YEUNG CHIU SING RICKY AND ANOTHER v. TSUI TACK KONG

DCCJ 6755/2019

[2021] HKDC 582

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6755 OF 2019

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JUDGMENT

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I. Introduction

1.  This is the plaintiffs’ appeal against Master Maurice Lam’s Orders dated 2 December 2020 (“the Orders”), inter alia, (a) dismissing the plaintiffs’ Summons for summary judgment against the defendant (“the SJ Summons”) and granting unconditional leave to the defendant to defend this Action; and (b) requesting the plaintiffs to forthwith pay the defendant’s costs of the SJ Summons to be summarily assessed if not agreed.  In the Notice of Appeal to Judge in Chambers dated 16 December 2020, the plaintiffs ask that (a) the Orders be set aside; (b) summary judgment be entered for the plaintiffs in terms of the Prayer for Relief in the Statement of Claim dated 13 December 2019 (“the SoC”); and (c) costs of the SJ Summons and this Action be paid by the defendant to the plaintiffs.

2.  At the hearing before me, the plaintiffs were represented by Mr Adrian Lai together with Mr Kevin Lau.  The defendant is represented by Mr Kwok Kam Kwan.

3.  Having considered the parties’ evidence and submissions, I decide to set aside the learned Master’s Orders and grant summary judgment in favour of the plaintiffs. The defendant’s counterclaim mirrors the plaintiffs’ claim, since I have decided to grant summary judgment in favour of the plaintiffs, I will dismiss the defendant’s counterclaim. I set out my reasons below.

II. Background facts

4.  The plaintiffs and the defendant’s dispute arises from a sale of the entire shareholding (“the Shares”) in a company known as Seven Round Properties Limited (“the Company”) by the plaintiffs to the defendant.  The Company’s only asset is and was at all material times a commercial premises known as Office (including the lavatories) on 2/F, Hing Lung Commercial Building, No 68-74 Bonham Strand, Hong Kong (“the Property”).

5.  For the purposes of the above sale, the plaintiffs and the defendant entered into a Provisional Agreement for Sale and Purchase on 18 May 2019 (“the PSPA”), whereby the parties agreed, inter alia, that:-

(a)  According to Clause 2, the consideration for the Shares shall be HK$53,980,000, which shall be paid in the following manner:-

(i)  Initial deposit in the sum of HK$2,699,000 shall be paid by the defendant to the plaintiffs upon the signing of the PSPA;

(ii)  Further deposit in the sum of HK$2,699,000 shall be paid by the defendant to the plaintiffs on or before 17 June 2019;

(iii)  The balance in the sum of HK$48,582,000 (“the Balance”) shall be paid on completion which shall take place on or before 30 August 2019. 

(b)  According to Clause 9,

“The [plaintiffs] undertakes to deliver to the [defendant] or the [defendant’s solicitors] at least five (5) days prior to the Completion Date the proforma completion accounts (herein after called “the Proforma Accounts”)… If the NTAV (hereinafter defined) as shown in the Proforma Accounts is more or less than zero, the Balance shall be adjusted upwards or downwards (as the case maybe) accordingly in the manner [set out in Clauses 9 (1) and 9 (2)]… For the purposes of this Agreement, “NTAV” means the aggregate of all tangible assets of the Company which are readily convertible into cash or cash equivalents (excluding the Property, any intangible assets and other fixed assets and deferred tax), less the aggregate of all liabilities (actual contingent or otherwise by excluding the Sale Debt) and provisions of the Company as at the Completion Date”.

6.  While it was stated in Clause 3 of the PSPA that the parties would enter into a Formal Sale and Purchase Agreement on or before 17 June 2019, eventually no such agreement was signed and the parties proceeded with the transaction based on the PSPA.

7.  The Company had claimed annual tax allowance in respect of the Property. Up to 30 June 2018, the total allowance claimed by the Company was HK$3,877,788.  The plaintiffs and the defendant dispute whether the above total allowance has given rise to an item of deferred tax liability (“the Deferred Tax Dispute”):-

(a)  The defendant claimed that a sum of HK$639,835 (“the Disputed Sum”), being the total allowance of HK$3,877,788 times the profit tax rate of 16.5%, was chargeable on the total allowance.  Following the applicable financial reporting standards, a deferred tax liability in the amount of the Disputed Sum should be booked on the Company’s audited financial statements for the year ended on 30 June 2018 (“the 2018 Accounts”).  Pursuant to Clause 9 of the PSPA, a reduction to the consideration of the Shares in the amount of the Disputed Sum should be made;

(b)  On the other hand, the plaintiff was of the view that the Disputed Sum was a balancing charge, which would be recognised on the Company’s audited financial statements only if the Property was disposed of by the Company, as opposed to a sale of the Shares in the Company as provided in the PSPA.  Hence, no deduction to the consideration of the Shares needs to be made.

8.  The parties were unable to resolve the Deferred Tax Dispute notwithstanding various rounds of correspondence between their solicitors from June to July 2019.

9.  Amongst the correspondence, the defendant heavily relied on a letter from his former solicitors, Messrs Au, Thong & Tsang Solicitors (“ATT”) to the plaintiffs’ solicitors Messrs Wat & Co (“W&C”) dated 10 July 2019 (“the 10 July 2019 Letter”).  As shall be seen below, the defendant’s defence in this Action is that the EY Opinion (as defined below) did not address the issues raised in the 10 July 2019 Letter.

10.  In the 10 July 2019 Letter, the defendant stated, inter alia, that:-

(a)  The deferred tax liabilities in the amount of HK$639,835 is calculated based on the 2018 Accounts in accordance with (a) Section 29.14 of HKFRS for Private Entities and (b) Section 15 of HKAS 12;

(b)  If the parties cannot agree on the deferred tax matter, “an independent opinion can now be [sought] on the point ‘whether the deferred tax constitute a potential liability on the Company?”.  According to the defendant, this is the “essential question” which has not been dealt with in the EY Opinion (“D’s Alleged Essential Question”). 

11.  In mid-August 2019, as the Completion Date was approaching, the parties agreed to the following arrangement to enable completion to take place notwithstanding the Deferred Tax Dispute (“the Dispute Resolution Agreement”):-

(a)  The parties would complete the sale of the Shares according to the PSPA on the Completion Date;

(b)  The parties consent to the Company engaging an independent accountant firm Ernst & Young (“EY”) to give an opinion on, inter alia, the proper accounting treatment of the Disputed Sum and the proper deferred tax calculations for the Company, which the parties would treat as authoritative; and

(c)  As of the Completion Date, a sum of money in the amount of the Disputed Sum would be retained by the plaintiffs’ solicitors as stakeholders, pending the issuance of the opinion by EY (“the Stakeholder Sum”).

12.  Pursuant to the Dispute Resolution Agreement, the Company engaged EY by an engagement letter dated 26 August 2019 (“the Engagement Letter”).  The 10 July 2019 Letter was referred to in the “Background” of the Engagement Letter.  The Engagement Letter contained, inter alia, the following:-

“1. Background

…

We further understand that during the performance of due diligence, the solicitors … of the [defendant] provided his comments on issues stated in the letter dated 10 July 2019, mainly in relation to the deferred tax calculations and accounting policies.

Based on the information available to us, the Company has been claiming commercial building allowances (“CBA”) on the Property for tax filing purpose. In addition, we understand that a deferred tax asset of HK$5,125 arising from the Property as at 30 June 2018 was calculated by the Company but the amount was not recorded in the Company’s audited financial statements (“AFS”) due to an immaterial amount involved.

In the light of the above, we understand you would like us to review and comment on the tax implications arising from the transfer of the Company from a Hong Kong tax perspective. Furthermore, you would also like us to review the reasonableness of the deferred tax calculations in respect of the Property as at 30 June 2018.

2. Scope of services

We will provide the following advisory services (the “Services”) to you:

• …

• …

• Provide our comments on the implications of commercial building allowance in Hong Kong arising from the transfer of the Company;

• Review and comment on the deferred tax calculations in respect of the Property as at 30 June 2018 and comments on whether such deferred tax would be recognised in the Company’s AFS pursuant to the relevant HKFRS and accounting standards…

• …”

13.  The terms of the Engagement Letter were agreed to by the defendant by ATT’s letter dated 16 August 2019.

14.  On 29 September 2019, EY issued its initial opinion.  The initial opinion was sent by W&C to ATT by letter dated 2 September 2019.

15.  By letter dated 3 September 2019, ATT commented on EY’s initial opinion and said that EY did not include 2 paragraphs which have been agreed by the parties to be stated on page 1 of the Statement of Work (including a reference to the 10 July 2019 Letter).  ATT’s proposed additions were enclosed to its 3 September 2019 letter for EY’s consideration (“D’s Proposed Additions”).

16.  On 6 September 2019, EY issued its final opinion (“EY’s Opinion”). In EY’s Opinion, EY included D’s Proposed Additions as part of the “Background facts and assumptions”.  In EY’s Opinion, the following was stated:-

“Further to our engagement letter dated 26 August 2019, we have been engaged to review and comment on the tax implications arising from the transfer of the shareholding of [the Company] from a Hong Kong profits tax perspective. In particular, you would like us to comment on the tax implications in respect of the commercial building allowances (“CBA”) which the Company has been claiming on a commercial property in its Hong Kong profits tax return. Furthermore, you would like us to comment on the deferred tax calculations in respect of the commercial property held by the Company as at 30 June 2018.

…

1.  Background Facts and Assumptions

•  …

•  We further understand that during the performance of due diligence, the solicitors, namely Au, Thong & Tsang Solicitors of the [defendant] provided his comments on issues stated in the letter dated 10 July 2019, mainly in relation to the deferred tax calculations and accounting policies.

•  Based on the information available to us, the Company has been claiming CBA on the Property for tax filing purpose.  In addition, we understand that a deferred tax asset of HK$5,125 arising from the Property as at 30 June 2018 was calculated by the Company but the amount was not recorded in the Company’s AFS due to an immaterial amount involved”

2.  Scope of work

 Our scope of work consists of the following:

•  …

•  Provide our comments on the implications of CBA in Hong Kong arising from the transfer of the Company;

•  Review and comment on the deferred tax calculations in respect of the Property as at 30 June 2018 and comments on whether such deferred tax would be recognised in the Company’s AFS pursuant to the relevant Hong Kong Financial Reporting Standards (“HKFRS”) and accounting standards;

•  …

4.  Our Tax and Accounting Analysis

4.1  Tax implications on CBA arising from the transfer of the shareholding of the Company

 As a recapitulation, balancing adjustments will only arise when one of the following events occurs:

a)  The relevant interest in the building or structure is sold;

b)  The leasehold interest comes to an end; or

c)  The building structure is demolished, or destroyed or without being demolished or destroyed, ceases altogether to be used.

Based on the provisional [sale] and purchase agreement dated 18 May 2019, the asset being transferred is the shares of the Company, i.e. not the Property being held by the Company. As such, the Company continues to have a relevant interest in the Property despite the change of ownership of the Company. Given the commercial building is not being sold or demolished or destroyed or ceases altogether to be used, there will be no balancing adjustments arising from the change in shareholding of the Company and thus no tax implications on the CBA being claimed by the Company. A balancing adjustment will only arise upon future disposal of the Property.

4.2  Tax Written Down Value of CBA

 …

4.3  Deferred Tax on the Property

 …

Given the difference of the tax written down value and the net book value on the portion of the Property claiming CBA is HK$31,063, a deferred tax asset of HK$5,125 is calculated for the Property as at 30 June 2018. Please refer to Appendix 5 for our deferred tax calculations.

 …”

17.  I will refer to paragraph 4.1 of EY’s Opinion as “the Balancing Charge Opinion” and paragraphs 4.2 and 4.3 of EY’s Opinion as “the Financial Statement Opinion” herein below.

18.  After the defendant received the EY Opinion, by letter from ATT dated 11 September 2019, the defendant asked W&C for the original Debit Note issued by EY for payment by the defendant.  By letter dated 19 September 2019, W&C sent EY’s Debit Note to the defendant and asked the defendant to consent to the release of the Stakeholder Sum to the plaintiffs as the EY Opinion was in the plaintiffs’ favour.  However, the defendant refused to settle the Debit Note and refused to consent to the release of the Stakeholder Sum to the plaintiffs.

19.  In a letter dated 12 November 2019 issued by the defendant himself to W&C, the defendant stated that it was his view that the EY Opinion did not deal with the 10 July 2019 Letter, did not deal with his queries raised during due diligence of the Company and the Shares, and did not deal with the correspondence between W&C and ATT. The defendant asked that the Stakeholder Sum be released to his solicitors.

III. The plaintiffs’ claim

20.  The plaintiffs commenced this Action and filed their Writ of Summons together with the SoC on 16 December 2019.  The plaintiff took out the SJ Summons on 15 May 2020.  The SJ Summons is supported by the Affirmation of Yeung Wing Leung Gary.

21.  The plaintiffs’ case is that the Stakeholder Sum should be released to them as the EY Opinion confirms their position that no balancing charge would arise from the sale of the Shares under the PSPA, as the sale did not involve the Property.  Further, a deferred tax asset (as opposed to a deferred tax liability as contended by the defendant) of HK$5,125 should be recognised in the 2018 Accounts, subject to the question of materiality.

22.  The plaintiffs seek, inter alia, a declaration that they are entitled to the release of the Stakeholder Sum to them.  Alternatively, the plaintiffs seek damages against the defendant as he was in breach of the Dispute Resolution Agreement in failing to accept as authoritative the EY Opinion and failing to consent to the release of the Stakeholder Sum to the plaintiffs. 

IV. The defendant’s defence

23.  The defendant filed his Defence and Counterclaim on 13 March 2020.  The defendant filed his Affirmation dated 6 July 2020 in opposition to the SJ Summons.

24.  The defendant’s case is that the Disputed Sum was not a mere balancing charge which would be recognised in the Company’s audited financial statements only if the Property was disposed of by the Company.  The Disputed Sum should be the deferred tax liabilities of the Company and should be deducted from the consideration for the Shares under Clause 9 of the PSPA.

25.  The defendant claimed that the EY Opinion was incomplete because it failed to address the issues stated in the 10 July 2019 Letter, in other words, D’s Alleged Essential Question.

26.  The defendant denied that the plaintiffs were entitled to the release of the Stakeholder Sum.  He denied that he was in breach of the Disputed Resolution Agreement or that he is liable to the plaintiffs for any loss or damages.

27.  The defendant raised a Counterclaim against the plaintiffs for release of the Stakeholder Sum to him, or alternatively, damages to be paid by the plaintiffs to the defendant for breach of the Dispute Resolution Agreement.

V. Applicable legal principles

28.  This is an appeal from Master.  I will consider the SJ Summons de novo while giving the previous decision of the learned Master the weight it deserves.

29.  The legal principles governing a summary judgment application are not controversial:-

(a)  Order 14 Rule 3 of the Rules of the District Court (Cap 336H) (“RDC”) provides that unless on the hearing of an application under Order 14 Rule 1 RDC either the Court dismisses the application or the defendant satisfies the Court with respect to the claim to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against that defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed;

(b)  Order 14 Rule 4 (1) RDC provides that a defendant may show cause against an application under Rule 1 by affidavit or otherwise to the satisfaction of the Court. Order 14 Rule 4 (3) RDC provides that the Court may give a defendant against whom such an application is made leave to defend the action with respect to the claim to which the application relates either unconditionally or on such terms as it thinks fit;

(c)  In considering whether the defendant can raise triable issues the Court will not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such contemporaneous documents. The Court will also consider the inherent probability of the defence. What the Court would not do is to conduct a mini-trial on complicated factual issues.

VI. Discussion

30.  On the evidence before me, I am satisfied that the plaintiffs have satisfied the preconditions under Order 14 Rules 1 and 2 RDC.  I will proceed to explain why in my view the defendant has failed to show cause against the SJ Summons.

31.  As could be seen from the plaintiffs’ SoC paragraph 12 and the defendant’s D&CC paragraph 7, it is common ground between the parties that they have entered into the Dispute Resolution Agreement in the terms as pleaded in paragraph 12 of the SoC. Particularly, according to paragraph 12 (b) of the SoC, the parties have agreed to engage EY as the independent accountant to give an opinion on the proper accounting treatment of the Disputed Sum and the proper deferred tax calculations for the Company, and that the parties would treat the opinion as “authoritative”.

32.  While the opinion of EY was described as “authoritative” instead of “final and binding” in paragraph 12 (b) of the SoC, having considered the context and the facts specific to the present case, including the contemporaneous correspondence between the parties, I agree with Mr. Lai that the plaintiffs and the defendant did intend the opinion of EY to be final and binding on them with respect to the Deferred Tax Dispute. In particular:-

(a)  After several rounds of debate between the plaintiffs and the defendant by solicitors’ correspondence and discussions between the plaintiffs and the defendant’s respective accountants, as the Deferred Tax Dispute remained unresolved, in W&C’s letter dated 28 June 2019, the plaintiffs proposed that “… If just in case any further disagreement to the same question … we would like to suggest to appoint a reputable 3^rd party to give an independent opinion on the calculation of deferred tax.  Costs can be shared by the vendor and buyer on agreed-upon basis”;

(b)  In the 10 July 2019 Letter, the defendant stated that “… In view of the above, we take the view that if we cannot agree on the deferred tax matter, an independent opinion can now be [sought] on the point ‘whether the deferred tax constitutes a potential liability on the Company?’  If the answer is positive, your client shall pay the HK$639,835.9 to our client upon Completion and also pay the cost therefore.  If otherwise, our client shall bear the costs [therefore].  We await your reply”;

(c)  In the letter from W&C dated 9 August 2019, the plaintiff stated that “As per the latest correspondence between the parties, the calculation of deferred tax in the [2018 Accounts] remain unsolved, we both have compromised that it can only be resolved by appointing any one from the biggest four accounting firms to give the independent opinion on the deferred tax issue.  We are instructed that Ernst & Young Tax Services Ltd (‘EY’) has offered to provide comments on this issue…  According to our mutual agreement, the cost incurred therein shall be borne by the losing party.  That is, if the deferred tax liability of HK$639,835 shall be recognised in the Company’s AFS for the year ended 30.6.2018 pursuant to the relevant HKFRS and accounting standards, our client shall bear the costs payable to EY.  Otherwise your client shall pay for the said amount in EY’s quotation…”.  In the same letter, W&C enclosed the draft engagement letter to EY for the defendant’s comments;

(d)  After raising certain comments on the draft engagement letter to EY by letter dated 13 August 2019, the defendant eventually agreed to the terms of the Engagement Letter as set out in paragraph 12  above by letter dated 16 August 2019 from ATT.

33.  As the parties have agreed to be bound by the EY Opinion, neither party can challenge it on the grounds that mistake had been made unless it could be shown the that the EY Opinion has departed from the instructions given to him in a material respect: see Lau Yee Ching v Wong Tak Kwong CACV 172/2006 (unrep, 26/1/2007) per Tang VP (as he then was) at paras 15-17. 

34.  It is clear from the EY Opinion, the agreed Engagement Letter and the correspondence between the parties before EY was instructed that EY has not departed from the instructions given to it.  In particular:-

(a)  As stated in the third bullet point of the Scope of Work in the EY Opinion (as well as the third bullet point of the Scope of Services in the Engagement Letter), EY was asked to provide its comments on the implications of commercial building allowance in Hong Kong arising from the transfer of the Company. By the Balancing Charge Opinion contained in paragraph 4.1 of the EY Opinion, EY has opined that no balancing charge would arise from the sale of the Shares in the PSPA, as a balancing charge would only arise when there is a sale of the Property itself;

(b)  As stated in the fourth bullet point of the Scope of Work in the EY Opinion (as well as the fourth bullet point of the Scope of Services in the Engagement Letter), EY was asked to review and comment on the deferred tax calculations in respect of the Property as at 30 June 2018 and comment on whether such deferred tax would be recognised in the Company’s audited financial statements pursuant to the relevant Hong Kong Financial Reporting Standards and accounting standards. By the Financial Statement Opinion contained in paragraphs 4.2 and 4.3 of the EY Opinion, EY has opined that according to the applicable accounting standards, the Company did not have any deferred tax liability but rather had a deferred tax assets of HK$5,125 calculated for the Property as of 30 June 2018. It was reasonable for the Company’s auditor not to book the deferred tax assets on the 2018 Accounts, as the amount was immaterial.

35.  The 2 questions raised and answered by EY in the EY Opinion as set out in paragraph 34 above are the very issues which the plaintiffs and the defendant were in dispute, as confirmed in their contemporaneous correspondence and their pleadings: see SoC paragraph 10 and D&CC paragraph 6.

36.  During Oral Submission, Mr Kwok said that the Balancing Charge Opinion was merely EY’s comment on a hypothetical scenario which has no relevance to the present case.  I disagree. It is plain from paragraph 4.1 of the EY Opinion that EY was expressing its view on the sale of the Shares pursuant to the PSPA as EY had made specific reference to the PSPA and the Company in that paragraph.

37.  The defendant is adamant that D’s Alleged Essential Question, namely “whether the deferred tax (i.e. the Disputed Sum) constitutes a potential liability on the Company”, has not been answered in the EY Opinion.  I cannot agree.  D’s Alleged Essential Question is not a standalone question, rather, the answer to it is dependent on EY’s Balancing Charge Opinion and Financial Statement Opinion.  As EY has confirmed that no balancing charge would arise from the sale of Shares under the PSPA, and that a deferred tax asset instead of a deferred tax liability should be booked on the 2018 Accounts subject to the materiality consideration, the answer to D’s Alleged Essential Question must be “No”.  While EY has not dedicated a paragraph or a section to expressly say that “the Disputed Sum does not constitute a potential liability on the Company”, by rendering the Balancing Charge Opinion and Financial Statement Opinion, EY has in substance answered D’s Alleged Essential Question.

38.  As the parties have agreed to resort to EY for a binding opinion on the Deferred Tax Dispute, and that EY has not departed from the Engagement Letter in any way or in any material way, the defendant is not entitled to reopen the Deferred Tax Dispute which has been determined in the EY Opinion.  It follows that the expert report of Mr Albert Wong dated 23 June 2020 adduced by the defendant which seeks to reopen the Deferred Tax Dispute is irrelevant.

39.  For the reasons stated above, the defendant has failed to raise any triable issues which needs to be resolved by a trial.

40.  During Oral Submission, Mr Kwok alluded to the possibility that there may be other letters which the defendant may wish to rely on and said that potential further discovery by the defendant would be a reason for allowing this Action to go to trial.  I do not accept the submission.  It is trite law that for a defendant to show cause against the granting of summary judgment the duty is on him to condescend upon particulars in his affidavit in opposition to the summary judgment application.  The defendant should have included all the letters which he considers to be relevant in his affirmation.  Possible discovery is not a valid reason for there to be a trial of this Action. 

41.  As an alternatively argument, the plaintiffs raised the doctrine of estoppel by convention and contended that even if I find that EY has not answered D’s Alleged Essential Question in the EY Opinion, the defendant is nevertheless estopped from raising the Alleged Essential Question as a ground to challenge the EY Opinion.  As I am of the view that it is clear that EY has not departed from the parties’ instructions and that it has in substance answered D’s Alleged Essential Question, I do not need to deal with the plaintiffs’ estoppel by convention argument.

42.  In conclusion, I will grant summary judgment in favour of the plaintiffs. I am prepared to grant summary judgment in terms of paragraphs (1) of the Prayer of Reliefs in the SoC, namely, a declaration that the plaintiffs are entitled to the release of the sum of HK$639,835 (currently held by Messrs. Wat & Co as stakeholders) to them or to such persons as they direct;

43.  As I have granted paragraph (1) of the Prayer of Reliefs, I will not grant the alternative relief set out in paragraphs (2) of the SoC.  

44.  As to paragraph (3) of the Prayer of Reliefs regarding interest on the sum of HK$639,835, I will grant interest on commercial rate on the above sum from the date of the Writ up to and including the date of this Judgment. No interest would be granted thereafter as Messrs. Wat & Co as the stakeholder should release the above sum to the plaintiffs forthwith.

45.  As I have mentioned above, the reliefs claimed by the defendant in his Counterclaim mirror those claimed by the Plaintiffs in their claim. Since I have granted summary judgment in favour of the plaintiffs, the defendant’s Counterclaim is bound to fail and I will dismiss it.

V. Disposition

46.  In the light of my decision above, I will grant the following Orders:-

(a)  The Orders of the Master dated 2 December 2020 be set aside;

(b)  Summary Judgment be entered for the Plaintiffs, namely, a declaration that the plaintiffs are entitled to the release of the sum of HK$639,835 (currently held by Messrs Wat & Co as stakeholders) to them or to such persons as they direct;

(c)  Interest on the sum of HK$639,835 at commercial rate for the period from the date of the Writ up to and including the date of this Judgment;

(d)  The defendant’s counterclaim be dismissed.

47.  As to costs, I make a costs order nisi that costs of the SJ Summons, this appeal and this Action be paid by the defendant to the plaintiffs. The costs order nisi will become absolute after 14 days from the date hereof unless there is an application for variation.

48.  Lastly, I thank counsel for their assistance.