PEREGRINE INVESTMENTS HOLDINGS LTD. AND ANOTHER v. ASIAN INFRASTRUCTURE FUND MANAGEMENT CO. LTD. L.D.C. AND OTHERS

HCA 2853/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2853 OF 1998

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JUDGMENT

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1. This is an interesting case involving the following issues:-

(1) were shares in the 1st defendant company ("AIFMC") which were held by the 2nd plaintiff company ("PII") the assets of its ultimate holding company the 1st plaintiff company ("PIH"), PII being merely the nominee or bare trustee of PIH?

(2) if the answer to question (1) is "Yes", was the transfer of

those shares, effected under an agreement made by PII that upon a petition for PIH's winding-up it would offer the shares in AIFMC to other shareholders in that company (AIFMC), a disposition of PIH's property and thus void under s.182 Companies Ordinance, Cap. 32?

(3) even if the answer to question (1) is "No", was that agreement to offer the shares in AIFMC at par value (being lower than their true value) void as being contrary to what has been called the "anti-deprivation" principle at common law, i.e. that as a matter of public policy, the court would regard as void a provision that an insolvent person's property is to pass to another where that would deprive his creditors of the full value of that property?

(4) was there a conspiracy to injure PIH?

Background Facts

Plaintiffs

2. The issues arose in the following way. PIH was incorporated in Bermuda. In the early 1990's, it carried on business primarily in Hong Kong, operating as a merchant and investment bank. It was at the head of a large group of companies commonly referred to as "Peregrine". There were more than 250 companies in the group, which were divided into 5 streams according to the nature of their business, viz. securities, corporate finance, fixed income, fund management and direct investment. PIH's role was as a treasurer or banker for the companies in the group.

3. The present action involves PII, one of the companies in the Peregrine group in direct investment. PII was incorporated in the BVI in August 1994. Its only issued share was acquired by Peregrine Venture Capital Ltd ("PVC") in September 1994. PVC, also a BVI company, was a wholly owned subsidiary of PIH.

Set-up

4. In about 1993, Peregrine was interested in setting up an infrastructure fund in Asia, the purpose being to achieve long term capital appreciation with an objective of a net return in excess of 20% per annum.

5. Peregrine started making arrangements for this purpose. It approached Mr William Liley who had substantial experience in infrastructure projects in the United States, the Middle East and Asia. Mr Liley was put on the Peregrine payroll, he operated out of a Peregrine office, and his expenses were paid by Peregrine upfront.

6. Mr Liley got together a team of personnel to source investment opportunities and potential investors.

7. It was learnt that Frank Russell Company, which was a respected investment adviser for pension funds in the United States, had a similar idea of setting up a China infrastructure fund, so they joined forces with Frank Russell Company.

8. Other potential investors included a company connected with Mr George Soros, the Asian Development Bank and the International Financial Corporation, a division of the World Bank. In the end, there were more than 20 potential investors.

9. Throughout this initial period of organization, Peregrine provided logistical support and office accommodation, and paid expenses upfront until the fund came into existence. PIH was also responsible for the Placing Memorandum. It is not disputed that PIH played a leading role in the setting up of the fund.

The Asian Infrastructure Fund

10. On 9 November 1993, the Asian Infrastructure Fund ("the A Fund") was incorporated in the Cayman Islands. Its sponsor was PIH, with Frank Russell Investments (Cayman) Ltd ("Frank Russell") as co-sponsor.

11. Frank Russell played an important part in initiating client contact and the active co-ordination of marketing to those clients using personnel from Frank Russell and the Peregrine group.

12. As for PIH, it is common ground that its role in the promotion and the establishment of the A Fund and its successful management thereafter was extremely important as the name and reputation of Peregrine in Asia attracted investors and inspired confidence in the fund.

13. The Fund Shareholders Agreement for the A Fund was executed on 28 October 1994. The initial capital commitment was US$250m. PII's shares however represented only a 4% interest in the A Fund.

AIFMC

14. The A Fund was to be managed by a management company, AIFMC, which was incorporated on 15 March 1994 in the Cayman Islands.

15. According to the Placing Memorandum, AIFMC would have sole investment discretion for the A Fund, and would make all decisions affecting assets in the Fund's portfolio under the supervision of the Fund's board and in accordance with the Fund's stated policies.

16. However in reality it was intended that all day to day work in the management of the fund would be undertaken by AIFMC's wholly owned subsidiary the 7th defendant company ("AIFAL"), a company incorporated in Hong Kong. There were no Peregrine personnel in AIFAL, which employed Mr Liley and his team.

17. AIFMC would be rewarded by a substantial management fee plus an opportunity to receive distributions under carried interest shares given to AIFMC under the Fund Shareholders Agreement.

18. There was some competition for the shares of AIFMC. Initially, Peregrine and Soros had hoped to own this company themselves, but the other potential investors in the fund obviously considered that this company would be a profitable enterprise and were eager for the opportunity to join it.

19. Eventually, there were 6 shareholders in AIFMC - PII holding 31.5%, the 2nd defendant SFM Advisory Holdings L.P. ("SFM"), a company associated with Mr Soros, holding 30.25%, the 3rd defendant Frank Russell holding 19%, the 4th defendant the International Finance Corporation holding 9.5%, the 5th defendant Remedial Management Ltd (a company owned by Mr Liley) holding 5% and the 6th defendant the Asian Development Bank holding 4.75%.

20. Of these AIFMC shareholders, PII, Frank Russell, the International Finance Corporation and the Asian Development Bank were shareholders of the A Fund. As for SFM, an affiliate Asian Infrastructure Development Fund Ltd, was a shareholder of the A Fund. Mr Liley and his company did not have any interest in the A Fund, although AIFMC had the opportunity to earn carried interest from the Fund.

21. The par value of the shares of AIFMC allotted to PII was US$3 150, but PII has received dividends in 1996 and 1997 of more than US$5m. It is these shares held by PII in AIFMC that is the subject-matter of the present action (settlement having been reached by the parties in respect of the shares held by PII in the A Fund and the Asian Infrastructure Fund Telecommunications Fund, a fund set up later).

22. The directors of AIFMC were 7 individuals, 2 nominated by PII, and 1 each from SFM, Frank Russell, the International Finance Corporation, the Asian Development Bank, and Remedial Management, although management operations were directed by AIFAL .

PII

23. As noted above, PII held shares in the A Fund and in AIFMC. It is agreed between the parties that PII had no staff, no office, and no bank accounts (until 1998), and that its financial records revealed no expenses of its own.

24. It is also common ground that the subscription money for the shares in AIFMC held by PII in the sum of HK$2 433 771.89 (or US$314 925) was paid by PIH on 27 October 1994, but PII was debited with this sum via PVC. The subscription monies for the shares in the A Fund held by PII were also paid for directly by PIH, and PII similarly debited. All other expenses relating to the investment in AIFMC and the A Fund on the part of PII's shareholding were paid directly by PIH, and PII debited via PVC.

Documents

25. The key documents governing the relationship between the various parties to the A Fund and AIFMC were all executed on 28 October 1994. It is obvious that they have to be read together for an understanding of the relationship between the various parties.

- Fund Shareholders Agreement

26. The "Fund Shareholders Agreement" was made between the A Fund, PIH as Sponsor and Frank Russell as Co-Sponsor, and the shareholders of the Fund. Therefore both PIH and PII were parties, PIH as sponsor and PII as shareholder.

27. This agreement contained terms setting out the business of the Fund and in respect of its operations, which will not be set out here. However, the following clauses are relevant to one or more of the issues in this action.

28. One of the recitals in the Fund Shareholders Agreement was that at date thereof, 1 share in the Fund was registered in the name of PII, a wholly owned subsidiary of PIH, and that PII had made a loan of US$ 5m. to the Fund.

29. At cl. 2.1.1, PIH represented and warranted to the shareholders that PII "is the sole beneficial owner of the issued and allotted Share [in the Fund] free from all liens, charges, encumbrances or other third party rights".

30. At cl. 13.5, it was agreed that "each of the Sponsor and the Co-Sponsor shall not, and shall procure that its Affiliates shall not, transfer or dispose of the Shares [in the Fund] or its shares in the Manager [AIFMC] (except to a person controlling, controlled by or under common control with, the Sponsor or Co-Sponsor, as the case may be) without a Super Majority Consent".

31. I pause here to note that it has been submitted on behalf of the Plaintiffs that the phrase in cl. 13.5 "its shares in the Manager" showed that those shares belonged to PIH. With respect to Mr Tong SC counsel for the Plaintiffs, I do not agree. As a matter of language, the words "its shares in the Manager" could be a reference to an affiliate's shares in the Manager. "Affiliate" was defined in the Fund Shareholders Agreement as a subsidiary or holding company. Therefore, PII was PIH's affiliate within the meaning of the agreement.

-Management Agreement

32. There was also executed a Management Agreement between the A Fund and AIFMC. This agreement contained terms as to the appointment and function of AIFMC, its powers and obligations, and its remuneration.

-Investment Advisory Agreement

33. By an Investment Advisory Agreement, AIFMC appointed AIFAL its Investment Adviser to render investment advice to AIFMC in connection with the A Fund. As noted above, there were no Peregrine personnel in AIFAL.

-Managers Shareholders Agreement

34. This agreement was made between AIFMC, PII and the other shareholders in AIFMC, i.e. the 2nd - 6th defendants. PIH was not a party.

35. This document set out the agreement between the shareholders regarding, amongst other things, transfer of interests and termination. Certain clauses are relevant to the issues in the present action.

36. One of the recitals was that at the date thereof, 2 shares in AIFMC had been issued, 1 in the name of PII and 1 in the name of Remedial Management Ltd, Mr Liley's company.

37. Clause 2.1 contained a representation and warranty by PII to the other parties that PII and Remedial Management "are the beneficial owners of the two issued and allotted shares free of all liens, charges, encumbrances or other third party rights".

38. Clause 9 set out the terms for the transfer of interests in the shares of AIFMC. Briefly, cl. 9.1 provided (with an exception for the International Finance Corporation and the Asian Development Bank, which is not relevant for present purposes) that a shareholder shall not transfer any of its shares until after the earlier of the end of the Commitment Period and the date on which AIFMC deemed the Fund is fully invested or committed to invest. Further, the prior written approval of the majority of the non-transferring shareholders was required.

39. Subject to those restrictions, cl. 9.2.1 provided a scheme for the transfer of shares. A "proposing transferor" should give a Transfer Notice to AIFMC, stating the name of the proposing transferee and the sale price. The sale price should be the "fair price of the shares being sold on a going concern basis between a willing seller and a willing buyer", as determined by an independent chartered accountant. An offer should then be made to the other shareholders pro rata to their commitments, the offer being open for acceptance within a period of 30 business days after the determination of the sale price. If the shares were not taken up by the other shareholders, the proposing transferor would then be at liberty to transfer the shares to the proposing transferee at a price not less than the sale price as determined.

40. Clause 14 however provided a different regime for transfer of shares in certain circumstances. This was the regime under which the purported transfer of PII's shares in AIFMC took place and which the Plaintiffs claim this action is void.

41. Clause 14.2 provided:-

"If a Shareholder (the "Defaulting Shareholder") and/or any Affiliate thereof which is a party to the Fund Shareholders Agreement:

14.2.1 commits a material breach of its obligations under this Agreement ...

14.2.2 makes an assignment for the benefit of creditors generally or fails to pay its debts generally as they become due; or

14.2.3 suffers any distress... ; or a petition is presented or an order is made or a resolution is passed for the winding -up of the Defaulting Shareholder or such Affiliate;

then any of the other Shareholders (a "Non-Defaulting Shareholder") may serve a notice in writing (a "Default Notice") to the Defaulting Shareholder. The Default Notice shall unconditionally constitute the Company [AIFMC] as the agent of the Defaulting Shareholder for the sale of the Sale Shares as defined below in accordance with the provisions of this clause" (emphasis added).

42. Clause 14.3 then provided:-

"Within 30 days of receipt of a Default Notice the Company [AIFMC] shall make an offer to the Non-Defaulting Shareholders by notice in writing (the "Transfer Notice") to sell to the Non-Defaulting Shareholders pro rata to their Commitments the Shares of the Defaulting Shareholder and any Affiliate of the Defaulting Shareholder at the par value thereof (in either case these Shares are referred to as the "Sale Shares"). To the extent that any Non-Defaulting Shareholder does not take up its pro rata entitlement to purchase the Sale Shares such Non-Defaulting Shareholder may at its sole discretion transfer its entitlement to the other Non-Defaulting Shareholder(s)" (emphasis added).

43. Clause 14.4 provided that within 30 days of receipt of the Transfer Notice, the Non-Defaulting Shareholders should notify the Company (AIFMC) whether they wished to purchase the Sale Shares.

44. Clause 14.5 provided that within 7 days of the Non-Defaulting Shareholders notifying the Company (AIFMC) that they wished to purchase the Sale Shares, the Defaulting Shareholder or the Company on its behalf should execute the necessary instruments of transfer of the Sale Shares in favour of the other shareholders.

45. Clause 14.6 provided that if the Company [AIFMC] did not receive offers from the Non-Defaulting Shareholders for all the Sale Shares it may offer the unsold Sale Shares "to any other person at the par value thereof ... " (emphasis added).

46. Pausing here, a number of points should be noted about this clause which are relevant to the issues in this action.

47. First, cl. 14.2.3 applies even where a petition has been presented not against a shareholder of AIFMC, but against any affiliate which was a party to the Fund Shareholders Agreement. Thus, it applied where a petition was presented against PIH, and not against PII. (Similarly it would have applied if a petition had been presented against the affiliate company of SFM which held shares in the A Fund).

48. Secondly, the presentation of a petition did not automatically bring about the offer for transfer of shares. Under cl. 14.2.3, the other shareholders could choose whether to serve a "Default Notice" or not.

49. Thirdly, cl. 14 did not bring about a forfeiture of the shares by the company (AIFMC).

50. Fourthly, the clause merely provided that the shares would be offered for sale. The shares would not be transferred unless and until there was an acceptance of that offer. If the other shareholders chose not to purchase the shares, AIFMC could then offer them to outsiders. If no outsiders were interested, i.e. if the offer for sale was not accepted by anyone, then presumably the shares would remain the property of the shareholder in question.

51. Hence the shares were not subject to a determinable interest, coming to an end upon the presentation of a petition. The shareholder's interest in the shares would only determine when there was an acceptance of his offer for sale.

52. Fifthly, it is not disputed that there was nothing in AIFMC's articles of association dealing with the cl. 14 situation. This was in contradistinction with a transfer under cl. 9, which was dealt with in the articles.

53. Another part of cl.14 which is relevant to this action is cl.14.8, which provided that if at any time before the earlier of the end of the Commitment Period and the date on which AIFMC deemed the Fund is fully invested or committed to invest (i.e. the same period as in cl. 9.1), PIH or any company controlling, controlled by or under common control with PIH ceased to own beneficially the entire issued share capital of PII, or Soros Fund Management ceased to control SFM, then PII or SFM should be treated as a Defaulting Shareholder and the provisions of cl.14 should apply.

54. In other words, after the relevant period, PIH would be free to transfer PII away from the Peregrine group without loss to PII of the shares in AIFMC.

55. Finally it should be noted that cl. 18 provided that the Managers Shareholders Agreement constituted the entire agreement between the parties and cancelled any prior agreement or understanding.

Subsequent events

56. In the following years, AIFMC was clearly successful and paid substantial dividends to its shareholders. Dividends amounting to US$ 5m. were paid in March and August 1996 and February and September 1997 for the shares held by PII.

57. These dividends were paid directly into the bank account of PIH. However it is agreed between the parties that in PIH's books, PIH credited PVC with these payments, and in PII's books, the payments were credited to itself. Although the books of PVC are incomplete, there is a record of one dividend payment debiting PIH and crediting PVC, and then debiting PVC and crediting PII.

Asian Infrastructure Fund Telecommunications Fund

58. In 1996, PIH sponsored another fund, the Asian Infrastructure Fund Telecommunications Fund ("the T Fund"). There was a similar set-up, save that in the management company for the T Fund (AIFTFMC), the shareholders were PII, Frank Russell and LTB, a company controlled by the management executives.

Winding-up of PIH

59. On 13 January 1998, a petition for the winding-up of PIH was presented in Hong Kong. A similar petition was presented in Bermuda on 19 January 1998.

60. On 13 January 1998, the court in Hong Kong appointed three partners of PricewaterhouseCoopers joint provisional liquidators of PIH. This was followed by a similar appointment by the court of Bermuda on 19 January 1998.

Effect on AIFMC

61. On 13 January 1998, Mr Ted Rule the managing director of AIFMC wrote to Soros Capital (the contact for Asian Infrastructure Development Fund Ltd, a shareholder of the A Fund and an affiliate of SFM) about the impact upon the Fund of "Peregrine's receivership", or more precisely, the petition for PIH's winding-up.

62. This letter is significant as a contemporaneous record of the effect of PIH's insolvency on the Fund and AIFMC. Mr Rule wrote:-"it is important to note that despite the fact that Peregrine is a leading shareholder of the AIF Management Company, the direct effects of its receivership are relatively small. AIF is capitalised by all of its shareholders - Peregrine's holding in the fund is only $20 million or 2.5% out of US$779.5 million. AIF Management Company is funded by your management fees and is therefore shielded from the effects of Peregrine's receivership. It is also true to say that in a management sense, AIFMC has operated independently of Peregrine for some years. We have obviously consulted but we have worked out of separate premises and the great bulk of our investments have been sourced via the AIFMC management team. Thus although we will clearly regret the loss of their support and counsel, real direct effects will be minimal and the main source of deals will remain as the management team ...In summary, Peregrine's receivership, whilst a disappointment, has only limited effects on the operations of the Fund" (emphasis added).

Dealings with PII's shares in AIFMC

63. On 15 January 1998, SFM served a Default Notice on PII "under section 14.2 of the [Managers Shareholders] Agreement ... for the reasons stated under Section 14.2.3 with respect to Peregrine Investment Holdings Limited".

64. On 20 January 1998, Mr Ted Rule writing on behalf of AIFAL circulated a Briefing Paper to the directors of the A Fund on the appointment of a liquidator for PIH. In relation to the effects on the Fund, it was noted that the (provisional) liquidator had already indicated that he did not intend to default on drawdowns and that he would be disposing of PII's interest in the A Fund either before the default period or in due course.

65. In relation to the effects on AIFMC, he noted that PII's share in the management fee income in 1997 was US$1.6m. and reported that a Default Notice had been served by SFM. He then observed that AIFAL's management team had no shareholding in AIFMC and put forward a proposal attributed to Frank Russell that the A Fund board recommend to AIFMC's shareholders and board that "a significant proportion of Peregrine's forfeited shares in AIFMC be allocated to the management team".

66. On 5 February 1998, AIFMC sent a Transfer Notice to the other shareholders offering PII's shares at par value. The resolution of the AIFMC board for this to be done was passed on 9 February 1998, having been circulated by fax.

67. On 9 February 1998, PIH's provisional liquidators informed Jason Glover of AIFAL that they would challenge any attempt to transfer PII's shares in AIFMC.

68. On 10 February 1998 however PII's shares in AIFMC were purportedly transferred at par value to the other shareholders (the 2nd - 6th defendant companies) by means of various notices and instruments of transfer signed by AIFMC as agent for PII.

69. On 13 February 1998, PII was informed of the transfers which were for the total consideration of US$3 150.

Proceedings

70. On 24 February 1998, the court in Hong Kong gave leave to PIH's provisional liquidators to commence this action. The next day a writ was issued.

71. On 18 March 1998, PIH was wound-up by the court. On 3 April 1998, Mr Kenneth Morrison was made receiver ad litem to assume the conduct of this action on behalf of the plaintiffs.

Issue (1) - was PII a bare trustee or nominee for PIH?

72. The first issue in this action is whether PII was merely a bare trustee or a nominee of PIH, such that the shares in AIFMC were in fact PIH's own property.

-Bare trust

73. It has been submitted on behalf of the Plaintiffs that there was a bare trust because the investment in AIFMC was PIH's, and that it was only as a consequence of internal corporate structuring that the shares became legally vested in PII. It was submitted that the beneficial entitlement to the shares in AIFMC never changed.

74. The fundamental assumption of this submission is that PIH had acquired the beneficial title to the shares in AIFMC for itself first, and then merely caused the legal title to the shares to be vested in PII.

75. I do not think that that assumption can be made. AIFMC was incorporated in March 1994, and as at 28 October 1994, only two shares had been issued, one to PII and the other to Remedial Management. Clause 2.1 of the Managers Shareholders Agreement contained a representation and warranty by PII to the other shareholders that it was " the beneficial owner" of the share "free of all liens, charges, encumbrances or other third party rights". Although PIH was not a party to the Managers Shareholders Agreement, it must have been aware of the contents of the Managers Shareholders Agreement (including that representation and warranty) because of the character and close connection of the 4 documents executed that day. Indeed Mr Eric Wei signed the Fund Shareholders Agreement on behalf of both PIH and PII, and the Managers Shareholders Agreement on behalf of PII.

76. As for the rest of the shares allotted to PII, it is true that payment for them was made by PIH, but an inference of trust cannot be drawn from those payments when the books of both PIH and PII showed that PII was debited with those payments, as considered later in this judgment.

77. Therefore, I cannot see any grounds for a finding of a bare trust based on an assumption that PIH had first acquired the beneficial interest in the shares in AIFMC and then had only the legal title in the shares vested in PII.

-Nominee

78. In considering the Plaintiffs' case that PII held the shares in AIFMC as a "nominee" for PIH, one must first consider what is intended to be meant by that term.

79. If what is meant is that PII was the agent of PIH, then there would have to be some evidence of an agreement, express or implied, of an intention, on the part of principal and agent, to create that relationship (Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia and others [1998] 2 BCLC 485, at 494 quoting Garnac Grain Co Inc v H M F Faure & Fairclough Ltd [1967] 2 All ER 353 at 358, [1968] AC 1130 at 1137).

80. I cannot find in the present action any words or conduct by PII and PIH creating such a relationship.

81. In any event it would appear that the Plaintiffs' submission was essentially that PII was PIH's nominee in the sense of being a "front" or a "mere facade" for PIH. Mr. Tong SC for the Plaintiffs submitted that to ascertain if PII was operating on its own behalf, or on behalf of PIH, the court should ask six questions posed in Smith, Stone and Knight Ltd. v City of Birmingham [1939] 4 All ER 116.

82. In that case, property which was being compulsorily acquired was owned by the parent company but was let to a subsidiary. The parent company claimed compensation for removal and disturbance. The authority raised the point that that claim must be made by the subsidiary itself, in which event the authority would escape paying compensation by virtue of a statutory provision.

83. Atkinson J asked himself six questions in order to ascertain whether the subsidiary was carrying on the business as the parent company's business or as its own. First, were the profits treated as the profits of the parent company? Secondly, were the persons conducting the business appointed by the parent company? Thirdly, was the parent company the head and the brain of the subsidiary? Fourthly, did the parent company govern the adventure, decide what should be done and what capital should be embarked on the venture? Fifthly, did the parent company make the profits by its skill and direction? Sixthly, was the parent company in effectual and constant control?

84. However it should be noted that in asking those questions, Atkinson J's purpose was to find out who was occupying the property where the business was carried on, as compensation was payable for disturbance in occupation. Atkinson J found that the occupation by the subsidiary was in order to render service to the parent company, and by drawing an analogy with a servant's occupation of premises (that occupation being in law the occupation of the master), he found that the parent company was the appropriate party to claim compensation for disturbance (at 121).

85. Similarly, DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852 was another case of compulsory acquisition. The property in question had been licensed to a subsidiary, which had no separate business operation and which was controlled in every respect by the parent company.

86. The Court of Appeal held on the facts of that case that it was permissible to pierce the corporate veil and to treat the group as a single economic entity for the purpose of enabling them to obtain compensation payable for disturbance.

87. Goff LJ emphasized (at 861) that he relied on the facts of the particular case. He said:-

"I would not at this juncture accept that in every case where one has a group of companies one is entitled to pierce the veil, but in this case the two subsidiaries were both wholly owned; further, they had no separate business operations whatsoever; thirdly, in my judgment, the nature of the question involved is highly relevant, namely, whether the owners of this business have been disturbed in their possession and enjoyment of it".

88. The nature of the question involved in both Smith Stone & Knight v Birmingham and DHN was:- who was in occupation of the property and had been disturbed by the compulsory acquisition. The tests applied in those cases cannot therefore be regarded as appropriate in the present case, where the issue is more straightforward, i.e. who owned the shares in AIFMC.

89. In the present case, the evidence does not justify a finding that the shares in AIFMC were held by PII as a "mere facade to conceal true facts" enabling PII's corporate veil to be pierced (Woolfson v Strathclyde Regional Council (1978) SC 90). The principle that a company is a separate legal entity, established in Salomon v Salomon & Co Ltd [1897] AC 22 remains the general rule, and the court should be cautious not to confuse a "legal entity" with an "economic entity".

90. None of the cases referred to me has gone so far as to suggest that where property is held by a wholly-owned subsidiary (which by its nature is controlled by its parent company) that without more is sufficient to lead to a finding that it is a mere nominee for its parent. In Adams v Cape Industries plc [1990] 1 Ch 433, Scott J cited The Albazero [1977] AC 774 which stated as one of the "fundamental principles of English law long established" that

"each company in a group of companies is a separate legal entity possessed of separate legal rights and liabilities so that the rights of one company in a group cannot be exercised by another company in that group even though the ultimate benefit of the exercise of those rights would enure beneficially to the same person or corporate body irrespective of the person or body in whom those rights were vested in law".

91. On the evidence in the present case, PII was one of 250 companies in the large enterprise that was the Peregrine group, which was involved in many different business operations in various forms. PII's business was simply the holding of shares in the A Fund and AIFMC. Actual management of the fund was undertaken by AIFAL. As such, PII's operations were simple and it did not need individual staff or office accommodation. Its board of directors was comprised of individuals. As considered below, it had its own profit and loss account.

92. Mr Morrison in his Witness Statement and Mr Tong SC in his submissions relied on a number of documents written before the execution of the Managers Shareholders Agreement, and afterwards in relation to the set-up of the T Fund, to support their contention that the investment in AIFMC was understood to belong to PIH.

93. However one must look at the nature of those documents, and the background against which they had been written, to see if the writer had been focussing on specifically identifying the owner of the shares in AIFMC, or generally the group of which it was a part.

94. It was obvious that the name "Peregrine" was used often in negotiations to denote the group. Whilst the other shareholders may have desired PIH's involvement in the A Fund and AIFMC, that did not mean that they could or did insist that the actual participant had to be a mere nominee of PIH, so long as it was within PIH's corporate control.

95. It is true that in a letter to the International Finance Corporation dated 5 February 1994, Mr Claude Charles of PIH said that PIH would maintain its shareholding in AIFMC until IFC no longer owned any shares. No doubt the purpose of that letter was to assure the other potential shareholders of AIFMC of PIH's continued interest in the direction of the Fund.

96. However, it is clear from the documents that by the summer of 1994, the Peregrine group's participation would not be by PIH itself. Thus, in a fax from the International Finance Corporation to Clifford Chance dated 7 October 1994, the IFC asked the solicitors to ensure that "the Managers Shareholders Agreement indicates that the Peregrine signatory is an indirectly wholly-owned subsidiary of Peregrine".

97. This illustrates that the other parties to the Managers Shareholders Agreement were aware that PIH's involvement would be through the corporate control route. If, as the Plaintiffs now suggest, the holder of the AIFMC shares was understood to be a bare trustee or mere nominee of PIH, then it would not have mattered whether PII was a wholly-owned subsidiary, or was an associated company, or was even a stranger to the group at all, since PIH would have control over the nominee by way of a trust or a contract.

98. It is significant, in my view, that the formal documents executed by the parties do not display any signs of PII being a mere nominee of PIH.

99. First, the shares in the A Fund would have been more valuable than the shares in AIFMC, yet in the Fund Shareholders Agreement, PIH warranted that PII (not PIH itself) was the beneficial owner of the (then) one of two shares issued in the A Fund.

100. Further in the Fund Shareholders Agreement, PIH was bound to procure that its affiliate (PII) shall not transfer or dispose of its shares in AIFMC without a super majority consent. This reference to "procuring" PII not to transfer its shares would not have been necessary if PIH was understood to be actually holding the shares itself.

101. Then in the Managers Shareholders Agreement, PII (to the knowledge of PIH) represented and warranted to the other shareholders that it was the beneficial owner of the (then) one of two shares issued in AIFMC.

102. Finally, I accept the evidence of Mr Liley that due to the involvement of U.S. pension funds, the administration of the A Fund and its managers AIFMC had to be scrupulous and strict, and the shareholders in the A Fund and AIFMC were treated as owners in truth of the shares, and not as nominees.

103. Indeed, even within the Peregrine group, the accounting records are consistent with the shares in AIFMC belonging to PII and not to PIH. Whilst I accept that accounting evidence should not be taken as conclusive, and has to be weighed against other evidence, it is nevertheless good contemporaneous evidence showing the intention of the company, as verified by its directors and auditors.

104. As noted above, the subscription moneys for the shares in AIFMC and other expenses of PII were paid by PIH. Similarly dividends from AIFMC were paid directly into PIH's bank account. However this was consistent with PIH's role as treasurer or banker of the Peregrine group. Although no loan documents were executed, PII was debited through PVC with the moneys paid by PIH for the AIFMC shares and expenses, and PII was credited through PVC with the dividends.

105. I consider as significant the evidence of Mr Grimsdick, the Defendants' expert witness, pointing to the fact that in PIH's single company accounts since 1994, which were prepared in accordance with the HKSSAP, signed by the directors and audited, the shares in AIFMC were not included in the item for "interests in associated companies".

106. It is also significant that the business of PII was stated as "investment holding". This was in contradistinction to another company in the group, "Peregrine Nominees" the business of which was stated as "nominee services".

107. Further, although there were no audited accounts available for PII, its trial balances since 1994 included the investment in AIFMC as an associated company. The dividend income from AIFMC was also included in PII's profit and loss account.

108. The Plaintiffs' expert witness, Mr Allen accepted that these points were consistent with the shares in AIFMC belonging to PII and not PIH. Although he suggested that the persons who prepared these accounts might not have addressed the issue of the nature of the ownership of the shares in AIFMC, the shares in the A Fund and AIFMC were valuable assets and there is no basis for any suggestion that the directors and auditors had failed to focus on the ownership of those assets.

109. Finally on this issue of whether PII was a mere nominee of PIH, the evidence of Mr Alan Mercer, who was the Peregrine Group General Counsel from 1993-1998, a director of PII and an alternate director of AIFMC, was that he had not been given any instructions to set up PII as a nominee for PIH. I accept this evidence, as well as his evidence that there would be stamp duty advantages should it be decided in the future that PII be sold as a company. This evidence is consistent with cl. 14.8 in the Managers Shareholders Agreement allowing PIH to sell its shares in PII after the stated period, without PII losing its shares in AIFMC.

110. In conclusion on this issue, I find it is clear that PII was not a bare trustee or nominee of PIH.

Issue (2) - Was there a disposition within meaning of s.182 CO?

111. Mr Tong SC accepted that if the answer to question (1) were "No", the transfer of the shares in AIFMC would not have been a disposition of PIH's "property" within the meaning of s.182 Companies Ordinance, and he would be left to his submission that under common law, the transfer of PII's shares in AIFMC was void as being contrary to public policy.

112. However, as a matter of completeness, I would briefly set out my views on the submission advanced by Mr Thomas SC counsel for the Defendants that even if PII had been the nominee of PIH and the shares in AIFMC belonged to PIH, the transfer would nevertheless not be caught by s.182 CO.

113. Section 182 CO provides that:-

"In a winding-up by the court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding-up, shall, unless the court otherwise orders, be void".

114. Section 184(2) CO provides that in a winding-up by the court, the date of presentation of the petition shall be deemed to be the commencement of the winding-up.

115. It is clear law that a disposition within the meaning of s.182 CO includes a disposition made by the company or by a third party, and whether made directly or indirectly (Re Leslie Engineers Co Ltd [1976] 1 WLR 292, 297). Section 182 CO also applies even if the recipient did not know of the presentation of the petition, or did not know that the property came from the company, although these matters would be relevant to the exercise of the court's discretion whether or not to validate the disposition.

116. Mr Thomas SC submitted that there was no disposition in the present case because PII was contractually bound to transfer the shares through AIFMC as its agent.

117. Mr Thomas SC sought to rely on cases such as Re French's (Wine Bar) Ltd [1987] BCLC 499 (where the company conveyed property which was subject to a pre-existing agreement for sale and purchase entered into before the presentation of the petition), Lee Tak Samuel v Lee Tak Yan and another [1999] 4 HKC 12 (where the property was trust money), and Re Margaret Pty Ltd [1985] BCLC 314 (where the property was subject to a prior charge). He also relied on In re Oriental Bank Corp ex p Guillemin (1885) 28 Ch D 634 in support of his submission that the presentation of a petition does not affect contracts.

Focus on proprietary interest

118. With respect to Mr Thomas SC, I think what the court focuses upon is the property of the company. If the beneficial interest in the property had already passed to another before the presentation of the petition, the passing of the legal title is not a disposition of the company's property, because it is no longer the company's property to dispose of (or dispone).

119. But if the beneficial interest in the property had not yet passed before the presentation of the petition, then even though there is a contract to transfer the property, any transfer of the property after the commencement of winding-up would be caught by s.182.

Contracts

120. The holding in Oriental Bank that contracts are "left untouched" does not mean that contracts to dispose of the company's property can be performed without infringing s.182. In that case, a branch of the bank entered into contracts receiving deposits from customers, as the branch had not yet received notice of the presentation of the petition at its head office. The court held that the customers could not invoke the equivalent of s.182 CO to obtain a refund, but had to prove for the amount under the winding-up pari passu. In arriving at that conclusion, Chitty J held (at 639) that "dispositions of property only are affected by the section, and that contracts are left untouched" (emphasis added).

121. If, conversely to the situation in Oriental Bank, the performance of a contract after the presentation of a petition would cause the company's property to be transferred away from its creditors, the section would apply to avoid the disposition. In Re Loteka Pty Ltd 15 ACLR 620, at 623, McPherson J held that "the statutory prohibition does not operate upon a mere contract after winding-up unless it is one that of its own force serves then to transfer an interest in a corporate asset away from the company".

Contractual right, no proprietary interest in shares

122. In the present case, the transfer of the shares in AIFMC was purportedly pursuant to the Managers Shareholders Agreement made on 28 October 1994. Under cl. 14, the other shareholders had only a contractual right against PII. They had no proprietary interest in PII's shares in AIFMC.

123. As noted earlier in this judgment in the section on the Managers Shareholders Agreement, under cl. 14, the other shareholders may or may not choose to serve a Default Notice after the presentation of a petition. If no Default Notice were served, the property in the shares would remain with PII.

124. Even where a Default Notice is served, this was followed by an offer for the sale of the shares. The other shareholders may or may not choose to accept the offer. If they did not, the shares would be offered to outsiders. If there were no takers, the property in the shares would remain with PII.

125. It is therefore clear in the present case that at the time the petition was presented on 13 January 1998, the entire beneficial interest in the shares in AIFMC belonged to PII. The other shareholders had nothing more than a contractual right to be offered the shares, and had no proprietary interest in the shares.

126. Thus, AIFMC's transfer of the shares in February 1998 purportedly as agent of PII (had I found PII to be a bare trustee or nominee for PIH), albeit in pursuance of a contractual right, would have been a disposition of PIH's property under s.182 and therefore void.

Issue (3) - transfer contrary to the anti-deprivation principle?

127. Although I have found that the shares in AIFMC were not held by PII as a bare trustee or nominee for PIH, there remains the question whether the court would regard cl. 14 as void, as being contrary to what has been called the "anti-deprivation principle" at common law, i.e. that as a matter of public policy, the court would regard as void a provision that an insolvent person's property is to be confiscated or is to pass to another where that would deprive his creditors of the full value of that property.

128. The source authority that no one is allowed to derive a benefit from a contract in fraud of insolvency laws (from which is derived the "anti-deprivation principle") is Ex parte Jay (1879) 14 Ch D 19. It was held that an agreement that on bankruptcy, the bankrupt's property would be forfeited such that his general creditors would not have it available for distribution is void, as it violated or was "in fraud of" the bankruptcy laws. The rationale was that upon bankruptcy, the bankrupt's property was really no longer his own, and becomes the property of his trustee in bankruptcy (at 25, 27).

129. Before going into an analysis of this principle, it should be mentioned that the Managers Shareholders Agreement was expressed to be subject to English law. Although Mr Tong SC has in his submissions contended that cl. 14 was repugnant to Hong Kong insolvency law, it has not been suggested that there is any difference as far as the common law is concerned.

Basis grounded in public policy

130. It does not appear to be disputed that at common law, the court would, as matter of public policy, strike down any provision diminishing the value of assets available to creditors of a company upon its insolvent liquidation.

131. In the majority speech in the House of Lords in British Eagle International Airlines Ltd v Compagnie Nationale Air France [1975] 1 WLR 758, 779-780, Lord Cross considered the submission that even though there may be nothing in the Companies Act which dealt expressly with the clearing-house arrangement, the court could always refuse to give effect to provisions in contracts which achieved a distribution of the insolvent's property which ran counter to the principle of insolvency legislation, which was that the property of a company should on its winding-up be applied in satisfaction of its liabilities pari passu.

132. At 780, Lord Cross held "it is to my mind irrelevant that the parties to the clearing house arrangements had good business reasons for entering into them and did not direct their minds to the question how the arrangements might be affected by the insolvency of one or more of the parties. Such a contracting out must to my mind be contrary to public policy".

Effect

133. Lord Cross held that what the court must consider is the effect of the deprivation provision, notwithstanding the innocent intentions of the parties to it or their ignorance of its effect in an insolvency situation.

Shares in a partnership or private company

134. The question that arises is where the property comprises of shares in a partnership or a private company. Whilst the law recognises as legitimate the wishes of businessmen to restrict the membership of a partnership or a private company to persons of their choice, at the same time public policy requires that there should be a full realization of an insolvent person's property (be it a share in a partnership or shares in a private company) for fair distribution amongst creditors pari passu.

135. From a consideration of the cases below, it seems to me that the way in which the courts have striven to reconcile both the legitimate interests of the remaining partners or shareholders and the rights of the insolvent person's creditors is to examine the nature of the insolvent member's shares, and if they are capable of being held and eventually realized for his creditors' benefit, to see that they are realized for a proper value.

Share in a partnership

136. Whitmore v Mason (1861) 2 J&H 204 was a case of a partnership. A partner (M) had injected a lease of land into a partnership. It was agreed in the deed of partnership that, in the event of the bankruptcy of any of the partners, the bankrupt partner's share in the lease should go over to the other partners. M's partner S became bankrupt. It was held that the provision in the deed of partnership was void and his share in the lease valued for sale.

137. As regards the other partnership assets, the deed provided that there should be an account or valuation. The Vice Chancellor Sir W. Page Wood held that "where there is a bona fide intention to secure the going on of the concern, by the other parties handing over to the creditors all that the creditors ought to take, I cannot conceive there is any fraud on the bankruptcy laws".

Shares in a private company

138. Borland's Trustee v Steel Brothers & Co Ltd [1901] 1 Ch 279 was a case of shares in a private company incorporated for the managers and assistants of a company in Burma. Article 47 provided that the members should hold their shares until they die, or effect a voluntary transfer, or become bankrupt.

139. Articles 49, 50 and 53 provided that if a member wished to effect a voluntary transfer, the fair price was to be fixed by the proposed transferor which was not to be higher than the par value (specifically defining par value as including the market value of various investments together with interest).

140. Articles 57-8 provided that on bankruptcy, the member's shares should be sold at the same price as on a voluntary transfer.

141. It was held that there was nothing obnoxious to the bankruptcy laws in articles which bona fide provide that a shareholder shall, in the event of his bankruptcy, sell his shares to particular persons at a particular price, which is fixed for all persons alike, and is not shown to be less than the fair price which might otherwise be obtained (at 291). The price payable for a sale on bankruptcy was the same as that on a voluntary transfer, and was held by the judge to be fair (at 292).

Significance of proper value

142. In re Frechette (1982) 138 DLR (3d) 61, a shareholders agreement provided that upon the bankruptcy of any of the shareholders, the other shareholders would be given a right to purchase his shares at 80% of the value fixed by a formula for setting the price on a voluntary sale. Applying English authorities, the Quebec Superior Court held that the clause for transfer on bankruptcy "would be perfectly valid were such a difference in price not provided for" but that since it had the effect of depriving the trustee in bankruptcy of the 20% balance, it was unconscionable and contrary to public policy.

143. In Canadian Imperial Bank of Commerce v Bramalea Inc. (1995) 33 OR (3d) 692 the Ontario Court held void as being contrary to public policy a provision in a partnership agreement that the remaining partners may purchase the bankrupt partner's shares at a price below market value. The court considered as unimportant the exact spread between the book value and fair market value, as long as it was more than minimal, and accepted as correct the submission that

"a provision in an agreement which provides that upon an insolvency, value is removed from the reach of the insolvent person's creditors which would otherwise have been available to them, and places that value in the hands of others - presumably in a contract other than a valid secured transaction - is void on the basis that it violates the public policy of equitable and fair distribution amongst unsecured creditors in insolvency situations".

Present case

144. Similarly, in the present case, value has been removed from the shares in AIFMC held by PII. It has been conceded on behalf of the Defendants that at the time of transfer, the value of the shares were "significantly higher" than the par value totalling US$3 150. Although the court was not asked to find any specific value or range of value of the shares, it is sufficient to note that the dividends received for those shares in the previous two years was more than US$5m. A transfer of such valuable shares at par value was clearly not a fair or proper realization.

Defendants' submissions

-Features of the Managers Shareholders Agreement

145. The Defendants sought to distinguish the present case from the above line of authorities. It was submitted first that the association of the parties to the Managers Shareholders Agreement could be likened to a limited duration investors club or syndicate, and the liquidation of PIH was perceived to create concern amongst the institutional investors of the A Fund.

146. That submission is answered by the fact that PIH's investment in the Fund itself was only 4% and that from the start, it had been known that the actual management work would be undertaken by AIFAL, which was run by Mr Liley and his team, with no personnel from Peregrine. This was confirmed by Mr Rule's letter dated 13 January 1998 that the "real direct effects" of PIH's receivership "will be minimal".

147. In any event, any concern amongst the remaining shareholders may be ground for their acquisition of the shares in AIFMC, but does not justify a transfer of these valuable shares at par value only.

-Under the law of property

148. It was further submitted on behalf of the Defendants that as a matter of property, a shareholder's interest in shares may be terminated on his insolvency by provisions in the articles of association or a collateral agreement.

149. If by that submission it is meant that the shares in AIFMC were held under a determinable interest, then that was clearly not the case. PII's shares remained its property on 13 January 1998. If however by that submission it is meant that the other shareholders had a right to provide contractually for the transfer of the shares upon an insolvency, then the issue whether the provision is valid depends on whether a proper value is to be given for the transfer.

-Under the law of contract

150. Then it was submitted on behalf of the Defendants that an agreement obliging a person to alienate his shares on insolvency was valid if the provision was not aimed at depriving his creditors of their statutory rights and that it was a reasonable stipulation having regard to their purposes and objectives, and the nature and content of the agreement.

151. In respect of the first part of that submission, the decision in British Eagle has made it quite clear that the court should look at the effect of the agreement rather than the aim or intention of the parties.

152. Further, one has to consider the nature of the shares in question. In Bombay Official Assignee v Shroff (1932) 48 TLR 443, the bankruptcy had been a member of a stockbrokers' club. His card was forfeited for default before his bankruptcy. The court held (at 446) that upon the forfeiture of the member's card for default, no interest in the card remained in the member himself, nor therefore in his estate. Indeed it did not matter whether the forfeiture occurred before or after his bankruptcy.

153. In Money Markets International Stockbrokers Ltd (in liquidation) v London Stock Exchange Ltd and anor [2001] 4 All ER 223, the share in question was a share in the London Stock Exchange. The share itself had no value. The real asset was membership of the stock exchange. After the insolvency of MMI, however, the London Stock Exchange was demutualised, and the share in question was exchanged for shares which traded at a price.

154. It was held that there was no infringement of the anti-deprivation principle. The share had not been a free-standing asset, it was not capable of uncontrolled transfer and membership of the Stock Exchange was personal.

155. In the present case, the shares in AIFMC had their own free-standing value at all times. It is correct that a transfer under cl. 9 could not be effected without consent until after the stated period, but that did not mean that until then, the shares had no value. Substantial dividends had been received since the time of allotment, many times more than the par value, and it is agreed that the current value at trial was also higher than the par value.

156. There was no evidence that the other shareholders would not have consented to their voluntary transfer, as was done with the shares in the A Fund. Even if no consent was forthcoming, there was no obstacle to the shares being retained by PII, collecting dividends which could be passed to PIH for the benefit of the creditors, until the expiry of the stated period, at which time they could be voluntarily transferred.

157. As for the personal character of the holder, the alleged importance of the status and solvency of PIH to AIFMC is contradicted by Mr Rule's letter of 13 January 1998, and, it must be emphasized, the facts in that letter (i.e. the small shareholding of PIH in the A Fund and the stand-alone capabilities of the AIFAL team) existed from the beginning.

158. Further, I cannot accept the submission on behalf of the Defendants that at the time the Managers Shareholders Agreement was executed, the parties would not have known that the par value was not a fair value. The parties' anticipation that the shares in AIFMC would be profitable can be seen from Mr Liley's evidence in cross-examination that many of the investors in the A Fund wanted to have shares in AIFMC, and many who were not perceived to be adding connections or "gloss" to AIFMC were rebuffed. Further, the point had been raised in discussions before the execution of the Managers Shareholders Agreement evidenced by the document dated 3 June 1994 that liquidators might challenge the transfer of shares at par value, when the query had been raised whether book value would be more appropriate.

-Applicability of principle to PII's promise on PIH's insolvency

159. It was further submitted on behalf of the Defendants that the common law principle was restricted to (a) promises made by a person (b) affecting his own property (c) in the event of his own insolvency. Since the promise was made by PII, affecting shares which I have found belonged to itself, but only PIH has been placed in compulsory liquidation, it has been submitted that the principle does not apply.

160. However, it is clear that the effect of cl. 14 was to strip an insolvent company (PIH) of the true value of its property (the shares through PVC in PII). When one considers that the public policy behind the anti-deprivation principle is to protect and preserve an insolvent company's assets for its general body of creditors, there is no reason why the principle does not apply to this situation. Since no-one is allowed to benefit from contracts in fraud of insolvency laws, it should not matter whether the insolvent company was party to the contract or not, so long as the deprivation was a consequence of its insolvency and its creditors' interests are adversely affected.

161. This must be so when the law now accepts that loss caused to a subsidiary is loss caused to a parent company (George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] 1 BCLC 260 and see Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 , 477) and a loss in the form of diminution of the value of shares is a loss recognised by the law (see e.g. Johnson v Gore Wood & Co [2001] 2 WLR 72).

162. In conclusion, on this issue, I find it is clear on the law and the evidence that cl. 14 had the effect of depriving an insolvent company of the value of its property on insolvency to the detriment of its creditors, and as such, public policy requires that it be declared void.

Issue (4) - was there a conspiracy?

163. Finally there is the issue of conspiracy. It should be noted that one of the parties to this cause of action was AIFAL, a Hong Kong company, which had taken an active role in effecting the transfer of shares.

164. The elements of the cause of action of conspiracy have been clearly set out in Lonrho v Fayed [1992] 1 AC 448. In the present case, I find there was a combination of the defendant parties in the series of events on and after 13 January 1998 to transfer away PII's shares in AIFMC.

165. The overt and unlawful acts undertaken were the acts effecting the purported transfer of the AIFMC shares in breach of the anti-deprivation principle and the public policy referred to in the earlier parts of this judgment.

166. The intention was to injure PIH by effecting the loss of its valuable shares, although another purpose may also have been to further their own interests by dividing amongst the other shareholders more than 30% of the shares in a valuable company at negligible cost. The injury caused is obvious. PII (and by virtue of the diminution of the value of its shareholding, PIH) has at least suffered the loss of dividend income from the shares in AIFMC.

167. I do not consider that the defendants have set up any defence of good faith when the possibility of a challenge by the liquidators had been brought to their attention before the execution of the Managers Shareholders Agreement, and it would appear that the parties chose to leave the warning unheeded.

168. Further, the fact was that as shown by Mr Rule's letter dated 13 January 1998, the effect of PIH's insolvency on the A Fund and AIFMC was minimal.

Order

169. In light of the matters considered above, I would make an order in terms of paragraphs (2) and (6) of the prayer in the Re-Amended Statement of Claim, any damages for conspiracy to be assessed, and there be liberty to apply.

170. Insofar as necessary, as I have given an order in terms of paragraph (2), I would make an order in terms of paragraph (1) save that the word "forfeit" therein should be amended to "transfer".

171. Since the transfer has already taken place, paragraph (4) has been overtaken by events and I make no order thereon.

172. I dismiss the claim in paragraph (5).

173. I would give liberty to apply in relation to the claim for interest in paragraph (7) and would give an order in terms of paragraph (8).

174. I would give an order nisi that the costs follow the event, i.e. that the Defendants bear the Plaintiffs' costs of this action.

175. It only remains for me to thank all counsel for their assistance in this interesting case.