RED ASSET MANAGEMENT LTD AND ANOTHER v. SANCUS GROUP LTD AND ANOTHER

HCA 1493/2022

[2025] HKCFI 432

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1493 OF 2022

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DECISION

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1.  Introduction

1.1  The 1^st Defendant (“D1”) is and was at all material times the registered owner of 90% of the entire issued share capital in BOA International Financial Group Limited[1] (“Target Company”). The 2^nd Defendant (“D2”) is and was at all material times a director of D1.

1.2  On 29 April 2019, the 1^st Plaintiff (“P1”), the 2^nd Plaintiff (“P2”), the Target Company and D1 entered into a written Memorandum of Understanding (“MOU”).

1.3  As will be seen below, the MOU has the effect of altering various contractual arrangements previously agreed between the parties. Such contractual arrangements include (1) a Share Purchase Agreement between P1 (as purchaser) and D1 (as seller) executed in late August 2017 in respect of identified number of shares in the Target Company (“SPA”), (2) a Subscription Agreement between the Target Company and P1 dated 22 August 2017 whereby the Target Company agreed to issue and P1 agreed to subscribe identified number of shares in the Target Company (“SA”), and (3) a Supplemental Sale and Purchase Agreement dated 20 April 2018 which varied some of the terms of the SPA including the postponement of the deadline of P1’s payment obligations under the SPA (“Supplemental SPA”).

1.4  Pursuant to the MOU, Ps (as transferee) and D1 (as transferor) entered into a written Share Transfer Agreement on 15 November 2019 in respect of 45.0295% of shares in the Target Company (“STA”) in accordance with the terms stated therein.

1.5  It is common ground that D1 has not transferred any shares in the Target Company to Ps, whether pursuant to the STA or otherwise, despite the fact that the STA contains an express acknowledgement that the relevant consideration for the transfer had been paid by Ps. Ps commenced the present action in November 2022 against Ds. The claims made against D1 are premised on D1’s alleged breach of the agreements entered into between the parties. The claim against D2 is pursued on the basis of various alleged misrepresentations but for which P1 would not have entered into SPA or the SA and Ps would not have agreed to make certain payments to D1 and/or the Target Company.

1.6  By their summons dated 8 February 2024 (“Summons”), Ps apply for summary judgment against D1 only. This is my decision on Ps’ application. At the hearing, Ps were represented by Mr Roger Phang (with Mr Kelvin Tse) and D1 by Mr Vincent Chiu, all of counsel.

1.7  The scope of the parties’ contentions was curtailed at the hearing:

(1)  Ps had originally sought either (a) final judgment for a declaration that Ps have validly terminated the STA[2] by reason of D1’s breach and the return of the consideration paid as money had and received on the basis of a total failure of consideration, or alternatively (b) interlocutory judgment on liability against D1 for its breach of the SPA and/or the MOU and/or the STA with damages to be assessed. Mr Phang has confirmed that Ps do not pursue their application for interlocutory judgment.

(2)  On D1’s part, the only ground of opposition relied on is that there is a triable issue on Ps’ claim that there was a total failure of consideration. Mr Chiu has confirmed that D1 no longer relies on the factual dispute raised as to whether Ps themselves were in breach of the STA for failing to provide information pursuant to Clause 3.2 thereof.

2.  The documentary evidence

2.1  In this section, I set out the (relevant) documentary evidence chronologically.

2.2  As stated earlier, in August 2017:

(1)  the SPA was entered into between P1 and D1 in late August 2017 whereby D1 agreed to sell and P1 agreed to purchase 1,300 shares in the Target Company at a consideration of US$39,000,000; and

(2)  the SA was entered into between P1 and the Target Company on 22 August 2017 whereby P1 agreed to subscribe for 2,249 newly issued shares in the Target Company at a consideration of US$51,000,000.

2.3  As stated in the Recitals in both the SA and the SPA (collectively “Original Recitals”) , the Target Company held: (1) 100% shareholding in Sancus Financial Holdings Limited (“SFHL”), (2) 100% shareholding in Eurasia Continental Capital Holdings Ltd (“Eurasia BVI”), (3) 50% shareholding in BOA Financial Group Ltd (“BOAFGL”) and (4) 100% shareholding in Global Financial Holdings Limited (“GFL”).

2.4  As described in the Original Recitals, as at the date of the SPA and the SA:

(1)  SFHL held 56.08% in Bank of Asia (BVI) Ltd (“BOA(BVI)”). BOA(BVI) was granted a banking licence by the Financial Services Commission of the British Virgin Islands (“BVIFSC”);

(2)  Eurasia BVI held 100% of Eurasia Continental Capital Limited (“Eurasia Hong Kong”). Eurasia Hong Kong had applied to the Astana International Financial Centre Authority in Kazakhstan for a Astana International Financial Centre Regulatory Sandbox Licence No 1 (“Sandbox Licence”);

(3)  The main businesses of BOAFGL, a Hong Kong company, were securities (證券), capital markets (資本市場) and asset management (資產管理) and it held 100% shareholding in BOA Securities Limited, BOA Capital Limited and BOA Asset Management Limited; and

(4)  GFL, a Hong Kong company, was in the process of acquiring a well-known company which had been licensed as a deposit taking company in Hong Kong (“DTC”).

2.5  Under Clause 3.1 of the SPA, the parties agreed that the monetary consideration was to be paid by two instalments: (a) a down payment of US$20,000,000 by 25 August 2017 and (b) the balance of US$19,000,000 by 30 December 2017. It is common ground that P1 had paid to D1 the down payment on 13 September 2017 (“Down Payment”).

2.6  Under Clause 3.1 of the SA, it was a condition precedent that the Target Company would obtain the written approval (if necessary) from BVIFSC in relation to the subscription of shares under the SA before the agreed completion date, ie 30 October 2017 and the payment of the agreed consideration (US$51,000,000 in 3 installments) was subject to the compliance of the foregoing condition precedent. It is common ground that the SA had not been performed.

2.7  On 20 April 2018, the Supplemental SPA was entered into between P1 and D, the effect of which was to replace and substitute the Recitals in the SPA as follows (“Updated Recitals”):

(1)  The recital in relation to SFHL remained unchanged;

(2)  The recital in relation to Eurasia BVI was updated to reflect that a wholly-owned subsidiary of Eurasia Hong Kong had already been granted the Sandbox Licence;

(3)  The recital in relation of BOAFGL was deleted and replaced by one which states that BOAFGL was in the business of enterprise management (企業管理); and

(4)  The recital in relation to GFL was deleted and replaced by one which states that a company was being formed to apply for a licence to carry on internet banking.

2.8  The Supplemental SPA also deferred that payment deadline of the balance sum (ie US$19 million) to 30 May 2018 or a date agreed between the parties.

2.9  Following the execution of the Supplemental SPA, two further payments were made to D1 and the Target Company as follows (“Further Payments”):

(1)  On 23 April 2018, HK$13,500,000 was paid to the Target Company; and

(2)  On 26 October 2018, RMB20,000,000 was paid to D1.

2.10  In February 2019, a proposal was made by or on behalf of D1 via Whatsapp. In a Whatsapp sent by Ms Isabella Chan[3] on 18 February 2019 (“18/2/19 Proposal”), to Mr Bao Yueqing[4] (“Mr Bao”) concerning the Target Company and another company called BOA International Financial Services Ltd (“BOAIFS”).

2.11  In relation to the Target Company, the 18/2/19 Proposal:

(1)  recognized that the valuation of the Target Company had to be drastically reduced and the sum to be invested by Ps was proposed to be reduced from US$90,000,000[5]to US$60,000,000 as a result of a reduction in the scope of the Target Company’s intended businesses;

(2)  requested a payment of US$35,000,000 after taking into account the sum of US$25,000,000 already paid (presumably represented by inter alia the Down Payment and the Further Deposits);

(3)  intimated that D1 or the Target Company gravely needed further cash inflow due to operational needs.

2.12  In relation to BOAIFS, the 18/2/19 Proposal:

(1)  stated that D2’s wife was its sole shareholder;

(2)  proposed that the shareholding of BOAIFS was to be held as follows: 51% by P1, 35% by a new investor and 14% by D2;

(3)  proposed that D2 would not require P1 to make any separate payment for the transfer of the shares in BOAIFS ([D2] 是不用 [P1] 另外付款獲得此平台的股權);

(4)  instead, D2 was content to retain a 14% shareholding and leave issues relating to the future operating expenses and operations to P1 and the new investor (只是平台是由D2搭建所以他的14%是干股，有關公司日後的費用亦有 [P1] 或35% 股權的投資者安排).

2.13  The 18/2/19 Proposal further requested a meeting with Mr He Chenguang (“Mr He”), a director of D1, on either 23 or 24 February 2019.

2.14  By another Whatsapp message to Mr Bao on 20 February 2019, Ms Chan reiterated the need to meet Mr He, as there was pressing financial needs on the part of D1 or Target Company.

2.15  Thereafter, Ps, the Target Company and D1 executed the MOU on 29 April 2019 which expressly provides as follows:

(1)  “[Target Company] 在有關 [SPA] 及 [SA] 中的組織架構中包括拉托維亞 (“Latvia”) 的 Meridian Trade Bank (“MTB”) 及在香港接受存款公司 (“DTC”)。而至今 [Target Company] 仍未收購 MTB 及 DTC 的股權，而MTB 及DTC 亦已不再服有被收購的可能性。同時因為合規要求，香港的Type 1, Type 2, Type 4, Type 6 及 Type 9公司的控股公司 [BOAIFS] 的股權亦不在 [Target Company] 名下，故 [Target Company] 的價值需要下調” (Recital 2);

(2)  The SA is cancelled (Clause 1);

(3)  “作為 [P1] 及 [P2] 截至2018年9月11日已支付的所有款項即 [Down Payment and Further Payments] 的對價, [D1] 向 [P1] 轉讓 4,139 股 [Target Company] 股份，該等股份折合為 [Target Company] 已發行股份的 33.3% 股權，同時 [D1] 向 [P2] 轉讓460股 [Target Company] 的股份。該等股份折合為 [Target Company] 的3.7% 股權” (Clause 2);

(4)  “就BOAIFS的股權，[P1] 可在適當時候給予 [D1] 指令安排不多於BOAIFS 的86%的股權無償轉讓 [P1] 或 [P1] 指令的第三方” (Clause 3);

(5)  “[Target Company] 的資產將只包括 [BOA(BVI)] 的56.08% 股權，其他的資產，包括 [Eurasia BVI and its subsidiaries] 將從 [Target Company] 無償剝離” (Clause 4);

(6)  “作為 [Target Company] 共37% 的股東，[Ps] 將間接擁有 BOA(BVI) 的 20.7496% 股權” (Clause 5);

(7)  “本備忘錄簽署生效後，由雙方簽訂具體執行協議，由 [D1] 負責辦理股權轉讓登記手續，並提交相關轉讓完成法律文件” (last paragraph of the MOU).

2.16  The STA was executed on 15 November 2019 between Ps and D1 as contemplated under the last paragraph of the MOU. It contains, inter alia, the following express terms:

“ 鑒於，[D1] 持有 [Target Company] 90% 股權 … [D1] 願意將其持有 [Target Company] 的 45.0295% 的股權轉讓給 [Ps]，[Ps] 願意受讓。

鑒於，[D1] 持有 BOA (BVI) 46.08% 股權 …

鑒於，Ps 已於2018年9月11日之前將 [Down Payment and Further Payments] (上述三筆款項合稱 “轉讓款”) 支付給D1，作為購買 [Target Company] 及購買[BOAIFS]股權的對價 ，[D1]確認已經收到全部轉讓款。

鑒於，D1與 Ps 於2019年4月4日簽訂了[MOU]，根據 [MOU]，… 雙方經協商一致，就轉讓股權事宜，達成如下協議：

…

[1.1] 作為 [Ps] 購買 [Target Company] 股權已支付的轉讓款之組成部份的對價，[D1] 現將其持有 [Target Company] 的共計 45.0295% 的股權 (“轉讓股權”) 轉讓給乙方。

[1.2] Ps 同意受讓上述轉讓股權。

[1.3] [D1] 確認已經收到 [Ps] 支付的全部轉讓款，且不再需要 [Ps] 就上述轉讓股權支付任何新的款項。

[1.4] 股權轉讓完成後，[Ps] 將間接持有 BOA (BVI) 20.746% 股權。

[1.5] 由於上述股權轉讓涉及超過 [BOA (BVI)] 10% 股權，該股權轉讓至英屬維京群島金融服務委員會 (BVI Financial Services Commission) [BVISFC] 批准後生效。[D1] 承諾本協議簽訂生效後，即開始辦理審批事宜，力爭在三個月內完成審批。

…

[4.1] 本協議作為 [MOU] 的必要組成部份，未經協議各方大成新的書面協議，本協議不得變更和解除。”

2.17  As Mr Phang points out, there is a discrepancy between the MOU and the STA with respect to the percentage of shares to be transferred (compare Clause 5 of the MOU and Clause 1.1 of the STA). As has been explained in He 2^nd, it was due to a reduction in the Target Company’s indirect shareholding in BOA (BVI), with the result that D1 had to transfer a larger percentage of shares in the Target Company to Ps in order for Ps to obtain the stipulated 20.7496% indirect control of BOA (BVI) (as stipulated by Clause 5 of the MOU and Clause 1.4 of the STA). Mr Chiu does not dispute the foregoing.

2.18  As envisaged under clause 3 of the MOU, on 21 March 2021, bought and sold notes and instruments of transfer were executed by D2’s wife, Madam Fung Yuet Shan Julia, to transfer a total of 860 shares in BOAIFS to Sino Leap International Ltd (“Sino Leap”) and P1 for nominal consideration (US$1 for the sale of 560 shares to Sino Leap and US$ 1 for the sale of 300 shares to P1). Sino Leap is the company through which Mr He holds his interests in P1.

2.19  On 2 August 2022, Ps’ solicitors issued a demand letter (“Demand Letter”) demanding the transfer of the Target Company’s shares pursuant to the STA to Ps.

3.  D1’s evidence

3.1  In the affirmation in opposition filed by D2 on behalf of D1, D1 contends as follows:

(1)  On a proper interpretation of the MOU and the STA, the Down Payment and the Further Payments (together “Total Consideration”) were paid by Ps towards the acquisition of both the shares in the Target Company as well as the shares in BOAIFS: Wen 1^st §§30-31 relying on the third recital of the STA reproduced at §2.16 above;

(2)  The above position was adopted in the Demand Letter: Wen 1^st §32;

(3)  The recital in the STA is consistent with the commercial deal between Ps and D1. During the negotiations for Mr He's investment in BOA(BVI), Mr He had requested that an asset management company and a securities company be added to the portfolio of the companies under the brand “Bank of Asia”. Those entities were acquired at around that time (2017 or 2018) in order to satisfy Mr He's request: Wen 1^st §34;

(4)  There was no conceivable reason why D1 would simply give away the shares in BOAIFS for free, given that its two subsidiaries, BOA International Securities Limited and BOA Global Asset Management Limited, were acquired at significant value: Wen 1^st §§36, 40-43; and

(5)  Ps are not entitled to be repaid the Total Consideration on the basis that the shares in the Target Company were not transferred to them, given that 86% of the shares in BOAIFS had in fact been transferred to Sino Leap and D1: Wen 1^st §37.

3.2  I should record in passing that Wen 1^st §22 refers to the fact that D1’s obligation to transfer the shares in the Target Company would not arise unless and until the BVI Financial Services Commission gave an approval for P1 to become a shareholder of more than 10% in BOA (BVI). Whilst Wen 1^st §22 refers to Clause 3.1 of the SA, it appears that the same requirement is set out at Clause 1.5 of the STA. As pointed out by Mr Phang, as no such allegation has been pleaded in D1’s Amended Defence in relation to the STA, D1 is not allowed to raise the argument in the present application, relying on the observations made at Hong Kong Topkey Ltd v Wintac (Hong Kong) Ltd [2023] HKCFI 1711 §14. At the hearing, Mr Chiu confirmed that no reliance is placed on the (lack of) approval from the BVIFSC.

4.  The applicable principles

4.1  The principles applicable to an application for summary judgment are trite. They are set out in Mr Phang’s Skeleton Submissions §45 and Mr Chiu’s Skeleton Submissions §§29-35. I adopt Mr Chiu’s summary:

(1)  It is trite law that the mere assertion in an affidavit of a given situation does not, ipso facto, provide leave to defend, since it is incumbent on the defendant to raise a defence or triable issue, and in so doing to condescend upon particulars. The issue is not whether the defendant is believed, but whether the assertions are believable;

(2)  Whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute;

(3)  Furthermore, the Court will not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. But what the Court should not do is to conduct a mini-trial on complicated factual issues;

(4)  If the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence and judgment will be given to the plaintiff;

(5)  Unless it is obvious that the defence is frivolous and practically moonshine, O.14 ought not be applied.

4.2  On the principles applicable to Ps’ claim for total failure of consideration, I do not understand there to be any substantial disagreement between counsel. They may be stated as follows.

4.3  It is well-established that a useful framework for approaching a claim in unjust enrichment involves asking four questions: (1) was the defendant enriched, (2) was the enrichment at the plaintiff's expense, (3) was the enrichment unjust (4) are any of the defences applicable: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §67.

4.4  In relation to the unjust factor of total failure of consideration or failure of basis:

(1)  Where a benefit has been conferred on the joint understanding that the recipient's right to retain it is conditional, and the condition is not fulfilled, the recipient must return the benefit: Goff & Jones, The Law of Unjust Enrichment, 10^th Ed, at §12-01;

(2)  "Consideration" in the context of a restitutionary claim is the anticipated performance for which the money was paid, or the "basis or purpose" of the payment: Shanghai Tongji §79; and

(3)  Where the basis is spelt out expressly and unconditionally on the face of a valid contract it is not possible to inquire into an alternative basis to the express basis agreed by the parties: Chitty on Contracts, 35^th Ed at §33-063.

4.5  As pointed out at MJDS Holdings LLC v G&B Trade Ltd [2023] HKCFI 280:

“ [53] … it is well-established that the unjust factor of total failure of consideration (or “failure of basis”, as the Plaintiff preferred to call it, following Goff & Jones [9^th ed]), requires a “total” failure of consideration. This means that even if a very small part of the benefit which formed the basis for the payment has been conferred, no action will lie: Goff & Jones at §12-16. The strictness of the “total” requirement is mitigated by the doctrine of severability. Thus, where a divisible part of an agreement has wholly failed, the portion of the consideration which can be attributed to that part of the agreement can be recovered: Goff & Jones at §12-26; Chitty on Contracts Vol. 1, 34^th ed, 2021, at §32-07..” (emphasis added)

4.6  Further, as stated at Goff & Jones §12-24:

“ Taken literally, requirement of total failure of basis would suggest that wherever a claimant has received anything at all in return for the payment, no claim in unjust enrichment can lie. However, the courts have not adopted a literal approach. Three qualifications have emerged. First, although the claimant might have received some benefit, if that benefit does not form part of what was understood to be given for the payment, the claim for total failure of basis remains intact… Secondly, the courts disregard benefits potentially forming part of the basis for payment where the claimant has exercised his legal rights so as to reject those benefits. Thirdly, it may be possible to sever the payment, and allocate parts of it to distinct elements of the benefit in return for which the payment was made; if only part of that expected benefit has been conferred, it is said that there has been a total failure of basis in relation to the severable part of performance which has not been achieved…”

4.7  The parties disagree on what is the proper construction of a number of contractual provisions. I do not understand counsel to have disagreed that the process of contractual interpretation is a unitary exercise. That exercise is illustrated at Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487 §§43-45:

“ [43] It is a truism that the starting point is the ordinary and natural meaning of the words of the contract, and of course in the vast majority of cases that is the ending point also. But, as Ma CJ pointed out in Fully Profit (Asia) Ltd v Secretary for Justice, in the more difficult cases it is not particularly helpful to refer to the ‘ordinary and natural meaning’ of words because in such cases there can be much debate over exactly what is the ordinary or natural meaning of words; and in those cases the surer guide to interpretation is context.

[44] In Wood v Capita Insurance Services Ltd, Lord Hodge JSC reviewed the many cases on interpretation and emphasised that interpretation was a unitary exercise. That is why, where there are conflicting interpretations, account should be taken of the natural and ordinary meaning of the provision in question, the purpose of the contract and of the provision, other relevant provisions, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense.

[45] The following points emerge from the judgment of Lord Hodge JSC:

(a) it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the Court balances the indications given by each;

(b) the Court must be alive to the possibility that one side may have agreed to something which with hindsight did not serve its interest, or that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms;

(c) some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals, whereas the correct interpretation of contracts which are marked by informality, brevity or the absence of skilled professional assistance may be achieved by a greater emphasis on the factual matrix;

(d) but negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement; and

(e) commercial common sense and surrounding circumstances should not be used to undervalue the importance of the language of the provision which is to be construed,[102] and the mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one of the parties, is not a reason for departing from the natural language.”

5.  Analysis of D1’s contentions

5.1  On the contention that there was no total failure of consideration, Mr Chiu’s submissions may be summarized as follows:

(1)  He relies heavily on Recital 2 of the MOU (§2.15 above) which provides that MTB, DTC and BOAIFS were originally intended by the parties to be within the structure of the Target Company. The inclusion of BOAIFS and its SFC-regulated businesses is consistent with the parties’ understanding as originally recorded in the SPA (§2.4 above);

(2)  The 18/2/19 Proposal aids D1’s case that the negotiations leading up to the MOU were for the composite deal of transfer of both the Target Company and BOAIFS (§2.10 above). In particular, it was proposed that D2 would not require P1 to make any separate payment (另外付款) for the transfer of the shares in BOAIFS (§2.12 above), indicating that the parties had always negotiated the transfer of shares in the Target Company and BOAIFS as a composite commercial deal;

(3)  Against such context, Clause 3 of the MOU (§2.15(4) above) cannot be understood to be an independent obligation of gifting BOAIFS shares to P1 for free. Instead, the obligation to transfer the BOAIFS shares pursuant to the directive of P1 for "no consideration" must have been intended to be part and parcel of the entire commercial transaction between Ps and D1;

(4)  The 3^rd Recital of the STA (§2.16 above) makes it clear that the Total Consideration were for the purpose of acquiring shares in both the Target Company and BOAIFS. As the STA was made expressly pursuant to the MOU, the understanding as per the MOU as contended above would apply to the STA as well;

(5)  Clause 1.1 of the STA (§2.16 above) provides that, as a constituent part of the consideration paid by Ps towards the acquisition of the Target Company (已支付的轉讓款之組成部份的對價), D1 was to transfer shares in the Target Company (being 45.0295%) to Ps.

5.2  For the following reasons, the contentions raised by Mr Chiu, in my view, do not raise any triable issues.

5.3  First, I do not believe D1 can derive much assistance from Recital 2 of the MOU, as it only records the previous state of affairs as between the parties. It seems to me plain that the context of the MOU, as shown by the 18/2/19 Proposal and the recitals in the MOU themselves, is that the parties had effectively agreed to renegotiate the agreement reached between them as contained in the SPA, SA and the Supplemental SPA. Indeed, it appears from the 18/2/19 Proposal that there were businesses contemplated which were not even expressly spelt out in the Original Recitals in the SPA and SA or the Updated Recitals in the Supplemental SPA (eg MTB in Latvia). In any event, what is clear is that under the MOU:

(1)  By Clause 2, the Total Consideration was regarded by the parties to be the consideration for the transfer of 37% shareholding in the Target Company by D1 to Ps;

(2)  By Clause 4, the Target Company would only comprise of its 56.08% shareholding in BOA (BVI) and all other assets would be “stripped away” from the Target Company at nil consideration (無償剝離); and

(3)  By Clause 3, P1 was entitled, at its option, to call for the transfer of 86% shareholding in BOAIFS at nil consideration.

5.4  Secondly, I do not agree with Mr Chiu that the factual matrix as shown in the 18/2/19 proposal is that the parties had always negotiated the transfer of shares in the Target Company and BOAIFS as a composite commercial deal. To the contrary, the 18/2/19 Proposal shows that D2 himself was treating the Target Company and BOAIFS as two separate issues. Whilst D2 proposed a reduced consideration for the shares in the Target Company (at that time still including the internet-banking business and the business of (as I understand it) correspondent banking “代理銀行”), D2 specifically stated that, in relation to BOAIFS, he was content to (1) not ask for separate payment for the transfer of up to 86% shareholding to D1 and the new investor, (b) relinquish operational control, (c) retain a 14% shareholding as dry shares, and (d) leave the operation and financing needs to D1 and the new investor.

5.5  Thirdly, it is significant to note that the STA is an agreement only in respect of the transfer of shares in the Target Company. Apart from the 3^rd Recital, there is no further reference to BOAIFS on the operative terms. In relation to Mr Chiu’s reliance on the 3^rd Recital, I agree with Mr Phang that where, as here, there is no dispute that the STA was executed pursuant to the MOU, one must proceed on the basis that the parties had agreed that the transfer of BOAIFS shares would be for no consideration.

5.6  Fourthly, I do not agree with Mr Chiu’s interpretation of Clause 1.1 of the STA. In my view, the reference to “組成部份” simply means that the Total Consideration, as set out in the 3^rd Recital, is comprised of different components, namely the Down Payment and Further Repayments.

5.7  Applying the principles set out at above (in particular those set out at §4.4(3) and 4.6), under the terms of the STA, it is plain that the basis for which the Total Consideration was paid was the transfer of 45.0295% shares in the Target Company from D1 to Ps. Put differently, the transfer of the BOAIFS shares from D2’s wife to Sino Leap and P1 does not form part of what was understood to be given for the payment of the Total Consideration. As such, despite the transfer of 86% shares in BOAIFS, the claim for total failure of basis remains intact.

5.8  For the above reasons, as D1 has not transferred any shares in the Target Company to Ps, I am of the view that D1 has not shown a triable issue in respect of Ps’ claim for the return of the Total Consideration.

5.9  Mr Chiu, however, makes an additional submission. He submits that in the event that the Court takes the view that Ps have established a claim in unjust enrichment based on total failure of consideration, D1 nevertheless has a further defence premised on Ps’ failure to make counter-restitution. He submits that Ps have not offered to return the BOAIFS shares, and in the circumstances where Sino Leap is not a party to these proceedings, there is no possibility that the return of the Total Consideration can made subject to an undertaking by Sino Leap.

5.10  Mr Chiu relies on Chitty on Contracts §33-211 which states:

“ Where the claimant has received a benefit from the defendant in circumstances where that benefit is sufficiently closely connected to the benefit which the claimant provided to the defendant, the claimant must give credit to the defendant for that benefit. This principle of counter-restitution has been recognised as a defence to a claim in unjust enrichment.” (emphasis added)

5.11  Mr Chiu further relies on Goff & Jones §31-01 and 21-02, which provide:

“ A claimant which seeks restitution of an unjust enrichment must make counter-restitution of benefits received from the defendant in exchange. If counter-restitution is impossible then the claim is barred. This rule has most often been applied where the claimant has sought rescission of a contract on the grounds of undue influence or misrepresentation, for example, and has sought to recovered benefits conferred under the contract. But the rule has also been applied where there was never a contract between the parties, for example because they transferred benefits to one another under a contract that turned out to be void.

… it has become inaccurate to say that “counter-restitution impossible” is a defence to claims in unjust enrichment; it is, rather, a precondition for recovery that the amount recovered by a claimant should be reduced by the amount of the benefits they received from the defendant.”

5.12  Mr Phang argues that the issue of counter-restitution has not been properly raised. It is not set out in the evidence in opposition and it is not pleaded in D1’s Amended Defence. Amended Defence §44.3 pleads:

“ It is further averred that, pursuant to the terms of the STA, the Relevant Sums were paid not only towards the acquisition of 45.0295% of the shareholding in the Target Company, but also towards the acquisition of another company called BOA International Financial Services Limited ("BOAIFS"). There is accordingly no total failure of consideration. The 1^st and 2^nd Plaintiffs have not pleaded any valid legal basis to seek repayments of the Relevant Sums without taking into account the acquisition of BOAIFS. As such, the 1^st and 2^nd Plaintiffs are not entitled to the reliefs as sought.”

5.13  In my view, Mr Phang is correct to say that the issue of counter-restitution has not been raised properly, whether as a defence or pre-condition for recovery.

5.14  But even were I wrong in the view set out in the preceding paragraph, it seems to me clear that the issue of counter-restitution fails on the evidence before me. As stated at Goff & Jones §31-04:

“ The proper inquiry is whether the claimant who claims restitution [on the ground of “failure of consideration”] has received any part of the bargained for performance (consideration). If he has and he is not in the position to make counter-restitution, then his restitutionary claim must fail. Conversely, if he has received no part of the consideration, or if it is still possible for him to make a constitution and respect of the part which he received, then his restitutionary claim should succeed.”

5.15  Mr Chiu’s argument is premised on the assumption that either the transfer of the BOAIFS shares can be regarded as part of the bargained-for performance or as sufficiently closely connected to the benefit which Ps provided. By reason of the analysis set out above, I am of the view that the transfer of the BOAIFS shares cannot be regarded as falling within either of the foregoing 2 scenarios.

6.  Conclusion

6.1  For the above reasons, I enter final judgment against D1 for:

(1)  A declaration that the Ps have validly terminated the STA for breach thereof by D1; and

(2)  Return of the Total Consideration as money had and received by D1 from P1 and/or P2 pursuant to the SPA and as Further Payments, on the basis of a total failure of consideration.

6.2  Mr Phang has confirmed that (1) Ps will not proceed with the rest of the declaratory relief sought in this action against D1 and (2) any recovery will be taken into account in respect of Ps’ claim for damages against D2 for misrepresentation.

6.3  As the above represents a conclusion of Ps’ claim against D1, I make a costs order nisi that D1 do pay to the Ps the costs of the action, including the costs of the present application, to be taxed if not agreed.