LI GUOZHU v. NEW CENTURY IATRICAL INV. MANAGEMENT LTD AND OTHERS

CACV 174/2018

[2020] HKCA 481

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 174 OF 2018

(ON APPEAL FROM HCMP NO 3353 OF 2014)

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J U D G M E N T

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Hon Kwan VP:

1.  This is an appeal brought by the petitioner against the judgment of G Lam J handed down on 26 April 2018. The appeal was scheduled to be heard on 13 and 14 February 2020 but the hearing dates were vacated due to the general adjournment of proceedings announced by the judiciary in view of public health considerations. The parties agreed to disposal of the appeal on paper, and leave was given to the petitioner to lodge a submission in reply.

2.  The petition was brought by the petitioner pursuant to sections 724 and 725 of the Companies Ordinance, Cap 622, on the basis that the 2^nd to 4^th respondents (“the respondents”) had conducted the affairs of the 1^st respondent (“the Company”) in an unfairly prejudicial manner.  The judge found the complaints of unfair prejudice established and ordered the respondents to sell their shares in the Company to the petitioner.  The appeal of the petitioner is solely in respect of the directions contained in the buy-out order.

Background

3.  The relevant background matters, taken from the findings in the judgment and documents not in dispute, may be stated as follows.

4.  The petitioner was trained as a Chinese medical doctor and had a good relationship with the local government in Baoying County, Jiangsu Province, China.  There was and is a public hospital there called Baoying Chinese Medicine Hospital (“the Hospital”).  In 2004, the petitioner was approached by government officials to make private investment in the Hospital. The petitioner managed to seek 11 co-investors including the respondents and on 27 May 2004, the 12 of them entered into an agreement for this purpose (“the Cooperation Agreement”), with a total investment of RMB 7 million.  It was agreed that the Company would be used as the vehicle for the joint venture project with the relevant local authority of Baoying.  The Cooperation Agreement provided that if any investor wishes to sell his shares to a third party, the other investors have a right to purchase those shares first on the same terms.

5.  Pursuant to the Cooperation Agreement, the Company was set up in Hong Kong on 18 June 2004.  On 15 November 2004, the Company entered into a joint venture agreement (“JVA”) with the Department of Health of Baoying (“DHB”) relating to the operation of the Hospital for 20 years.  The petitioner, the 3^rd respondent and another investor Zhang Zheng (“Zhang”) were nominated to the Hospital’s management board.  The petitioner worked as the General Administrator of the Hospital from 2004 to 2009.

6.  The judge found that the Company was not a quasi-partnership, and the cooperation of the investors (who took up shares in the Company) was primarily a commercial one based on the express terms of the Cooperation Agreement.  At the time of the initial investment, the investors expected the joint venture project to be profitable, that the Hospital would distribute profits to the Company, and that they would receive dividends from the profits.

7.  Thus Preamble 5 to the Cooperation Agreement estimated the return on investment to be 20 to 30% from the second year onwards and possibly even higher in subsequent years. Clause 11(3) provided that the investors were entitled to dividends in proportion to their capital contributions.  Clause 23 provided that when distributing profits, the Company should retain 20% of the profits towards funds for the development and general welfare of the Company.  Preamble 8 stated that the Company was founded on the success of the joint venture project, which was the first step towards the establishment of a medical group, in preparation for the intended listing of the Company on the Hong Kong Stock Exchange some time in future.

8.  This was also the understanding of the DHB. Under the JVA, it was provided that apart from 20% which would be retained for development, the net profits of the Hospital would be distributed at the end of each year between the Company and DHB in the proportion of 70% to 30%.

9.  Pursuant to the Cooperation Agreement, each of the petitioner and the respondents invested RMB 1 million, resulting in each acquiring 1/7 interest in the Company.  On 10 June 2005, the petitioner, Zhang, the 3^rd and 4^th respondents each agreed to invest a further RMB 500,000 for the purposes of the Hospital.

10.  The Hospital was the only business of the Company and the very reason why the Company was brought into existence.  The investment in the Hospital is also the Company’s only substantial asset. The Company had little activity to conduct except matters relating to the Hospital.

11.  In March 2006, the Bureau of Industrial and Commercial Administration of Yangzhou City, Jiangsu Province (“ICA Bureau”) imposed an Administrative Penalty Decision on the Company[1] and a Reprimand Order and Correction Notice on DHB[2] for entering into the JVA without “the Certificate of Approval for the Establishment of Enterprises with Foreign Investment as well as a business licence”, in violation of the relevant law.  The Company was fined RMB 50,000 and the net profit of the Hospital of RMB 295,968.83 for 2005 was confiscated, apparently for carrying on business as an enterprise with foreign investment without the necessary licence.

12.  From the communications within the management board of the Hospital and with the government authorities in the wake of this event, the petitioner learnt that there was a problem arising from governmental regulations concerning the status of the Hospital.  The problem was not entirely resolved within two months as demanded in the Reprimand Order and Correction Notice.  Discussions with the DHB continued in the few years following March 2006 how to rectify the situation, without success, and those efforts came to a stop when dispute broke out between the petitioner and the respondents in the summer of 2009.  The business licence of the Hospital issued in September 2015 still specified that it was a non-governmental non-profit-making medical institution. The respondents had knowledge of these matters.

13.  There has never been any distribution of dividends by the Hospital and in turn by the Company to the shareholders.  But even the petitioner did not say it would be impossible for the Hospital to distribute dividends in future.  While the respondents and possibly other investors might have been disappointed or frustrated by the absence of return by way of dividends by mid-2009, the judge found that the failure to pay dividends had not been shown to be unfairly prejudicial conduct on the part of the petitioner, as in light of the problems with the status of the Hospital it could not be inferred that the failure to pay dividends was intentionally caused by the petitioner, who was not even shown to be in control of the financial matters.

14.  By early July 2009, the respondents wanted to exit from the investment in the Hospital and they agreed to sell to an outsider, Jiang Wensong (“Jiang”), their equity (RMB 1 million each, plus the later contributions of the 3^rd and 4^th respondents of RMB 500,000 each) at the price of RMB 1.80 per RMB 1.00 invested.  Each of the respondents signed an agreement with Jiang to that effect on 25 July 2009 and on the same date, for the purpose of purporting to comply with the pre-emption provisions in the Cooperation Agreement, the respondents issued a notice to the other investors, including the petitioner, stating falsely that they intended to sell all their shares in the Company to an outsider at three times the value of their investments.  The respondents did this to avoid their shares from being purchased by the petitioner in the exercise of his pre-emption rights.  They considered the petitioner would purchase at RMB 1.80 for each RMB 1.00 invested and so inflated the price to ensure that it would not be attractive to the petitioner.

15.  Having learnt that the respondents were selling their shares to an outsider, the petitioner entered into agreements with other investors on 1 August 2009 to purchase their shares in the Company, at the price of RMB 1.70 for each RMB 1.00 invested.  However, the 3^rd respondent persuaded four of the investors to terminate their agreements with the petitioner and to sell their shares to him instead (which, as between the 3^rd respondent and Jiang, were for Jiang), to assist Jiang in acquiring control over the Company.

16.  On 25 and 26 August 2009, the respondents and other shareholders of the Company passed resolutions (which were invalid) to approve the transfer of equity by the respondents to Jiang and others, to replace the board of directors and to revoke the Company’s nomination to the management board of the Hospital.  As a result, the petitioner was excluded from the management of the Company and the Hospital.  Jiang replaced the petitioner as the General Administrator of the Hospital from early September 2009 to January 2012.  In early September 2011, Jiang was removed from the management of the Hospital as the DHB stepped in and took over.  The local government was in charge between September 2011 and January 2014. It was only in January 2014 that the petitioner was formally reinstated as the General Administrator of the Hospital.

17.  This petition was presented on 30 December 2014.

The judgment and the buy-out order

18.  The judge held that the petitioner’s allegations of unfair prejudice have been made out.  The respondents’ acts were both grossly unfair and seriously prejudicial and involved deceptive practice and a conspiracy.  Specifically,

(1)  they effected share transfer agreements which were in breach of the petitioner’s pre-emption rights under the Cooperation Agreement;

(2)  they procured breach of share transfer agreements between the petitioner and four other co-investors;

(3)  the 3^rd and 4^th respondents acting with others passed resolutions at the company meeting on 26 August 2009 to exclude the petitioner from, and to confer on Jiang and his nominees, management of the Company and the Hospital; the 2^nd respondent’s participation in the course of the conduct was not reduced to any significant extent by his not taking part in the voting on 26 August 2009; and

(4)  the 3^rd respondent made false and misleading statement in an affirmation in January 2010 to assist Jiang’s application to discharge the injunction granted in HCA 2023/2009 against the Company, and this was done as part of the exercise to prevent the petitioner from obtaining remedy to reverse the effect of the appointment of Jiang and the exclusion of the petitioner.

19.  The judge held that this case called for a “clean break” and that the appropriate relief was an order that the respondents should sell their shares in the Company (which amounted to 3/7 of the shareholding) to the petitioner.

20.  On the question of valuation of the shares, the judge rejected the principal contention of the petitioner that the valuation should follow Preamble 4 to the Cooperation Agreement, which provided for a fixed return of 6% per annum on the amount of the investment fund at the time of withdrawal together with the fund as settlement, as the buy-out is ordered by decree of the court, not a sale by operation of Preamble 4. Further, Preamble 4 was acceded to in the context of an agreement that envisaged dividends would be paid to the shareholders every year, with an expected return of 20 to 30% or more from the second year onwards, and is expressly not operable when the Company is operating at a loss[3]. There is no appeal from this ruling.

21.  The petitioner contended in the alternative that the respondents’ shares should be valued at RMB 1.80 per unit, being the price at which they were willing to sell to Jiang in July 2009.  The judge rejected this, as there is no basis to say that this represents the fair value of the respondents’ shares to be bought out by the petitioner pursuant to the court order to be made in April 2018, and the respondents’ capital has been locked in and still forms part of the capital of the Company, which have financed the operations of the Hospital[4].

22.  The judge ordered the respondents to sell to the petitioner their shares at a price to be determined by a valuer or joint valuers and gave directions for this purpose.

23.  For the date of valuation, the judge rejected the petitioner’s submission that the date of exclusion of the petitioner (26 August 2009) should be adopted, as this is not a case where the respondents had wronged the Company by misappropriating its funds or diverting its business opportunities so that a date earlier than the date of the buy-out order might be appropriate, to exclude the effect of the wrongful acts.  The judge again emphasized that the respondents have remained shareholders in the Company and there is no sufficient basis for saying that they should be excluded as outsiders from August 2009 onwards.  He considered it would be fair to order the valuation date to be the date of the judgment (26 April 2018)[5].

24.  The judge made no discount on account of the respondents’ shares being a minority stake.  He also rejected the petitioner’s contention there should be a discount or a specific direction to the valuer to exclude from account the convertibility of the Hospital to a non-public profit-making hospital because it was not fairly raised on the pleading as a complaint of unfairly prejudicial conduct that previous steps to convert the Hospital had been sabotaged by the respondents and evidence on this was scant[6].

25.  The judge also ordered the petitioner to pay the respondents interest on the price of the shares from the date of the judgment until the determination of the price at the rate of 1% above prime per annum, and thereafter at judgment rate until payment[7].

This appeal

26.  The petitioner seeks to set aside the orders as mentioned above and that the following orders be made in lieu in respect of the valuation of the respondents’ shares:

(1)  at RMB 1.80 per RMB 1.00 invested;

(2)  alternatively, as at the date when the petitioner was excluded from the management of the Company and the Hospital (26 August 2009);

(3)  alternatively, as at the date of presentation of the petition (30 December 2014);

(4)  further or alternatively, with specific directions to the valuer or joint valuers to value the Hospital as a non-governmental non-profit-making medical institution and to exclude from the valuation any enhanced value of the shares of the Company that may be attributable to any future conversion of the Hospital into a non-public profit-making hospital, if such enhanced value is found to exist by the valuer or joint valuers.

27.  Six grounds are advanced in the notice of appeal in support of the above orders sought in lieu.

Applicable principles

28.  Before considering the grounds of appeal, I set out the relevant legal principles.

29.  In valuing a company for the purposes of ascertaining the price to be paid for shares to be acquired by one party from another ordered in a petition based on unfair prejudice, the overriding consideration is fairness as between the parties.  Which of the various approaches to valuation of a shareholding should be adopted is to be determined by what fairness in a particular case requires (Re Yung Kee Holdings Ltd [2014] 2 HKLRD 313 at §146).  Which approach should be adopted as appropriate depends on all the circumstances, and the choice must be fair to both parties (CVC/Opportunity Equity Partners Ltd v Demarco Almeida [2002] 2 BCLC 108 at §38).

30.  The statutory framework of the remedies for unfair prejudice confers on the court a wide discretion to do what is considered fair and equitable between the parties in all the circumstances of the case, in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company (In re Bird Precision Ltd [1986] 1 Ch 658 at 669D to E, 672G to H).

31.  The directions for valuation in the buy-out order challenged on appeal were made by the judge in the exercise of his discretion.  The general principles are well established for an appeal against the exercise of judicial discretion.  The appeal court will not interfere unless it be shown that the judge exercised his discretion under a mistake of law or in disregard of principle, or under a misapprehension as to the facts, or failed to take into account any relevant considerations, or took into account irrelevant matters, or failed to exercise his discretion, or that the conclusion he reached in the exercise of his discretion was outside the generous ambit within which a reasonable disagreement is possible.  For statements of the appellate tribunal made in the context of the discretion exercised in the valuation of shares, see Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 at 343; Re Sparkle Consultants (HK) Ltd [2002] 4 HKC 107 at §33.

32.  As regards the choice of the date of valuation, the starting point is that prima facie, an interest in a going concern ought to be valued at the date on which it is ordered to be purchased.  That is subject to the overriding requirement that the valuation should be fair on the facts of the particular case (Re London School of Electronics Ltd [1986] Ch 211 at 224A to B; Profinance Trust SA v Gladstone [2002] 1 BCLC 141 at §60). The judge has correctly stated this principle in his judgment[8].

Valuation at RMB 1.80 per RMB 1.00 invested as the fair value[9]

33.  The arguments advanced by Mr Samuel Chan[10] for the petitioner ran along these lines.

34.  Mr Chan emphasized the wide discretion of the court to do what is fair and equitable in making an order of this nature.  He prayed in aid the statement in Profinance Trust SA v Gladstone at §31 (which was said in a different context, namely, the court’s power to make an order for the equivalent of interest) in support of his proposition that the court has the discretion to make adjustments in valuation, which means that it is “actually valuing shares, not as they are, but as they would have been if events had followed a different course”.

35.  He submitted that the court should value the respondents’ shares at RMB 1.80 per unit as that would have been the fair value if events had followed a different course, and the judge erred in holding that there is no basis to say that the price of RMB 1.80 represents the fair value of the shares ordered to be bought out by the petitioner in 2018.  The judge has found that the respondents were willing to sell to Jiang at RMB 1.80 in July 2009, but falsely stated RMB 3.00 as the unit price to ensure that it would not be attractive for the petitioner to exercise his pre-emption rights. He argued that a fair price in this case should be the same price at which the respondents were willing to sell and the petitioner was willing to purchase in 2009, but for the deception and conspiracy of the respondents. The judge has erred in principle by disregarding the underlying fairness and has failed to put right the unfair prejudice by resorting to the “most straightforward and inexpensive way” of providing for RMB 1.80 as the sale price in the buy-out order.

36.  Mr Chan further contended the fact that the respondents’ capital has remained “locked in and still forms part of the capital of the Company, and thus the Hospital, on which its operations have been financed” (a matter which weighed in the judge’s decision in rejecting his contention to value the shares at the price in 2009)[11] is “self-induced” and brought about by the outgoing shareholders who are guilty of unfairly prejudicial conduct, and should not prevent the court from finding the price of RMB 1.80 as the fair value of the respondents’ shares ordered to be bought out in 2018.

37.  I have mentioned earlier the judge’s reasoning in rejecting Mr Chan’s contentions.  I do not propose to repeat them.  I agree with his reasons there is no basis to say that the price at which the respondents were willing to sell their shares in July 2009 should represent the fair price in the sale and purchase ordered by the court in April 2018.  I do not read the selected statements (said in different fact situations) in the various cases relied on by Mr Chan that the discretion of the court to do what is fair and equitable to both parties in all the circumstances of this particular case must be exercised only in the way he contended, namely, on the footing that the unfairly prejudicial conduct had never occurred.  There is no principle that a respondent guilty of unfairly prejudicial conduct must invariably be deprived of any increase in the value of shares, and regardless of whether such conduct has had an adverse impact on the share value.

38.  It could not be said that the judge has exercised his discretion on wrong principles or has taken into account irrelevant considerations.  I am unable to see what adverse impact the respondents’ unfairly prejudicial conduct has had on the share value.  There is no justification for attacking the holding there is no valid basis for excluding the respondents from the full prospects of the joint venture as a going concern[12].

39.  The judge has found that the respondents’ capital “has been locked in and still forms part of the capital of the Company, and thus the Hospital, on which its operations have been financed”.  Mr Paul Shieh, SC[13] for the respondents has drawn our attention to the audited financial statements of the Hospital for the year 2016, which demonstrated the reality that the capital provided by the respondents helped the business of the Hospital to get off ground and that the capital so provided and any return thereon have all along been “locked in” for the running, financing and development of the Hospital.

40.  Mr Chan argued in his reply submission that the respondents’ investment has all along been “locked in” is “wholly unjustified”, in that the respondents did receive the purchase price for their shares at RMB 1.80 per unit from Jiang as the judge has found that subsequently Jiang actually procured funds to be transferred to the respondents at that price[14]. It was not raised in the notice of appeal that the judge’s holding the respondents’ capital has remained “locked in and still forms part of the capital of the Company, and thus the Hospital, on which its operations have been financed” would be challenged on this ground.  Nor was this ground clearly and properly addressed in the petitioner’s first submission[15].  In any event, the judge also noted[16] in proceedings in the Mainland, it was found by the Intermediate People’s Court of Yangzhou City in December 2013 that the sale of shares by the respondents to Jiang was void. In the absence of an amendment of the notice of appeal, it would not be just to allow the petitioner to rely on this ground.  This is not a matter of technicality.  Matters of fact are involved which this court is unable to resolve properly due to the unsatisfactory manner in which this ground was raised.

41.  For the above reasons, I would reject the petitioner’s contentions under this head.

Earlier date of valuation[17]

42.  In support of the contention that the judge should have used an earlier date of valuation, being the date the petitioner was excluded from management (26 August 2009) or the date of presentation of the petition (30 December 2014), Mr Chan made these submissions.

43.  The choice of a valuation date as close as possible to the actual date of sale is often necessary to protect the interests of the successful and exiting shareholder.  But that is not the situation here.  The judge has erred in principle and should have adopted an earlier date to fairly compensate the petitioner for the past oppression committed by the respondents.

44.  The judge has also misdirected himself in concluding that an earlier date of valuation would have the effect of excluding the respondents “as outsiders from August 2009 onwards”[18], given that the respondents were ready and willing to treat themselves as outsiders as from that time by disposing of their shares to Jiang and handing over the management and control to Jiang and his nominees.

45.  Mr Chan further argued that it would not be fair to choose a date as close as possible to the actual sale, as any increase in the value of the shares close to the time of the actual sale could only be attributable to the efforts of the petitioner as the shareholder remaining in control of the Company since January 2014, when he was reinstated as the General Administrator of the Hospital.  The respondents did not control or manage the Company or its affairs since late August 2009, when Jiang was in control or when the DHB took over in September 2011.  As an alternative to the date of the petitioner’s exclusion, the judge should have chosen the date of presentation of the petition in December 2014, as that was when the petitioner crystallised his position and elected to treat the unfairly prejudicial conduct as destroying the basis on which he agreed to associate with the respondents as a shareholder.

46.  None of the arguments are sufficient for the appeal court to interfere with the judge’s exercise of discretion regarding the valuation date.

47.  The judge has taken into account the matters urged upon him by Mr Chan.  He gave valid reasons for declining to choose an earlier date to exclude the effect of the respondents’ wrongful acts, as this is not a case where wrong was done to the Company by misappropriation of funds or diversion of business opportunities.  Furthermore, the respondents have remained shareholders in the Company and they should not be excluded as from August 2009, for the reasons I have alluded to earlier.  And although the petitioner was excluded from the management in August 2009, he had not been excluded from all the benefits of the Company.  It could hardly be said that the judge has misdirected himself or has erred in principle.

48.  Mr Chan’s persistence that the choice of the valuation date should somehow favour the successful petitioner so as to “put right” the unfairly prejudicial conduct is just missing the point.  This is not a situation where the unfairly prejudicial conduct was shown to have had any adverse impact on the value of the shares.  As mentioned at the outset, the overriding consideration is one of fairness to both parties in all the circumstances.

49.  The contention that any increase in the value of the shares close to the time of the actual sale could only be attributable to the efforts of the petitioner since January 2014 must be rejected for lack of evidential basis.

50.  As for using the petitioning date, I agree with Mr Shieh’s submission that this is not apposite as the present situation is not where the petitioner “elects to treat the unfair conduct of the majority as in effect destroying the basis on which he agreed to continue to be a shareholder, and to look to his shares for his proper reward from participating in a joint undertaking” (Re a Company (No 002612 of 1984) (1986) 2 BCC 99,453 at 99,492-99,493[19], quoted in Profinance Trust SA v Gladstone at §35)[20]. The petitioner is to buy out the respondents and would remain in the Company and he is not looking to cash in on his shares for his proper reward.  In this instance, there are no compelling reasons why the petitioning date as opposed to the date of the buy-out order almost four years later should be regarded as the fair date for valuation.

51.  Mr Chan sought to rely on Vitaly Orlov v Magnus Leonard Roth & Anr [2019] HKCFI 2120 as an example that the date of presentation of a cross petition was chosen notwithstanding that the respondent, who bought out the petitioner, was not seeking to cash in on his shares.  The reasons for choosing the date of the cross petition are peculiar to that case.  Two petitions were presented to the court, in which each sought a buy-out order.  Coleman J found some unfairly prejudicial conduct was made out on each petition.  There was no dispute that the appropriate remedy upon the findings of unfair prejudice in each petition was to order a buy-out and that Roth should buy out Orlov.  The judge did not think it fair or appropriate to choose the date of Orlov’s exclusion from management or the date of Orlov’s petition, for reasons which have no similarity to our case.  He directed that the valuation be by reference to the date of 1 January 2018 rather than the date of the buy-out order because it was only when Roth issued his petition on 22 December 2017 that it became “open common ground that the appropriate way to resolve the disputes was for him to buy out Orlov” (at §381), that it might be thought “a buyout could and should have been effected rather soon after 22 December 2017” (at §383), and essentially from that date “Roth had determined to operate the TCC Group businesses in his way” (at §382). 

52.  I do not think the above case relied on by Mr Chan would assist his argument.

Exclusion of enhanced value attributable to conversion of Hospital[21]

53.  The judge rejected the petitioner’s contention that the valuer should be directed to give a discount to reflect the uncertainty of the Hospital’s conversion into profit-making status during the remaining term of the JVA because this point (that previous steps to convert the Hospital to a non-public profit-making hospital had been sabotaged by the respondents) was not fairly raised on the pleading as a complaint of unfairly prejudicial conduct, the evidence of “what precisely was done” was scant and was not foreshadowed by the petitioner’s affirmations.  He concluded there is no basis to exclude the respondents from the full prospects of the joint venture as a going concern.

54.  Mr Chan sought to challenge the judge’s view that the point was not fairly raised on the pleading. I have considered the passages he relied on in the Amended Points of Defence and Counterclaim of the 2^nd, 3^rd and 4^th respondents[22] and the Amended Points of Reply and Defence of Counterclaim of the petitioner[23].  The petitioner’s pleading merely asserted that DHB “did try to commence the conversion application to turn the Hospital into a for profit making hospital, however, due to the ongoing shareholders dispute within the Company, this effort has now been grind [sic] to a halt”[24].  The judge’s ruling cannot be faulted.  This is a hopeless contention.

55.  Mr Chan’s contention that there is evidence in support of the point he sought to raise is equally without merit.  It cannot seriously be suggested that the evidence was other than scant or that it was not foreshadowed by the petitioner’s affirmations.

56.  He further contended that any successful rectification of the Hospital’s status in future can only be attributable to the petitioner’s efforts without any involvement of the respondents and so the respondents ought not be entitled to benefit from their own wrongs by obtaining “the full prospects of the joint venture as a going concern”.  This is in essence a repetition of the point he has been making under the foregoing heads, which I have already dealt with.  I do not find it necessary to deal with the additional argument of Mr Shieh in the amended respondents’ notice about the common intention of the parties in the Cooperation Agreement to run the Hospital business for profits.

Setting aside the award of interest[25]

57.  The last point may be dealt with shortly as it is wholly without merit.

58.  The award of interest on the price of the shares is from the date of judgment until the determination of the price at 1% above prime per annum and thereafter at judgment rate until payment.  In other words, the award is not in respect of the pre-judgment period or what has been characterized as “quasi-interest” (ie not awarded qua interest), which serves as a proxy to measure the increment in value of the outgoing shareholder’s investment in the company and in an appropriate case to reflect the fact that the remaining shareholder has had the use of the other’s investment since the valuation date (Re Lehmanbrown Ltd, CACV 272/2011, 13 March 2013, at §§90 to 96; Vitaly Orlov v Magnus Leonard Roth & Anr at §398).  The judge’s award of interest to run from the date of judgment is on the usual basis and wholly unexceptional. There is no basis to interfere with his discretion in this respect.

Conclusion and costs

59.  For the above reasons, I would dismiss the petitioner’s appeal. Costs of the appeal should follow the event.  I would make an order nisi that the petitioner should pay the respondents’ costs of this appeal, with a certificate for two counsel.

Hon Cheung JA:

60.  I agree with the judgment of Kwan VP.

Hon Au JA:

61.  I agree with the judgment of Kwan VP.