Lin sought against Ko and Gold Glory 3 declarations :-

(i) That the Registered Shareholders’ Resolution was invalid;

(ii) That the share capital of Gold Glory remained/remains at HK$10,000;

(iii) The Purported Allotment to Ko was invalid.

404.  Lin’s case was based on:

(i) The Registered Shareholders’ Resolution was signed by Hui and Ko only and there was no signature by Lin, and Ko was not a shareholder of the company at that time;

(ii) Lin never agreed to any increase in the share capital or allotment of shares to Ko;

(iii) Lin never consented to or knew of the appointment or resignation of Ko as a director.

405.  It was accepted by Mr Cheung that the Registered Shareholders’ Resolution was not a valid resolution in that it was not signed by Lin who was a shareholder and was signed by Ko who was yet not a shareholder.

406.  Ko’s case , supported by Hui, was, however, there was another resolution signed by her, Hui and also Lin on 17 April 1998 which was not registered with the Companies Registry (“Unregistered Shareholders’ Resolution”)[159] and that there was also a board resolution passed by all the directors on 17 April 1998 and signed by Ko and Hui (“17.04.98 Board Resolution”)[160] indicating that Lin had knowledge and consented to the allotment of shares to her.

407.  Further, Ko’s, and Gold Glory’s, case was :

(i) Agents of the Central Commission came from Beijing to Hong Kong to investigate the financial dealings and other matters between Lin and Fang Dacheng, and Ko was invited to accompany Lin to the meeting;

(ii) After the meeting, Ko was informed by Lin that he was not able to sell the property owned by Gold Glory immediately as the property market was then in a bad shape but that he was short of funds and that he wanted to dilute his shareholding in Gold Glory as quickly as possible to disassociate himself from the company;

(iii) At the suggestion of Lin, the share capital of Gold Glory was increased from HK$10,000 to HK$200,000 and that Ko was to be allotted 190,000 shares at HK$1 each for which Ko was to pay Lin HK$200,000;

(iv) Ko was willing to help and duly paid Lin HK$200,000 and she was brought by Lin to the office to sign the relevant documents including the Unregistered Shareholders’ Resolution;

(v) The Unregistered Shareholders’ Resolution was then passed to the then company secretary for handling and registration with the Companies Registry;

(vi) Ko had no knowledge as to why the Unregistered Shareholders’ Resolution was not registered;

(vii) Lin had given his consent to the directors of Gold Glory for the allotment of shares to increase the share capital and the 17.04.98 Board Resolution was also passed to the company secretary for handling and registration with the Companies Registry.

408.  Lin had alleged that his signature on the Unregistered Shareholders’ Resolution was forged.  As previously mentioned, it was Lin’s case that before his emigration, he had given pre-signed blank cheques and blank paper to Hui and it was his suggestion that Hui had used some of the blank paper to prepare some or all of those documents for the Purported Increase without his authorisation[161].

Wrong filing of documents by Smart Fortune

409.  Lin’s case was that he only discovered through the assistance of Ms Ellen Tsang of C & T about the Purported Increase and the Purported Allotment in late November 2013[162].  He then immediately tried to contact Ko through Wang Jiansheng to request her to transfer back the shares allotted to her.

410.  Lin’s evidence was that he went to the office of Smart Fortune to meet with Lee on about 1 December 2013 to enquire about Noble City and that he told Lee that he would like to change the registered office of Gold Glory and to become the sole shareholder and director of the company. 

411.  Lee immediately carried out a search at the Companies Registry and informed Lin that Ko was the majority shareholder.  Lin said, believing at that time that Ko would agree to transfer the allotted 190,000 shares back to him, he then instructed Lee to prepare relevant documents for Ko as well as Hui to sign.

412.  Various documents were duly prepared by Lee, 5 documents of which were set out in schedule 3 in Lin’s statement of claim (“Schedule 3 Documents”)[163]. These were:

(i) The 16.12.13 Notification reflecting the resignation of Hui as director and appointment of Lin’s daughter Vivian as director signed by Lin on 16 December 2013[164] ;

(ii) an annual return as at 16 April 2013 dated 1 December 2013 signed by Lin (“2013 Annual Return”)[165];

(iii) a notification of change of registered office address to the Connaught Road Office of Smart Fortune dated 6 December 2013 signed by Lin (“06.12.13 Notification”)[166];

(iv) a special resolution dated 28 November 2013 signed by Lin to adopt new Memorandum and Articles of Association attached to that resolution (“28.11.13 Special Resolution”)[167];

(v) an ordinary resolution dated 17 April 1998 for increase of capital to HK$200,000 and stated to have been signed by Lin as chairman (“17.04.98 Ordinary Resolution”)[168].

413.  Lee also prepared undated share transfer documents and bought and sold notes for Ko to sign to transfer her 190,000 shares in Gold Glory to Lin, and also a set of documents dated 16 December 2013 for Hui to sign for Hui to transfer her 100 shares in Gold Glory to Lin and for Hui to resign as director and company secretary of the company (collectively “Share Transfer Documents”).

414.  It was Lin’s case that in early February 2014 when it became clear to him that Ko and Hui would not sign the Share Transfer Documents, he then informed Lee accordingly and to withhold filing the Schedule 3 Documents, but Lin was told by Lee that they had already been filed[169]. 

415.  Lee’s evidence in his affirmation of 11 March 2014 was that he and Lin had intended that documents (ii) – (v) of the Schedule 3 Documents to be filed as soon as possible based on the then state of affairs of the company as it appeared on the public record, and that once Ko and Hui had executed the Share Transfer Documents, these would be filed with the Companies Registry to update the public record[170]; accordingly, items (iii) – (v), namely the 06.12.13 Notification, the 28.11.13 Special Resolution and the 17.04.98 Ordinary Resolution were filed on 9 December 2013 and item (ii) the 2013 Annual Return was filed on 20 December 2013.  It was Lee’s evidence that the 17.04.98 Ordinary Resolution was prepared by him based on the then state of affairs he gathered from the public record and he had conveniently put Lin down as chairman of that meeting. 

416.  Lee said thereafter due to inadvertence of his clerk, who thought there was an omission to file the 16.12.13 Notification, proceeded to file it on 24 January 2014.  The 16.12.13 Notification was meant to be filed only after the Share Transfer Documents had been signed by Hui.

417.  It was also Lee’s evidence in his affirmation of 11 March 2014 that at no time until early February 2014 had Lin told him that the Purported Increase and the Purported Allotment were not within Lin’s knowledge or authorisation, and that in preparing the Schedule 3 Documents, he had assumed that there was consensus among all the relevant parties on the contents thereof.

418.  During the trial, Lee confirmed after Lin went to see him on about 1 December 2013, he had immediately carried out the company search.  He saw the Notice of Increase and had told Lin that Ko was the majority shareholder.  Lee said Lin had however told him that Ko was Lin’s friend and that there was no problem as she agreed to transfer her shares to him.  He then proceeded to prepare the documents pursuant to Lin’s instructions.

419.  Lee had further said that although the 28.11.13 Special Resolution was dated 28 November 2013, it did not necessarily mean that Lin actually signed on that day or the meeting was held that day.  He said he had no knowledge of the actual day of the EGM or how that meeting was held or conducted and that he was only informed of the date of the EGM by Lin.  

420.  Lee confirmed during the trial that he had prepared all the documents pursuant to Lin’s instructions and that he said Lin should have read the documents, although Lee said he could not recall whether he had explained the documents to Lin or not.  It was Lee’s evidence in his affirmation that the 2013 Annual Return was prepared based on there being no changes from the previous annual return, the 06.12.13 Notification was based on the assumption that the change of registered address would be agreed upon by the other director, and the 28.11.13 Special Resolution was on the assumption that it would be agreed by Ko.

421.  According to Lin, there was in fact no EGM held by Gold Glory on 28 November 2013. 

422.  Lee said Lin came to collect the Share Transfer Documents in December 2013 after they were prepared and that from December 2013 until early February 2014, Lin never raised any query from Lee as to why Ko was holding as many as 190,000 shares in the company.

423.  Lee confirmed that it was only in early February 2014 that Lin told him that Ko and Hui refused to sign the Share Transfer Documents, and Lin had asked him to withhold the filing of the Schedule 3 Documents.

424.  Lee is a certified public accountant.  I see no reason to doubt his evidence in this regard.

425.  To summarise, it was the evidence of Lee that Lin had intended and instructed Lee to file the documents (ii) to (v) as soon as possible based on the then state of affairs as appeared on the public records and further based on Lin’s instructions, Lee had assumed that there was consensus among the shareholders and the directors.  So far as Lee and/or Smart Fortune was concerned, there was no mistake on their part on the filing of items (ii) to (v) of Schedule 3 Documents as they were following instructions from Lin and the only mistake was on the filing of item (i), which should have been filed after the Share Transfer Documents had been signed. 

426.  It was also clear that it was Lin who instructed Lee that there was an EGM on 28 November 2013, and Lin had personally signed the 28.11.13 Special Resolution.  At no time did Lin tell Lee in early December 2013 that he and Hui had the Argument or that Hui’s employment with him had been orally terminated in October 2013[171], which was his pleaded case or in December 2013, what he later said.  More importantly, at no time did Lin tell Lee that the Purported Increase and the Purported Allotment was without Lin’s knowledge, consent, or authorization until February 2014.  

427.  I find it odd that Lin did not tell Lee when he instructed the latter to prepare the Schedule 3 Documents, notwithstanding Lin’s own evidence that in about late November 2013 through Ellen Tsang, he had already discovered the Purported Increase and Purported Allotment.  Further, upon being told by Ellen Tsang, what Lin said he immediately did was to try to contact Ko. Yet, when he went to see Lee, he said it was concerning Noble City and it was in fact Lin’s own evidence that it was only in passing that he told Lee about Gold Glory’s failure to file the annual return for 2013[172].

428.  Thus, it appeared from Lin’s own evidence that Gold Glory’s failure to file the 2013 annual return was not really a matter of immediate concern to Lin, and in fact, the 2013 Annual Return was the last of the items (ii) to (v) of Schedule 3 filed, namely only on 20 December 2013. 

429.  Anyway, in the amended defence , Ko and Gold Glory pleaded generally that the documents in Schedule 3 were incorrect[173], without specifying what was incorrect.  In so far as the names of the shareholders and their respective shareholding and names of the directors on the 2013 Annual Return, they were prepared by Lee based on the then state of affairs of the company.  I accept that there was no sufficient evidence that Hui, as director, had agreed to the change of the registered address on 6 December 2013 and thus the 06.12.13 Notification would be incorrect.  There seemed to be no dispute among all the parties that no EGM was in fact held on 28 November 2013 and thus the 28.11.13 Special Resolution would be incorrect.

430.  As for the 17.04.98 Ordinary Resolution, it was stated by the Registrar that it was not presented for filing by Smart Fortune[174].

The Unregistered Shareholders’ Resolution

431.  According to Ko, after Lin issued the Gold Glory Action against her, she had approached Hui to try and find the relevant documents, and Hui then contacted the former staff of Mutual Faith who was responsible for presenting those documents of Gold Glory for filing with the Companies Registry in 1998.  It was Hui’s evidence that she then obtained a bundle of 7 documents (“7 Documents”) which were :-

(i) The Registered Shareholders’ Resolution;

(ii) The 1998 Return of Allotments;

(iii) The 17.04.98 Notification;

(iv) The 17.04.98 Director’s Consent;

(v) The 22.05.98 Notification of Registered Office;

(vi) The Unregistered Shareholders’ Resolution;

(vii) The 17.04.98 Board Resolution;

432.  As mentioned earlier, the above items (vi) and (vii) were never filed with the Companies Registry.  The above 7 Documents were first produced by Ko in her affirmation of 23 April 2014 and her evidence was that she did not know why the Unregistered Shareholders’ Resolution was not filed with the Companies Registry.

433.  It can be seen on the 7 Documents that they were faxed to Hui from a firm Y K Yu & Co, which was said to be one of the companies belonging to the then auditors of Gold Glory.

434.  Hui made a witness statement and an affirmation to support Ko’s case and to respond to Lin’s affirmations.

435.  I have accepted that although there was no evidence that Lin was ever a subject of investigation by any one, in May 1998 he became concerned over investigations over Fang Dacheng and he then emigrated to Australia.  Hui said at the time Lin had asked her to make enquiries about transferring/selling his properties and she said she was informed by accountants that there needed to be a valuation of the property owned by the company before a sale.  As the property prices were low at the time, and if there needed to be a valuation, a sale would take time, and therefore the accountants at the time suggested that Lin could reduce his shareholding in the company by increasing the capital and allotting the increased shares to another person, and this would reduce Lin’s shareholding and also the stamp duty of the property transaction.  Hui said she was then instructed by Lin to follow the suggestion of the accountants, and to prepare the documents for the capital increase and allotment of the increased shares to Ko.

436.  According to Hui, she then instructed the younger brother of a Mr Ken Yu to prepare the relevant documents (“Yu’s Brother”). Mr Ken Yu is said to be the proprietor of the accountant firm Y K Yu & Co and Mutual Faith.  Lin had mentioned meeting with a Mr Yu Yan Kong of Mutual Faith.  I understand Mr Ken Yu to be the same person as Mr Yu Yan Kong of Y K Yu & Co and of Mutual Faith.  

437.  In any event, according to Hui, all the 7 Documents faxed to her were prepared by Yu’s Brother or staff of Y K Yu & Co, and that Lin had signed personally the Unregistered Shareholders’ Resolution in her presence at the office.  Ko had initially said it was signed at the Sharp Street Office, but it appeared that at that time, the registered office of Gold Glory was at the Gloucester Road Office as the Sharp Street Office was rented out.  Anyway, Hui’s evidence was that it was signed at the office of Gold Glory, wherever the location of the office was at the time.

438.  According to Hui, after all the 7 Documents had been signed, she handed them back to Yu’s Brother to follow up, and she was not clear why the Unregistered Shareholders’ Resolution was not filed with the Companies Registry.  She said after Lin issued the Gold Glory Action, she had made enquiries from Yu’s Brother, who then faxed the set of 7 Documents to her.

439.  Lin’s signature on the Unregistered Shareholder Resolution was one of the Disputed Signatures. The original of the Unregistered Shareholder Resolution was never produced by Ko or Hui notwithstanding an order made by Master Ho on 22 June 2105[175].  After Ko had produced the 7 Documents, Lin had called upon Hui to request Mr Ken Yu and Mutual Faith to give evidence.  Neither Mr Ken Yu, nor Yu’s Brother, nor any one from Y K Yu & Co or Mutual Faith was called to give any evidence by Ko or Gold Glory to explain why the Unregistered Shareholders’ Resolution was prepared on the same day as the Registered Shareholders’ Resolution and why one was filed and not the other, and also why a copy of the Unregistered Shareholders’ Resolution was kept for 16 years and was produced but the original had not been produced.

440.  Ko could only become a shareholder of the company after the Purported Allotment, and same with the Registered Shareholders’ Resolution, she had no capacity to sign on the Unregistered Shareholders’ Resolution either.  There were also a number of conspicuous mistakes in Unregistered Shareholders’ Resolution, such as the total number of the allotted shares, and also the respective shareholding of Hui and Lin.  As said by Mr Wong, it was prepared in a sloppy and unprofessional manner.  I agree.

441.  There was no reasonable explanation from Ko or Hui as to why they were not able to produce the original of the Unregistered Shareholders’ Resolution.  It was not Hui’s case that the signature thereon fell into the Category of Alleged Authorised Signatures, as she and Ko both said Lin had signed it personally in their presence.  Having considered all the above, particularly when there was no evidence from Mr Ken Yu or Yu’s Brother as to the circumstances of how the Unregistered Shareholders’ Resolution was signed, I find there was no sufficient evidence that Lin had personally signed the Unregistered Shareholders’ Resolution on 17 April 1998.  However, this would not necessarily mean that Lin had no knowledge or did not authorise or consent to a shareholders’ meeting be held or a resolution be passed or signed for the increase of the capital at that time.  In my view, that the 17.04.98 Ordinary Resolution was prepared by Lee under Lin’s instructions based on the then state of affairs would indicate there had been a proper resolution passed for the Purported Increase and/or Lin had knowledge, consented and/or authorised the same.   

442.  As for the 17.04.98 Board Resolution for the purpose of the Purported Allotment, this was signed by Ko and Hui as directors and dated 17 April 1998.  Under cross examination, Hui had confirmed that Ko only became a director of Gold Glory after the Purported Allotment, and this was accepted by Ko.  Mr Wong thus submitted that Ko had no authority to execute the 17.04.98 Board Resolution either.

443.  Even so, again this would not necessarily mean that Lin had no knowledge or did not authorise board a resolution be passed for the allotment of the increased shares to Ko.

Payment of HK$200,000

444.  Ko had said in her 1^st affirmation that because Lin failed in his investments and Sure Resources had to be wound up, Lin was concerned that the Liquidation would affect his assets as he was a director of Sure Resources, and he was therefore anxious to leave for Australia and to cash out of his assets.  Later in her witness statement, Ko had also said at the time Lin was under the investigation of the Central Commission and was anxious to reduce his role in Gold Glory and other companies to avoid investigation.

445.  Anyway, as I have found earlier, Lin became concerned over the then investigation over Fang Dacheng at around April/May 1998, and he left Hong Kong for Australia.  It was not in fact clear as to when exactly Lin moved to Australia.  However, as gathered from the documents, Fang Dacheng’s 11.05.98 Letter was handed to Lin at his meeting with the new team from CNIEC and Ko was present at this meeting.  The meeting could only take place after 11 May 1998.  Although the 28.05.98 Documents were all dated 17 April 1998 they were in fact not filed until 28 May 1998.  The petition for winding up of Sure Resources was filed on about 23 May 1998.  It would thus appear that Lin left for Australia in May 1998 sometime after the meeting with the new team from CNIEC, namely after 11 May 1998.

446.  As also mentioned earlier, it was Ko’s case that Lin had approached her in April/May 1998 and that she agreed to help him out by purchasing 190,000 shares in Gold Glory for HK $200,000.  It was also Ko’s case that she agreed to purchase from Lin his interest in the Huhhot Company for HK$500,000.

447.  Digressing here, in relation to the Huhhot Company, Ko’s case was that Lin’s interest in this company was sold to City Effort which belonged to her.  The Huhhot Agreement was signed by Ko on behalf of City Effort, but it was Lin’s case that at the time Ko was not a director nor a shareholder of City Effort, and that she was merely authorized to sign the Huhhot Agreement on behalf of City Effort by Wang Jiansheng.

448.  In any event, Ko was not able to produce any documentation to support her case that City Effort belonged to her.  As seen below :-

(i) The public records showed that prior to Lin became a majority shareholder which Lin said was in January 1998, Wang Jiansheng was one of the directors and the company secretary, and the other director was Wang Jiansheng’s brother, Wang Haisheng and the shareholders were the two of them, with the former being the majority shareholder;

(ii) After 18 July 2001, the public records showed that Lin and Vivian were directors and Vivian was the company secretary and the registered office was changed to the Sharp Street Office, and in July 2002, Lin became the majority shareholder with Vivian holding the remaining shares.

449.  Ko claimed she had no knowledge of those changes in directorship and shareholders in City Effort effected in 2001.  However, it was Hui’s case that those company documents filed in 2001 were signed by her with authorisation from Lin[176]. Interesting enough, those signatures in fact were not disputed by Lin to be his own signatures.

450.  Ko was also unable to provide evidence of her alleged payment of HK$500,000 to Lin to purchase the Huhhot Company.  She did not appear to be aware that the registered capital of the Huhhot Company was changed from HK$500,000 in July 1998 to HK$3.3m in December 1998, in that the debt the Huhhot Company owed to City Effort of HK$2.8m was treated as an amount invested by City Effort in the Huhhot Company[177].  However, her signature appeared on a board minutes of Huhholt Company of 30 November 1998 approving the above change[178].  She had also claimed that she did not know that she had been removed as the legal representative of the Huhhot Company in 2001 until 2014, and that her signature on City Effort’s board minutes of 20 December 2001 approving her removal[179] was forged.  Her signature also appeared on a “certificate” with City Effort’s letter head, to certify that Lin was on 11 July 2001 “總經理” of City Effort[180].  She claimed during the trial for the first time that her signature on this certificate was also not hers.

451.  In my view, it would not have been possible that Ko did not know that she had been removed as the legal representative of the Huhhot Company in 2001, if she had indeed been involved in the management and business of the Huhhot Company.  In any event, so far, she had not taken any action to challenge her allegedly unauthorized removal as the legal representative of the Huhhot Company or any action on the alleged forged documents.

452.  Wang Sanhu’s evidence was that Ko had no involvement in the management of the Huhhot Company although her name had appeared on the business licence and public record of the Huhhot Company as “董事長” and “總經理” from 16 July 1998 until 18 June 2002[181]. It was Wang Sanhu’s evidence that Ko was only a nominee for Lin. Wang Jiansheng had not been called as a witness by Ko to support her case, as Wang Jiansheng was on record a majority shareholder of City Effort until 2001.  There was no sufficient evidence to contradict what was said by Wang Sanhu.  Having considered all the evidence, I find there was no suffered evidence that Ko had paid HK$500,000 to Lin to purchase the Huhhot Company. 

453.  Turning back to Gold Glory, as mentioned earlier, in April/May 1998, the company was the registered owner of two properties, namely the Sharp Street Office and the Shenzhen Property.  Although there was no proper valuation carried out by Lin or Ko, the evidence showed that HK$200,000 would be an undervalue of the 190,000 shares.  In any event, Ko was not even aware of the Shenzhen Property, and that she only found out about the sale of the Shenzhen Property in this action.

454.  Further, I find that there was no sufficient evidence that Lin was in need of HK$200,000 and/or HK$500,000 at that time bearing in mind, there were at least 5 other properties with no mortgage and also securities and cash held by Lin and/or his companies.

455.  The Sharp Street Office was used as the registered office for Lucky Ocean[182], Masen[183], City Effort[184] and no rent had been paid by these companies to Gold Glory.  When asked, Ko said there was an oral agreement between her and Lin that Lin could use the Sharp Street Office as registered office of his companies free of rent, as Lin was responsible for paying the mortgage for the Sharp Street Office.

456.  The mortgage of Sharp Street Office was discharged in September 2006 and yet Ko had received no rent thereafter for providing the property as registered office for Lin’s companies. 

457.  There was also a Building Order registered in the Land Registry against the Sharp Street Office in December 2007[185].  When asked how she dealt with this, Ko was vague and said she could not recall.  When asked how rates were paid, Ko said Hui paid as Lin’s companies were using the office.

458.  Had Ko indeed purchased the shares in Gold Glory and had become the majority shareholder, one would have thought she would have taken more interest and/or became involved in the management of or assets of Gold Glory.  Yet, it was quite clear from Ko’s own evidence she in fact knew very little about Gold Glory or its assets.  Further on her own evidence, she had not seen Lin since 2002 until December 2013.  Having considered all the evidence, I find there was no sufficient evidence that Ko had in fact paid HK$200,000 to Lin to purchase the allotted shares in Gold Glory, nor was there any evidence that she had paid any sum to Gold Glory for the allotted shares.  Ko also had little or no involvement in the management of the company.  However, Lin had not sought any declaration that Ko was a nominee shareholder holding her shares for him.  

Knowledge, consent and/or authorisation of Lin

459.  Notwithstanding the Registered Shareholders’ Resolution was invalid, it was Ko’s case, as well as Gold Glory’s case, that the Purported Increase and the Purported Allotment was with the knowledge, consent and/or authorisation of Lin and was carried out pursuant to Lin’s instruction.

460.  Further, it was Ko’s and case that Lin resigned as a director in 17 April 1998 to disassociate himself from the company and Ko was appointed in his place.  Hui’s evidence was that both the 15.04.01 Notification and Lin’s Consent to Act as Director were signed by Hui in Lin’s name but with the knowledge and authorisation of Lin.  As for Ko, she said she was asked by Lin to be a director and complained that she was later removed as a director in 2001 and replaced by Lin without her knowledge and consent.  In any event, Ko had not taken any action against Lin or Hui after she had found out, nor had she made any counterclaim in the Gold Glory Action.

461.  The Hong Kong companies which held assets in April/May 1998 were: (1) Gold Glory (Sharp Street Office and the Shenzhen Property), (2) Lucky Ocean (securities at Wardley and cash), (3) Masen (Regent on the Park), (4) City Effort (shares in the Huhhot Company), (5) Charter Port (6 properties as seen earlier).

462.  As seen earlier in this judgment, the majority of the issued shares of Charter Port were held by Noble City and the majority of the issued shares of Lucky Ocean had been transferred to Hui in June 1996, and City Effort was on public record the company of Wang Jiansheng and his brother. 

463.  Thus out of the 5 Hong Kong companies which held assets, by April/May 1998, Gold Glory and Masen appeared to be the only two companies that Lin was still on public record the majority shareholder and a director.  So far as Masen was concerned, as seen earlier, the other director and shareholder was Lin’s wife.

464.  The 28.05.98 Documents were filed with the Companies Registry on 28 May 1998.  As mentioned earlier, at around that time, on 19 May 1998, there was a similar increase of capital and allotment of 190,000 shares in Masen to Kimrich, and the relevant documents were filed in the Companies Registry on 21 May 1998.

465.  The change of registered office address for Gold Glory took effect on 22 May 1998 and for Masen on 21 May 1998 and both were changed to the address of the Sharp Street Office.

466.  Thus by about end of May 1998, Lin was no longer a director on public record of Gold Glory and Masen, and indeed of any of the other companies, and on public record was either not a shareholder or only a minority shareholder.  Hui and Ko were directors of Gold Glory and Kimrich and Ko were directors of Masen.  The majority shareholder of Gold Glory was Ko, and the majority shareholder was Kimrich.

467.  Then by 23 August 2002, Lin had re-appeared on the public record as a director and/or a majority shareholder.  He was re-appointed as a director in place of Ko in Gold Glory, Lucky Ocean, and Masen on various dates in April/May 2001.  He was also appointed as a director in place of Wang Jiansheng and became a shareholder on public record in City Effort in July 2001 although according to a resume, he was said to have started working for City Effort in 2000[186]. Changes were also effected in the Huhhot Company and on 18 June 2001 Lin became the general manager and legal representative in place of Ko.  As seen earlier, Hui had also transferred back all the shares in Lucky Ocean back to Lin on 23 August 2002. 

468.  Anyway, the changes in the directorships and shareholdings in Gold Glory and Masen filed towards end of May 1998 were all around the time when Lin was emigrating to Australia, and the changes in 2001/2002 were at about the time or not long after Lin had moved back to Hong Kong, although it was not certain as to when exactly Lin moved back[187].  Lin had admitted in the trial to meeting Hui in Los Angeles in June 2001, and it would appear that it would be thereafter that he moved back although he said he had been visiting Hong Kong occasionally when he was living in Australia.

469.  So far as Masen was concerned, as I have said earlier, Hui had maintained that Lin was all along in charge of Masen himself. I have earlier mentioned in relation to the issue over the Post Office Address under the Charter Port Action that since Hui was replaced by Lin as company secretary on 31 December 1992, she had not been a shareholder or director or company secretary of Masen.  There was a similar increase of share capital and allotment of shares in respect of Masen, as in Gold Glory, and Lin’s signature on those documents dated 19 May 1998 (filed on 21 May 1998 with the Companies Registry) were Disputed Signatures.  Hui had admitted that she signed in Lin’s name with Lin’s knowledge, consent and authorisation[188].  There was no sufficient evidence that Hui had anything to do with the increase of nominal capital of Masen and the allotment of the increased 190,000 shares to Kimrich or the appointment of Ko as a director of Masen, and I have found earlier, when dealing with the issue of the Post Office Address in the Charter Port Action that Kimrich was more probably than not nominee of those allotted shares for Lin in Masen.  Lin was the one who received all the net sale proceeds of Regent on the Park.  

470.  I have also earlier accepted the evidence of Hui that she and Ko did not know each other well in 1998.  Mr Cheung submitted that it was only since 2008 that their friendship began to grow[189].  I have accepted their evidence that it was much later than 1998 that they became friendly and close and I find no sufficient evidence that Hui and Ko were “conspiring” or had acted in collusion in 1998 to dilute Lin’s beneficiary interest in Gold Glory or in Masen or for Ko to replace Lin as a director of the two companies, as seemed to be alleged by Lin.

471.  Further, I do not find Lin’s evidence that he had no knowledge, nor did he authorize or consent to the Purported Increase and Purported Allotment in Gold Glory, or similarly in Masen, or of the appointment of Ko as director in place of him, to be credible.  Lin seemed to also dispute his wife’s signature on the written resolution for the allotment of the 190,000 shares in Masen, but there was no evidence at all from his wife Han Zhili. 

472.  I have found that Lin was concerned over the investigations over Fang Dacheng in April/May 1998 and he then left for Australia in May.  I find that more probable than not in May 1998, he was making arrangements for his name to be removed from public records as being a director or a majority shareholder of various companies.  In my view, Lin had knowledge and had consented and/or authorised Hui to proceed and prepare all the necessary company documents for the Purported Increase and Purported Allotment of Gold Glory and for him to resign as a director and for Ko to appointed in his place.  The Registered Shareholders’ Resolution was not properly prepared and without any evidence from Mr Ken Yu or Yu’s Brother or any one of Y K Yu & Co or Mutual Faith, it was not clear who was to be blamed, but this did not mean Lin had no knowledge or did not consent or authorise the Purported Increase and the Purported Allotment or Ko’s appointment as director.  Further, it is my finding that after Lin moved back to Hong Kong, he had authorised Hui to prepare necessary documents for him to be re-appointed as a director of Gold Glory again in place of Ko.  I accept Hui’s evidence that for those company documents in respect of Gold Glory, and Masen, which fell into the Alleged Authorised Signature[190], namely those she had signed in Lin’s name but with his knowledge, consent and authorisation, those were indeed signed with Lin’s knowledge, consent and authorisation.

473.  In particular, the Shenzhen Property was sold by Gold Glory in 2011 and in connection with that sale, Lin together with Hui went to a China Appointed Attesting Officer in Hong Kong to execute various documents for the sale, and amongst the documents attached for attestation was an annual return of Gold Glory on which Ko’s shareholding was stated.  Lin had said he met a lady at the solicitors’ office who did not verify with him each and every document he was presented with.  At the trial, Lin had however admitted that 5 copies of the attested documents were sought by and sent to him in Shenzhen, to be dispatched to estate agent/s for the purpose of the sale.  I do not find Lin’s evidence credible that he did not have knowledge of the contents of those documents.

474.  Further, on Lin’s own evidence, when he found out in November 2013 from Ellen Tsang about the Purported Increase and Purported Allotment, he did not seem to have immediately try to find out from Wang Jiansheng how to contact Ko and as according to him it was only on 5 December 2013 that he met first with Ko, after finding out her telephone number from Wang Jiansheng.

475.  As mentioned earlier, when Lin went to meet with Lee in December 2013, he never told Lee the Purported Increase or the Purported Allotment was without his knowledge or authorization until February 2014. Instead, Lin instructed Lee to prepare the Share Transfer Documents.

476.  Lin had said that when he met with Ko on 5 December 2013, she did not know about Gold Glory, and that he had believed that she was not involved in those changes and that she had agreed to transfer the allotted shares back to Lin, and that was why Lin instructed Lee to prepare the Share Transfer Documents.  It was Lin’s case that it was only on 19 December 2013 that he saw Ko again and asked her to sign the Share Transfer Documents, and that she took them away to consider.  Lin then said after Chinese New Year in early 2014 when he realized that Ko would not sign those Share Transfer Documents, he had asked Wang Jiansheng to arrange another meeting with Ko in a hotel restaurant in Causeway Bay.  Wang Jiansheng was at this meeting as well but left earlier.

477.  Lin further disclosed during the trial that at this Causeway Bay meeting that Ko wanted to discuss consideration for the transfer and that she offered to pay Lin HK$1m to purchase his 9,900 shares in Gold Glory.  Lin never mentioned this in his 4 affirmations or 2 witness statements.

478.  Ko admitted that she met Lin for lunch in early December 2013 and during lunch, Lin told her that he wanted to retire and that his relationship with Hui was bad.  Ko said Lin never mentioned about her transferring her shares in Gold Glory to him.  Ko’s case was also that there never was a second meeting on 19 December 2013 as alleged by Lin, or that Lin had produced to her the Share Transfer Documents or that he had asked her to take away those documents for consideration.  Ko also denied that there was the Causeway Bay meeting in early 2014.

479.  Neither Ko nor Lin called Wang Jiansheng to give evidence.  Having considered the evidence, I find it more probable than not that there would at least further contact between Lin and Ko on about 19 December 2013, as Lin had instructed Lee to prepare the Share Transfer Documents and it must be with a view to ask Ko to sign those documents.  I also find it more probable than not that there was also the Causeway Bay Meeting, as it did not seem likely that Lin could have made up on the spot as to what happened at the meeting, and further the timing appeared to accord with Lin then having to tell Lee in February 2014 about Ko refusing to sign.

480.  To summarise, having considered all the evidence, I accept Hui’s evidence that she was instructed and authorised by Lin to go ahead with the preparation of the relevant documentation for the Purported Increase and Purported Allotment of Gold Glory.

481.  Even though the Registered Shareholders’ Resolution was invalid, I find that all along the Purported Increase/Purported Allotment was with the knowledge, consent and authorisation of Lin and that Lin had agreed to his shareholding in Gold Glory, as well as Masen, to be reduced in accordance with the then advice received from the accountant.  It was Lin who agreed to the share capital of Gold Glory to be increased and it was Lin who approached Ko for her to be allotted the increased shares and to be appointed a director of Gold Glory and when she agreed, Lin then authorised Hui to prepared the relevant documentation.  I also find Lin had consented to and/or authorised both the appointment, and resignation, of Ko as a director.  As I have said earlier, in fact, the 17.04.98 Ordinance Resolution was prepared by Lee based on the current situation in accordance with his then instructions from Lin.  

482.  As Lin himself had said, in December 2013, he thought he would be able to get Ko to transfer back to him the 190,000 shares allotted to her, and that it was only after Ko refused to do so in February 2014 that he then told Lee that the Purported Increase/Purported Allotment was without his knowledge or consent.

483.  The burden was on Lin to satisfy this court that the Purported Increase and the Purported Allotment was invalid or ineffective or done without the company’s authority, or otherwise without his knowledge or consent.  In my view, he had not discharged this burden.

Declarations sought in the statement of claim

484.  All parties agreed that the Registered Shareholders’ Resolution was invalid.  I am prepared to make such declaration, that the Registered Shareholders’ Resolution as signed was invalid.

485.  Lin also sought a declaration that the share capital of Gold Glory remained, and still remains at HK$10,000, and also a declaration that the Purported Allotment was invalid.  In light of my earlier findings that Lin had not satisfied this court that the Purported Allotment or the Purported Increase was invalid, or ineffective, or without company’s authority or otherwise without his knowledge, consent or authorization, I decline to make such declarations. 

486.  Lin further sought orders from this court directing Gold Glory to remove the documents in Schedules 1, 2, 3 and 4 attached to the statement of claim or to rectify as proposed by him, as set out hereinafter.  Lin’s originating summons was issued under sections 42 and 633 of the Companies Ordinance, Cap 622.

Rectification or Removal of Information on Companies Register

487.  There was no dispute that under section 42 of the Companies Ordinance, Cap 622, that the court may, on application by any person, by order direct the Registrar to rectify any information or to remove any information on the Companies Register as provided therein.  Section 633 furthers set out the power of the court to rectify the Companies Register.  Section 42(1) provides as follows:

“The Court may, on application by any person, by order direct the Registrar to rectify any information on the Companies Register or to remove any information from it if the Court is satisfied that –

(a) the information derives from anything that –

(i) is invalid or ineffective; or

(ii) has been done without the company’s authority; or

(b) the information –

(i) is factually inaccurate; or

(ii) derives from anything that is factually inaccurate or forged.”

488.  In relation to section 42, G Lam J in Re China Nice Education Research Publishing Investment and Management Co Ltd [2016] 3 HKLRD 525, HCMP 343 of 2016, judgment dated 25 July 2016, had pointed out that there is an important difference in the Hong Kong provision and the equivalent provision in the UK 2006 Act section 1096(3), and that section 42(1) empowers the court to do one of two things, ie rectifying any information on the register and removing any information from it.  Further, the Learned Judge has said that subsection (4) is important, because it prescribes and restricts how the court’s power to order removal of information may be exercised[191]. 

489.  Subsection (4) provides:

“The Court must not order the removal of any information from the Companies Register under subsection (1) unless it is satisfied that –

(a) even if a document showing the rectification in question is registered, the continuing presence of the information on the Companies Register will cause material damage to the company; and

(b)   the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the Companies Register.”

490.  G Lam J then went on to say:

“17. The effect of the language subsection (4), it seems to me, is to restrict the power to order removal and to make rectification the ordinary remedy where the situation referred to in subsection (1) arises. Removal is to be ordered only if the two additional conditions as set out in subsection (4) are satisfied:

(1) First, the applicant has to show that registration of a document showing the rectification is not good enough; the continuing presence of the incorrect information will cause material damage to the company. Note that it is damage to the company, not to any other person such as the applicant, that needs to be shown.

(2) Secondly, the applicant has to show that the company’s interest (note, again: not any other person’s interest) in removing the information outweighs the interest of other persons in the information continuing to appear on the register.

18. On the terms of section 42(4), the fact that the information is incorrect, or relates to an invalid or ineffective transaction, or has been filed without proper authority of the company in question, is not in itself a sufficient reason for removing it as opposed to rectifying it; nor in my view is the fact that a document is a nullity or is one that should never have been registered had the true facts been known. The structure of section 42 suggests that even forged documents are not necessarily to be removed unless the conditions in subsection (4) are satisfied. By statute, removal cannot be ordered unless, inter alia, it is shown that material damage to the company will be caused by the continuing presence of the incorrect information despite any rectification.”[192]

491.  The Registrar had filed a statement pursuant to section 43(2) of the Companies Ordinance, Cap 622, on 1 April 2014, and a supplemental statement on 8 August 2014 (“Supplemental Statement”)[193] and had made observations on the orders sought by Lin in the statement of claim.  This was on the basis if Lin were to prove his case.  The Supplemental Statement was filed prior to the above mentioned case.  In light of the above quoted passages, it would appear that rectification would need to be considered fist prior to the court could be satisfied in ordering removal. 

Schedule 1

492.  Lin asked this court to direct Gold Glory to rectify the information in the Companies Registry by removing the 2013 Annual Return and by registering an amended annual return made up to 16 April 2013,  reflecting the nominal share capital, the respective shareholding of Lin and Hui prior to the Purported Increase and Purported Allotment, and reflecting that Lin and Hui were the only two directors, as in Schedule 1 of the statement of claim[194].

493.  The Registrar had stated in the Supplemental Statement that if in fact incorrect information was reported in the 2013 Annual Return filed by Smart Fortune, then the registration of the amended 2013 annual return in Schedule 1 would be acceptable to the Registrar save and except that the address of each of the directors reported therein should be their respective residential address[195].

494.  The 2013 Annual Return was listed as item 2 in Schedule 3.  As mentioned earlier, this was prepared by Lee upon Lin’s instructions and based on the then state of affairs.  In light of my earlier findings, although Hui and Ko did not have knowledge, consent or authorize the filing of 2013 Annual Return by Smart Fortune, I am not satisfied that the information in the 2013 Annual Return was factually inaccurate, save that the address of Sharp Street Office was stated to be the residential address of both Lin and Hui, and also the address of Ko, which did not appear to be correct. 

495.  In any event, I am of the view a document showing rectification can be registered.  I am not satisfied at this stage the 2013 Annual Return should be removed, and I am not prepared to direct Gold Glory to register the amended 2013 annual return in Schedule 1.

Schedule 2

496.  There were 3 documents in Schedule 2 namely:

(i) Notice of Increase and the Registered Shareholders’ Resolution, both dated 17 April 1998;

(ii) The 17.04.98 Return of Allotment;

(iii) Gold Glory’s annual returns for 14 years, beginning with the 1^st one dated 16 April 1999, and each for subsequent years, with two in 2011 and the last one being the 2013 Annual Return.

497.  In so far as the Registered Shareholders’ Resolution was concerned, I have said earlier that I am prepared to declare that resolution invalid.  It was invalid as it was signed by Hui and Ko only, and Ko was not yet a shareholder.  However, in light of my finding that that Lin was not able to satisfy this court that he had no knowledge, did not consent nor authorize the Purported Increase and the Purported Allotment, I am only satisfied that the information therein which was factually inaccurate was Ko’s signature as a shareholder.

498.  However, as I have said, the 17.04.98 Ordinary Resolution was prepared by Lee under the instruction and authorisation of Lin. This document stated that at an EGM of the members of Gold Glory duly convened and held at the registered office on 17 April 1998, an ordinary resolution was duly passed, namely “That the share capital of the Company be increased to HK$200,000 by the creation of 190,000 shares of HK$1.00 each to rank pari passu in all respects with the existing ordinary share of the Company and be issued o such terms and at such time or times as the Board shall determine”, and Lin was stated to have signed this resolution as chairman.

499.  Lin had sought an order for the 17.04.98 Ordinary Resolution to be removed.  The Registrar said in the Supplemental Statement that this document was not presented by Smart Fortune to the Companies Registry and was the same as the Registered Shareholders’ Resolution.  However, there was a difference between the two documents, as the 17.04.98 Ordinary Resolution was stated to be signed by Lin as chairman of the meeting and that it was stated that there was an EGM duly held and an ordinary resolution duly passed. 

500.  Lin said the 17.04.98 Ordinary Resolution was a mistake.  As I have found earlier, there was no mistake on the part of Lee and/or Smart Fortune.  I am not satisfied that the information in the 17.04.98 Ordinary Resolution fell within s 42(1).  I see no reason for removal of the 17.04.98 Ordinary Resolution.

501.  Mr Cheung had submitted that pursuant to the previous section 55 (as at 30 June 1997) of the Companies Ordinance Cap 32, only a notice of the increase in capital should be given to the Registrar, and there was no need to send a copy of the ordinary resolution to the Registrar pursuant to section 117. 

502.  I understand that there was no objection from Ko and Gold Glory to the Registered Shareholders’ Resolution being removed. Notwithstanding this, this court must be satisfied of the conditions in section 42(4) before an order for removal can be made. 

503.  The Registered Shareholders’ Resolution was signed by Hui and Ko, both as shareholders.  In light of my earlier findings the only information in the document which was factually inaccurate was that Ko signed as a shareholder, in my view, there is no reason why the information in the Registered Shareholders’ Resolution cannot be rectified by the 17.04.98 Ordinary Resolution or otherwise by a rectification order. 

504.  There was no sufficient evidence that even if the 17.04.98 Ordinary Resolution remains in the Company Register, the continuing presence of the information of the Registered Shareholders’ Resolution will cause material damage to Gold Glory, or that the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the Companies Register. 

505.  As for the Notice of Increase and the 17.04.98 Return of Allotment, in light of my findings, I am not satisfied that the information in these two documents were factually inaccurate or fell within s 42(1), and I see no reason for removal.

506.  I have earlier dealt with the 2013 Annual Return.  So far as the 14 years of annual returns and/or certificates of no change were concerned, I am not satisfied that the information therein was factually inaccurate at the time of their respective filing, or fell within in s 42(1).  I see no reason for removal.

Schedule 3

507.  In so far as Schedule 3 was concerned, I accept Lee’s evidence that item 1, namely the 16. 12.13 Notification, was filed by mistake by Smart Fortune.  I am satisfied that the document was filed without the knowledge, consent or authority of Hui, or Ko, or Gold Glory and the information therein was factually inaccurate, as Hui had not resigned as a director.  There was no evidence that Vivian was served or had notice of Lin’s application, but as she is Lin’s daughter, I assume she has no objection to her father’s application.  There was no evidence as to what interest she has which the court should consider.  There was no document proposed for rectification but even if a document showing rectification is registered, I am prepared to accept that the continuing presence of wrong information as to the identity of directors will cause material damage to the company and the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the Companies Register.  I am prepared to order the removal of this document from the Companies Registry.

508.  As I have said earlier, there was no mistake on Lee’s/Smart Fortune’s part in filing the other 4 documents in Schedule 3.

509.  I have dealt with the 2^nd item, namely the 2013 Annual Return earlier.

510.  Lin had sought the removal of the 3^rd item, namely the 06.12.13 Notification regarding change of registered office.  Hui, Ko and Gold Glory agreed that no valid board resolution was passed to change the registered office of Gold Glory, which they was without their knowledge.  The information in the 06.12.13 Notification was thus factually inaccurate.   However, I am not satisfied at this stage as to why this document cannot be adequately be dealt with by an order for rectification rather than removal, as seen from what was said by G Lam J in Re China Nice Education Research Publishing Investment and Management Co Ltd[196].

511.  As for the 4^th item, Lin now said there was no EGM held on 28 November 2013 and there was no special resolution passed on that day, namely there was no 28.11.13 Special Resolution passed to adopt the new Memorandum and Articles of Association attached to that resolution.  Ko, Gold Glory and Hui agreed.  The effect of the purported new Memorandum and Articles of Association was mainly to allow the company to have only one member and one director, instead of two members and two directors. The information in the 28.11.13 Special Resolution were factually inaccurate and the 28.11.13 Special Resolution was filed without proper authority of the company.  However, I am not satisfied at this stage that this document cannot adequately be dealt with by an order for rectification. 

512.  So far as the 17.04.98 Ordinary Resolution, I have dealt with this earlier.  

Schedule 4

513.  Schedule 4 consisted of:

(i) The 17.04.98 Notification and the 17.04.98 Director’s Consent

(ii) The annual returns dated 16 April 1999 and 16 April 2000

(iii) 15.04.01 Notification

(iv) 03.03.14 Notification

514.  The 17.04.98 Notification was to notify the Registrar and Lin had resigned as director and Ko was appointed in his place, and the 17.04.98 Director’s Consent were signed by Ko to act as director.  In light of my earlier findings, I am not satisfied that the information in the 17.04.98 Notification and the 17.04.98 Director’s Consent was factually inaccurate or they were filed without the company’s authority, or otherwise fell within s 42 (1).  It is my finding that Lin had knowledge of, and had consented or authorized the appointment of Ko in his place and had authorised Hui to filed the 17.04.01 Notification.  I am not satisfied they should be removed.

515.  I have dealt with all the annual returns earlier, including the 1999 and 2000 annual returns.

516.  The 15.04.01 Notification was to reflect the re-appointment of Lin as director in place of Ko and this was signed by Hui in the name of Lin.  The 15.04.01 consent to act was signed by Hui in the name of Lin.  I have earlier found that Lin had knowledge of, and had consented and authorized Hui to prepare necessary documents for him to be re-appointed as director of Gold Glory in place of Ko.  Notwithstanding Ko’s evidence that she had no knowledge of this, she had not taken any action or made any counterclaim, nor had Gold Glory since she had knowledge thereof.  Further, by the 06.04.14 Notification, Ko had removed Lin as director and re-appointed herself in his place, although this only took effect on 3 March 2014. Nevertheless, all this in my view indicated that Ko had accepted Lin’s appointment as a director between 15 April 2001 until 3 March 2014.

517.  Further, Hui was Ko’s witness and she did not dispute Lin’s appointment as a director between 15 April 2001 until 3 March 2014.  In fact, Hui was the one who effected it with the knowledge, consent and authorisation of Lin. 

518.  I am therefore not satisfied that the information in the 15.04.01 Notification and Lin’s consent to act was factually inaccurate or otherwise fell within s 42 (1).  I am not satisfied that the two documents should be removed.

519.  As for the 03.03.14 Notification, this was to remove Lin and re-appoint Ko.  This was signed by Ko and Hui and filed by Mutual Faith on 6 March 2014[197]. According to the current state of affairs, Ko and Hui would have the authority to do so.  Again, in light of my findings, I am not satisfied that this document should be removed.

Conclusion

520.  In light of my findings and indications above, I will ask the parties, including the Registrar, to file further submissions on rectification and on the terms of the order.

521.  The plaintiff should file his written submissions within 21 days and the defendants to file theirs within 21 days thereafter.  Any reply by the plaintiff to be filed within 14 days thereafter. The matter will be dealt with on paper, unless otherwise directed.

Costs of the 4 actions

522.  I direct the matter of costs be fixed for argument in consultation with Counsel’s diaries, estimated length of hearing being one day, and to be fixed after final orders have been made in the Charter Port Action and the Gold Glory Action.  As for the costs of the Registrar in the Gold Glory Action, unless orders for costs are sought against the Registrar, or by the Registrar, or otherwise directed, the attendance of the Registrar at the costs hearing may be excused.

Index