CHUAN WEN SZE v. USINE CO LTD AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. These are two petitions in which the Petitioner, Ms. Chuan Wen Sze seeks the winding up of two companies on the just and equitable ground and in the alternative, relief under Section 168A of the Ordinance, specifically an order that her shares in the two companies be purchased by the 2nd Respondent, Mr. Boon Chuan Hong.

2. These petitions have had a chequered history to say the least. They were launched in 1990. There was an aborted hearing in 1991. Further amendments had been made to the petitions since then. In addition to filing a great deal of further evidence, it can be said that both parties have significantly changed material parts of their cases. The delay since these petitions were first lodged and the changes in the material parts of the parties' evidence is in itself a matter which causes difficulty. That is only compounded by the fact that many of the events which are the subject of dispute took place 14 years ago or more.

3. As I will refer to later, the personal antagonism between the parties coupled with the length of time of preparation of this case seems to me to be a factor which has contributed to what I regard as "wishful" memory. I use that expression to indicate that perhaps when litigants have been thinking about events which took place sometime ago, they may have been inclined to remember those events in a light favourable to themselves. Unfortunately this is also made somewhat more difficult in circumstances where the witness involved is having to piece together what he regards must have happened in the light of such documentary evidence as is now available. I cannot leave these preliminary observations without reference to the fact that because of the close family connection between the Petitioner and the Respondent, the Action was unusually fraught. Specifically the Respondent, as referred to by his counsel and as he himself said in evidence, was seeking in part by these proceedings to justify his own conduct in the eyes of his children.

4. Because of the difficulties presented by the evidence in this case, the conclusions as to facts are based on the state of affairs which I have found the most likely given the evidence which has been presented and taking into account the respective parts of the witnesses' evidence which appeared to coincide with known undisputable facts and the most likely state of events.

THE FORMATION OF THE USINE BUSINESS

UCL

5. In 1979 the Petitioner, Ms. Chuan Wen Sze, formed the intention of running a business. From the start, it seems to have been the intention that the business would be concerned with very specific textiles, namely blouses of the type which are to be found in parts of Southern Germany and Austria. The Petitioner was acquainted with an importer in Southern Germany, namely Mr. Schliessman.

6. There appear to have been two businesses which the Petitioner started up. The first was an unincorporated business. The Petitioner first registered the name of Usine Company as a business name on the 26th April 1979. That was first registered as her own business but the registration was later changed to a partnership. The Petitioner herself kept the books. The books of the initial business and the later partnership are different but it is unnecessary to dwell on that.

7. At about the same time, Usine Company Limited, which is one of the two companies the subject of the petitions, was incorporated. The reason for the incorporation of Usine Company Limited (which will be referred to as 'UCL') was that Ms. Chuan had asked a Mr. Chau, who was her former employer, to contribute funds. It appears that Mr. Chau was only prepared to do so provided a limited company was formed. It was for that reason that the Petitioner did not use the Business Registration as the vehicle for the business into which Mr. Chau contributed funds. Altogether Mr. Chau contributed HK$300,000.00 to the funds of UCL. Shares were allotted in UCL in the ratio of 1,500 to Mr. Chau and 750 shares to each of Ms. Chuan and a Mr. Tsui. Those shares were allotted on the 11th of September 1979. It is not in dispute that Ms. Chuan and Mr. Tsui did not pay for their shares. It was never intended that Mr. Chau would be involved other than in contributing funds for UCL. Ms. Chuan had her connection with Mr. Schliessman and also her experience in the clothing business. It was always contemplated that the business would be run by Ms. Chuan with the assistance of, apparently, Mr. Tsui who was also experienced in the clothing business.

8. In the circumstances, I do not find it surprising that there would be a division of the shares in the ratio 50:25:25. Ms. Chuan and Mr. Tsui would be doing the work and bringing in the business whereas Mr. Chau would simply be providing finance. Whether the shares were regarded as a gift by Mr. Chau or more properly for consideration, whether strictly good or bad, does not seem to me to matter at this juncture. I approach it on the basis that those three persons were entitled to the shares which were allotted to them.

9. As I have indicated the business of UCL was set up on Ms. Chuan's initiative and run very much by her efforts. I have no doubt that it was the intention of those originally involved in UCL that Ms. Chuan should effectively run its business.

UC2

10. Soon after the incorporation and allotment of shares in UCL, Ms. Chuan seems to have been keen to commence a parallel business. For this purpose, she used the Business Registration of Usine Company. Her concept was to run it in parallel to UCL. The second business would be of a very similar nature to the first but confined to a specific customer or customers. For this new business further finance was needed and she approached Mr. Boon, the 2nd Respondent. Mr. Boon was married to the Petitioner's sister. Mr. Boon was a comparatively wealthy person to whom an investment of $200,000.00 was something which could be contemplated without any serious difficulty. According to the Petitioner, and I accept what she says, she made clear to Mr. Boon at the outset that there was another business namely UCL which was in existence and that the business of Usine Company into which Mr. Boon was being asked to invest would be run separately but parallel to it. The arrangement was that Usine Company would operate from the same premises as UCL.

11. Whether it was obvious to begin with is not clear but to a considerable extent, Usine Company benefited from UCL's payment of costs of running the business without contributing to them. I have to say that I was concerned about the propriety of these arrangements. Mr. Chau was, apparently, deliberately kept in the dark about the existence of Usine Company. Having listened to the Petitioner, however, I came to the conclusion that whereas on the face of it this arrangement would seem very odd and undesirable, there was in fact no intention to take an unfair advantage of UCL or Mr. Chau and his contribution. The Petitioner regarded it as necessary to keep the two businesses separate because otherwise she felt with the introduction of Mr. Boon and his contribution considerable difficulty would be caused in sorting out the respective parties' entitlements. Whereas this is an arrangement which in other circumstances I would have felt showed some impropriety, that conclusion is not one to which I feel it appropriate to come in the circumstances of this case.

12. The firm, Usine Company, which carried on business until 1982 was referred to during the trial as UC2, which is a name I adopt here for convenience. Again, as with UCL I have no doubt that it was the intention of all concerned that Ms. Chuan would be the key figure in the running of the UC2 business.

13. The original books of UC2 were exhibited in evidence. They were clearly neat and well maintained books. They have, however, a certain drawback to the extent that the Petitioner was not an accountant but had, quite obviously, some basic book-keeping knowledge. Nevertheless, the accounts, particularly of UC2 and indeed some of the other accounts which featured in this case, have been described unanimously by the accountants as convoluted. In a number of respects, one could see that the books had been drawn up in a manner which reflected the Petitioner's own concepts. It appears from the books of UC2 which have been kept by the Respondent that on the 9th August 1979, both herself and Mr. Tsui each contributed $5,000.00 by way of capital to UC2.

14. On the 16th October 1979, Mr. Boon paid the Petitioner $200,000.00 which was to be used in the business of UC2. Again this is a somewhat odd feature, but it appears that the Petitioner did not pay that money into the accounts of UC2 in the first instance but fed the money in over a period culminating in the final payment being credited to UC2 books on the 28th December. This date is of some interest because on the 27th December 1979, Mr. Boon had completed a BR64 form to notify the Business Registration Office that he was a partner of Usine Company (UC2). I mention in passing that Mr. Boon gave the impression that he had forgotten about this. I do not draw any adverse inference from his apparent forgetfulness but it is a feature of this case which reinforces my own impression that I have to be especially careful about matters which the witnesses claim to remember or not remember since in my view their memories are by no means perfect and in some instances seriously faulty. On this occasion Mr. Boon's evidence can at best only be indicative of a very hazy understanding of what took place back in 1979.

15. One other feature relating to this amount of $200,000.00 is the fact that it was the Petitioner's evidence that there had been a payment of interest of $15,000.00 which represented interest on the amount of $200,000.00. How that interest was calculated was never fully explained. The matter loomed fairly considerably in this case since the payment was said to be confirmed by a voucher which the Petitioner had said, and was adamant even in cross-examination, had been signed by the Respondent, Mr. Boon, in her presence, acknowledging receipt of this $15,000.00.

16. Mr. Boon had challenged that. Indeed handwriting evidence was obtained, ultimately on both sides. The consensus was that the signature was probably not that of Mr. Boon. Moreover, Mr. Boon said, supported by reference to his passport, that he was not in Hong Kong on the day when the receipt was signed. The Petitioner in re-examination said that she had then remembered that the receipt for the $15,000.00 had been signed by the Respondent's wife, namely the Petitioner's sister, who had forged the Respondent's signature not, I gather, for the purpose of defrauding the Respondent but really for record keeping purposes and that the payment had been received on the Respondent's behalf by his wife.

17. Although Mr. Allman-Brown on behalf of the Respondent reopened cross-examination of the Petitioner in respect of other matters, he specifically did not seek to cross-examine on this new evidence. In later submissions he said that the evidence of the Petitioner was so unbelievable that he had regarded it as unnecessary. In the very strange circumstances of this case, however, I do not agree. In the first place, the Petitioner gave her evidence in a very steady manner. She was clearly a woman of perhaps lesser intelligence than the Respondent. She gave the impression of being a person who was, to a certain extent, set in her ways and had fixed ideas. I bear in mind the extraordinary way in which this evidence came out so long after the very document had been challenged and, indeed, expert handwriting evidence on it obtained, nevertheless peculiar things can happen. Her evidence was not at as I have indicated cross-examined and no attempt was made by the Respondent to put in any evidence from his wife.

18. There is a record in the entry of UC2's books of a withdrawal of capital on the basis of the interest payment.

19. Mr. Lovell on behalf of the Respondent challenges the fact that the $15,000.00 could ever have been treated as interest. He points out that interest would have been an expense to UC2 and treated as such in its profit and loss account and would not have appeared as a cash drawing by Mr. Boon. Whilst there are undoubted unsatisfactory aspects to the matter, the only conclusion which I find I can reasonably come to is that this is just another aspect of the convoluted way in which the accounts were kept. If the money had been put in the business as equity, there would seem to me to be no basis for it attracting interest. It would have only attracted interest if it were loan capital. If it were loan capital, there would have been no reduction in the capital amount because of payment of interest. If the interest accrued at a time before it was put in the business, there was no basis for charging any interest to UC2.

20. In the upshot, I come to the conclusion that this sum of $15,000.00 was paid to the Respondent's wife on the Respondent's behalf. In the way in which the family finances were managed, I do not find that particularly surprising as it seems that the transfers of funds between the Petitioner and the Respondent and his family were often on an informal basis.

21. Piecing together the evidence which I find accords with such of the contemporaneous documents which exist and accords with the preponderance of probabilities, as I see it, what probably happened was this. In 1979 when Ms. Chuan and Mr. Tsui were starting the garment business, they found that even with the $300,000 put in by Mr. Chau they were underfinanced for the amount of business which Mr. Schliessman could put their way. Having secured Mr. Chau's assistance they then considered how best more finance could be arranged. The next obvious source was Mr. Boon. The idea of running separate businesses then occurred. This was thought to be appropriate because it would avoid having to renegotiate with Mr. Chau, the finances of the 2 businesses could be kept separate and the customers of the 2 businesses were also to be different. Whereas Mr. Chau apparently had wanted the business into which he invested to be a company, there was no reason why the separate business could not be a firm and for that purpose all that was necessary was to keep going the Business Registration that was already in existence. Mr. Boon was thus asked to contribute. This he did. In the Petitioner's own peculiar way, she kept the money which Mr. Boon gave her to invest in the new business outside UC2 until it was required and gradually fed it in. The Petitioner and Mr. Tsui had themselves each contributed $5,000.00 in capital to UC2.

22. It is said on the Respondent's behalf that the Petitioner and Mr. Tsui effectively withdrew their capital. Clearly they received money from the UC2 business and that is shown in the accounts. I do not consider, however, that at the time they regarded it as withdrawing their capital and ceasing to be partners of UC2. What seems most likely to me is that they thought that they were drawing against anticipated profits. Such a course, although not something of which an accountant would approve, was something which clearly from time to time the parties did and in particular when it came to winding up the affairs of UC2 that is precisely what they did.

THE RESPECTIVE INTERESTS IN UC2

23. The first point which arises is as to what were the respective interests of the Petitioner, the Respondent and Mr. Tsui in UC2 from 1979 through to 1982. In this respect it seems to me that, looking at all the facts and having listened to the witnesses namely the Petitioner and the Respondent and considered their various statements made from time to time in the affidavits, and then having considered the expert evidence, the conclusion which I come to is that during this period each of these three persons were equal partners in the business of UC2. As regards the Respondent, it seems he had forgotten that he had been a partner in UC2. This is not surprising. Many years had elapsed from the events of 1982, to which I shall come in a moment, and the presentation of the petition and the break-up of the parties.

24. The Petitioner was criticised for failing to produce at the outset of her Petition the relevant documentation and in particular the ledgers relating to UC2. In my view although in hindsight that is now seen to be a matter of some importance, in the form that the Petitions originally took and in the form that the defence originally took, it was accepted on both sides that the Petitioner was a 25% shareholder in both companies. The route, by which she had acquired her shareholding and the amount of her shareholding was not in dispute. I can only imagine that if legal advisers had been told of the original UC2 company, they would have formed the opinion that reference to it was entirely irrelevant in view of the fact that the Petitions were for winding up the companies on the just and equitable ground and for relief under Section 168A of the Ordinance. The subsequent introduction of the UC2 accounts and evidence has in part assisted the Petitioner on the one side to mount a claim to 50% interest in the two companies and the Respondent on the other to claim that the Petitioner has no interest in the two companies. For reasons which I will come to, I reject both these submissions.

25. The major piece of evidence which forms the basis for the contention that UC2 was anything other than an equal partnership between the three persons are first of all what appears to be a compliments slip of UC2 on which is written in handwriting the following table:

This notation was said to be in Mr. Tsui's handwriting. The figures $115,519.04 and $99,016.33 reflect entries in the UC2 books of account. What they appear to be is an approximation that was made in March 1982 of the profits of UC2. These were not realised profits. No doubt this method of accounting would similarly be anathema to a qualified accountant but the Petitioner, the Respondent and Mr. Tsui were not accountants.

26. The division, on a calculation, is in the ratio of 35:35:30. UC2's books record these as separate to the drawings which had otherwise been made by the Petitioner and Mr. Tsui and, indeed, Mr. Boon. According to the accounting evidence it is unclear on UC2's record whether these profit entitlements were allocated in addition to the drawings already made or whether those drawings were to be offset against the profits of $115,519.04 allocated to each of the Petitioner and Mr. Tsui. What seems to be in agreement between the two sets of accountants is that this figure of profits could only have been a rough estimation and was not in fact the true figure of profits in respect of UC2. I might add, though, that the approximation was not too far from what has been calculated to have been the real figure.

27. The emergence of the significance of these documents caused the Respondent, in February of this year, to change his allegation that there was an agreement that each of himself, the Petitioner and Mr. Tsui would receive equal 1/3 shares of the profits derived from his investment of $200,000.00 in a business in which Mr. Chau's was also on investor, to an allegation that the profits of UC2 were to be spilt 35:35:30 in view of the work which the Petitioner and Mr. Tsui put into the running of that business.

28. It is the Respondent's case that it was his understanding that the $200,000.00 investment which he placed was to be placed in a company in which the only other shareholder was Mr. Chau. He alleged that the Petitioner and Mr. Tsui were to benefit out of his share of the profits.

USINE GARMENT FACTORY LIMITED

30. In 1980, a further company was set up under the name Usine Garment Factory Limited (which I shall also refer to as Factory). The shareholding in that company was held as to 50% in the name of Usine Company Limited and the remaining 50% in Mr. Boon's name. What is clear on the evidence and seems to be common between the accountants is that there was a close link between the finances of UC2 and those of Usine Garment Factory Limited. For the purposes of this case I find it unnecessary to examine them in any great depth save to say that it seems to me that there is a strong argument for saying that prior to 1982, the shares in Usine Garment Factory Limited which were in Mr. Boon's name were probably held on account of UC2. It is unnecessary to come to any concluded view because the events of 1982 changed the shareholding and indeed ownership of the companies at least in part.

31. Little was said in the evidence specifically about Factory's business. It seems to have been an extension of the already existing businesses. Again, it must have been the intention of all parties that Ms. Chuan would run that business. Although she had no direct shareholding in Factory, she had indirect interests through UCL and UC2.

MR. CHAU'S DEPARTURE

32. In early 1982, Mr. Chau announced his intention to emigrate and his wish to retrieve his investment from the business. In view of the feature to which I have already alluded, namely that UC2 did not have any premises of its own and was to a large extent carrying on business at the expense of UCL, the matter no doubt posed a situation which required resolution on the part of the proprietors of UC2.

33. Initially Mr. Tsui was to stay on as a participant in the business. Apparently, he had at first suggested that he and the Petitioner could buy out Mr. Chau provided that was done over several instalments. Mr. Chau, however, wanted to be bought out quickly. For this reason, the Petitioner turned to Mr. Boon as a source of funds to do so. It was agreed that Mr. Boon would purchase Mr. Chau's 50% shareholding in UCL. The bought and sold note relating to Mr. Chau's shares only instances the payment of $150,000.00. That fact is used as a partial basis for the allegation that the $300,000.00 payment (giving an allowance of $25,000.00 because there had been dealings with a company by the name of Hing Fat Company Limited) which Mr. Boon paid Mr. Chau was in respect of all the shares of UCL. It is the Respondent's case that the shares held by Mr. Tsui and the Petitioner were held in trust for Mr. Chau since it was Mr. Chau who had provided all the finance.

34. I regret that the analysis that is put forward on behalf of the Respondent appears to me, again, to be an ex post facto attempted reconstruction of what it is considered must have happened. Mr. Lovell, one of the accountants called on behalf of the Respondent, points to the fact that on an accounting basis no one would have paid $300,000.00 for 50% of the shares in UCL. That may be correct but it highlights in my view the appropriateness of the attack on his experience which is made against Mr. Lovell's evidence. Academically he may be correct as to his calculation but his enthusiasm for his client's case unhampered by caution drawn from experience have led him to draw conclusions which I do not. Practically, what he says loses sight of whether Mr. Boon ever saw any accounts of UCL. I would be most surprised to learn that he had studied any books or accounts in any great depth. Indeed when he was shown the up-to-date accounts of UCL it appeared that the accumulated losses which are now shown in those accounts came as a source of considerable surprise to him. In view of the fact that he is and has since 1990 been the only effective director and certainly in control of UCL, I have no hesitation in saying that I doubt that any knowledge he had of the accounts of the company at a time when he had very little involvement in the running of the business was anything other than the most cursory and rudimentory.

35. It should not go unmentioned that Mr. Lovell's evidence, in particular, in many instances went far beyond what could be regarded as expert evidence that should be given by an accountant. It is the office of expert evidence to instruct the Court about the meaning of technical expressions and the technical aspects, to clear ambiguities. In relation to accounts it may be impossible for a Court to understand the relevant accounts without instruction as to the rules and process of accounting, in other words without expert assistance. It is for the Court having understood the technical evidence to draw its own conclusions of fact as to what did or did not occur. Under the Evidence Ordinance, Section 58, it is now permissible for expert witnesses to give their opinion on issues. To that extent the full rigours of the rules of exclusion enunciated for example by Neville J in Joseph Crossfield & Sons Ltd. v. Techno-Chemical Laboratories Ltd 30 RPC 297 at 309-10 and by Lord Tomlin in British Celanese v Courtaulds 52 RPC 171 at 196 have been removed. On the other hand there are still limits as to what it is relevant for an expert to say. In receiving evidence which comprises opinions as to issues the Court must be careful not to allow its function to be usurped by the expert.

36. It is not the function of an accountant giving expert evidence on accountancy matters to attempt to give evidence as to whether one of the parties to the action did or did not pay a particular amount for an interest in a business if that is founded upon his assessment of the probabilities as he sees them. Certainly the accountant may give evidence as to what the value of a business was at a particular time and may explain various bases for calculating that value. It may also be highly relevant to know how people calculated the value of businesses at a particular time if that differed from current day approaches to valuations. But it is for the Court to assess what and why a person paid what he did for a business, particularly if that is a matter of assessing the weight of other evidence.

37. Still less is it a witness's function to tell the Court what his opinion is as to the relative veracity of conflicting versions of historical facts. That is the function of the Court, armed in appropriate cases with all the relevant accountancy and statistical information. In this case in more than one place in his report Mr Lovell attempted to give evidence as to what the Respondent had told him and then draw conclusions as to what was the most likely state of affairs on a balance of probabilities as to which of the Respondent or the Petitioner is correct in what they say, be it about having received money or whatever. That went far beyond any legitimate function of an expert witness. The assessment of what the parties and the witnesses have to say has to be made by the Court, in the light, of course, of the evidence as to what the accounts show on a proper reading.

38. In my view, in effect Mr. Boon paid $300,000.00 for the 50% share in UCL. At the time he would have been aware that had he not done so steps would have had to have been taken to preserve the business of UC2. It was making a profit at the time. There was no doubt good sense in keeping the goodwill relating to UCL, as well as its business facilities, in order to be able to preserve the overall business. The figure of $300,000.00 which Mr. Boon paid was one which on the face of it would not have appeared to be unnatural. Mr. Chau had paid that figure, had seemingly received no material benefit from it and no doubt wanted his investment back. Quite who did the negotiating with Mr. Chau I am not clear. I have no doubt that in the first instance it was the Petitioner but probably at the end the Respondent discussed the matter with Mr. Chau directly.

INITIAL ARRANGEMENT IN MARCH 1982 BETWEEN

THE PETITIONER, THE RESPONDENT AND MR. TSUI

39. The compliments slip with the calculation to which I have referred above can, at least to some extent, be shown to have been implemented. Trace has been found of at least one cheque of $9,480.96. The parties are in some disagreement as to the reason why the notional profits allocated to the Petitioner and Mr. Tsui plus an additional sum should have been transferred to Mr. Boon. The Petitioner's case is that it was for a purchase by herself and Mr. Tsui of the balance of the interest in the two companies UCL and Factory to bring each party's respective interest up to 1/3. The Respondent's case on the other hand, is that the Petitioner and Mr. Tsui were each purchasing a 25% interest in the companies. The Respondent's case is that the amount of $200,000.00 which had been put into UC2 and the $300,000.00 which he had paid Mr. Chau for his shares in UCL would total $500,000.00 which in effect was the only capital that had been put into the company. Hence the transfer of $125,000.00 by each of the Petitioner and Mr. Tsui by the transfer of the interests in the profits of UC2 and the additional payments of $9,480.96 represented 25% of what Mr. Boon had put into the business.

40. My view of the matter is that the initial arrangement which was come to between the Petitioner, the Respondent and Mr. Tsui was somewhat complicated. Both parties are partially correct. It seems to me, however, most likely that Mr. Boon did take the view that if he were in effect to rescue UCL and the whole business venture, he should have the largest portion i.e. 50% of the shares and that the profits which had been built up in UC2 should in effect be his. Both the Petitioner and Mr. Tsui always had 25% of the shares of UCL and a derivative interest in Factory. They would be keeping their existing interests in UCL and regularising their derivative interests in Factory by having a direct corresponding shareholding.

41. Whatever arrangement was come to did not last long however. Mr. Tsui quickly made known his intention to depart. That intention was probably known to or suspected by Mr. Boon soon after the initial arrangement was arrived at. Mr. Boon had departed for Singapore but apparently conscious of the fact that Mr. Tsui was not altogether happy and also, apparently, somewhat distrustful of the fact that Mr. Tsui might be a disrupting influence.

42. Soon after the Respondent returned to Singapore, the Petitioner telephoned him on about the 22nd March and informed him that Mr. Tsui wished to leave the business. Mr. Boon returned to Hong Kong at which time it emerged that Mr. Tsui had helped himself to some $80,000.00 from the company's accounts. He was forced to repay that and, it seems, Mr. Boon bought him out as well. I hold on the balance probabilities that Mr. Boon paid Mr. Tsui the sum of $160,000.00 in two cheques, one of $125,000.00 and one of $35,000.00. There was some dispute between the parties as to whether one of the cheques was for $80,000.00 or $125,000.00 but from Mr. Boon's bank account it seems that it was for $125,000.00.

THE AFTERMATH OF THE PURCHASE OF MR. TSUI'S SHARES

43. The real bone of contention between the parties lies in what happened after Mr. Tsui was bought out. It is the Petitioner's case that she and the Respondent in effect became joint partners and owned each of the two companies as to 50%; the payment to Mr. Tsui having been accomplished in part from assets of the joint partnership. It is Mr. Boon's case that after Mr. Tsui was bought out he agreed with the Petitioner that she could retain 25% of the profits of the companies but that he would pay her out a like sum to that which was paid to Mr. Tsui. It is the Respondent's case that the Petitioner was paid the sum of $165,000.00 to this end. One of the curiosities of the Respondent's case is that it was never explained to me why the Respondent should be paying Mr. Tsui $160,000.00 and the Petitioner $165,000.00 for something which on the Respondent's case he had, the week before, been paid $125,000.00.

44. It was to this part of the case that a great deal of the "evidence" of Mr. Lovell was directed. I have to say, however, that I regard it as an ex post facto ferreting around amongst stale and difficult to understand accounts which I find totally unconvincing. As I have indicated the accounts were agreed on all sides to be convoluted and that is a conclusion to which I certainly come. The fact that Mr. Lovell has found that between May and August 1982 what he regards as discrepancies to the tune of $165,000.00 leaves me to commend him for his assiduousness in trying to construct a case on behalf of his client, but its accuracy is I regret more than suspect.

THE LOVELL ANALYSIS OF $165,000.00

45. The first observation which I would make in respect of the purported reconstruction of the payment of $165,000.00 is that the figure is clearly curious in view of the fact that it is the Respondent's case that Mr. Tsui was paid $160,000.00. No explanation has been given for this discrepancy nor for the reason as to why it is alleged in what I take to be the Respondent's latest version of allegations that the Petitioner took the sum over a period of time.

46. The figure of $165,000.00 is made up of a figure of $20,000.00 which was taken from the Petitioner's factory DCA (Director's Current Account), a figure of $30,000.00 which was paid to Crown Motors Limited, two cheques of $40,000.00 and $30,000.00 respectively which were paid on or about 17th May 1982 into the Petitioner's Bank of America account and finally a figure of $45,000.00 which was debited from the Petitioner's DCA in Factory.

47. I will refer first to the sum of $20,000.00 which is recorded as having been withdrawn on the 1st of May 1982 from the Petitioner's Factory DCA. Although in his report Mr. Lovell traces the amount of $20,000 as being so withdrawn, the accounting entries are more easily comprehended in Mr. Chubb's report. There were 2 journal entries on the 1st May 1992, one a debit to Ms. Chuan's Factory DCA and the other a credit to Subcontract income. However, the entry has written beside it in Chinese "received on behalf of Usine Co. Ltd part of the funds." When that is coupled with the fact that that UCL's records show a payment from its Chekiang First Bank Account of $20,000 on the 4th May 1982 that was apparently against a subcontract charge account, it can be seen that the hand-written entry has something wrong about it. I put it to Mr Lovell that I found it baffling and he agreed with me and could not really take the matter any further. I would note here that unlike the UC2 accounts, the company accounts were written up by a bookkeeper who was the wife of the auditor.

48. Mr. Lovell's report concludes with the statement that the debit in the DCA indicates to him that either the Respondent or the Petitioner received this sub-contract income in cash. He says that he searched the Respondent's bank statements and could find no trace of a relevant entry. He takes into account the fact that the Respondent has told him that he did not receive the money and then concludes "On the basis of my findings, it appears likely therefore that Chuan received this money". I do not regard that as sufficient evidence to show receipt of money although it does give rise to some suspicion. But before proceeding I note again that I am not altogether happy with the accounting entries, as I have indicated they cannot be entirely accurate. More importantly neither Mr. Lovell nor Mr. Chubb could find any trace of the sum having been received into one of the Petitioner's accounts.

49. The Petitioner adamantly averred that she never received this money. In the light of all the other evidence, I accept her evidence. I emphasize that it must be on a balance of probabilities primarily because the events took place some 14 years ago. I could not expect any witness to have perfect recollection of details of banking transactions that long ago. In the circumstances of this case, as I outlined, I am cautious as to the witnesses' recollections. Nevertheless, the financial dealings between the parties were somewhat abnormal and with the passage of time and of course the partial recording of such transactions, in hindsight they become more complex.

50. The next sums to which Mr. Lovell refers as having been received by the Petitioner all related to a figure of $100,000.00 which was a balance which appeared in Mr. Boon's DCA in UCL. On the 14th May 1982, a cheque in the sum of $30,000.00 was paid to Crown Motors Limited. There is no doubt that this cheque was the deposit for a new car purchased by Mr. Anthony Mak. He is the younger brother-in-law of the Petitioner. He is also for the same reason the younger brother-in-law of the Respondent's wife. The Petitioner said that she could not remember the exact events in respect of this cheque but either Mr. Boon had instructed her to pay the $30,000.00 by way of deposit or in any event he would have been asked. The Petitioner also said that the $30,000.00 had been repaid to Mr. Boon. There was no reference to that in any of the company books but that I do not find that surprising since it, in effect, would have been a private loan by Mr. Boon to Mr. Mak and the company would have had no further involvement in it. Again, at this juncture one cannot be certain. Mr. Mak was not called by either party. It could be said that if there had been an unauthorised taking of the sum of $30,000.00 which had benefited Mr. Mak and he had not repaid it he was hardly likely to be a willing witness on behalf of the Respondent. Nevertheless, I have to take into account the fact that no doubt this case has caused considerable difficulty within the family of the Petitioner and the Respondent's wife. Seemingly, none of the other family members have taken any part in this case. Looking at the matter in the round, however, I see nothing surprising in the fact that the Respondent may have agreed to lend his wife's brother-in-law $30,000.00 in 1982 as the down payment for a car. I accept what the Petitioner says that the payment was authorised. I consider that in all likelihood, the money was repaid as well.

51. The two sums of $40,000.00 and $30,000.00 which were withdrawn from the Respondent's DCA in UCL on the 17th and 20th May 1982 were admittedly paid into the Petitioner's Bank of America account. The Petitioner was adamant that the sums were accumulated and then paid to the Respondent. She could not remember the details specifically as to why the money was paid into her account in the first place. She could not remember exactly when it was paid to Mr. Boon nor whether it was paid in Singapore currency or Hong Kong currency but she was sure that it was paid by the end of May when all accounts were settled. Again I accept the Petitioner's evidence in respect of this. I could not detect a trace of semblance when she gave her evidence. The way the finances of this company were handled both in 1982 and thereafter specifically with the Respondent deriving benefit from the company for example on the occasions of his visits to Hong Kong and indeed from time to time with what might be regarded as personal expenditure is consistent with what the Petitioner has said.

52. The final sum was the amount of $45,000.00 which was taken from the funds of Factory on the 11th August 1982. The credit appeared in the Petitioner's DCA with Factory. That credit was acknowledged to belong to UC2 and therefore either belonged to the Respondent or on the basis that UC2 had been merged with UCL it belonged to the Company. When the Petitioner was first asked about this payment of $45,000.00 again she said that she did not take this money: she specifically denied that she took it personally. When asked where the $45,000.00 had gone she said that she might be able to find that out if she could look at the "black book". At this juncture I would note that the Petitioner was in the habit of keeping "black books" which reflected the transactions in the various bank accounts of the companies and businesses. These were informal records which the Petitioner kept in black exercise books. These books were exhibited. She did not keep similar black books in respect of personal accounts. The black book which she was shown whilst in the witness box on that occasion related to the Metropolitan Bank and was of no use. Later in the case it was discovered that there was a reference in the Chekiang First Bank Limited black book and the Petitioner was recalled.

53. It was confirmed that the Metropolitan Bank was not the relevant bank. This was not appreciated when the Petitioner was first giving evidence because the cheque for $45,000.00 had been paid in on the 11th August 1982 to an account in the name of Usine Company at Chekiang First Bank Limited. This on the face of it was strange particularly in view of the fact that that bank account does not appear to have been used very much in the past and secondly because at that stage Usine Company (UC2) had ceased to be a trading entity. Moreover, the relevant bank statement was not one which was contained with the other statements which had been disclosed on discovery.

54. Whilst the position was taken on the Respondent's behalf that there was something deliberate in the failure to produce that bank statement I do not so hold. There are grounds for supposing that statements may have gone astray. I would add that even when further copies of the statements of this bank account were obtained it seems that some sheets were missing; one was subsequently retrieved apparently from the floor of the copying machine room of the Respondent's solicitors, it was subsequently marked R6 but a crucial sheet namely that relating to December 1982 was never, so far as I am aware, located.

55. The black book reveals that the sum of $14,530.00 and two sums of $5,000.00 were spent on decoration expenses. In respect of the larger sum this included a sum for air-conditioner and refrigerators. The larger sum and one of the $5,000.00 sums was apparently spent on Dragon Court which was the flat which the Respondent and his wife had purchased and in which the Petitioner and her mother lived. The sum of $30,610.00 is marked as having been spent for "C8 deposit". This was a flat which the Petitioner and her younger brother had purchased. However, the black book also reveals that that sum was credited back in the books on the 8th December. It also reveals that a large part of that money was spent on the balance of decoration costs at Dragon Court, payment for sofas and crystal lamps put into the Dragon Court flat. There was some argument as to whether it was the Petitioner who benefited from it since she was living at Dragon Court or whether it was the Respondent. This is a moot point since clearly some of the items were left in Dragon Court in 1989 when the Petitioner moved out. Account also has to be taken of the fact that the Petitioner's mother lived in the Dragon Court flat. On the face of it, it was no more the Petitioner's responsibility to provide her mother with accommodation than it was the Respondent's wife's responsibility. Furthermore, I consider that the reality of the situation is that the Respondent would have been well aware of the expenditure and had approved it in respect of this flat in which the Petitioner and her mother lived and from what I gathered from the evidence, the Respondent and his wife were wont to visit if not stay in when they came to Hong Kong.

56. Of this figure of $45,000 the only part which went to the Petitioner was one of the payments of $5,000 shown on page 97 of the Black Book. Interestingly that was a payment for decoration expenses of the Petitioner's C8 flat and it appears to correspond to a payment of the same amount in respect of decoration expenses of the Respondent's Dragon Court flat. In this respect on another occasion as well the funds in this bank account seem to have been treated as belonging to the Petitioner and the Respondent equally because in November 1987 there was a payment to each of $17,934 reflected in the Chekiang First Bank account statement.

57. The upshot of the matter is that I am very far from satisfied that this sum of $165,000.00 was taken by the Petitioner in 1982. Since this is the main plank of Mr. Lovell's contention that the shares in both UCL and Factory belonged to Mr. Boon, in my view, his case, in that regard, must for that reason alone collapse.

PREPONDERENCE OF PROBABILITIES

58. I have so far attempted to distill the major parts of the factual contentions of the parties without, I hope, becoming unnecessarily involved in intricate details of accounting matters which in my view at this stage are unresolvable. Nevertheless, I consider that on the preponderance of probabilities, given the basic facts, the conclusion that I would in any event come to is that the shareholdings of the Respondent and the Petitioner in the two companies, namely UCL and Factory, were held in the ratio of 75 to 25 and that the Petitioner held her shares beneficially.

59. In the first place, the Petitioner has always held the 25% shares in UCL and even after the major reconstruction in 1982, she continued to so hold it beneficially. As regards Factory, there was a deliberate transfer of 25% of the shareholding to the Petitioner after Mr. Tsui left in 1982 and, in my view, this is highly indicative of the fact that she was intended to so hold it. Furthermore, right up until 1986 as far as the relationship between the Petitioner and the Respondent was concerned, the Respondent was the major financier of the operation but the Petitioner was the operative part of it. It was she who attracted the business; it was she who set the business up; it was she who ran the business. I also accept her evidence that at times she lent money to the business. I cannot imagine that a person in her position would do otherwise than arrange matters in such a way that she had a significant and substantial interest in the companies the businesses of which she clearly regarded as coming from and being run by her.

60. Finally, in so far as dividends were paid over the years, particularly the major dividend which was paid in 1988 some confirmation of a beneficial holding of 25% is gained. On that occasion Mr. Boon required something in the order of a million dollars to pay for a flat in Singapore and the Petitioner insisted on getting her 25% share of what was being paid out. Apparently the accountants then advised to declare this as a dividend and that was done. All in all, I see nothing in the way the companies were conducted otherwise than is consistent with the Petitioner obtaining a 25% beneficial ownership.

61. It is impossible of course to be categorical about this because the Petitioner was at certain times paid a salary. Quite what she was paid in salary seems to have varied from year to year. This is also complicated by the fact that the Petitioner's mother was also paid a salary and a salary was credited as having been paid to Mr. Boon's mother as well. It transpired though that some of these amounts were paid into what was called the joint savings account. The purpose of this account was to be some form of a buffer which could be used to absorb excess funds which the companies did not require at the time, but which were redirected back to the companies as and when they were required. This, again, was yet another aspect of the convoluted way in which the finances and accounts of the companies were kept.

62. In summary, I have no hesitation in reaching the conclusion as to the relative shareholdings of the Petitioner and the Respondent from 1982 onwards: the Petitioner held 25% of each of the companies and the Respondent held 75%.

CONDUCT OF THE BUSINESS AFTER MARCH 1982

63. After the retirement of Mr. Chau and Mr. Tsui from the business, Ms. Chuan continued to run the business and, as before, I consider that everybody concerned in this case, namely by now the Petitioner and the Respondent, operated on the basis that Ms. Chuan would be the person who ran business.

64. From 1982 until 1986 little of importance appears to have taken place. The Petitioner and the Respondent appear to have been on good terms. The Respondent appears to have received certain benefits from the companies and it appears that on his visits to Hong Kong he received payments in cash or payments were made on his behalf at the companies' expense. It is suggested that the Petitioner also received payments. Again it seems to me to be a reasonable conclusion that she did and I have little doubt that she received payments which were commensurate with her 25% shareholdings.

65. In 1986, Mr. Schliessman died. Up until his death he was the introducer of business to the companies. From what I gather all the clients of the companies were Mr. Schliessman's clients. It was at that stage that the Respondent then began to take an active interest in the affairs of the companies. Primarily he was involved in securing orders. He took it upon himself to travel to Germany to see customers and to secure orders. No doubt during the course of some at least of his visits he also took the opportunity to have a holiday and apparently the Petitioner accompanied him on some visits together with his own family. The expenses of these trips came from the companies.

THE ADVENT OF MRS. KROTH

66. In 1988, the Respondent introduced Mrs. Kroth to the companies. Mrs. Kroth had previously been working for one of the German customers but she was enticed to come away and work for the companies. She seems to devote her time now, and has since 1988 devoted her time, solely to the companies' business. She is a forthright person, clearly efficient in her manner. She, like the Petitioner and Respondent, has no doubt set ideas as to how matters should be conducted. The Petitioner marks the start of the breakdown between herself and the Respondent at about the time of the introduction of Mrs. Kroth. I consider that that is probably right although not quite for the same reasons as attributed by the Petitioner. It seems to me that there was considerable misunderstanding between Mrs. Kroth and the Petitioner. This exacerbated the fact that Mrs. Kroth's set ideas extended to how the manufacturing process should take place.

67. Whilst giving her evidence in a straightforward and firm manner, Mrs. Kroth became distinctly flustered and hesitant when asked about her relationship with the Petitioner. This was very obvious when she was asked questions by the Respondent's own counsel when giving her evidence in chief as well as when she was asked about the tone of some of the correspondence in cross-examination. In the upshot, I consider that there was probably a good deal of miscommunication between Mrs. Kroth and the Petitioner. Both no doubt have a command of English but for both English is not their first language. When German expressions are translated too literally into English, they may have the appearance of being dictatorial or indeed unfriendly. The same expressions spoken might not have quite that connotation. In her evidence Mrs. Kroth was very frank that she had not previously been involved in manufacturing. Her precise nature and her methodical approach may have generated a misunderstanding when she was addressing the difficulties actually encountered in manufacturing. This may have caused the Petitioner to feel aggrieved.

68. The Respondent's attitude is that the introduction of new methods including in particular the production schedule and different costing sheets was necessary. He explained at some length the fact that production delays over promised times for delivery were something which in his view caused the companies to lose a considerable number of customers and goodwill. It is very difficult for me to make up my mind about that save that I do observe that, for the large part, during those years when the Petitioner was involved in the management of the companies, taken together the companies did appear to be making healthy profits. Whatever the shortcomings of her planning and management, clearly goods were manufactured and the end product was delivered, albeit perhaps late on occasions.

69. The Respondent, as I have indicated, was highly critical of the Petitioner's method of calculation of costing. In one instance complaint is laid because the Petitioner forgot a particular item from the calculation of the price of a garment. I do not draw any adverse inference from that, mistakes can always be made. When the Petitioner discovered the mistake on that occasion, she faxed to Mrs. Kroth and indicated the mistake and that if it were too late to rectify the situation, the costs would have to be borne by the company. It seems to me that this was a perfectly reasonable approach in the light of the admitted mistake. However, when the Respondent's own costing schedules were examined it seemed to me that they suffered from just as many defects as those of which he complained in the Petitioner's. He could not explain to me some of the calculations on the sheets. In respect of some of the figures there was clearly guesswork involved.

70. From the period of 1988 through to the end of 1989, it is clear that the relationship between the Petitioner and the Respondent deteriorated. The Petitioner could give no explanation as to why the Respondent should have changed his attitude towards her although there was a tendency to attribute the cause of the breakdown to the advent of Mrs. Kroth on to the scene.

71. The Respondent on the other hand attributed any changes that took place to the Petitioner's expressed intention to emigrate to the United States. There is no doubt, and it is indeed the Petitioner's case, that she made no secret of the fact that she would eventually wish to emigrate to the United States. She herself, and Mr. Boon agreed that this was so, offered to resign in about December 1988 when Mrs. Kroth complained about her performance.

72. The Respondent says that after 4th June 1989, the Petitioner became particularly anxious and was almost in a state of panic. He says that the difficulty was such that he was afraid that the Petitioner would leave Hong Kong and hence the management of the companies at any time. It was therefore necessary for him to take over the running of the companies. In July of that year he effectively took control of the banking books and cheques of the companies. He kept those in a drawer in his desk. They were accessible by the Petitioner but in effect they were taken out of her control. The Respondent would come to Hong Kong twice a month to sign the cheques for staff wages.

73. The Petitioner felt that she was being sidelined. It is no doubt true that with the advent of Mrs. Kroth came the increasing involvement of and interference by the Respondent and Mrs. Kroth with the manufacturing and supply side of the business and the Hong Kong operation generally.

74. At about the same time a new arrangement was made for delivery of goods to Mrs. Kroth in Germany. Previously all goods which had been sent to Germany were to meet specific orders for specific clients. Because of the downturn in business and to make use of some materials which the companies had, arrangements were made, primarily it seems between Mrs. Kroth and the Respondent, to have garments manufactured in Hong Kong and delivered to Mrs. Kroth in Germany for sale as and when she found a buyer. This episode again generated difficulties between the parties largely, it seems to me, through bad, or a lack of, communication. In the first place, it seems that the Petitioner was not aware of the new arrangement and caused consternation by sending repeated fax reminders for payment. The Respondent on the other hand felt that this was unreasonable as the goods were on consignment. It was not until Mrs. Kroth was in the witness box that it emerged that in effect all shipments of goods to Germany which were arranged by Mrs. Kroth were recorded as being "payment terms on consignment". This was to distinguish those where the payment terms were letter of credit. Hence the presence on the documentation of the words "on consignment" did not, as the Respondent thought it did, convey any special meaning to the Petitioner because the words had been on the documentation of most, if not all, previous transactions.

75. Mutual distrust was perpetuated when the Petitioner believed that significantly lower prices were being charged in respect of goods sold to Mrs. Kroth on consignment. Information had been passed to the Petitioner by those working within the companies. At first blush that might seem accurate, but as it transpired the arrangement was that instead of being paid on commission, Mrs. Kroth would take her profit from the mark-up on the goods which were sold and the prices at which they were sold were a matter for Mrs. Kroth and did not affect the company at all.

76. The initial intention was that Mrs. Kroth should operate what in effect was a branch office of the companies in Germany. It seems that tax advice at the initial stages was that Mrs. Kroth's operation should be, and should evidently be seen to be, quite separate from that of the companies. For that reason instead of using the name Usine, Mrs. Kroth used the name Firma Babette Kroth.

77. The exact intricacies of how her commission was calculated are not important. It seems that apart from the initial set up expenses which were dealt with separately, she invoiced the companies for the time and costs which were spent. Overall, however, she was entitled to a percentage of the business which she brought in. That appears to have increased over the years from 10% to something like 13%. The Petitioner has been concerned that excessive costs had been run up by reason of this. Looking at the charts which were produced, namely P6A and P6B, which are a distillation of the companies' accounts, there is no doubt in my mind that the selling expenses over the years have increased particularly in 1988 and thereafter, despite the fact that there appears to have been a significant downturn in turnover. To that I do not attribute any mishandling of finance or levying of unentitled costs on the part of Mrs. Kroth or the German operation but simply that the method by which, particularly in Germany, the sales were handled was and became increasingly significantly more expensive than previously.

78. Further difficulty seems to have come with the appointment of a Miss Wong as factory manager. According to the Respondent, the Petitioner was ungracious to say the least when the Respondent appointed Miss Wong as the factory manager after the previous manager had left. According to the Respondent, Mr. Poon who was the newly installed financial advisor of the company called Mr. Boon in Singapore and told him that he had better do something about the factory. The Respondent then inquired as to what and said that he thought that the team that they were putting together should be working very well. Mr. Poon then said that this was not so and that Miss Wong had threatened to resign. When the Respondent inquired further Mr. Poon said that someone was putting pressure on Miss Wong. According to the Respondent he then tried to discover from Miss Wong what was taking place but she was in his words "very vague about all this".

79. These event must have happened around the beginning of December 1989. I say so because the Respondent said that he then sent a fax to Teresa (the Petitioner) saying: "Please do not do it, we try to work as a team." That fax seems to be one which was in fact exhibited to Mrs. Kroth's affidavit. The exact words were:

"Please confine your work to the production plan. DO NOT interfere with Miss Wong's job. If I did not call her directly from Singapore to solve this problem, you would never have done it. From now on study the production plan everyday and follow the production line. Do not give advice. If the production and the factory is not following the plan, let me know. If you had given me the information earlier I would have asked Miss Wong to pay more to get the key workers."

80. Putting myself in the position of the Petitioner, I find this fax amongst others particularly offensive. This was a reply to a fax of the same date which was sent to Mrs. Kroth and the Respondent. It is unnecessary to set out the terms of the fax from the Petitioner but it sets out in perfectly reasonable and understandable terms the difficulties in production and in particular the difficulties in finding more workers. The fax from the Respondent to the Petitioner to which I have already referred starts off:

"Is this again your idea or Miss Wong's idea. For years we have not had enough workers. You were managing the factory and I gave you full power and what was the result? We get less and less workers. I have given Miss Wong power to employ please don't interfere. Let her do her job."

81. The final breakdown between the parties came shortly afterwards when in the Respondent's own words he said that he had discussed the matter with his wife and they decided that they had better go to the factory unannounced. They therefore flew from Singapore to Hong Kong. When they arrived at the factory they saw Miss Hui, who was a secretarial assistant, waving to someone in the factory. The Respondent said he turned around and saw the Petitioner sitting in the first row of sewing machines sewing away. He says that she had her head bowed down. The Respondent says that his reaction was that the factory manager Miss Wong could not possibly control a boss sitting in the factory doing what she likes; he regarded matters as totally out of control. The Respondent's wife then spoke to the Petitioner in the Petitioner's room at the factory. The Respondent apparently was not in the room but says that in effect what happened is that the Respondent's wife told the Petitioner that she would have to leave but that the Respondent and his wife would still take care of her financial needs. Thereafter it seems the Petitioner packed her things and left the factory. The Respondent helped her home and in fact, it seems drove home with her in the same car. At that stage the Petitioner decided that she would leave the Dragon Court flat belonging to the Respondent and his wife and that she did promptly that day. The Respondent says that he and his wife invited the Petitioner to dinner. The Petitioner says she does not remember that but in any event it can hardly have been any surprise that the Petitioner refused that invitation.

82. The Respondent says that no attempt was made as far as he was aware to find out why the Petitioner was sewing at the time. The Respondent repeated on a number of occasions that the Petitioner had claimed that she could not sew and therefore he found it even more inexplicable. Later, the Respondent said that he had been reasonably happy with the Petitioner's performance and that the decision to sack her was a spur of the moment decision that day. I find this impossible to accept. He had already said that he had discussed the question of dismissing the Petitioner with his wife a few days earlier and anybody considering the fax the 9th of December would find it difficult to believe that the Respondent was "reasonably happy" with the Petitioner's performance. Indeed in his affidavits filed, the Respondent went so far as to say that he considered that the Petitioner had been sabotaging the company. When asked about this in cross-examination sometime after he had said that he had been reasonably happy with the Petitioner's performance, he averred that he maintained that the Petitioner had been sabotaging the company. I find the Respondent's approach in this regard to be symptomatic of his very excitable nature. This showed itself during his evidence on a number of occasions, one, at least, of which caused me to have to adjourn the hearing so that the Respondent could compose himself sufficiently to continue with his evidence.

83. After the Petitioner had been sacked she never returned to the factory except to retrieve and examine documents. In March 1990, an incident occurred when the Petitioner was attempting to examine company books. During that incident the Petitioner was knocked to the ground by the Respondent who also fell. As a result the Respondent was charged and agreed to be bound over to keep the peace. The Respondent said he agreed to be bound over in order to shorten matters. That it no doubt did. But on the face of the evidence I consider he rightly agreed to be bound over. Again I consider this incident a symptom of the Respondent's excitable nature.

84. The Petitioner was formally removed as a director in 1990 although, of course, from the time of her expulsion at the end of December 1989 she took no part in the running of the companies other than exercising her right to inspect the books in March.

85. These proceedings were commenced in April 1990 and after a false start in 1991, the matter has become protracted whilst preparation for trial stalled.

86. Since the companies have been taken over by Mr. Boon and effectively run by him they have clearly been "turned around". At the end of 1989, Usine Company Limited had accumulated profits of $1.429m. The latest accounts show that as at the 31st of December 1995, that company has accumulated losses of $1.756m. The position for Usine Garment Factory Limited is that at the end of 1989 there were accumulated losses of $451,897.74 but by the end of December 1995, the accumulated losses stood at $4,692,411.14. The Respondent said this was caused by a downturn in business. That may be correct or partially correct. Certainly the turnover was lower but I cannot tell from the evidence before me what was the real cause of that. Nevertheless, the recent results are far from favourably impressive. Clearly it can be seen that the benefit to the Petitioner of any winding up would be marginal to say the least and not surprisingly Mr. Westbrook on behalf of the Petitioner was concerned to seek relief under Section 168A in preference to an order for winding-up. To a large extent that relief appeared preferable to counsel for the Respondent as well.

87. I would mention in this context that there were two letters written, one in May 1990 by the Petitioner's then solicitors to the Respondent's former solicitors and the other in December 1990 written by the Petitioner's solicitors to the Respondent's present solicitors. In both these letters the Petitioner had suggested that the shares of the two companies should be valued and that the Petitioner should be bought out at a price of 25% of that valuation. Although I enquired during the course of the hearing it does not appear that any reply was ever given to those letters. I would say at this stage that they seem to me to be eminently sensible and reasonable.

88. It does appear to me that the conduct in relation to these two companies has been prejudicial to the interests of the Petitioner. These companies were clearly set up on the basis that the Petitioner would take an active part in the management if not the controlling part in the management of them. Whilst undoubtedly she did have an intention at some stage to emigrate, I do not consider that intention was so imminent that it required her immediate removal at the end of 1989. As I have indicated I consider that the break-up between parties may have been ultimately inevitable given their divergent characters which were difficult to reconcile. It seems to me that the persistent nature of the Petitioner having run the companies in a particular way and not being particularly receptive to change, the excitable nature of the Respondent with what clearly seems to me to have been a growing antagonism with the Petitioner and the intransigent nature of Mrs. Kroth reflecting as it does her strong views as to how the business of the companies should be organised were destined after the Respondent had ceased to have effective sole control and particularly after the advent of Mrs. Kroth, to lead to a breakdown.

89. The origins of Section 168A have been traced by Fuad J. in the case of re Taiwa Land Investment Co. Ltd. [1981] HKLR 297 and by Arden J. in re BSB Holdings Ltd. (No.2) [1996] 155. I have found particular assistance both from these cases and from the Court of Appeal decision in Re Saul D Harrison & Sons plc [1995] 1 BCLC 14.

90. The starting point of the consideration of any decision on the question of the rights of shareholders inter se must be the Articles of Association. But with the introduction of the provision of Section 168A the law now provides that

"A member of a company who complains that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interest of its members generally or of some part of its members (including himself) or, in a case falling within section 147(2)(b), the Financial Secretary, may make an application to the court by petition for an order under this Section."

91. The difference in the wording between this section and s.459 of the Companies Act 1985 reflects perhaps the fact that the provision was introduced earlier in Hong Kong than the United Kingdom. The effect of the 2 provisions seems to be the same. The powers of the Court seem also to be commensurate. Specifically as far as this case is concerned the Court has power to order a purchase of the petitioner's shares either by other members or by the company itself.

92. Thus the legislation now recognises that, whatever the Articles might provide, circumstances may exist which may entitle the Petitioner to say that it would be unfair for the majority to exercise their powers whether in the Board or in General Meeting in a particular way. Neill L.J. pointed out that the words "unfairly prejudicial" should be applied flexibly to meet the particular circumstances of the case. Nevertheless both words have to be given their full force. The conduct has to be both unfair and prejudicial. It is important to bear this in mind since clearly conduct could be one of those things and not the other.

93. The conduct complained of, specifically her removal from the companies and the manner of it has clearly been prejudicial to the Petitioner. She has been deprived of her opportunity to run the companies and further their business. She has been deprived of the perks which seem to go with being a director and a shareholder of the companies. She has had to stand by and watch the companies make substantial losses without being able to do anything about it. It seems to be unarguable that the result of the conduct complained of was prejudicial.

94. The unfairness aspect has it seems to me to be looked first from the point of view of the Articles of the company and, then, in a similar way to the just and equitable considerations explained by Lord Wilberforce in Westbourne Galleries [1973] AC 360 at 379. The agreements and understandings between the members may give rise to legitimate expectations which can be enforced under these provisions.

95. At the end of the day, however, I consider that the Respondent's removal particularly in the manner in which it was from any involvement in the companies and subsequently her removal from being a director was unjustified. An employee would have every right to feel unjustly treated if summarily dismissed without being given a chance to explain. That a director and shareholder should in the Respondent's own words be "summarily dismissed" given the position she had and was intended to have in the companies is unacceptable and the manner in which it was done was not something which the Petitioner should be expected to tolerate. In short, the conduct of which she complains and her subsequent exclusion were unfair. The prejudice which the Petitioner has suffered has been unfair. The Respondent's attempt to attribute the necessity for the Petitioner's removal to her intention to emigrate, as I have said, fails. Any emigration was not so imminent that it necessitated an immediate dismissal. In my view the Petitioner was entitled to a voice in the management of the companies. That is what increasingly she was being denied until the final move came on 29th December.

96. In my view, her shares should be bought out by the Respondent at a fair valuation at the price they would have been worth at the end of December 1989 without any discount for the fact that they are a minority holding. I propose to so order. It can hardly be anything other than correct that if the Respondent should exclude the Petitioner from the companies he should buy her out rather than subject her interest to his own management skills.

97. Had I not ordered relief under Section 168A this case would have been suitable for an order for compulsory winding up under the just and equitable grounds. As I have indicated the special nature of this company particularly after 1982 when the Petitioner, who had set up the companies, continued to run their businesses, gave those companies the particular quality which renders them effectively a quasi partnership. That partnership entailed the Petitioner effectively running the companies and certainly having a major say in the day to day operation. Clearly by breaking that arrangement the Respondent had created a situation whereby the companies were liable to be wound up. Although the companies do have substantial accumulated losses it seems that on a break up there may just be sufficient assets to justify a winding up even though the return to the shareholders would probably be very small.

98. Finally, I should deal with the argument raised by the Respondent that the Petitioner may have unjustly benefited from whole or part of the $165,000.00 which I have dealt above and a sum of $71,832.76 in unaccounted for drawings in the UC2. As I have indicated despite the assiduous manner in which the events and accounts relating to UC2 have been investigated by the accountants, I find a fundamental difficulty in accepting any conclusions which have been drawn from what are clearly such convoluted accounts after such a very long time when the memories of the parties are clearly so incomplete, not to say defective. Suffice it to say that I am not satisfied that the Petitioner has had any unjustified benefits either from UC2 or from the companies which would either debar her from relief or should be taken into account. In this respect I also bear in mind that the Respondent too had significant benefits from the companies, I have no doubt having seen the Petitioner at length in the witness box that she never, intentionally at any rate, took an advantage which she did not consider was rightly hers.

99. I should also mention that there were some small sums of money which were obtained by the Petitioner from old UC2 accounts in 1990. This arose largely from the sale of unwanted quota. The Petitioner took the sums effectively because her means of livelihood had been taken away after being removed from the companies. Those sums, which total $6,661.58 are made up of sums of

100. These sums are all shown in the Black Book on page 56. I accept the Petitioner's evidence that the remaining sums listed as Petty Cash were reimbursement of expenses incurred on behalf of the companies, which expenses exceeded $10,000. In this respect I note that the final balance shown on the bank statement was $1,659.58 but it is apparent when comparing page 56 of the Black Book with the final statement of Account 10-02-01194-1 that $3,000 was intended to be claimed as petty cash rather than $2,000 drawn by one of the cheques. The sum of $6,661.58 should be taken into account in assessing the value of the shares.

101. I have not found it necessary to deal with the operation of Shaw Bong Limited. That was a company purchased at the instigation of the Respondent in May 1990 after the Petitions had been presented to overcome difficulties consequent upon the presentation of the Petition. The fact that the use of Shaw Bong Limited was the wrong way of going about coping with those difficulties has been acknowledged by the Respondent. In view of the Order I propose to make, the existence and operation of this company should have no effect on the outcome and I need say no more about it.

102. In the circumstances I propose to make an Order that the Respondent do purchase the Petitioner's shares in the 2 companies at a valuation as of 31st December 1989 without a discount for there being a minority holding. The valuation is to be made by a suitably qualified accountant to be agreed between the parties within 14 days and in default of agreement to be appointed in accordance with directions which I shall give on the making of the Order. I propose to make an Order that the winding-up proceedings be stayed until after the payment and transfer of the shares and thereafter upon successful transfer of the shares it can be dismissed.