SECURITIES AND FUTURES COMMISSION v. SUPERB SUMMIT INTERNATIONAL GROUP LTD AND OTHERS

HCMP 2305/2020

[2025] HKCFI 2682

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2305 OF 2020

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REASONS FOR DECISION

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Introduction

1.  The Securities and Futures Commission (“SFC”)  commenced these proceedings by a petition dated 18 December 2020 (as amended on 26 April 2021)  (“Petition”)  under section 214 of the Securities and Futures Ordinance (Cap. 571)  (“SFO”)  seeking, inter alia, disqualification orders against the 2^nd to 16^th Respondents in respect of the affairs of the 1^st Respondent, Superb Summit International Group Limited (“Company”).

2.  The present hearing concerns the 5^th, 7^th, 8^th, 10^th and 15^th Respondents (collectively “Relevant Respondents”), each of whom has agreed with the SFC to dispose of the proceedings by way of the Carecraft procedure[1] based on two sets of Statement of Agreed Facts[2] (collectively “Statements”), which I have appended to these Reasons for Decision.  The Statements contain an outline of the relevant facts, the SFC’s case against each of the Relevant Respondents, and the agreed proposed orders.

3.  The SFC and the Relevant Respondents have agreed to the following periods of disqualification, on the basis that each of the Relevant Respondents admits the business or affairs of the Company have been conducted in a manner described in sections 214(1)(a), (b), (c)  and (d) of the SFO and that they were responsible for the same:[3]

(1)  The 5^th Respondent: 10 years[4]

(2)  The 7^th, 8^th and 10^th Respondents: 5 years[5]

(3)  The 15^th Respondent: 7 years[6]

Factual Background

4.  The material facts have been set out in the Statements. It is only necessary for the Court to give an overview.

The Parties

5.  The Company was incorporated on 29 January 2001. At all material times, the Company was and is a non-Hong Kong company registered under Part XI of the predecessor Companies Ordinance (Cap. 32), now Part 16 of the Companies Ordinance (Cap. 622)  [7].  Its shares were listed on the Main Board of the Stock Exchange of Hong Kong in 2001[8].

6.  Initially, the Company’s business was in the manufacture, distribution and sale of electronic products, but later diversified into the integrated timber business and subsequently in bulk resources commodity trading and new energy technology[9].

7.  Trading in the Company’s shares was halted on the Company’s request on 20 November 2014 and subsequently suspended on 15 December 2015[10].  The Company’s listing was cancelled on 4 June 2020[11].

8.  Insofar as the Relevant Respondents are concerned:

(1)  The 5^th Respondent was an executive director (“ED”)  of the Company between 10 February 2009 and 16 July 2014, and the Chairman between 17 February 2009 and 16 July 2014. He remained as a Consultant/Strategic Development Consultant to the Company for two years after his cessation as a director until 15 July 2016[12].

(2)  The 7^th and 8^th Respondents are married and were the co-founders of the Company.  The 7^th Respondent was founder chairman and ED from, respectively, 12 September 2001 and 29 January 2001, until he ceased to hold both positions on 17 February 2009. 8^th Respondent was ED of the Company from 29 January 2001 until 23 October 2007.  Both of them were substantial shareholders until 22 June 2020 (for the 7^th Respondent), and 7 November 2006 (for the 8^th Respondent)[13].

(3)  The 10^th Respondent was a former ED of the Company from 1 September 2002 until 23 October 2007[14].

(4)  The 15^th Respondent was a former independent non-executive director (“INED”)  of the Company from 11 April 2007 until 24 June 2010, and a member of the Audit Committee[15].

The Forestry Case

9.  On 12 April 2007, the Company entered into a letter of intent with Superview International Limited (“Superview”)  for the acquisition (“2007 Acquisition”)  of shares in a company known as Green and Good Limited (“Green & Good”), which purportedly held 329,898 Chinese mu of timber resources in forests in Yunnan, Hunan and Hebei (“Alleged Forests”)  through a company known as Leeka Wood Company Limited (“Leeka Wood”)  [16].

10.  The Company then entered into a share transfer agreement in respect of such acquisition on 16 May 2007[17], and issued an announcement on 8 June 2007 (“2007 Announcement”), disclosing details about the acquisition including:

(1)  The fact that Leeka Wood held forest ownership certificates (“FOCs”)  from the local forestry government department where the relevant forest land was located, though applications to the state forestry department for FOCs were in progress;

(2)  That the consideration of HK$1.38 billion would be satisfied by (i)  HK$200 million in cash payable on completion; (ii) HK$250,311,150 by allotment of consideration shares; and (iii)  HK$929,688,850 by issue of “2007 Convertible Notes” at a conversion price of HK$0.45 per conversion share (HK$300 million of which would not be convertible until 31 March 2009, and after all liabilities in respect of the Profit Guarantee (defined in [10(3)] below)  had been discharged in full), with such consideration having been determined with reference to, inter alia, the business prospect, potential profitability, market scalability and product mix of Leeka Wood and its subsidiary, the asset quality back-up by the Green & Good group, and the Profit Guarantee; and

(3)  There was a “Profit Guarantee” by Superview as vendor (and shareholders of Superview as guarantors)  that the audited consolidated net profit after tax of the Green & Good group for the two financial years ending 31 December 2007 and 2008 would be not less than HK$300 million, and that they would compensate the Company for any shortfall[18].

11.  A further circular was issued on 3 September 2007 (“2007 Circular”)  in which the 7^th Respondent (the then Chairman and acting on behalf of the board of the Company)  confirmed, inter alia, that the forestry department of local government had not issued any FOCs, and the status of the FOCs in respect of the Alleged Forests was set out in the 2007 Circular as follows:

“Obtained forest ownership letter (the temporary ownership document)  from the forestry department of local government where the forest land is located but the application for forest ownership certificate from the forestry department of local government is still in progress.” [19]

12.  A significant difference between the 2007 Announcement and the 2007 Circular was that:

(1)  The 2007 Announcement represented that FOCs had been issued by the local forestry government department (see [10(1)] above); but

(2)  The 2007 Circular represented that only forest ownership letters (“FOLs”), but not FOCs, had been issued by the forestry department of local government (see [11] above)[20].

13.  The 2007 Acquisition was completed on 8 October 2007[21].

14.  On 27 April 2009, the Company issued another announcement that, inter alia, the Profit Guarantee was not met and there was a shortfall of some HK$725,111,000, and that the Company had set off approximately 55% of such shortfall against part of the 2007 Convertible Notes and other amounts due to Superview, and the remaining shortfall amount of approximately HK$325,111,000 (“Outstanding Shortfall”)  would be compensated by way of cash or other methods as agreed by the Company.

15.  Subsequently, on 10 July 2009, the Company entered into a Conditional Share Transfer Agreement in respect of, inter alia, the acquisition of the remaining 30% of Green & Good and disposal of 67.7% interest held by Leeka Wood in a substantially inactive company to Superview[22].

16.  This was then announced on 23 July 2009 (“2009 Announcement”)[23] and followed by a circular issued on 23 October 2009 (“2009 Circular”)  disclosing, inter alia, the consideration for the acquisition of HK$751,990,000 which would be set off against the Outstanding Shortfall, with the balance settled by the issue of convertible notes to Superview (“2009 Acquisition”)[24].

17.  It transpired, however, that in fact Leeka Wood (and in turn Green & Good)  did not own the Alleged Forests or the rights thereto (“Alleged Forestry Rights”)[25].  In particular, as confirmed by the China Securities Regulatory Commission’s letter dated 16 June 2016 to the SFC:

(1)  The relevant authorities administering the laws governing the Alleged Forestry Rights within Mainland China had no record of, and had not approved, any of the purported agreements pursuant to which farmers and villagers in Yunnan had initially transferred rights to a company known as 思茅市翠雲區伊祿木材加工廠 (“Simao”), which later purportedly entered into transfer agreements with Leeka Wood in 2006 and 2007[26].

(2)  None of the FOLs purportedly obtained by Leeka Wood had been issued by any of such relevant authorities, nor had the Alleged Forests been registered with the relevant authorities, under Leeka Wood or otherwise[27].

18.  In other words, on the basis that Green & Good did not own the Alleged Forestry Rights, the Company had paid HK$1.678 billion /RMB1.601 billion for non-existent assets during the course of the 2007 and 2009 Acquisitions, thereby suffering losses[28].

The JFT Case

19.  The JFT Case only concerns the 5^th Respondent as the other Relevant Respondents had stepped down by then.

20.  On 3 March 2014, the Company made an announcement (“JFT Acquisition Announcement”)  concerning a sale and purchase agreement for its indirect wholly-owned subsidiary, Superb Summit International Energy Holdings Limited (“SSIE”), to acquire 51% of the entire issued shareholding of a company known as Cosmic Summit Limited (“Cosmic Summit”)  from the vendor, Sherri Holdings Resources Limited (“Sherri Holdings”), which is wholly owned by one Mr Ng (“Ng”)[29], for a consideration of not more than HK$600 million (“JFT Acquisition”)[30].

21.  In the JFT Acquisition Announcement, it was stated that:

(1)  Cosmic Summit indirectly held 80% of the equity interest in Beijing Jinfeite Energy Technology Company Limited (“JFT”), which exclusively enjoyed the entire intellectual property rights of an engineering technology involving the hydrogenation process of heavy energy (“Target Technology”).  This technology was claimed to have been invented by JFT’s general manager (who also guaranteed the JFT Acquisition), one Mr Jin Jun (“Jin”)[31].

(2)  To the best of the Company’s directors’ knowledge, information and belief, Sherri Holdings and its ultimate beneficial owners (Ng), as well as Jin, were independent third parties not connected to the Company[32].

(3)  SSIE was to pay Sherri Holdings (i)  HK$50 million within 5 business days of the sale and purchase agreement (“1^st Payment”); (ii)  85% of the consideration less the 1^st Payment upon completion; and (iii)  the remaining 15% within 5 business days after JFT obtained a notice of acceptance by the State Intellectual Property Office of Mainland China in relation to certain specified patent applications being processed[33].

22.  In the announcement dated 23 March 2014, the Company further disclosed, inter alia, the valuation conducted by Beijing Tian Hai Hua Asset Valuation Firm in respect of the equity interest in JFT (including valuation of the Target Technology of around RMB1,237.1764 million (“Target Technology Valuation”)  as at 31 December 2013 to be around RMB1,283.1649 million and that the consideration for the JFT Acquisition would be fixed at HK$600 million[34].

23.  On 30 May 2014, the Company issued an announcement that, inter alia, SSIE had entered into a supplemental deed with Sherri Holdings for payment of the balance of the consideration (viz. some HK$550 million)  by issuance of a promissory note (“Promissory Note”), with a maturity date of 28 February 2015[35].

24.  On 1 March 2015, the Company announced that a principal amount of HK$302 million remained outstanding on the Promissory Note and that parties had agreed to extend the maturity date to 28 February 2016 (implying that HK$298 million had been paid to Sherri Holdings on such Promissory Note before 1 March 2015)[36].

25.  However, it has been accepted and admitted by the 5^th Respondent as follows:

(1)  First, most of the HK$298 million (out of the total HK$398 million paid in connection with the JFT Acquisition, of which HK$100 million had been paid to Jin[37])  were ultimately paid to recipients connected with the Company and the 2^nd Respondent (“Yang”), being (i)  a substantial shareholder of the Company and (ii)  chief executive officer or president of the China region of the Company from 2008 and 2012/13; and (iii)  Consultant of the Company since 2013[38].

(2)  Second, only some HK$150 million was actually transferred to Jin[39]. However, Sherri Holdings was not in fact beneficially owned by either Jin or Ng, but instead by Yang[40].

(3)  Third, the Target Technology was significantly overvalued, and in fact has nil or minimal value; the Target Technology Valuation was unreasonable, grossly overvalued and fraudulent, and was part of a greater scheme to defraud the Company and defalcate or misappropriate.

26.  The 5^th Respondent admits and accepts that the loss suffered by the Company as a result of the JFT Acquisition amounts to HK$121.7 million, being the total sum that was diverted to Yang and associates of Yang in connection with the acquisition[41].

Legal Principles

27.  The principles applicable to the Carecraft procedure are well established.  As I have explained in SFC v Tong Shek Lun[42]and more recently in SFC v Combest Holdings Limited[43]:

(1)  Three conditions must be satisfied before relief under section 214(1) of the SFO can be granted, namely (1)  the corporation in question is or was a listed corporation, (2)  the business or affairs complained of is that of the corporation, and (3)  the conduct complained of falls within one or more heads of misconduct specified in sections 214(1)(a)  to (d) of the SFO;

(2)  Regarding the first condition, “listed” means “listed on a recognised stock market”: section 1, Part 1 of Schedule 1 to the SFO;

(3)  As regards the second condition, the conduct complained of can be that of the listed company and/or the subsidiaries directed by or under the control of such listed company, and the Court will take a realistic approach in determining whether the affairs of the subsidiary are the affairs of the holding company;

(4)  In respect of the third condition:

(a)  “Oppressive” under section 214(1)(a) of the SFO has been described as tyrannical conduct, abuse of power or a visible departure from the standards of fair dealing.  It typically involves an abuse of one’s rights or powers as a majority to procure the occurrence or non-occurrence of events unfair or prejudicial to the complainants who, by reason of their minority status, can only submit; and

(b)  The characteristics of the matters described in sections 214(b)-(d) of the SFO have recently been summarised by Ng J in SFC v Li Wing Sang & Ors[44] from [41] to [43]:

“41. In respect of s 214(1)(b):

(a)  ‘Defalcation’ is defined as ‘misapplication, including misappropriation, of any property’. Misapplication means the disposition of the company’s property which the company or the board is forbidden, incompetent or unauthorized to make, or which is carried out by the directors in breach of their duties in good faith to promote the success of the company and for proper purposes: Re First Natural Foods Holdings Limited unrep, HCMP 205 of 2013, 17 February 2017, DHCJ Hunsworth;

(b)  ‘Misfeasance’ is defined as ‘the performance of an otherwise lawful act in a wrongful manner’. The notion of misfeasance overlaps with that of breach of fiduciary duty and seemingly covers a wide range of conduct. In particular, it covers a director’s breach of his duties to exercise reasonable care and diligence in his management of the company, and to act in good faith in the best interests of the company: SFC v Zheng Dunmu[2024] 2 HKLRD 688 at [20(2)] per Linda Chan J;

(c)  The words ‘other misconduct’ connote improper or wrong behaviour or mismanagement, or culpable neglect of duties. This term is something of a ‘belt and braces exercise’, and is intended to cover the ‘widest range of possible misconduct’ including a director’s breach of the duty to exercise reasonable skill care and diligence in the management of a company: SFC v Zheng Dunmuat [20(3)  - 21] per Linda Chan J;

42. As for s 214(1)(c)  ie members not having been given all the information with respect to its business or affairs that they might reasonably expect, it can be complementary to the other subsections and covers situations such as (1)  the making of misleading or false announcements; and (2)  situations requiring publication of periodic financial statements and announcements, as members are entitled to expect the listed company to provide complete and accurate information in respect of such matters: SFC v Zheng Dunmuat [22].

43. With respect to s 214(1)(d), the following observations were made in SFC v Zheng Dunmuat [23].

(a)  The conduct in question does not have to be wrong per se.

(b)  ‘Unfairly prejudicial’ conduct covers a range of conduct, from fraud at the one end to neglect or inaction on the part of those to whom the affairs of a company are entrusted on the other end. The question to be asked in such circumstances is whether the conduct concerned is that which can be expected from the managers of the company to whom those affairs have been entrusted.

(c)  It covers the case where the listed company has (a)  failed to comply with the disclosure requirements (SFC v Kwok Wing, HCMP 3392/2013, 9 October 2014, at [12]), (b)  made misleading or false announcements, and (c)  failed to publish periodic financial statements and announcements, as members are entitled to expect the listed company to provide complete and accurate information in respect of such matters: SFC v Sound Global Ltd [2022] HKCFI 3025, at [96].”

28.  The relevant principles which guide the Court in determining the period of disqualification orders are also well settled and set out in SFC v Tse On Kin[45]at [5] and [26].  In gist:

(1)  The power to determine the appropriate period of disqualification is a discretionary power.  It will be necessary for the Court to be satisfied that the director’s involvement in the relevant matter involves a sufficiently serious failure to satisfy his duties that some period of disqualification is justified and fair;

(2)  The objectives of a disqualification order are twofold: (a)  to protect the public; and (b)  as a general deterrence.  The former is recognised to be the primary purpose.  It is of the greatest importance that any individual who undertakes the statutory and fiduciary obligations of being a company director should realise that these are personal responsibilities;

(3)  In deciding whether to make a disqualification order, the Court adopts a broad-brush approach.  Earlier decided cases are of limited assistance to the exercise of the Court’s discretion;

(4)  The Court must be independently satisfied, based on the agreed facts, that the business or affairs of the Company have been conducted in a manner described in section 214(1)(a), (b), (c)  or (d) of the SFO and, if so satisfied, determine the scope and duration of the disqualification order;

(5)  The Court is not bound by the agreement reached by the parties. However, in practice, the Court is likely to be guided by the agreement that the SFC, as a responsible regulator, has reached;

(6)  The period of disqualification must reflect the gravity of the offence. The period of disqualification may be fixed by starting with an assessment of the correct period to fit the gravity of the conduct, and a discount is then given for mitigating factors;

(7)  Generally speaking, the Court has divided the maximum period of disqualification of 15 years into three brackets, though these are only guides and not straitjackets:

(a)  The top bracket, of disqualification for over 10 years, for particularly serious cases;

(b)  The middle bracket, of disqualification for between 6 to 10 years, for cases which, although serious, are not so serious so as to merit a period of disqualification in the top bracket; and

(c)  The minimum bracket, of disqualification for up to 5 years, for relatively less serious cases; and

(8)  The Court will have regard to a wide range of considerations, including the age, state of health and character of the offender, the nature of the breaches, the honesty and competence of the offender, the length of time he has been in jeopardy, whether he appreciates and/or admits the breaches, his general conduct before and after the offence, the periods of disqualification of his co-directors that may have been ordered by other courts, and the interest of shareholders, creditors and employees.

Application of Section 214 of the SFO

29.  In the present case, I am satisfied that all three conditions stipulated in section 214 of the SFO are met.

30.  The first condition is satisfied since the Company’s shares were listed on the Main Board of the Stock Exchange of Hong Kong Limited between 18 September 2001 and 3 June 2020[46].

31.  The second condition is satisfied because the matters complained of by the SFC and summarised from [5] to [26] above concern the affairs of the Company and its subsidiaries directed by or under the Company’s control (such as SSIE).

32.  With respect to the third condition, based on the agreed facts set out in the Statements, I am satisfied that the conduct complained of falls within sections 214(1)(a)-(d) of the SFO:

(1)  First, the 2007 and 2009 Acquisitions and the JFT Acquisition were each transactions not entered into for a proper purpose or in the best interests of the Company.  They were approved in breach of the Relevant Respondents’ directors’ duties to act with due care, skill and diligence[47].

(a)  The 2007 and 2009 Acquisitions did not involve acquisitions of any valuable asset(s)  given that Leeka Wood was not in fact the owner of any Alleged Forests or Alleged Forestry Rights at all.  The Company ended up paying HK$1.678 billion for non-existent assets during the course of these transactions[48].

(b)  The JFT Acquisition was ultimately a means to channel significant funds to Yang and his associates, and the purported Target Technology which was acquired was effectively worth nil or minimal.  The whole scheme was one to defraud the Company and to defalcate or misappropriate its assets[49].

(2)  Second, members of the Company were not given all the information concerning the 2007 and 2009 Acquisitions and the JFT Acquisition.  In particular, the truth that Leeka Wood did not own the Alleged Forests or Alleged Forestry Rights, and that the Target Technology was grossly overvalued and that monies were in fact being routed to benefit Yang ultimately, were not disclosed to the Company’s members.[50]

(3)  Third, the relevant transactions were oppressive and plainly prejudicial to the interests of the other members of the Company:

  (a)  Other than being EDs of the Company, both the 7^th and 8^th Respondents were also substantial shareholders at the time of the 2007 Acquisition.  By playing critical roles in bringing the 2007 Acquisition to fruition, the Company ended up acquiring 70% of Leeka Wood when it did not in fact hold any Alleged Forestry Rights at all[51].

  (b)  The other Relevant Respondents[52] have also facilitated and allowed such a state of affairs to take place, by not having reviewed the relevant documents or questioning the methodology or assumptions applied by professional parties[53].

  (c)  In addition, the JFT Acquisition ultimately benefited Yang as a substantial shareholder.  He channeled funds to himself under the guise of the acquisition of Cosmic Summit.  Despite being the Chairman and an ED at the time, the 5^th Respondent accepted blindly and unquestioningly the relevant information put to him concerning the JFT Acquisition, without independently understanding or verifying the information[54], thereby perpetuating an oppressive state of affairs to the Company’s members.

(4)  Fourth, in view of the above, the affairs of the Company have clearly been conducted in a manner unfairly prejudicial to its members, given how there have been material overstatements in the Company’s accounts and significant sums were expended to acquire valueless or overvalued assets.

Disqualification Orders

The 5^th Respondent

33.  The 5^th Respondent was the Chairman and ED at the material time.  He has accepted that he acted in breach of his fiduciary duties owed to the Company in respect of both the 2009 Acquisition and the JFT Acquisition, in that:

(1)  He failed to take the relevant steps to satisfy himself that proper and reasonable due diligence had been carried out in relation to the Alleged Forestry Rights[55].

(2)  He was negligent in approving the 2009 Acquisition, the 2009 Announcement and the 2009 Circular (which contained false and misleading statements).

(3)  He failed to properly satisfy himself of requisite due diligence in respect of the JFT Acquisition.  Had he done so, he ought to have known about the significant overvaluation of the Target Technology[56].

34.  The 2009 Acquisition and the JFT Acquisition involved significant amounts (i.e. a consideration of HK$751,990,000 and HK$600 million respectively, totalling over HK$1.3 billion).  In both transactions, the Company ended up effectively acquiring valueless assets.  The JFT Acquisition, in particular, involved a significant fraudulent scheme to benefit a substantial shareholder (Yang)[57]. Although the 5^th Respondent did not personally embezzle funds or participate in the fraud, his mismanagement and failures directly contributed to the fraud and enabled over HK$398 million to be misappropriated.

35.  Given the 5^th Respondent’s egregious oversight and incompetence caused significant losses to the Company, Ms Sara Tong SC[58], counsel for the SFC, submits this is a case at the top end of the middle bracket and 10 years would be an appropriate period for disqualification (to which the 5^th Respondent also agreed).

36.  There are a number of mitigating factors agreed between the SFC and the 5^th Respondent[59]:

(1)  The 5^th Respondent has been cooperative in these proceedings and accepts liability;

(2)  By agreeing to conclude the proceedings by way of the Carecraft procedure, time and costs have been saved;

(3)  The 5^th Respondent agreed to pay his share of the SFC’s costs; and

(4)  The 5^th Respondent is now 76 years old and no longer holds any directorship in any listed companies in Hong Kong.

37.  Apart from the agreed mitigating factors set out in [36] above, Mr Lavesh Kirpalani, counsel for the 5^th Respondent, drew my attention to the following mitigating circumstances:

(1)  There is no allegation of dishonesty against the 5^th Respondent;

(2)  There has been exceptional delay in bringing the present proceedings. The Petition was filed in December 2020, which was 11 years after the 2009 Acquisition and over 6 years from the completion of the JFT Acquisition.  This mitigating factor was noted by Ferris J in Re Aldermanbury Trust[60] and that “some credit” ought to be given;

(3)  The 5^th Respondent’s reliance upon professional advice and the expertise of third parties should be a mitigating factor with regard to his culpability.  This mitigating factor was recognised by the Court in Re Rolus Properties[61]; and

(4)  The 5^th Respondent was not involved with the Company at the time of the 2007 Acquisition, which was the genesis of what led to the 2009 Acquisition.

38.  Having regard to the above matters, I accept that the conduct of the 5^th Respondent is sufficiently serious to fall within the top end of the middle bracket.  A disqualification period of 10 years is commensurate with the gravity of the 5^th Respondent’s conduct and gives appropriate regard to the mitigating factors.

The 7^th, 8^th and 10^th Respondents

39.  The 7^th, 8^th and 10^th Respondents were only involved in the 2007 Acquisition, and were EDs at the material time.  Additionally, the 7^th Respondent was the Chairman during the period when the 2007 Acquisition was entered into. As directors of the Company, the 7^th, 8^th and 10^th Respondents accept that they have breached their fiduciary duties owed to the Company in respect of the 2007 Acquisition in that:

(1)  Each of them failed to review the underlying primary ownership documents (viz. the transfer agreements with Simao)[62].

(2)  They did not notice the disclaimer on the legal opinion from De Heng Law Offices disclaiming any verification of authenticity of documents provided, and did not question whether it was necessary to verify the authenticity of the FOLs which substantiated the Alleged Forestry Rights[63].

(3)  They did not question the methodology or assumptions adopted by professional parties engaged by the Company[64].

40.  In view of the amount at stake for the 2007 Acquisition, viz. HK$1.38 billion[65], and the fact that set the scene for the subsequent 2009 Acquisition which caused further loss to the Company down the road, Ms Tong submits that the misconduct and incompetence of the 7^th, 8^th and 10^th Respondents fall within the top end of the lower bracket and a disqualification period of 5 years for each of the 7^th, 8^th and 10^th Respondents would be appropriate (to which the 7^th, 8^th and 10^th Respondents also agreed):

(1)  The Alleged Forestry Rights were the whole raison d’etre of the 2007 Acquisition.  One would have expected at least some degree of investigation or review of the underlying documents which would have revealed red flags (such as a blank page in the transfer documents), yet none of the Relevant Respondents took any such step at all.

(2)  What resulted was a significant fraud to which the Company fell victim, in that it spent millions of dollars on purchasing 70% of Leeka Wood when in fact held no Alleged Forestry Rights at all.

41.  Similar to the 5^th Respondent, the SFC and the 7^th, 8^th and 10^th Respondents agree that the Court should take into account the following mitigating factors: they have been cooperative with the SFC by admitting liability, agreed to pay their shares of the SFC’s costs, and have saved time and costs by adopting the Carecraft procedure[66].

42.  Mr John Hui, counsel for the 7^th and 8^th Respondents, agrees that a 5-year disqualification period is appropriate.  He highlights the following aspects of the case:

(1)  There is no allegation of dishonesty or personal gain on the part of the 7^th and 8^th Respondents;

(2)  There is no indication that the 7^th and 8^th Respondents knew of – or consciously turned a blind eye to – the fraud perpetrated against the Company;

(3)  The 7^th and 8^th Respondents’ reliance on professional advice mitigate their culpability;

(4)  The 7^th and 8^th Respondents are now around 70 years old.  The risk of committing misconduct again is low;

(5)  There is substantial delay in bringing the proceedings: see [37(2)] above; and

(6)  A 5-year disqualification is proportionate with the sanctions of the other Relevant Respondents, in particular the 15^th Respondent.

43.  Mr Vincent Chan, counsel for the 10^th and 15^th Respondents, draws my attention to the following mitigating factors on behalf of the 10^th Respondent:

(1)  There is no suggestion of dishonesty or fraud on the part of the 10^th Respondent;

(2)  The 10^th Respondent does not oversee financial matters or Mainland business of the Company;

(3)  This is the first time the 10^th Respondent has been subject to any criminal or disciplinary actions in his life;

(4)  There is no pending investigations by any authorities against the 10^th Respondent; and

(5)  The 10^th Respondent left the Company on 23 October 2007.  There is no suggestion of the 10^th Respondent re-offending.

44.  In view of the above matters and mitigating factors, I agree that a disqualification period of 5 years against each of the 7^th, 8^th and 10^th Respondents is fair and appropriate.

The 15^th Respondent

45.  The 15^th Respondent was an INED at the material time for both the 2007 and 2009 Acquisitions.  He has agreed that he acted in breach of his fiduciary duties in respect of both tranches of the acquisition of Green and Good:

(1)  The 15^th Respondent failed to raise specific queries in the course of the 2009 Acquisition, and was reckless and turned a blind eye to the issue of ownership over the Alleged Forests[67].

(2)  Such recklessness carried onto his approval of the 2009 Announcement, which purportedly disclosed information about the Alleged Forestry Rights which were false or misleading[68].

46.  Similar to the other Relevant Respondents, the SFC and the 15^th Respondent agreed on the following mitigating factors: the 15^th Respondent has been cooperative with the SFC by admitting liability, agrees to pay his share of the SFC’s costs, and has saved time and costs by adopting the Carecraft procedure[69].

47.  Ms Tong submits that a disqualification period of 7 years against the 15^th Respondent (to which the 15^th Respondent has agreed)  is justified having regard to the following matters:

(1)  The 15^th Respondent is involved in both the 2007 and 2009 Acquisitions;

(2)  Though he was an INED, his (admitted)  recklessness in considering and approving the subject transactions resulted in the Company suffering significant loss, as HK$1.678 billion had been paid for non-existent assets;[70] and

(3)  The 15^th Respondent was also a member of the Audit Committee at the material time.  He played a part in approving the 2009 Announcement which seriously misrepresented the intended acquisition by the Company.

48.  Mr Chan, on behalf of the 15^th Respondent, emphasised the following matters:

(1)  The 15^th Respondent does not have any expertise or work experience in the areas of law or forestry;

(2)  As an INED, the 15^th Respondent’s involvement in the Company’s business and affairs was secondary;

(3)  There is no suggestion of dishonesty or fraud on the part of the 15^th Respondent;

(4)  The 15^th Respondent has a clear criminal record; and

(5)  The 15^th Respondent’s cooperation with the SFC speaks well of his remorse and low likelihood of reoffending.

49.  Having regard to the SFC’s case and the 15^th Respondent’s mitigating circumstances, I am satisfied that the 15^th Respondent’s conduct is sufficiently serious to fall within the middle bracket and a disqualification period of 7 years is appropriate.

50.  In light of the foregoing reasons, I made the orders sought in the draft orders produced to the Court.

STATEMENT OF AGREED FACTS FOR CARECRAFT PROCEDURE BETWEEN THE PETITIONER AND THE 5^th RESPONDENT

PART I — INTRODUCTION

1.  On 18 December 2020, the Securities and Futures Commission (Petitioner)  presented a petition pursuant to section 214(2)  of the Securities and Futures Ordinance (Cap. 571)  (SFO)  seeking, among other things:

(1)  An order under section 214(2)(a)  and/or section 214(2)(d)  of the SFO that each of the 2^nd to 16^th Respondents shall not, for such periods as the Court shall consider appropriate, without leave of the Court:

(a)  be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of Superb Summit International Group Limited (Superb Summit or Company)  or any other corporation including any of the Company's subsidiaries and affiliates; and

(b)  in any way, directly or indirectly, be concerned, or take part, in the management of the Company or any other corporation including any of the Company's subsidiaries and affiliates; and

  (2)  Costs.

2.  On 26 April 2021, the petition was amended pursuant to the Order of Master Rita So dated 21 April 2021.  The definitions of “corporation”, “subsidiary” and “affiliate” are set out in Appendix 1 to this Statement.

A.  PURPOSE

3.  Subject to the approval of the Court, the Petitioner and the 5^th Respondent have agreed to dispose of these proceedings against the 5^th Respondent by way of the summary procedure (Carecraft Procedure)  sanctioned in Re Carecraft Construction Co. Ltd. [1994] 1 WLR 172, as clarified by the English Court of Appeal in Secretary of State for Trade and Industry v Rogers [1996] 1 WLR 1569 and as adopted by the Court in a number of cases in respect of proceedings under section 214 of the SFO.

4.  This Statement sets out the material facts relied upon by the Petitioner in these proceedings that are not disputed by the 5^th Respondent, for the purpose of disposing of these proceedings against the 5^th Respondent by way of the Carecraft Procedure.

5.  The facts set out in this Statement are not disputed between the Petitioner and the 5^th Respondent on the basis that the case against the 5^th Respondent will be dealt with by the Court by way of the Carecraft Procedure.  If the Court for any reason is of the view that these proceedings shall not be dealt with by the Carecraft Procedure or that a full hearing is appropriate, no admission or concession by either the Petitioner or the 5^th Respondent and none of the proposed orders referred to below or liability to pay costs shall be referred to or relied on by any of the parties at any subsequent hearing without the prior written consent of the Petitioner and the 5^th Respondent.

6.  For the purpose of resolving these proceedings against the 5^th Respondent by way of the Carecraft Procedure, and by reference to the facts set out in Part II of this Statement (which the 5^th Respondent admits and accepts), the 5^th Respondent accepts that during the relevant period, the business and affairs of the Company have been conducted in a manner described in section 214(1)(a)  to (d)  of the SFO, namely:

(1)  oppressive to its members or any part of its members;

(2)  involving defalcation, fraud, misfeasance or other misconduct towards it or its members or any part of its members;

(3)  resulting in its members or any part of its members not having been given all the information in respect of its business or affairs that they might reasonably expect; and

(4)  unfairly prejudicial to its members or any part of its members.

B.  UNOPPOSED ORDERS

7.  On the basis of the facts set out in Part II of this Statement, the Petitioner and the 5^th Respondent agrees, and the 5^th Respondent accepts, that it would be appropriate for the orders set out in Part III of this Statement below to be made against the 5^th Respondent.

8.  If pursuant to this Statement, the Court disposes of these proceedings summarily, the 5^th Respondent agrees that there should additionally be an order that he pays the costs of the Petitioner in these proceedings, or such portion thereof as the Court thinks appropriate, to be taxed if not agreed with certificate for two counsel.

9.  In the event that the Court makes any order sought against the 5^th Respondent by reference to this Statement, the Petitioner and the 5^th Respondent agrees that they will jointly apply to the Court for a direction that this Statement be annexed to a judgment of the Court.

10.  Furthermore, without prejudice to all of the Petitioner’s rights, the Petitioner specifically reserves the right to (a)  disclose this Statement to third parties where it appears proper to do so in the public interest, including, but not limited to, making use of the Statement for the purpose of any press release issued in respect of these proceedings, and (b)  refer to this Statement for purposes ancillary to, connected with and/or arising out of these proceedings.

PART II – STATEMENT OF AGREED FACTS

A.  INTRODUCTION AND BACKGROUND

A1.  The Company

1.  Superb Summit was incorporated on 29 January 2001 in the Cayman Islands and was at all material times and is a non-Hong Kong company (no. F11367)  registered under Part XI of the predecessor Companies Ordinance (Cap. 32), now Part 16 of the Companies Ordinance (Cap. 622)  (CO).

2.  Over the years, the Company has changed its name several times.  It used the names of:

2.1  Tak Shun Technology Group Limited (德信科技集團有限公司)  from its date of incorporation to 25 January 2008;

2.2  Superb Summit International Timber Company Limited (奇峰國際木業有限公司)  from 25 January 2008 to 19 September 2012; and

2.3  Superb Summit International Group Limited (奇峰國際集團有限公司)  from 19 September 2012 onwards.

3.  The registered office of Superb Summit was at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111 Cayman Islands.  Its head office and principal place of business was, until 31 August 2020, at Room 2013, 20/F., Pico Tower, 66 Gloucester Road, Wanchai, Hong Kong.

4.  The share capital of Superb Summit is divided into 10,000,000,000 shares of nominal value of HKD 0.10 each. As at 20 November 2014, the amount of the capital paid up or credited as paid up was HKD 11.958 billion.

5.  The objects for which Superb Summit was established are set out in Article 3 of its Memorandum of Association and include (without limitation): general trading, importing, exporting, buying, selling and dealing in goods, materials, substances, articles and merchandise of all kinds in, from and to any part of the world, whether as principal or as agent.

6.  Between 18 September 2001 and 3 June 2020, Superb Summit’s shares were listed on the Main Board of the Stock Exchange of Hong Kong Limited (SEHK).

7.  Superb Summit was principally engaged in integrated timber business including (a)  the development and management of timber resources in the Mainland of the People’s Republic of China (Mainland)  and (b)  the distribution, marketing and sales of a wide range of timber products.

8.  Since 2012, Superb Summit diversified its businesses and developed its business related to resource products other than timber and particularly in the bulk resources commodity trading sector.  It was principally engaged in the exploitation and management of timber resources and sales of coal products and other bulk commodities in the Mainland.  It also sought to participate in projects concerning new energy technology.

9.  On 20 November 2014, at the request of the Company, trading in the Company’s shares on the SEHK was halted pending the release of a clarification announcement in relation to inside information of the Company.  On 15 December 2015, trading and all dealings in the Company’s shares on the SEHK were suspended by the SEHK at the SFC’s direction pursuant to section 8 of the Securities and Futures (Stock Market Listing)  Rules (Cap 571V).

10.  On 4 June 2020, the SEHK cancelled the listing of Superb Summit’s shares pursuant to Rule 6.01A of the Main Board Listing Rules (LR).

A2.  The 5^th Respondent

11.  The 5^th Respondent, Lee Chi Kong (CK Lee), was an executive director (ED)  of the Company between 10 February 2009 and 16 July 2014, and the Chairman of the Company between 17 February 2009 and 16 July 2014.  CK Lee later remained as a Consultant/Strategic Development Consultant to the Company for two years until 15 July 2016.

12.  At the material times, the 5^th Respondent owed to the Company, inter alia, fiduciary duties as an officer/a director of the Company and also a duty of care at common law to:

12.1  act with or exercise due and reasonable care, skill and diligence that would be exercised by a reasonably diligent person with (i)  the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as carried out by a director in relation to the Company and (ii)  the general knowledge, skill and experience that the director has;

12.2  continually acquire and maintain a sufficient knowledge and understanding of the business of the Company as well as its subsidiaries (Group)  to enable him to properly discharge his duties as an officer of the Company; and

12.3  where a director has delegated some of the managerial or financial responsibilities to his subordinates or other fellow officers, a duty to supervise the discharge of the delegated functions.

13.  At all material times, the 5^th Respondent was also obliged to ensure the Company's compliance with the legal and regulatory requirements (including the LR)  that were applicable to the Company.

A3.  The 5^th Respondent’s Roles

A3(a)  2009 Acquisition

14.  At all material times in respect of the Company’s acquisition of various forestry assets in 2009 (2009 Acquisition), the Company had the following key officer, among others:

Name	Position	Other Roles
CK Lee	ED (10.02.2009 – 16.07.2014) Chairman (17.02.2009 – 16.07.2014)	Consultant/Strategic Development Consultant (16.07.2014 – 15.07.2016)

A3(b)  JFT Acquisition

15.  At all material times in respect of the JFT Acquisition (as defined in paragraph 42.1 below), the Company had the following key officer, among others:

Name	Position	Other Roles
CK Lee	ED (10.02.2009 – 16.07.2014) Chairman (17.02.2009 – 16.07.2014)	Consultant/Strategic Development Consultant (16.07.2014 – 15.07.2016)

B.  THE FORESTRY CASE

B1.  Background and Chronology of the 2007 and 2009 Acquisitions

16.  On 12 April 2007, the Company entered into a letter of intent with Superview International Limited (Superview)  in relation to the Company’s acquisition of various forestry assets in 2007 (2007 Acquisition), with the consideration to be determined pending negotiation and due diligence on various aspects of the 2007 Acquisition. A profit guarantee (see paragraph 18.8 below)  was also contemplated.

17.  On 16 May 2007, the Company and Superview entered into a share transfer agreement (2007 STA)  in respect of the 2007 Acquisition.

18.  On 8 June 2007 Superb Summit issued an announcement (2007 Announcement) in relation to the 2007 STA and the 2007 Acquisition, which included the following details:

18.1  Pursuant to the 2007 STA, the Company as purchaser agreed to acquire from Superview as vendor 70 shares representing 70% of the issued share capital of Green and Good Group Limited (Green & Good)  at a total consideration of HKD 1.38 billon (2007 Acquisition Consideration), with Yiu Yat On (Yiu), Ho Kam Hung (Ho)  and Qian Mingjin (Qian)  (being holders of 56%, 25% and 19% of the issued share capital of Superview respectively)  as guarantors.

18.2  Prior to the 2007 STA, Superview was the sole shareholder of Green & Good.

18.3  Green & Good’s only asset was the entire equity interest in Leeka Wood Company Limited[71] (Leeka Wood)  (綠之嘉木業有限公司)  (collectively Green & Good Group).

18.4  Based on the information available to the Company in the course of the due diligence exercise in respect of Green & Good, Leeka Wood possessed about 329,898 Chinese mu of timber resources covering various regions in Yunnan, Hunan and Hebei, among which were forestry assets (Alleged Forests)  in:

18.4.1  Jiangcheng, Yunnan (100,996 mu; the term of the land use rights was for 40 years);

18.4.2  Heishan, Yunnan (81,546 mu; the term of the land use rights was for 50 years); and

18.4.3  Mapu, Yunnan (46,358 mu; the term of the land use rights was for 40 years).

The Alleged Forests accounted for 69% of the total forest land purportedly held by Leeka Wood.

18.5  The status of forest ownership certificates (FOCs)  (林權證)  in respect of the Alleged Forests were set out in the 2007 Announcement as follows:

  “Obtained forest ownership certificate from the local forestry government department where the forest land is located but the application for forest ownership certificate from the state forestry department is still in progress.”

18.6  The 2007 Acquisition Consideration was HKD 1.38 billion, to be satisfied in the following manner:

18.6.1  HKD 200 million in cash to be payable upon completion;

18.6.2  HKD 250,311,150 by the allotment and issue of 556,247,000 Consideration Shares, credited as fully paid, to Superview upon completion (i.e. equivalent to HKD 0.45 per consideration share); and

18.6.3  The remaining balance of HKD 929,688,850 by issue of the convertible notes with a conversion price at HKD 0.45 per conversion share to Superview upon completion (2007 Convertible Notes).

18.7  Part of the 2007 Convertible Notes with a two-year term in a principal amount of HKD 300 million (Restricted Convertible Notes)  were not convertible until 31 March 2009 and after all liabilities in respect of the Profit Guarantee(defined below)had been discharged in full.

18.8  The Profit Guarantee referred to the joint and several undertaking by Superview as vendor and Yiu, Ho and Qian as guarantors that the audited consolidated net profit after tax of Green & Good Group (prepared in accordance and compliance with Hong Kong Generally Accepted Accounting Principles)  for the two financial years ending 31 December 2007 and 2008 would not be less than HKD 300 million and that they would compensate the Company for any shortfall.

18.9  In the event that the conversion rights attaching to the Convertible Notes were fully exercised by Superview, the conversion shares thereunder (Conversion Shares)  would amount to approximately 74.3% of the existing issued share capital of the Company and approximately 38.2% of the then issued share capital of the Company as enlarged by the issue of the Consideration Shares and Conversion Shares.

18.10   The 2007 Acquisition Consideration had been determined with reference to, among other things, (i)  the business prospect, potential profitability, market scalability and product mix of Leeka Wood and its subsidiaries, (ii)  the asset quality back-up by Green & Good Group; and (iii)  the Profit Guarantee.

18.11   As at the date of the 2007 Announcement, HKD 100 million had been deposited by the Company as refundable interest-bearing deposit.

19.  On 3 September 2007, the Company issued a circular (2007 Circular)  providing reasons for and further details of the 2007 Acquisition, and giving notice of an extraordinary general meeting for the consideration and approval of, among other things, the 2007 Acquisition, the issue of Consideration Shares and Convertible Notes.

20.  In the 2007 Circular, Lam Ping Kei (the then Chairman and on behalf of the board of the Company)  confirmed that, in respect of the Alleged Forests, the forestry department of local government had not issued any FOC – the status of the FOCs in respect of the Alleged Forests was set out as follows:

  “Obtained forest ownership letter (the temporary ownership document)  from the forestry department of local government where the forest land is located but the application for forest ownership certificate from the forestry department of local government is still in progress”

21.  A significant difference between the 2007 Announcement and the 2007 Circular was that, in respect of the Alleged Forests:

21.1  The 2007 Announcement represented that FOCs had been issued by the local forestry government department (see paragraph 18.5 above); but

21.2  The 2007 Circular represented that only forest ownership letters (FOLs), but not FOCs, had been issued by the forestry department of local government (see paragraph 20 above).

22.  The 2007 Circular revealed that the assets of Green & Good had been valued at approximately HKD 3.279 billion as at 30 June 2007 by LCH (Asia-Pacific)  Surveyors Limited (LCH), and provided further details at Appendix V thereto (containing LCH’s valuation report on the assets proposed to be acquired by the Company (LCH’s 2007 Valuation Report)).

23.  On 15 October 2007, the Company made an announcement (15.10.2007 Announcement)  announcing the completion of 2007 Acquisition on 8 October 2007.

24.  On 27 April 2009, Superb Summit issued an announcement (27.04.2009 Announcement)  that:

24.1  The Profit Guarantee was not met and the shortfall amounted to approximately HKD 725,111,000 (Shortfall).

24.2  As at the date of the 27.04.2009 Announcement, Superview has settled approximately 55% of the Shortfall by way of set-off against the Restricted Convertible Notes (HKD 300 million)  and set-off against other amounts due to Superview (HKD 100 million).

24.3  The remaining Shortfall amount of approximately HKD 325,111,000 (Outstanding Shortfall)  would be compensated by way of cash or other methods as agreed by Superb Summit.

24.4  Superview and Superb Summit were in the process of negotiating a settlement arrangement in relation to the Outstanding Shortfall.

25.  On 9 June 2009, Superb Summit and Superview entered into an extension agreement pursuant to which Superb Summit would extend the payment date of the Outstanding Shortfall from 9 June 2009 to 8 September 2009, with interest at 6.5% per annum payable on 8 September 2009 (Extension Agreement).

26.  On 29 June 2009, Superb Summit entered into a Memorandum of Understanding with Superview in relation to the intention to enter into a series of transactions including the 2009 Acquisition.

27.  On 10 July 2009, Superb Summit entered into a Conditional Share Transfer Agreement (2009 CSTA)  in respect of:

27.1  The 2009 Acquisition;

27.2  The disposal of Leeka Wood’s 67.7% equity interest in 綠之嘉木制品制造有限公司 (G&G Wood), a substantially inactive company which has contributed to the loss of Green & Good, to Superview; and

27.3  The release of the respective counter guarantee obligations of Leeka Wood and G&G Wood to a third party guarantor 金聯通信用擔保有限公司 for the bank loan under the “Counter Guarantee Agreements” by Superview.

(collectively, the 2009 Transactions)

28.  On 23 July 2009, Superb Summit issued an announcement (2009 Announcement)  that it has entered into the 2009 CSTA in respect of the 2009 Transactions on 10 July 2009.

29.  On 23 October 2009, Superb Summit issued a circular (2009 Circular)  providing reasons for and further details of the 2009 Transactions, and giving notice for an extraordinary general meeting for the consideration and approval of, among other things, the 2009 Transactions. It stated, among other things, that:

29.1  The consideration for the 2009 Acquisition was HKD 751,990,000 (2009 Acquisition Consideration), equivalent to a discount of 16% to the net asset value of Green & Good attributed to 30% of the net consolidated asset value of Green & Good including Leeka Wood and G&G Wood.

29.2  Superb Summit would set off the Outstanding Shortfall of HKD 335,011,000 (i.e. principal amount of HKD 325,111,000 plus interest)  owed by Superview to the Company against the 2009 Acquisition Consideration. The remaining balance of the 2009 Acquisition Consideration in the sum of HKD 416,979,000 would be settled by the issuance of convertible notes by Superb Summit to Superview on the completion date (2009 Acquisition Convertible Notes)[72].

30.  On 27 November 2009, Superb Summit issued an announcement (27.11.2009 Announcement)  that all conditions to the 2009 CSTA had been fulfilled, and the 2009 Transactions had been completed on 27 November 2009, such that the Outstanding Shortfall had been extinguished, G&G Wood ceased to be a subsidiary of Superb Summit, and Green & Good had become a wholly owned subsidiary of Superb Summit.

31.  On 30 December 2010, Leeka Wood entered into a transfer agreement to transfer the relevant rights in the Alleged Forests (Alleged Forestry Rights)  to 綠之嘉木業（普洱）有限公司 (Leeka Wood (Pu’er)), another wholly owned subsidiary of Superb Summit.

B2.  False Ownership of Alleged Forests and Alleged Forestry Rights

32.   The 5^th Respondent admits, accepts and agrees that, for the purposes of both the 2007 Acquisition and 2009 Acquisition, Leeka Wood and in turn Green & Good did not own the Alleged Forests and the Alleged Forestry Rights.

33.  The 5^th Respondent admits, accepts and agrees that:

33.1  The purported genesis of the Alleged Forestry Rights was the transfer from farmers and villagers in Yunnan to 思茅市翠雲區伊祿木材加工廠 (Simao)  prior to December 2006.

33.2  Thereafter, on 13 December 2006 and 26 December 2006, Simao and Leeka Wood purportedly entered into three transfer agreements in respect of the Alleged Forestry Rights.  On 10 July 2007, Simao further entered into three supplemental agreements with Leeka Wood in respect of the same.  These are collectively referred to as the Simao Agreements.

33.3  The three responsible competent authorities administering the laws governing the Alleged Forestry Rights are as follows:

33.3.1  In respect of the Alleged Forests allegedly located in Jiangcheng – the Forestry Bureau of Jiangcheng Hani and Yi Autonomous County;

33.3.2  In respect of the Alleged Forests allegedly located in Heishan – the Forestry Bureau of Lancang Lahu Autonomous County; and

33.3.3  In respect of the Alleged Forests allegedly located in Mapu – the Forestry Bureau of Ning’er Hani and Yi Autonomous County.

  (collectively, the Forestry Bureaux)

34.  As it transpires, the Forestry Bureaux had no record of the Simao Agreements. The Simao Agreements had not gone through any approval or record documentation process with any of the Forestry Bureaux.

35.  By way of a letter dated 16 June 2016, the China Securities Regulatory Commission confirmed to the SFC and observed that:

35.1  The Forestry Bureaux had not issued any FOLs to Leeka Wood or Leeka Wood (Pu’er)  – “均未对绿之嘉木业有限公司及/或绿之嘉木业（普洱）有限公司进行过答复，也未曾出具林权证明。”

35.2  The Alleged Forests had never been registered with the Forestry Bureaux, and that Leeka Wood had never registered any other forests with the Forestry Bureaux – “贵会提供资料（附件3）涉及的3宗林地未在澜沧等三县登记，绿之嘉木业有限公司也未在澜沧等三县登记过其他林地。”

35.3  There were obvious inconsistencies between the chops affixed on certain FOLs and the official chops – “公章存在明显不一致”.

36.  The Forestry Bureaux never issued the 15 FOLs which were relied on by Superb Summit to purportedly establish the existence of and the chain of ownership concerning the Alleged Forests, either during or after the 2007 and 2009 Acquisitions.

37.  There were also an absence of the anti-counterfeiting code (防伪码)  on the seals affixed on the FOLs purportedly issued in relation to the Alleged Forests and missing characters in the names shown on such FOLs / seals (such as the missing characters of “人民政府”).

B3.  Materiality of the Alleged Forestry Rights

38.  The 5^th Respondent admits, accepts and agrees that the Alleged Forests are significant in terms of land size.  The Alleged Forestry Rights are also significant in terms of market price.

38.1  At all material times, the Alleged Forests accounted for about 69%[73] to 72%[74] of the total land size of all the forestry assets purportedly held by Leeka Wood.

38.2  The market value of the Alleged Forestry Rights was approximately RMB 2,513.01 million to RMB 2,620 million.  They accounted for 76.64% to 82.54% of the purported total value of Green & Good, the issued share capital of which formed the subject matter of the 2007 and 2009 Acquisitions.

38.3  Assuming the share of value of the Alleged Forestry Rights in the market value of Green & Good was proportionate to that in the 2007 Acquisition Consideration (HKD 1.38 billion)  and the 2009 Acquisition Consideration (HKD 751,990,000)  respectively, the Company would have been effectively paying HKD 1,057,632,000/RMB 1,057,632,000[75] for a 70% interest in the Alleged Forests in the 2007 Acquisition, and HKD 620,692,546/RMB 543,038,098[76] for the remaining 30% interest in the Alleged Forests in the 2009 Acquisition.

38.4  In other words, Green & Good did not own the Alleged Forestry Rights and the Company has paid HKD 1.678 billion / RMB 1.601 billion for non-existent assets during the course of the 2007 and 2009 Acquisitions.

39.  The 5^th Respondent admits, accepts and agrees that the Alleged Forestry Rights are a significant and material aspect of the 2007 and 2009 Acquisitions.

B4.  Downward Adjustment in the Company’s Financial Reports

40.  On the basis that the Company or the Group did not own the Alleged Forestry Rights, the 5^th Respondent admits, accepts and agrees that significant downward adjustments ought to be made to the respective balances of Biological Assets, Prepaid Land Lease Payments and Revenue as stated in the Company’s published annual reports and interim reports.

41.  The 5^th Respondent admits, accepts and agrees that:

41.1  There should be at least a reduction in Biological Assets by HKD 2,786,364,100, Prepaid Land Lease Payments by HKD 48,824,716 and Revenue by HKD 33,942,000, in the 2014 annual report of the Group.

41.2  The downward adjustments stated above would have a material impact on the relevant financial statements of the Group at the material time, and there would be a material impact on the Group’s principal activities in relation to at least the timber-related activities in the Mainland.

41.3  On the basis that the Group did not hold the Alleged Forestry Rights, there is a high degree of uncertainty in respect of the continuality/sustainability of the Group.

41.4  As a corollary of the above, the investing public has been misled by the rosy but illusory appearance of Superb Summit’s revenue and profitability which were false or misleading in material respects in the manner described, and were prevented from accurately assessing the risk of their investment or making an informed investment decision.

C.  THE JFT CASE

C1.  Background and Chronology of the JFT Acquisition

42.  Superb Summit announced on 3 March 2014 (JFT Acquisition Announcement) the following:

42.1  Pursuant to a sale and purchase agreement dated 2 March 2014 (SPA), Superb Summit International Energy Holdings Limited (SSIE), an indirect wholly owned subsidiary of the Company,  as purchaser agreed to acquire the shares (Shares)  in Cosmic Summit Limited (Cosmic Summit)  from Sherri Holdings Resources Limited (Sherri Holdings)  as vendor for a consideration of not more than HKD 600 million (2014 Consideration), with one Mr Jin[77] as the guarantor (JFT Acquisition).

42.2  The Shares represent 51% of the issued share capital of Cosmic Summit, which held the entire equity interest in Chongcheng (Shanghai)  Energy Technology Company Limited (Chongcheng SH), which in turn held 80% of the equity interest in Beijing Jinfeite Energy Technology Company Limited (JFT), which exclusively enjoyed the entire intellectual property rights of an engineering technology involving the hydrogenation process of heavy energy (Target Technology)  claimed to have been invented by the general manager of JFT, Jin Jun (Jin).

42.3  The 2014 Consideration is to be determined by the following formula: (V x (80% x 51%))  x 95%).

42.3.1  “V” represents the HKD equivalent of “the valuation of the shareholders’ equity interests in [JFT] and the Target Technology as shown in the valuation report to be issued by an independent valuer as designated by the Purchaser [SSIE].”

42.3.2  95% “represents a discount rate to the acquisition of the Target Group (including the Target Technology)”.

42.3.3  The exchange rate was stipulated to be HKD 1 = RMB 0.78878.

42.4  Mr Jin was (i)  the general manager of JFT and (ii)  the inventor of the Target Technology.

42.5  One Mr Ng[78] (Ng)  was the legal and beneficial owner of the entire issued share capital of Sherri Holdings.

42.6  To the best of the knowledge, information and belief of Superb Summit’s board of directors (Directors), Sherri Holdings and its ultimate beneficial owner (i.e. Mr Ng), as well as Mr Jin, were third parties independent of and are not connected with the Superb Summit and the connected persons of the Superb Summit.

42.7  Completion shall take place on the 5^th business day following the fulfilment of the relevant conditions precedent (Completion).  In any event, the Long Stop Date, by which the conditions precedent must be fulfilled unless waived by SSIE, would be, unless otherwise agreed, 31 May 2014.

42.8  SSIE as purchaser shall pay to Sherri Holdings:

42.8.1  A sum of HKD 50 million (1^st Payment)  within 5 business days following the date of the SPA;

42.8.2 A sum representing 85% of the 2014 Consideration less the 1^st Payment upon Completion; and

42.8.3  The remaining 15% of the 2014 Consideration within 5 business days following JFT obtaining the notice of acceptance issued by the State Intellectual Property Office of the Mainland in relation to those patent applications specified in the SPA remaining to be processed.

42.9  The shareholding structures before and after the JFT Acquisition (with some modification on the names)  are shown in the diagrams below:

  

43.  A number of public announcements have been made by Superb Summit before and after the JFT Acquisition Announcement:

43.1  On 6 June 2013 (06.06.2013 Announcement), Superb Summit announced that on 5 June 2013, it had entered into a letter of intent with a potential vendor in relation to a proposed acquisition of a heavy energy hydrogenation upgrading project.  The “Target Company” is identified as “ow[ning] and posses[sing] relevant equipment and certain technologies and rights of patent application” in relation to “the heavy energy hydrogenation and upgrading project”.  This is the first public announcement in relation to the then potential JFT Acquisition.

43.2  On 27 August 2013 (27.08.2013 Announcement), Superb Summit announced that on 26 August 2013, it had entered into a cooperation framework agreement with the “Target Company” named in the 06.06.2013 Announcement and China Shipbuilding Industry Complete Logistics Company Limited (China Shipbuilding)[79] in relation to the long term and full scale cooperation in the development and industrial application of hydrogenation and upgrading project of heavy energy.

43.3  On 14 February 2014 (14.02.2014 Announcement), Superb Summit announced that if the then proposed JFT Acquisition were to materialize, it would constitute a notifiable transaction under Chapter 14 of the Listing Rules.  It confirmed that as at 14 February 2014, no definitive agreement had been reached.

43.4  On 3 March 2014, Superb Summit made the JFT Acquisition Announcement.

43.5  On 23 March 2014 (23.03.2014 Announcement), Superb Summit published a further announcement setting out the appraisal value of JFT and Target Technology.  The following information was provided:

43.5.1  Superb Summit appointed Beijing Tian Hai Hua Asset Valuation Firm (Tian Hai Hua)  as the independent professional asset valuer for the JFT Acquisition, which had since prepared a valuation report (Valuation Report).

43.5.2  According to the Valuation Report, the total value of the shareholders’ equity interests in JFT (including the valuation value of the Target Technology of around RMB 1,237.1764 million (Target Technology Valuation))  as at 31 December 2013 was around RMB 1,238.1649 million (equivalent to approximately HKD 1,569.7215 million).

43.5.3  Pursuant to the SPA, since the parties agreed that the 2014 Consideration would not exceed HKD 600 million[80], the 2014 Consideration was fixed thereat.

43.5.4  Since the Target Technology Valuation involved the use of discounted cash flow methodology, it is regarded as a profit forecast under Rule 14.61 of the Listing Rules. Hence, the 23.03.2014 Announcement was considered to be made pursuant to Rules 14.60A and 14.62 of the Listing Rules.

43.5.5  Parker Randall CF (HK)  CPA Limited (Parker Randall), certified public accountants and the reporting accountants of Superb Summit, had examined the arithmetic accuracy of the discounted future estimated cash flows calculations which the Target Technology Valuation involved.  Parker Randall’s comfort letter dated 23 March 2014 was appended to the 23.03.2014 Announcement.

43.5.6  CCB International Capital Limited (CCBI Capital), the financial adviser to Superb Summit, had reviewed the Target Technology Valuation and discussed it with the Directors as well as Tian Hai Hua, including, in particular, the valuation approach, and bases and assumptions.  It also considered Park Randall’s comfort letter.

43.5.7  On the basis that the Directors were satisfied that there are no further matters that should be brought to the attention of CCBI Capital, it was CCBI Capital’s opinion that the Target Technology Valuation and the bases and assumptions of the Target Technology Valuation, for which Tian Hai Hua and the Directors were solely responsible, had been made after due and careful enquiry.  CCBI Capital’s letter dated 23 March 2014 to the Directors recording the same was appended to the 23.03.2014 Announcement.

43.5.8  The Directors were satisfied that the Target Technology possesses cutting edge technology and hence huge potential in its commercial application as described in the Target Technology Valuation Report.

43.6  On 8 April 2014 (08.04.2014 Announcement), Superb Summit announced that it had signed a non-legally binding minutes of cooperation (Minutes of Cooperation)  with China State Shipbuilding Corporation (CSSC), an “extra large enterprise group directly managed by State Asset Regulatory Commission of the [Mainland]”, in relation to cooperation in industrial application of heavy energy hydrogenation and upgrading engineering technologies (defined as Coal-to-oil Production Technologies[81] in the 08.04.2014 Announcement)  and its application and innovation in the field of vessels and marine technologies.  Among other things, it was stated that:

  “Following the entering into of the acquisition agreement of [JFT], [Superb Summit together with its subsidiaries (the “Group”)] continues to develop the heavy energy hydrogenation and upgrading project. By entering into the Minutes of Cooperation, the Group is in a better position in research and development of Coal-to-oil Production Technology with the expertise of CSSC.”

43.7  On 30 May 2014 at 21:11 (30.05.2014 1^st Announcement), Superb Summit announced that:

43.7.1  SSIE had entered into a supplemental deed (Supplemental Deed)  with Sherri Holdings, pursuant to which SSIE would pay the remaining balance of the 2014 Consideration, i.e. HKD 550 million, to Sherri Holdings by way of the issue and delivery of a promissory note in favour of Sherri Holdings (Promissory Note).  The Promissory Note was issued on 30 May 2014 and had a maturity date of 28 February 2015.  Pursuant to the Supplemental Deed, Sherri Holdings undertook that JFT would obtain a notice of acceptance issued by the State Intellectual Property Office of the Mainland in relation to those patent applications specified in the SPA remaining to be processed on or before 30 July 2014.

43.7.2  After the signing of the Supplemental Deed, the completion of the JFT Acquisition had taken place on 30 May 2014.

43.8  On 30 May 2014 at 22:52 (30.05.2014 2^nd Announcement), Superb Summit announced that further to the 08.04.2014 Announcement, it had signed a legally binding cooperation agreement with CSSC (CSSC Cooperation Agreement)in respect of cooperation in the industrial application of the Coal-to-oil Production Technologies and its application and innovation in the projects involving, in particular, the field of vessels and marine technologies.

  43.8.1  Among other things, it was stated that:

“Following the acquisition of 51% effective interest in [Chongcheng SH] (which has 80% equity interests in [JFT] that holds the Coal-to-oil Production Technologies [i.e. the Target Technology]), the Group continues to develop the heavy energy hydrogenation and upgrading projects. Previously, CSSC had provided vigorous efforts and cooperation in the projects of the Coal-to-oil Production Technologies. By entering into the Cooperation Agreement, the Group is in a better position in research and development and application of the Coal-to-oil Production Technologies with the expertise and economic strength of CSSC.” (emphasis added)

43.8.2  It was also stated, under the section headed “Verification of Technological Achievements”, that:

“[Superb Summit] and CSSC will jointly file the application to Chinese Academy of Sciences for the verification of technological achievements in relation to the Coal-to-Oil Production Technologies [held by JFT]. Chinese Academy of Sciences serves as the highest level of academic institution focused on the development of the science and technology in the People’s Republic of China, representing the national and strategic scientific strength in the People’s Republic of China…”

43.9  On 6 June 2014 (06.06.2014 Announcement), Superb Summit clarified that “any description and reference made to the Chinese Academy of Sciences and Dean of the Chinese Academy of Sciences in the first paragraph of the section headed “Verification of Technological Achievements” and the definition of the Chinese Academy of Sciences in the [30.05.2014 2^nd] Announcement be removed”.

44.  By 30 July 2014, no announcement had been made by Superb Summit to confirm the issuance of a notice of acceptance by the State Intellectual Property Office of the Mainland to JFT in relation to those patent applications specified in the SPA remaining to be processed.  This was so notwithstanding Sherri Holdings’ undertaking in the Supplemental Deed (and as announced in the 30.05.2014 1^st Announcement)  that JFT would obtain such notice of acceptance by 30 July 2014.

45.  On 1 March 2015, Superb Summit made an announcement (albeit dated 27 February 2015)  (01.03.2015 Announcement), stating that a principal amount of HKD 302 million remained outstanding under the Promissory Note, and that SSIE and Sherri Holdings had mutually agreed to extend the maturity date from 28 February 2015 to 28 February 2016.  It can be inferred from the 01.03.2015 Announcement that SSIE (and Superb Summit)  had already made payments in the sum of HKD 298 million to Sherri Holdings before 1 March 2015.

46.  By an announcement dated 7 August 2018 (07.08.2018 Announcement), Superb Summit announced as follows:

  “On 30 November 2017, (i)  中船重工科技投資發展有限公司 (China Shipping Heavy Industry Technology Investment Development Limited (China Shipping)), (ii)  北京金菲特能源科技有限公司 (Beijing Jin Fei Te Energy Technology Company Limited (JFT))  and (iii)  中國石油大學（華東）(China University Of Petroleum (Hua Dong)  (CUP))  signed 《重質能源輕質化技術工程先導性實驗合作協議書》(Cooperative Agreement for Pilot Experiment on Heavy Energy Hydrogenation and Upgrading Engineering Technology)  for the purpose of commencing pilot experimental study at 重質油國家重點實驗室 (National Key Laboratory of Heavy Oil)  jointly. On 29 January 2018, CUP commissioned 中國石化工程建設有限公司 (Sinopec Engineering Incorporation (SEI))  to conduct a preliminary economic technique assessment based on the laboratory report provided by the CUP. SEI concluded in its assessment that the Heavy Energy Hydrogenation and Upgrading technique of JFT is currently at leading level in the industry and it is expected that the technique, after industrialization, will bring about position impacts on social and economic aspects.”

47.  By an announcement dated 6 November 2018 (06.11.2018 Announcement), Superb Summit stated that as at the date of the announcement, the State Intellectual Property Office of the Mainland granted JFT 11 patents representing all patent applications filed by JFT. These included the patent applications specified in the SPA as remaining to be processed.

C2.  Target Technology Valuation

48.  The 5^th Respondent admits, accepts and agrees that in relation to the payments in connection with the JFT Acquisition totalling HKD 398 million:

48.1  The first HKD 100 million was sourced from Superb Summit and was ultimately transferred to Jin.

48.2  Superb Summit drew seven cheques in connection with the remaining HKD 298 million.  Most of the ultimate recipients of the HKD 298 million were connected to Superb Summit and the 2^nd Respondent, Yang Donjun (Yang), who was and is a substantial shareholder of the Company and formerly the chief executive officer or president of the China region between 2008 and 2012 or 2013, and a Consultant of the Company since 2013.  Only HKD 50 million was ultimately received by Jin.

48.3  More specifically:

48.3.1  Cheque 1: HKD 50 million was transferred to Zhiku Capital Investment Limited, a company of which the sole director and shareholder was Yang’s driver/assistant, Liang Xucan;

48.3.2  Cheques 2 to 6: HKD 3 million was transferred to Yang;

48.3.3  Cheques 2 to 6: HKD 3 million was transferred to Yang Jilin, Yang’s son;

48.3.4  Cheques 2 to 6: HKD 3 million was transferred to Liang Juan, a close acquaintance of Yang;

48.3.5  Cheques 2 to 6: HKD 5 million was transferred to Magic Stone Fund (China)  which was majority owned by Yang;

48.3.6  Cheques 2 to 6: HKD 55 million was transferred to Zhiku Capital Investment Limited; and

48.3.7  Cheques 2 to 6: HKD 2.68 million was transferred to Yuan Wei, a director of China E-Learning Group Limited, a company of which Yang was a substantial shareholder.

49.  The 5^th Respondent admits, accepts and agrees that (1)  Sherri Holdings, being the vendor in the JFT Acquisition, was associated with those in control of Superb Summit but was not beneficially owned by Jin; and (2)  Ng held Sherri Holdings as a nominee, not of Jin, but of Yang.

50.  The 5^th Respondent admits, accepts and agrees that the Target Technology Valuation was unreasonable, grossly overvalued and fraudulent.  Accordingly, the Target Technology and the Target Technology Valuation were part of a greater scheme to defraud the Company and defalcate or misappropriate its assets.

51.  The 5^th Respondent further admits, accepts and agrees that on the basis that the Target Technology was overvalued, significant downward adjustments ought to be made to the balance of Intangible Assets as stated in the Company’s published annual report and interim report.

52.  The 5^th Respondent admits, accepts and agrees that that:

52.1  There should be a downward adjustment to the balance of Intangible Assets of HKD 1,239,000,000 as at 31 December 2014.

52.2  The downward adjustments stated above would have a material impact on the relevant financial statements of the Group at the material time, and there would be a material impact on the Group’s principal activities in relation to at least the development of the Target Technology in the Mainland.

52.3  Given that the Target Technology has nil or minimal value, there is a high degree of uncertainty in respect of the continuality/sustainability of the Group.

52.4  As a corollary of the above, the investing public has been misled by the rosy but illusory appearance of Superb Summit’s revenue and profitability which were false or misleading in material respects in the manner described, and were prevented from accurately assessing the risk of their investment or making an informed investment decision.

D.  LOSSES SUFFERED BY THE GROUP AND FINANCIAL BENEFITS OBTAINED BY THIRD PARTIES

53.  By reason of the matters stated above, the 5^th Respondent admits, accepts and agrees that the 2009 Acquisition and the JFT Acquisition were significantly overpriced, and the Company has accordingly suffered a huge loss.

54.  Insofar as the JFT Acquisition is concerned, the 5^th Respondent admits, accepts and agrees that the loss suffered by the Company is of HKD121.7 million being the total sum that was diverted to Yang and associates of Yang in the cheques referred to in paragraph 48 above drawn in connection with the JFT Acquisition to Sherri Holdings.

E.  SECTION 214 PETITION FOR DISQUALIFICATION ORDERS

55.  The 5^th Respondent admits, accepts and agrees that Superb Summit’s business or affairs had been conducted in a manner:

55.1  Oppressive to its members or any part of its members under section 214(1)(a)  of the SFO;

55.2  Involving defalcation, fraud, misfeasance or other misconduct on the part of the 5^th Respondent towards it or its members or any part of its members under section 214(1)(b)  of the SFO;

55.3  Resulting in its members or any part of its members not having been given all the information in respect of its business or affairs that they might reasonably expect under section 214(l)(c)  of the SFO; and

55.4  Unfairly prejudicial to its members or any part of its members under section 214(l)(d)  of the SFO.

E1.   The 5^th Respondent – CK Lee

57.   The 5^th Respondent admits, accepts and agrees that, as former Chairman and ED of the Company, he acted in an incompetent manner and failed to act in the best interest of the Company and breached his duty of care towards the Company, such that he was responsible for the business or affairs of the Company having been conducted in the manner described in paragraph 55 above.

E2.  Liability in respect of the 2009 Acquisition

58.  The 5^th Respondent admits, accepts and agrees the following.

59.  First, a reasonably diligent director would have reviewed the Simao Agreements, those being the source of the Leeka Wood’s ownership of the Alleged Forestry Rights.

59.1  Had the directors done so, they would have noticed that although the appendix to the relevant Simao Agreement relating to the Mapu forests purported to exhibit the agreement of the villagers to transfer the forestry rights thereto to Simao, the said appendix titled “村民同意轉讓聯名簽字畫押簿” was actually a blank page.

59.2  In the absence of this document, one ought to immediately raise queries as to the basis on which Simao had the relevant forestry rights to transfer to Leeka Wood, and as to why the relevant forestry authorities would have nonetheless issued the relevant FOL.

60.  Second, a reasonably diligent director, having read the legal opinion obtained from De Heng Law Offices (De Heng)  on which Superb Summit places reliance (De Heng Legal Opinion), ought to have noticed the disclaimer on page 4 that De Heng would not verify the authenticity of any of the documents provided, and had provided the De Heng Legal Opinion on the basis of Green & Good’s guarantee that the documents, materials, confirmations were authentic, complete and effective.  Upon noticing the disclaimer, the directors should have at least questioned whether it was necessary to verify the authenticity of the FOLs, those substantiating the Alleged Forestry Rights that became the subject matter of the 2007 Acquisition, especially in light of the peculiar feature stated in the paragraph above.

61.  Third, a reasonably diligent director ought to have questioned or applied their minds to the methodology of or the assumptions made by the professional parties in reaching the respective conclusions.

62.  Fourth, a reasonably diligent director ought to have inspected the FOLs being the primary documents to substantiate the existence of the Alleged Forestry Rights.  Had they done so as part of their proper and reasonable due diligence, it would have revealed that the information stated in the relevant FOLs (that the deposits under the Simao Agreements have been paid already)  was incorrect.

62.1  At the time of the completion of the 2007 Acquisition in October 2007, Leeka Wood only paid 0.7% of the said total consideration under the Simao Agreements to Simao in respect of the Alleged Forestry Rights. The remaining consideration for the transfers of Alleged Forestry Rights under the Simao Agreements was purportedly paid between December 2007 and November 2011.

62.2  By way of illustration, insofar as the Alleged Forestry Rights for the Alleged Forest in Jiangcheng are concerned, the relevant Simao Agreement provided at clause 5.1 that the deposit payable by Leeka Woods was in the amount of RMB 25.5 million (as 30% of the consideration thereunder).  This amount far exceeded the RMB 1.5 Million paid as at the date of completion of the 2007 Acquisition.

62.3  The relevant FOLs were one-page documents (each containing four paragraphs only)  and were simple to read and digest. Had they inspected the FOLs, upon reading the second paragraph stating that Leeka Wood had already paid the agreed deposit (“2、你公司己按照合同约定支付了首付款项”), a natural question for a reasonably diligent director to ask would be (given the importance of these FOLs)  for proof of at least the said paragraph to confirm Leeka Wood’s payment of the deposit to Simao, if not proof of all four paragraphs.

63.  The 5^th Respondent admits, accepts and agrees that:

63.1  He failed to take any of the steps set out at paragraphs 59 to 62 above insofar as they are applicable to the 2009 Acquisition, to satisfy himself that proper and reasonable due diligence had been carried out in relation to the single most important asset in the 2009 Acquisition, i.e. the Alleged Forestry Rights.

63.2  The professional parties on which the Company purportedly relied have entered express caveats in respect of the independent verification of or investigation into the ownership of assets.

63.3  He was unaware of the status of the FOCs and did not check the FOLs himself, those being the primary documents in support of the Alleged Forestry Rights.

64.  The 5^th Respondent admits, agrees and accepts that he was negligent in approving the 2009 Acquisition without carrying out independent and proper due diligence.

E3.  Liability in respect of the Publication of the 2009 Announcement and 2009 Circular

65.  Further, the 5^th Respondent (among all other directors at the material time)  attended the board meeting on 10 July 2009 at 4:30pm in which the issuance of the 2009 Announcement was approved.

66.  The 5^th Respondent was also present with all other EDs at the material time at the board meeting on 20 October 2009 at 4:00pm in which the issuance of the 2009 Circular was approved.

67.  By reasons of the facts stated above, the 5^th Respondent admits, agrees and accepts that the 2009 Announcement and 2009 Circular were false or misleading as to a material fact:

67.1  Information disclosed in relation to the status of FOLs, size of forest lands, harvest details and the market value of the assets of Green & Good were false or misleading due to the non-existence of the Alleged Forestry Rights.

67.2  Such information was material as the forestry assets were the most material assets in the balance sheet of Green & Good and Leeka Wood. Reference is made to section B3 above.

68.  The 5^th Respondent admits, agrees and accepts that, coupled with his negligence in relation to the due diligence aspect of the 2009 Acquisition, he was negligent, in approving both the 2009 Announcement and the 2009 Circular.

E4.  Liability in respect of the JFT Acquisition

69.  In respect of the JFT Acquisition, by approving the same, the 5^th Respondent admits, agrees and accepts that:

69.1  He failed to properly supervise the business and affairs of the Company and its subsidiaries and properly satisfy himself of the requisite due diligence;

69.2  He was in breach of his fiduciary duties in approving the JFT Acquisition; and

69.3.  He failed to exercise the requisite degree of skill and care in the management of Superb Summit as may reasonably be expected of a person of his knowledge and experience and holding his office and functions within Superb Summit.

70.  In particular, at the time when the 5^th Respondent conducted his due diligence, he ought to have known that the 2014 Consideration was significantly overpriced and the value assigned by the Target Technology Valuation greatly exceeded the true value of the Target Technology.

71.  As the major decision maker in his capacity as Chairman and ED of the Company, the 5^th Respondent admitted, agreed and accepted that he approved the JFT Acquisition by accepting blindly and unquestionably any financial forecast, information and business plans provided to him without independently understanding and verifying the information.

E5.  Conclusion

72.  The 5^th Respondent admits, agrees and accepts that he was responsible for the affairs of the Company being conducted in the manner described in paragraph 55 above.

F.  AGREED MITIGATING FACTORS

73.  The 5^th Respondent has been cooperative in relation to these proceedings with the Petitioner and accepts liability.

74.  The 5^th Respondent has adopted a reasonable course of action in agreeing to conclude these proceedings by way of the Carecraft Procedure which saves the time and costs of the Petitioner and the Court, and in agreeing to pay their share of the Petitioner’s costs incurred up to and including the hearing of the Carecraft Procedure.

75.  The 5^th Respondent is now 76 years old and no longer holds any directorship in any listed company in Hong Kong.

PART III – AGREED PROPOSED ORDERS

76.  On the basis of the agreed facts and the agreed mitigating factors set out in Part II above, the Petitioner and the 5^th Respondent agree and submit that it would be appropriate for an order to be made against the 5^th Respondent under section 214(2)(a)  and 214(2)(d)  of the SFO, that the 5^th Respondent shall not, for a period of ten (10)  years, without leave of the Court:

(1)  be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of the Company or any other corporation including any of the Company’s subsidiaries and affiliates; and

(2)  in any way, directly or indirectly, be concerned, or take part, in the management of the Company or any other corporation including any of the Company’s subsidiaries and affiliates.

77.  If, pursuant to this Statement, the Court disposes of these proceedings summarily, the 5^th Respondent agrees that there should additionally be an order that the 5^th Respondent do pay the costs of the Petitioner in these proceedings, or such portion thereof as the Court thinks appropriate, to be taxed if not agreed.

Dated this 18^th day of February 2025

Appendix 1

Definitions

In this Statement:

“corporation” means a company or other body corporate incorporated either in Hong

Kong or elsewhere;

“company” means a company as defined in section 2(1)  of the Companies Ordinance (Cap. 622).  The expression “company” in the definitions of subsidiary, holding company and affiliate below, shall be read as including a corporation;

“subsidiary” means, with respect to its holding company, a company:

i.  the composition of the board of directors of which is directly or indirectly controlled by the holding company; or

ii.  more than half of the issued share capital of which is directly or indirectly controlled by the holding company; or

iii.  which is a subsidiary of a company which is a subsidiary of the holding company; or

iv.  which is accounted for and consolidated in the holding company's consolidated financial statements;

“holding company” in relation to a company shall be read as a reference to a company of which that last-mentioned company is a subsidiary; and

“affiliate” in respect of a company, means any subsidiaries or holding companies of such company or any subsidiaries of any of the holding companies of such company.

STATEMENT OF AGREED FACTS FOR CARECRAFT PROCEDURE BETWEEN THE PETITIONER AND THE

7^th RESPONDENT, 8^th RESPONDENT, 10^th RESPONDENT AND 15^th RESPONDENT

PART I — INTRODUCTION

1.  On 18 December 2020, the Securities and Futures Commission (Petitioner)  presented a petition pursuant to section 214(2)  of the Securities and Futures Ordinance (Cap. 571)  (SFO)  seeking, among other things:

(1)  An order under section 214(2)(a)  and/or section 214(2)(d)  of the SFO that each of the 2^nd to 16^th Respondents shall not, for such periods as the Court shall consider appropriate, without leave of the Court:

(a)  be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of Superb Summit International Group Limited (Superb Summit or Company)  or any other corporation including any of the Company's subsidiaries and affiliates; and

(b)  in any way, directly or indirectly, be concerned, or take part, in the management of the Company or any other corporation including any of the Company's subsidiaries and affiliates; and

(2)  Costs.

2.  On 26 April 2021, the petition was amended pursuant to the Order of Master Rita So dated 21 April 2021.  The definitions of “corporation”, “subsidiary” and “affiliate” are set out in Appendix 1 to this Statement.

A.  PURPOSE

3.  Subject to the approval of the Court, the Petitioner and the 7^th, 8^th, 10^th and 15^th Respondents (Relevant Respondents)have agreed to dispose of these proceedings against the Relevant Respondents by way of the summary procedure (Carecraft Procedure)  sanctioned in Re Carecraft Construction Co. Ltd. [1994] 1 WLR 172, as clarified by the English Court of Appeal in Secretary of State for Trade and Industry v Rogers [1996] 1 WLR 1569 and as adopted by the Court in a number of cases in respect of proceedings under section 214 of the SFO.

4.  This Statement sets out the material facts relied upon by the Petitioner in these proceedings that are not disputed by the Relevant Respondents, for the purpose of disposing of these proceedings against the Relevant Respondents by way of the Carecraft Procedure.

5.  The facts set out in this Statement are not disputed between the Petitioner and the Relevant Respondents on the basis that the case against them will be dealt with by the Court by way of the Carecraft Procedure.  If the Court for any reason is of the view that these proceedings shall not be dealt with by the Carecraft Procedure or that a full hearing is appropriate, no admission or concession by either the Petitioner or the Relevant Respondents and none of the proposed orders referred to below or liability to pay costs shall be referred to or relied on by any of the parties at any subsequent hearing without the prior written consent of both the Petitioner and the Relevant Respondents.

6.  Solely for the purpose of resolving these proceedings against the Relevant Respondents by way of the Carecraft Procedure but not other proceedings, and by reference to the facts set out in Part II of this Statement (which the Relevant Respondents admit and accept), the Relevant Respondents accept that during the relevant period, the business and affairs of the Company for which the 7^th, 8^th, 10^th and 15^th Respondents as directors were partly responsible, have been conducted in a manner described in section 214(1)(a)  to (d)  of the SFO, namely:

(1)  oppressive to its members or any part of its members;

(2)  involving misfeasance or other misconduct towards it or its members or any part of its members;

(3)  resulting in its members or any part of its members not having been given all the information in respect of its business or affairs that they might reasonably expect; and

(4)  unfairly prejudicial to its members or any part of its members.

B.  UNOPPOSED ORDERS

7.  On the basis of the facts set out in Part II of this Statement, the Petitioner and the Relevant Respondents agree, and the Relevant Respondents accept, that it would be appropriate for the orders set out in Part III of this Statement below to be made against them.

8.  If pursuant to this Statement, the Court disposes of these proceedings summarily, the Relevant Respondents agree that there should additionally be an order that they do pay the costs of the Petitioner in these proceedings, or such portion thereof as the Court thinks appropriate, to be taxed if not agreed with certificate for two counsel.

9.  In the event that the Court makes any order sought against the Relevant Respondents by reference to this Statement, the Petitioner and the Relevant Respondents agree that they will jointly apply to the Court for a direction that this Statement be annexed to a judgment of the Court.

10.  Furthermore, without prejudice to all of the Petitioner’s rights, the Petitioner specifically reserves the right to (a)  disclose this Statement to third parties where it appears proper to do so in the public interest, including, but not limited to, making use of the Statement for the purpose of any press release issued in respect of these proceedings, and (b)  refer to this Statement for purposes ancillary to, connected with and/or arising out of these proceedings.

PART II – STATEMENT OF AGREED FACTS

A.  INTRODUCTION AND BACKGROUN

A1.  The Company

1.  Superb Summit was incorporated on 29 January 2001 in the Cayman Islands and was at all material times and is a non-Hong Kong company (no. F11367)  registered under Part XI of the predecessor Companies Ordinance (Cap. 32), now Part 16 of the Companies Ordinance (Cap. 622)  (CO).

2.  Over the years, the Company has changed its name several times.  It used the names of:

2.1  Tak Shun Technology Group Limited (德信科技集團有限公司)  from its date of incorporation to 25 January 2008;

2.2  Superb Summit International Timber Company Limited (奇峰國際木業有限公司)  from 25 January 2008 to 19 September 2012; and

2.3  Superb Summit International Group Limited (奇峰國際集團有限公司)  from 19 September 2012 onwards.

3.  The registered office of Superb Summit was at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111 Cayman Islands.  Its head office and principal place of business was, until 31 August 2020, at Room 2013, 20/F., Pico Tower, 66 Gloucester Road, Wanchai, Hong Kong.

4.  The share capital of Superb Summit is divided into 10,000,000,000 shares of nominal value of HKD 0.10 each.  As at 20 November 2014, the amount of the capital paid up or credited as paid up was HKD 11.958 billion.

5.  The objects for which Superb Summit was established are set out in Article 3 of its Memorandum of Association and include (without limitation): general trading, importing, exporting, buying, selling and dealing in goods, materials, substances, articles and merchandise of all kinds in, from and to any part of the world, whether as principal or as agent.

6.  Between 18 September 2001 and 3 June 2020, Superb Summit’s shares were listed on the Main Board of the Stock Exchange of Hong Kong Limited (SEHK).  At the time of the Company’s listing in 2001, the Company and its subsidiaries were principally engaged in the manufacture, distribution and sales of electronic products.

7.  After the 2007 Acquisition (as defined below)  Superb Summit started to be engaged in integrated timber business including (a)  the development and management of timber resources in the Mainland of the People’s Republic of China (Mainland)  and (b)  the distribution, marketing and sales of a wide range of timber products.

8.  Since 2012, Superb Summit diversified its businesses and developed its business related to resource products other than timber and particularly in the bulk resources commodity trading sector.  It was principally engaged in the exploitation and management of timber resources and sales of coal products and other bulk commodities in the Mainland.  It also sought to participate in projects concerning new energy technology.

9.  On 20 November 2014, at the request of the Company, trading in the Company’s shares on the SEHK was halted pending the release of a clarification announcement in relation to inside information of the Company.  On 15 December 2015, trading and all dealings in the Company’s shares on the SEHK were suspended by the SEHK at the SFC’s direction pursuant to section 8 of the Securities and Futures (Stock Market Listing)  Rules (Cap 571V).

10.  On 4 June 2020, the SEHK cancelled the listing of Superb Summit’s shares pursuant to Rule 6.01A of the Main Board Listing Rules (LR).

A2.  The Relevant Respondents

11.  The 7^th Respondent, Lam Ping Kei (PK Lam), was the co-founder, former chairman (at least since 12 September 2001 to 17 February 2009)  and an executive director (ED)  (from 29 January 2001 to 17 February 2009)  of the Company.  PK Lam was also a substantial shareholder of the Company until around 22 June 2010.

12.  The 8^th Respondent, Wong Choi Fung (CF Wong)  was also the co-founder and a former ED of the Company from 29 January 2001 to 23 October 2007.  She was the spouse of PK Lam and was a substantial shareholder of the Company until around 7 November 2006.

13.  The 10^th Respondent, Yeung Kwong Lun (KL Yeung), was a former ED of the Company from 1 September 2002 to 23 October 2007.

14.  The 15^th Respondent, Wong Yun Kuen (YK Wong), was a former independent non-executive director (INED)  of the Company from 11 April 2007 to 24 June 2010 and a member of the Audit Committee.

15.  At the material times, each of the Relevant Respondents owed to the Company, inter alia, fiduciary duties as an officer/director of the Company and also a duty of care at common law to:

15.1  act with or exercise due and reasonable care, skill and diligence that would be exercised by a reasonably diligent person with (i)  the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as carried out by a director in relation to the Company and (ii)  the general knowledge, skill and experience that the director has;

15.2  collectively and individually, continually acquire and maintain a sufficient knowledge and understanding of the business of the Company as well as its subsidiaries (Group)  to enable each of them to properly discharge his/her duties as officers of the Company; and

15.3  where a director has delegated some of the managerial or financial responsibilities to his/her subordinates or other fellow officers, a duty to supervise the discharge of the delegated functions.

16.  At all material times, the Relevant Respondents were also obliged to ensure the Company's compliance with the legal and regulatory requirements (including the LR)  that were applicable to the Company.

A3.  Relevant Individuals

A3(a)   Relevant Individuals in respect of the 2007 and 2009 Acquisitions

17.   At all material times in respect of the Company’s acquisition of various forestry assets in 2007 (2007 Acquisition), the following individuals, among others, were officers, and respectively EDs and INEDs, of the Company:

Name	Position	Other Roles
PK Lam	ED (29.01.2001–17.02.2009) Chairman (12.09.2001 – 17.02.2009)	Substantial shareholder of the Company (until around 22.06.2010)
CF Wong	ED (29.01.2001– 23.10.2007)	Substantial shareholder of the Company (until around 7.11.2006) Spouse of PK Lam
KL Yeung	ED (01.09.2002 – 23.10.2007)
YK Wong	INED (11.04.2007 – 24.06.2010)	Member of the Audit Committee

18.  At all material times in respect of the Company’s acquisition of various forestry assets in 2009 (2009 Acquisition), the Company had the following key officer, among others:

Name	Position	Other Roles
YK Wong	INED (11.04.2007 – 24.06.2010)	Member of the Audit Committee

B.  THE FORESTRY CASE

B1.   Background and Chronology of the 2007 and 2009 Acquisitions

19.   On 12 April 2007, the Company entered into a letter of intent with Superview International Limited (Superview)  in relation to the 2007 Acquisition, with the consideration to be determined pending negotiation and due diligence on various aspects of the 2007 Acquisition.  A profit guarantee (see paragraph 21.8 below)  was also contemplated.

20.  On 16 May 2007, the Company and Superview entered into a share transfer agreement (2007 STA)  in respect of the 2007 Acquisition.

21.  On 8 June 2007 Superb Summit issued an announcement (2007 Announcement)  in relation to the 2007 STA and the 2007 Acquisition, which included the following details:

21.1  Pursuant to the 2007 STA, the Company as purchaser agreed to acquire from Superview as vendor 70 shares representing 70% of the issued share capital of Green and Good Group Limited (Green & Good)  at a total consideration of HKD 1.38 billon (2007 Acquisition Consideration), with Yiu Yat On (Yiu), Ho Kam Hung (Ho)  and Qian Mingjin (Qian)  (being holders of 56%, 25% and 19% of the issued share capital of Superview respectively)  as guarantors.

21.2   Prior to the 2007 STA, Superview was the sole shareholder of Green & Good.

21.3   Green & Good’s only asset was the entire equity interest in Leeka Wood Company Limited[82] (Leeka Wood)  (綠之嘉木業有限公司)  (collectively Green & Good Group).

21.4  Based on the information available to the Company in the course of the due diligence exercise in respect of Green & Good, Leeka Wood possessed about 329,898 Chinese mu of timber resources covering various regions in Yunnan, Hunan and Hebei, among which were forestry assets (Alleged Forests)  in:

21.4.1  Jiangcheng, Yunnan (100,996 mu; the term of the land use rights was for 40 years);

21.4.2  Heishan, Yunnan (81,546 mu; the term of the land use rights was for 50 years); and

21.4.3  Mapu, Yunnan (46,358 mu; the term of the land use rights was for 40 years).

The Alleged Forests accounted for 69% of the total forest land purportedly held by Leeka Wood.

21.5  The status of forest ownership certificates (FOCs)  (林權證)  in respect of the Alleged Forests were set out in the 2007 Announcement as follows:

“Obtained forest ownership certificate from the local forestry government department where the forest land is located but the application for forest ownership certificate from the state forestry department is still in progress.”

21.6  The 2007 Acquisition Consideration was HKD 1.38 billion, to be satisfied in the following manner:

21.6.1  HKD 200 million in cash to be payable upon completion;

21.6.2  HKD 250,311,150 by the allotment and issue of 556,247,000 Consideration Shares, credited as fully paid, to Superview upon completion (i.e. equivalent to HKD 0.45 per consideration share); and

21.6.3  The remaining balance of HKD 929,688,850 by issue of the convertible notes with a conversion price at HKD 0.45 per conversion share to Superview upon completion (2007 Convertible Notes).

21.7  Part of the 2007 Convertible Notes with a two-year term in a principal amount of HKD 300 million (Restricted Convertible Notes)  were not convertible until 31 March 2009 and after all liabilities in respect of the Profit Guarantee(defined below)had been discharged in full.

21.8  The Profit Guarantee referred to the joint and several undertaking by Superview as vendor and Yiu, Ho and Qian as guarantors that the audited consolidated net profit after tax of Green & Good Group (prepared in accordance and compliance with Hong Kong Generally Accepted Accounting Principles)  for the two financial years ending 31 December 2007 and 2008 would not be less than HKD 300 million and that they would compensate the Company for any shortfall.

21.9  In the event that the conversion rights attaching to the Convertible Notes were fully exercised by Superview, the conversion shares thereunder (Conversion Shares)  would amount to approximately 74.3% of the existing issued share capital of the Company and approximately 38.2% of the then issued share capital of the Company as enlarged by the issue of the Consideration Shares and Conversion Shares.

21.10   The 2007 Acquisition Consideration had been determined with reference to, among other things, (i)  the business prospect, potential profitability, market scalability and product mix of Leeka Wood and its subsidiaries, (ii)  the asset quality back-up by Green & Good Group; and (iii)  the Profit Guarantee.

21.11   As at the date of the 2007 Announcement, HKD 100 million had been deposited by the Company as refundable interest-bearing deposit.

22.  On 3 September 2007, the Company issued a circular (2007 Circular)  providing reasons for and further details of the 2007 Acquisition, and giving notice of an extraordinary general meeting for the consideration and approval of, among other things, the 2007 Acquisition, the issue of Consideration Shares and Convertible Notes.

23.  In the 2007 Circular, PK Lam (on behalf of the board of the Company)  confirmed that, in respect of the Alleged Forests, the forestry department of local government had not issued any FOC – the status of the FOCs in respect of the Alleged Forests was set out as follows:

“Obtained forest ownership letter (the temporary ownership document)  from the forestry department of local government where the forest land is located but the application for forest ownership certificate from the forestry department of local government is still in progress”

24.  A significant difference between the 2007 Announcement and the 2007 Circular was that, in respect of the Alleged Forests:

24.1  The 2007 Announcement represented that FOCs had been issued by the local forestry government department (see paragraph 21.5 above); but

24.2  The 2007 Circular represented that only forest ownership letters (FOLs), but not FOCs, had been issued by the forestry department of local government (see paragraph 23 above).

25.  The 2007 Circular revealed that the assets of Green & Good had been valued at approximately HKD 3.279 billion as at 30 June 2007 by LCH (Asia-Pacific)  Surveyors Limited (LCH), and provided further details at Appendix V thereto (containing LCH’s valuation report on the assets proposed to be acquired by the Company (LCH’s 2007 Valuation Report)).

26.  On 15 October 2007, the Company made an announcement (15.10.2007 Announcement)  announcing the completion of 2007 Acquisition on 8 October 2007.

27.  On 27 April 2009, Superb Summit issued an announcement (27.04.2009 Announcement)  that:

27.1  The Profit Guarantee was not met and the shortfall amounted to approximately HKD 725,111,000 (Shortfall).

27.2  As at the date of the 27.04.2009 Announcement, Superview has settled approximately 55% of the Shortfall by way of set-off against the Restricted Convertible Notes (HKD 300 million)  and set-off against other amounts due to Superview (HKD 100 million).

27.3  The remaining Shortfall amount of approximately HKD 325,111,000 (Outstanding Shortfall)  would be compensated by way of cash or other methods as agreed by Superb Summit.

27.4  Superview and Superb Summit were in the process of negotiating a settlement arrangement in relation to the Outstanding Shortfall.

28.  On 9 June 2009, Superb Summit and Superview entered into an extension agreement pursuant to which Superb Summit would extend the payment date of the Outstanding Shortfall from 9 June 2009 to 8 September 2009, with interest at 6.5% per annum payable on 8 September 2009 (Extension Agreement).

29.  On 29 June 2009, Superb Summit entered into a Memorandum of Understanding with Superview in relation to the intention to enter into a series of transactions including the 2009 Acquisition.

30.  On 10 July 2009, Superb Summit entered into a Conditional Share Transfer Agreement (2009 CSTA)  in respect of:

30.1  The 2009 Acquisition;

30.2  The disposal of Leeka Wood’s 67.7% equity interest in 綠之嘉木制品制造有限公司 (G&G Wood), a substantially inactive company which has contributed to the loss of Green & Good, to Superview; and

30.3  The release of the respective counter guarantee obligations of Leeka Wood and G&G Wood to a third party guarantor 金聯通信用擔保有限公司 for the bank loan under the “Counter Guarantee Agreements” by Superview.

(collectively, the 2009 Transactions)

31.  On 23 July 2009, Superb Summit issued an announcement (2009 Announcement)  that it has entered into the 2009 CSTA in respect of the 2009 Transactions on 10 July 2009.

32.  On 23 October 2009, Superb Summit issued a circular (2009 Circular)  providing reasons for and further details of the 2009 Transactions, and giving notice for an extraordinary general meeting for the consideration and approval of, among other things, the 2009 Transactions.  It stated, among other things, that:

32.1  The consideration for the 2009 Acquisition was HKD 751,990,000 (2009 Acquisition Consideration), equivalent to a discount of 16% to the net asset value of Green & Good attributed to 30% of the net consolidated asset value of Green & Good including Leeka Wood and G&G Wood.

32.2  Superb Summit would set off the Outstanding Shortfall of HKD 335,011,000 (i.e. principal amount of HKD 325,111,000 plus interest)  owed by Superview to the Company against the 2009 Acquisition Consideration.  The remaining balance of the 2009 Acquisition Consideration in the sum of HKD 416,979,000 would be settled by the issuance of convertible notes by Superb Summit to Superview on the completion date (2009 Acquisition Convertible Notes)[83].

33.  On 27 November 2009, Superb Summit issued an announcement (27.11.2009 Announcement)  that all conditions to the 2009 CSTA had been fulfilled, and the 2009 Transactions had been completed on 27 November 2009, such that the Outstanding Shortfall had been extinguished, G&G Wood ceased to be a subsidiary of Superb Summit, and Green & Good had become a wholly owned subsidiary of Superb Summit.

34.  On 30 December 2010, Leeka Wood entered into a transfer agreement to transfer the relevant rights in the Alleged Forests (Alleged Forestry Rights)  to 綠之嘉木業（普洱）有限公司 (Leeka Wood (Pu’er)), another wholly owned subsidiary of Superb Summit.

B2.  False Ownership of Alleged Forests and Alleged Forestry Rights

35.  For the purposes of both the 2007 Acquisition and 2009 Acquisition, Leeka Wood and in turn Green & Good did not own the Alleged Forests and the Alleged Forestry Rights.

36.  In this regard:

36.1  The purported genesis of the Alleged Forestry Rights was the transfer from farmers and villagers in Yunnan to 思茅市翠雲區伊祿木材加工廠 (Simao)  prior to December 2006.

36.2  Thereafter, on 13 December 2006 and 26 December 2006, Simao and Leeka Wood purportedly entered into three transfer agreements in respect of the Alleged Forestry Rights.  On 10 July 2007, Simao further entered into three supplemental agreements with Leeka Wood in respect of the same.  These are collectively referred to as the Simao Agreements.

36.3  The three responsible competent authorities administering the laws governing the Alleged Forestry Rights are as follows:

36.3.1  In respect of the Alleged Forests allegedly located in Jiangcheng – the Forestry Bureau of Jiangcheng Hani and Yi Autonomous County;

36.3.2  In respect of the Alleged Forests allegedly located in Heishan – the Forestry Bureau of Lancang Lahu Autonomous County; and

36.3.3  In respect of the Alleged Forests allegedly located in Mapu – the Forestry Bureau of Ning’er Hani and Yi Autonomous County.

(collectively, the Forestry Bureaux)

37.  As it transpires, the Forestry Bureaux had no record of the Simao Agreements. The Simao Agreements had not gone through any approval or record documentation process with any of the Forestry Bureaux.

38.  By way of a letter dated 16 June 2016, the China Securities Regulatory Commission confirmed to the SFC and observed that:

38.1  The Forestry Bureaux had not issued any FOLs to Leeka Wood or Leeka Wood (Pu’er)  – “均未对绿之嘉木业有限公司及/或绿之嘉木业（普洱）有限公司进行过答复，也未曾出具林权证明。”

38.2  The Alleged Forests had never been registered with the Forestry Bureaux, and that Leeka Wood had never registered any other forests with the Forestry Bureaux – “贵会提供资料（附件3）涉及的3宗林地未在澜沧等三县登记，绿之嘉木业有限公司也未在澜沧等三县登记过其他林地。”

38.3  There were obvious inconsistencies between the chops affixed on certain FOLs and the official chops – “公章存在明显不一致”.

39.  The Forestry Bureaux never issued the 15 FOLs which were relied on by Superb Summit to purportedly establish the existence of and the chain of ownership concerning the Alleged Forests, either during or after the 2007 and 2009 Acquisitions.

40.  There were also an absence of the anti-counterfeiting code (防伪码)  on the seals affixed on the FOLs purportedly issued in relation to the Alleged Forests and missing characters in the names shown on such FOLs / seals (such as the missing characters of “人民政府”).

B3.  Materiality of the Alleged Forestry Rights

41.  The Alleged Forests are significant in terms of land size.  The Alleged Forestry Rights are also significant in terms of market price.

41.1  At all material times, the Alleged Forests accounted for about 69%[84] to 72%[85] of the total land size of all the forestry assets purportedly held by Leeka Wood.

41.2  The market value of the Alleged Forestry Rights was approximately RMB 2,513.01 million to RMB 2,620 million.  They accounted for 76.64% to 82.54% of the purported total value of Green & Good, the issued share capital of which formed the subject matter of the 2007 and 2009 Acquisitions.

41.3  Assuming the share of value of the Alleged Forestry Rights in the market value of Green & Good was proportionate to that in the 2007 Acquisition Consideration (HKD 1.38 billion)  and the 2009 Acquisition Consideration (HKD 751,990,000)  respectively, the Company would have been effectively paying HKD 1,057,632,000/RMB 1,057,632,000[86] for a 70% interest in the Alleged Forests in the 2007 Acquisition, and HKD 620,692,546/RMB 543,038,098[87] for the remaining 30% interest in the Alleged Forests in the 2009 Acquisition.

41.4  In other words, Green & Good did not own the Alleged Forestry Rights and the Company has paid HKD 1.678 billion / RMB 1.601 billion for non-existent assets during the course of the 2007 and 2009 Acquisitions.

42.  The Alleged Forestry Rights are a significant and material aspect of the 2007 and 2009 Acquisitions.

B4.  Downward Adjustment in the Company’s Financial Reports

43.  On the basis that the Company or the Group did not own the Alleged Forestry Rights, significant downward adjustments ought to be made to the respective balances of Biological Assets, Prepaid Land Lease Payments and Revenue as stated in the Company’s published annual reports and interim reports.

43.1  There should be at least a reduction in Biological Assets by HKD 2,786,364,100, Prepaid Land Lease Payments by HKD 48,824,716 and Revenue by HKD 33,942,000, in the 2014 annual report of the Group.

43.2  The downward adjustments stated above would have a material impact on the relevant financial statements of the Group at the material time, and there would be a material impact on the Group’s principal activities in relation to at least the timber-related activities in the Mainland.

43.3  On the basis that the Group did not hold the Alleged Forestry Rights, there is a high degree of uncertainty in respect of the continuality/sustainability of the Group.

43.4  As a corollary of the above, the investing public has been misled by the rosy but illusory appearance of Superb Summit’s revenue and profitability which were false or misleading in material respects in the manner described, and were prevented from accurately assessing the risk of their investment or making an informed investment decision.

C.  LOSSES SUFFERED BY THE GROUP AND FINANCIAL BENEFITS OBTAINED BY THIRD PARTIES

44.  As stated above, on the basis that Green & Wood did not own the Alleged Forestry Rights, the Company had paid HKD 1.678 billion / RMB 1.601 billion for non-existent assets during the course of the 2007 and 2009 Acquisitions.  The Company has accordingly suffered losses.

D.  SECTION 214 PETITION FOR DISQUALIFICATION ORDERS

45.  By reason of the matters aforesaid, Superb Summit’s business or affairs had been conducted in a manner:

45.1  Oppressive to its members or any part of its members under section 214(1)(a)  of the SFO;

45.2  Involving misfeasance or other misconduct towards it or its members or any part of its members under section 214(1)(b)  of the SFO;

45.3  Resulting in its members or any part of its members not having been given all the information in respect of its business or affairs that they might reasonably expect under section 214(l)(c)  of the SFO; and

45.4  Unfairly prejudicial to its members or any part of its members under section 214(l)(d)  of the SFO.

D1.  The 7^th, 8^th, 10^th and 15^th Respondents – 2007 Acquisition

46.  The 7^th, 8^th, 10^th and 15^th Respondents admit, agree and accept that in approving the 2007 Acquisition, they displayed incompetence, and negligence in discharging their duties as directors of a listed company and in failing to exercise reasonable skill, care and diligence and accordingly acted in an incompetent manner and failed to act in the best interest of the Company and breached their duty of care towards the Company, such that they were responsible for the business or affairs of the Company having been conducted in the manner described in paragraph 45 above.

47.  The 7^th, 8^th, 10^th and 15^th Respondents admit, agree and accept that they did not take the steps described below at the material time:

47.1  First, they did not review the Simao Agreements.  Had the directors done so, they would have:

47.1.1  noticed that although the appendix to the relevant Simao Agreement relating to the Mapu forests purported to exhibit the agreement of the villagers to transfer the forestry rights thereto to Simao, the said appendix titled “村民同意轉讓聯名簽字畫押簿” was actually a blank page; and

47.1.2  immediately raised queries as to the basis on which Simao had the relevant forestry rights to transfer to Leeka Wood, and as to why the relevant forestry authorities would have nonetheless issued the relevant FOL.

47.2  Second, they did not notice the disclaimer on page 4 of the legal opinion obtained from De Heng Law Offices (De Heng)  that De Heng would not verify the authenticity of any of the documents provided, and had provided its legal opinion on the basis of Green & Good’s guarantee that the documents, materials, confirmations were authentic, complete and effective, and they did not question whether it was necessary to verify the authenticity of the FOLs, those substantiating the Alleged Forestry Rights that became the subject matter of the 2007 Acquisition.

47.3  Third, they did not question the methodology of or the assumptions made by the professional parties in reaching the respective conclusions.

47.4  Fourth, they did not inspect the FOLs being the primary documents to substantiate the existence of the Alleged Forestry Rights.  Had they done so, they would have noticed that the information stated in the relevant FOLs (that the deposits under the Simao Agreements have been paid already)  was incorrect.

47.4.1  At the time of the completion of the 2007 Acquisition in October 2007, Leeka Wood only paid 0.7% of the said total consideration under the Simao Agreements to Simao in respect of the Alleged Forestry Rights.  The remaining consideration for the transfers of Alleged Forestry Rights under the Simao Agreements was purportedly paid between December 2007 and November 2011.

47.4.2  By way of illustration, insofar as the Alleged Forestry Rights for the Alleged Forest in Jiangcheng are concerned, the relevant Simao Agreement provided at clause 5.1 that the deposit payable by Leeka Woods was in the amount of RMB 25.5 million (as 30% of the consideration thereunder).  This amount far exceeded the RMB 1.5 Million paid as at the date of completion of the 2007 Acquisition.

47.4.3  The directors did not ask for proof of at least paragraph 2 of the FOLs (“2、你公司己按照合同约定支付了首付款项”), to confirm Leeka Wood’s payment of the deposit to Simao.

48.  The 7^th, 8^th, 10^th and 15^th Respondents admit, agree and accept that they have not taken any or all of the steps described in paragraph 47 above.  In the premises, by reason of their incompetence and negligence, they were responsible for the business or affairs of the Company having been conducted in the manner described in paragraph 45 above.

D2.  The 15^th Respondent – 2009 Acquisition

D2(a)   Liability in respect of Due Diligence

49.  The 15^th Respondent admits, agrees and accepts that in approving the 2009 Acquisition, he was reckless and turned a blind eye to the pertinent question of ownership of the Alleged Forests.

50.  Further, the 15^th Respondent admits, agrees and accepts that he acted in an incompetent manner and failed to act in the best interest of the Company and breached his duty of care towards Company.

51.  The 15^th Respondent admits, agrees and accept that:

51.1  He had been previously involved in the 2007 Acquisition.

51.2  He knew that the FOLs in respect of the Alleged Forests were temporary measures as at the 2007 Acquisition pending the issuance of FOCs.

51.3  He ought to have known that the FOCs in relation to the Alleged Forests remained outstanding and should have asked proper questions. Nonetheless, he approved the 2009 Acquisition without raising any specific queries.

51.4  In the premises, he was reckless and turned a blind eye to the issue of ownership of the Alleged Forests.

52.  By reason of the aforesaid, the 15^th Respondent admits, agrees and accepts that he was responsible for the business or affairs of the Company having been conducted in the manner described in paragraph 45 above.

D2(b)   Liability in respect of Publication of the 2009 Announcement and 2009 Circular

53.  The 15^th Respondent attended the board meeting on 10 July 2009 at 4:30pm in which the issuance of the 2009 Announcement was approved.

54.  By reason of the matters stated above, the 2009 Announcement was false or misleading as to a material fact:

54.1  Information disclosed in relation to the status of FOLs, size of forest lands, harvest details and the market value of the assets of Green & Good were false or misleading due to the non-existence of the Alleged Forestry Rights.

54.2  Such information was material as the forestry assets were the most material assets in the balance sheet of Green & Good and Leeka Wood. Reference is made to section B3 above.

55.  In the premises, the 15^th Respondent admits, agrees and accepts that, coupled with his recklessness in relation to the due diligence aspect of the 2009 Acquisition, he was reckless in approving the 2009 Announcement.

D2(c)   Conclusion on the 15^th Respondent

56.  In the premises, the 15^th Respondent admits, agrees and accepts that he was responsible for the business or affairs of the Company having been conducted in the manner described in paragraph 45 above.

E.  AGREED MITIGATING FACTORS

57.  The Relevant Respondents have been cooperative in relation to these proceedings with the Petitioner and accepts liability.

58.  The Relevant Respondents have adopted a reasonable course of action in agreeing to conclude these proceedings by way of the Carecraft Procedure which saves the time and costs of the Petitioner and the Court, and in agreeing to pay their share of the Petitioner’s costs incurred up to and including the hearing of the Carecraft Procedure.

PART III – AGREED PROPOSED ORDERS

59.  On the basis of the agreed facts and the agreed mitigating factors set out in Part II above, the Petitioner and the 7^th Respondent agree and submit that it would be appropriate for an order to be made against the 7^th Respondent under section 214(2)(a)  and 214(2)(d)  of the SFO, that the 7^th Respondent shall not, for a period of five (5)  years, without leave of the Court:

(1)  be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of the Company or any other corporation including any of the Company’s subsidiaries and affiliates; and

(2)  in any way, directly or indirectly, be concerned, or take part, in the management of the Company or any other corporation including any of the Company’s subsidiaries and affiliates.

60.  On the basis of the agreed facts and the agreed mitigating factors set out in Part II above, the Petitioner and the 8^th Respondent agree and submit that it would be appropriate for an order to be made against the 8^th Respondent under section 214(2)(a)  and 214(2)(d)  of the SFO, that the 8^th Respondent shall not, for a period of five (5)  years, without leave of the Court:

(1)  be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of the Company or any other corporation including any of the Company’s subsidiaries and affiliates; and

(2)  in any way, directly or indirectly, be concerned, or take part, in the management of the Company or any other corporation including any of the Company’s subsidiaries and affiliates.

61.  On the basis of the agreed facts and the agreed mitigating factors set out in Part II above, the Petitioner and the 10^th Respondent agree and submit that it would be appropriate for an order to be made against the 10^th Respondent under section 214(2)(a)  and 214(2)(d)  of the SFO, that the 10^th Respondent shall not, for a period of five (5)  years, without leave of the Court:

(1)  be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of the Company or any other corporation including any of the Company’s subsidiaries and affiliates; and

(2)  in any way, directly or indirectly, be concerned, or take part, in the management of the Company or any other corporation including any of the Company’s subsidiaries and affiliates.

62.  On the basis of the agreed facts and the agreed mitigating factors set out in Part II above, the Petitioner and the 15^th Respondent agree and submit that it would be appropriate for an order to be made against the 15^th Respondent under section 214(2)(a)  and 214(2)(d)  of the SFO, that the 15^th Respondent shall not, for a period of seven (7)  years, without leave of the Court:

(1)  be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of the Company or any other corporation including any of the Company’s subsidiaries and affiliates; and

(2)  in any way, directly or indirectly, be concerned, or take part, in the management of the Company or any other corporation including any of the Company’s subsidiaries and affiliates.

63.  If, pursuant to this Statement, the Court disposes of these proceedings summarily, the Relevant Respondents agree that there should additionally be an order that the Relevant Respondents do pay the costs of the Petitioner in these proceedings, or such portion thereof as the Court thinks appropriate, to be taxed if not agreed.

Dated this 10^th day of January 2025

Appendix 1

Definitions

In this Statement:

“corporation” means a company or other body corporate incorporated either in Hong

Kong or elsewhere;

“company” means a company as defined in section 2(1)  of the Companies Ordinance (Cap. 622).  The expression “company” in the definitions of subsidiary, holding company and affiliate below, shall be read as including a corporation;

“subsidiary” means, with respect to its holding company, a company:

v.  the composition of the board of directors of which is directly or indirectly controlled by the holding company; or

vi.  more than half of the issued share capital of which is directly or indirectly controlled by the holding company; or

vii.  which is a subsidiary of a company which is a subsidiary of the holding company; or

viii.  which is accounted for and consolidated in the holding company's consolidated financial statements;

“holding company” in relation to a company shall be read as a reference to a company of which that last-mentioned company is a subsidiary; and

“affiliate” in respect of a company, means any subsidiaries or holding companies of such company or any subsidiaries of any of the holding companies of such company.