POLESTAR ASSETS LTD v. ANTON CAPITAL LTD AND ANOTHER

HCA1836/2009 & HCMP 1883/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1836 OF 2009

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BETWEEN

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J U D G M E N T

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1.  On 26 August 2009, Polestar Assets Ltd (“Polestar”) brought an action against Anton Capital Ltd (“Anton”) and Katherine Chan Wai Kay under the action of HCA 1836/2009 (“the Main Action”).

2.  On 29 October 2009, the Defence was filed and a Third Party Notice was issued in the main action of HCA 1836/2009 against Madam Cheung Kwan (“the Third Party”).  The Third Party filed a Defence in Chinese on the 23 June 2010.

3.  HCMP 1883/2010 (“Stop Notice Action”) was commenced on 2 October 2010 by Polestar.  The action was taken out against the listed company in question, namely, Natural Diary (NZ) Holdings Ltd. (formerly known as China Jin Hui Mining Corporation Ltd and before that known as Linfair Holdings Ltd) (“the ListCo”)

4.  On 8 October 2010 there was a direction hearing before Reyes J under the Main Action and the Stop Notice Action.  The two sets of proceedings were ordered to be consolidated.  The Third Party Action was to be tried separately from the Main Action. 

5.  I have raised concern about the absence of the Third Party when the issues in the Main Action touched upon and affected the interests or rights of the Third Party.  No party has sought for a variation of the order of 8 October 2010 nor has any party sought to subpoena the Third Party to give evidence in the trial.

6.  On the first day of the hearing, counsel for both parties informed me that the five days set down for this trial was clearly inadequate.  In the event, the evidentiary hearing lasted nine days.

7.  Oral closing submission was heard on 2 July 2011.

8.  On 9 September 2011 the plaintiff sought to adduce further new evidence which is disposed of by the ruling dated 28 December 2011.

PARTIES INVOLVED IN THE TRANSACTIONS

9.  Mr Chang Ei Eu (“Chang”) set up an engineering business using the name of “Linfair” in Taiwan and has continued to use the name of “Linfair” in his other engineering businesses. 

10.  In around 1991, Chang set up Linfair Engineering (HK) Co. Ltd in Hong Kong with a view to develop the Hong Kong and Mainland China market.

11.  On 8 October 2002, Chang set up an investment holding company in the name of Linfair Holdings Ltd which was listed on the main board of the Hong Kong Stock Exchange in June 2005 (stock code 462), the ListCo.  The ListCo is incorporated in the Cayman Islands.  Upon listing, Chang was appointed Chairman and an executive director of the ListCo. 

12.  Mr Chow Kin Ming (“Chow”) assisted Chang in his businesses and acted as the financial controller and was responsible for the accounting and financial aspects of Chang’s businesses. 

13.  Chang set up Polestar on 28 November 2003.  Polestar was the corporate vehicle used by Chang to hold his shares in the ListCo.  Chang and his wife (“Hsieh”) held 80% and 20% of the shares in Polestar respectively.

14.  Apart from Chang and Chow the other relevant persons or entities in this case include the following :

(1)  The 2^nd defendant, Chan Wai Kay Katherine (“Chan”) was formerly the deputy managing director of Quam Securities Co Ltd (“Quam”)

(2)  Quam was retained by the ListCo as its placing agent for the placement in June 2007.

(3)  Anton Capital Ltd (“Anton”) is owned and controlled by Chan.  Anton is the alter ego of Chan.

(4)  Mr Navin Kumar Aggarwal (“Aggarwal”) was a solicitor and partner of K & L Gates.  He was involved in the transactions between the parties.  At the oral closing, the plaintiff sought leave to recall Aggarwal in the light of reports from the news that he was suspected of certain fraudulent acts involving his law firm.  After the oral closing submissions made on 2 July 2011, Aggarwal was charged and was subsequently convicted. Thereafter, the plaintiff sought to adduce the two new documentary evidence judgment on his conviction and the charge sheets against Aggarwal.  They also withdrew the application to recall Aggarwal to give oral evidence.  By a ruling dated 28 December 2011 this court admitted the new documentary evidence relating to the charges made against Aggarwal and the court judgement which included his admission as new evidence.

(5)  The managing director of AIG Global Investment Corporation, (“AIG”) Soo Kok Beng Peter (“Soo”) was called to give evidence.  AIG together with another potential investor, Value Partners, were interested in investing in the ListCo for its venture into the mining business.

(6)  Two other persons involved in this case were Lau Siu Yin (“Lau”) and Wong Hoi Yee Eille (“Wong”).  Lau was the driver engaged by the ListCo and Wong was the personal assistant of Chan and later served in the ListCo.

(7)  A few other companies were raised during the evidence and they include : Oriental Gem Group Ltd (“Oriental Gem”), prima facie, the purchaser of 70,000,000 shares from Polestar; Deloitte Touche Tohmatsu Ltd (“Deloitte”), the auditor of ListCo in about 2007 which refused to sign off the accounts of the ListCo over a suspected fraud which led to the prolonged suspension of trading of the shares of the ListCo from 31 July 2007 to 8 December 2008; China Ground Source Energy Ltd is a company listed in the Hong Kong Stock Exchange under listing no. 8128 and the Third Party was its chairman; Alvarez & Marsal Asia Ltd was the consultancy company instructed by the audit committee of the ListCo to conduct an investigation into the suspected fraud and produced the A & M Report on 29 October 2007.

THE DISPUTE

15.  The dispute involved 80,000,000 shares of the ListCo (“the Disputed shares”) registered originally in the name of Polestar, which the plaintiff contends have been misappropriated by the defendants.

16.  According to the plaintiff, in or around June 2007 the ListCo intended to venture into mining business by acquiring iron ore mines in Chengde.  As a result of that, there was a need to raise capital.  Upon the advice of Aggarwal, the mode of placement which has been described as “top-up placement” was adopted.  The top up placement procedures required the substantial shareholder of the ListCo to transfer its shares to the placees and then later subscribe for the new replacement shares. The shares that had to be transferred to the placees would have to be deposited with the placing agents so that the same could be placed out to the placees.

17.  In June 2007, Quam was appointed as the placing agent and an account was opened with Quam (“the Account”) for the purposes of arranging this top up placement.  Chan was the person from Quam who was responsible for this.

18.  A total of 150,000,000 shares of the ListCo were deposited into the Account.  By an announcement dated 25 July 2007, the placement was to be conducted in two tranches. Tranche 1 would involve 50,000,000 shares while tranche 2 would involve 100,000,000 shares.  Quam was named as the Placing Agent in the announcement.

19.  Chow was made the only authorised person to operate the Account on behalf of Polestar.  Chan asked Chang and Chow to sign documents in blank, according to the plaintiff, and that included blank sold notes and securities settlements instructions. 

20.  Tranche 1 placement took place on 25 June 2007.

21.  On 31 July 2007, trading of shares of the ListCo was suspended as a result of certain investigations by the Commercial Crime Bureau into the affairs of the ListCo.

22.  Chan was appointed as an executive director and chief executive officer of the ListCo in September 2007.

23.  Chang ceased to be the chairman and executive director and Chang’s wife also resigned as an executive director of the ListCo in October and November respectively.  Chow became a non-executive director on 1 April 2007 and resigned as non-executive director in April 2008.

24.  Chang left Hong Kong after his resignation in November 2007 and returned only in August 2009.

25.  According to the plaintiff, during Chang’s absence from Hong Kong and from the ListCo, the Disputed shares were deposited in the Account.  These shares were, according to the plaintiff, misappropriated by Chan through Anton as her corporate vehicle.  It is alleged that this was achieved through the wrongful use of blank documents that had been signed by Chang and Chow sometime in June 2007 as well as one sold note with the signature of Chang being forged.

26.  The defendants contend that in fact Polestar was under the control of the Third Party who was the beneficial owner of the Disputed shares.  The defendants contend that the Third Party was indebted to Chan.  The Third Party and Chan, according to the defendants, agreed that the method of settling the indebtedness was by the way of transfer of the Disputed shares of the ListCo held in the name of Polestar to Anton.  Hence, the Third Party caused Chang to sign a Sale and Purchase Agreement on behalf of Polestar in the presence of Chan, the Third Party and Aggarwal.

27.  The defendants further contend that Chang signed on behalf of Polestar the 1^st and 2^nd Sold Notes at the same time when the Sale and Purchase Agreement for the Disputed shares was entered into between Polestar and Anton in Macau.  Thereafter, to complete the transfer, Chow signed on behalf of Polestar two Settlement Instructions on 4 August 2008 and that took place in Chow’s car in the presence of Lau.

THE ISSUES

28.  The main issue turns on a finding of fact of how the sold notes and settlement instructions were signed :

(1)  The 1^st Sold Note, under which 55,000,000 shares of the ListCo were transferred by Polestar to Anton bears the signature of Chang which was not in dispute.  What is in dispute is the circumstances under which it was signed.  The plaintiff contended that it was signed in blank sometime in June 2007 in connection with the June 2007 placement.  The defendants contended that it was signed in Macau pursuant to the Agreement for Sale and Purchase of the Disputed shares that was entered into with Anton and was signed by Chang on behalf of Polestar.

(2)  The 2^nd Sold Note, under which 25,000,000 shares of the ListCo were transferred by Polestar to Anton is contended by the plaintiff to be a document bearing a forged signature of Chang.  The defendants on the other hand contended that the 2^nd Sold Note was signed by Chang on behalf of Polestar in Macau at the same time when the Agreement for Sale and Purchase for the Disputed shares was executed.

(3)  There were two Securities Settlement Instructions that were used by Anton to complete the transfer of the 55,000,000 and 25,000,000 shares of the ListCo out of Quam to Anton.  The plaintiff contended that they were signed by Chow in blank sometime in June 2007 in connection with the June 2007 placement.  The defendants contended that they were signed by Chow on 4 August 2008 after the two Sold Notes were signed by Chang sometime in May 2008 in Macau.

29.  In determining the main issues set out above, the plaintiff said it would be necessary to form a view on whether or not the Third Party was the ultimate beneficial owner of the Disputed shares.  The Third Party is not a party to this Main Action so this issue which, according to the plaintiff, is pivotal to the defendants’ case, cannot be fully explored.  Any decision relating to this issue involving the Third Party would therefore only be binding between the plaintiff and the defendants.

THE EVENTS

30.  The parties have helpfully put together a chronology of events indicating those events which are not in dispute and those which are. 

31.  There is no dispute between the parties that Chang was the founder of Linfair set up for engineering businesses.  Chang has received tertiary education and is an experienced business man.

32.  Polestar was set up by Chang to hold and control the share holding of Linfair.  In or around June 2005, Linfair Holdings Ltd was listed on the main board of the Stock Exchange of Hong Kong Ltd, at which time, Polestar held 225,000,000 shares of Linfair represented 75% of the total shares in Linfair.

The raising of capital in 2007

33.  The ListCo went through a number of ways of raising capital.  In January 2007, Polestar placed out 45,000,000 existing shares of the ListCo to raise capital in the sum of HK$29,250,000. Then in February 2007, 30,000,000 shares were placed and again in April 2007, a further placement of another 30,000,000 shares through Quam took place. 

34.  Chan gave evidence that the Third Party arranged for the placements by ListCo in February and April 2007.  In the Third Party’s pleadings, she asserted that from about December 2006 she began the process of acquiring control of the ListCo from Polestar.  She also asserted that through the introduction of a Mr Chan Wai Hung (陳維雄) and in the office of K&L Gates, Mr Dong Yu and herself met with Chang and Chow on 29 December 2006 and that a share acquisition agreement was reached with Polestar.  She also stated that the full payment for the acquisition of control of the ListCo was made. 

35.  Whilst discovery in the Third Party proceedings have not taken place and none of the documents nor issues were before me, Chang did admit in his witness statement that a lot of the events mentioned by the Third Party in her defence did in fact take place.  He did not specifically say which events were agreed though.

36.  Chan gave evidence of how she came across the Third Party.  They were introduced by and met in the office of Aggarwal.  Chan did not check whether or not the Third Party was the registered owner of the shares of the ListCo and proceeded to make arrangements with the Third Party for the purposes of placements in February 2007.

37.  On 1 April 2007, Chow resigned as executive director and became a non-executive director.

38.  These placements and raising of capital have been announced publicly. Nothing appears to turn on it but the fact that Quam was already dealing with the ListCo by then.  These earlier placements according to Chan and Wong had involved the Third Party already.

39.  There is a dispute as to whether Chow met Chan in February.  Chow originally in his written evidence denied he met Chan in February but that would be inconsistent with the fact that the April 2007 placement was carried out through Quam.  Under cross-examination, Chow admitted he met Chan in Quam’s office in February.

Venturing into Mining Business

40.  In June 2007, the ListCo wanted to invest in the mining business in the Mainland China.

41.  For the purposes of venturing into this new area of business, Aggarwal suggested to Chang that the ListCo should raise capital by way of top-up placement and Quam was later appointed as the placing agent with Chan being responsible for handling this matter.

42.  There was a visit to the mines arranged by the Third Party.  Chan, Aggarwal, Soo of AIG and Mr Cheah and his colleague (representing a potential investor Value Partners), on 11 and 12 June 2007, visited the mines in Chengde.  The two mines that were visited were the Hilltop Mines and what has been termed the 462 mine (i.e. the mine that the ListCo ultimately decided to pursue).

43.  The evidence shows that Chow was in Beijing prior to 11and 12 June 2007 with the Third Party.  She took him to the airport on 11 June.  Chow knew that Chan and potential funders would be visiting the mines.  He waited outside the airport whilst the Third Party went in and brought out the delegation and introduced Chow (as her CFO) to the delegation outside the airport.  A gentleman by the name He Changming was present outside the airport at that time because he was to advise the potential funders the value of the mines.

44.  For some reasons, whilst the ListCo was interested in the mining business, neither Chang nor Chow took part in that mine visit on the 11 and 12 June 2007.  After meeting the delegation outside the airport on 11 June 2007, Chow left Beijing and returned to Hong Kong arriving at around 8 p.m. 

45.  The evidence from Chow given under cross-examination and Chan and Soo was that there was a telephone conversation which Chow was at the other end of the telephone call.  There is a dispute as to whether it was Chan or Aggarwal and the Third Party who made the call to Chow.  According to Chan, the telephone call was made by her and she asked Chow to go to Quam the next day to open an account and to deposit 150,000,000 shares to the account.  On the other hand, Chow gave evidence that it was Aggarwal and possibly also the Third Party who made the telephone call. It was made after 8 p.m. when he got back to Hong Kong.  The content of the telephone conversation that is common to the parties, whether originated from Chan or Aggarwal and the Third Party is that Chow was to open an account with Quam the next day and to deposit the 150,000,000 shares.

46.  Chow also referred to a request from Aggarwal or the Third Party that He Changming be made a non-executive director of the ListCo.  This I find, must have taken place, but most probably sometime on 12 June 2007 after a breakfast meeting between Soo, Mr Cheah and his colleague, and the Third Party negotiating the placement deal.

47.  Chan’s evidence that she was the one who made the telephone call is corroborated by Soo who was not involved with any of the parties and is an independent witness.  He was there at the mine visit on the invitation of Chan in order to look into whether or not to invest in the ListCo in pursuit of its mining business.  He said he was in the same car with Chan and heard the words uttered by her.  There is nothing for me to infer that Soo’s evidence about overhearing a telephone call from Chan regarding the contents should be rejected.  Whilst Soo clearly could not say whether the person at the other end of the telephone conversation was Chow or not, the inevitable inference from the evidence of all the witnesses was that it must have been Chow who had been told to open the account and to deposit the shares.

48.  I prefer the evidence of Chan in relation to the parties to the telephone conversation.

49.  On 12 June 2007, when the delegation was still in Mainland China, (the flights only arriving in Hong Kong at around 8:30 p.m.), Chow, pursuant to the telephone conversation, went to the office of Quam and deposited the 150,000,000 shares.

50.  In Beijing on 12 June 2007, there was a breakfast meeting wherein the Third Party and the potential investors negotiated the placement deal. 

51.  According to Chow, in a telephone conversation, he was told that the potential investors, AIG (represented by Soo) and Value Partners (represented by Mr Cheah and a colleague), had suggested that He Changming be appointed as director for the ListCo due to his knowledge and experience in the mining business.  Chow did not query nor refuse to consider arranging for He Changming to be appointed as director and in fact He Changming was indeed subsequently so appointed.

52.  What is interesting however is what Chow said in the box.  Whilst denying the control of the Third Party or her involvement in the ListCo, Chow admitted that it was Aggarwal and possibly also the Third Party and not Chang nor Chan (the placing agent) who called him after the mine visit.

53.  It was reasonable to infer that it was the Third Party who told Chow about He Changming based on what Chow said and the fact of the discussions of the placement deal on 12 June 2007 in Beijing.  This means Chow was taking instructions from the Third Party in relation to this new mining business that the ListCo was venturing into.

54.  The Third Party was indisputably the person who led the delegation to visit the mines. 

55.  The evidence shows that the placement deal was negotiated on 12 June 2007 in Beijing.  There is no suggestion from the plaintiff’s witnesses as to when the negotiation of the placement with investors were otherwise conducted.  There was also no suggestion that Chang or Chow participated in any such discussions.  This also lends support to the inference the defendants invited this court to draw, namely that the Third Party had control over the ListCo and the Disputed shares. 

56.  The fact that Soo and perhaps also Value Partners did not carry out such other investigations and studies into the ownership of the ListCo and other commercial due diligence that might or ought to have been done may suggest that the investors were reckless, unprofessional or they were somehow involved in this strange set of events, or simply being over enthusiastic about the investment.  Insofar as my findings of fact here is concerned, Soo’s objective evidence is reliable as to what happened.

57.  The court’s attention has been drawn to the fact that it was only under cross-examination, and upon production of the records of travel of Chan, that Chow retrieved his allegedly vivid memory contained in his written evidence that he met Chan in Hong Kong in the office of Quam on 12 June 2007.  The way that Chow was prepared to make bold statements until confronted with objective evidence suggests that his written statement or affirmation ought not to be taken on its face value.

Hilltop Mine Agreement

58.  The Hilltop Mine was purchased by Chan in a mine agreement which was prepared by K & L Gates.  This Hilltop Mine Agreement dated 13 June 2007 was entered into between the Third Party and Chan.  It provided for a consideration of HK$50,000,000 to be paid by Chan to the Third Party who provided a warranty that the Third Party is an indirect 100% beneficial owner of the mine company, a PRC company, which in turn owns the mine.  Chan was cross-examined as to why she herself purchased the mine when she were in fact going to visit the mines on behalf of the ListCo in her capacity as a representative from Quam.  Whilst the criticisms are rightly levied in so far as Chan’s professionalism as the placing agent’s representative is concerned, it cannot override the fact that there was indeed the Hilltop Mine Agreement that had been signed and dated as 13 June 2007.  Her conduct may be condemned but that is the subject of another forum and another action.  There is not enough evidence before me that suggests that this documentary evidence should be treated as a sham or to be ignored.

59.  The main point about this Hilltop Mine Agreement so far as the defendants’ case is concerned is that it gives rise to the debts owed by the Third Party to Chan which ultimately resulted in the transfer of the 80,000,000 shares of ListCo to Chan through her alter ego Anton.

Alleged signing of blank forms

60.  In the next few days (13to 16 June 2007) after the mine visit on 11and 12 June 2007, the plaintiff contended that certain blank sold notes were signed by Chang and blank settlement instructions by Chow for the placement to be arranged by Quam.

61.  Chang and Chow have been cross-examined as to how they normally carry out their business in relation to the signing of documents.  Chang’s evidence is, to say the least, confusing and incoherent.  He did not deny that he would not sign anything in blank and admitted that copies ought to have been made of documents he had signed blank but there was no photocopy of any such blank sold notes that he had allegedly signed.  Chow admitted under cross-examination that he had never seen Chang signed any blank document. Whilst this evidence has been elicited from Chow, it does not really assist the resolution of the signing of such blank documents given that Chow cannot possibly be with Chang all the time.  Other circumstantial evidence will have to be resorted to.

62.  The signing of blank documents seems to be contrary to the following :

(1)  the lack of photocopies of such blank documents;

(2)  the importance of such documents which tend to suggest that no one would sign them as blank documents and deposited with Chan or Quam before any placement agreement was formally entered into;

(3)  Chang is an experienced businessman having set up the ListCo and which ultimately arranged for it to be listed in the Hong Kong Stock Exchange; and

(4)  there was no request made to Chow for blank forms to be signed when he had the telephone conversations regarding opening the Account and depositing the 150,000,000 shares.

63.  However this is not adequate to conclude how the documents were signed and hence the circumstances surrounding the Macau meetings will have to be considered before conclusion can be made.

64.  Returning to the events that happened after the deposit of the 150,000,000 shares with the placing agent, Quam, the placing agent agreement between ListCo and Quam was ultimately signed on 18 June 2007.

The Tranche 1 placement

65.  One 21 June 2007, 50,000,000 shares were transferred out of the account opened by Polestar with Quam in connection with the tranche 1 placement.

66.  Immediately after the transfer out of the 50,000,000 shares under tranche 1 placement, on 22 June 2007, He Changming was appointed as non-executive chairman of the ListCo.

67.  There was no reference by Chang regarding him interviewing or had knowledge about He Changming and yet, he was apparently still appointed by the Board as noted in the public announcement dated 25 June 2007.  It is unusual to say the least that Chang would have allowed such appointment to take place when he had not even met or interviewed He Changming as to his suitability.  Such appointment is, on a balance of probability, more consistent with the defendants’ contentions that the Third Party and not Chang was in control of the ListCo and therefore the appointment was carried out pursuant to the instruction given by the Third Party to Chow, after the request was made by the potential investors to Chan and the Third Party during the mine visit on 11 and 12 June 2007.

68.  In any event, three days after He Changming was appointed, tranche 1 of the June 2007 placement was completed.

Shui On Centre Office

69.  There is evidence from the witnesses that the office of ListCo was moved to Shui On Centre in or around February 2007 although the ListCo formally changed its address to Shui On Centre much later in November 2007.  The Third Party has an office (the largest room) in the Shui On Centre.  Chow said that this was so because they provided facilities for their clients or partners and moving directors when they visited Hong Kong and it was not because the Third Party was the “real boss”.  Chow’s evidence is on balance, not plausible when the facts were viewed in the round.  Chang hardly went to the Shui On Centre office and there were hardly any engineering business conducted there.  The defendants adduced evidence through Lau that his service as a chauffeur was actually engaged for the exclusive use of the Third Party.

70.  According to Chow he conducted the interview of Lau on 29 June 2007.  Both Chow and Lau gave evidence that after the interview, the Third Party was given a trial drive by Lau.  Chow said that since the Third Party was present and the chauffeur would serve the clients or business partners, the Third Party was therefore invited to take a test drive. This explanation of Chow is implausible.  There is another car to service the engineering operations of the Chai Wan office of the ListCo.  When Chang was in Hong Kong (for the period of July to November 2007) Lau did not serve him.  When Chang was not in Hong Kong (from November 2007 to August 2009) there would not have been a need for a driver.  It is inherently unlikely in the circumstances that Lau would be engaged specifically to serve clients or business partners.  In fact, Lau was engaged to serve the Third Party exclusively and that is again consistent with the defendants’ case that the Third Party was the person in control of the ListCo.

After suspension of trading Chang left Hong Kong

71.  On 31 July 2007, the Hong Kong Stock Exchange suspended the trading of the ListCo’s shares.

72.  A month later, 50,000,000 shares were deposited into Polestar’s account with Quam (that was subscribed back from the ListCo as part of the tranche 1 placement transaction).

73.  On 28 September 2007, Chan was appointed as the executive director and CEO of the ListCo.  The fact of her appointment is documented and not in dispute.  The parties, however, differ as to how and why the appointment took place.  Chan gave evidence that she was invited by the Third Party to resign from Quam in order to join the ListCo and to work in the Shui On Centre office and she was promised a HK$2,000,000 bonus for that move.  On the other hand, according to Chang, he resigned as chairman and executive director on 16 October and 5 November 2007 respectively upon subtle persuasion by Chan.

74.  On 29 October 2007, the Stock Exchange of Hong Kong Ltd censured Chang, Hsieh (Chang’s wife) and Chow for the company’s failure to issue a profit warning in respect of its financial performance for the six months ended 30 September 2005.

75.  Chow gave some unconvincing evidence about his involvement of the engagement of the CEO.  He gave some evidence about seeing some other candidates but I am not convinced that he was telling the truth.  He, in my view, had no say on who to appoint.

76.  As to Chang, his evidence revealed that he was persuaded to resign so that the trading of the shares could resume earlier as his conduct was investigated.  Further his resignation as chairman was voluntary and after the appointment of Chan as the CEO and the resignation as executive director was after the censure by the Stock Exchange of Hong Kong Ltd and when he decided to leave Hong Kong.  There appears to be nothing untoward in the persuasion said to have been made by Chan.

77.  Chang said he was very depressed as a result of the suspension of the trading, and the censure and so he left Hong Kong.  The agreed fact provided by the parties stated that “Chang fled Hong Kong to avoid possible detention by CCB (i.e. the Commercial Crime Bureau) and did not return or set foot in Hong Kong until August 2009.”

Payment by Chan to the Third Party

78.  During this time payment was made by Chan to the Third Party under the Hilltop Mine Agreement.  Chan gave evidence that the payment of HK$48,000,000 were made either to Financial International Holdings Ltd, the company belonging to the Third Party or to other third parties pursuant to directions from the Third Party.  These other third parties are : Rexcapital Finance Ltd, Ever Rich (HK) Electronic Transp. Co., Ying Jia Xun International (HK) Co. Ltd, Financial International Holdings Ltd and Wong Pui Sang.  

79.  Chan explained how the Third Party became indebted to her and how they agreed to settle the debt in her statement :

“(3) Between 8^th October and 6^th November 2007, pursuant to the Mine Agreement, and to enable Ms. Cheung (the Third Party) to close the deal she claimed she had locked up over the Hilltop Mine, I paid Ms. Cheung a total of HK$50m (of which HK$48m was paid in cash, and the remaining HK$2m was set off against compensation payable by Ms. Cheung to me for my loss of bonus when I resigned from Quam to join the Listed Company in late September 2007).

(4) Sometime in late December 2007, Ms. Cheung admitted that she had failed or was unable to secure the ownership of Hilltop Mine and was therefore liable to repay me the money paid by me under the Mine Agreement (plus interest). This was how Ms. Cheung became indebted to me and it was in connection therewith that Ms. Cheung caused Mr Chang to sign on behalf of Polestar the Sale and Purchase Agreement, the 1^st Sold Notes, and the 2^nd Sold Notes on 2^nd May 2008.

(5) Subsequently, she had on two separate occasions and in the presence of Mr Soo and Mr Aggarwal, openly acknowledged her indebtedness to me and the transfer of the shares to Anton in connection therewith. The first time was 16^th September 2008 during breakfast at Beijing Regent Hotel on the second day of a 3-day trip to Chengde (“Second Chengde Tour”) and the other was 6^th February 2009, during the annual general meeting of China Ground Source Energy Limited (“CGSE”), a public company listed in the HKSE under listing no.8128.”

80.  The Third Party is not here to refute these statements and in fact asserted that in her Defence.  Based on the oral and documentary evidence before me, I accept that this payment in the sum of HK$48,000,000 was in fact made by Chan to the Third Party.  There is nothing that has been raised by the parties to allow me to doubt that these monetary transactions did take place. 

81.  This oral agreement to repay HK$50,000,000 (HK$48,000,000 + HK$2,000,000 compensation for loss of bonus) was corroborated by the evidence of Soo when he was present with the Third Party, Chan, Aggarwal at the AGM of China Ground Source Energy Ltd on 6 February 2009. 

82.  From the evidence, what happened was this.  On 6 February 2009, there was the AGM of China Ground Source Energy Ltd, a public company listed in the Hong Kong Stock Exchange under listing no. 8128. During that AGM, the Third Party was removed as a director and Chan was appointed as the chairman and director.  A heated argument between Chan and the Third Party apparently took place in a side-room during the adjournment of the AGM regarding the trust, or rather lack thereof between them.  In the presence of Soo and Aggarwal, the Third Party, in an emotive voice, admitted that she was indebted to Chan in the sum of HK$50,000,000 and that this had been repaid by the transfer of 80,000,000 shares from the ListCo to Chan’s alter ego Anton.  The Third Party, apparently, also stated that she would top up any shortfall should the value of the 80,000,000 ListCo shares be inadequate.

83.  In the light of the existence of the Hilltop Mine Agreement and the payment of the HK$48,000,000 by Chan to the companies designated by the Third Party as well as the pleaded position of the Third Party, I accept that, on balance, the discussions regarding how repayment by the Third Party to Chan should be made is established.

Continued pursuit of mining business

84.  Whilst Chang was not in Hong Kong and the trading of the ListCo shares suspended, the investment into the mining business apparently continued as evidenced in the later public announcements.  The details of the transaction does not matter but it illustrates the control of ListCo is not with Chang.

The two Macau meetings

85.  In 2008, when Chang was avoiding coming to Hong Kong, two meetings took place in Macau, one on 15 February 2008 and another on 2 May 2008.

86.  The evidence of the witnesses differs as to where the two meetings took place, in the office or in the congee shop.  Mr Chang asserted that the 15 February 2008 meeting took place inside a small congee shop whilst the defendants’ case is that the 2 May 2008 meeting was the one that took place, in part, in the congee shop.

87.  The exact location of where the meetings took place did not matter save as to provide an indication as to the memory of the witnesses and hence their reliability.  Mr Chang’s evidence was again confused and incoherent. Insofar as the evidence as to where the meetings took place is concerned, I prefer that of the defendants’ witnesses.  Chan and Aggarwal gave evidence on behalf of the defendants in this respect making it comparatively consistent that the congee shop meeting took place on 2 May 2008.

88.  The parties do not differ as to the persons attending the 15 February 2008 meeting.  They agreed that Chang, Aggarwal, Chan and the Third Party were present in the February meeting.  This consensus regarding the presence of the Third Party is interesting.  Whilst Chang denies the beneficial ownership of the Third Party, his admission that the Third Party was also present at the meeting in February 2008 suggests the Third Party must have some interest in the ListCo and Chang knew it.

89.  Chang failed to refer to this 15 February meeting in his affirmation. He asserted in the written evidence that there was only one face-to-face meeting in May 2008.  When put that he lied in his affirmation, there was a long pause but no response nor explanation was put forth as to why he chose not to mention the February meeting in his affirmation.

90.  Upon further cross-examination, it became apparent that on that day, i.e. 15 February 2008, Chang told the other three persons that CCB started investigation on him.  He also said in the box that he had signed some documents in the presence of Chan, Aggarwal and the Third Party but could not remember what they were. Yet he categorically denied that he signed documents for the sale of 70,000,000 shares to Oriental Gem.

91.  The 70,000,000 shares of the ListCo, which was not the subject matter of this action was sold, on the face of the documents, to Oriental Gem.  The defendants’ case is that in this February 2008 meeting, in the presence of these persons who attended the meeting, Chang on behalf of Polestar signed an agreement relating to the sale of the 70,000,000 shares to Oriental Gem and payment in the sum of HK$23,000,000 (HK$1,500,000 + HK$11,500,000 + HK$10,000,000) was made to Chang as set out in Ho Tse Wai & Partners’ (Oriental Gem’s lawyers) letter dated 7 July 2009.

92.  The plaintiff noted that the Oriental Gem transaction is not within the jurisdiction of this court.  Irrespective of what the plaintiff will contend in relation to this Oriental Gem transaction, the fact remains that there exists in the bundle of documents which on their face shows an agreement between Polestar and Oriental Gem dated 18 February 2008 for the sale of 70,000,000 shares of the ListCo and records of payment in the sum of HK$23,000,000 to and received by Chang.

93.  Chang’s testimony in the box regarding what happened in these two meetings is not reliable, inconsistent and confused.  When taking his written evidence also into account, it can be readily seen that he was prepared to make bold assertions without reservations under oath in his affirmations and only resiled from or modified those statements after being confronted with objective documentary evidence such as Immigrations Department’s record of exit and entry or under cross examination on the details. 

94.  The second meeting indisputably took place on 2 May 2008 but the parties differ significantly in relation to the circumstances surrounding this meeting.  The persons that were indisputably present are Chang, Chan and Aggarwal.

95.  Chang denied that the Third Party was there and that he denied he had signed any document on that day.  In his witness statement he asserted he had signed some financial documents or accounts of the ListCo but gave completely different testimony in the box.

96.  The defendants’ case that the Third Party was also present is to be preferred.  The Third Party has been shown to have a lot of influence and relationship with the staff of the ListCo and the dealings of the ListCo.  This has been dealt with by the defendants’ witnesses and the events described by Chow and Chang also tend to support the defendants’ case of the Third Party’s control over the ListCo. The Third Party’s presence in the February meeting also lends weight to the conclusion that it is more likely than not that the Third Party was also present in the May meeting.

97.  In the pleadings, the plaintiff denies that there was a meeting on 2 May 2008 amongst the Third Party, Chang, Chan and Aggarwal.  Chang tried to explain under cross-examination that he denied that in the pleadings because he disagreed that the Third Party was there.  He admitted that Chan and Aggarwal were present at the meeting.  His evidence in the box was that he did not sign anything on the day.  As to the purpose of the meeting, Chang said :

“…they had asked me to meet them. … At that time the trading had not resumed yet so we had to talk about matters relating to the resumption of trading.”

98.  He originally seemed to agree that he made a mistake and agreed that the meeting took place at a congee eatery near the Linfair office in Macau. Later on, he denied that and asserted that it was in the office.  He was either confused or avoiding telling the whole truth.

99.  Aggarwal gave evidence that on 2 May 2008 when they arrived at the Macau office of Linfair, they called Chang who was at a meeting.  Aggarwal said he then went up to the office at the invitation of Chang whilst Chan and the Third Party waited downstairs in the congee shop.  Aggarwal said he had, on the instructions of Chan and the Third Party, prepared the Sale and Purchase Agreement.  Aggarwal said that he went up to the office of Chang and briefly told him about the Share and Purchase Agreement and that he was instructed to prepare it for his execution.  Aggarwal explained again, in the box, that he reminded Chang that he had to be satisfied that he agreed to transfer the shares to Chan and, according to Aggarwal, Chang said “OK”.  He said :

“Yes.  I mean, it won’t be verbatim.  Just I must have said words to the effect that ‘Duncan, we’re here because we need to -- I’ve been told to prepare a bunch of agreements, the sale and purchase agreement for 55 million shares.  There is a trigger mechanism for a further 25 million shares to be transferred.  This relates to the -- the consideration will be set off against a third party debt owed by Madam Cheung to Ms Katherine Chan.  Madam claims the 80 million shares are hers.  If you are not okay with this, then let’s not proceed further.’  And the answer that I got was ‘It’s okay.  Let’s move on.’ “

Aggarwal took the “It’s okay” as “an admission that they (i.e. the shares) belonged to Madam Cheung Kwan”. It was a brief meeting in the office, Aggarwal said.  After that they went down together to the congee shop where Chan and the Third Party were.  The three documents (Sale and Purchase Agreement between Polestar and Anton, the 2 sold notes) were then signed by Chang in his presence.

100.  Aggarwal was cross-examined about his role as a solicitor and his duty to advise Chang regarding the transaction in the light of the clear documentation that Chang was the “legal and beneficial owner” of Polestar which held the Disputed shares. He was shown the following clauses :

“2. SALE AND PURCHASE OF THE SALE SHARES

2.1 Subject to and upon the terms and conditions of this Agreement, the Vendor shall, as legal and beneficial owner, sell to the Purchaser and the Purchaser shall purchase from the Vendor the Sale shares with effect from Completion free from any lien, charge, encumbrance or third party rights of whatsoever nature and together with all rights now or thereafter attaching thereto (including but not limited to all dividends and other distributions paid, declared or made in respect thereof on or after the Completion Date).

2.2 The consideration of HK$55,000,000 payable by the Purchaser to the Vendor for the sale and purchase of the Sale shares shall be set-off against the amount of HK$55,000,000 due from a third party to the Purchaser and the Vendor acknowledges and agrees to such arrangement and is thereby deemed to have received the said amount.

2.3 If the resumption of trading of shares on the Stock Exchange does not occur within 30 days of this Agreement or if the closing price per Share on the first day of resumption of trading of shares (following the execution of this Agreement) is less than HK$1.00 per Share, the Vendor shall transfer a further 25,000,000 shares to the Purchaser and the term ‘Sale shares’ in this Agreement shall be deemed to have been amended to 80,000,000 shares.”

101.  He accepted under cross-examination given his understanding that the Third Party was the beneficial owner he should not have described Polestar as the “beneficial owner” in the agreement.  Those representations were not correct as he believed the beneficial owner is the Third Party.  He admitted that with hindsight, it was a mistake on his part to leave those false representations in the Sale and Purchase Agreement.  He said “it didn’t occur to me” that further disclosure ought to be made to the Stock Exchange.  His explanation or excuse was that there was no black and white evidence regarding beneficial ownership and so he took Chang’s statement that “it’s okay” as being an admission that those representations were properly put there.  He either turned a blind eye or was not giving proper advice to Chang and the ListCo or perhaps was collaborating in some improper transactions that ought to have been disclosed to the Stock Exchange. 

102.  However, the fact of the matter was that Chang did sign the Sale and Purchase Agreement between Polestar and Anton.  It is inherently implausible that a chairman of a listed company would have executed documents without studying it or enquired about its nature.  Whilst Aggawal said he made the explanations briefly in the office, Chang denied there was any such conversation at all.  No reasonable explanation has been put forward by Chang as to why he signed the document save his repeated assertions that he did not really look at them which, in my view, is not believable.

103.  There is no evidence from the plaintiff’s witnesses as to what representations were made by Aggarwal that led to Chang to sign on the Sale and Purchase Agreement.  As a result, irrespective of whether Aggarwal’s evidence as to his “private moment” with Chang in his office took place or not, on a balance of probabilities, I find that the misrepresentation plea was not made out by the plaintiff.  Chang had signed the Sale and Purchase Agreement on behalf of the Polestar.  I also prefer the evidence of the defendants regarding the presence of the Third Party as explained above.  This is important in the context of the signing as it shows that more likely than not, Chang was caused to sign that document by the Third Party whose debt was actually mentioned therein although her identity was not revealed.

104.  Chang does not dispute that the 1^st Sold Note was signed by him although he contended that it was a blank document that he signed sometime in June for the purposes of the June 2007 placement.  I do not prefer the plaintiff’s evidence of signing blank documents.  On balance, I find that the signing of the sold notes took place at the time when the Sale and Purchase Agreement was executed. 

105.  Chang denied that the signature on the 2^nd Sold Note was his.  In relation to his signature on the 2^nd Sold Note, Mr Mak, counsel for the defendants, prepared a sheet of paper with all the signatures that were not disputed as being Chang’s for the purposes of comparison.  On the face of it, the signature on the 2^nd Sold Note bears close resemblance to the other signatures of Chang.  The plaintiff has not sought to adduce expert evidence to prove the forgery.  In relation to an allegation of forgery, the mere assertion on the part of Chang would not suffice. 

106.  I find therefore that the 1^st and 2^nd Sold Notes for the 55,000,000 and 25,000,000 shares respectively were signed by Chang on 2 May 2008 in Macau.  I have already expressed my doubt as to the signing of the blank documents as alleged by the plaintiff and when the 2 May 2008 Macau meeting was taken into account, and on a balance of probability, I dismiss the plaintiff’s plea in this regard.

Signing of the Settlement Instructions

107.  Lau gave evidence that he was asked by Wong to take the settlement instructions that have been prepared which was in a plastic folder down to the car of Chow for him to sign on 4 August 2008.  It is normally unusual for a driver to be able to remember the exact date and what happened on that day.  However, Lau gave evidence that in fact when he took the settlement instruction forms down to Chow for him to sign, he hurt his forehead and he had to receive medical care after Chow has signed on that day.  He gave clear evidence that he remembered his forehead was hurt and that Chow actually has asked about it.  Chow’s evidence on what happened on 4 August was vague.  However, he gave evidence that he sometimes signed documents when documents were brought down to his car but he denied any recollection of signing any settlement instructions on 4 August. As stated above, Chow’s evidence was that he signed blank forms back in June. 

108.  I prefer the evidence of Lau.  There is no reason, in my view, that he should give false evidence.  Wong was also cross-examined about the telephone discussion between her and Lau about how to locate the plastic folder from the papers on her desk which, although subject to detailed cross-examination, was not shown to be unbelievable or implausible.

109.  Looking at the signing of the settlement instructions alone, I conclude that it was signed by Chow after certain entries have already been put into the settlement instruction on 4 August.  Wong gave evidence of what was put in before Chow’s signature.  In the premises, Chow knew it was for the transfer of the Disputed shares.

110.  Looking at the evidence together with my findings in the Macau May meetings, I prefer the defendants’ case as to the circumstances regarding the signing of the documents, the sold notes and the settlement instruction form.

Other events and public documents

111.  In 2008, a few other matters have occurred which are not in dispute.  Chow was arrested by the Commercial Crime Bureau for suspected fraud in March and he resigned as non-executive director of the ListCo in April 2008.

112.  Various notices of disclosures of interests in connection with the Sale and Purchase Agreement were filed by Chan and Anton as well as by Polestar and Chang.  They indisputably show that Chang was aware of the transfer of the Disputed shares.

113.  In relation to the disclosures of interests (“DI”) form, there is documentary evidence to show that Caroline Cheung of K & L Gates did send the same to Chang for his comment.  This was done on 4 August 2008.  At 3:39 p.m. Caroline Cheung sent an email to Chang stating :

“Dear Duncan, Please find attached the draft DI notices for your consideration. Please let me have your comments, if any, by 4:30 pm today in order to allow us to submit the notices to SEHK today.”

Then at 6:15 p.m., she wrote to Chang again :

“Please find attached the DI notices submitted to Hong Kong Exchanges and Clearing Ltd. today for your record.”

114.  It is reasonable to conclude that Chang was aware of them at the time.  He received those emails.  He said he was busy, and did not read them.  But he must have read them shortly thereafter.  The long lapse of time between the emails and the raising of the allegation of fraud in this action is noteworthy as he must have had the chance to review the emails some time after it was received. He must have been aware of the contents and did not see the need to challenge that at that time.  This is more consistent with the inference that Chang accepted the contents in those emails.

115.  The defendants drew the attention of the court to other documents that were signed by Chang to support his knowledge of the transfer of the 70,000,000 shares to Oriental Gem and 80,000,000 shares to Anton :

(1)  Polestar’s proxy of 21,360, 000 shares (after transfer of the 70,000,000 and 80,000,000 shares) dated 20 August 2008 : Chang was asked about it and he did not give any explanation or answer as to why the document was signed by him if the statement as to his shareholding there was inaccurate. 

(2)  In a letter for the Stock Exchange of Hong Kong Ltd dated 10 December 2008, it recorded :

“There has also been a substantial change in the shareholding of the Company. Mr Chang’s and Ms. Hsieh’s shareholding in the Company, through Polestar Assets Limited, was substantially reduced from approximately 75% at the time of the Advances to approximately 5.07% as at 5December 2008.”

  Chang admitted that he had seen this letter and signed it.  He said he read it briefly but again it was unbelievable that if the statement was false he would have signed it then. 

(3)  Another example is the Disclosure of Interst notice filed by Polestar and Chang in respect of sale of the 400,000 shares by Polestar on 13 May 2009 which contain a disclosure made by Polestar and Chang that immediately prior to the sale of the 400,000 shares it had interest in 5.07% of the total shareholding of ListCo (which percentage represented 21,360,000 shares which is consistent with the position of disposal of 70,000,000 and 80,000,000 shares).

(4)  Another public document was that issued by ListCo on 5 December 2008 in which under the heading of “change in shareholdings”, it stated that :

“Polestar Asset Limited, which is held at 80% by Mr Chang and 20% by Miss Hsieh (the wife of Mr Chang), disposed 35.6% interest of the company to Anton Company Limited, a company solely owned by Miss Chan and Oriental Gem Group.”

116.  Chang denied he had notice of all such documents at the time or where they bear his signature that he did not read them carefully when he signed.  The repetition of such events rendered his excuse incredible and unbelievable. 

117.  On 8 December 2008, the trading of the shares of ListCo resumed.

WEIGHT OF EVIDENCE

118.  This case turns entirely on the weight of the evidence that is adduced.  In Star Glory Investment Ltd v Kai Tuo (HK) Technology Co. Ltd, unreported, HCA 3523/2002 (Chung J) (30 August 2005) the court held :

“There are two objective tests for assessing a witness credibility regarding a matter to which he has testified:

(1) whether that part of testimony is inherently plausible or implausible;

(2) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that the witness has been discredited over one or more matters to which he has testified (using the above tests), these factors relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony.  For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest.”

119.  Apart from assessing the overall credibility of the witness, it is also pertinent to bear in mind that whilst a witness may be found to have been of bad character in other instances, it does not, per say, be adequate to conclude that he must therefore have been untruthful in his testimony before this court.  The evidence has to be weighted against the other evidence from the witnesses as well as documents and the circumstances surrounding the particular events that occurred in the case.  A witness may be truthful in some aspects but not so in other aspects of his evidence.  A general conclusion that the evidence of one witness is to be preferred over another witness simply by reason of credibility would, in my view, be over simplistic and may not be in the best interest of justice.

120.  Similarly, the profession of a witness can only of limited value in the assessment of the weight of his evidence.  The defendants originally emphasisd the credibility of Aggarwal on the basis that he was a solicitor. Whilst it is the duty and the expectation of the society and the legal profession that a lawyer should not part take in any dishonest behaviour or be unprofessional, it does not mean that all members of the legal profession is necessarily compliant with this duty and meet such expectation.  It is particularly so when the weight of the evidence of the witnesses have to be assessed objectively without any pre-conceived views.  When in the witness box, a member of the general public and one of the legal profession should have been accorded equal weight from the outset.  They both have come to give evidence to assist the court in resolving the dispute.  I know of no presumption nor can there be one that statements from a legal profession must necessarily be afforded greater weight irrespectively. 

121.  Evidence of witnesses may be untruthful or misleading either by intent or as a result of the memory and the mind-set being changed with time through re-construction in one’s mind of how events occurred.  Evidence of a witness from a respectable profession may be equally susceptible to such human failures just as any other individuals in the society.  The possibility that a witness has misremembered or misconstrued a past event cannot be ignored.  It is for this reason that cross-examination of witnesses is pertinent to the adversarial system and the objective and fair assessment of all relevant evidence form the basis of the finding of facts.  The fact that certain events have been misremembered either deliberately or inadvertently, does not mean that the whole of the evidence of that witness should be ignored.

122.  As a result, whilst having the proposition summarised helpfully in the case above, the evidence must still have to be weighed according to the evidence that is tendered in this case.  The demeanour of the witness and the way he has made statements in his previous affirmations which were modified or even withdrawn under cross-examination are all factors to be taken into account.  None of them is conclusive but they all form a basket of factors that would have to be considered and balanced in order to come to a view on the evidence and hence the finding of fact.

123.  The credibility of Aggarwal has been specifically challenged and the two new evidence regarding his conviction as well as the charges of crimes involving dishonesty have been referred to.  I am not persuaded that the new evidence is adequate to conclude that everything else that Aggarwal said in his evidence before this court should automatically be disbelieved.  There is no evidence before me to suggest that Aggarwal was improperly benefiting from the transactions between the Third Party and Chan.  He has been subjected to extensive and detailed cross-examination.  He has acted unprofessionally and should be subject to sanctions but it does not automatically mean that all his evidence of what happened should be rejected.  I do not accept that the new evidence is adequate for me to conclude that all his other activities would involve dishonesty or impropriety.  I assess his evidence with his conviction and the new evidence in mind, but more so with the overall circumstances and evidence in this case before coming to any finding of fact.

124.  The plaintiff submitted that the case of the defendants should not be preferred for that case “rests on allegations of serious misconduct, serious misrepresentation or even conduct akin to fraud.  Take Issue 1 (i.e. Beneficial ownership of the Disputed shares) as an example, the defendants’ case that Cheung [the Third Party] was the beneficial owner and the real boss of the ListCo is a clear case of conspiracy to act in breach of the disclosing provisions in the Listing Rules, if not fraud on the general investing public.  Issue 2 (i.e. Alleged Mines Agreement relating to the indebtedness of the Third Party to Chan) likewise, involves serious allegation.  Although on the face of it, it simply asserts the making of an agreement (i.e. the Alleged Mines Agreement). However, if the factual scenario asserted by the defendants is correct, it would amount to a breach of serious fiduciary duty on the part of Cheung and Chan.”

125.  The observation of the plaintiff is noteworthy and not without force. However the implications following from the defendants’ case would be a matter that would have to be further investigated and may lead to action taken by other authorities or parties.  No plea of illegality arising from such improper behaviour was made before me.  In dealing with the issues before me, I have to consider the evidence and afford it appropriate weight and to therefore prefer one to the other, bearing in mind the plausibility or otherwise of such assertions.  In this case, I do not rule out, although there is no need for me to find that Chang and Chow were aware of the beneficial ownership of the Third Party and have taken part in the actions that have brought that into place.  Chan said in evidence that Chang was just a “head” or a face but the control was with the Third Party.  The breaches of the Listing Rules and other relevant provisions appear to me to have been ignored by all concerned in this case. Whilst it is not possible for me to make any such observation or conclusion, the facts as found here whilst binding only on the parties before me may result in further investigations into the parties involved including those in receipt of the HK$48,000,000 paid by Chan.  That, however, does not affect my findings as to what happened based on the evidence before me in relation to the issues before me.

Beneficial ownership of the disputed shares

126.  On the basis of the evidence before me I have to draw an inference as to whether or not the Third Party is the beneficial of the

Disputed shares in her absence.  Inferences that have been drawn from individual events or circumstances have been set out above and I summarise/supplement my conclusion that the Third Party is the beneficial owner of the Disputed shares below :

(1)  The Shui On Centre office was used by the Third Party when neither Chang nor Chow used that office in any significant way.

(2)  In the early 2007 placements, the Third Party has been involved.

(3)  Wong gave evidence of how the Third Party was treated as the “real boss” by colleagues of hers in Quam.

(4)  Lau was specifically engaged as a driver to serve the Third Party exclusively.

(5)  The mine visit in June 2007 was led by the Third Party and was not participated by Chang or Chow.

(6)  The placement negotiations with AIG and Value Partners were conducted by the Third Party as explained by Soo.  Neither Chang nor Chow gave evidence of how the negotiations and the deal was otherwise reached.

(7)  Chow took instructions from the Third Party regarding the appointment of He Changming as the director of the ListCo.

(8)  The Third Party was responsible for inviting and ultimately engaging Chan to be CEO in September 2007.

(9)  The Third Party was present at the meeting in Macau in February 2008 which, on the face of the documents, led to the transfer of 70,000,000 shares to Oriental Gem.

(10)  The Third Party was also present in the May 2008 meeting in Macau, when the Sale and Purchase Agreement of the Disputed shares was signed by Chang on behalf of Polestar.

(11)  The subsequent public documents evidencing the transfer of the Disputed shares was not challenged until the bringing of this action.

(12)  Chan was dealing with the Third Party and therefore has always treated Chang as the “face” for the ListCo when the real control was with the Third Party.

(13)  Aggarwal introduced the Third Party to Chan in arranging the early 2007 placements.

127.  The above factors and circumstances enable me to draw an inference, unsatisfactory though it may be in the absence of the Third Party, that the defendants’ case that the beneficial owner of the Disputed shares if the Third Party is made out.

128.  I would also observe that by reason of the conduct of Chang and Chow, they were also aware of it at the time.  The four protagonists, Chang, Chow, Chan and Aggarwal, in this action have, in my view, been party to the arrangements that have created the beneficial ownership of the Third Party over the ListCo and therefore the Disputed shares.  Chang was willing to be the head or face of the ListCo whilst conducting his own Linfair engineering business with the office in Chaiwan.

129.  Ultimately, in this case, it is a matter of balancing the case of the plaintiff and that of the defendant in the light of the evidence adduced. My findings in relation to the evidence have been set out above.

130.  In the premises, the plaintiff’s case in both actions are dismissed. There is no reason that costs should not follow the event.  I order that the plaintiff shall bear and pay the defendants’ costs on a party and party basis, to be taxed if not agreed.