TSANG WOON MING v. LAI KA LIM also known as LAI KAI LIM AND OTHERS

HCCW 407/2016

[2020] HKCFI 1503

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 407 OF 2016

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BETWEEN

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HCA 33/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 33 OF 2017

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BETWEEN

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HCMP 2689/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2689 OF 2017

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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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1.  This is a shareholders’ dispute involving three actions, namely, (1) HCCW 407 of 2016 in which Mr Tsang Woon Ming (“Tsang”) petitions to wind-up Nobility School Ltd (“Nobility”); (2) HCA 33 of 2017 which is an action by King’s Glory Educational Centre Ltd (“Centre”) against Tsang[1] in respect of alleged breaches of fiduciary duties[2]; and (3) HCMP 2689 of 2017 by Nobility against Tsang and King’s Glory Noble Education Group Ltd (“Noble”) in respect of the ownership of the shareholding in Noble.

2.  These actions were tried together, with HCCW 407 of 2016 as the lead action.  For convenience, they are referred to herein as Action 1, Action 2 and Action 3.

Background

3.  In about March 2015, Tsang and 3 friends, namely, Mr Lai Ka Lim (“Lai”), Mr Lin Wai Hsien (“Lin”) (the 1^st and 2^nd Respondents in Action 1) and Mr Ho Man Lung (“Ho”) (the beneficial owner of the 3^rd Respondent in Action 1) agreed to acquire a business known as the King’s Glory Education Group of companies (“Group”) which provided tutorial and educational services in Hong Kong.  The 4 friends were all experienced businessmen. 

4.  The Sale and Purchase Agreement between the former shareholders of the Group was made with Nobility.  Subsequently, Noble was incorporated and used as the vehicle to complete the acquisition of the Group.

5.  The shares of Nobility were initially held by the 4 friends equally, each holding 25% (Ho’s shares were held via his company, Yiligu Investment Ltd (“Yiligu”)).  Later, part of Lai’s shares was acquired by Tsang, and the shareholdings of Tsang, Lai, Lin and Yiligu became 37.5%, 12.5%, 25% and 25% respectively. 

6.  Nobility had no business.  It acted as the holding company of the Group.  Its only substantive asset was the entire shareholding in Noble.  In turn, Noble owned 13 subsidiary companies (“Subsidiaries”) which, inter alia, operated 11 education centres under the “KGE Education” brand. 

7.  Tsang was the sole director of Nobility until February 2018.  He was and is Noble’s sole director.  He was also a director of each of the Subsidiaries.  In respect of 11 out of the 13 Subsidiaries, his directorship ceased in August 2016.  For the remaining 2 companies, his directorship ended in July 2016 and January 2017.

8.  It is common ground that Tsang was the only Shareholder involved in the day to day operation of the Group because the other Shareholders were too pre-occupied with their own business and/or had their personal reason not to become a director of the KGE companies.

9.  Tsang was and is also the sole shareholder of Noble (only 1 share was issued).  Prior to the completion of the acquisition of the Group on 30 April 2015, Tsang executed an Instrument of Transfer and a Bought and Sold Note on 24 April 2015 to transfer his share in Noble to Nobility (“Transfer”).  The transfer documents were duly stamped.  It is not in dispute that the Transfer was never registered by Tsang. Consequently, Nobility’s ownership of the share was not reflected in the Register of Members or the records of the Companies Registry.  This is the subject matter of Action 3.

10.  The parties were unable to turn the Group into a profitable business.  On 4 July 2016, the 4 shareholders signed a Provisional Sale and Purchase Agreement (“PSPA”) to dispose of their interests in the business to a company belonging to Lin (see further below).  Thereafter, Lin took over the running of the business and funded the operation of the same. 

11.  However, in October 2016 Tsang refused to enter into a Formal Agreement for the sale and the transaction was not completed as anticipated.  His reason for doing so concerned the obligations imposed on him under the representations and warranties contained in the Formal Agreement. 

12.  In around November 2016, Lai, Lin and Ho (collectively, “Respondents[3]”) allegedly discovered that Tsang did not register the Transfer and that he remained (and remains) the registered owner of the Noble Share. 

13.  Further, in the process of taking over the affairs of the Group and carrying out due diligence for the sale, Lin (acting via his agent, Ms Li Biyun (“Ms Li”)) allegedly discovered various misconducts and questionable dealings by Tsang during his tenure as director of Nobility and the Subsidiaries, some of which are the subject matters of Action 2.

Action 1

14.  The Petition was issued on 17 November 2016, at the time when the relationship between the parties had broken down.  Tsang alleges that the collective effect of :

(1) The Respondents’ repeated failure to contribute to the operating expenses of the Group;

(2) The Respondents’ attempt to dispose of the entire shareholding in Nobility on unreasonable terms which were prejudicial to his interest and those of Nobility;

(3) The attempt to unfairly expose him to unreasonable risk of post-completion liabilities arising from the sale of Nobility’s shares;

(4) The Respondents had wrongfully divested him of the exclusive control of the management of the Group;

(5) The Respondents had refused to allow him to participate in the management of the Group as one of the directors; and

(6) The Respondents had refused to allow the repayment of personal loans extended by him to the Group

had led to a breakdown of trust and confidence between the Shareholders, and that either his shares in Nobility should be purchased by the Respondents or the company should be wound-up.

15.  It is the Respondents’ case that there was no unfairness or any prejudice to Tsang.  Tsang’s misconducts and breaches of shareholders’ agreement and fiduciary duties to Nobility or the Group was the material and predominant cause of the breakdown of mutual trust and confidence between the Shareholders.  Some of these allegations are also the subject matters of Action 2 and 3.

Action 2

16.  Centre was one of the Subsidiaries.  It was in the business of operating tutorial centres[4].  At the material times, Tsang was one of its directors.  The 2^nd Defendant[5], Mr Yan King Tong (“Yan”), was the Chief Executive Officer (“CEO”) of the Group from 1 May to about 30 September 2015.

17.  Centre alleges that Yan had falsified his employment contract with it and that Tsang, in breach of his fiduciary duties, signed the alleged falsified contract on its behalf knowing that it was not genuine.  Alternatively, Centre claims that Tsang was negligent or reckless in signing the alleged falsified contract.

18.  Centre also claims against Tsang for breach of fiduciary duties by embezzling various sums of petty cash (totalling HK$160,000) belonging to it.

19.  Tsang denies all claims.  He says that the alleged falsified contract was in fact genuine.  Further, the petty cash in question represented loans made to a tutor called Mr Keith Leung (“Leung”) and his team of staff who had been recruited by Centre to provide lessons.  Those loans were validly authorized by Centre.

Action 3

20.  In this action, Nobility seeks a declaration that Tsang is holding the 1 share in Noble (“Share”) on trust for it and is liable to transfer it unconditionally to Nobility upon its demand, which Tsang had wrongfully refused to comply.

21.  Tsang does not dispute that he is holding the Share on trust for Nobility.  His case is that there was an agreed condition that the Share would only be transferred to Nobility upon his cessation as a shareholder of Nobility.

Issues

22.  The issues in these Actions are largely factual.  As in most litigations, the issues were further refined at the time of the trial.  Helpfully, Mr Cheung, who appeared with Mr Yip for Tsang, informed the court that the main issues in Action 1 are: (1) the pressure exerted on Tsang to sell his shares in Nobility at an unreasonably low price; (2) the exclusion of Tsang from Nobility’s management; and (3) the non-repayment of his shareholder’s loan given to Nobility.

23.  Appeared on behalf of the Respondents, Centre and Nobility, Mr Yip (with Ms Liao) informed the court that the breakdown of the parties’ relationship was caused mainly by: (1) Tsang’s refusal to complete the sale of the business to Lin; (2) Tsang’s attempt to wind-up Centre in December 2016; and (3) his refusal to hand back the Share.  However, the Respondents also rely on: Tsang’s misconducts in respect of: (4) Yan’s employment contract; (5) the alleged loans to Leung; and (6) his failure to provide a complete accounting record of the business.

24.  The determination of these issues will resolve Action 1 and 2.  As regards Action 3, the issue is confined to the alleged condition for the transfer of the Share to Nobility.

Witnesses

25.  Tsang gave evidence and called a witness, Ms Cheung Mei Han (“Ms Cheung”).  Ms Cheung was at the material times a shareholder and director of Tin Chak Consultants Ltd (“Tin Chak”) and she was providing accounting service to the Group under contract.  In addition, Yan gave evidence under a subpoena by Tsang.

26.  On the Respondents’ side, the witnesses called were Ms Li (who gave evidence in Shenzhen via video link), Lai, Mr Shum Yee Fai (“Shum”), Ms Yiu Ngar Li (“Ms Yiu”) and Ho.  Shum and Ms Yiu were 2 of the 4 beneficial owners of the Group prior to the sale to Nobility.  They continued to work for the Group after the sale as respectively a Consultant and Chief Operating Officer. 

Applicable principles of law

27.  The relevant principles of company law are not in dispute and may be briefly stated as follows.  

28.  In an unfair prejudice petition, the burden is on the petitioner to establish that (a) the affairs of the company in question have been conducted (b) in a manner which is unfairly (c) prejudicial to the interests of the petitioner or the shareholders generally: Shareholders’ Rights, 8^th edn, Hollington, §7-01.

Affairs of a company

29.  The conduct complained of must be conduct in the affairs of the company, or which is an actual or proposed act or omission by or on behalf of the company. Shareholders’ dealings with their shares in the sense of their private position do not generally constitute conduct in the affairs of the company or acts or omissions by or on behalf of the company: Re Estate Acquisition & Development Ltd [1995] BCC 338.

30.  In Li Guozhu v New Century Iatrical Investment Management Ltd & Ors [2018] HKCFI 868, at §§58-60, it was held that mere sale of shares in breach of a pre-emption right is not the affairs of a company unless it is an element of wrestling control of the company.

Unfairness

31.  Unfairness and prejudice are distinct concepts and both need to be shown. 

32.  Unfairness is an objective concept.  The conduct in question is to be assessed against the legal background of the corporate structure under consideration :

(1) The starting point is to ascertain whether there is any breach of the Articles of Association or any collateral agreements and understandings between shareholders which identify their rights and obligations as members of the company;

(2) The terms of the corporate structure are further subject to established equitable principles which may moderate the exercise of strict legal rights when insistence on the enforcement of such rights would be unconscionable;

(3) It follows that it will not ordinarily be unfair for the affairs of a company to be conducted in accordance with the provisions of its Articles or any other relevant and legally enforceable agreement, unless it would be inequitable for those agreements to be enforced in the particular circumstances under consideration.

See Shareholders’ Rights, §7-01 and Re Asia Television Ltd [2015] 1 HKLRD 607, §§52-53

Prejudice

33.  The Court takes a wide view of prejudice suffered by a shareholder, which is essentially a question of fact.  Prejudice does not have to be demonstrable financial loss, as in a claim for damages.  Where the petitioner cannot show that he is, from a practical point of view, substantially in a worse position as a result of the allegedly unfairly prejudicial conduct, the court will not grant any remedy: Shareholders’ Rights, §7-68.

34.  A buy-out order cannot be made (even with agreement of the parties) unless unfairly prejudicial conduct is proved.  It is not enough merely to show that the relationship between the parties has irretrievably broken down.  There is no right of unilateral withdrawal for a shareholder when trust and confidence between shareholders no longer exist: Shareholders’ Rights, §7-01; Lai Chi Keung & Anor v Wang Zhihua & Anr [2018] HKCFI 867, at §6; Re Barbican Capital Investment Ltd, unrep, HCCW 444/2006, 30 November 2007, at §109.

The petitioner’s conduct

35.  Whilst there is no overriding requirement that the petitioner should come to court with clean hands, the petitioner’s conduct may nevertheless be highly relevant.  In Ng Yat Chi v Max Share Ltd [2001] 1 HKLRD 561, at 572G-I, per Rogers VP :

“Whether one considers this to be an application of the equitable maxim of ‘clean hands’ in my view matters not. The judge below dismissed the application of the maxim on the basis that the petitioner’s misconduct was only relevant if it was causative of the breakdown in confidence on which the petition was based. Of course, if the misconduct were causative of the breakdown, that in itself would be conclusive. But I do not consider that a petitioner can consistently and persistently abuse his position to defraud the Company and then rely upon some prior arrangement based upon mutual confidence, to which he had not adhered, to found his claim.”

Shareholders’ agreement/understanding

36.  Shareholders’ agreements and understandings are not immutable and can change over time.  Agreements between businessmen are ordinarily terminable on reasonable notice and that a departure from arrangements between shareholders as to the conduct of the company’s affairs may not be unfairly prejudicial if caused by a change of circumstances not anticipated by the parties: Hunter v Organic and Natural Enterprise Group Pty Ltd & Ors [2012] QSC 383 at §120; Shareholders’ Rights, §7-98.

Assessment of the evidence

37.  The relevant principles can be found in Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, 8 April 2014, DHCJ Fung SC, §§76-83.

38.  It is fortunate that in this dispute there were material contemporaneous documents.  Such documents and inherent probabilities would constitute the best guide to the court in the fact finding exercise.

Shareholders’ agreement

39.  It is common ground that there was an oral shareholders’ agreement which underpinned the parties’ relationship in respect of Nobility.  The dispute concerns the terms of that agreement. 

40.  It is not unusual for a shareholders’ agreement or understanding to exist in a relatively small business involving a few friends, and I see no reason to doubt that to be the case here.

41.  Tsang’s case is that the financing of the initial and operating capital and the management of Nobility and the Group were agreed between the shareholders by way of oral shareholders’ agreement and partly contained in the Subscription Agreement dated 13 April 2015 by which they acquired the shares in Nobility.

42.  According to Tsang, the terms of the oral shareholders’ agreement were as follows :

(1) Tsang would be the sole director and shareholder in charge of the management and operation of Nobility and Noble;

(2) Tsang would be a director of the Subsidiaries;

(3) Together, the Shareholders would participated in and decide all major decisions relating to Nobility, Noble and the Subsidiaries with openness and transparency, resembling a partnership or family business.  The profits derived from the business of Nobility would be shared by the Shareholders in accordance with their respective shareholding;

(4) The initial working or operating capital for Nobility, Noble and the Subsidiaries would be raised and contributed by the Shareholders pro rata in accordance with their respective shareholding in Nobility.  As the Group as a whole was in financial difficulties from the inception, all subsequent working capital needs for the Subsidiaries would also be raised and paid by the Shareholders in accordance with their respective shareholding;

(5) Initially, the Shareholders would each make a loan of HK$5 million to Nobility pursuant to the Subscription Agreement signed between Nobility and the Shareholders dated 13 April 2015 (Clauses 2.1 and 2.2) (“Initial Contributions”)[6];

(6) Subsequently, Lai was only able to put up HK$2.5 million for his Initial Contribution.  Tsang made up the other HK$2.5 million loan in exchange for 7,500 shares in Nobility which were allotted to Lai[7];

(7) As a result of the above agreement concerning the directorship and management of Nobility and Noble, Tsang became the “front man” of the Group, and he held himself out to the public as the only person who had control and final say in the management as well as being accountable for the business of Nobility, Noble and to a large extent the Subsidiaries.

43.  The Respondents’ case is that there was an oral agreement reached by the Shareholders around the time of acquiring the Group in relation to the operation and management of the Group, which included the following key terms :

(1) All significant business matters should be disclosed to and discussed amongst the Shareholders, and could only be acted upon with the consent of the majority of the Shareholders;

(2) Significant matters included: the making of contracts by entities within the Group; the employment of senior management personnel; and budgeting and future development;

(3) Tsang would initially be appointed as the sole director of Nobility and Noble, as well as one of the directors of the Subsidiaries for the sole purpose of business efficacy;

(4) The Shareholders would inject funds into KGE Group from time to time in accordance with the ratio of their respective shareholding, if there was a genuine and demonstrated need for funds.

44.  There was a deficiency in the evidence of the Respondents in respect of their case on the terms of the Shareholders’ Agreement because Lin did not give evidence[8].  The evidence in question was set out in Lin’s witness statement and the relevant part of which was adopted by both Ms Li and Lai.  In cross-examination, Ms Li said that the terms were agreed between her and the other 3 Shareholders, which was contradicted by all other witnesses for both sides.  Lai did not come up to proof when he was cross-examined on this topic.  Therefore, Mr Cheung had submitted that the court should ignore this part of the Respondents’ evidence.

45.  The difference between the 2 sets of terms is not huge.  More importantly, as will be seen below, the key term relevant to the resolution of these actions is the one concerning the joint participation on major decisions.  There was little difference between the parties on that term.

Action 1

Sale of Nobility

46.  As the evidence unfolded in the course of the trial, it became clear that there is no substance in the allegation that Tsang was put under pressure in the sale of Nobility to Lin’s company or that the sale was undervalued.  To his credit, Tsang accepted in cross-examination that the obstacle to the completion of the sale was the obligations placed on him under the Warranties contained in the Formal Agreement and not the price. Quite fairly, in his final submissions, Mr Cheung had confined his case to undue pressure being put on Tsang in respect of the sale.

47.  To flesh out the relevant backdrop, the Group was not a profitable business at the time it was acquired by the Shareholders. They did not manage to turn it around.  Further, the Shareholders had only provided for 3 months’ operating expenses in their Initial Contributions of HK$20 million (HK$5 million each). 

48.  Tsang said that liquidity problem began to surface at an early stage[9]. In her evidence, Ms Li had expressed much reservation over the existence of liquidity problem.  She questioned whether the HK$20 million had been exhausted at the material times and criticised the lack of sufficient financial information provided by Tsang to demonstrate the need for additional funds. Notwithstanding such evidence, the undisputed facts were that (a) both Tsang and Ho had made substantial additional injection of funds into the business (see further below); and (b) the business had to be sold at a loss in a little over 1 years after its acquisition due to financial crisis. 

49.  Further, there were contemporaneous electronic exchanges between the Shareholders in respect of the need for additional funding.  In light of such contemporaneous record and the said undisputed facts, I have little doubt that liquidity issue began to appear not long after the acquisition.  The precise timing is not important for the present purposes. 

50.  In November 2015, there was an approach by a potential buyer, Mr Liu, who was interested to purchase a 51% stake in Noble. Eventually, an offer of HK$25 million was made by Mr Liu in January 2016. Tsang wanted to accept the offer but he was outvoted by the other 3 Shareholders. This piece of evidence is not controversial and was relied upon by Tsang to suggest that the sale to Lin’s company was undervalued. 

51.  The Group continued to be trouble by liquidity issue, especially during the low season which coincided with the Summer holidays for the schools.  The agreed evidence was that from July 2015 to June 2016 Tsang and Ho had further injected HK$2,580,000 and HK$3,820,000 respectively into the Group.  In June 2016, Lai and Lin had respectively injected HK$160,000 and HK$320,000 into the Group.

52.  After those injections, neither Tsang nor Ho was able or willing to put further funds into the business, and in June 2016 the Shareholders looked for a buyer to disposal of the business.  At Lai’s suggestion, Tsang contacted Mr Liu again about the sale.  He was told by Mr Liu that the matter would have to be assessed afresh.  Subsequently, some financial information was sent to Mr Liu but the matter was not taken further.

53.  On 28 June 2016, Tsang informed the other Shareholders that there was an offer from one Mr Edwin Li to purchase the business at HK$8 million.  When asked about his view on the offer, Tsang expressed affirmatively that it should be accepted despite his reservation on the price.  Tsang pointed out the urgent need for funding, without which neither the staff nor the rent could be paid.  He stated that if the offer was rejected, it was unclear when another interested buyer could be found, and delay would likely diminish their bargaining power.

54.  According to Tsang, Lai and Ho rejected Mr Li’s offer.  They then suggested asking Lin to take over the business, and to which Tsang agreed.  Tsang confirmed in cross-examination that the terms of the proposal which the 3 of them later made to Lin to take over the business were similar to those offered by Mr Li.  Prior to the sale to Lin, Tsang was asked by Ms Li to find out if Mr Li would agree to raise the purchase price.  Mr Li declined to do so.

55.  It should be added that Ms Li’s unchallenged evidence was that prior to the sale to Lin, each of the other 3 Shareholders were asked if they wanted to buy the business.  Tsang was given the first right of refusal by reason of being the largest shareholder. 

56.  For completeness, Tsang disagreed with the warranty provisions contained in the Formal Agreement because he believed that the responsibilities arising thereunder should be borne by Nobility and not by him solely.

57.  However, in light of the above evidence, Tsang’s complaint over undue pressure on him in the sale to Lin’s company (or in respect of the price) does not get off the ground.  I shall have to return to the sale of Nobility in the analysis below.

Management of Nobility

58.  There are 2 limbs in Tsang’s complaint about exclusion from the management of Nobility: (a) he was divested of the exclusive control of the management of the Group; and (b) he was excluded from participating in the management of Nobility[10].

59.  In respect of (a), the proposition that Tsang was divested of the exclusive control over the management of the Group must embrace the implicit suggestion that such control would last for as long as he liked or for an indefinite period of time.  Otherwise, the other Shareholders could remove him with a majority decision. 

60.  I find proposition (a) to be inconsistent with Tsang’s own case that the Shareholders were entitled to participate in all major decisions of the Group.  According to that agreement, if the other Shareholders wanted to become directors of Nobility and to manage it jointly with Tsang, that must be a major decision which they were entitled to make. Hence, proposition (a) could not sit comfortably with joint participation on major decisions.

61.  Further, it is inherently unlikely for the other Shareholders to exclude themselves from the management of the Group indefinitely, especially when the business was newly acquired and how it would develop was unknown.  I can find no good reason why these experienced businessmen would have made such an unusual decision.   

62.  I must also assess this part of Tsang’s case in light of: (i) Lai’s evidence, which I accept, that Tsang happened to be the shareholder who could spare some time to look after the new business, whilst the others were too pre-occupied with their own business; and (ii) the undisputed evidence that Tsang was not familiar with the education business. Such evidence renders it all the more unlikely for the other Shareholders to have given Tsang exclusive management or control over the Group.

63.  Furthermore, Tsang said in cross-examination that it was not the case the other Shareholders had no right to manage the business, but they had no time to do so.  He agreed that if they had the time they could participate in the management. 

64.  In the premises, I have no hesitation in rejecting Tsang’s case of exclusive control. 

65.  In respect of complaint (b), according to the company’s records, Tsang resigned from his directorship in Nobility on 18 February 2017.  The Notice of Resignation was signed by him on 21 June 2017.  In cross-examination, Tsang said that he resigned from the directorship at an AGM on 18 February 2017, and he did so voluntarily.  He said that he was not re-elected as director at a subsequent AGM.  The documentary evidence was that at an adjourned AGM of Nobility on 25 April 2017, Tsang sought to be appointed as a director which was voted down. 

66.  Lin and Ms Li were appointed as directors of Nobility on 23 February 2017.  Another Mr Lai was also appointed on 25 April 2017.

67.  The change of directorship has to be considered in light of the fact that the business was sold to Lin’s company (Doers Youth (Hong Kong) Group Ltd (“Doers Youth”)[11]) pursuant to the PSPA on 4 July 2016.  Putting aside any argument whether the PSPA was binding (see below), it is common ground that Doers Youth took over the business from that day. 

68.  Pursuant to the provisions of the PSPA, Doers Youth was to propose by 30 August 2016 suitable candidates to be appointed as replacement directors for all the KGE companies.  Further, Ms Li’s unchallenged evidence was that in the course of the handover to Doers Youth, Tsang gave her the password to the bank account and told her that he would not return to the office and that she could contact him if necessary.  Tsang’s evidence in cross-examination was that he left in July 2016, which I understood to mean that he had left the Group by that time.   

69.  The refusal to re-appoint Tsang as director of Nobility must be considered in the context of the sale to Doers Youth, as well as the strained relationship between the parties.  The same should be said in respect of Tsang’s complaint about the non-payment of his shareholder’s loans. I can see no documentary evidence about a fallout between the Shareholders until an impasse was development over the completion of the sale to Doers Youth.  Indeed, despite the trying financial circumstances, the Shareholders were working closely together to try to resolve the crisis.  Therefore, I need to examine the failure to complete the sale as planned. 

Failure to complete the sale of Nobility

70.  The PSPA was drafted by Lai and Ms Debbie Au Yeung (“Ms Au Yeung”)[12], who was Ms Li’s assistant.  The agreement embodied in the document was reached after a shareholders’ meeting lasting 10 hours.  It was attended by Tsang, Lai, Ho and Ms Li (as a representative of Lin), with Ms Au Yeung taking the minutes of the meeting.

71.  Although the PSAP only referred to Doers Youth (whose name was wrongly stated) as the buyer and Nobility as the seller, it stated that Doers Youth was to purchase at the price of HK$8 million: the entire shareholding in Nobility; Nobility’s 100% owned shareholding in Noble; and the entire shareholding of all of Noble’s subsidiaries.  Apart from Doers Youth, the PSPA was signed by all 4 Shareholders of Nobility.  Nobility did not sign the agreement. 

72.  Completion date was stated to be 4 July 2016 (the date of the PSPA).  However, there was also a provision for the completion of the share purchase (“完成上述股權交易”) before 31 October 2016, and that from 4 July 2016 Doers Youth would be responsible for the financial and legal obligations arising from the operation of the Group.   

73.  The PSPA further provided that from 4 July 2016 to 30 August 2016 Nobility must assist Doers Youth with the effective and smooth hand over.  During the period from 4 July 2016 to 31 October 2016, Nobility would fully cooperate with the professional due diligence to be conducted over the finance and legal obligations [of the companies].  If any improper account or improper administrative arrangement was discovered, the person responsible for the matter had to answer for the financial and legal consequences. 

74.  The distribution of the purchase price of HK$8 million was provided for in the PSPA.  Save for the payment of a rental deposit owed to Shum, the balance would be distributed amongst the 4 Shareholders to repay their loans[13] to the Group at a discount (the balance was insufficient to enable full repayment).  It is uncontroversial that the sum payable to Tsang was miscalculated and the corrected sum should be HK$2,129,334.75[14].

75.  Finally, there was a Note (“注”) at the conclusion of the PSPA which stated that it was a temporary agreement, and the provisions [of the PSPA] would depend on the formal agreement to be drawn up by solicitor as the final agreement (“這協議為暫時簽署，以上條款最後以律師發出正式協意為最終法律協議”).

76.  On 6 October 2016, a draft Formal Agreement was produced by Doers Youth’s solicitors.  A revised version was produced by Tsang’s solicitors on 21 October 2016.  As indicated above, in the revision Tsang’s personal liabilities as a Guarantor of the transaction were removed and such liabilities became those of Nobility as vendor. 

77.  On 26 October 2016, Doers Youth’s solicitors wrote to Tsang’s solicitors proposing that the sale be proceeded on the terms of the PSPA.  It can be seen from the reply of Tsang’s solicitors of the same date that there was a concern over the liabilities which might arise from any improper account or administrative arrangement (see para 73 above).  A Disclosure Letter was enclosed with the reply with the apparent aim to protect Tsang against such potential liabilities.

78.  The parties were unable to bridge their differences and the sale was not proceeded with on Tsang’s part.  However, both Lai and Ho proceeded with the sale.  The documents for the transfer of their shares were executed and they had received the payments stated in the PSAP. According to the Respondents, the share transfers had not been registered due to Nobility’s inability to produce its audited financial statements by reason of Tsang’s alleged failure to produce various accounting records of the Group.

Breakdown of relationship

79.  I cannot see any contemporaneous document indicating a breakdown of relationship between the Shareholders until the impasse was reached in respect of the completion of the sale.  I have not overlooked the fact that Tsang was chased about various company documents which were required by Doers Youth in respect of the sale.  It was possible or probable that the Respondents’ side were not happy about the situation, but I am unable to see that their relationship with Tsang had broken down for that reason.  The balance of the evidence is that the breakdown was primarily caused by the impasse over the sale.

80.  On 17 November 2016, the Petition was issued by Tsang.  On 12 December 2016, he issued a Statutory Demand against Centre for the repayment of his director’s loans of HK$3 million[15].  These proceedings indicated clearly that the relationship of the parties had broken down by then.

81.  The sale of their shares to Doers Youth indicated that Lai and Ho disagreed with Tsang’s position regarding the completion of the sale of Nobility.  I have little doubt that bringing the Petition had further alienated Lai and Ho from Tsang.

82.  Before I return to the issue of exclusion from the management of Nobility, I should deal with one which had arisen by reason of another action brought by Tsang. 

HCA 2021/2018

83.  At the start of this trial, the court was informed that on 28 August 2018 Tsang took out an action, HCA 2021/2018, against Centre for the recovery of his director’s loan[16] of HK$2.6 million.  Although the figure was a little different, it was the same debt owed to Tsang as stated in para 51 above. 

84.  In its Defence, Centre admitted that additional shareholder’s loans[17] of HK$2.58 million were granted by Tsang.  However, it was Centre’s case that those loans were subsumed under the share of the purchase price to be received by Tsang under the PSPA, which was a binding and enforceable agreement.  Further, Tsang was bound by the accord that his loans would not be separately recoverable, and the accord was satisfied by Doers Youth’s agreement to pay the purchase price.  Furthermore, other defences of waiver, estoppel by convention and assignment were relied upon. 

85.  When the parties were asked by the court why HCA 2021/2018 was not consolidated with the actions before the court, both sides said that those proceedings were at an early stage and it was thought inappropriate to consolidate it with these actions which were ready for trial. The answer is unsatisfactory given that the same solicitors on both sides had been handling these actions and HCA 2021/2018, and the Defence in the latter was filed in November 2018.  Therefore, it must have been abundantly clear for a long time that there is a common issue between Action 1 and HCA 2021/2018, namely, “[w]hether the [PSPA] is a binding agreement”[18]. 

86.  The failure to consolidate HCA 2021/2018 with these actions gave rise to the question whether the common issue should be determined in Action 1 with the risk of inconsistent finding later by the court in HCA 2021/2018.  There is disagreement between the parties whether it is appropriate for this court to resolve the issue.  Taking a position contrary to that of Mr Cheung, Mr Yip submitted that this court should do so.  He said that the determination of the issue in the Respondents’ favour would be a complete answer to the Petition.

87.  I disagree with Mr Yip.  Fundamentally, if there is another action on foot in which various issues concerning the binding effect of the PSPA is going to be adjudicated, it is inappropriate for this court to determine one such issues (whether the PSPA was binding) without regard to the other related issues raised in HCA 2021/2018, eg, estoppel. 

88.  Further, resolving the issue here would not put an end to the dispute over the PSPA.  Centre is the defendant in HCA 2021/2018 but not a party in these actions.  The purchaser under the PSPA was meant to be Doers Youth.  So far, there is no proper attempt to grapple with the resolution of the disputes over the PSPA.  If Lin is serious about his contention that the PSPA was binding, Doers Youth will have to be a party to the action to resolve the disputes, rectification is required regarding the identity of the purchaser and the remedy of specific performance will be needed.  Mr Yip agreed with these observations of the court regarding what will have to be done to resolve the issue in an effective manner.  The court does not deal with an issue in a piecemeal and ineffective manner at the behest of the Respondents. 

89.  Furthermore, the primary issue of the Petition is whether there was unfair and prejudicial conduct.  For reasons stated herein, it is unnecessary to resolve the controversy over the legal effect of the PSPA in the adjudication of the Petition. 

Management of Nobility

90.  Returning to the issue of alleged exclusion from the management of Nobility, I have already dealt with the departure of Tsang from the management of Nobility.  It was a voluntary act on his part. 

91.  As regards the refusal to reappoint Tsang as a director, after his resignation from the directorship in Nobility in February 2017, if not before, the parties’ relationship had broken down.  The refusal did not contribute to the breakdown.

92.  It can easily be understood that the Respondents did not agree to reappoint Tsang in light of the strained relationship, putting aside the allegations about the discovery of various wrongdoings of Tsang after Doers Youth had taken over the business. 

93.  Further, the court should bear in mind that Tsang had declined to complete the sale to Doers Youth in accordance with the terms of the PSPA.  It was a sale he proposed (with Lai and Ho) to Lin.  The other Shareholders were happy to abide by the PSPA, and Lai and Ho were paid what was agreed.  The fact that Tsang had a choice in the matter should be taken into account by the court in judging his complaint. 

94.  Mere exclusion from management is not unfairness if a reasonable offer has been made to buy out the shares of the petitioner: O’Neill v Phillips [1999] 1 WLR at 1107C-1108C per Lord Hoffmann.  In my view, the offer made to Tsang to complete the sale to Doers Youth in accordance with the PSPA should be regarded as such an offer. 

95.  As a consequence of Tsang’s proposal, the shareholding in Nobility and the dynamics between the shareholders had been changed.  It had become a 2 shareholder company, with Tsang holding his 37.5% of the shares and the balance belonging to Doers Youth.  Whether or not the PSPA was binding, this had become a fact.  Since 4 July 2016, the business of the Group had been managed and financed by Doers Youth alone.  The evidence was that HK$8.78 million had been injected by Lin into the business during the period from 5 July 2016 and 9 September 2016[19].  Tsang was not required to contribute to the injection.  As majority shareholder, Doers Youth was and is entitled to dictate the composition of the board of directors.

96.  In these changed circumstances, and guided by the principles set out in para 36 above, I do not believe that Tsang can maintain his entitlement to participate in the management of Nobility.  Put another way, I do not believe that in these circumstances the refusal to reappoint him as a director constituted unfair or prejudicial conduct.   

97.  For completeness, there was an issue concerning the discharge of Tsang from the positions of CEO and Chairman of the Group with effect from 28 July 2016[20]. It is not an independent or standalone complaint but part of the one about exclusion from the management of Nobility.  Save for the use of the term “discharge” in the Memo addressed to the staff from the Accounting and Personnel Department, this was consistent with Tsang’s own evidence that he left the Group in July 2016.  It adds little to the assessment of the complaint over the exclusion from management.   

Repayment of Tsang’s loans

98.  The point made in para 93 above applies equally to this complaint.  Tsang could have had his loans repaid pursuant to the terms of the PSPA just like Lai and Ho. 

99.  Moreover, Tsang is not without remedy.  There is an action by him on foot where his entitlement to be repaid will be tried.   

100.  In fairness to Tsang, I do not believe that he had the agenda to extract more money out of the sale to Doers Youth.  If anything, he might have had second thoughts about the potential liabilities over the “improper account” or “improper administrative arrangement”, especially after having consulted his solicitors.  Given that he was the only shareholder who was responsible for the day to day operation and management of the business, such liabilities would likely fall on his shoulders.  It appears to me that after the impasse was reached on the completion of the sale, Tsang probably felt that he had no choice but to sue for the repayment of his loans.

101.  It is clear from the solicitors’ correspondence exchanged at the end of October 2016 that there was an argument between the parties as to the binding effect of the PSPA.  Their disagreement should be properly resolved by the court where necessary.  There is no reason to believe that Tsang’s loans would not be repaid if the matter was resolve in his favour.  Unless Tsang could say that the position taken by the other side was untenable, which I do not believe to be the case, I do not see how it can be said that not repaying his loans was unfair or prejudicial in these circumstances.

102.  Mr Cheung argued that the PSPA could not work by reason of a number of technicalities, eg, the Shareholders were not party to the agreement.  With respect, I do not believe that these are unanswerable points.  Plainly, the PSPA was not a well-drafted document.  However, each of the Shareholders had signed it to signify his agreement.  I need to say no more than this[21]. In my view, it was reasonably arguable that the PSPA was a binding agreement.

Allegations of the Respondents

103.  Given the court’s rejection of Tsang’s complaints in Action 1, it is unnecessary to consider the counter allegations of the Respondents under this Action (some will be analysed under Action 2 and 3).  However, I would mention 2 matters.  Firstly, despite my finding that the breakdown of relationship was primarily caused by the impasse over the sale, it would not be right to blame Tsang for refusing to complete the sale based on the PSPA.  What was source for the goose was source for the gander.  In light of the Note contained in the PSPA[22], it was not unarguable that the parties had agreed to complete the sale in accordance with a formal agreement.

104.  Secondly, there was a good deal of evidence about the Respondents’ complaint that Tsang had failed to provide a complete accounting record of the business.  I do not find the complaint made out on the evidence.  To begin with, it is not at all clear what was missing from the accounting record and why it was for Tsang to produce it. 

105.  Ms Li was given plenty of opportunity in the witness box about the alleged missing documents.  Her evidence did not sit comfortably with some of the contemporaneous documents.  Some of her complaints were not reflected in those documents or her witness statements. 

106.  It became clear in the course of Ms Li’s evidence that she was well qualified in the management of a company, and there was a divergence between her expectation of what financial information should be produced by a CEO and what Tsang was capable of.  Ms Li referred to the need for an operation report which would set out all kinds of analysis of the finance of the Group, eg, the projection of financial needs, strategy of the Group, the trend for student intake, how the strategy might impact upon the capital requirement. 

107.  In response to questions of the court, Ms Li said that Tsang was able to do deals but not qualified to be a CEO.  That evidence resonated with Tsang’s own evidence that he had done his best but it might not be good enough for some people.  It should not be overlooked that Tsang became the CEO of the Group temporarily after Yan’s appointment was terminated. 

108.  For the evaluation of this complaint, it should be borne in mind, as Ms Li had accepted, that the keeping of the books or accounts was not the duty of the CEO.  There was an Accounting Department[23], which was augmented by the service of Ms Cheung.  Ms Cheung’s evidence that management accounts were produced by her was supported by the documents.  The production of such accounts must involve examining the source documents like receipts.  It is therefore difficult to understand Ms Li’s complaint that all the original receipts were missing. 

109.  Ms Li said that Ms Ah Yeung had tried to ask Tsang to obtain information from Tin Chak but Tsang was uncooperative.  When she was asked whether she had issued any instruction to Tin Chak to provide information, Ms Li said that she needed Tsang’s consent because he was the CEO.  When she was further questioned whether she had asked Tsang for the requisite consent, Ms Li answered in the negative.  Tsang had ceased to be the CEO on 28 July 2016.  This evidence of Ms Li cannot be accepted. 

110.  Ho, who was the person tasked to obtain information from Tsang for the purpose of the sale to Doers Youth, also gave evidence on this complaint but his evidence is likewise unconvincing.  Ho said that the auditors of the Group refused to hand over the accounting records to him because he was not a director.  When he was asked whether the new directors (appointed in February 2017) had tried to obtain the information from the auditors, Ho said that he was not clear about that.  When he was asked whether he had asked the Accounting Department or Ms Cheung for information, Ho said that he did not, and that any chasing of the Accounting Department was carried out by Ms Ah Yeung.

111.  Apart from the unsatisfactory nature of the Respondents’ evidence, as pointed out in Mr Cheung’s final submissions, there were some contemporaneous documents which evidenced the production of accounting documents by Tsang.

112.  For completeness, some of the less serious complaints of misconduct against Tsang, eg, the allegation of receipt of director’s fees without the majority consent of the Shareholders, were not pressed in the Respondents’ final submissions.

Conclusions on Action 1

113.  For the above reasons, none of the alleged unfair and prejudicial conduct has been made out.  It is trite that s.724 of the Companies Ordinance, Cap 622 does not provide for a “no-fault divorce”.  In the absence of unfair prejudice, the mere existence of breakdown of trust and confidence does not entitle Tsang to relief under s.724: see Re Barbican Capital Investment Ltd[24] at §109.

114.  There is no sufficient ground for the court to wind-up Nobility under the just and equitable principles either.  Whilst the court has a wide discretion to grant a winding-up order, there must be sufficient ground to justify the imposition of such a draconian remedy, and the court will be guided by the same factors as the grant of a remedy on the unfair prejudice ground: see Hollington on Shareholders’ Rights, [10-57].

115.  The remedy of winding-up is one of last resort, and an exceptional remedy in the context of disputes between shareholders: Fulham Football Club (1987) v Richards [2012] Ch 333 at §§54-56.

Action 2

Yan’s contract

116.  The allegation of falsified contract is a very serious one.  Such allegation was not put to either Tsang or Yan.  The deprivation of an opportunity to answer the allegation was unfair to both of them, which militates against the acceptance of the allegation.

117.  However, the evidence on the employment of Yan as the Group CEO is actually against the Respondents’ case.  Firstly, the Respondents’ evidence is that the Shareholders had reached an agreement to hire Shum as the CEO, and Tsang was tasked to follow up on the matter.  Tsang said that Shum had declined the appointment.  His evidence was supported by Shum’s admission in cross-examination that when Tsang asked him in April 2015 whether he wished to become the CEO, his answer was that he wanted to be a Consultant.  Shum was duly appointed as the Consultant of the Group.  

118.  Shum tried to wriggle out of the admission in re-examination by, firstly, saying that he was nervous and did not hear the question clearly.  When the court asked him what was unclear about the question, Shum then said that he misunderstood that Tsang was asking about his interest in the post after Yan’s employment as CEO was terminated in September 2015 and not at the time of the acquisition.  He said that he was mistaken about the timing.  The two answers given by Shum were quite inconsistent.  The question put to him in cross-examination was perfectly plain.  He had been in the witness box for a while when the question was asked.  I have little doubt that it was a poor effort by Shum to change his evidence.  It reflected badly on his reliability as a witness.

119.  There is no controversy that Yan was the CEO of the Group from May 2015 until the termination of his employment in September 2015.  There was no contemporaneous complaint by the Respondents about his appointment.  Quite the contrary, Yan’s appointment was announced to the staff on 13 April 2015. 

120.  As regards the alleged falsified contract, it is not disputed that 2 contracts were made with Yan, and the terms of the second contract, which replaced the first one, were considerably better than its predecessor.  Both Tsang and Yan gave evidence that at the time when the second contract was made there was an offer by a competitor of the Group to attract Yan to work for it instead.  Tsang said that Yan was a right choice as the CEO of the Group.  He referred to Yan’s ability to deal with the popular tutors who behaved like superstars.  Yan said that he had a good connection with the popular tutors, and the highest earning tutor of the Group was a former student of his.  I have no reason to doubt such evidence.  Hence, there was a reason for the improvement of Yan’s remuneration package.  There was no sufficient evidence to support the Respondents’ contention that the new package was way out of line.

121.  Importantly, there were contemporaneous WhatsApp exchanges between Nicole Wong of Personnel Department and Ms Cheung concerning the termination payments to be made to Yan.  It was apparent from the discussions that they, as well as another colleague, Mr Norman Lui, were aware that Yan had 2 contracts and that the monthly salary had been increased from HK$50,000 to HK$80,000 under the second contract.

122.  In light of these evidence, the allegation of falsified contract is quite unsustainable. 

123.  I have to say that some of the allegations made by the Respondents against Tsang are simply not properly supported with evidence.  It struck me that there were driven by Ms Li’s overzealous investigation of the affairs of the Group which was fuelled by the breakdown of relationship.  I believe that Lai and Ho simply went along with some of the complaints “uncovered” by Ms Li, eg, when he was in the witness box Lai disassociated himself with the allegation about misuse of petty cash by Tsang; and Ho admitted to knowing little about that allegation save that he was told by a lady from the Accounting Department that she did not know what the petty cash was for. 

Petty cash

124.  Tsang’s case is that the petty cash in question were loans in the form of advancement of salaries made to Leung for hiring his teaching team and preparing teaching material.  His case is consistent with the documentary evidence.  First of all, even on the Respondents’ case, Leung had signed on a contract with Centre, although the contract had not been signed by Centre[25].

125.  The discussions about getting Leung to work for Centre were conducted openly in a WhatsApp group comprised of Yan, Shum, Yiu, Mr Norman Lui, Tsang, Ms Tse (the Chief Marketing Officer of the Group at the material time) and Lai.  Like Shum and Yiu, Mr Lui was a beneficial owner of the business before the acquisition by Nobility, and he remained a director of the Subsidiaries until between June to August 2016 with the exception 1 such companies where he ceased to be a director in February 2018.

126.  Despite the evidence of Shum and Yiu to the contrary, the record of discussions showed that they agreed with the employment of Leung. 

127.  There was a need to keep the joining of Leung confidential because he was still under contract with a competitor.  Expenses were incurred by Centre after Leung had agreed to join it for the production of promotional material for his classes.  Such evidence was consistent with Tsang’s evidence that Leung’s team had started preparing the education material needed, and Yan’s evidence that Centre had begun to “soft-sell” the tutorials to be provided by Leung. 

128.  Further, there were records kept by Centre of the money taken out by Tsang (HK$20,000 per month) with reference to Leung’s name.  It is unlikely for such a trail to be left behind if the money was not taken for a legitimate purpose.  There was also a “Certificate of Loans” by which Leung acknowledged the loans borrowed by him from Centre via Tsang.

129.  Furthermore, the evidence was that Ms Yiu had introduced a firm of solicitors to Leung to assist him in issuing a letter of termination of employment to the company he was under contract with.  The documents suggested that, more likely than not, the fees of the solicitors were paid by Centre, possibly with a view to later reimbursement by Leung.  I have to say that I found Ms Yiu to be evasive in that: (a) she tried to play down the fact that she not only introduced the solicitors but when to their office with Leung; and (b) she tried to evade the question whether the solicitors’ fees were paid by Centre. 

130.  Accusing Tsang of taking the petty case without justification is tantamount to accusing him of theft.  I am simply unable to see the proof of the allegation.  It is inherently unlikely for a man who had invested substantially in a new business to be taking money from it when it was in financial need.  The allegation must be rejected. 

131.  Finally, I see nothing in the Respondents’ complaint that Leung was a bankrupt and Tsang should not have lent any money to him.  Shum and Yiu knew about Leung’s bankruptcy at the time he was recruited, and they agreed with the recruitment.  Tsang said that he did not know about Leung’s bankruptcy at that time[26]. He also said that having been bankrupt was not uncommon amongst the tutors. That piece of evidence was consistent with the fact that both Shum (who was a well-known English tutor) and Yan had been in that position. 

132.  Tsang said that Leung’s request for advancement of salaries was not unique.  Such evidence was consistent with Centre’s records about advancements made to 2 tutors, Mr Siu and Mr Liu, in respectively October 2016 and October 2015.  

Action 3

133.  In my view, Tsang’s case that there was an agreed condition that the Share would only be transferred to Nobility upon his cessation as a shareholder of Nobility (“Condition”) is not one which is inherently probable.  Tsang’s explanation that the Condition was not evidenced in writing due to time constraint, despite the fact that there were solicitors acting for the Shareholders in the acquisition, is hard to believe.  The documents suggested that the involvement of solicitors lasted the better part of 2 months. 

134.  Secondly, the Condition was allegedly agreed at the time when the shares in Nobility were held by the Shareholders equally.  I am unable to see why Tsang would have been given special privilege by the other Shareholders in having the benefit of the Condition.  His explanation that he was acting as the front man which involved big risk and obligations is unconvincing.  Tsang was free to resign as Chairman and director of Nobility. He did not become a temporary CEO until a few months later.  Further, that explanation could not be found in any of Tsang’s 3 witness statements plus 1 affirmation.  Given the primacy of that issue, there was a hollow ring to Tsang’s answer that he had told his solicitors about it. 

135.  Thirdly, the contemporaneous documents suggest that the Respondents were not aware of the fact that the Share was still registered under Tsang’s name until late October 2016 at the earliest :

(i) Tsang attended a meeting of Nobility on 4 August 2016 to discuss the handover to Doers Youth.  Para 2 of those minutes recorded a request to Tsang to find the original Instrument of Transfer of the Share. There was no mention of any trust arrangement;

(ii) The draft Formal Agreement dated 6 October 2016 prepared by the solicitors of Doers Youth stated that Nobility was the shareholder of Noble;

(iii) In an effort to complete the sale, Lin’s solicitors issued a letter dated 28 October 2016 to Tsang requesting a General Meeting of Nobility to vote on, inter alia, “the sale of the entire issued share capital of [Noble] as legally and beneficially owned by [Nobility] to Doers Youth”.

These documents fortified the Respondents’ case that they knew nothing of any trust arrangement and confirmed the lack of credibility in Tsang’s case.

136.  Fourthly, there was no mention at all of the Condition by Tsang in the course of the sale to Doers Youth.  Given his later disagreement with the sale, one would have expected him to raise objection on the basis that the sale of Noble was subject to his consent by reason of the Condition.  I reject Tsang’s explanation that he did inform his solicitors about the Condition but they failed to mention it in any of the correspondence.  It was not the kind of instruction which a solicitor would likely overlook.

137.  Fifthly, there was a 1-page written resolutions dated 24 April 2015 and signed by Tsang as the sole director of Nobility which, inter alia, purportedly recorded or evidenced the Condition as follows :

“It was further resolved that TSANG Woon Ming be authorized to retain all original stamped instrument of transfer, sold note and bought note until the resignation of director or not a shareholder of King’s Glory Noble Education Group Limited by TSANG Woon Ming. TSANG Woon Ming is strictly prohibit to release all those documents to the public which have been held in his hand.”

138.  Tsang said that the document was drafted by a solicitor.  Apart from the fact that it was poorly drafted, the resolution was not consistent with the Condition in that it referred to the resignation of Tsang as a director or his cessation as a shareholder of Noble as triggering event for the release of the transfer documents for the Share held by him.  In addition to referring to the wrong company, the requirement that he remained a director was not part of the Condition.

139.  Tsang was unable to provide any credible explanation for these inconsistencies, eg, when he was taxed about the cessation as a shareholder of Noble as opposed to Nobility, Tsang said that the two companies were the same.  I am inclined to accept the Respondents’ suggestion that the document was concocted by Tsang to support his case.

Disposition

140.  For the reasons stated above, the Petition is dismissed.  So is Action 2.  As for Action 3, I grant the declaration and the vesting order sought under paras (1) and (2) of the prayer in the Statement of Claim in favour of Nobility.

141.  I make the following costs order nisi.  The costs of the Petition be to the Respondents.  The costs of Action 2 be borne by Centre in favour of Tsang.  The costs of Action 3 be borne by Tsang. 

142.  The parties had agreed that this court should apportion the costs of this trial to assist the taxation of costs of these actions.  I prefer Mr Cheung’s assessment of such costs in the proportions of 40%, 40% and 20% for respectively Action 1, 2 and 3.  Such apportionment is accordingly adopted by the court.

143.  Last but not least, I am grateful to all counsel for their assistance.