CHINA EVERBRIGHT-IHD PACIFIC LTD. v. CH'NG POH

A12837/95

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 12837 OF 1995

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JUDGMENT

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Introduction

1. This is an action by the plaintiff company China Everbright-IHD Pacific Limited ("IHD") against the Defendant Ch'ng Poh for damages for conspiracy and/or conversion and/or breach of fiduciary duty, and for an account including as constructive trustee.

2. IHD was a listed company. On 18 July 1985, a company controlled by the Defendant, Join Park Ltd, agreed to acquire a substantial stake in IHD from a company called Territorial Development Ltd ("Territorial") for $232,540,000.

3. On 17 August 1985, that purchase was completed. IHD's case is that on that day, an amount of $127,617,747.88 was credited to, but was then withdrawn from, its account with the Ka Wah Bank. Its case is that it had been deprived of that amount by reason of the Defendant's unlawful acts, namely, conspiracy, breach of s.48 of the Companies Ordinance, conversion and breach of fiduciary duty.

4. On 5 July 1994, the Defendant was convicted of 2 offences. The 1st count was of conspiracy to defraud, contrary to Common Law. The 2nd count was of publishing a false statement, contrary to s.21(1) of the Theft Ordinance cap.210.

5. The particulars of the offence under the 1st count were that he had, during July and August 1985, in Hong Kong, conspired with Low Chang-hian ("CH Low"), Doreen Yong Poh-choo ("Doreen Yong"), Quek Teck-huat ("Quek") and Victor Tan Khai-chong ("Victor Tan") to defraud IHD, and actual and potential shareholders and creditors of IHD, by dishonestly :-

(1) causing and permitting IHD to participate in an exchange of cashier orders and cheques which were on 17 August 1985 circulated through the Ka Wah Bank in order to conceal the fact that HK$127,617,747.88 belonging to IHD was used improperly to give financial assistance to Join Park to purchase 77,000,000 shares in IHD from Territorial and

(2) causing and permitting the said HK$127,617,747.88 belonging to IHD to be used improperly to give financial assistance in the purchase of the said 77,000,000 shares in IHD by Join Park from Territorial in circumstances of risk that IHD would not be repaid the said HK$127,617,747.88 or that IHD would not receive assets worth HK$127,617,747.88, there being no or no adequate security or guarantee for IHD.

6. The particulars of the offence under the 2nd count were that the Defendant being an officer of IHD had on a day unknown between 26 November 1985 and 18 December 1985, the latter being the date of the Annual General Meeting of IHD, did with intent to deceive members and/or creditors of IHD about its affairs publish and/or did concur in the publishing of a written statement, namely the IHD Annual Report for 1985, which to his knowledge was or might be misleading, false and deceptive in certain material particulars in stating that "... your Board has taken positive steps to reduce the indebtedness by disposing of the overseas quoted investment of HK$26,300,000 at book value; furthermore the advance of HK$89,781,000 to an associated company was recalled and paid in full" without also stating the related fact that on 17 August 1985, the same day IHD received the said sums of HK$26,300,000 and HK$89,781,000, IHD was deprived of the sum of HK$127,617,747.88, which was made up of, inter alia, the said sums of HK$26,300,000 and HK$89,781,000.

7. The convictions were upheld in the Court of Appeal, and leave to appeal was refused by the Privy Council.

8. The writ in the present action was issued against the Defendant and others on 12 December 1995. The Defendant denied liability and also issued third party proceedings which were subsequently struck out. By the time of trial, the Defendant had become the only defendant in the action.

9. The evidence in this action covered a wide area and spanned a number of years. This judgment contains only those findings of fact which are necessary to the determination of this action.

10. It may be helpful first to summarize the backdrop against which the action arose.

Plaintiff

11. As at 1985, IHD had issued a total of 128,406,000 shares. About 87,000,000 (or 68%) of those shares were held by Territorial, a private company purportedly owned by Quek, and about 38,000,000 shares were held by private companies known as Wanfong Nominees Ltd and Vestall Ltd. Only about 2,000,000 - 3,000,000 shares (about 2%) were held by members of the public.

12. Immediately prior to the main events described below, all the directors of IHD were from South-East Asia, viz. Quek, Santosa Amidjojo, Chew Kam-meng ("Chew") and Tan Hock-chan. None of them was resident in Hong Kong.

13. The administration of the company was undertaken by Doreen Yong, who was not a director, but who was resident in Hong Kong.

14. IHD owned, through its subsidiary companies Accordance Limited and Land City Company Limited, a substantial part of a commercial and office building in Tsimshatsui East, Kowloon, known as Inter-continental Plaza.

15. Apart from Accordance and Land City, IHD also had a subsidiary called Dixon Limited.

16. IHD also held shares in a company called Seareef Investments Limited ("Seareef"). It used to hold about half of Seareef's shares, but by 1985, its holdings had been reduced to about 33%.

Defendant

17. The Defendant Ch'ng Poh is from Malaysia. He qualified as an architect and developed a successful architectural practice in Malaysia and neighbouring countries.

18. In the mid-1970's, he turned to business and within the following 10 years, became successful at various businesses including property development, construction and defence supplies.

19. By the mid-1980's, the Defendant, then 45 years of age, had acquired diversified business interests in Malaysia, Singapore, the PRC and the United States. By then, he was on his own admission a mature and experienced businessman. He also became active in promoting relations between the governments of Malaysia and the PRC.

Background to Join Park's acquisition of Territorial's shares in IHD

20. The Defendant wanted to acquire a listed company to hold his diverse business interests. He said, and I have no reason to doubt, that he had once paid a deposit for the acquisition of a Hong Kong listed company called Century City Holdings Ltd, but that acquisition had to be aborted when problems with non-disclosure in its accounts were discovered. Although the Defendant did not say exactly when that episode occurred, from the context of his evidence, it must have been prior to the summer of 1985.

21. In the spring of 1985, an acquaintance called Eddie Choo introduced him to a Malaysian listed company called Paper Products Malaysia Berhad ("PPM"). This company was apparently indebted to the Ka Wah Bank. In the course of the Defendant's negotiations to acquire PPM, which did not eventually take place, he came to know CH Low. CH Low was a member of the Low family from Malaysia which controlled the Ka Wah Bank. He was in 1985 an executive vice-president of the bank.

22. The Defendant's evidence was, and I have no reason to disbelieve, that his involvement with IHD commenced shortly after mid-May 1985, when CH Low asked him if he would be interested in acquiring a Hong Kong listed company which later turned out to be IHD.

23. A few days later, CH Low showed him accounts of IHD made up to April 1985. According to the Defendant, CH Low told him that IHD was a "clean company" and that it would suit him more than PPM. The Defendant was interested in IHD, because as a property-holding company in Hong Kong, it would be a more appropriate vehicle for him to hold his interests in the PRC than a Malaysian listed company.

24. The Defendant says that CH Low showed him a number of unaudited Consolidated balance sheets and Profit and Loss accounts of IHD from which, he says, it appeared to him that the company was "clean".

25. The unaudited Consolidated balance sheets and Profit and Loss accounts ending 31 May 1985 showed land and buildings valued at more than $388m., an amount due from Seareef of about $89m. ("the Seareef loan") and an amount owing on overdraft from the Ka Wah Bank of about $91m. On the basis of those accounts, IHD's net asset value was more than $387m.

26. The Defendant says that he wondered why the company was available for sale when it was financially healthy, and he asked CH Low, who was his contact in the negotiations, CH Low having told him that the IHD shares were owned by Quek, but that he had Quek's authority to negotiate the proposed sale as Quek was living in London.

27. The Defendant's evidence was that CH Low told him that Quek needed money because he (Quek) had to pay estate duties in respect of his father, mother and brother. CH Low also told him that Quek was one of the Ka Wah Bank's "bad loans" or "non-performing loans", and that it was in the Ka Wah Bank's interest to try to look for a buyer with a future and a business plan. CH Low said the Ka Wah Bank would provide 100% financing if he (the Defendant) would acquire IHD.

28. Shortly before, there had been a run on the Ka Wah Bank. The Government had had to step in to restore public confidence. In June 1985, the two note-issuing banks HSBC and Bank of China had both announced that they would be providing credit lines to the Ka Wah Bank.

29. There is no reason to disbelieve the Defendant's evidence as to how in the late spring of 1985, he first found himself with the prospect of acquiring the IHD shares held by Territorial. However the end result of the discussions he had with CH Low between May and July 1985 as to the means of that acquisition will be dealt with later in this Judgment.

Agreement for Join Park's acquisition of Territorial's shares in IHD

30. The Defendant intended to acquire Territorial's shares in IHD through a Hong Kong private company, Join Park. The Defendant controlled about 74% of the shares in this company, with the balance held by his friend, Ngai Shiu-kit, a prominent local businessman.

31. The quantity of shares agreed to be transferred were 77 million out of the 87 odd million shares held by Territorial.

32. The purchase price for these 77,000,000 shares in IHD was to be $232,540,000 or $3.02 per share. This value per share was derived from a net asset value of more than $387m. shown on the last version of the unaudited Consolidated balance sheet as at 31 May 1985.

33. No due diligence exercise on IHD was done by Join Park. It did however retain financial advisors and solicitors in Hong Kong for the purposes of the proposed takeover, which necessitated the making of a general offer to minority shareholders. The financial advisors were Schroders. The solicitors were Woo Kwan Lee and Lo. The Defendant had retained Woo Kwan Lee and Lo in the past and he knew Peter Lo, a partner. However, the partner who dealt with most of the legal work in the acquisition of IHD was Susan Chow, who had expertise in dealing with the takeover of listed companies.

Funding of purchase price

34. The Defendant's evidence was that CH Low had, early in the course of discussions in May 1985, said that the Ka Wah Bank could provide 100% financing for his acquisition of IHD.

35. However, by reason of a restriction on the Ka Wah Bank's lending limits, it was made clear to the Defendant by July 1985 (before the share purchase agreement) that the Ka Wah Bank would only make available part of the purchase price required.

$109,000,000

36. The Ka Wah Bank would only provide finance in the sum of $120m., as to $80m. to the Defendant's company Contech Franchise Asia Ltd, and as to $40m. to Ngai's company Ganton Estates Ltd. However, of the loan of $120m., the net amount available was only $109m. as the balance was to be held in a reserve interest fund.

37. All 77,000,000 shares in IHD were pledged as security for the loan from the Ka Wah Bank, as were the shares in the Defendant's company Golden Gate Development.

$123,540,000

38. The balance of the purchase price for the shares was $123,540,000 ($232,540,000 - $109,000,000). It is common ground that Join Park did not have cash in hand of this sum.

39. One of the issues in this action is whether Join Park was treated by the parties to the sale and purchase as having paid this sum of $123,540,000, and whether that was related to the transfer of the amount of $127,617,747.88 credited into and then withdrawn from IHD's account with the Ka Wah Bank on the day of completion of the sale and purchase.

Defendant's case on the sum of $123,540,000

40. At this point, it may be helpful to set out the Defendant's case on how and when the sum of $123,540,000 was to be paid

41. The Defendant's case is that when he insisted on 100% financing for the acquisition of the IHD shares despite the Ka Wah Bank's lending limits, CH Low first said that Quek would provide the finance. In this scenario, Quek would pay Join Park to pay Territorial, with the result that Join Park would be liable to repay Quek.

42. Subsequently a second proposal was made by CH Low, that the Ka Wah Bank would increase the overdraft available to IHD, so that Join Park (or the Defendant and Ngai) could borrow the sum from IHD.

43. Section 48 of the Companies Ordinance was however in force. This prohibited a company from providing financial assistance, whether directly or indirectly, in connection with the purchase of its own shares.

44. The Defendant accepts that he was aware of the existence and effect of s.48, as his solicitors Woo Kwan Lee and Lo had advised him of its effect. He says that as a result of that advice, he rejected CH Low's second proposal.

45. According to the Defendant, there was then a third proposal. The Defendant says that at that stage, even though the share price had been calculated by reference to the net asset value of $3.02 per share, he wanted a valuation of the real property to verify that net asset value.

46. He says CH Low proposed that instead of Join Park getting finance from Quek, the vendor (i.e. Territorial) could get finance from Quek, and that the sum of $123,540,000 could be retained by Join Park until such time up to one year after completion as the Defendant was satisfied with the net asset value of the shares and could sell some assets to IHD. The Defendant calls the sum of $123,540,000 the "retention sum". He and Ngai would sell some of their assets to IHD, and with the proceeds, he and Ngai would pay the outstanding sum to Territorial. Therefore he wanted the Seareef loan to be repaid to IHD before completion so that IHD would have funds to pay for those assets.

47. I shall state later in this Judgment my findings on the Defendant's case on the sum of $123,540,000 as summarized above.

Join Park's solicitors' concern about Seareef

48. Meanwhile, a Share Purchase Agreement was being prepared by solicitors. It was due to be executed on 17 July 1985 but was postponed for a day to enable solicitors to finalize the drafting.

49. On 17 July 1985, Join Park's solicitors Woo Kwan Lee & Lo, in a letter marked for the Defendant's attention, confirmed in writing the advice that Susan Chow (together with another solicitor of that firm) had given the Defendant at a meeting earlier that day.

50. The letter dealt in the main with Seareef. The solicitors expressed their concerns - there was little information about this company, but IHD had lent it the sum of about $89m. on an interest-free loan when IHD itself was indebted to the Ka Wah Bank in the sum of about $91m. on an interest-bearing overdraft account. Further, having made the loan of $89m. odd to Seareef without interest, IHD had then reduced its holding in Seareef from 50% to 33 %.

51. The solicitors also referred to discussions regarding the possibility of IHD's sale of its shares in Seareef to Territorial, and warned Join Park against entering into any such arrangement with Territorial for a number of reasons, including infringement of s.48 of the Companies Ordinance.

52. The letter concluded with the solicitors' statement for the record that they had advised Join Park on the course it should take and that they were unable to protect its' interests and position in the circumstances, but that Join Park had confirmed to them that it was nevertheless willing and anxious to enter into the agreement.

Share Purchase Agreement

53. Notwithstanding those concerns expressed by Woo Kwan Lee & Lo, the Share Purchase Agreement was signed the following day between Territorial as vendor, Quek as warrantor and Join Park as purchaser of 77m. shares in IHD.

54. Clause 2 provided, amongst other things, that Join Park was to purchase the shares upon the terms and conditions set out in the Share Purchase Agreement.

55. Clause 3 is significant. It provided that the consideration payable by Join Park for the shares was "HK$232,540,000 in cash payable by [Join Park] to [Territorial] in the following manner:-

(a) as to the sum of HK$123,540,000 as and by way of deposit and part payment of the purchase price and the receipt of which is hereby acknowledged by [Territorial]; and

(b) as to the balance of HK$109,000,000 payable upon completion as hereinafter mentioned" [emphasis added]

In fact, contrary to cl. 3(a), no part of the sum of $123,540,000 had been paid by Join Park to Territorial, and as will be seen later, the sum of $109m. was paid not on completion which was to be within 30 days, but only 1 week after the Share Purchase Agreement.

56. Clause 4 provided, amongst other things, that Territorial would procure the repayment to IHD by Seareef of loans aggregating HK$89,158,071 within 30 days of the agreement. In this connection, Clause 6(vi) also provided that on completion, Quek would procure Territorial to, and Territorial would, deliver to Join Park a banker's draft in that sum in favour of IHD in discharging the Seareef loan.

57. Clause 5 provided that completion of the Share Purchase Agreement would take place within 30 days of the agreement when, amongst other things, Join Park would pay Territorial "the balance of the consideration referred to in Clause 3(b) above [i.e. $109m.], (subject to such adjustment as may be required by virtue of Clause 7)".

58. Clause 7 provided that Territorial and Quek would deliver to Join Park the audited accounts of IHD for the year ended 30 June 1985 within 30 days of the agreement. They further warranted, amongst other things, that the net asset value of IHD as shown in the audited accounts would not be less than HK$374,945,520, and in the event that the audited accounts showed a lesser figure, the consideration for the purchase would be reduced by the difference, and the balance of the consideration payable upon completion would be reduced accordingly.

59. In short, the arrangement according to the Share Purchase Agreement was as follows:-

on 18 July 1985:-

- $123,540,000 in cash paid by Join Park to Territorial;

within 30 days (i.e. 16 August 1985):-

- Territorial and Quek were to deliver to Join Park audited accounts of IHD for the year ended 30.6.1985;

- Join Park was to pay Territorial the balance of $109m. in cash, subject to reduction by any difference between HK$374,945,520 and the net asset value of IHD as shown in such audited accounts;

- Completion of the sale and purchase of 77m. shares;

- Quek was to procure Territorial to deliver to Join Park a banker's draft for $89,158,071 in favour of IHD to discharge Seareef's debt to IHD.

Early payment of $109,000,000.

60. As mentioned above, Join Park did not pay any part of the sum of $123,540,000 to Territorial on or before 18 July 1985.

61. As for the balance of $109m., that was due only on completion on 16 August 1985, and only if the audited accounts showed a net asset value of no less than $374.9m.

62. However, what in fact happened was that on 25 July 1985, 3 weeks before completion, Contech and Ganton (companies controlled by the Defendant and Ngai respectively) drew down the loans from the Ka Wah Bank, and instructed the bank to credit the sums in the total amount of $109m. to "the account of Wanfong Securities Co. account with you in respect of [the Share Purchase Agreement]". This was done before the audited accounts of IHD were made available to Join Park, and without the knowledge of Join Park's solicitors.

63. The Defendant's explanation for this early payment was that it was to assist the Ka Wah Bank which had introduced him to this deal. This explanation is unconvincing. The Defendant's allegation that Quek was financing Territorial in the sum of $123,540,000 does not sit well with his allegation that he was a "bad loan" prompting the Bank to request early payment from Join Park. There was no written evidence that the Bank had ever requested the Defendant to make early payment to Territorial. By drawing down the loans 3 weeks before they were needed for completion, Contech and Ganton were paying 3 extra weeks interest for no apparent commercial benefit to Join Park.

64. The reason for the early payment of the $109m. becomes clear when it is noted that Territorial had not received any money from the agreement for sale. No deposit had been paid, notwithstanding the parties' purported agreement in the Share Purchase Agreement that $123,540,000 had been paid. The payment of $109m. was evidently made so that Territorial would proceed with the transaction.

References in documents to appointment of Defendant as Chief Executive

65. The Defendant then prepared to take over IHD. One of the issues in the action is whether on 9 August 1985, the Defendant became the Chief Executive of IHD. The evidence relevant to this issue will be analysed later in this Judgment. It suffices in this summary of the background facts to mention this date as the date on which, according to some of IHD's documents, the Defendant became the Chief Executive of the company.

Solicitors' concerns

66. Completion was due to take place on Friday 16 August 1985, 30 days from the execution of the Share Purchase Agreement.

67. As late as 15 August 1985, however, it was apparent from correspondence from Woo Kwan Lee & Lo that IHD's audited accounts for the year ended 30 June 1985 (which, according to the Share Purchase Agreement, would be required for any adjustment to the balance payable on completion) were still lacking, as were the secretarial file for IHD and for its subsidiaries and Seareef.

68. As events transpired, completion was postponed for a day to Saturday 17 August 1985. On 16 August 1985, the eve of the extended completion date, Woo Kwan Lee & Lo wrote a letter to Join Park, marked for the Defendant's attention, stating in no uncertain terms the solicitors' misgivings over the intended transaction.

69. In this letter, the solicitors complained more than once about Doreen Yong's lack of co-operation on matters which the solicitors had asked to inspect, and related her allegations that the Defendant had "cleared" the matters which they (Woo Kwan Lee & Lo) were pursuing. The solicitors required the Defendant's confirmation of his satisfaction with these matters.

70. Further, the solicitors stated that they had only that very day received the audited accounts of IHD required under Clause 7 of the Share Purchase Agreement, and put on record their oral advice to the Defendant that Join Park should instruct their own accountants to review the accounts of the IHD group and should satisfy itself that there had been no material deviation in the period since 30 June 1985.

71. It may be useful at this point to note that although the Share Purchase Agreement specified only that Seareef should repay IHD about $89m. at completion, in fact the sum that was to be repayable to IHD at completion was increased to more than $127m. This was as a result of some purported late disclosures by CH Low, who said that IHD had stocks overseas worth $26m and a sum of about $10m. standing to IHD's credit with Ariffin & Low, a firm of Malaysian stockbrokers associated with the Low family. Purportedly as a result of those late disclosures, Join Park required Seareef to pay interest to IHD of about $2m. on its loan, and required that the stocks be sold and the proceeds, together with the alleged sum at Ariffin & Low, be repaid to IHD at completion. The total amount of these 3 sums (i.e. the Seareef loan with interest, the proceeds of the overseas stocks and the alleged Ariffin & Low sum) was $127,617,747.88.

72. Returning to the solicitors' letter, they made it quite clear that they remained disturbed about IHD's interest-free loans to Seareef, notwithstanding Territorial's agreement to procure that Seareef would pay the additional sum of about $2m as interest.

73. The solicitors were also concerned about the lack of any information for a determination of Seareef's value. The solicitors wrote:- "... we would stress once again that the advice contained in our letter to you of 17 July 1985 still holds and that we are not in a position to comment any further on Seareef. We have been requested by you to draft a simple letter providing for the sale of Seareef at a consideration of HK$1.00 and we wish to put on record that we are not in a position to give you any advice on this matter".

74. The letter concluded with the solicitors' statement that "we must repeat that unless we receive co-operation from the vendors, it is very difficult for us to continue acting in your best interest in this transaction".

75. In response to this letter, the Defendant had to give what he called a "letter of comfort" to the solicitors.

Events of 15 - 17 August 1985

76. The following events are clear from the contemporaneous documents or have not been disputed in any material respect.

15 August 1985

77. As the completion date under the Share Purchase Agreement was Friday 16 August 1985, a pre-completion meeting of the parties and their professional advisers was held the previous day (15 August 1985).

78. It had been decided that the new signatories for IHD for the Ka Wah Bank account would be the Defendant, Ngai, Quek and Peter Lo of Woo Kwan Lee & Lo, with cheques to be signed by any 2 of them. However, it was disclosed by Peter Lo that he would be leaving Hong Kong the following day (16 August 1985) and consequently the new mandate cards, although dated 16 August 1985, were signed by all the new signatories at the pre-completion meeting on 15 August 1985 for delivery to the bank.

79. At the end of the meeting, however, the parties agreed to postpone completion for 1 day (to 17 August 1985) on CH Low's request, purportedly for preparation of the cashier orders for the repayment to IHD. During that postponement, the Defendant said he changed his mind on the signing arrangements, and this necessitated new mandate cards being signed, as will be seen later.

16 August 1985

80. On 16 August 1985, Quek approached Miss Chiu Chik-shang, the manager of Wanfong Nominees Ltd. He was known to Miss Chiu as a friend of her employer and she did not query his requests for assistance, although she did ask that his request be put in writing, which he did by way of a brief letter from Territorial dated 17 August 1985.

81. On 16 August 1985 Quek instructed Miss Chiu to go to the Ka Wah Bank at 9:00 a.m. the following day (17 August 1985) to apply for 3 cashier orders in favour of IHD in the total amount of $127,617,747.88. Miss Chiu was assured that even though there were inadequate funds in Wanfong's account to fund the cashier orders, Victor Tan would arrange for the cashier orders to be provided to her (Victor Tan was a senior official of the Ka Wah Bank who was in charge of credit facilities). The cashier orders were to be brought back to her office from where they would be picked up.

82. On the same day (16 August 1985), Quek gave her 8 cash cheques of Dixon, IHD's subsidiary. The cheques were dated 17 August 1985 and were drawn on Dixon's Ka Wah Bank account. Miss Chiu was told that Wanfong could bank the cheques into its account only after 11:00 a.m.

17 August 1985

83. On 17 August 1985, Miss Chiu did as instructed. Wanfong applied for 3 cashier orders from the Ka Wah Bank in favour of IHD in the total amount of $127,617,747.88. Although the application form stated that it authorised the bank to debit its account, at that time there were insufficient funds in Wanfong's account.

84. Nevertheless, the cashier orders were provided by the bank to Miss Chiu, before any debit entry was made against Wanfong's account. The cashier orders were drawn on the bank's own Cashier Order Account.

85. Prima facie, therefore, the Ka Wah Bank made itself liable to pay IHD the payee of the cashier orders, although the bank had not itself debited Wanfong's account yet. This will be discussed in detail later in this Judgment.

86. The cashier orders were brought back to Wanfong's office, from where they were later collected and brought to the completion meeting.

87. Meanwhile, Wanfong brought the 8 cash cheques from Dixon in the total amount of $127,617,747.88 to the Ka Wah Bank at 11:00 a.m to pay into its account. At that point in time, Dixon did not have those funds in its account.

88. The cashier orders were brought to the completion meeting at about 12 noon. That morning, the Defendant and his solicitors were occupied as the Defendant had given late instructions that the 77m. shares would be transferred to a total of 7 different companies (including Join Park). Consequently, the procedures for the acquisition of the 6 other companies had to be attended to that morning.

89. The Defendant also made a late change in the mandate for the bank account. Although all 4 new signatories had signed mandate cards on 15 August 1985 because of Peter Lo's departure from Hong Kong on 16 August 1985, the Defendant apparently changed his mind the night before the extended completion date so that the authorized signatories were changed, from any 2 of the 4 signatories, to himself jointly with any of the other 3 signatories. This required new mandate cards to be signed that very morning, although Peter Lo had by then left Hong Kong.

90. At about noon, Doreen Yong took to the completion meeting the 3 cashier orders in favour of IHD in the total sum of $127,617,747.88, together with blank mandate cards for the purposes of the new authorization. The cashier orders were given to Quek who then gave them to the Defendant. They were then given by him to Ngai who gave them to Susan Chow for photocopying. Thereafter Doreen Yong asked if she could take them to the bank to save interest. The Defendant said he checked with Ngai and Susan Chow and he raised no objection. The cashier orders were taken by Doreen Yong to the Ka Wah Bank. The group's current overdraft with the bank was about $91m.

91. The bank's journal tape shows that an inquiry was made at 12:31 p.m. which showed that the 3 cashier orders had been credited to IHD's account, putting the balance in credit in the sum of $127,663,651.

92. Eight IHD cash cheques dated 17 August 1985 and signed by Quek and Chew totalling $127,617,747.88 (the same amount as the 3 cashier orders paid into IHD's account) were paid into Dixon's account.

93. This supported Dixon's 8 cash cheques which Wanfong's staff had brought to the bank at 11:00 a.m. for banking into Wanfong's account.

94. By the time of another inquiry made at 12:48 p.m., Wanfong had thus been put in credit in the sum of $127,617,747.88, an amount which the bank only then debited from its account, even though it (the bank) had handed over the 3 cashier orders drawn on its Cashier Order Account earlier that morning.

95. The course of the various transactions that morning was thus:-

- the Ka Wah Bank had issued 3 cashier orders in favour of IHD in the total amount of $127,617,747.88 drawn on the bank's cashier order account (albeit without the bank first debiting Wanfong's account), which cashier orders were delivered to IHD

- IHD was credited with the amount of the cashier orders before being debited with the amount of its 8 cash cheques to Dixon

- Dixon was credited with that amount before being debited with the amount of its 8 cash cheques to Wanfong, and

- Wanfong was credited with that amount before being debited with the amount of the cashier orders.

96. Doreen Yong returned to the completion meeting with the pay-in slips at about 2:00 p.m. The evidence is not clear as to what was done with the new mandate cards or with the mandate cards that had been signed on 15 August 1985.

97. Completion of the sale and purchase of the 77m. shares of IHD took place.

Flow of $571,892.39

98. On 27 August 1985, a circular flow of funds between the same companies involved in the transactions of 17 August 1985 took place, but this time without the intervention of cashier orders from the bank.

99. The funds involved on 27 August 1985 was an amount of $571,892.39. It is not clear from the evidence how this sum arose, but arithmetically this sum is close to the difference ($571,902) between the interest element in Seareef's purported repayment to IHD on 17 August 1985 ($2,026,599) and such interest according to the Offer Document of 27 August 1985 ($1,454,697). It may therefore be that there had been a recalculation of the interest element, or an attempt to reconcile the same with the sum stated in the Offer Document.

100. Although the specific times of the crediting and debiting of this sum are not clear, it would appear that it flowed in the other direction from that on 17 August 1985.

101. The IHD cheques were signed by Quek and Chew. These were accepted by the bank. This meant that either the bank had not received the new mandates (whether of 15 August 1985 or 17 August 1985), or that the bank had received them but had disregarded them, or that the operative dates of the new mandates had been altered so that they did not take effect yet. The alteration in the mandate cards will be dealt with later in this Judgment.

Sale of Seareef

102. On 22 August 1985, IHD sold its interest in Seareef for $1.00.

General Offer

103. On 27 August 1985, a General Offer was sent to minority shareholders offering to purchase their shares at $3.02 per share, i.e. the same price as that "paid" by Join Park to Territorial assuming that the entire sum of $232,540,000 had been paid.

Defendant's directorship of IHD

104. The following day, on 28 August 1985, the Defendant became a director of IHD. On 19 September 1985, the General Offer closed. The Defendant became IHD's Deputy Chairman, Ngai being made its chairman.

Defendant's inquiry about $127,617,747.88

105. By an internal memorandum dated 21 September 1985, 2 days after the General Offer closed, the Defendant wrote to Quek as Executive Chairman of IHD as at 31 August 1985 and Doreen Yong. In this memorandum, he said that he had received a copy of the bank statement for the month ending 31 August 1985 together with a copy of the general statement of accounts dated 21 August 1985 prepared by them, the balance sheet of which showed $127,617,747.88 as investments by Dixon.

106. The Defendant said that he was "deeply perturbed" by the sum of $127,617,747 being transferred out into investments without his prior knowledge and wished to know if a board meeting had taken place. He also asked for information on the "business nature" of the investments and for a report accompanying it, if any.

107. He referred to the first meeting of the new board of directors scheduled for sometime in October 1985 which would require a report on the portfolio of investments during Quek's chairmanship.

108. He also said that the Share Purchase Agreement provided that there should be no substantial change in the account other than in the normal course of business and asked to hear from them as soon as possible.

109. The memorandum was marked "Delivered by Hand". There was no evidence of its actual delivery. However, assuming that it had been delivered, there was no written reply from either Quek or Doreen Yong. Nor were there any "chasers" from the Defendant or any of his staff for a response to this memorandum.

110. Surprisingly, given the serious nature of its contents, the memorandum was not copied, nor the information contained in it given, to any of the other directors of IHD. Nor was any letter written to the Ka Wah Bank demanding an explanation as to why the cheques, which were not in compliance with the new mandates, were honoured. Nor were solicitors consulted until more than 2 months later. Indeed, no board meeting was called to even discuss the matter in the 3 months from September to December 1985.

Alleged visit to Singapore

111. It is the Defendant's case that some time after that memorandum was delivered to Quek and Doreen Yong, he was told by CH Low that the $127,617,747 had been invested in properties in Singapore. He says he proceeded with a trip to Europe and arranged to visit Singapore on the way back to Hong Kong.

112. He says that on 5 October 1985, he stopped by Singapore, and met with CH Low and Quek who showed him some properties in the course of development which they said had been acquired with the sum of $127,617,747.88. He says he asked for verifying documents which were promised to him.

113. No such documents were ever produced. There was never any correspondence from the Defendant (or anyone at IHD or Dixon) to CH Low or to Quek asking for the documents allegedly promised to him on that trip.

Company secretary's inquiry

114. Meanwhile, the Annual General Meeting of IHD was imminent. On 28 November 1985, Dixon's company secretary St James Secretaries & Registrars Ltd., which was associated with the proposed new auditors Loke & Heng, wrote to Quek and Doreen Yong regarding the withdrawal of $127,617,747.88 and its treatment as "investments", saying that they were instructed by the company to enquire from them the "exact nature of the investments" and giving them nearly two weeks to reply.

115. No reference was made to the Defendant's alleged inspection of Singaporean properties in October 1985, or to Quek's alleged promise to the Defendant to supply verifying documents.

Doreen Yong's reply

116. Doreen Yong replied within 4 days (on 2 December 1985) saying that she and Quek were "surprised" to receive the company secretary's letter.

117. She asserted that the Dixon cheques mentioned in the inquiry were "issued with the full knowledge and awareness of [the Defendant], the Chief Executive of IHD, and such action was done concurrently during the Offer Document period. Instructions were given for it to be executed that way and perhaps it would be more appropriate if you get the details as to the exact nature of the investments from [the Defendant]".

Consultation of Solicitors

118. On 4 December 1985, the Defendant consulted Peter Lo and Susan Chow of Woo Kwan Lee & Lo, who asked for copies of relevant documents which were provided on 10 December 1985. The meeting of 4 December 1985 was recorded in a letter of advice from the solicitors dated 18 December 1985.

119. No reference was made in the solicitors' letter to any instructions from the Defendant regarding his alleged inspection of properties in Singapore or the promised documents which had not materialised.

Defendant's letter to Quek

120. Also on 4 December 1985, the Defendant wrote a letter to Quek, copied to Doreen Yong and CH Low, referring to his memorandum dated 21 September 1985, and saying that the auditors of Accordance and Dixon had asked for substantiation of the investments (of $127,617,747.88).

121. In this letter he wrote:- "as these investments were conducted by yourself prior to Join Park Ltd take over of the companies, it is appropriate that you should be able to explain better". Presumably, his reference to their being able to explain "better" was in reply to Doreen Yong's letter 2 days previously when she said that the cheques had been issued with the Defendant's full knowledge and awareness, and that details should be obtained from him.

122. Again, no reference was made by the Defendant of his alleged inspection of the Singaporean properties or the documents allegedly promised to him 2 months ago. There was no reply to this letter.

Solicitors' advice

123. The advice from Woo Kwan Lee & Lo of 18 December 1985, in a letter marked for the Defendant's attention, was that since the circumstances of the withdrawals were "extremely suspicious", the matter should be reported to the police and steps taken to recover the money, as otherwise the directors would be in breach of their duties to the shareholders. IHD was also advised to inform the Commissioner for Securities and possibly suspend trading.

124. The solicitors emphasised that the matter appeared to be one of utmost seriousness and advised that immediate action must be taken.

Annual General Meeting

125. Notwithstanding the solicitors' advice, the Annual General Meeting of IHD proceeded the following day (19 December 1985) without any mention of the events described in Woo Kwan Lee & Lo's letter of advice the previous day.

126. The Defendant took the chair because Ngai did not attend. Peter Lo had resigned as a director the previous day (18 December 1985). Two prominent local businessmen who had been newly appointed directors on 1 October 1985 also resigned on 19 December 1985.

127. Quek, however, attended and offered himself for re-election. The shareholders present (including the Defendant) unanimously resolved to re-elect Quek as a director.

128. The Defendant made no mention to the shareholders of the events which had caused Woo Kwan Lee & Lo the previous day to advise that a report be made to the police and the Commissioner for Securities. The Directors' Report for the year ended 30 June 1985 was presented to the shareholders without any additional statements. The Report stated amongst other things that the board "has taken positive steps to reduce [IHD's] indebtedness by disposing of the overseas quoted investment of HK$26,300,000 at book value; furthermore, the advance of HK$89,781,000 to an associated company [Seareef] was recalled and paid in full".

Subsequent events

129. The Defendant's case is that in December 1985, there were negotiations with CH Low which proved to be fruitless.

Litigation

130. On 6 January 1986, IHD made a report to the police and on 7 January 1986, proceedings in the High Court in CL1/86 were instituted by IHD, involving an application for a Mareva injunction.

131. In January 1986, CH Low filed a defence asserting that the Defendant was involved in the conspiracy to withdraw the sum of $127,617,747.88 from IHD. This was denied by the Defendant.

132. In September 1986, a derivative action was commenced against the Defendant by two corporate shareholders of IHD who were probably connected to CH Low, judging from their registered offices. This action was however aborted at an early stage when IHD obtained an order for security for costs which the Plaintiffs failed to provide.

Criminal proceedings

133. In July 1991, CH Low returned to Hong Kong from Malaysia and pleaded guilty to conspiracy with various persons including the Defendant.

134. In March 1992, the Defendant was arrested and in February 1993, he ceased to be a director of IHD.

135. On 5 July 1994, the Defendant was found guilty in the High Court of the offences referred to earlier in this Judgment.

136. Two days later, on 7 July 1994, IHD resolved to consider issuing proceedings against him. The writ was not issued however until 12 December 1995. Between his conviction in July 1994 and late 1995, the Defendant had sought to introduce new evidence in the form of statements made by Warwick Reid and an inmate of the prison where CH Low had been imprisoned.

137. In January 1996 the Court of Appeal dismissed the application and dismissed the appeal. In July 1996, the Defendant's application for leave to appeal to the Privy Council was rejected.

Effect and weight of convictions

138. In my decision of 21 October 1998, I had held that a conviction did not merely shift the burden of proof. The effect of s.62(2)(a) Evidence Ordinance cap. 6 is that the conviction is itself a fact which is admissible in evidence, and consequently a court has to decide the weight to be given to that fact. That decision has not been made the subject of an appeal.

139. Of course, whatever the weight of a conviction, it cannot be such as to place upon the Defendant a higher burden than the usual burden in a civil case - i.e. proof on the balance of probabilities. Accordingly, the Defendant cannot be required to go beyond that standard in seeking to disprove that he had conspired to use the sum of $127,617,747.88 belonging to IHD to assist Join Park in its purchase of the IHD shares from Territorial.

140. As for the weight to be accorded in any given case to a conviction, that must depend on the circumstances in which the conviction was obtained. In my decision in October 1998, I had discussed the relevant authorities (Taylor v Taylor [1970] 1 WLR 1148, Stupple v Royal Insurance [1971] 1 QB 50, Hunter v Chief Constable of the West Midlands [1982] AC 529) and I will not repeat that discussion here. It was held in Hunter that where there has been a conviction after a full contested hearing, the conviction would carry greater probative weight.

141. In the present case, the Defendant was convicted after a full trial. He was represented by leading counsel and he gave evidence before the jury. There was a detailed summing-up by the judge. The conviction was upheld by the Court of Appeal and an application for leave to appeal was considered, and rejected, by the Privy Council. In those circumstances, the convictions should be given substantial weight.

142. Of course, this court also has to consider and evaluate the evidence that had not been considered by the jury, the most important of which, in the Defendant's contention, were the debriefing tapes. However, the Court of Appeal had fully considered the debriefing tapes in the Defendant's application to consider fresh evidence, and had found that nothing new of importance had been revealed and that the material was peripheral.

143. In any event, the present case is one where the Court has available to it, not just the convictions, but a great deal of contemporaneous documentary evidence which are relevant to the determination of the issues raised.

Conspiracy

144. The first issue is whether the Defendant had entered into an agreement with others to commit an unlawful act or to use unlawful means (the acts and the means being the tort of conversion and/or breach of s.48 Companies Ordinance) with intent to injure IHD, thereby causing loss and damage to the company (in discharging the Seareef loan and having the sum of $127,617,747.88 withdrawn, for no consideration, from its group accounts immediately after it had been deposited).

145. It is important to determine first whether the Defendant had entered into such an agreement, i.e. whether he knew that the sum of $127,617,747.88 would be withdrawn from IHD and Dixon, before dealing with the question whether IHD suffered any loss.

Quek's allegation of rehearsal meeting

146. In this respect, Quek's evidence of a pre-completion meeting on 16 August 1985, at which the exchange of cheques was rehearsed, is the most direct evidence of the Defendant's involvement, but in my view, the evidence against the Defendant is strong enough even without this allegation.

147. As far as the alleged rehearsal was concerned, it has been submitted on behalf of the Defendant that the jury might have had a different opinion of Quek's credibility if he had been cross-examined as to why he had not mentioned the rehearsal meeting in his affirmation in CL1/86 or in his police interview. It has also been submitted that if the jury had been referred to the debriefing tapes, it might have taken the view that Quek was not just a puppet of CH Low, but had a financial incentive to frame the Defendant.

148. As to the first aspect, it was open to the Defendant's counsel at the trial to have cross-examined Quek on the omission of the rehearsal meeting from his affirmation and his police interview. The materials were available then, and no satisfactory evidence has been offered by the Defendant as to why Quek was not cross-examined on these matters.

149. As for the debriefing tapes, as mentioned above, the Court of Appeal has held that nothing new of importance had been revealed and the material was peripheral only.

150. In any event, I find that even disregarding Quek's allegation of the rehearsal meeting, there is more than sufficient evidence, though of a less direct nature, in the form of the contemporaneous documents and the Defendant's actions to show that the Defendant was indeed implicated in the conspiracy.

Defendant's involvement in agreement

151. I find that the Defendant was indeed aware that the sum of $127,617,747.88 would be withdrawn from the accounts of IHD and its group. It is clear from the evidence that that was the "trade-off" for Join Park's non-payment of the balance of the purchase price of $123,540,000, in a scheme whereby:-

(i) Join Park would be treated as having paid the sum of $123,540,000 to Territorial (which was controlled by CH Low), in consideration for

(ii) the Defendant's agreement to a purported discharge of the liabilities of CH Low's companies to IHD by the payment of $127,617,747.88 into IHD's bank account which would be immediately withdrawn.

152. Put another way, the debts of CH Low's companies would be treated as having been repaid to IHD, in exchange for a reduction in the purchase price payable by Join Park to Territorial for IHD's shares. That is a breach of s.48 Companies Ordinance, as a company is prohibited from providing financial assistance, whether directly or indirectly, in connection with the purchase of its own shares.

153. In treating the finances of IHD and Join Park as one and the same, the Defendant was clearly acting contrary to the interests of the minority shareholders, who were of course not members of Join Park.

(i) Join Park treated as having paid $123,540,000

154. There is clear evidence that Join Park was treated as having paid the sum of $123,540,000 even though no money had changed hands. The following matters point towards that conclusion:-

- in the Share Purchase Agreement, Territorial acknowledged receipt of the sum of $123,540,000 even though Join Park had not made any payment;

- the Defendant's purported explanation for the acknowledgment, that Quek had financed Territorial whilst as between Territorial and Join Park, there was a "retention" sum held by Join Park, was never given contemporaneously to Join Park's solicitors;

- the evidence of the alleged "retention agreement" is, in any event, unsatisfactory;

- the fact that Territorial and Join Park treated the sum of $123,430,000 as having been paid is supported by a copy receipt for that sum, a fact which contradicts the Defendant's evidence that the sum had been retained.

- Acknowledgment of receipt in the Share Purchase Agreement

155. Clause 3 of the Share Purchase Agreement, signed by the Defendant on 17 July 1985, could not have been clearer. The consideration payable by Join Park for the shares was

"HK$232,540,000 in cash payable by [Join Park] to [Territorial] in the following manner:-

(a) as to the sum of HK$123,540,000 as and by way of deposit and part payment of the purchase price and the receipt of which is hereby acknowledged by [Territorial] ..."

(emphasis added).

156. Clause 3 contemplates the payment by Join Park of $123,430,000 to Territorial, and contained Territorial's acknowledgment of receipt of that payment. That is completely contradictory to the Defendant's story that that sum was only lent by Quek to Territorial, with Join Park's liability to pay that sum to Territorial being conditional upon determination of IHD's net asset value and sale of assets to IHD within a year.

157. There was no satisfactory evidence from the Defendant as to why a genuine, honest commercial transaction should have proceeded on a legal document containing a significantly false premise.

- Solicitors never told of any "retention agreement"

158. I have set out above under the heading "Defendant's case on the sum of $123,540,000" the Defendant's case as to how CH Low proposed that Quek would finance Territorial and Join Park would "retain" the sum of $123,540,000.

159. If there had been such a proposal in a sale and purchase, one would have expected a mature and intelligent businessman such as the Defendant, if he were acting honestly, to have consulted his professional advisers, so that they could advise him on the validity of the proposal, and if appropriate, prepare the documents so that they reflected the parties' rights and obligations accurately and truthfully.

160. I shall consider first the issue whether the Defendant had informed Susan Chow of the "retention agreement", and secondly, if he had not, what conclusion should be drawn from his silence.

161. The Defendant's evidence in chief was that he had not informed Susan Chow about the position concerning the sum of $123,540,000. His evidence in chief in particular on Day 10 was as follows:-

"Q: Did you have any discussions with Susan Chow about payment of the $123.54 million? Was that the subject of any discussion between you?

A: No.

Q: Did she ask you about that at any stage at all?

A: No.

Q: Had she asked you, would you have told her what the position was?

A: Yes, I would.

Q: Did you not tell her about the position of the $123.54 million for any dishonest reason?

A: No, not for any dishonest reason."

162. The reason the Defendant gave for his reticence was first, that the General Offer could not be made if there was a balance of the purchase price outstanding. His later evidence was that the General Offer could still be made, but that it would have been unlikely for the minority shareholders to accept delayed payment on the same terms. The General Offer that was in fact made was at $3.02 per share, with nothing about "retention".

163. However, what is significant is that the Defendant, as a businessman from Malaysia acquiring a Hong Kong listed company for the first time, had never even sought to discuss CH Low's proposal of a "retention" sum with his professional advisers, such as whether there were any aspects of that arrangement that might not be in Join Park's interests, and how that might impact upon the General Offer. It is obvious from the evidence that for the purposes of the takeover, the Defendant and his solicitors at Woo Kwan Lee and Lo were working closely together, and were in regular contact, both at meetings and on the telephone. It is plainly implausible that if there had been such an important proposal from CH Low, that the Defendant had not, even once, discussed it with his solicitors.

164. In cross-examination however on Day 14, the Defendant claimed that he had told Susan Chow about retention. His evidence was as follows:-

"Q: You never told either of them (Susan Chow and Schroders' representative) about what you call vendor financing, did you?

A: I told them about the retention.

Q: You never told them about what you told -

Ct: You told them - who is them? When you say "them", who is "them"?

A: I told Susan Chow about the retention sum. Over the discussion, somehow we were touching about the payment. I say that should be financed by Quek. It would be 100 per cent financing. She knew it was 100 per cent financing. Of course I did not go into the detail".

165. In the absence of "detail", anyone being told by a purchaser that there was "100% financing" would have reasonably assumed that it was the purchaser who was being financed, not the vendor.

166. Therefore, if all that the Defendant had told Susan Chow was that there would be 100% financing, even by Quek, that is not equivalent to his having told her about the "retention agreement".

167. But if the Defendant was saying that he had actually told her about the retention agreement, then that evidence would be contradictory to his evidence in chief.

168. I find that the Defendant had not told Susan Chow about the retention sum. It has not been suggested that she was acting otherwise than in accordance with proper professional standards. If she had been actually informed by the Defendant about the retention agreement, one would have expected her to have reacted immediately instead of proceeding with the transaction on a false Share Purchase Agreement, particularly with the General Offer fixing the offer price at $3.02 per share, a price fixed on the assumption that Join Park had indeed completed the Share Purchase Agreement at that price.

169. The next matter for determination is, what is the conclusion to be drawn from the finding that the Defendant had never consulted or informed his solicitors about the alleged agreement for "retention". As an experienced businessman, the Defendant must have realised that any such arrangement was important, and since the Defendant had nothing to hide from his solicitors (the Defendant having said that if Susan Chow had asked, he would have told her about the retention), there was no satisfactory explanation why he did not tell her about the "retention agreement" - if there really had been such an agreement.

170. The only reasonable conclusion to be drawn from the above is that there was no "retention agreement", and hence the Defendant has no innocent explanation for Join Park's non-payment of the sum of $123,540,000 and the false acknowledgment of receipt in the Share Purchase Agreement.

- Rejection of Defendant's case of a "retention agreement"

171. In any event, the Defendant's case of a "retention agreement" contains inconsistencies and unanswered questions. First, it was alleged by the Defendant that the reason for a retention sum was because the net asset value of IHD would have to be ascertained from a valuation to be done on IHD's units in Intercontinental Plaza.

172. However, in his affirmation in CL1/86, that was not the reason given. In that affirmation, the Defendant said that the reason for the retention sum was because of "anomalies" in IHD's accounts. The need to wait for a valuation could not be regarded as an anomaly in the accounts. No satisfactory explanation was given by the Defendant as to the discrepancy between the evidence given in his affirmation in CL1/86, sworn within just a few months of the events, and his present case.

173. Further, given Quek's circumstances, any experienced businessman in the Defendant's position must have been put on notice as to how Quek could have agreed that Join Park could retain a sum as large as $123,540,000 in a transaction involving $232,540,000. Quek was said to be in need of cash for payment of estate duty, and not performing on repayment of loans to the Ka Wah Bank. Yet, the Defendant claims that he simply accepted without question the assertion that Quek would finance Territorial.

174. Even if one were to disregard Quek's circumstances and to assume that Quek was the alter ego of Territorial, it would be highly improbable for there to be a genuine commercial transaction where a person would unconditionally transfer his property when he would not receive a substantial part (more than 50%) of the purchase price for a year, when he would not be compensated by interest, when he would not have the benefit of holding any security, and when there was not a scrap of paper to evidence the fact that he had not been fully paid, but on the contrary when the executed documents showed receipt of the entire purchase price.

175. In any event, the alleged "retention agreement" had been reached before the Share Purchase Agreement. The Share Purchase Agreement provided a mechanism in cl. 7 for ascertaining the net asset value of IHD by the time of completion. If there had been a "retention agreement" because a valuation had to be done, no doubt the Share Purchase Agreement could have been drafted to include a provision to that effect. The Defendant accepted in evidence that there was no rush and that everything was going his way. In fact, there was not even the briefest of side letters to record the alleged "retention agreement".

176. The Defendant's evidence in the present case was that he had discussed with CH Low the matter of having a written agreement. He accepted in cross-examination that as an experienced businessman, he would not generally take important financial matters on trust. This was an important financial matter. It would have been important to Join Park to put it on the record because the sum payable eventually might be less than $123,540,000, depending on the valuation of the units in the building.

177. However, no steps were taken by the Defendant to even ask for a written confirmation. It is also noted that in his affirmation in CL1/86, there is no mention that he had discussed the matter of a written agreement with CH Low.

178. A retention sum (albeit in the wrong amount) was referred to in Join Park's audited accounts, but that was prepared after CL1/86 had been commenced, and thus is of little probative value.

- Copy receipt

179. Finally, there is the copy receipt in the sum of $123,539,400.

180. At the criminal trial, the prosecution had produced as evidence copies of 2 signed receipts. Both were dated 17 August 1985. One, in the sum of $109,000,000, was made out by Territorial in favour of Join Park for "Balance payment for sale of seventy-seven million Intercontinental Housing Development Limited shares".

181. More significant is the other receipt, in the sum of $123,539,400, which was made out by Territorial in favour of "Camden Ltd and Earlstone Ltd" for "payment of seventy-seven million Intercontinental Housing Development Limited shares purchased for account of Join Park Limited". It is clear on its face that Territorial acknowledged that sum as having been received by it in discharge of Join Park's obligation to pay for the shares, and it is inconsistent with Territorial having only received a loan of that sum from Quek, and the alleged retention of the sum by Join Park for up to a year.

182. The Defendant raised some argument at the criminal trial as to whether the copy receipt had indeed been found by the authorities in a file in his office. However, that is not important, because he does not dispute that he had in fact been sent the copy receipt at his office, although he said he had asked his secretary to return it to CH Low.

183. The Defendant sought to explain the existence of the copy receipt by saying that it had been sent to him, after he had started his inquiries on the missing sum of $127,617,747.88, to entice him to "set-off" the missing sum against the balance of the purchase price payable by Join Park. He said he had received it from CH Low in December 1985.

184. This explanation is highly improbable. For there to be a "set-off", there would have to be a liability to pay set against another liability to pay. One could have understood CH Low wanting to remind the Defendant that Join Park had not paid the balance of the purchase price, but a copy signed receipt would only tend to show that Join Park had paid that balance. There would be little to be gained, and much that might be lost, by CH Low producing a document tending to show that Join Park had paid the entire purchase price, when he was trying to negotiate a "set-off" based on mutual liabilities.

185. I find that the copy receipt for $123,539,400 is evidence supporting the finding that the parties had treated that part of the purchase price as having been paid, in exchange for the discharge of the liabilities of CH Low's companies to IHD through the payment and withdrawal of the cashier orders.

186. It is noted that the receipt was made out in favour of Camden and Earlstone. These were 2 Isle of Man companies which were controlled by Ngai and the Defendant respectively and which, on the Defendant's evidence, were intended to be named as the source of the rest of the purchase price for tax saving purposes.

187. CH Low could not have known of these companies' names if he had not been told of them by the Defendant. I find that the fact that the receipts were made out in favour of these companies supports the conclusion that as between the parties, the payment of the purchase price was complete.

188. The Defendant sought to explain CH Low's knowledge of these names in the following way. He said that in July 1985, he had had a discussion with CH Low. CH Low asked him how the sum of $123,540,000 would be paid if Join Park eventually agreed to pay the retained sum in full. The Defendant said he then wrote down some notes on a piece of notepaper to explain how he would get tax benefits if he used Isle of Man companies to make payment. CH Low kept the notepaper, which is in the bundle.

189. I find the Defendant's evidence to be implausible. If the Defendant and CH Low had been simply discussing a tax benefit scheme to be effected in the future, it would have been completely unnecessary and highly improbable for the Defendant to go into such specific detail as the names of the companies. The giving of these companies' names to CH Low is far more consistent with the intention that receipts were to be made out in these names.

190. It is noted that the amount stated in the receipt was $123,539,400, i.e. $600 less. I do not find this discrepancy to be significant. On the back of the notepaper, the Defendant had originally written: "Join Park 77m. shares = $232,539,400". The figures "539,400" were struck out and "540,000" written at some stage. It may be that whoever had made out the receipt had simply copied the original figure and deducted $109,000,000 from it.

191. In conclusion, therefore, I find the first limb of the scheme proved, i.e. that the parties agreed to treat Join Park as having paid the sum of $123,540,000 to Territorial.

(ii) Defendant's agreement to a purported discharge of the liabilities of CH Low's companies to IHD

192. I find that the other limb of the scheme was that the Defendant would agree to treat the liabilities of CH Low's companies as having been discharged.

193. The evidence is clear that the Defendant turned a blind eye to suspicious circumstances surrounding Seareef, and was prepared to proceed to completion without any real consideration of the IHD group's audited accounts. This was notwithstanding the fact that his own solicitors had repeatedly drawn his attention to questions about Seareef. In the absence of any satisfactory explanation, the attitude he adopted supports the existence of the conspiracy.

- Refusal to find out what Seareef was worth

194. Queries about Seareef had been set out in detail in Woo Kwan Lee & Lo's letters to the Defendant. IHD had made an interest-free loan to it, and yet had subsequently reduced its shareholding from half to one-third. That was despite the fact that the IHD group was paying overdraft interest to the Ka Wah Bank for a loan which consisted, for the most part, of the sum that it had lent to Seareef. Any genuine businessman would therefore have wanted to look further into Seareef to see what that company had done with the money lent to it by IHD, to find out what the one-third shareholding was worth.

195. However the Defendant did not take his solicitors' advice to make further investigations and was prepared to agree to have IHD's shares in Seareef sold for a nominal consideration of $1. It has not been suggested by the Defendant that he had not understood Woo Kwan Lee & Lo's advice concerning Seareef. Nor has it been suggested that there was any commercial pressure upon the Defendant to close the acquisition. He said in evidence that he was not rushing and that everything was going his way. In those circumstances, the fact that he refused to look into the matter leads to the conclusion that he was protecting Territorial and the persons controlling it - and the only credible reason why he would do that is if he had entered into a conspiracy with them.

- Proceeding to completion notwithstanding late supply of audited accounts

196. Another pointer to the Defendant's part in the conspiracy is the fact that he was prepared to proceed to completion without considering IHD's audited accounts with any real care.

197. I have referred above to the fact that he had caused the $109m. payable only at completion to be drawndown and paid only 1 week after the Share Purchase Agreement and 3 weeks before actual completion.

198. Further, Join Park completed the acquisition on 17 August 1985, when the Defendant was sent the audited accounts only on 14 August 1985 and Woo Kwan Lee & Lo, as late as 16 August 1985. I find the reason for that was because the completion was virtually a fait accompli, by reason of the conspiracy.

199. In relation to the audited accounts, it is noted that in Woo Kwan Lee & Lo's letter to Join Park dated 16 August 1985, there is a sentence under the title "Seareef"which reads: "The audited accounts for the year ended 30th June 1985 provided that the Seareef loan of HK$89,158,070.00 has been repaid by Seareef to IHD". It has been suggested by counsel for IHD that there must have been a typographical error and that the word "not" must have been omitted inadvertently, so that the sentence should have read "the Seareef loan of HK$89,158,070.00 has not been repaid by Seareef to IHD". That stands to reason because the Share Purchase Agreement provided that the Seareef loan would be repaid at the same time as completion.

200. The Defendant has denied that there was an omission but in any event, I do not see where the Defendant's interpretation of the letter gets him. If it were really the case that the audited accounts for the year ended 30 June 1985 showed that the Seareef loan had been repaid, and yet the IHD group still had the same overdraft with the Ka Wah Bank, that without more would surely have alerted him to realise that IHD was not the "clean company" that he was intending to acquire.

201. Along the same lines, it is also noted that according to the Defendant, he only became aware of the $26m in overseas stocks and the $10m credit with Ariffin and Low when he received the audited accounts on 14 August 1985, barely 2 days before the scheduled completion. One would have expected him to have reacted with shock. After all, he had said that the attraction of IHD was that it was a "clean company", with simple assets and liabilities. The assets were the real property and the liabilities were primarily the overdraft at the Ka Wah Bank.

202. So when, 2 days before completion, this extra $36m. figure allegedly suddenly turned up, which had not been in any of the management accounts he had been given, one would have expected an honest reasonable businessman to at least take a second look at whether he wanted to carry on.

203. No plausible reason was given by the Defendant to explain why he proceeded notwithstanding Woo Kwan Lee & Lo's misgivings. He said in evidence in chief that normally he would take professional advice but that at times he had to make some commercial decisions. In the present case, there were no commercial constraints compelling him to press ahead. The only plausible explanation for his actions, together with the absence of an explanation for the non-payment of the sum of $123,540,000 and his delay in pursuing the missing cash (discussed below), was that he was part of the conspiracy.

Alteration of mandate cards

204. It may be relevant here to deal with the Defendant's argument that one fact points towards his non-participation in the conspiracy. That is the fact that the effective date on the mandate card found at the Ka Wah Bank had been altered to 2 September 1985.

205. The Defendant's argument is that since the mandate card had been altered, that showed that he was not part of the conspiracy. If he had been part of the conspiracy, he could have signed the cheques for IHD's withdrawal of the sum of $127,617,747.88 himself, and the conspirators would not have had to alter the mandate card to enable Chew to sign the cheques (for that sum and also the sum of $571,892.39).

206. Of course if the Defendant had signed the cheques himself, his involvement may be more readily apparent. But it does not follow that because he did not sign the cheques and the mandate card had been altered, that he was not part of the conspiracy. There are many unknown aspects of the evidence concerning the mandate cards - e.g. why it was that the Defendant suddenly made a late change in the authorized signatories after Peter Lo's travel plans had caused the mandate cards to be "pre-signed" on 15 August 1985; whether the "pre-signed" mandate cards had been delivered to the bank before 17 August 1985 and whether and when they were retrieved from the bank; when was the Defendant first aware of the alteration of the effective date to 2 September 1985, and why he made no written complaints to the bank when he found out about the cheques signed by Quek and Chew and dated 17 August 1985 and 27 August 1985.

207. In view of the above, the fact of the alteration of the mandate cards is far from showing that the Defendant was not involved in the conspiracy.

Delay in pursuit of missing sum

208. Even on his own case, the Defendant claims to have discovered on or about 21 September 1985 that the sum of $127,617,747.88 had been withdrawn from Dixon's accounts. However, solicitors were not instructed until 4 December 1985.

209. This delay is inconsistent with what would have been expected of an innocent victim. One would have expected the Defendant to have been most anxious to secure the return of the cash for IHD.

- IHD in need of cash

210. According to the Defendant's evidence, the payment of cash of $127,617,747.88 to IHD was extremely important to his business plans. The repayment of the Seareef loan, the sale of the overseas stocks and the return of money from Ariffin & Low were required for the IHD group to reduce its substantial overdraft at Ka Wah Bank. Once the overdraft was reduced, IHD would be able to purchase the assets that the Defendant and Ngai were intending to sell to IHD, so as to raise funds for paying the "retention" sum. That would also fulfil the Defendant's plans for a Hong Kong listed company to hold his diversified business interests. All those plans would have been jeopardized when the cash was withdrawn from IHD.

- Failure to inform other interested persons

211. Yet, the Defendant did not call a board meeting or consult solicitors until more than 2 months later. He never wrote to the Ka Wah Bank to find out why they honoured the cheques signed by Quek and Chew on 17 August 1985 (and on 27 August 1985), when on his evidence, he was not aware of the alteration in the effective date of the mandate. In cross-examination (Day 13), he accepted that he was aware of the apparent breach of mandate on 21 September 1985, but he was unable to give any explanation why he did not write to the Ka Wah Bank. He only said that he was "wrong". He later said that it had not occurred to him to do so. I find that answer to be untenable. Any honest person would have immediately demanded to find out why there was such an irregularity at his bank and to demand redress.

- Inconsistencies in evidence

212. The Defendant's evidence as to what he said he was told between 21 September and 8 October 1985 was vague and inconsistent. His evidence was first, that he had no reply between 21 September and 8 October; that CH Low had told him that he (CH Low) knew nothing about the use to which the money had been put; that he (the Defendant) had no satisfactory answer within that fortnight; and that he had been told by CH Low before 25 September 1985 that the money had been invested in properties in Singapore.

213. As for his trip to Singapore to inspect the properties, I find the Defendant's evidence to be implausible for the reasons set out below.

- Delay in making trip to Singapore

214. On one version of the Defendant's evidence, he had been told by CH Low before 25 September 1985 that the sum of $127,617,747.88 had been invested in properties in Singapore. One would have expected him to have investigated that immediately. Even if he had another trip to Europe planned which he could not put back, one would have expected him to have sent Ngai or Eddie Choo (who was helping the Defendant with IHD's business and who, the Defendant claimed, was the first to have informed him of the missing cash) to Singapore to make further inquiries as to what these properties were, so that, if appropriate, the money could be extricated and returned to IHD in Hong Kong as soon as possible.

215. However, the Defendant waited until the first week of October. He says that in Singapore, Quek and CH Low entertained him and showed him two uncompleted developments of Premier Realty, Quek's company, where they said the sum of $127,617,747.88 had gone. He claims to have been reassured upon seeing those developments and asked for documents which they promised to provide him.

- Evidence of events in Singapore implausible

216. In light of the importance to the Defendant of getting cash into IHD's coffers, the action of Quek in injecting that cash into his own company's uncompleted developments should have deeply disturbed the Defendant. It was not as if the money had been put into securities that could have been readily liquidated on the market. The money was being tied up in uncompleted developments. There was no evidence that an investment such as that could be easily realisable.

- Aspects of property ownership unknown

217. Further, it is implausible that the Defendant did not even bother to find out what was the share of the uncompleted developments that Quek and CH Low said had been acquired with the sum of $127,617,747.88. One would have expected the Defendant, who had been an architect and property developer with contacts in Singapore where he had business, to have immediately demanded to know from Quek what part or share in the developments Quek had allocated to IHD, so that he (the Defendant) could immediately set in train independent inquiries of the market value of those developments, so as to see whether the share allocated by Quek to IHD was a reasonable one. After all, Quek would have been in a position of conflict of interests, having invested IHD's money in projects in which his company was the developer/vendor. Any experienced businessman in the Defendant's position would have wanted an independent assessment of the investment.

218. Moreover, even if he had been impressed with the uncompleted developments such that he did not wish to attempt to extricate the sum of $127,617,747.88, he would still have needed to know what future liabilities IHD might have to undertake before the completion of the developments. There is no evidence that the Defendant ever asked for such information.

- No documents supplied

219. The Defendant said that he had asked for and been promised documents to show that IHD had a share in the uncompleted developments. It is surprising that the Defendant was content with that. There was no reason why he did not insist on at least sight of the documents during the time that he was in Singapore.

220. The Defendant said that he expected the documents to be assembled and sent to him by 13 October 1985. However, no such documents were then, or ever, forthcoming, and yet the Defendant never requested these promised documents.

221. The Defendant's tolerance of Quek's failure to provide the documents is especially implausible when IHD was, at that period of time, in need of cash as it wished to acquire a property in Hong Kong. The Defendant's evidence was that he and Ngai wanted to acquire a development known as Stanley Knoll which cost $88m. The deposit required was $15m. According to the Defendant, CH Low had represented to him that IHD's cheque for the deposit would be honoured by the Ka Wah Bank. However, it was dishonoured twice, a matter which apparently caused Ngai and the Defendant considerable embarrassment and aggravation.

222. In those circumstances, no-one in the Defendant's position would have tolerated Quek's action in having tied up IHD's money in an amount more than 8 times the amount of the dishonoured cheque for Stanley Knoll in an unauthorized investment of an unknown value, and in not honouring his promise to provide verifying documents.

223. Yet the Defendant did not write to Quek or CH Low about the promises he alleged they had made to him in Singapore. This may be contrasted with the fact that in late November 1985, he had taken the time to write to Doreen Yong about a much smaller matter concerning her salary.

- Queries made about "nature of investment"

224. When IHD eventually did write to Quek, by way of Dixon's company secretary's letter dated 29 November 1985 in anticipation of the annual general meeting, the company secretary asked about "the nature of the investment" - a strange request considering that the Defendant was, on his own case, well aware that the nature of the investment was real estate, and indeed was aware of the actual developments into which the money had been invested.

-Vote to re-elect Quek

225. Another implausible aspect of the Defendant's evidence was his explanation of why he had voted to re-elect Quek to the board of directors at the annual general meeting of IHD held on 19 December 1985.

226. The Defendant had said that he was disturbed by the lack of response from Quek after his trip to Singapore, and he had, after receiving Doreen Yong's letter of 2 December 1985, consulted solicitors on 4 December 1985. He had received advice that he should take immediate action to report the matter to the police and to the Commissioner for Securities.

227. And yet the Defendant voted to re-elect Quek to the board, because, he says, he assumed simply from a gesture from Quek when he (Quek) entered the meeting room that he (Quek) had brought the verifying documents.

228. It is simply implausible for a businessman in the Defendant's position, who had been put into the quandary that Quek had placed him in, to have simply relied on some gesture from Quek.

- No mention of Singapore trip in Mareva affirmation

229. Finally, as another pointer towards the whole implausibility of the Defendant's evidence about the Singapore properties, it is noted that in his affirmation in support of a Mareva injunction against Quek and CH Low in CL1/86, he made no mention of the Singapore properties, even though he had been told by his legal advisers that he should make full and frank disclosure. The Defendant was unable to give any satisfactory answer as to why the Singapore properties were not referred to in his affirmation.

230. The conclusion that I would draw from all the matters set out above is that the Defendant's evidence of the visit to the Singapore properties is untenable and was an attempt to explain his inactivity for the period up to December 1985, an inactivity that had to be explained as no innocent chief executive would have failed to pursue the missing cash with alacrity.

231. I find, in the light of all the evidence discussed above, that there was a conspiracy involving the Defendant which benefited Join Park and CH Low's companies, to the detriment of IHD as discussed below. Join Park was paying substantially less than the purchase price disclosed to the public. The result would be that the share price would not be depressed when in due course Join Park was to dispose of some of the IHD shares. CH Low's companies benefited in that their liabilities to IHD were discharged.

232. As a matter of completeness, it is noted that in the course of negotiations after the parties had fallen out, the Defendant did require CH Low to pay $127m back into IHD as a condition for a settlement. The Defendant refers to this as evidence that he was not party to the conspiracy. However this was at a time when the matter had been revealed to solicitors, so that the Defendant would have had little choice but to require the payment back of the sum.

233. It is not necessary for this court to seek out the reason why the conspirators fell out. There is some evidence of a dispute between the Defendant and CH Low about the valuation of the units in the building. The Defendant's evidence was uncertain as to when he first received Jones Lang Wootton's valuation which was considerably less than that first provided to the Defendant by CH Low. However, it is not necessary for this court to speculate as to what caused them to discontinue the conspiracy. The issue for this court is to see if the Defendant has satisfied the burden of overturning the conviction, and I find that he has failed to do so.

Loss to IHD in conspiracy and Conversion

234. It would be convenient for these two aspects to be dealt with together.

Conversion

235. I shall first consider whether the elements of conversion have been proven.

236. Clause 6(a)(vi) of the Share Purchase Agreement provided that Territorial was to deliver to Join Park a banker's draft in favour of IHD in discharge of the Seareef debt. This was actually done at the completion meeting. It is common ground that the 3 cashier orders were delivered by Quek, representing Territorial, to the Defendant, representing Join Park. The Defendant accepted in evidence that he had a responsibility to pass them on to IHD. The cashier orders were consequently given to IHD staff in the person of Doreen Yong for deposit into its bank account.

237. It is a well-established principle that there can be a conversion of a cheque. The chattel converted is the piece of paper, and the value of the converted chattel is the money received under the cheque (see e.g. the cases cited by Scrutton LJ in Lloyds Bank v Chartered Bank of India [1929] 1 KB 40, at 56).

238. It is also well-settled law that conversion consists of the dealing with a chattel in a way which is inconsistent with the rights of the true owner. A person may be liable for conversion even if he has not had actual or constructive possession of the chattel (Douglas Valley Finance v Hughes [1969] 1 QB 738, 750-2).

239. Here, Quek had in accordance with the Share Purchase Agreement given the 3 cashier orders to the Defendant. The Defendant then (through Ngai and Susan Chow) passed the 3 cashier orders to Doreen Yong, he with the intention that she would deal with them so as to cause the sum of $127,617,747.88 to be ultimately withdrawn through Dixon's cheques. The withdrawal of the sum out of the control of the IHD group was a dealing with the money contrary to the rights of IHD. As part of the conspiracy which intended and in fact caused the money to be withdrawn from the IHD group, the Defendant is liable to IHD in conversion.

240. It has been submitted on behalf of the Defendant that there was no loss to IHD. This is an argument which applies to both the conspiracy and conversion causes of action. It was the Defendant's contention that :-

(i) there was no genuine indebtedness on the part of Seareef or Ariffin & Low;

(ii) the apparent repayment of the alleged indebtedness and the subsequent apparent circular flow of funds was in fact a sham, being artificial transactions not backed by any real funds, the transactions being tainted by fraud and of no commercial validity.

Genuine indebtedness to IHD

241. It was submitted by behalf of the Defendant there was in the first place no genuine indebtedness to IHD. The evidence of Mr Charles Dickson as an expert witness was adduced to show that Seareef was merely a conduit for funds. Funds that had been received by Seareef had gone straight out from that company to the credit of other companies to repay their indebtedness to the Ka Wah Bank.

242. Mr John Lees, the expert called for IHD, whilst not accepting that there were no genuine commercial transactions, was unable to show from the books available to what use Seareef had put the funds.

243. Having considered the evidence from both experts, I find that it is more likely than not that there were no genuine commercial transactions behind the transfer of funds. The same suspicion applies to the overseas stocks of $26m. and the amount of $10m. said to be standing to the credit of IHD with Ariffin & Low.

244. However, that does not mean that there was no indebtedness to IHD. Irrespective of what Seareef had done with the funds, or whether Ariffin & Low had really acquired overseas stocks, the fact remains that there were in the first instance funds which belonged to IHD which moved to these companies. This is clear from the evidence of Mr Dickson in cross-examination (Day 17) when he accepted that actual cash had gone out of IHD, and that whether there was an authentic loan from IHD or cash filtered out by fraud, the fact was that IHD was owed money, and that was the money repayment of which was represented by the cashier orders.

245. Consequently, when the cashier orders were paid into IHD's account with the Ka Wah Bank on 17 August 1985, IHD was entitled to retain the money in settlement of the indebtedness.

Commercial validity

- Not a mere circle of cheques

246. The next issue is whether this was a mere circular movement of cheques when no funds in reality ever existed.

247. The Defendant referred to Selangor United Rubber Estates Ltd v Cradock (No.3) [1968] 1 WLR 1555. One of the arguments in that case was that there was satisfaction of Woodstock's debt to the Company. Ungoed Thomas J held (at 1651) that where there was a circular movement of cheques, by which the payments to the Company were dependent upon corresponding payments out by the Company's directors from the Company's account to the payer, by a scheme in which the payer participates and without advantage to the Company, then the payer was giving with one hand what he was at the same time taking away with the other. The Company had "the satisfaction of a conduit pipe". Applied to the cause of action of misapplication of funds, the consequence of the circular cheques was that because no money had actually been provided to the Company, it received no money capable of being misapplied.

248. However, the factual situation in the present case is different from that in Selangor v Cradock. In Selangor, there was a true circle of cheques where the same funds were being circulated. In the present case however, there was an interposition of cashier orders, and cashier orders are drafts drawn by a bank upon its own funds. (Indeed, it is for precisely this reason that cashier orders are treated in the commercial world as being equivalent to cash).

249. Thus the sum of $127,617,747.88 is to be distinguished from the sum of $571,892.39 which was circulated on 27 August 1985. On the latter occasion, no cashier orders were involved and the bank's own funds were not interposed. That latter transaction was a true circle of cheques, and therefore the sum claimed by IHD should not be reduced by this sum because IHD had never received any of these funds.

- Allegation that cashier orders not backed by real funds not substantiated

250. The Defendant contended that even though cashier orders had been interposed, the cashier orders in this case were not backed by real funds.

251. A witness statement of Norman Lok Hong-ping was tendered. Mr Lok is a vice president of the consumer banking group of the Ka Wah Bank. In the statement, he said that according to "established procedure" of the bank, the cashier orders would not be handed over to the customer unless they had been paid for, i.e. unless Wanfong had been debited with the necessary sum, resulting in a corresponding credit of the bank's Cashier Order Account. In the present case, clearly that procedure had not been complied with.

252. However, that is not equivalent to saying that the Cashier Orders were worthless. There was no evidence that the Bank had no or no sufficient funds of its own on which it could draw the cashier orders, as a means of financing Wanfong. It has not been alleged that the officers who had issued the cashier orders were part of the conspiracy. They had not complied with established procedure in handing over the cashier orders before debiting Wanfong's account, but that is not to say that they had drawn the cashier orders upon the bank's cashier order account when that account had insufficient funds. Mr Lok's statement did not deal with the Bank's cash position on 17 August 1985. Mr Dickson could only speculate that at that time, the Bank might have had cash between $1.098 billion (being the cash position according to the Bank's consolidated balance sheet for 31 December 1984) and $159 m. (the cash position according to the Bank's consolidated balance sheet for 31 December 1985).

253. I find therefore that the Defendant's contention that the Bank had no real funds to be unsubstantiated by the evidence.

254. Further, irrespective of the cash position of the Bank at the time, HSBC and the Bank of China had in June - July 1985 given it lines of credit which were generally understood to be substantial, although the extent was never revealed. There was no evidence that those credit lines would have been insufficient for the amount of the 3 cashier orders.

- Title passed because authority to deliver cashier orders, though induced by fraud, not avoided

255. The next question then is what was the effect of the fraud on the validity of the Cashier Orders.

256. It was not disputed that the 3 Cashier Orders were properly drawn and signed by the correct officers. There is no evidence that any of these officers were involved in any conspiracy, and it is assumed, in view of the established procedure referred to in Norman Lo's evidence, that they had been induced by the fraud of Victor Tan to draw and hand over the cashier orders.

257. However, the fact that a banker's draft has been induced by fraud does not render them void from the start. Title can still pass, notwithstanding that the issuing bank had been operating under an assumption induced by fraud. In Citibank NA v Brown Shipley & Co [1991] 2 All ER 690, a fraudster had forged the signature of a customer of the I bank (the issuing bank), and had obtained a banker's draft from the I bank which was presented to the R bank (the receiving bank). On the strength of that banker's draft, which was genuine and issued in the ordinary course of business, R bank paid cash to the fraudster. Funds were then collected by the R bank from the I bank.

258. When the I bank discovered the fraud, it sued the R bank for conversion, on the ground that the title in the draft had never passed to the R bank, because there was no contract between them, and so the R bank could only obtain title to the funds through the fraudster, who had never received good title.

259. It was held that in determining which of the two innocent parties should suffer, the I bank and not the R bank had to bear the loss. Under the Bills of Exchange Act (equivalent to the Bills of Exchange Ordinance), the instrument became a valid instrument (establishing a contract between the two banks under which title to the draft passed) on delivery to the R bank. For delivery to be effective, it must be under the authority of the I bank. At the time of delivery, the I bank had given authority for the delivery. Although the authority was induced by fraud, it was only voidable, not void. The authority remained actual authority until it was avoided.

260. In Brown Shipley, the authority had not been avoided in time before title passed. Similarly in the present case, the bank officers had handed over the cashier orders, made out in favour of IHD, to Wanfong. That was sufficient to authorize Wanfong to deliver the cashier orders to IHD, as there could have been no other purpose in giving Wanfong the cashier orders made out in favour of IHD (Yan v Post Office Bank Ltd.[1994] 1 NZLR 154, 160).

261. Although that authority to deliver the cashier orders was induced by fraud, it remained actual authority, not avoided at any stage before the cashier orders were actually credited to IHD's account, putting it in credit in the sum of $127,663,651. This exhausted the operation of the cashier orders and title passed to IHD, as it had passed to the R bank in Brown Shipley.

262. As far as consideration was concerned, IHD received the money from the cashier orders in good faith and for consideration, as the cashier orders were received to discharge the indebtedness of Seareef and Ariffin & Low. It may be that there was no consideration passing between Wanfong and the Ka Wah Bank, but that mattered not. That was a separate contract which does not impinge on the validity of the contract established by the delivery of the cashier orders to IHD.

263. As stated succinctly by the Court of Appeal in Yan, the lack of consideration between the bank and its customer (Wanfong) for the issue of a banker's draft does not avail the bank when it had made them out to a named payee (IHD), and the bank entrusted them to its customer so that it could deliver them to the payee, which took them in good faith and gave consideration for them.

264. In its contentions against the above concept, the Defendant sought to rely on a decision of the High Court of Ireland in National Bank Ltd v Joseph O'Connor and Bowmaker (Ireland) Ltd 103 Ir. L.T. 73. It was submitted on behalf of the Defendant that this is authority for the proposition that where a cashier order is issued by a servant or agent of a bank to a customer as part of a fraudulent scheme, the bank is not bound to pay on presentation of such a cashier order.

265. However, the quoted case did not establish a proposition in such absolute terms. Thornton was a fraudulent employee of the National Bank. Through his fraudulent actions, the Bank issued 2 bank drafts. They were given to O'Connor, a business associate of Thornton's. O'Connor caused the bank drafts to be met by the re-issue of a bank draft made in favour of Bowmakers. This re-issued bank draft was met and the money paid to Bowmakers, which held them to O'Connor's credit. After discovering Thornton's fraud, the Bank sought payment from both O'Connor and Bowmakers on the ground that the draft was the property of the Bank. The case was contested only by O'Connor, Bowmakers lodging the money in Court.

266. It was held by the judge that on the facts of that case, O'Connor was privy to Thornton's wrongdoing and must cause the money to be repaid to the Bank. That result is hardly surprising, given the finding that O'Connor was privy to Thornton's fraud. But that is not the present case. Of course, IHD's directors Quek and Chew were privy to the fraud of CH Low and Victor Tan, but since the company was the victim of the conspiracy, it was not to be treated on the basis that the directors had notionally transmitted their knowledge to the company to make it a dishonest conspirator as well (Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] 1 Ch 250). This is particularly so when one of the purposes of s.48 is to protect the company's money from being used, directly or indirectly, for the purchase of its own shares. Therefore, IHD is in a completely different position to that of O'Connor, an individual.

267. In this connection, the Defendant sought to rely on an obiter dictum in Thackwell v Barclays Bank plc [1986] 1 All ER 676 to support its contention that even if IHD is to be regarded as innocent because the guilty knowledge of its directors could not be imputed to the company, nevertheless it would still not succeed in an action in conversion.

268. In Thackwell, the scheme was that Thackwell would enter into a false sale to AJ Ltd of 2 machines, one of which did not exist, and the other substantially overvalued. R Ltd (a participant in the scheme) through its director Sawford then entered into a hire-purchase agreement with a finance company for finance to purchase a number of machines from AJ Ltd, including these 2 machines.

269. When the finance company paid the cheque to AJ Ltd, this cheque was taken to Barclays Bank, where Sawford gave the bank manager 2 cheques of AJ Ltd, one of which was made out to Thackwell.

270. Sawford forged Thackwell's signature in purported endorsement of this cheque to R Ltd. The money was paid to R Ltd which then went into liquidation. Thackwell sued the Bank in conversion and negligence. The Bank contended that the doctrine of ex turpi causa prevented Thackwell from recovering, because he had been a party to the fraudulent re-financing scheme, which had caused the converted cheque to be made payable to him in the first place.

271. It was held by Hutchison J that as Thackwell was a party to the fraudulent re-financing scheme which was the cause of the cheque being made payable to him, it would be contrary to public policy to allow him to recover the proceeds. That finding is not surprising.

272. However, the judge then went on to say that even if Thackwell was innocent, and it was Sawford alone who perpetrated the scheme, Thackwell would still not be entitled to recover in conversion. The judge's reasoning (at 689f) was based on proximity of the criminal conduct to the issue of the cheque, finding that the cheque constituted in reality the very proceeds of the fraudulent conduct.

273. It is difficult to understand why proximity alone should be the test of whether it would offend the public conscience to allow the plaintiff's claim, and the judgment does not contain any explanation for that obiter dictum. Certainly, the House of Lords in the later case of Tinsley v Milligan [1994] 1 AC 341 questioned the development of the "public conscience test" in Thackwell (although not the result itself) and held that that test has no place in determining the extent to which rights created by illegal transactions should be recognised. It held that public policy only required a court to deny its aid to a plaintiff seeking to enforce a cause of action if he was implicated in the illegality and sought to rely on the illegal act in putting forward his case. IHD, in contrast to its dishonest directors, was not implicated in the illegality.

274. In conclusion on this issue, it is clear that the interposition of the bank's own funds took the transactions outside a mere circle of cheques, there was no evidence that the cashier orders were not backed by any real funds, and notwithstanding that the authority for the delivery of the cashier orders were induced by fraud, the authority was not avoided before title passed. It cannot therefore be said that the cashier orders had no commercial validity, and when the money was withdrawn from the control of the IHD group, it suffered a real loss.

Breach of fiduciary duty

275. A third cause of action against the Defendant is in breach of fiduciary duty. For the Defendant to be liable, he must of course have been in a fiduciary capacity to IHD on 17 August 1985 when the money was withdrawn from IHD's control.

- As chief executive

276. It is IHD's case that the Defendant was its Chief Executive (CE) as from 9 August 1985. It is the Defendant's case that he did not become CE until 29 August 1985.

277. In support of IHD's case, there is a minute of a board meeting of 9 August 1985 signed by Quek and Chew resolving that the Defendant be appointed CE with effect from that date. The authenticity of that minute has been disputed by the Defendant as the minute purported to be of a meeting held in Hong Kong, and since neither Quek nor Chew was in Hong Kong on that date, no physical meeting could have been held as alleged.

278. However the validity of the board meeting of 9 August 1985 was in fact acknowledged by the Defendant himself when on 11 January 1986, the board of IHD (including himself) resolved to rescind the minutes of 9 August 1985 appointing him as CE "in view of the fact that Mr Ch'ng Poh was not officially appointed to the Board until 28th August 1985". It is to be noted that the reason for the rescission of the 9 August 1985 board meeting was not that he had not been appointed CE on 9 August 1985, but only that he had not been appointed a director until 28 August 1985.

279. In cross-examination (Day 13), the Defendant was asked: "It is not suggested that it [the board meeting of 9 August 1985] had not occurred or it was not binding, or anything of that sort, is it?" The answer was "That is right, and we wanted to be honest that we will pass a resolution to rescind it, and no attempt was made to even destroy it".

280. The Defendant said that the reason for the rescission was that he had been advised by Tom Tong, who was IHD's in-house lawyer as well as a director, that his appointment as CE on 9 August 1985 would have been in breach of the Takeover Code as that was prior to the General Offer.

281. Therefore it is clear that the Defendant was in fact CEO as from 9 August 1985, and it was only several months later that the change in the date of appointment was sought to be made retrospectively.

282. The Defendant's appointment as CE as from 9 August 1985 is also supported by his "Contract of Service for a Chief Executive", from which it is clear from the typing in paragraph (1) that the figure "2" in the date "29th day of August 1985" had been inserted subsequently.

283. The Defendant's salary records also showed that he had been appointed CE as from 9 August 1985. A receipt signed by the Defendant himself was pro-rated to exactly 23/31 of his monthly salary, i.e. he was paid his CE's salary as from 9 August 1985.

284. The Defendant sought to explain that the extra payment was for his services in supervising the renovation of his office, and reimbursement for the services of his personal assistant Judy Tan who had come from Singapore at his expense to help him set up a new office. This explanation for the payment is implausible. Not only was the payment exactly 23/31 of his monthly salary, but also for accounting and tax purposes, it would have made no sense for the Defendant to accept as "salary" (for which tax would be payable by him) a payment made by IHD for decoration expenses for the office.

285. There is an entry in the Defendant's pocket diary which, on one reading, stated that he was moving into IHD that day and which he explained as being moving in for the start of renovations only. In my view, that entry was too cryptic to enable any point to be made whether for or against either party.

286. It is noted that in a letter dated 22 August 1985 from Woo Kwan Lee & Lo to Join Park, Susan Chow asked Eddie Choo to confirm that the terms of "the service contract" with Ngai and the Defendant had not been settled and would be subject to the approval of the new board. However, it is not clear what this "service contract" refers to. Ngai was to be appointed Chairman of the Board and the Defendant, Deputy Chairman. If the "service contract" in that letter was meant to be for the Defendant's appointment as CE, it is difficult to see why there would have been a reference to Ngai as well, as he was not being appointed to any executive post. There was no evidence as to what was Eddie Choo's response (if any) to this letter asking for confirmation.

287. In any event, there is little evidence as to exactly how much Woo Kwan Lee & Lo knew about the Defendant's appointment as CE. The "Contract of Service for a Chief Executive" does not bear the signatures of any solicitors as attesting witnesses.

288. In all the circumstances, bearing in mind in particular the evidence as to the reason for the rescission of the board resolution of 9 August 1985 and the payment of 23/31 of the monthly salary, one is left with the conclusion that the Defendant had started as Chief Executive of IHD on 9 August 1985. The fact that this was before the completion date is not surprising. In reality, Join Park had paid the "completion moneys" of $109m. on 25 July 1985, and it would not be at all surprising for the Defendant to wish to take over control, and for Territorial to agree to relinquish control, soon after that.

289. As Chief Executive, the Defendant of course had a fiduciary duty to IHD and so would have been under such a duty on 17 August 1985 when the money from the cashier orders were first deposited into its account and then withdrawn from its control.

- not as director on 17 August 1985

290. The evidence was that the Defendant had been appointed a director of IHD only on 28 August 1985. It was not pleaded on behalf of IHD that the Defendant was, as it were, a "de facto" director on 17 August 1985. Accordingly, there is no evidence to support IHD's contention that the Defendant was under any fiduciary duty to IHD on 17 August 1985 by virtue of his capacity as a director only.

- as person who had control of cashier orders

291. However, even if the Defendant had not held any official position with the company on 17 August 1985, I accept IHD's contention that he nevertheless was under a fiduciary duty to it when he received the cashier orders from Territorial for transfer to IHD.

292. The Share Purchase Agreement provided in Clause 6(vi) that on completion, Quek would procure Territorial to, and Territorial would, deliver to Join Park a banker's draft in the stated sum in favour of IHD in discharging the Seareef loan. Although there was no express reference as to what Join Park was to do with the cashier orders after receipt from Territorial, the only reasonable inference must be that Join Park should deliver them to IHD for its (IHD's) benefit. A fiduciary duty was thus assumed by Join Park in favour of IHD.

293. Thus, when pursuant to that Share Purchase Agreement, the Defendant received the cashier's orders on 17 August 1985, he received them as agent for IHD under a fiduciary duty to deal with them for IHD's benefit. Indeed the Defendant accepted in cross-examination (Day 13) that it was his responsibility to pass the cashier orders on to IHD.

294. It mattered not that IHD had not expressly made him its agent. A fiduciary duty may be self-imposed and undertaken without any authority from the party to whom the duty is owed. The duty had been in fact undertaken and the property had been received by the Defendant who had assumed to act in a fiduciary character (Lyell v Kennedy [1889] 14 App Cas 437, 463).

295. That duty was not discharged by his participating in a charade, passing them to Doreen Yong knowing that she would be dealing with them pursuant to the conspiracy. By agreeing to let Doreen Yong take the cashier orders to the Bank when he knew that she was going to deprive IHD of the benefit of the moneys, he was acting in breach of his fiduciary duty to the company.

296. I shall now deal with the Defendant's other defences.

Defences based on Accordance settlement

297. This was a deed of settlement dated 29 September 1987 involving 7 parties, including IHD and the Defendant in his personal capacity. It is a lengthy document and I shall not set it out in this Judgment. However, it can be seen from the substance of the document (in particular, cl. 4.03) that in reality, it was a settlement agreement between the Ka Wah Bank of the one part and all the other parties of the other part.

298. Therefore, it is unreal to suggest that this was also a settlement between IHD and the Defendant. Indeed, it is noted that the Defendant signed the document on behalf of IHD, and the same solicitors acted for all the parties save the Ka Wah Bank.

299. It is true that in the Accordance settlement, IHD agreed not to adopt the derivative proceedings issued by two minority shareholders, where the Ka Wah Bank, the Defendant and IHD were named as defendants. But that agreement cannot be read out of context to mean that IHD was entering into a settlement with the Defendant.

300. The context was that the Accordance settlement was between the Ka Wah Bank of the one part and the other parties of the other. Therefore, the agreement of IHD not to adopt the derivative proceedings can only be reasonably interpreted to mean its agreement not to adopt the derivative proceedings against the Ka Wah Bank.

301. Although cl. 4.06 of the Accordance settlement was drafted in wide-ranging terms, given the context of "Bank v the Rest" shown in cl. 4.03, it cannot be doubted what the intention of the parties was. It cannot be suggested that somehow, by a side-wind, IHD's rights against the Defendant had been destroyed, when the Defendant was in control of IHD, and when the company was being advised by his solicitors.

302. However, it should be noted that as part of the Accordance settlement, IHD was paid a sum of $58,271,948.33 by the Ka Wah Bank. As this reduces the loss suffered by IHD, it should be deducted from the sum being claimed by IHD against the Defendant.

303. I see no reason why the Accordance settlement should result in any other reduction of the claim. As far as the Fairtime property is concerned, it is true that Accordance got to keep the rental deposit which it would have been liable to pay Fairtime and it had the benefit of occupying various units, but there is no reason why the Defendant should be given credit for that by IHD.

304. The same reasoning applies to the dispute over the Intercontinental Garden Restaurant. Under the Accordance settlement, the restaurant surrendered its lease which had contained terms unfavourable to IHD. That no doubt was a benefit to IHD, but I see no reason why that should result in a reduction of the sum for which the Defendant is liable to IHD in the present case. The work the Defendant put into that matter would have been done simply in performance of his duties as a director of IHD.

305. As a matter of completeness, if I am wrong in holding that the Defendant cannot be credited with the settlement of the Fairtime property, I would indicate that I preferred the evidence of IHD's expert valuer Miss Alexandra Hamilton-Meikle, applying a discount rate of 9% to her model. The suggestion of the Defendant's expert Miss Lisa Fisher Jones of a monthly tenancy would have been unusual for commercial leases in Hong Kong as shown by the inability to put forward any rental data for a monthly tenancy. In fact, units 801 and 805 were for 2-3 year terms, and a 35-month occupation is far closer to a 3-year term with an early surrender of 1 month only.

Limitation

306. Finally I deal with the defence of limitation. The writ in this action was issued on 12 December 1995, more than 10 years after the events of 17 August 1985, although, it has to be said, many events had occurred during that decade.

307. Before considering this defence, I note that it is well-established that the onus is on a plaintiff (i.e. IHD) to prove that it had issued proceedings within the limitation period prescribed in the Limitation Ordinance (London Congregational Union Inc v Harriss & Harriss [1988] 1 All ER 15).

308. In the present case, IHD has relied on s.26(1), s.4(7) and s.20(1) of the Limitation Ordinance for its case that the proceedings have been issued within the period prescribed by the Ordinance. I shall deal with each in turn.

Section 26(1)

309. This provides, for present purposes, that where in the case of any action for which a period of limitation is prescribed by the Ordinance, either -

(a) the action is based upon the fraud of the defendant; or

(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant,

the period of limitation shall not begin to run until the plaintiff has discovered the fraud or concealment or could with reasonable diligence have discovered it.

310. Section 26(3) provides that for the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

311. Section 26 operates on the basis that the action is one for which a limitation period is prescribed, in contradistinction to a claim for equitable relief.

312. In relation to (a), I have held in my decision delivered on 20 January 2000 that the present action is not based upon the fraud of the defendant, following the rationale in Beaman v ARTS Ltd [1949] 1 KB 550. That is because fraud is not an essential element in any of the 3 causes of action here, of conspiracy, conversion and breach of fiduciary duty. I shall not repeat that decision here.

313. In relation to (b), I find that the Defendant has deliberately concealed from IHD his participation in the conspiracy. It is important to note that from August 1985 until February 1993, he controlled IHD. Indeed it was accepted by the Defendant in cross-examination (Day 14) that he controlled IHD and its legal actions. In CL1/86, he made affirmations portraying the accusations of the other conspirators as sinister attempts to frame him, and throughout he has portrayed himself as simply being the head of the victim company. It is noted, of course, that it was he who had first reported the matter to the police.

314. The question then, is when IHD could with reasonable diligence have discovered the concealment. In this respect, it is for IHD to show that it could not have discovered it without exceptional measures which it could not reasonably have been expected to take (Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400, 418).

315. It is noted that the facts that were relevant to a plaintiff's cause of action were those which were sufficient to constitute or complete a cause of action, not all those facts which might be evidentially material to proving the claim (Cia de Seguros Imperio v Heath (REBX) Ltd [1999] 1 All ER (Comm) 750).

316. It is also true that a cause of action accrues without the need for identification of the defendant. In R.B. Policies at Lloyd's v Butler [1950] 1 KB 76, it was held that a cause of action accrued against a thief (who sold a stolen car to the defendant) in 1940 notwithstanding the fact that his identity was unknown until 1947, and the plaintiff insurer's right of action was therefore barred when it issued proceedings in 1947.

317. That was not a case of concealment, and the finding of the statute bar was perfectly consistent with the rationale of the limitation statutes, which was not only to prevent plaintiffs from sleeping on their rights, but also to prevent injustice to defendants. In that case, the defendant was an innocent purchaser of the car many years previously.

318. The issue here is whether IHD has shown that acting in an ordinary prudent way in the circumstances set out above, it could not have discovered with reasonable diligence the facts relevant to its claim in this action by 12 December 1989 (being 6 years prior to the date of issue of the writ).

319. This issue cannot be considered in a vacuum. In considering whether IHD could not have discovered the concealment with reasonable diligence, the role the Defendant played in IHD throughout the years from August 1985 to February 1993 cannot be ignored. It would be unreal to do so.

320. In reality, the facts were that the Defendant was at the helm of IHD from August 1985 to February 1993 when he ceased to be a director. He has accepted that he was in control of the company and its legal actions.

321. As far as the other members of the board were concerned, it is clear from an agreed table of directors supplied to the Court that there was a constant turnover in membership of the board. As noted previously, Peter Lo had resigned the day before the Annual general meeting in December 1985. Two prominent local businessmen who were friends of Ngai resigned the next day without having even attended a single board meeting since their appointment in October 1985. Ngai himself resigned in February 1986, shortly after the commencement of CL1/86. Mr Tom Tong had left Hong Kong and was not a director from 1987 to 1993.

322. The only directors who stayed on the board for any period of more than a few months (before the relevant date of 12 December 1989), other than the Defendant's wife, were Tan Sri Dato Seri Shariff Ahmad, Tan Sri M Ghazali Shafie and Tan Sri Dato Taib Hj Andak. All were non-executive directors resident overseas. These were close friends of the Defendant whom the Defendant had invited onto the board. He had protested his innocence to them and had concealed his participation in the conspiracy. Those persons would not reasonably have been expected to undertake the sort of investigations which were taken by the authorities in the criminal trial. Even if they had attempted to do so, the Defendant would have been able to react effectively against it by virtue of his position as the person controlling the majority shareholding of the company and who had appointed them to the board in the first place.

323. In conclusion, therefore, I find that IHD could not have discovered with reasonable diligence the facts relevant to its claim in this action before 12 December 1989. In reality, it was not free to do so by reason of the Defendant's control over it.

Section 4(7)

324. This provides that the limitation period shall not apply to any claim for equitable relief. A claim for an account is such a claim, and by reason of my finding that the Defendant was in breach of fiduciary duty, no limitation period therefore applies (Burdick v Garrick [1870] 5 LR Ch App 233).

325. It was then contended by the Defendant that IHD was guilty of laches and acquiescence, s.36 of the Ordinance having preserved the Court's equitable jurisdiction to refuse relief on the ground of acquiescence.

326. In this regard, it should be noted that a court of equity does not merely look at the length of the delay, but also at the acts done during the interval which might affect either party and which cause a balance of justice or injustice in taking one course or the other (Lindsay Petroleum Co. v Hurd [1874] LR 5 PC 221, 240).

327. In the present case, it is not unconscionable for IHD to assert its rights in 1995 when the Defendant had been in control of it from August 1985 to February 1993, and when no prejudice has been suffered by the Defendant. It could not be said by the Defendant that he had been led to think that his conduct had been sanctioned by IHD, when he was controlling it and was misleading other directors into thinking that he was not implicated.

Section 20(1)

328. This provides that no period of limitation prescribed by the Ordinance shall apply to an action by a beneficiary under a trust, being an action -

(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or

(b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.

329. In respect of (a), I have found that this is not an action based on fraud for the reasons stated in my decision of 20 January 2000. It would be surprising if the words "in respect of" any fraud were intended to mean anything different.

330. In respect of (b), the Defendant was a fiduciary and a constructive trustee by reason of his assistance in the scheme causing the loss to IHD of the sum of $127,617,747.88. Section 20 of the Limitation Ordinance incorporates the definition of "trust" and "trustee" in the Trustee Ordinance. As the definition of "trust" in the Trustee Ordinance extends to constructive trusts, s.20(1) in the Limitation Ordinance also applies to constructive trusts (Extramoney Ltd v Chan Lai Pang & Co [1991] 2 HKC 125). The present action for an account of profits from the Defendant as constructive trustee is therefore an action within the terms of s.20(1)(b).

Order

331. In the result, I find the Defendant liable to IHD for damages in conversion and conspiracy and for breach of fiduciary duty in the sum of $127,617,747.88 togther with interest as set out below, but the Defendant is to be credited with the total amount of $58,574,315 being the sum recovered from the Ka Wah Bank under the Accordance settlement and some further sums recovered in March 1991. Alternatively there is to be an account of profits as constructive trustee.

Interest

332. As far as interest is concerned, it was accepted in Komala Deccof & Co SA v Pertamina [1984] HKLR 219 that the rate of interest should be the rate at which persons with the general attributes of the actual plaintiff (although not with any special or peculiar attribute) could borrow money. In that case the Court of Appeal awarded interest at Prime + 1% and held (at 223) that that rate should be used, unless in any particular case there was evidence to show some other rate to be more appropriate.

333. The general attribute of the plaintiff here is that it is a listed company with a substantial number of office units in a modern building in a popular, though not first-class, commercial location. I do not consider that there is sufficient evidence here to show that some other rate than that used in Komala Deccof v Pertamina would be more appropriate.

334. It is true that Canadian Eastern Finance Ltd gave a loan to IHD at a rate of Prime + 1.85%, and it would appear that the Ka Wah Bank had charged an even higher interest rate. However, Canadian Eastern Finance Ltd is a finance company, not a bank, and the loan was short-term and granted in answer to an urgent request for funds. In those circumstances, one would expect the interest rate to be substantially increased. As for the Ka Wah Bank, the rate charged by that bank is not a reliable indicator in light of the relationship that persons controlling the bank had with IHD.

335. I would therefore apply the standard rate of Prime + 1% as laid down in Komala Deccof v Pertamina. I order that compound interest should be awarded, by reason of the Defendant's breach of fiduciary duty benefiting himself at the company's expense (Wallersteiner v Moir (No. 2) [1975] 1 QB 373). Compound interest will be ordered on monthly rests, that being the norm in Hong Kong as agreed by the experts, and in the absence of any good grounds for any longer rests.

336. Finally, it has been contended on behalf of the Defendant that the Court may order that interest be abated for any period when there has been unreasonable delay on the part of a plaintiff. Here, the only period to which such a contention might apply is the period between February 1993 (when the Defendant ceased to be a director of IHD) and December 1995 when the writ was issued.

337. However, I do not find that period to be one of unreasonable delay when one considers that since criminal proceedings had been commenced against the Defendant, it would have been likely for a court to have stayed any civil action until the criminal trial was completed. In this case, the criminal trial was completed with the Defendant's conviction in July 1994 but there was then an application for fresh evidence to be adduced, which (if admitted) might have led to a re-trial. Accordingly, I do not find that there was any unreasonable delay for which an abatement of interest would be appropriate.

Costs

338. Finally, in relation to costs, I would make an order nisi that the costs follow the event, i.e. that the Defendant bears the Plaintiff's costs.