TSE CHONG SANG v. TSE’S BROTHERS CO LTD AND ANOTHER

CACV 371/2018, CACV 372/2018
CACV 391/2018 & CACV 392/2018
(Heard together)

[2021] HKCA 874

CACV 371/2018 &
CACV 391/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 371 OF 2018 &

CIVIL APPEAL NO. 391 OF 2018

(ON APPEAL FROM HCA NO. 1341 OF 2012)

________________________

AND

CACV 372/2018 &
CACV 392/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 372 OF 2018 &

CIVIL APPEAL NO. 392 OF 2018

(ON APPEAL FROM HCA NO. 2401 OF 2012)

________________________

(Heard together)

________________________

________________________

J U D G M E NT

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Hon Cheung JA (giving the Judgment of the Court) :

I. The appeal

1.1   B Chu J tried two actions.  The protagonists of these two actions are two brothers, namely Tse Chong Sang (‘Chong Sang’) and Tse Tai Wing (‘Tai Wing’).  The Judge referred to their two camps as the Chong Sang camp and Tai Wing camp.  

1.2   In the first action (HCA 1341/2012), the plaintiff (‘Tse’s Brothers’) is part of the Tai Wing camp.  The defendants belong to the Chong Sang camp. The plaintiff is the registered owner of an industrial unit in San Po Kong, Kowloon, Hong Kong (‘Unit 16G’).  Tse’s Brothers sued Kinghall Development Limited (‘Kinghall’) and Skygift (Kinghall) Company Limited (‘Skygift’) for vacant possession and mesne profit of this unit. 

1.3   The defence and counterclaim raised by the Chong Sang camp was that Tse’s Brothers held Unit 16G in trust for Chong Sang and Tai Wing in equal shares and also there were various agreements both written and oral between the parties pursuant to which Chong Sang or such persons nominated by him including Kinghall and Skygift were allowed to occupy Unit 16G on a rent‑free basis.

1.4   In the 2^nd action (HCA 2401/2012), Chong Sang sued Tse’s Brothers and Tai Wing based on the same allegations raised in the defence and counterclaim of Kinghall and Skygift in the 1^st action and seeking similar relief mirroring the counterclaim of Kinghall and Skygift in the 1^st action. 

1.5   The Judge upheld the contention of the Chong Sang camp and made a declaration in terms of the contention of the Chong Sang camp. 

1.6   Tai Wing appeals against the Judge’s decision in favour of the Chong Sang camp in respect of the 1^st action (CACV 391/2018) and in respect of the 2^nd action (CACV 392/2018).  

1.7   The Judge further ordered Chong Sang to pay 50% of the mesne profits (which is agreed to be HK$29,000 per month) to Tai Wing/Tse’s Brothers, and 50% of the Related Expenses as from January 2013.

1.8   The Chong Sang camp appeals against this order in respect of the 1^st action (CACV 371/2018) and in respect of the 2^nd action (CACV 372/2018).

II.     Background

1)     Brief introduction

2.1   The brief nature of the litigation is as follows. 

2.2   Chong Sang, Tai Wing and their elder brother (‘Tai Chi’) had been doing business together.  In 1993, Unit 16G was acquired by Tse’s Basketball, a company jointly owned by them.  By an agreement reached in 1994 (‘the 1994 Agreement’), they divided up their business such that Unit 16G was stated to be owned by Tai Wing and Chong Sang.  A day after the 1994 Agreement, Tse’s Brother was incorporated with Chong Sang and Tai Wing as the only two directors and shareholders.  It is common ground that they were also equal shareholders despite a slight variance in their registered shareholdings.  Then, three months later in March 1995, Unit 16G was transferred to Tse’s Brothers.  Chong Sang and Tai Wing had been doing business together through Tse’s Brothers and some other companies.  One of the businesses is a loudspeaker factory located at No 21 Factory.  

2.3   In about 2005/2006,Chong Sang and Tai Wing decided to split up their businesses. Tai Chi was asked by their mother to assist them.  There was no dispute that they entered into the Share Distribution Agreement.

2.4   Chong Sang’s claim is that they had further entered into three other agreements (collectively referred to as the ‘Composite Agreement’), whereby Tse’s Brothers held Unit 16G in trust for them equally.  The three other agreements were described by the Judge as the 3 Disputed Agreements.  Subsequently, the parties made the 2007 Share Transfers to redistribute their ownership in various Hong Kong companies whereby Tai Wing became the sole owner of Tse’s Brothers.  Chong Sang said they further entered into the Oral Agreement whereby it was agreed that Unit 16G was to be occupied by Chong Sang’s camp rent free for as long as Tai Wing’s camp could occupy a factory in the Mainland (‘No 21 Factory’). 

2.5   Tai Wing, however, said there was no Oral Agreement but instead the parties had entered into the Final Agreement whereby the ownership of the Hong Kong companies was settled in the 2007 Share Transfers and the sharing of assets in the Mainland should be negotiated in future.

2.6   In order to understand the case fully, it is necessary for me to refer to the background of the case which is based mainly on the summary by the Judge.

2)     The beginning 1981 - 1995

2.7   In 1981 the three brothers set up a business of reprocessing of plastic products under a company called Tse’s Basket Ball Products Limited/謝氏籃球製品廠有限公司(‘Tse’s Basketball’). Their respective interest in Tse’s Basketball was as follows :

(1)  Tai Chi 40%;

(2)  Chong Sang 30%; and

(3)  Tai Wing 30%. 

2.8   The three brothers had all along worked together to build up their family business until the division in 1994.

2.9   Kinghall was established on about 4 June 1985.

2.10  Chong Sang was mainly in charge of the production side of their business, whereas Tai Chi and Tai Wing were respectively in charge of finance and sales.

2.11   In 1987, the factory for the production arm was relocated from Hong Kong to the Mainland and the production factory then known as「謝氏製品廠」was set up by Tse’s Basketball there.  By a lease dated 7 September 1987 Chong Sang entered on behalf of Tse’s Basketball for the leasing of a piece of land in Jin Sha for building of factory premises thereon, for a period of 25 years commencing from 1 October 1987 and the factories were referred to as the No 1149 Factory and No 1151 Factory.  The lease was later varied or terminated by agreement upon the signing of a new lease on 20 October 1991 in the name of Kinghall for the land for a period of 50 years from 1 January 1992.

2.12   In 1990, a company called Double Faith Industrial Limited/再誠實業有限公司 (‘Double Faith’) was acquired by Tai Wing, and another third party, each holding one of the two issued shares.  Tai Chi was initially the company secretary and later by April 1991 Chong Sang had become the company secretary.  The business of Double Faith included the further processing works in sound speakers/loudspeakers and hi-fi (‘Loudspeaker Business’) and the Loudspeaker Business was since early 1990s operated by Double Faith, initially through a sino-foreign entity set up in the Mainland called Haiyin Electronic Company Limited (‘Haiyin’), with the Mainland shareholder holding 51% and Double Faith holding 49%.

2.13   Unit 16G was purchased in the name of Tse’s Basketball on 21 January 1993 at HK$1,530,000.  On 12 May 1993, Unit 16G was mortgaged to HSBC to secure general banking facilities.  It had been used as an office for Kinghall and still is.

2.14   On 13 March 1994, Kinghall (signed by Tai Wing on behalf of Chong Sang) entered into another long lease with a Mainland Co-operative entity on another piece of land upon which a number of factories were built.  Amongst which two were known as No 21 Factory and No 22 Factory.  Further, as one side of No 22 Factory was on another road and that part of the No 22 Factory has also been called the No 7 Factory.  It was also in about October 1994, that the Mainland company/factory called 深圳市龍崗區坑梓沙田群豪製品廠(‘Kinghall Mainland Company’) was set up by Kinghall which then occupied No 22 Factory.  Part of No 21 Factory was occupied by the Loudspeaker Business (‘the Loudspeaker Factory’).

3)  The first division

2.15   In December 1994, the three brothers decided to formally divide up the businesses and properties of Tse’s Basketball and Kinghall into two : Tai Chi on one part, and Chong Sang and Tai Wing jointly on the other part.  There was a settlement agreement titled「謝氏籃球製品廠有限公司－分股協議書」dated 28 December 1994 entered into by Tai Chi as Party A and Tai Wing and Chong Sang jointly as Party B (‘1994 Agreement’).  It was stated in the 1994 Agreement that upon the terms therein being complied with, Party A agreed to transfer his shareholding/interest in Kinghall to Party B and thereafter Kinghall was to be operated solely by Party B and Party B agreed to transfer their shareholding/interest in Tse’s Basketball to Party A and thereafter Tse’s Basketball was to be operated solely by Party A.

2.16   The date of incorporation of Tse’ Brothers was 29 December 1994, one day after the signing of the 1994 Agreement.  Chong Sang and Tai Wing were the only two directors of Tse’s Brothers, with Tai Wing registered as holding 51% of the issued shares and Chong Sang holding the remaining 49%.  As mentioned before it was common ground that Chong Sang and Tai Wing were equal shareholders of Tse’s Brothers despite the slight variance in their registered shareholding.

2.17   On 30 January 1995, the three brothers signed a further agreement in relation to the share transfers in the two companies.  Subsequent thereto, the three of them executed a deed on 10 March 1995 in relation to the transfer of shares in the presence of Mr. Tai, a solicitor at the firm of Tai, Tang Chong.

2.18   The day before the execution of the deed, on 9 March 1995, an agreement for sale and purchase and an assignment was entered into between Tse’s Basketball and Tse’s Brothers under which Unit 16G was transferred by Tse’s Basketball to Tse’s Brothers at a stated consideration of HK$2,750,000, and further on the same day, the mortgage to HSBC for general banking facilities to Tse’s Basketball was discharged.

2.19   After the division, Tai Chi went on to run his own businesses including Tse’s Basketball.

2.20   It was Chong Sang’s case that after the 1994 Agreement, he and Tai Wing agreed to conduct their respective businesses together and that they had been doing so since 1995 until the later split between them in 2007.  It was also his case that pursuant to the 1994 Agreement, Unit 16G was to be beneficially owned by Tai Wing and Chong Sang in equal shares and Tse’s Brothers held Unit 16G on trust for them.

2.21   There was dispute as to the nature of Chong Sang’s holding of 4,000 shares in Double Faith.  Chong Sang said he was invited by Tai Wing to invest in Double Faith.  This was denied by Tai Wing who said that Chong Sang was all along his nominee in Double Faith.  The Judge found against Tai Wing on this issue.

2.22   Subsequent to 1995, another company called Shinwoo Electronics Company Limited/信宇電子有限公司(‘Shinwoo’) was established.  According to Tai Wing, this company was established by him and a Korean investor to set up a Mainland factory for plastic coating on fabrics, and when the Korean investor withdrew, Tai Wing asked Chong Sang to hold the shares as nominee for him and later in about 1998/1999, they used Shinwoo to invest in properties and there had been no business operation since.  

2.23   Chong Sang’s evidence was on the other hand it was the agreement and understanding between him and Tai Wing that they owned equal stake in their businesses and properties.  In particular, they owned or held equal shares in the following four Hong Kong companies (‘4 Companies’) up until the 2007 Share Transfers (as defined later) :

(1)  Tse’s Brothers

(2)  Kinghall

(3)  Double Faith

(4)  Shinwoo

2.24   In respect of the 4 Companies :

(1)  Tse’s Brothers was responsible for trading business of metal and plastics in Hong Kong and also held investment properties;

(2)  Kinghall was responsible for the production side of Tse’s Brothers through Kinghall Mainland Company, and also held investment properties;

(3)  Double Faith, as mentioned earlier, operated the Loudspeaker Business, initially through Haiyin and later through DHY (SZ) mentioned below;

(4)  Shinwoo was a company holding investment properties.

2.25   The businesses of Chong Sang and Tai Wing appeared to flourish.  On 1 July 2001, Kinghall entered into another long lease where Zhang Feng Factory長豐厰房 (‘Zhang Feng Factory’) is located.  It was Tai Wing’s evidence that the Zhang Feng Factory was adjacent to the No 1151 Factory and that this was purchased by him and Chong Sang jointly.

2.26   On 8 January 2002, Double Faith further entered into another long lease and the Long Tin Factory built thereon was also for the use of the Loudspeaker Business.

2.27   On about 22 January 2003, 大海音電子(深圳)有限公司(‘DHY (SZ)’) was established in Shenzhen as a wholly foreign owned enterprise of Double Faith, for operating and/or taking over the Loudspeaker Business from Haiyin. 

2.28   No 21 Factory was mainly occupied/used by the Loudspeaker Factory and/or DHY (SZ), but part of it, also used as a warehouse by Kinghall Mainland Company.  No 22 Factory was occupied/used by Kinghall Mainland Company, although there were about four buildings on No 22 Land with iron sheet roofs/鐵皮屋 (‘Iron Roof Buildings’) and two of which were used by the Loudspeaker Factory/DHY (SZ) for production of the covering cloth for the exterior of the loud speakers「布車間」(‘Cloth Factory’).

4)  The second division

2.29   Tai Wing claimed that from 2004 there were disputes between him and Chong Sang over their businesses.

2.30   According to Chong Sang, in February 2006, he discovered that without his prior knowledge and consent, Tai Wing had transferred or procured the transfer of Double Faith’s interest in DHY (SZ) to a company called Kingswell Investments Limited/海音投資有限公司(‘Kingswell’), incorporated in Hong Kong on 17 November 2005 by Tai Wing without Chong Sang’s knowledge.  Further, on the same day, Chong Sang was removed as a director of DHY (SZ) without his knowledge and consent and replaced by one Ng Siu Ho (‘Ng’).  Ng is the son of their sister.

2.31   The transfer agreement was dated 20 December 2005 and was signed by Mr Lee as director of Double Faith and Tai Wing on behalf of Kingswell and the transfer was said to be at a consideration of HK$100,000 (‘DHY (SZ) Transfer’).  It was Chong Sang’s case that the DHY (SZ) Transfer was without his authorisation and that his signatures on two Double Faith minutes dated 17 November 2005 approving the transfer and the replacement of himself as a director and Ng’s appointment as director of DHY (SZ) were forged (‘Forged Minutes’). 

2.32   Tai Wing admitted that Chong Sang’s signatures on the Forged Minutes were signed by him on behalf of Chong Sang, and his explanation was that this was because Chong Sang never had any beneficial interest in Double Faith and was only holding 4,000 shares as his nominee, and that Chong Sang was only appointed as a director of DHY (SZ) because he was a registered shareholder of Double Faith.  As stated earlier, the Judge rejected Tai Wing’s allegation that Chong Sang was merely a nominee shareholder for him.  The Judge further rejected Tai Wing’s later allegation that he only agreed to Chong Sang having equal shares in Double Faith/DHY (SZ) after repayment to Tai Wing of his initial capital investment.

2.33   Thereafter, the two brother’s relationship deteriorated and Chong Sang proposed to Tai Wing to split up their businesses.  In the process, Tai Chi was asked by their mother to assist Chong Sang and Tai Wing in their separation.  According to Chong Sang, Tai Chi was the agent of Tai Wing, and on his behalf had entered into four agreements (‘4 Agreements’) which formed part and parcel of a composite agreement (‘Composite Agreement’). It was Chong Sang’s case that under the Composite Agreement, amongst other things, Unit 16G was agreed to be owned by Chong Sang and Tai Wing equally.

2.34   It was also Chong Sang’s case that Tai Chi had taken the 4 Agreements to the solicitor Mr Tai, and that subsequently there were various share transfers effected in 2007 (‘2007 Share Transfers’), and that shortly before the execution of the relevant transfer documents, an oral agreement was also reached between Chong Sang and Tai Wing (through Tai Chi) whereby it was confirmed and agreed that, amongst other things, Unit 16G was to be owned by Chong Sang and Tai Wing equally and that Chong Sang and/or persons nominated by him could occupy Unit 16G rent free for as long as Tai Wing/Loudspeaker Factory and/or persons nominated by him could occupy No 21 Factory/Loudspeaker Factory pending further resolution on or after 31 December 2011 (‘Oral Agreement’).

2.35   On the other hand, Tai Wing’s evidence was that, save for the Share Distribution Agreement (as defined later), it was only in May 2007 when he, Tai Chi and Chong Sang went to Mr Tai’s office that he first saw the other three of the 4 Agreements, namely the 1^st Agreement, the 2^nd Agreement and the Addendum (these documents were collectively referred to as ‘3 Disputed Agreements’).  It was Tai Wing’s case that he had never authorised Tai Chi to enter into the 3 Disputed Agreements on his behalf and that he had never agreed to the terms thereof.  Tai Wing denied there was the Oral Agreement. The Judge accepted Chong Sang’s case of the Oral Agreement.

2.36   Further, according to Tai Wing, Mr Tai had advised those present that he was unable to assist regarding the transfer of assets in the Mainland and that notwithstanding this, there was a final agreement reached at the office of Mr Tai in May 2007 between him and Chong Sang that Chong Sang’s shareholding in Tse’s Brothers and Double Faith (together with their respective holding assets which were situated in Hong Kong including Unit 16G) be transferred to Tai Chi as nominee of Tai Wing and Tai Wing’s shareholdings in Kinghall and Shinwoo (together with their respective holding assets which were situated in Hong Kong) be transferred to the children of Chong Sang and the ownership of the holding assets of the 4 Companies which were situated in the Mainland should be negotiated in future (‘Final Agreement’).

2.37   It was Tai Wing’s case that the 2007 Share Transfers were effected pursuant to the Final Agreement.  Chong Sang denied there was the Final Agreement.  The Judge rejected Tai Wing’s claim that there was the Final Agreement.

2.38   The 2007 Share Transfers were effected by Instruments of Transfer and the Bought and Sold Notes all dated 5 July 2007 but they were not actually signed by all the transferors and transferees on that day.

2.39   Prior to the 2007 Share Transfers, the registered shareholdings of the 4 Companies were :

(1)  Tse’s Brothers – Tai Wing held 51,000 out of 100,000 issued shares or 51% and Chong Sang held 49,000 shares or 49%;

(2)  Double Faith – Tai Wing held 4,000 shares out of 10,000 issued shares or 40%, Chong Sang held 4,000 shares or 40%, Mr Lee 1,000 shares/10% and Ms Lai 1,000 shares/10%;

(3)  Kinghall – Tse Wing held 101,000 shares out of 200,000 issued shares or 50.5%, and Chong Sang held 99,000 shares or 49.5%;

(4)  Shinwoo – Tai Wing held 40,000 shares out of 100,000 issued shares or 40% and Chong Sang held 60,000 shares or 60%.

2.40   Pursuant to the 2007 Share Transfers :

(1)  Tse’s Brothers – Chong Sang transferred his 49,000 shares to Tai Chi, to hold as nominee for Tai Wing;

(2)  Double Faith – Chong Sang transferred his 4,000 shares to Tai Chi, to hold as nominee for Tai Wing;

(3)  Kinghall – Tai Wing transferred his 101,000 shares to Chong Sang’s three children, namely 35,350 shares to each of Chong Sang’s two sons and 30,300 to Chong Sang’s daughter, and Chong Sang himself also transferred his 99,000 shares to his three children, namely 34,650 shares to each of his two sons and 29,700 shares to his daughter;

(4)  Shinwoo – Tai Wing transferred his 40,000 shares to Chong Sang’s two sons, namely 20,000 share each.

2.41   Thus, as a result of the 2007 Share Transfers, Tai Wing (through himself and Tai Chi) became the sole owner of Tse’s Brothers and Double Faith, and Chong Sang and his children became the sole owner(s) of Kinghall and Shinwoo.

2.42   After the 2007 Share Transfers, according to Tai Wing, every one carried on as before peacefully for a while, namely he/DHY (SZ) continued to occupy the Loudspeaker Factory/No 21 Factory, and Chong Sang/Kinghall Mainland Company continued to occupy part of No 21 Factory and No 22 Factory, and also Unit 16G.  However, not long thereafter Chong Sang started to complain that he received less than Tai Wing from the division, and their mother asked Tai Chi to mediate again.  It was Tai Wing’s and Tai Chi’s evidence that a further agreement was then reached between Tai Wing and Chong Sang through the mediation of Tai Chi (‘Mediated Agreement’).  This was denied by Chong Sang. The Judge rejected Tai Wing’s allegation of the existence of the Mediated Agreement.

2.43   Anyway, it was not disputed that the Cloth Factory was soon vacated by Tai Wing/DHY (SZ) in about 2007/2008.  Afterthe Cloth Factory was vacated, the Iron Roof Buildings on No 22 Land were demolished and a new four‑floor factory was then built thereon.  

5)  The Hong Kong actions

2.44   The mother passed away in September 2011.  Not long after, the conflict between Chong Sang and Tai Wing flared up again concerning the occupation of the factories.

2.45   There were reports made to the Mainland police/security bureau by Chong Sang, and it would appear that by about September 2012, both No 21 Factory and No 22 Factory were taken over by Tai Wing/ Tai Wing camp and they had rented the factories out to tenants.

2.46   The disputes between the two brothers had led to Chong Sang/Kinghall demanding the return of No 21 Factory and No 22 Factory and Tai Wing/Tse’s Brothers demanding the return of Unit 16G.

2.47   Tse’s Brothers instructed solicitors to write to Kinghall and Skygift, initially on 2 June 2012 a ‘without prejudice subject to contract’ letter (‘WP Letter’), demanding vacant possession of Unit 16G or alternatively that the two companies enter into a tenancy agreement to pay rent as from 1 July 2012, and having received no response thereto, a letter dated 4 July 2012 was sent to Kinghall and Skygift demanding the two companies to deliver up vacant possession of Unit 16G (‘Notice to Quit’).  Kinghall and Skygift did not do so and they denied Tse’s Brothers’ entitlement to such demand.  As a result, Tse’s Brothers issued the 1^st Action on 31 July 2012 against Kinghall and Skygift seeking vacant possession of Unit 16G.

2.48   This was followed by Chong Sang issuing the 2^nd Action on 28 December 2012.

6)  The Mainland litigations

 2.49   The two actions also sparked off litigations in Mainland China (‘Mainland Litigations’).

2.50   In early 2013, Kinghall issued a claim against Tai Wing in the People’s Court in Long Gang District in Shenzhen (Claim No 78/2013) in which Kinghall sought a confirmation that it had the right to occupy both No 21 Factory and No 22 Factory.  The claim was dismissed.  This claim is not relevant to this appeal.

2.51   In 2015, Kinghall issued another claim in the Long Gang People’s Court against, amongst others, Tai Wing, under Claim No 570 of 2015, claiming, amongst other things, for the delivery up of No 21 Factory and No 22 Factory (including the No 7 Factory) to Kinghall.  Tai Wing had sought a dismissal of this claim.  A decision was eventually handed down by Long Gang People’s Court on 23 January 2018 (‘570/15 Decision’), just two months before the trial below.  The Long Gang People’s Court ordered Tai Wing to deliver up both No 21 Factory and No 22 Factory to Kinghall, and to pay compensation.  The 570/15 Decision was later overturned.  The Shenzhen Intermediate People’s Court has by a decision dated 12 November 2018 set aside the 570/15 Decision and dismissed Kinghall’s application for the delivery up of the No 21 Factory and No 22 Factory (including the No 7 Factory) to Kinghall.  The Court further ruled that the construction of the factory buildings on the No 21 Land and No 22 Land was without the approval of the relevant authority and therefore they were all unauthorised buildings, hence the parties’ respective claim and counterclaim were not within the jurisdiction of the People’s Courts.  This decision was subsequently affirmed and upheld by a decision of the High People’s Court of Guangdong dated 24 December 2020.

7)  The agreements

(1)  The Composite Agreement

2.52   The Composite Agreement relied on by Chong Sang consisted of the 4 Agreements which are summarised by the Judge as follows :

i)  An agreement dated 11 April 2006 titled「分股協議書」(‘Share Distribution Agreement’);

ii)  A document undated and titled「協議書 < 一 >」 (‘1^st Agreement’);

iii)  A document undated and titled「協議書 < 二 >」 (‘2^nd Agreement’);

iv)  A document undated (‘1^st Addendum’), with three versions.

(2)  The Share Distribution Agreement

2.53   The Share Distribution Agreement was a typed agreement dated 11 April 2006 and signed by Chong Sang on the one part and on the other part signed by Tai Chi on behalf of Tai Wing, and further signed by Tai Wing as a witness.  It set out four points in relation to the division of the shares of three companies, DHY (SZ), Kinghall and Tse’s Brothers, namely :

i)  DHY (SZ)’s shares to be in accordance with the original shareholding of Double Faith, namely Chong Sang 40%, Tai Wing 40%, Taiwan shareholder (i.e. Mr Lee) 10% and Ms Lai (10%), but the amount of capital invested and the manner of how the capital was invested, or any investment by Kinghall, would have to be supported by evidence;

ii)  The accounts to be verified and certified by Shen Boamin (i.e. the Mainland accountant) (‘Shen’) and Tai Chi, including the amounts paid by Chong Sang and Tai Wing respectively and the accessory items and sponges taken by DHY (SZ) from Kinghall, all such accounts to be verified;

iii)  After the accounts being verified, Chong Sang to transfer his 40% in DHY (SZ) to Tai Wing and Tai Wing to transfer his 50% in Kinghall to Chong Sang, and both at a consideration/price to be fixed (「二家公司都要作價」);

iv)  The amounts withdrawn by Chong Sang and Tai Wing respectively and the consideration/price of the two companies to be added together to see who would have more and who would have less, and the difference to be adjusted at the distribution of the properties (at prices to be fixed), so that each would receive an equal share (「…各人所拿取的金額及二家公司的作價，合起來看誰多誰少，再在物業作價，然後分配各人，使其各人所得的平均，平等」).

(3)  The 1^st Agreement

2.54   The 1^st Agreement was undated and handwritten by Tai Chi who wrote that according to the information provided by the two sides, he had summarised five points, namely :

i)  Chong Sang had withdrawn a total of HK$21,836,626.14 (HK$5,460,000 to his two sons), and the net was HK$16,376,626.14; Tai Wing had withdrawn HK$17,051,797.00;

ii)  According to the information from Shen and Tai Wing, Tai Wing withdrew HK$2,704,848.00;

iii)  According to the information, Tse’s Brother did not invest any capital into DHY (SZ) as the remittance advices indicated that the capital was invested not by Tse’s Brothers but by Double Faith, and those remittance advices produced by Chong Sang could only be said to be shareholders’ transfers 「股東往來」and Tai Wing had also said a part of the remittances were for exchange into RMB on behalf of Kinghall Mainland Company.  In the accounts prepared by Shen in relation to the RMB receipts by Kinghall Mainland Company from Tse’s Brothers, there was no record of whether the remittances were from Tai Wing or from the company, and in the accounts prepared by the cashier Ms Li Hung, there was record of the remitter for part of the remittances only.  Thus, for the payments to Kinghall Mainland Company, the payers of part of these payments were unknown;

iv)  As for the shareholding of DHY (SZ), according to Chong Sang, it was jointed owned by him and Tai Wing.  But according to Tai Wing, he only promised Chong Sang, that after DHY (SZ) started to generate profits and after the capital invested by Tai Wing had been repaid to him, then DHY (SZ) would be jointly owned;

v)  Tai Chi would list out the information provided by each side, namely the assets and liabilities of DHY (SZ), Tse’s Brothers and Kinghall, pending further discussion between Chong Sang and Tai Wing on how to deal with the same.

(4)    The 2^nd Agreement

2.55   The 2^nd Agreement was undated and handwritten by Tai Chi setting out in the opening sentence that「現在在壯生，大穎，兄弟在互相互讓及兄弟之情誼，作出以下的協議」, namely that ‘Chong Sang and Tai Wing made the following agreement with mutual concessions and brotherly friendship’, and thereunder Tai Chi set out the following terms :

i)  In relation to the arrangements of the businesses and the Mainland assets :

a)  The business of Kinghall in Jinsha, machinery and tools and factory premises, including the original Jingsha Factory, the original Zhang Feng Factory, the No 22 Factory, to belong to Chong Sang;

b)  The business of DHY (SZ) in Hang Tze town, machinery and tools and factory premises, including the Long Tin Factory, Loudspeaker Factory/No 21 Factory, to belong to Tai Wing;

Remark: the two brothers discussed amicably for Tai Wing to lend the dormitory, the 4^th and 5^th floors of No 21 Factory for use of Chong Sang for five years, and then to discuss further as to who would have a greater need for those premises; at the same time Tai Wing had to vacate the Cloth Factory on the east side of the 2^nd Shenzhen Land within two years;

c)  In relation to the assets in Hong Kong, the brothers agreed to take out Unit 16G for the use of Chong Sang, but the title not to be transferred in the interim and only to be transferred when the matter of No 21 Factory is resolved.

(No need for valuation of all the assets and properties under A, B, C under item (1) above「均不作價」).

ii)  In relation to the shareholding and assets of Kinghall, Tse’s Brothers, Shinwoo :

a)  Tai Wing agreed to transfer his shareholding in Kinghall and Shinwoo to Chong Sang, including all assets (listing out all properties held by Kinghall and Shinwoo) which would belong to Chong Sang;

b)  Chong Sang agreed to transfer his shareholding in Tse’s Brothers to Tai Wing, including all assets (listing out all properties held by Tse’s Brothers, except Unit 16G) which would belong to Tai Wing.

All the properties in A, B under item (2) had to be valued/at a price「要作價」, and the valuation to be carried out by solicitors Messrs Tai Tang Chong (Mr Tai’s firm), and the transfer of the shares and the properties after valuation, would be distributed to Chong Sang and Tai Wing in equal shares, and any differences would be paid at the solicitors’ office.

(5)  The 1^st Addendum

2.56   As mentioned earlier, there were three versions of the 1^st Addendum but the main body of all three versions consisted of the same four points :

i)  Regarding the Loudspeaker Factory (No 21 Factory), the factory premises and dormitory on 1^st 2^nd, and 3^rd floors to be used by Tai Wing and the dormitory on the 4^th and 5^th floors to be used by Chong Sang, until 31 December 2011, and the parties would discuss again depending on the production need of the parties at that time;

ii)  Regarding the Cloth Factory, Tai Wing to borrow for use until 31 December 2008 when it would be vacated and returned to Chong Sang;

iii)  Regarding Unit 16G, this to remain jointly owned by the parties until 31 December 2011 (mistakenly typed as 2001) pending the resolution of the Loudspeaker Factory (No 21 Factory);

iv)  Until 31 December 2011, if No 21 Factory were to go to Chong Sang for his use, then Unit 16G’s ownership would be each 50%, but if No 21 Factory were to go to Tai Wing, then Unit 16G would be 100% owned by Chong Sang.

III.     The Issues

3.1   The Judge summarised the disputed issues as follows  :

1)  Whether there was the alleged trust, namely Tse’s Brothers was holding Unit 16G in trust for Chong Sang and Tai Wing in equal shares;

2)  Whether Tai Chi was the agent of Tai Wing in the negotiation of division of businesses and assets between Chong Sang and Tai Wing;

3)  Whether Chong Sang and Tai Wing had entered into the 3 Disputed Agreements, or the Oral Agreement or the Final Agreement or any agreement in respect of Unit 16G;

4)  Whether the case of proprietary estoppel was established.

3.2   In respect of the first issue, the Judge held that Tse’s Brothers held Unit 16G on resulting trusts for Chong Sang and Tai Wing equally :

‘ 104. Having considered the above, I find that Chong Sang had discharged the burden on him, that the transfer of Unit 16G by Tse’s Basketball to Tse’s Brothers was only of legal title and subject to the trust of the beneficial interest being held for Chong Sang and Tai Wing. I accept Chong Sang’s evidence that Tse’s Brothers was only nominated by him and Tai Wing to hold Unit 16G in trust for them equally. As there was no consideration paid by Tse’s Brothers, I find Tse’s Brothers has held Unit 16G as resulting trust for Chong Sang and Tai Wing in equal shares since 9 March 1995, when Tse’s Brothers became the registered owner.’

3.3   In respect of the second issue, the Judge held that Tai Chi was an arbiter, arbitrator or adjudicator, but he was not an agent of Tai Wing :

‘ 130. Having considered all the evidence, in particular the Undated Note, the 15/12 Fax, and the 01.07.12 Memorandum sent by Tai Wing himself, I find that at the time, due to the 3 brothers’ respect to the Mother, and as it was the Mother who asked Tai Chi to assist, and Tai Chi being the eldest of the brothers, Tai Chi’s role was more than that of a mere mediator and in my view, his role was an arbiter, or more akin to an arbitrator or an adjudicator, namely that he was authorized by his two brothers to handle and to decide on how to achieve an equal division of businesses and assets between them. I further find that out of respect for the Mother and for Tai Chi at the time, both Chong Sang and Tai Wing had accepted Tai Chi’s authority and had agreed to abide by Tai Chi’s decision in the handling of the equal division of businesses and assets.

131.  Having said the above, I do not however find that there was any sufficient, or clear and equivocal evidence that Tai Chi was an agent of Tai Wing in the manner as pleaded by Chong Sang.’

3.4   In respect of the third issue, the Judge held for Chong Sang :

‘ 277. To sum up and as said earlier, I find that Tai Wing was fully aware of what was written in the 3 Disputed Agreements and had at the time accepted and agreed to what was written therein, even though there was no written or formal agreement signed by both Chong Sang and Tai Wing. I find that the 4 Agreements formed part and parcel of the Composite Agreement as pleaded. I also find that there was the Oral Agreement between Chong Sang and Tai Wing. I find there was no Final Agreement or the Mediated Agreement, or Certificate of Agreement, as alleged by Tai Wing and/or Tai Chi.

278.  The present actions were not over whether the Composite Agreement and/or the Oral Agreement was enforceable.  Neither side was seeking any specific performance or damages for breach of contract.  The issue was whether there was any agreement that had affected the beneficial interest of Unit 16G or the Trust.’

3.5   In respect of the fourth issue, the Judge held that proprietary estoppel was established.

‘ ...... However, in light of my earlier findings on the Trust, the 4 Agreements and also the Oral Agreements and in light of the faxes and memoranda and various matters mentioned earlier, I find that there had been Representation and Further Representation on the part of Tse’s Brothers through Tai Chi and Tai Wing and I further accept Chong Sang’s evidence that he and persons nominated by him had acted in reliance upon the Representation and the Further Representation to their detriment and that Tse’s Brothers was estopped and precluded from denying Chong Sang’s right and entitlement to 50% of the beneficial interest in Unit 16G.’

IV.     Tai Wing’s appeal

4.1   Seven grounds of appeal are relied upon by the Tai Wing camp.  Mr. Li SC (together with Mr. Yuen) for the Tai Wing camp accepted that the appeal is primarily a challenge in law under Grounds 1 and 2 and the appeal should be allowed based on these two grounds alone.  The other grounds, if established, will supplement the overall appeal but are not individually decisive.

1)     Ground 1

(1)  Tai Wing’s arguments

4.2   Mr Li argued that the Judge erred in law in finding that upon the transfer of Unit 16G on 9 March 1995 from Tse’s Basketball to Tse’s Brothers, the latter is only the legal owner of Unit 16G and is holding the beneficial interest for Chong Sang and Tai Wing upon a resulting trust.  In a case where a property is held by a limited company with funds provided by its shareholders, the rebuttable inference is that the beneficial interest was intended to pass to the company.  The burden is on the shareholder who claims there is a trust in his favour to rebut the inference by proving the parties’ intention.  It is in stark contrast to a case of non‑corporate context where the rebuttable presumption is that the provider of the funds has a beneficial interest in the property by resulting trust : Lo Man Yau v Chiu Sung Fai & Or [2018] HKCA 387 at [12-13].  In other words, the shareholder cannot simply say a resulting trust arises by relying on the absence of payment made by the company.  He has to prove something more, i.e. intention.  That intention must be the common intention of both Chong Sang and Tai Wing.

4.3   Mr. Li argued that the Judge was wrong to rely solely on the absence of payment by Tse’s Brother in respect of the transfer of Unit 16G to say that a resulting trust had arisen and that the burden was shifted to Tai Wing/Tse’s Brothers to prove otherwise.  He argued that absence of payment is irrelevant and referred to Re Hansby HCMP 4610/2003, 12 May 2004 where Barma J (as he then was) said at [20] and [22] : (1) if a company were intended to be a bare trustee, there would have been no point in its existence; and (2) it is common for persons to acquire property through a limited company, and to advance funds by way of loan to the company in order to enable it to acquire the property, which it will own beneficially. He further argued that the legal position is that a settlor can intend a trustee to have both the legal and beneficial interest, Snell’s Equity 34^th Ed [25‑027] and [25‑028].  He argued that Chong Sang had failed to discharge his burden at all.  The Judge has overlooked the fact that Chong Sang has failed to adduce any evidence to prove that Unit 16G had not been injected into Tse’s Brothers as capital assets when Tse’s Brothers has genuine business of trading operation and properties investment, whether by way of capital contribution or shareholder loans by Chong Sang and Tai Wing.  Chong Sang should have discharged such burden by producing the accounts of Tse’s Brothers after Unit 16G was assigned to it.  The failure to do so is fatal to Chong Sang’s case on resulting trust especially when the Judge acknowledged that the available account of Tse’s Brother showed that Unit 16G was recorded as an asset of Tse’s Brother and that all rates and related expenses of Unit 16G were paid by Tse’s Brother.

4.4   Mr. Li argued that the Judge further erred in law in taking into consideration the evidence of Chong Sang in his witness statement that he and Tai Wing merely nominated Tse’s Brothers to hold Unit 16G in trust for them.  The alleged nomination which was essential to Chong Sang’s case of trust has not been pleaded but just slipped into Chong Sang’s witness statement.  Chong Sang could only have succeeded by relying on common intention constructive trust.  But it is neither his pleaded case, nor the way he argued in the trial, nor being the basis of finding by the Judge.

4.5   The Judge also erred in law in finding that all three brothers (Tai Chi, Chong Sang and Tai Wing) have treated the landed properties of their companies as their own properties based on the 1994 Agreement and the Share Distribution Agreement. If the landed properties of their companies were all intended to be held on trust for them equally, there was no need to negotiate distribution of assets in 2006.  The true purpose of those agreements was for the division of assets amongst the siblings and not being the records or evidence of the parties’ intention when the properties were transferred to the companies.

4.6   It has often been said that context is everything in a case.  In my view, this is more so in this case.  For all intents and purposes the two brothers had regarded the assets in their business belonged to them jointly.  This is reflected in the 1994 Distribution as a result of which Tse’s Basketball held Unit 16G in equal shares by Tai Wing and Chong Sang.  It is important to recognize the family context in which the division was made.  The brothers had actually used the term 分 家 (Fan Ga), a term usually connected with the division of family assets between its members.  Tse’ Basketball was the corporate vehicle holding the unit on trust for these two brothers equally.  This was accepted by the Tai Wing camp in the court below and this must be the basis and starting point of the inquiry.  When this unit was later transferred to Tse’s Brothers, there is no indication that this agreement and arrangement had, somehow, been changed by the change in the corporate vehicle which holds this property.  The principles in Lo Man Yau, Re Hansby and Snell’s are not disputed.  Lo Man Yau is concerned with a purchase of a property made in the name of company.  Re Hansby deals with the situation where an asset is purchased in the name of a company and the question arises as to whether the purchase would vest equitable title separately in the shareholders.  But to rely on these authorities is to ignore the context or the factual matrix of this case.  The facts of this case is clearly different when the parties had already accepted before the transfer to Tse’s Brothers that each of them had an equal beneficial interest in Unit 16G which was held on trust for them by a corporate vehicle. 

4.7   As to Mr. Li’s argument that Unit 16G was injected to Tse’s Brothers as a capital asset and as a result, according to the authorities, the legal and beneficiary interest vested in Tse’s Brothers and the two brothers do not have any beneficial interest in the property, there is no evidence that the two brothers ever intended to inject Unit 16G as a capital asset to Tse’s Brothers.  It is not in dispute that notwithstanding the unit was said to have been sold to Tse’s Brothers for a consideration of $2,750,000, this sum was not paid at all by Tse’s Brothers and Tse’s Basketball had not received this sum.  It is impossible, given the nature of this transaction together with the other evidence available to the Judge below, for the Court to hold that Tse’s Brothers hold Unit 16G solely as its own asset and without the imprint of a trust.  Mr. Li referred to the absence of accounts.  I fail to see the relevance of this, bearing in mind the actual legal documents relating to the sale of Unit 16G did not reflect the real position in respect of the payment and receipt of the consideration.

4.8   Further, the fact that Tse’s Brothers held the property in trust for Tai Wing and Chong Sang equally is further supported by other evidence.  Starting with the 1994 Agreement, the Judge held :

‘ 90. The 1994 Agreement was in effect a shareholders’ agreement entered into between Tai Chi as Party A and both Chong Sang and Tai Wing as Party B. Tse’s Basketball was not a party to the agreement, nor was Kinghall. Having said this, as seen in the 1994 Agreement and the other agreements later mentioned in this case, all three brothers have treated the landed properties of the companies as their own properties. It was also not the case of Tse’s Brothers/Tai Wing that Tse’s Basketball or Kinghall were not bound by the 1994 Agreement.’

4.9   The Judge also referred to the 2^nd Agreement which provided that Unit 16G was to be 100% Chong Sang’s but the title was not to be transferred until the matter of the occupation of the No 21 Factory had been resolved in five years’ time.  The Judge then held that Unit 16G was 50/50 was, in fact, part of the four points stated in the 1^st Addendum.  She held :

‘ 279. In light of my findings on the agreements, I am of the view that “carving out” of Unit 16G as stated in the 2^nd Agreement and the 1^st Addendum and confirmed by the Oral Agreement was consistent with Chong Sang’s case that he and Tai Wing had remained beneficial owners throughout since Tse’s Brothers became registered owner. Further, as I have found that there was no Final Agreement, the 2007 Share Transfers was subject to the joint ownership of Chong Sang and Tai Wing, and that the joint ownership of Chong Sang and Tai Wing did not come to a halt at the time of the 2007 Share Transfers as alleged by Tai Wing/Tse’s Brothers.’

4.10   The Judge also referred to other documents which supported Chong Sang’s view that Unit 16G is held on trust by the two brothers equally, namely :

‘127(ii) A fax bearing a date 15/12 (15 December) but with a header of a fax date of 26 August 2006 but with both sides agreeing to be 15 December 2010 (“15/12 Fax”), written and sent by Tai Wing to Tai Chi (to be forwarded to Kwong Hon) in which he had said the matter of division had not yet been completely dealt with, as the Mainland properties needed to be set out and in Hong Kong, the only remaining property of Unit 16G, and Tai Wing was proposing to Tai Chi to sell Unit 16G, with the sale proceeds to be handled/dealt with by Tai Chi;

 (iii)  The 11.06.12 Memorandum mentioned earlier, sent by Tai Chi to both Chong Sang and Tai Wing, in which Tai Chi reiterated to both Chong Sang and Tai Wing that he was entrusted by them to handle the division of the assets held by Tse’s Brothers and Kinghall, each to hold 50%;

 (iv)  A typed memorandum from Tai Wing to Tai Chi dated 1 July 2012 and signed by Tai Wing, stating that he and Chong Sang had authorised Tai Chi to handle the division of assets when Mother was alive and that it was almost 10 years ago and yet Chong Sang had continued to make trouble, and therefore he had set out various suggestions for Tai Chi to consider, and stating that Tai Chi had the right to decide or Chong Sang could also choose first (“01.07.12 Memorandum”).

...

243.  It was clear from the 08.06.12 Fax that Tai Chi had acknowledged to Chong Sang that Unit 16G was 50/50 between Chong Sang and Tai Wing, and further in the 11.06.12 Memorandum, Tai Chi had explained further, he said again that Unit 16G belonged to his two brothers jointly.’

4.11   The Judge referred to the fact that Chong Sang had collected the title deeds to Unit 16G which remained in his possession after the signing of the relevant documents for the 2007 share transfers.  The Judge further accepted Chong Sang’s evidence that Tai Chi had made oral admissions during a family gathering on 23 June 2012.  On that occasion Tai Chi admitted that Kinghall and Skygift should pay the whole of the rent first and that half of the rent would be returned to Chong Sang after one year so that the rent would be equally distributed between Chong Sang and Tai Wing.  Tai Wing himself on 27 July 2012 said he was reneging on what he had agreed in relation to Unit 16G. 

4.12   Mr. Li also submitted that Chong Sang had not properly identified the nature of the trust be it resulting trust or common intention constructive trust.  The Judge had, in fact, addressed this argument :

‘ 83. Having considered the pleadings, although the term “resulting trust” was not pleaded specifically by Chong Sang/Kinghall/Skygift and although the pleadings could be improved, I am of the view that sufficient material facts had been pleaded and that in any event, Tai Wing/Tse’s Brothers should be fully aware of what Chong Sang’s case was and what case to respond to.’

4.13   In my view, the Judge’s finding that Tse’s Brothers held Unit 16G on trust for Chong Sang and Tai Wing is fully supported by the evidence.  Even for the purposes of argument, Chong Sang bears the burden of rebutting the presumption that the beneficial interest belongs to the company, he had fully rebutted the presumption.  

4.14   Accordingly Ground 1 does not provide valid reasons for upsetting the Judge’s finding on this issue.

2)     Ground 2

4.15   Mr. Li argued that the Judge had rejected Chong Sang’s pleaded case that Tai Wing through his agent, Tai Chi, entered into the Composite Agreements with Chong Sang but she erred in law in finding that Tai Chi was an arbiter/arbitrator/adjudicator in the negotiation of division of business and assets between Chong Sang and Tai Wing.  The finding was not supported by evidence and it was not the pleaded case of Chong Sang.  It should be overruled as it is not supported by evidence and/or the Judge had misdirected herself on this matter (United Muslims Association of Hong Kong v Yusuf Yu [2018] 4 HKLRD 22 at [38-41]).  The finding that Tai Chi was authorized by Chong Sang and Tai Wing to decide on how to equally divide their assets was contrary to the oral evidence of Chong Sang that (1) the general practice was that Tai Chi after getting any information from either younger brother would have to negotiate with the other brother and Tai Chi would only write down the agreement after both Chong Sang and Tai Wing reached a consensus; and (2) the 2^nd Agreement was proposed by Tai Wing and the 1^st Addendum was a counter proposal made by Chong Sang.  Thus, the further finding that the Composite Agreement was binding on Tai Wing as they were made out by Tai Chi on the basis of the latter’s role as an arbiter/arbitrator/adjudicator is wrong. 

4.16   In my view, it is correct that the only pleaded case of Chong Sang was that Tai Chi acted as an agent for Tai Wing.  The other capacity of Tai Chi as found by the Judge was not pleaded by Chong Sang.  However, as submitted by Mr. Suen (together with Mr. Cheung) for the Chong Sang camp and I agree, the Judge did not rely on her ruling that Tai Chi is an arbiter/arbitrator/adjudicator to find that Tai Wing accepted the Composite Agreement.  Instead, she made express findings of Tai Wing’s knowledge and acceptance of the contents of the Composite Agreement. Similarly, for the same reason it is irrelevant that the Judge had rejected Chong Sang’s case on agency.  

3)     Grounds 3 and 5

4.17   Mr. Li argued that the Judge erred in law in finding that Tai Wing was fully aware of what was written in the 3 Disputed Agreements, and had at the time accepted and agreed to what was written therein.  As a matter of law, objectively the 3 Disputed Agreements were not made for the following reasons :

i)  there were contradictory provisions in the Composite Agreement.

ii)  the Composite Agreement was an agreement to negotiate which was incomplete and failed for uncertainty in that the ownership of Unit 16G and No 21 Factory as provided for in the 2^nd Agreement and the 1^st Addendum was left to be decided in future : see Hyundai Engineering & Construction Co Ltd v Vigour Ltd [2005] 3 HKLRD 723 at [23]-[29] and New World Development Co Ltd v Sun Hung Kai Securities Ltd op cit at [28]-[29].

iii)  the Composite Agreement was not performed in some materials aspects.

iv)  as the Judge has rejected Chong Sang’s pleaded case on agency, she erred in finding Tai Wing had entered into the Share Distribution and the 3 Disputed Agreements on a basis different from the pleaded case of Chong Sang.

v)  the Judge’s conclusion that Tai Chi should relay anything to Tai Wing unless it was unreasonable had no legal or factual basis.  

vi)  the Judge erred in failing to consider that Chong Sang’s oral evidence regarding the 2^nd Agreement deviated from his pleaded case and his witness statements. 

vii)  the Judge wrongly categorised Tai Wing’s case of the 3 Disputed Agreements simply on the basis that he was not bound because he did not sign them.  In fact Tai Wing’s case was that he had no knowledge of the 3 Disputed Agreements and had never entered into those agreements.  (Ground 3)

4.18   The Judge also erred in failing to consider that the Composite Agreement is unenforceable in that it lacks contractual force for want of certainty of terms and it was not intended to be legally binding.  It is the finding of the Judge that the 4 Agreements formed part and parcel of the Composite Agreement as pleaded by Chong Sang.  (Ground 5)

4.19   Grounds 3 and 5 can be dealt with together.  In my view they should be rejected for three reasons.  First, many of the matters now relied upon by Tai Wing in respect of the Composite Agreement such as contradictory provisions, incomplete, uncertainty of terms and lack of performance were not relied upon by the Tai Wing camp before the Judge.  These arguments which involve evidence were simply not advanced in the court below.  Accordingly, Tai Wing is barred from relying on these grounds under the Flywin principle.  The second reason for rejecting Grounds 3 and 5 is that, as the Judge had pointed out, the actions were not over whether the Composite Agreement or the Oral Agreement was enforceable when neither side was seeking any specific performance or damages for breach of contract.  The real issue is whether the trust existed as evidenced by, among other things, documents including the 1^st Addendum.  Third, in so far as these grounds challenge the findings of fact by the Judge, Tai Wing camp had not shown that such findings were plainly wrong which is the threshold for the Court of Appeal to upset any findings of fact by the Judge who had the benefit of observing the demeanour and evidence of the witnesses at first hand.

4)     Ground 4

4.20   Mr. Li argued that the Judge erred in relying on a number of documents and matters as listed in the judgment in support of her finding that Tai Wing did agree to the terms of the 2^nd Agreement and the 1^st Addendum. These documents and matters at most showed the subjective intention of Tai Wing which is irrelevant in deciding whether the parties had the contractual intention to enter into the Composite Agreement as alleged and relied on by Chong Sang. 

4.21   I disagree.  The Judge’s reliance on the documents and admissions went beyond merely showing the subjective intention of Tai Wing.  On the contrary, the documents and admissions relied upon by the Judge are evidence of Tai Wing’s knowledge and acceptance of the Composite Agreement.  It has not been shown such findings are plainly wrong.

5)     Ground 6

4.22   Mr. Li argued that the Judge erred in accepting the existence of the Oral Agreement but not the Final Agreement. 

4.23   I disagree.  Again Tai Wing camp had failed to show that the Judge’s acceptance of the Oral Agreement and rejection of the Final Agreement was plainly wrong. 

6)     Ground 7

4.24   Mr. Li argued that the Judge also erred in finding that Chong Sang’s case on proprietary estoppel was established on the basis that the parties had entered into the 2^nd Agreement, the 1^st Addendum and the Oral Agreement.  But he accepted that Ground 7 will rise and fall together with the other grounds.  This being the case, as I have rejected the other grounds of appeal, Ground 7 likewise fails.

4.25   Accordingly Tai Wing’s appeal is dismissed.

V.     Chong Sang’s appeal

5.1   Chong Sang appeals on the decision on mesne profits.  The Judge referred to the 570/15 Decision where the Long Gang People’s Court ordered Tai Wing to deliver up and return both No 21 Factory and No 22 Factory to Kinghall and to pay compensation to Kinghall calculated by reference to rent from the tenants as from January 2013 onwards.  She held that by this decision as from January 2013 onwards, Tai Wing’s occupation of the factories on a rent-free basis had ended.  This would mean that the arrangement under the Oral Agreement was brought to an end by January 2013.  As Chong Sang is only 50% owner of Unit 16G, she held he will have to pay 50% of the mesne profits to Tai Wing/Tse’s Brothers, and 50% of the Related Expenses as from January 2013 onwards.  As noted, the 570/15 Decision was overturned.

5.2   Mr. Li accepted that if the Tai Wing camp fails in its appeal, the appeal by Chong Sang should be allowed.

5.3   On that basis, Chong Sang’s appeal is allowed.

IV.     Costs

6.   Costs of appeal be to Chong Sang with certificate for two counsel.