WONG CHUNG CHI v. YUILLEY BUILDING MATERIALS CO LTD AND OTHERS

HCCW 367/2016

[2019] HKCFI 324

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 367 OF 2016

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J U D G M E N T

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1.  This is the trial of a Petition filed on 20 October 2016 seeking a winding up order in respect of the 1^st Respondent, Yuilley Building Materials Co Ltd (“Company”), based on s.177(1)(f) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 or alternatively unfair prejudice remedies under s.724 of the Companies Ordinance, Cap 622.

2.  The Petitioner and the 2^nd and 3^rd Respondents are brothers and the Company is a family business in which they are the shareholders. 

Background

3.  There is a Statement of Agreed Facts filed pursuant to the directions of this court.  There is also a Judgment of Deputy High Court Judge Sakhrani dated 24 November 2015 (“Judgment”) in respect of an application by the Petitioner for inspection of documents of the Company.  In the Judgment (§§5-31), much of the background facts concerning the Company and the dispute between the 3 brothers in respect thereof can be found.  I shall therefore only set out the essential facts below. 

4.  The Company was incorporated in Hong Kong on 4 March 1988.  It was started by Mr Lau Chai Kan Richard and the father of the 3 brothers[1] (“Father”).  At the time of incorporation, the Company’s share capital consisted of 2 issued shares of HK$1.00 each.  The 2^nd Respondent held 1 share and Mr Lau held the other. 

5.  In 1994, Mr Lau sold his interest in the Company. Since 2 May 1994, the Petitioner, the 2^nd Respondent and the 3^rd Respondent became the only shareholders and directors of the Company[2].  The distribution of shares was respectively 25% (250/1000), 50% (500/1000) and 25% (250/1000).  

6.  The Company’s main business was and is the sale of building and construction materials and decoration works.

7.  By 29 July 1996, the Company had two shops for its business, one in Wanchai and one in Mongkok.  The Petitioner and the 3^rd Respondent were responsible for running the Wanchai Shop whilst the 2^nd Respondent was in charge of the Mongkok Shop. 

8.  Since about 2007, the Petitioner no longer participated in the business of the Company, but he kept his position as a director of the Company until his removal on 21 January 2015.

Issues

9.  There is a Revised Agreed List of Issues filed pursuant to the directions of this court.  There are 3 main complaints advanced by the Petitioner.

10.  Firstly, back in 2000, the Company provided the sum of HK$1.2 million for the down payment of a flat and a car park (“Properties”) acquired by Powerful Ltd.  That company was used as a vehicle by the Company to acquire the properties as investment, says the Petitioner. However, the Properties were subsequently used by the 2^nd Respondent as residence for himself and his family.  It constituted a misapplication of the Company’s assets and breach of fiduciary duties to the Company.  Further, it is alleged that the 2^nd and 3^rd Respondents had been syphoning funds from the Company through payments to Powerful Ltd. 

11.  Secondly, the Petitioner’s shares in the Company had been diluted and he had been excluded from its management.  Such conducts are alleged by the Petitioner to be unfairly prejudicial to him. 

12.  Thirdly, there were other wrongful conducts on the part of the 2^nd and 3^rd Respondents, eg, the cash shortfall at the Mongkok Shop and the purchase of luxurious vehicles and registration mark, which amounted to misapplication or misappropriation of the Company’s assets and unfairly prejudicial conducts to the Petitioner.

13.  On their part, the Respondents contend that the loss of trust between the 3 brothers was caused by the wrongdoings of the Petitioner culminating in his departure from the management of the Company in June 2007.  The Properties were acquired by the 2^nd Respondent with the use of Powerful Ltd as a corporate vehicle.  The dilution of the Petitioner’s shares in the Company was necessitated by the need to raise a loan for the Company to alleviate its financial problem in 2014, and the removal of the Petitioner from the Board of Directors of the Company was to prevent further harassment from the Petitioner which was disruptive to the Company’s operation. 

14.  The resolution of these issues depends on the factual dispute between the parties.  With the exception of the “other wrongful conducts” alleged against the 2^nd and 3^rd Respondents (for reasons which will become apparent), I shall summarise the parties’ cases on the issues.

The Properties

Petitioner’s case

15.  It is an agreed fact that part of the down payment for the Properties (HK$1.2 million) was paid by the Company.  The Petitioner’s case is that he knew and agreed with the purchase as an investment of the Company.  He said that he was told by his brother[3] that much tax had to be paid if the Company was to acquire the Properties, so another company (Powerful Ltd) was used as a vehicle to do so. However, the Petitioner was unable to explain why there would be different tax liability with different company acquiring the Properties, but he said that he was contented to accept what he was told. 

16.  Despite the occupation of the Properties by the 2^nd Respondent and his family, the 2^nd Respondent never paid any rent to the Company.  Instead, the 2^nd Respondent caused the Company to pay a “License Fee” of an irregular amount every month to Powerful Ltd.

17.  In about August 2014, the 2^nd and 3^rd Respondents caused Powerful Ltd to charge the Properties under a second mortgage without notifying the Petitioner or accounting for the funds advanced thereunder.   

18.  The Petitioner’s attempt to have the 2^nd and 3^rd Respondents account for the Company’s funds spent in relation to the Properties was met with their refusal.  Contrary to the common understanding between the parties, the 2^nd Respondent maintains that the Properties belong to him beneficially.  

Respondents’case

19.  In around November 2000, the 2^nd Respondent wanted to purchase a property as he was planning to get married.  The Properties were later purchased for that purpose.  Powerful Ltd was used for 2 reasons, namely, tax advantage and to enhance a successful mortgage application with his elder brother, Mr Wong Chung Yau (“Chung Yau”) who was a civil servant, as one of its shareholders. 

20.  The 2^nd and 3^rd Respondents and Chung Yau duly became the shareholders of Powerful Ltd with each holding 1 share.  The Petitioner was invited to become a shareholder of Powerful Ltd.  He declined because he wanted to purchase a property himself and did not want his credit rating affected.  

21.  The down payment for the Properties, HK$1,260,000, was paid using the funds of the Company as loans to Powerful Ltd (HK$400,000), the 2^nd Respondent (HK$460,000) and the 3^rd Respondent ($400,000), as the 2^nd Respondent did not have sufficient funds. 

22.  The mortgage repayments for the Properties were also funded by the Company as loans to the 2^nd Respondent and Powerful Ltd.  Those loans were repaid under an arrangement whereby Powerful Ltd would license the Properties to the Company as director’s quarters for the 2^nd Respondent and for which a license fee was payable.  The license fee would be set off against the loans.

23.  Before the 2^nd Respondent moved into the Properties, the flat was decorated and for which purpose he obtained a loan of HK$100,000 from Chung Yau. 

24.  The mortgage in August 2014 was obtained because the Company was in financial need.  A loan from Hang Seng Bank was granted to the Company which was secured by a second mortgage against the Properties, as well as personal guarantees by the 2^nd and 3^rd Respondents.

Dilution of shares and exclusion from management

Petitioner’s case

25.  After Mr Lau sold his interest in the Company in 1994, it became a family business operated by the Petitioner, 2^nd Respondent and 3^rd Respondent as the only shareholders and directors of the Company.  It was a firm understanding between the 3 brothers that each would have a right and a responsibility to manage the family business.

26.  In May 2007, the Petitioner discovered a shortfall in cash exceeding HK$100,000 per month in the accounts of the Mongkok Shop, which was managed by the 2^nd and 3^rd Respondents. After he confronted his younger brothers about the shortfall, he was asked to retire from the management of the Company altogether.  Consequently, since about 2007, the Petitioner was ousted from the Wanchai Shop.  Although he kept his position as a director of the Company, it is common ground that he took no part in its management after he was ousted. 

27.  On 14 February 2014, the Petitioner’s shareholding in the Company was diluted by the 2^nd and 3^rd Respondents after the allotment of 1,500 shares and 500 shares to themselves respectively.  This resulted in a dilution of the Petitioner’s shareholding from 25% to less than 9%.

28.  The allotment was done without the Petitioner’s knowledge or consent.  He was never informed of any shareholders or board meeting in relation to the exercise.  

29.  On 5 December 2014, the Petitioner’s solicitors wrote to the 2^nd and 3^rd Respondents seeking particulars of the notice of the meeting.  In reply, it was alleged that the notice was sent to the Petitioner’s usual address.  However, no such notice was received by the Petitioner.

30.  Between October and November 2014, the Company terminated: (i) the Petitioner’s medical insurance; (ii) monthly payment of HK$45,000 to him; and (iii) his company credit card.

31.  On 17 December 2014, a notice of extraordinary general meeting was issued by the Company seeking to remove the Petitioner as a director of the Company.  By a resolution dated 21 January 2015, the Petitioner was removed as a director and secretary of the Company.

Respondents’ case

32.  The accounts at the Wanchai Shop were managed by the Petitioner’s wife (“Lau”).  In around 2006, the 2^nd Respondent became aware that there was regular shortfall in cash deposit compared with cash sales at the Wanchai Shop, and the cash expenditure was abnormally high.

33.  The 2^nd Respondent began to look into the matter and recruited an accounts clerk called Candy to keep track of the records of the Mongkok Shop.  He asked Candy to perform a reconciliation of the deposits of the Company for the year ended 30 April 2007, which revealed a cash shortfall of HK$1,244,780.

34.  In about June 2007, the 2^nd Respondent summoned a meeting in the Wanchai Shop which was attended by the 3 brothers and their elder sister Ms Wong Sau Chong (“Sau Chong”), who also worked for the Company.  Sau Chong was asked by the 2^nd Respondent to attend the meeting because he wanted her, as a senior sibling in the family, to witness the event.

35.  During the meeting, the 2^nd Respondent asked the Petitioner about the cash shortfall.  To which, the Petitioner admitted to having taken HK$500,000 from the Company’s cash sales for his family use.

36.  The 2^nd Respondent decided not to press the matter further because he did not want to cause trouble to his brother.  However, he decided to dismiss the Petitioner and Lau.  The Petitioner agreed to leave but requested the Company to provide him with HK$45,000 of living expenses per month as he had to meet his mortgage commitments and provide for his two children who were still studying.  The 2^nd and 3^rd Respondents agreed.

37.  Shortly afterwards, the Petitioner left the Company.  Neither he nor Lau had participated in the Company’s management or operation since then.

38.  In February 2014, due to the downturn of business and urgent need of injection of funds, the 2^nd and 3^rd Respondents tried to obtain a business loan for the Company from Standard Chartered Bank (“SCB”).  They were informed that such loan required the personal guarantees by the Company’s beneficial owners, defined as all shareholders holding not less than 10% of its shares.

39.  As the relationship with the Petitioner was poor, the 2^nd and 3^rd Respondents decided to call an EGM to allot new shares to themselves such that their shareholdings would exceed than 90%.  However, if the Petitioner was agreeable to providing a personal guarantee for the loan, there would be no need for the allotment of shares.

40.  Notice of the EGM dated 14 January 2014 was sent to the Petitioner’s address as recorded with the Companies Registry.  The Petitioner did not attend the EGM and the special resolution to allot new shares was passed. 

41.  On 24 February 2014, SCB provided a loan of HK$1.4 million to the Company, which was guaranteed by the 2^nd and 3^rd Respondents.

42.  In relation to the termination of benefits for and payments to the Petitioner, it was done in light of the downturn in business of the Company.  At the time, the Petitioner was very well off with two unencumbered landed properties, a flat at Richland Gardens and one at Banyan Gardens. 

43.  Further, the credit card issued to the Petitioner was cancelled because he was incurring monthly expenditure of about HK$15,000 purely for personal purposes.  

44.  As for the termination of the Petitioner’s directorship, he had been dismissed from the Company after admitting to taking HK$500,000 of the Company’s funds.  Also, his removal was to prevent or minimize further harassment from him, which was detrimental to the Company’s operation.

Law

45.  There is no dispute over the applicable legal principles on unfair prejudice.  The following broad principles set out in Hollington on Shareholders’ Rights, 7^th edn, [7-01], were adopted by the Court of Appeal in Re Yung Kee Holdings Ltd [2014] 2 HKLRD 313, §105 :

“(1) To establish a claim under s.994, the aggrieved shareholder must demonstrate 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.

(2) Both element (b), ie unfairness, and element (c), ie prejudice, have to be established. Conduct may be unfair without being prejudicial, and vice versa.

(3) As to (b), ie the requirement of unfairness:

   (i) the concept of unfairness, although objective in its focus, is not to be considered in a vacuum.  An assessment that conduct is unfair has to be made against the legal background of the corporate structure under consideration.  This will usually take the form of the articles of association and any collateral agreements and understandings between shareholders which identify their rights and obligations as members of the company;

   (ii) these are the terms upon which the parties agreed to do business together, which include applicable rights conferred by statute.  The starting point therefore is to ask whether the exercise of the power or rights in question would involve a breach of these terms;

   (iii) these terms include, by implication, an agreement that any party who is a director will perform his duties as a director;

   (iv) these terms are 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;

   (v) agreements and understandings do not have to be contractually binding in order to be enforceable in equity;

   (vi) 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. Unfairness may, to use Lord Hoffmann’s words, “consist in a breach of the rules or in using rules in a manner which equity would regard as contrary to good faith”: see O’Neill v Phillips [1999] 1 WLR 1092 at 1099A; the conduct need not therefore be unlawful, but it must be inequitable.  Although it is impossible to provide an exhaustive definition of the circumstances in which the application of equitable principles would render it unjust for a party to insist on his strict legal rights, those principles are to be applied according to settled and established equitable rules and not by reference to some indefinite notion of fairness;

   (vii) to be unfair, the conduct complained of need not be such as would have justified the making of a winding-up order on just and equitable grounds as formerly required under s.210 of the Companies Act 1948;

   (viii) 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.  It is, however, different if that breakdown in relations then causes the majority to exclude the petitioner from the management of the company or otherwise to cause him prejudice in his capacity as a shareholder.

(4) The court has a wide discretion with regard to the relief to be granted if unfair prejudice is made out, fashioning the remedy to the unfair prejudice which has been made out.”

46.  In respect of delay in making complaint about unjust conduct, although a “just and equitable” winding up petition is not subject to any period of limitation, relief is always within the discretion of the court.  The court should not entertain a petition based on conduct of the company’s affairs in which the petitioner participated without protest years before the presentation of the petition: see Re Grandactual Ltd [2006] BCC 73 at [19]-[20].

47.  As regards the conduct on the part of the petitioner, in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 387G, Lord Cross held that :

“A petitioner who relies on the ‘just and equitable’ clause must come to court with clean hands, and if the breakdown in confidence between him and the other parties to the dispute appears to have been due to his misconduct he cannot insist on the company being wound up if they wish it to continue.”

48.  Even though there is no overriding requirement that the petitioner has to come to court with clean hands, the conduct of the petitioner may: (1) render the conduct on the other side, even if it is prejudicial, not unfair; and (2) affect the relief which the court thinks fit to grant even if the conduct of the other side is both prejudicial and unfair: Re London School of Electronics Ltd [1986] 1 Ch 211, at 221H-222C.

Analysis

49.  The Petitioner was the only witness in support of the Petition.  On the other side, the 2^nd Respondent, Sau Chong and Chung Yau gave evidence.

50.  I have no difficulty accepting, and it cannot seriously be disputed, that since 1994, the Company was run as a small family business by the 3 brothers, who were very close and enjoyed considerable trust and confidence in one another.  They worked for the Company and made their livelihood from that business. 

51.  In this case, the Petitioner relies heavily on the purchase of the Properties in support of his case.  This complaint was made some 15 years after the Properties were purchased.  At the time of the transaction, the brothers enjoyed a very close relationship, and the Petitioner was one of the directors of the Company. 

52.  The Respondents’ case that the Properties were purchased by the 2^nd Respondent in anticipation of his marriage is supported by the undisputed circumstances which prevailed at the time. 

53.  In 2000, the Petitioner already owned a property, whereas the 2^nd and 3^rd Respondents were residing at Sui Wo Court, a property which belonged to the Father’s estate but was transferred to the 2 brothers with the consent of the other siblings without compensation to them.  This reflected favourably on the relationship between the siblings.

54.  The 2^nd Respondent’s only source of income was from the Company (the same applied to the Petitioner and the 3^rd Respondent).  Naturally, he would turn to that source for the funding of the Properties.  There is no reason to doubt the evidence that the Petitioner and the 3^rd Respondent were perfectly agreeable to the arrangement that the Company would assist the 2^nd Respondent in funding the purchase of the Properties.  In return, the 2^nd Respondent had continued to work for the Company, no doubt to the best of his ability as it was his livelihood. 

55.  A few years later, in July 2004, the Petitioner’s monthly drawing from the Company was increased to HK$36,000 from HK$17,000 to enable him to finance the purchase of a second property, whilst the drawings of his brothers remained at HK$17,000 (increased to HK$20,000 from November 2004).  I reject the Petitioner’s evidence that he was paid more because he was hard-working.  Such contention is not consistent with the evidence that the 2^nd Respondent was more experienced in the Company’s business, and that he was in charge of the Mongkok Shop by himself. The increase of the Petitioner’s drawing is consistent with Chung Yau’s evidence that the Petitioner intended to purchase another property, and therefore declined to become a shareholder of Powerful Ltd to avoid any difficulty when he applied for a mortgage himself.

56.  In my view, the purchase of the Properties by the 2^nd Respondent and the subsequent purchase by the Petitioner of another property reflect an arrangement whereby the 3 brothers had each acquired a property, although in the case of the 3^rd Respondent he and the 2^nd Respondent inherited the Father’s property with the consent of the other siblings (the 3^rd Respondent enjoyed sole possession of that property after the 2^nd Respondent moved out), whereas the 2^nd Respondent and the Petitioner each acquired a property with the help of the Company.  I have little doubt that it was a consensual arrangement reached between 3 brothers who enjoyed a very close relationship.

57.  Further, there can be little doubt that the Petitioner, being a director of the small business, must have been aware of the financial arrangements over the funding of the Properties, including the licence arrangement under which licence fees were paid to Powerful Ltd which in turn were used to repay the mortgage.  The licence fees were always disclosed in the Company’s Audited Financial Statements. 

58.  I should add that the licence arrangement was not altogether unusual.  I see no reason to doubt the evidence of the 2^nd Respondent that it was based on the advice from the accountant.  The accounting documents before the court are incomplete, which is unsurprising in light of the staleness of the complaint.  However, the available documents are consistent with the Respondents’ case on the licence arrangement. 

59.  I must bear in mind also that no complaint was made by the Petitioner in respect of the Properties for nearly 15 years. Further, the Respondents’ case is supported by the evidence of both Sau Chong and Chung Yau notwithstanding that they did not know the details on how the purchase was funded.  They had a close relationship with the 3 brothers and it is inconceivable for them not to know over the years whether the Properties belonged to the 2^nd Respondent beneficially or were the investment of the Company.  In the premises (see below on the credibility of the Petitioner as a witness), I am unable to find any substance in this complaint.

60.  Before I consider the other complaints, I shall deal with the dispute concerning the departure of the Petitioner from the Company in 2007.  The Respondents’ case in this regard is supported directly by Sau Chong who was at the meeting during which the Petitioner admitted to having pocketed HK$500,000 of the Company’s money, and indirectly by Chung Yau, who had no interest whatsoever in the Company’s business despite helping out in the Wanchai Shop when he was free.  I fail to see why they would tell serious lies against their own brother.  The only explanation offered by the Petitioner was that they both liked to gossip. 

61.  Chung Yau’s evidence was that he was aware of the shortfall of cash in the Wanchai Shop and he asked the 3^rd Respondent to keep an eye on it.  Although he did not attend the meeting at which the Petitioner was confronted with the shortfall, on the next day he witnessed the Petitioner taking a bundle of cash belonging to the Company before leaving and the money was not subsequently deposited into the Company’s account.

62.  It is unlikely for the Petitioner to have left the Company, which was his livelihood, if it was his younger brothers who had wronged the Company as he alleged.  At the very least, he would have complained to the other siblings and rallied for their support (his evidence was that he did not speak to other family members about the matter).  

63.  The Petitioner was an unimpressive witness.  He was asked in cross-examination about receipts for transportation expenses of the Wanchai Shop in July 2005.  It can clearly be seen that some of the receipts had been altered, and the inflated amount of expenses were out of line compared with other receipts.  The payment vouchers for the expenses were written by Lau.  The Petitioner was defensive in his answers and offered no satisfactory explanation. 

64.  The Petitioner was also questioned about business expense claims in relation to many ferry tickets to Macau.  At least some of the expenses were admittedly incurred for the Petitioner’s family.  His explanation that there was no reimbursement claimed in respect of some of the expenses, and the tickets were merely provided to the Company to enable it to claim tax deduction is not credible.  As to reimbursement of some of the expenses, the Petitioner was unable to explain why the Company should have made reimbursement of personal expenditure.

65.  These evidence support the Respondents’ case on the circumstances whereby the Petitioner was required to leave the Company.

66.  Apart from being unable to explain these expenses, the Petitioner was a hesitant witness.  He was prone to making generalised and unsupported allegations against the 2^nd and 3^rd Respondents, eg, that they also made claims against the Company in respect of their personal expenditure.

67.  In the premises, I am inclined to agree with the Respondents’ case that the loss of trust and confidence between the brothers was the result of the Petitioner’s action which culminated in his departure in about June 2007. 

68.  As regards the dilution of the Petitioner’s shares, he accepted that the Company was in financial need in 2014.  He also accepted that his relationship with the 2 younger brothers had been poor with no improvement over the years.  They had not been on speaking terms since he left the Company. 

69.  I am not therefore prepared to accept the Petitioner’s assertion that he was open to discussion with his brothers about the financial problems of the Company, and was willing to provide a personal guarantee for the Company’s loan.  Quite apart from the speculative nature of the assertion, I am unable to see why the brothers would suddenly mend their relationship or why the Petitioner would have agreed to expose himself to financial obligations over a company in which he had no say.

70.  The Notice of the EGM dated 14 January 2014 (see para 40 above) was sent to the Petitioner’s registered address at Richland Gardens.  Although he was living at Banyan Gardens at the time, the Petitioner’s evidence was that he would have received the correspondence sent to Richland Gardens.  The contention that the Petitioner did not receive the Notice is based solely on his assertion[4]. 

71.  In light of the fact that the Petitioner was not an impressive witness, I am not inclined to accept his bare assertion.

72.  Quite rightly, Mr Chan, who appeared for the Petitioner, accepted that the Company was entitled to allot additional shares for legitimate commercial reason, notwithstanding the dilution of the shareholding of existing shareholders.  This court also bears in mind that the 2^nd and 3^rd Respondents controlled 75% of the shares of the Company, and the allotment exercise would be approved regardless of any disagreement by the Petitioner. 

73.  Further, the 2^nd and 3^rd Respondents had to take on the financial obligations of the Company by providing a personal guarantee over its loan.  Therefore, they were not allotted more shares for free.

74.  In the premises, I see no substance in this complaint either.

75.  I propose to deal quickly with the allegations over the cash shortfall at the Mongkok Shop and the purchase of vehicles and registration mark.  These allegations are not made out on the documents. 

76.  The alleged cash shortfall was boiled down to 2 relatively small sums of HK$30,190.80 and HK$2,044.  Those payments were adequately explained by the evidence of the Respondents. 

77.  The complaints over the cars and registration mark were again raised many years later.  There is no reason to doubt the Respondents’ evidence that the cars belonged to the Company and were used for its purposes.  Even if the cars were used for private purposes from time to time, it would not have been an unusual arrangement and I see nothing sinister in it.  There is no substance in these complaints, which I believe were raised as a mud-slinging exercise.

78.  For completeness, I shall mention 3 more complaints of the Petitioner, the first two were the subject matters of cross-examination of the 2^nd Respondents.  Firstly, the cancellation of the company credit card issued to Petitioner.  It is a matter of the internal management of the Company.  The evidence is abundantly clear that the Petitioner was using the credit card for his private purposes at a time when he was providing no service to the Company.  His allegation that his brothers were also using their company credit cards for similar purposes was not borne out by the evidence.  The cancellation took place at a time when the Company was under financial strain.  There is nothing in the complaint.

79.  Secondly, the complaint of non-disclosure of company documents has not been substantiated.  Mr Chan accepted that disclosure of company documents had been made by the 2^nd and 3^rd Respondents in response to the Petitioner’s request, but said that the disclosure was incomplete.  This complaint was subsequently ventilated before Deputy High Court Judge Sakhrani, and the disclosure ordered was limited to the documents in relation to the acquisition of the Properties (see the Judgment).

80.  Thirdly, I do not see anything sinister in the removal of the Petitioner as a director of the Company.  It was within the rights of the majority shareholders to do so.  I bear in mind also that the Petitioner had not been performing any function as a director since he left the Company in about June 2007.

81.  Finally, despite the 2^nd Respondent’s difficulties with explaining the accounting arrangements concerning the purchase of the Properties, I believe that he was a truthful witness.  As he said in evidence, he only completed his Form 5 education and had been working as a sales person.  He did not impress the court as a person who was keen on the paperwork, and he appeared frustrated by the cross-examination on the details of the Company’s accounts which went back many years.  However, the 2^nd Respondent’s evidence is largely consistent with the available documents.  Importantly, his evidence over the breakdown of trust and confidence between the 3 brothers was supported by Sau Chong and Chung Yau whose evidence I have no reason to doubt.

Conclusions

82.  For these reasons, I find that the trust and confidence between the 3 brothers was loss in 2007 due to the action on the part of the Petitioner.  I see no unfair or prejudicial conduct committed by the 2^nd or 3^rd Respondents against the Petitioner. Accordingly, the Petition is dismissed with an order nisi that the costs of and occasioned by the Petition be paid by the Petitioner.