AIM GLOBAL HOLDINGS LTD AND OTHERS v. CHIEN KUN ALLEN AND ANOTHER

HCA 2217/2014 and

HCA 2495/2014

(Consolidated)

[2023] HKCFI 1126

HCA 2217/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2217 OF 2014

______________

______________

(By Original Action)

______________

(By Counterclaim)

AND

HCA 2495/2014

ACTION NO 2495 OF 2014

______________

______________

(Consolidated pursuant to

the Order of Master Leong dated 3 February 2015)

______________________

J U D G M E N T

______________________

A.  Introduction

1.  There are five parties before me. I will for convenience refer to AIM Global Holdings Limited as “AIM” or “P1”, Lily Liu Durr as “Madam or Ms Liu”, “Liu” or “P2”, Shanghai Weicon Optical Co Ltd as “Shanghai Weicon” or “P3” (and P1, P2 and P3 collectively as “Ps”), Chien Kun Allen as “Mr Chien”, “Chien” or “D1”, and Rising Dragon Global Limited as “Rising Dragon” or “D2” (and D1 and D2 collectively as “Ds”).

2.  HCA 2217/2014 and HCA 2495/2014 were consolidated by Order of Master Leong on 3 February 2015.

3.  On 26 March 2019, I ordered that there be a split trial in respect of Ds’ counterclaim based on the Share Award Agreement (defined below) in that the issue Ps’ liability under the same be determined or tried before the issue of quantum (if necessary).

4.  This is the consolidated trial of the 2 actions on liability pursuant to those Orders..

5.  Mr K M Chong together with Mr Philip S Y Li appeared for Ps. Mr Yang-Wahn Hew together with Mr Arthur Poon appeared for Ds.

B.  The parties

6.  Described below was the state of affairs at the time material to these proceedings. There have been some subsequent changes. In particular, Shanghai Weicon (its business or shares therein) was sold in 2021. We are not however not concerned with those subsequent details.

7.  AIM is a limited company incorporated under the laws of the British Virgin Islands (“BVI”). It was the holding company of all shares in Shanghai Weicon. According to the Statement of Agreed Facts[1], that had been its role and only operation.

8.  Shanghai Weicon is a company incorporated under Mainland laws. Its business has been the manufacturing of contact lens and cleansing solutions. Its sole direct shareholder was AIM.

9.  Liu was the chairwoman, sole shareholder, and a director of AIM. One issue to be resolved is whether Chien was appointed as a director of AIM in November 2013 pursuant to one of the agreements in dispute (the “Hong Kong Employment Agreement”, as defined below). Putting aside the disputed appointment of Chien for the time being, Liu was the sole director of AIM.

10.  Liu’s sole shareholding in AIM made her the sole indirect shareholder of Shanghai Weicon. She was its chairwoman.

11.  Rising Dragon is a limited company incorporated under the laws of the BVI.

12.  Chien has been the sole director and shareholder of Rising Dragon. He started working as an investment banker in 1993. He had held senior positions with several international investment banks, including the HSBC.

C.  The backdrop, and the four agreements

13.  In 2013, Liu wanted to sell her business by way of sale of shares or assets of Shanghai Weicon and/or its direct or indirect holding companies (the “Transaction”). The project to carry out the Transaction was named “Project Flying Horse”.

14.  In July 2013, Chien was introduced to Liu by Mr George Lin (“Lin”) of Bank of America Merrill Lynch (“BOAML”). The first meeting between Lin, Liu and Chien took place on 19 July 2013.

15.  Subsequently, and related to the Transaction, 4 agreements were entered into (collectively, the “Agreements”). Those Agreements are:

(a)  The Services Agreement[2] (the “Services Agreement”). On its face:

(i)  it was dated 26 August 2013;

(ii)  whilst the 1^st paragraph of the Preamble says that it was between Liu (referred to as the “Client” therein) and Rising Dragon (referred to as the “Consultant”)[3], the 4^th paragraph of the Preamble (“Preamble §4”) stipulates that:

“Client is signing this Agreement for itself and for and on behalf of Shanghai Weicon and AIM, being the Client's directly or indirectly wholly owned entities effecting the Transaction. Client represents and warrants that Shanghai Weicon, AIM, and any intermediary company(s) may be established for the purpose of effecting the Transaction have validly authorized Client to enter into the Agreement on their behalves. The obligations of Client and Shanghai Weicon, AIM and such intermediary company(s) under this Agreement shall be joint and several.”

(iii)  the second paragraph of the Preamble (“Preamble §2”) provided that;

“Consultant acts as the transaction consultant to Client in relation to the proposed disposal, whether by way of sale of shares or assets, of [Shanghai Weicon] and/or its directly or indirectly holding company(s) (the ‘Business’) pursuant to the project code-named Project Flying Horse (the ‘Transaction’). The officer primarily responsible for carrying out the Services at the Consultant is [Chien], its Managing Director.”

(iv)  Clause 1 provided that:

“Services

Consultant shall render to Client the Services (as defined in Exhibit A) in a timely and professional manner consistent with industry standards, in accordance with this Agreement. If any services, functions or responsibilities not specifically described in this Agreement are required for the proper performance and provision of the Services, they shall be deemed to be included within the scope of Services to the same extent as if specifically described in this Agreement ...”

(v)  “Services” was described in “Exhibit A” attached to the Services Agreement as follows:

“Consultant’s responsibilities for providing the Services will comprise the following:

1. Assisting, together with Client’s financial advisor, to organize Client's Transaction plan;

2. Assisting Client to put together its internal transaction team and coordinate its working plan;

3. Assisting Client with instructing, liaising with and coordinating the work of Client’s other advisors (recognizing that Consultant will not be responsible for the work of Client’s other advisors);

4. Assisting Client to prepare and make relevant corporate information in relation to Business available for supporting the Transaction;

5. Assisting, together with Client’s financial advisor, with its valuation of the Business and advising on the structuring of the Transaction;

6. Assisting, together with Client’s financial advisor, with the organization of the sale process, including supporting the due diligence investigation to be carried out by potential buyers of the Business (the ‘Buyer’) in relation to the Transaction;

7. Assisting, together with Client’s other advisors, with meetings, negotiations and communications with any Buyers or potential Buyers and their financial advisors, including advising on Client strategy and tactics in response to one or more offers;

8. Advising, together with Client’s other advisors, on the financial terms and the form of consideration offered by Buyers;

9. Being generally available to Client to discuss the Transaction in its capacity as Consultant, and providing such additional assistance as may be reasonably required by Client in connection with the Transaction and as agreed between the parties in writing.

Other than as specified above, Consultant will not be responsible for:

1. Providing specialist or technical advice (for example: on legal, regulatory, accounting, actuarial or taxation matters) nor will it have any liability for any such advice, or

2. The verification of any document made available to Consultant or of any information provided or representations made to it, and Consultant may rely on all and any such advice and information without having independently to verify any of it. Client is solely responsible for the commercial assessments of the Transaction on which the advice provided by Consultant is based.”

(vi)  The stipulated retainer fee was HK$315,000 payable monthly in arrears [Clause 2.1];

(vii)  Chien would be entitled to a “Success Fee” upon the completion of the Transaction, the amount and payment terms of which would be dependent upon the time when the Transaction is completed (within 6 months of the commencement of the Services Agreement, between 7 and 12 months, or after end of its term) [Clause 2.2];

(viii)  The term of the Agreement was 12 months, with express mechanisms for renewal or early termination [Clause 4];

(b)  The Employment Contract was in English[4] (the “Hong Kong Employment Agreement”). On its face:

(i)  it was dated 15 November 2013;

(ii)  the parties were AIM and Chien;

(iii)  Chien was hired thereby as a Director[5], Chief Finance Officer (“CFO”) and acting Chief Executive Officer (“CEO”) of AIM;

(iv)  “‘Group Companies’ means [AIM], its holding company, its subsidiaries, subsidiaries of its holding company, and any Associated Companies (if any) from time to time”;

(v)  “‘Group’ means the Group Companies collectively”;

(vi)  §3.1 thereof set out Chien’s main duties thereunder, that:

“The Employee shall during the continuance of the Employment devote his energies and working hours to the business of the Company and such duties as are consistent with his position, including, without limitation, jointly plan and determine the Company and its Group’s objectives, development strategies, and annual plan; lead to determine the Company and its Group’s financial development plan and strategies, annual budget, audit, profit distribution, financing and investment, and oversee their executions; lead to improve the Company and its Group’s financial management policies and financial management team’s performance; lead to attract investors and raise financings for supporting the development of the Company and its Group, and maintain effective dialog and relationship with investors, professional firms, as well as relevant regulators; prior to the Company’s formal appointment of its chief executive officer, assist the Company and its Group to determine their development strategies, operating plan and strategic decisions; coordinate the Company’s annual budgeting and planning, as well as investment and financing planning and execution.”

(vii)  §4.1 thereof, that the monthly salary would be HK$20,000;

(c)  The “高級行政人員聘用合同” in Chinese[6] (the “PRC Employment Agreement”, and together with the Hong Kong Employment Agreement, collectively the “Employment Agreements”). On its face:

(i)  it was dated 15 November 2013;

(ii)  the parties were Shanghai Weicon and Chien;

(iii)  Chien was hired thereby as a Director, Chief Finance Officer and acting Chief Executive Officer of Shanghai Weicon;

(iv)  Clause 2.2 set out Chien’s main duties thereunder, that:

“員工的工作範圍及職責為: 參與規劃決策公司的目標、發展戰略和年度實施計劃和制定和落實；根據董事會的要求，主持制定公司的財務發展戰略、年度財務預、決算方案、利潤分配方案和彌補虧損方案、投融資方案、及其具體的實施和管理，參與審定集團公司的重要財務報表和報告、財務管理規定及其他經濟管理制度、重大財務決策以及組織公司各項審計工作，吸引和落實新的投資者和資本融資，管理與包括投資者、中介機構和證券監管機構等的溝通和關係開拓和維護；在公司任命首席執行官之前，協助制定公司的發展戰略、經營方針、發展計劃和重大決策，組織實施公司年度經營計劃和投資方案、負責召集和主持辦公會議，協調、檢查和督促各部的工作。”[7]

(v)  Clause 3.1 provided that the monthly salary would be RMB50,000 per month;

(d)  The Deed of Share Award in English[8] (“Share Award Agreement”, which together with the Employment Agreements have collectively been referred to by the parties as the “2^nd Agreements”, which term I adopt). On its face:

(i)  it was dated 15 November 2013;

(ii)  the parties were AIM, Chien and Liu;

(iii)  provisions are made thereby in relation to the grant of certain “Awarded Shares” in AIM to Chien, being[9]:

“720 Shares or such number of Shares as shall equal six per cent (6%) of the enlarged issued share capital of the Company (the ‘Initial Awarded Shares’) to a duly incorporated corporate escrow agent (the ‘Agent’)[10], which shall hold the Initial Awarded Shares in escrow for the benefit of Mr Chien, and shall transfer the specified portion of the Initial Awarded Shares to Mr. Chien on the respective Vesting Dates in accordance with clause 2.2.” [Clause 2.1];

(iv)  Under Clause 2.2, “[s]ubject to and conditional upon the continued engagement of Mr. Chien by the Group[11]”, AIM should procure the Escrow Agent to transfer an aggregate total of 3%, 2% and 1% of the Initial Awarded Shares to Mr Chien before respectively the 1^st, 2^nd and 3^rd anniversary date of the Share Award Agreement. Each of those shares should accrue from month to month in the respective years and should be vested in Chien by equal instalments in arrears on the last business day of every calendar month (defined as the “Vesting Date”);

(v)  Clauses 2.3 and 2.4 provided, in so far as material, that:

“2.3. Subject to clause 2.4, if Mr Chien ceases to be engaged by the Group, all unvested Awarded Shares shall, notwithstanding anything herein to the contrary, automatically lapse and expire on the date of cessation of engagement.

2.4. In the event of the occurrence of (i) the services of Mr. Chien in the Group being terminated by any Group Company without cause, (ii) a Change of Control of the Company for whatever reasons or … , all unvested Awarded Shares, notwithstanding anything herein to the contrary, shall not vest on the relevant Vesting Date but shall be immediately vested in Mr. Chien on the date of occurrence of such event (the ‘Event Date’), whether or not at which time Mr. Chien remains to be engaged by the Group.”

(vi)  There were in addition clauses apparently for the protection of Chien’s right under the Share Award Agreement and as minority shareholder upon vesting of the Awarded Shares (“Co-sale Right” under Clause 5, “Minority Protection” under Clause 6, and “Anti-dilution” under Clause 7).

16.  The present disputes of the parties centre around the validity, enforceability and effects of the above mentioned Agreements.

D.  The pleadings

17.  The pleadings have been amended on multiple occasions. The current ones are as follows:

(a)  Ps’ Re-Re-Amended Consolidated Statement of Claim filed on 5 July 2019 (the “SoC”);

(b)  Ds’ Re-Re-Re-Re-Re-Re-Amended Defence and Counterclaim filed on 22 November 2019 (the “D&CC”);

(c)  P1’s Re-Re-Re-Re-Re-Re-Re-Amended Reply and Defence to Counterclaim filed on 8 May 2020 (“P1 R&DC”);

(d)  P2’s Re-Re-Re-Re-Re-Re-Re-Amended Reply and Defence to Counterclaim filed on 8 May 2020 (“P2 R&DC”);

(e)  P3’s Re-Re-Re-Re-Re-Re-Re-Amended Reply and Defence to Counterclaim filed on 8 May 2020 (“P3 R&DC”);

(f)  Ds’ Amended Rejoinder of P1 R&DC filed on 13 May 2020 (“Ds Rejoinder/P1”);

(g)  Ds’ Amended Rejoinder of P2 R&DC filed on 13 May 2020 (“Ds Rejoinder/P2”);

(h)  Ds’ Amended Rejoinder of P3 R&DC filed on 13 May 2020 (“Ds Rejoinder/P3”); and

(i)  6 sets of further and better particulars.

E.  Parties’ pleaded cases

E.1.  Ps’ pleaded case

18.  Ps’ pleaded case according to their SoC and the further and better particulars provided[12] may be summarized as follows.

19.  In respect of the Services Agreement, Ps accept that Liu has signed it. Ps deny liability on the following bases:

(a)  Ps were induced to enter into the same by Chien’s misrepresentations (the “1^st Alleged Misrepresentations”) to the following effects [§5][13], that:

“(a) [D1] was, and would be, in a position to procure the sale of [P1’s] shares in [P3] within 8 months; and

(b) upon engaging his service as a consultant, [D1] would, in his capacity as [Ps’] consultant, be able to procure the sale of [P1’s] shares in [P3] within 8 months.”

(b)  The 1^st Alleged Misrepresentations were made orally by Chien to Liu and Ms Veronique Guan (“Ms Guan” or “Guan”) in about July and August 2013 during a meeting at the Conrad Hotel (“Conrad”) [Ps F&B#1, Answer to Requests 1-3]. There is no dispute that Guan is Liu’s daughter and Special Assistant;

(c)  The 1^st Alleged Misrepresentations were false, and were made by Chien fraudulently, alternatively recklessly, and alternatively innocently [§§7-9];

(d)  The Services Agreement was void due to uncertainty of parties [§9A];

(e)  Ps suffered loss as a result in the form of the total sum of HK$2,520,000 paid to D1 through D2 [§10];

(f)  Further or in the alternative, there has been a total failure of consideration for payment of that sum on HK$2,520,000, in that Ds have failed to render any service under the Services Agreement [§§11-12].

20.  In respect of the 2^nd Agreements, Ps again accept that Liu has signed them. They deny liability on the following bases:

(a)  Ps were induced to enter into the same by Chien’s further misrepresentation (the “2^nd Alleged Misrepresentations”) to the following effects [§13][14]:

“(a) That the [2^nd Agreements] would be necessary to enable [D1] to represent to potential purchasers for the purpose of procuring sale of [P1’s] shares in [P3];

(b) That the [2^nd Agreements] would not be used by [D1] for any purposes other than to assisting his negotiation with the said potential buyers and other third parties in the sale of [P1’s] shares in [P3];

(c) That save and except for the purposes referred to in subparagraphs (a) and (b) above, the [2^nd Agreements] would not be used for other purposes;”

(b)  The 2^nd Alleged Misrepresentations were made orally in around October and November 2013 in various meetings the exact dates of which Liu does not recall [Ps F&B#1, Answer to Requests 12-15];

(c)  The 2^nd Agreements do not reflect the true intention of the signatories. The 2^nd Alleged Misrepresentations were false, and were made by Chien fraudulently, alternatively recklessly [§§15-16];

(d)  Further or in the alternative, the allotment of shares to D1 under the Share Award Agreement was unsupported by consideration and was a gratuitous gift from AIM to Chien [§20];

(e)  The Share Award Agreement, although formed as a deed, was not validly executed as a deed in that (i) AIM’s seal has not been affixed thereto, and/or (ii) the Share Award Agreement was not delivered as a deed [§21]. As pleaded in §28 of the SoC:

“On 18.8.2008, [AIM], by a written resolution of its directors, imposed a mandatory requirement that all its deeds and all its agreements which specify the requirement of a common seal shall be affixed with the company seal and that the same shall be effected by a director duly authorized to do so.”[15]

(f)  The Hong Kong Employment Agreement and Share Award Agreement were not validly executed agreements in that they were not signed by 2 directors of AIM [§23]. However, in the course of opening submissions, Mr Chong accepted that he could found no basis for the plea that those Agreements were required to be signed by 2 directors. §23 is no longer being pursed;

(g)  AIM and/or Liu were not authorized by resolution of AIM’s board of directors to enter into the Hong Kong Employment Agreement and Share Award Agreement [§24]. Again, in the course of opening submissions, Mr Chong accepted that this plea is made on the basis of the 2008 Resolution, which he accepted has no application to the Hong Kong Employment Agreement. §24, in so far as it relates to the Hong Kong Employment Agreement, is no longer being pursued[16];

(h)  The gratuitous gift from AIM of its own shares to the Chien under the Share Award Agreement constitutes “financial assistance”, which is prohibited under the laws of Hong Kong and the laws of the BVI [§25]. However, in the course of submissions, Mr Chong confirmed that Ps would no longer pursue this plea;

(i)  Alternatively, if the Share Award Agreement is found to be governed by Mainland law, the Share Award Agreement has under Mainland law never been completed, and is invalid, ineffective and unenforceable [§§26-31, and Ps F&B#2 on the relevant Mainland laws and judicial practice]. However, in the course of opening submissions, parties reached consensus that Mainland law does not apply to the Share Award Agreement. This has been confirmed a number times subsequently by Mr Chong. This plea is no longer pursued;

(j)  In any event, Chien has never provided any service pursuant to the Agreements, so that he is not entitled to any contractual benefit thereunder [§32].

21.  Ps as a result seek damages and a number of Declarations to the effects that the Services Agreement and the 2^nd Agreements are inter alia void.

E.2.  Ds’ Defence and Counterclaim

22.  Ds’ defence as pleaded in the D&CC may be summarized as follows.

23.  In respect of the Services Agreement and the 1^st Alleged Misrepresentations:

(a)  Chien denies having made the 1^st Alleged Misrepresentations. The alleged meeting at the Conrad did not take place. He would not have made them as the successful procurement of the Transaction would involve other parties’ input and assistance[17], and would further involve various factors beyond his control[18] [§§8-10];

(b)  Uncertainty of parties is denied [§12A];

(c)  Total failure of consideration is denied. Services have been provided under the Services Agreement by Rising Dragon via Chien to Liu [§15].

24.  In respect of the 2^nd Agreements and the 2^nd Alleged Misrepresentations:

(a)  Chien denies having made the 2^nd Alleged Misrepresentations. The 2^nd Agreements reflected the truth and contained the true intention of the Signatories [§§16-19];

(b)  Total failure of consideration is denied. Chien’s entry into the Hong Kong Employment Agreement and the PRC Employment Agreement were part of the valuable consideration given by him for AIM’s and Liu’s entry into and performance of the Share Award Agreement [§§22B and 23];

(c)  All the claims based on inter alia want of formality, lack of authority and “financial assistance” are denied in the light of the various governing laws pleaded in the D&CC, and estoppel is also relied upon [§§22C-22Q].

25.  In respect of their Counterclaim, Ds plead as follows:

(a)  Rising Dragon is entitled to be paid under the Services Agreement monthly retainer fee in the sum of HK$315,000. It had only been paid HK$2,520,000 for the period up to April 2014. It claims further retainer fees in the total sum of HK$1,260,000 (the “Outstanding Retainer Fees”) covering the period between May and 26 August 2014 when the Services Agreement, it avers, was on that latter date terminated by effluxion of time [§§32-39];

(b)  Chien provided to AIM services pursuant to the Hong Kong Employment Agreement for which AIM has failed to pay him any salary. AIM is further deemed to have terminated the Hong Kong Employment Agreement [§§40-42]. Chien therefore claims against AIM the following amounts (or alternatively loss and damage to be assessed[19]):

(i)  arrears of wages (“Arrears of Wages”) in the total amount of HK$146,666.66 [§43];

(ii)  wages in lieu of notice (“Wages in Lieu of Notice”) in the amount of HK$59,938.83 [§44];

(iii)  annual leave pro rata payment (“Annual Leave Pro Rata Payment”) in the total amount of HK$4,728.01 [§45];

(c)  In respect of the Share Award Agreement:

(i)  Chien’s services to AIM were wrongfully terminated without cause by AIM on 24 June 2014 [§48B];

(ii)  all the unvested Awarded Shares under the Share Award Agreement should be immediately vested in Chien as of 24 June 2014 [§48C];

(iii)  AIM and Liu committed continuing and repudiatory breaches of the Share Award Agreement [§48D];

(iv)  Chien elected to accept the continuing and repudiatory breaches of AIM and Liu of the Share Award Agreement, thereby terminating the same, by the following acts:

(1)  in the proceedings in the BVI commenced by Chien (BVIHC (COM) 86/2014, the “BVI Proceedings”) seeking relief in relation to the Share Award Agreement [§48DB]:

(a)  the filing of the Amended BVI Claim Form and Amended BVI Statement of Claim date 5 September 2014, and further or alternatively;

(b)  the filing and service upon AIM the Re-Amended BVI Claim Form and Re-Amended BVI Statement of Claim dated 26 September 2014[20];

(c)  thereby accepting breaches by AIM and Liu up to the following dates (when Liu/AIM had notice of the election):

(i)  26 or 29 September 2014 [§48DB(1)];

(ii)  in the alternative between 26 September and 3 October 2014 [§48DB(2)]; or

(iii)  in the further alternative 9 December 2014 [§48DB(3)];

(v)  alternatively in the present proceedings:

(1)  service of the Re-Amended Defence and Counterclaim dated 13 October 2015 [§48DC];

(2)  in the further alternative, service of the Re-Re-Amended Defence and Counterclaim [§48DD];

(3)  in the further alternative, service of the Re-Re-Re-Amended Defence and Counterclaim [§48DDA];

(4)  In the alternative, if the Share Award Agreement is governed by Mainland law, and that the Share Award Agreement was terminated by the service of the Re-Re-Amended or alternatively Re-Re-Re-Amended Defence and Counterclaim, Chien will rely on Article 94, and 96 of the Mainland Contract Law [§48DE];

(vi)  Chien has suffered loss and damage not less than US$5,672,000, assessed:

(1)  under BVI or Hong Kong law:

(a)  on the date of the breach, being 24 June 2014, or alternatively upon expiry of 5 business days therefrom, being 2 July 2014 [§§48F(1), (2), 48FA and 48FB];

(b)  alternatively to be assessed on 5 September 2014 [§§48FDa and 48FDb];

(c)  alternatively:

(i)  a date between 26 September and 3 October 2014 [§48FE(1)]; or

(ii)  in the alternative 9 December 2014 [§48FE(2)]; or

(iii)  in the further alternative, 13 October 2015, 2 May 2017 or 28 July 2017, being the dates on which the respective services of the Re, or Re-Re, or Re-Re-Re-Amended Defence and Counterclaim was served [§§48FE(3)-(5)][21];

(2)  or alternatively under Mainland law, being 3 July 2014 [§§48F(3) and 48FC];

(vii)  In the course of submissions, Mr Hew confirmed with this court that his primary case is that 2 July 2014 should be adopted as the date of assessment. Mr Chong then confirmed that for the purpose of assessment, he also accepted that 2 July 2014 is the appropriate date.

F.  The trial bundles, and the challenged documents

26.  The trial bundle comprises some 60 box files.

27.  Amongst the trial bundle are 26 files of documentary exhibits. The authenticity of the vast majority is not in dispute. The only exceptions are the following items, which are all copies of purported resolutions of either AIM or Shanghai Weicon:

(a)  “Copies of written resolutions of the directors of AIM”[22] dated 18 August 2008 (i.e. the 2008 Resolution);

(b)  The following purported resolutions of Shanghai Weicon (the “Challenged Weicon Resolutions”, and together with the 2008 Resolution, the “Challenged Resolutions”):

(i)  “Board Resolution, Shanghai Weicon Optical Co Ltd”[23] of 18 June 2013;

(ii)  “Copies of all Shanghai Weicon’s board resolution during the period that [Chien] was engaged”[24] of various dates; and

(iii)  “Board Resolution, Shanghai Weicon Optical Co Ltd”[25] of 17 January 2014.

28.  The Challenged Resolutions were all disclosed and adduced by Ps. I will come back to them later.

G.  The Agreed Issues

29.  The following are the issues agreed between the parties:

(a)  In respect of the Services Agreement:

(i)  Whether the Services Agreement was entered into as a result of fraudulent or innocent misrepresentations of Chien resulting in AIM losing the said sum of HK$2.52 million (“Issue #1”);

(ii)  Whether a reasonable person in Ps’ position would have been induced by the misrepresentations into entering into the Services Agreement (“Issue #2”);

(iii)  Whether there has been a total failure of consideration, in that no service has ever been rendered by either Chien or Rising Dragon to Ps (“Issue #3”). However, in his written closing[26], Mr Chong makes clear that “[a]part from relying upon the loss/damages [sic.] suffered by reason of the 1^st Representation, Ps would not rely upon total failure of consideration under the Services Agreement as a separate line of defence.”;

(iv)  Whether the Services Agreement is void for uncertainty (“Issue #4”);

(b)  In respect of the 2^nd Agreements:

(i)  What was the governing law of the Share Award Agreement (“Issue #5”);

(ii)  Whether the Share Award Agreement, the Hong Kong Employment Agreement, and the PRC Employment Agreement were executed by Ps due to fraudulent misrepresentations of Mr Chien, and whether there was no intention of any of the contracting parties to create a legal relationship (“Issue #6”);

(iii)  Whether the Hong Kong Employment Agreement was valid and binding on the parties thereto considering:

(1)  Whether it was validly executed (“Issue #7(a)”). However, as I have recorded above, upon Mr Chong’s acceptance that the 2008 Resolution has no application to the Hong Kong Employment Agreement, Issue #7(a) is no longer being pursued; and

(2)  Whether AIM is estopped from denying the validity and enforceability of the Hong Kong Employment Agreement (“Issue #7(b)”);

(iv)  Whether the Share Award Agreement was valid and binding on the parties thereto considering:

(1)  Whether it was validly executed having regard to, inter alia, P1’s resolution of 18 August 2008 (“Issue #8(a)”);

(2)  Whether AIM and Madam Liu are estopped from denying the validity and enforceability of the Share Award Agreement (“Issue #8(b)”); and

(3)  Whether the Share Award Agreement constituted a gift of AIM’s shares and/or was an imperfect gift, and is thus unenforceable (“Issue #8(c)”);

(v)  Whether there was consideration in support of the Share Award Agreement (“Issue #9”);

(vi)  Whether there has been a total failure of consideration, in that no service has ever been rendered by Mr Chien to the Ps pursuant to the Hong Kong Employment Agreement and the PRC Employment Agreement (“Issue #10”);

(vii)  Whether Mr Chien was constructively dismissed under the Hong Kong Employment Agreement (“Issue #11”);

(viii)  Whether, under the Share Award Agreement, AIM terminated Mr Chien’s services “without cause” (“Issue #12”);

(c)  On the question of relief:

(i)  Whether Ps have breached the Services Agreement and what remedies should be granted to Rising Dragon (“Issue #13”);

(ii)  Whether Ps have breached the Hong Kong Employment Agreement and what remedies should be granted to Mr Chien (“Issue #14”);

(iii)  Whether Ps have breached the Share Award Agreement, and what remedies should be granted to Mr Chien, including the basis upon, and date upon which damages should be assessed in relation to the Share Award Agreement (which issue of quantum will be tried separately) (“Issue #15”).

H.  Witnesses

30.  Ps have called the following factual witnesses:

(a)  Liu, who has given 2 witness statements (filed 24 May 2016[27] (“Liu/WS1”) and 24 June 2016[28](“Liu/WS2”)),

(b)  Guan, who has given one witness statement filed on 24 May 2016[29] (“Guan/WS”), and

(c)  Cao Lan (“Cao”), who has given one witness statement filed on 24 May 2016[30](“Cao/WS”).

31.  Originally, and on behalf of Ds, witness statements by Pan Ruiping[31], Xia Fang[32], Shen Ping[33], Hu Min[34] and Zhou Houling[35] each of 24 May 2016 have been filed. Those persons have not been called. I ignore their statements.

32.  Ds have called only Chien, who has given 3 witness statements (filed 24 May 2016[36] (“Chien/WS1”), 24 June 2016[37] (“Chien/WS2”) and 22 November 2019[38] (“Chien/WS3”)).

33.  On BVI law:

(a)  Ps’ have engaged Michael Fay QC (“Fay”) who has been called and given oral evidence via video link;

(b)  Ds have previously engaged Richard Millett QC (“Millett”). He has subsequently been replaced by Matthew Hardwick QC (“Hardwick”). Hardwick has been called and given oral evidence via video link, but not Millett, though the reports previously prepared by Millett remain relevant;

(c)  The experts have prepared a number of reports:

(i)  Millett’s dated 28 June 2016 (“Millett/1”)[39], 29 August 2018 (“Millett/2”)[40] and 4 November 2019 (“Millett/3”[41], which included and confirmed Millett/2);

(ii)  Fay’s dated 29 June 2016 (“Fay/1”)[42] and 30 December 2019 (“Fay/2”)[43];

(iii)  the joint reports of Millett and Fay dated 28 July 2016 (“BVI JR1”)[44] and 11 February 2019 (“BVI JR2”)[45]; and

(iv)  Hardwick’s dated 19 August 2021 (“Hardwick Report”)[46], in which he expresses agreement to the views expressed by Millett (and certain of Fay) in their prior reports.

34.  On Mainland law:

(a)  Ps have engaged Li Yan (“Li”);

(b)  Ds have engaged Charles Qin Yuemin (“Qin”);

(c)  Li and Qin have prepared a number of reports;

(d)  However, and as I have recorded above, in the course of opening submissions, parties reached consensus that Mainland law does not apply to the Share Award Agreement. This has been confirmed a number of times subsequently by Mr Chong. In the end, neither Li nor Qin has been called.

I.  The credibility of the factual witnesses

35.  I have been cited a number of cases by Mr Chong and Mr Hew on the approach in assessing the credibility and reliability of witnesses[47]. I remind myself when considering a witness’ credibility of the importance of considering the inherent likelihood or unlikelihood of the witness’ evidence, the consistency of the witness’ evidence with undisputed or undisputable evidence, with contemporaneous conduct and documents, the internal consistency of the witness’ evidence amongst their witness statements and with pleadings, and any material change of case. If the contents of different witnesses’ statements are strikingly similar so as to suggest prior conferral, or mutual reference during preparation, or that they were prepared out of a common template, the court must be very cautious in approaching them, and that the weight that can be placed on them can be greatly diminished. I need to consider the totality of the evidence. I warn myself against attaching undue weight on demeanour, though demeanour is obviously relevant when considering credibility.

36.  I have considered the totality of the evidence before me. I have considered also counsel’s submissions. I do not find Liu, Cao and Guan to be credible or reliable witnesses. I find their evidence inherently improbable, internally inconsistent and contradictory, repugnant to common and commercial sense, and inconsistent with undisputable contemporaneous conduct and documents. On the other hand, I find Chien to be a credible and reliable witness. His evidence is inherently probable, materially consistent both internally and with contemporaneous conduct and documents, and makes good commercial sense. I will set out my detailed reasons when considering and discussing the agreed issues below.

37.  I state that whilst I am going to discuss the question of credibility and reliability issue by issue, I have considered the totality of the evidence in the round before reaching any conclusion on the credibility and reliability of any particular witness on any specific issue.

J.  Issue #1

38.  The crux of Issue #1 is a factual one, namely whether on the evidence before this court Ps have established that Chien made the 1^st Alleged Misrepresentations.

J.1.  The material evidence

39.  Liu and Guan both gave evidence. Both claimed that the 1^st Alleged Misrepresentations had been made.

40.  The material parts of Liu’s evidence in support are as follows:

(a)  In Liu/WS1:

(i)  Liu deals with the background. She confirms that AIM wholly owns all shares in Shanghai Weicon. It did not have any physical office of its own, and did not have any operation other than as the holding company of Shanghai Weicon;

(ii)  She states that in around the beginning of 2013, she decided to sell the business of Shanghai Weicon. She approached BOAML for advice. Lin was the main point of contact. Lin suggested that she and AIM should bring in an experienced person to deal with the preparation of the sale and to present her company in an effective way to potential purchasers. Lin introduced Chien to her. Her first meeting with Chien took place on about 19 July 2013. Lin was present. Chien introduced himself to her as a very experienced banker, and that he had vast experience in working on deals similar to the Transaction;

(iii)  She met Chien again on around 17 August 2013. Guan was also there. The meeting took place at the Four Seasons Hotel in Central. She says that during that meeting, Chien informed them that he had done a lot of research in their company and their plan to sell Shanghai Weicon. He said that he was very experienced and was an expert in such deals, and that he was “certain” if they engage him as their consultant, he would be able to successfully sell Shanghai Weicon “within 6-8 months at a good price”;

(iv)  They discussed Chien’s requested consultancy fee. She informed him that his requested amount of HK$350,000 per month was higher than she had expected, but that:

“12. … I am willing to engage him for HK$315,000 per month if he already has potential purchasers and if he is able to complete the sale within 8 months. I made it clear to Mr Chien that it is important that he bring in new potential purchasers so that the sale of Shanghai Weicon is completed within 8 months at a good price.

13. Mr Chien replied that he is absolutely certain that he can complete the sale of Shanghai Weicon within 8 months because, in addition to the potential purchasers that he has already contacted, he also has a large network of other investors who he would contact and would use his best efforts to bring in and sell to. Mr Chien said that in his previous experience of similar deals, he has always managed to complete the sale within around 6-8 months and therefore he is certain that he can also complete the sale of Shanghai Weicon within similar timeframe.

14. Even though I thought Mr Chien’s fee was higher than expected and is more than my own remuneration of RMB50,000 per month as the chairwoman and Chief Executive Officer of Shanghai Weicon, I decided to engage Mr Chien for HK$315,000 per month because he assured us that he has already found potential purchasers and would bring in additional potential purchasers, and he was certain that he would complete the sale of Shanghai Weicon within 8 months at a good price. I would not have agreed to engage Mr Chien for HK$315,000 per month if I knew that Mr Chien have not yet found any potential purchasers or if I knew that he was unable to complete the sale of Shanghai Weicon within 8 months.”

(b)  At §§4, 5 and 12 of Liu/WS2, she further claims that:

“4. Between September and November 2013, I personally provided Mr Chien with many of AIM and Shanghai Weicon's key documents so that he could have a better understanding of the business and the corporate structure …

5. At the time, I had not yet decided on how the Shanghai Weicon business was to be sold. The sale could be by way of the sale of the shares or assets of Shanghai Weicon (being the operating company) or could be by the sale of the shares in AIM (being the holding company of Shanghai Weicon). I was still trying to evaluate which was the best method to sell the business …

…

12. … During the negotiation stage before the Service Agreement was entered into, Mr Chien assured me that, since our first meeting in July 2013, he has already found potential purchasers who are interested in purchasing the Shanghai Weicon business, and that he was certain he could complete the sale of within 8 months at a good price. Mr Chien said that in his previous experience of similar deals, he has always managed to complete the sale within around 6-8 months and therefore he is certain that he can also complete the sale of Shanghai Weicon within similar timeframe. It was only as a result of such representations by Mr Chien that I decided to engage him at such a high fee as a consultant for AIM.”

J.2.  Discussion

41.  For the following reasons, I find neither of Liu or Guan to be a credible witness. Their evidence on material aspects are inherently improbable, inconsistent both internally and with contemporaneous documents, and repugnant to commercial and common sense. I set out below my main considerations.

42.  Firstly, the contents of Liu/WS1 and Guan/WS are materially the same:

(a)  In relation to the making of the 1^st and 2^nd Alleged Misrepresentations, §§7, 9-19, 21-32 and 34-44 of the former are nearly word for word the same as §§7-41 of the latter, with the only changes being the adaptation of the subjects and pronouns. But in one paragraph, the author of Liu/WS1 forgot even to do that. At §18 of Guan WS[48], Guan says that “At a nearby coffee shop, Madam Liu told Mr Chien that she wanted more time to read the service agreement before she signs it. However, Mr Chien said that there is no time for that and insisted that we must sign the service agreement immediately because he has arranged urgent meetings with his potential investors in Shanghai to discuss the sale of Shanghai Weicon” (emphasis added). Those exact same words also appear at §19 of Liu/WS1[49], resulting in Liu referring herself to “Madam Liu” and “she”;

(b)  The same typographical errors (“not” typed as “now”[50]) also appear in their respective statements, so that both had to be corrected;

(c)  There have clearly been some cutting and pasting from one statement to the other;

(d)  Putting forward substantially identical statement of different witnesses has been subject to strong judicial criticisms before – see Au Yeung Pui Chun at §§28-35 and the cases cited therein. Whilst that ground by itself might not result in the rejection of the statements and relevant evidence altogether, the Court must be very cautious in approaching them.

43.  Secondly, as is obvious from Preamble §2, Liu had not by the time of the execution of the Services Agreement decided how the business was to be sold (whether by sale of shares or assets). As Liu has stated at §5 of Liu/WS2, even by November 2013, she remained undecided on that issue. There is further no evidence showing that she and Chien had discussed the price she intended to offer the sale at. The involvement of other professions was also contemplated[51]. It is inherently most improbable, and against all commercial sense, that Chien would have represented that he was “certain” that he would be able to successfully sell Shanghai Weicon “within 6-8 months at a good price” and that “he is absolutely certain that he can complete the sale of Shanghai Weicon within 8 months” before any discussion on the price, when he did not even know what price Liu intended to or was willing to complete the Transaction at, did not know how the business was to be sold, and did not know what views the other professionals might hold.

44.  Thirdly, and importantly, there is no contemporaneous document which sets out, or even just makes reference to, the 1^st Alleged Misrepresentations:

(a)  The 1^st Alleged Misrepresentations are not set out in the Services Agreement, nor even in any of the earlier drafts. Nor are there any contemporaneous emails or WeChats showing that either Liu or Guan had requested them to be included in the Services Agreement or any of the drafts;

(b)  Given the following facts, the lack of contemporaneous documentary support is particularly striking, and is inherently most improbable if the 1^st Alleged Misrepresentations had in fact been made;

(c)  At the time when Liu and Chien entered into negotiations for his engagement, Liu was an experience business person. When being asked during cross-examination as to whether she was “by the end of 2012 … an experienced business woman”, she answered “All along I was”;

(d)  Liu says that she would not have agreed to engage Chien for HK$315,000 per month if she had known that Chien had not yet found any potential purchasers or if she had known that he was unable to complete the sale of Shanghai Weicon within 8 months[52]. On Liu’s evidence, she must have attached importance to those alleged representations. Guan confirmed that that was so. Indeed, Guan herself during cross-examination described them as the “key reasons” for Chien’s engagement;

(e)  It was not as if Liu and Guan had not had the opportunity to request for their written confirmation or inclusion into the Services Agreement:

(i)  The first draft of the same was sent by Chien to Liu and Guan via email of 21 August 2013[53]. That draft made no reference to the 1^st Alleged Misrepresentations. Save a couple of matters not related to the 1^st Alleged Misrepresentations[54] (which Chien dealt with in the email), Chien said in that email that “I have very much reflected in the draft document all the discussion and oral agreement we have reached over the weekend”. During cross-examination, Liu agreed, with reference to that email, that the contents of the draft reflected what were discussed on 17 August 2013 about the engagement;

(ii)  In that same email, Chien said that “If needed, I could be available for the rest of this week to go over the draft Agreement with you after you have time going through it. We could have a telephone confcall to go through it in details. Please let me know your feedback on the document as well as your suggested way going forward.” In the WeChat message of 24 August 2013 at 10:35 am from Guan to Chien[55], Guan said amongst others that “Hi Allen! My mon said the agreement is fine. How do we proceed to the final version?” On the same day at 2:05 pm, Chien sent Guan and Liu a revised agreement[56]. He referred to a telephone conversation with Guan. He asked them again to confirm the contents. He proposed that the agreement be signed on 29 August 2013. On 26 August 2013 at 6:47 pm, Chien sent them another revised draft. He further invited them to confirm the contents. At 9:51 pm, Guan sent Chien a voice message[57]. She thereby notified Chien of a typographic error (“s” missing from the word “transaction”), and said that “If you want to make that correction, everything else is good to go.” Then, at 10:29 pm, Chien emailed the final draft to them[58];

(iii)  Both Liu and Guan must have reviewed the drafts with care, to the extent that even a missing “s” was spotted. For Liu as an experienced business person assisted further by her daughter to assert that she did not in the circumstances even mention or request any confirmation or inclusion of the 1^st Alleged Misrepresentations, such assertions are beyond belief;

(iv)  When under cross-examination, Guan accepted that she did read the drafts provided to her. She made some suggested changes, in relation to the name and a typographical error. She realized then that there was nothing in the drafts which reflected the key terms that Chien should sell Shanghai Weicon within 6-8 months. She never attempted to suggest to Chien that those terms be inserted into the Services Agreement. She explained under cross-examination that the term of the engagement would only be 12 months, that they did not want to deter Chien from taking on the engagement, and that they were naive. I do not find any of those explanations credible. I find them to be repugnant to commercial sense, and are inherently improbable. In particular, Liu was an experienced businesswoman. She was far from being naive;

(v)  At §§18 and 19 of Liu/WS1, Liu described how Chien refused her request for more time to review the drafts, and that the Services Agreement was signed on 26 August 2013 at a coffee shop near BOAML’s office in Hong Kong. However, during cross-examination, Liu accepted that she was in fact in the Mainland on 26 August 2013, and she could not have signed the Services Agreement in Hong Kong on that day. She also agreed to the suggestion put to her that the matters depicted in the first two sentences of §19 of Liu/WS1 (which I have reproduced in §42 above) never happened, that the Services Agreement was signed on 29 August 2013, and that there had been meetings on that day involving inter alios she and Chien in Shanghai;

(f)  In this regard, I regard also as important what Guan has stated in her witness statement filed before the Labour Tribunal in relation to the disputes. In her statement of 21 August 2014[59], at §3, she says:

“In August of 2013, [Chien] was hired as a consultant with the sole responsibility of preparing Shanghai Weicon’s accounting information, presenting them in a manner which potential investors can readily understand, as well as be on hand during meetings with investors to answer any questions regarding the Weicon information presented.”

The contents of that paragraph flatly contradict her and Liu’s case based on the 1^st Alleged Misrepresentations, but are consistent with Chien’s case;

(g)  In his written closing, Mr Chong relies heavily on an email sent by Chien to Liu and Guan on 9 November 2013[60]:

(i)  In that email, Chien said, amongst other things:

“Regarding the employment contract with AIM, I was advised that Hong Kong does not allow for nil amount of salary, therefore, I have put in a HK$20,000 per month as a substitute. This amount would only last for several months until the New Investment transaction is completed; by then, the agreed HK$315,000 will kick in to replace the HK$20,000 going forward.”

(ii)  Mr Chong relies heavily on the words “only last for several months”. He submits[61] that:

“… the aforesaid content of Mr Chien’s above email is the only reasonable conclusion of the existence of an understanding between Mr Chien, on one hand, and Madam Liu/Madam Guan, on the other, as pointed out by him, that:-

(a) completion of the ‘New Investment transaction’ (denoting either the sale of the shares or the assets of Shanghai Weicon …) would take place within a period of ‘…several months…’ from 9.11.2013; and

(b) by reason of (a) above, the period for AIM to pay $20,000 under the Hong Kong Employment Agreement would ‘…only last for several months…’ ”

(iii)  Even in that email, there is no clear and express reference to any of the 1^st Alleged Misrepresentations. The words used by Chien therein are by no means clear;

(iv)  There was no reply from either Liu or Guan making reference to the 1^st Alleged Misrepresentations;

(v)  Further, and as submitted by Mr Hew[62], the other documents contemporaneous to that email and contextual to the same[63] made no reference to any anticipated completion date of the Transaction;

(vi)  Under cross-examination, Chien’s evidence was that he might not have expressed himself clearly, and that what he meant was that the HK$20,000 would cover “whatever the period until the new investment is completed”. I find Chien’s explanations in this regard not inherently improbable, and are consistent with other documents. I accept his evidence in this regard.

45.  Fourthly, not only were the 1^st Alleged Misrepresentations not recorded or referred to in any contemporaneous documents, their existence is in fact inconsistent with the terms and structure of the Services Agreement. According to Exhibit A, the Consultant’s responsibilities comprised principally roles of “assisting” as specified therein. Financial advisor and other advisors were contemplated to be involved. The Services Agreement contemplated a term of 12 months, with the possibility of renewal beyond that (Clause 4.1). It also contained provisions for payment of success fee to Chien even if the Transaction could only be completed between the 7^th month from the Effective Date of the Services Agreement and the end of its term, and even beyond (up to 24 months of the Effective Date) (Clause 2.2). Those terms would make no sense if Chien had in fact represented that the Transaction would be completed within 8 months of his engagement.

46.  Fifthly, Ps’ factual case as to where Chien made the 1^st Alleged Misrepresentations has also been inconsistent and contradictory:

(a)  In the SoC, apart from saying “In or about July and August 2013”[64], no facts as to when and where are pleaded;

(b)  Particulars were then sought as to “the time and date(s) of each and every occasion on which” the 1^st Alleged Misrepresentations were made. In Ps F&B#1[65], Ps says that Chien made them to Liu and Guan “In or about July and August 2013 in a meeting at the Conrad Hotel”;

(c)  In Liu/WS1[66], Liu however says that it was during a meeting “at the Four Seasons Hotel in Central” when Chien made them. Guan says the same in Guan/WS[67];

(d)  During cross-examination, when asked further about that alleged meeting, Liu gave another version, claiming that she had “no way to remember such details but every time when we met each other, Mr Chien stressed his speech”. Guan also changed her evidence during cross-examination, claiming that Chien made the 1^st Alleged Misrepresentations during several meetings, and that the meeting at the Four Seasons Hotel was only one of them;

(e)  Such changes of evidence are not those which one would expect from credible and reliable witnesses.

47.  As I will explain below, Liu and Guan’s evidence on Chien’s making of the 2^nd Alleged Misrepresentations is also plagued with problems. I have also taken into account their evidence in those regards in concluding that Liu and Guan are neither credible nor reliable witnesses.

48.  Chien denies having made the 1^st Alleged Misrepresentations. His evidence is materially consistent with the contemporaneous documents produced, and is inherently credible. I accept his evidence in this regard. I also accept his evidence that the Services Agreement was signed on 29 August 2013 in Shanghai[68]. As I have discussed above, Liu was no longer seeking to say that it was signed on 26 August 2013 in Hong Kong. I reject Guan’s version given for the first time in the witness box that it was signed on 28 August 2013 in Hong Kong after some sort of meeting the details of which she was not able to give.

J.3.  Conclusion on Issue #1

49.  For the above reasons, I reject Liu and Guan’s evidence that Chien has made the 1^st Alleged Misrepresentations. I accept Chien’s evidence that he has not.

50.  On those findings, I answer Issue #1 in the negative.

K.  Issue #2

51.  In the light of my conclusion on Issue #1, Issue #2 is not engaged.

L.  Issue #3

52.  As I have recorded above, Mr Chong no longer seeks to pursue total failure of consideration as a separate line of defence. I state that I have nonetheless considered Chien’s evidence on the performance of the Services Agreement[69] (and as summarized by Mr Hew)[70]. His evidence, consistent with and supported by contemporaneous documents, which I accept, in my view clearly supports the conclusion that there had been performance of the Services Agreement, and I so find.

M.  Issue #4

53.  The issue arises from the wording of Preamble §4. I have set it out above. The focus is the words “and any intermediary company(s) may be established for the purpose of effecting the Transaction” (the “Impugned Words”). Mr Chong’s submissions in gist are that given the wording of Preamble §4, the intention of the parties was that “any non-existing company to be established in the future for the Flying Horse Project would also be contractually bound as a party”[71], that “the contractual intention as expressed in the clear wordings of the Services Agreement was to include non-existing, future and unknown companies as parties to the agreement”[72], so that the Services Agreement was void for uncertainty as to the identity of the contracting parties.

M.1.  The applicable legal principles

54.  An agreement may lack contractual force because it is so vague or uncertain that no definite meaning can be given to it without adding further terms – see Chitty on Contract, (33^rd ed.) Vol.1, §2-148 which Mr Chong cites.

55.  Uncertainty as to the identities of the contractual parties may lead to such a result – see e.g. World Food Fair Ltd v Hong Kong Island Development Ltd [2005] 1 HKLRD 665 at §6.

56.  As submitted by Mr Chong[73], the issue raises a question of interpretation of the Services Agreement.

57.  The following principles on interpretation are relevant:

(a)  As observed by Jackson LJ in Hamid v Francis Bradshaw Partnership [2013] EWCA Civ 470 at §§57(i) and (ii):

“i) Where an issue arises as to the identity of a party referred to in a deed or contract, extrinsic evidence is admissible to assist the resolution of that issue.

ii)   In determining the identity of the contracting party, the court’s approach is objective, not subjective. The question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts of the protagonists concerning who was contracting with whom are irrelevant and inadmissible.”

(b)  In Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 Tang PJ at §74 expressed agreement to the following observations made in the Court of Appeal by the Chief Judge, that:

“[24] ... Contracts are not made in a vacuum. In construing a contract, it is important to bear in mind, amongst other things, the context or setting in which a contract was made, and the purpose for which it was made. The test is invariably objective.

[25] In relation to a commercial contract, as has been pointed out by Lord Wilberforce in the well known case of Reardon Smith Line Ltd v Hansen Tangen [1976] 1 WLR 989, 995H to 996A, it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”

(c)  As explained in McMeel on the Construction of Contracts (3^rd ed.) at §5.54:

“The intention of the actual draftsperson remains inadmissible. If legal context is to be admitted the rhetorical question has been posed: ‘where does one stop with knowledge of the law?’ The answer is: what was reasonably available to both parties, and (where relevant) their advisers. Whether or not they had access to legal advice, or were reasonably likely to have had such access, will be a relevant contextual factor.”

(d)  The courts are reluctant to strike down a commercial agreement for uncertainty. As explained in Chitty on Contracts (34^th ed.) Vol 1 at §4-186:

“The courts do not expect commercial documents to be drafted with strict legal precision. The cases provide many examples of judicial awareness of the danger that too strict an application of the requirement of certainty could result in the striking down of agreements intended by the parties to have binding force. The courts are reluctant to reach such a conclusion, particularly where the parties have acted on the agreement. As Lord Wright said in Hillas & Co Ltd v Arcos Ltd:

‘Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but, on the contrary, the court should seek to apply the old maxim of English law, verba ita sunt intelligenda ut res magis valeat quam pereat. That maxim, however, does not mean that the court is to make a contract for the parties, or to go outside the words they have used, except in so far as they are appropriate implications of law.’

In addition, so long as there is no ‘conceptual uncertainty’, it is no bar to finding a binding agreement that the matter maybe difficult ‘to resolve in practice’; the latter is ‘a matter for interpretation’. Rix LJ said:

‘it is simply a non sequitur to argue from a disagreement about the meaning and effect of a contract to its legal uncertainty ... For that to occur - and it very rarely occurs - it has to be legally or practically impossible to give to the parties’ agreement any sensible content ... that is certain which can be rendered certain ...’ ”

(e)  Consistent with the above, Coleman J observed in Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 at §24 that:

“There is a separate and independent requirement of a contract that there be certainty and completeness of terms. So even in cases where the Court concludes that the parties have made an agreement which is intended to be legally binding, the court may nevertheless also conclude that the agreement is too uncertain or incomplete to be enforceable. A typical example is because the agreement lacks an essential term which the court cannot supply for the parties. But the court will only hold that the contract, or some part of it, is void for uncertainty if it is legally or practically impossible to give the agreement, or that part of it, any sensible content.”

(f)  The contra proferentum rule is a rule of last resort. As explained in Lewison, The Interpretation of Contracts, (7^th ed.) at §7.88:

“However, the principle only applies where there is a ‘real doubt’ or ambiguity. It should not be used for the purpose of creating a doubt or magnifying an ambiguity, where the circumstances of the case raise no real difficulty. Before concluding that the contract is ambiguous, thus opening the way for the application of the contra proferentem principle, the court should examine the background and commercial purpose of the contract.”

M.2.  Discussion

58.  For the reasons set out below, I conclude that there is no uncertainty to the Services Agreement on the identities of the parties:

(a)  The Services Agreement was a commercial agreement for the engagement of a consultant in relation to the Transaction;

(b)  Whilst it was drafted by Chien, Liu and Guan had had ample opportunities to study and comment on the drafts;

(c)  It clearly stated that it was between Liu and Rising Dragon, and that Liu signed for herself, AIM and Shanghai Weicon;

(d)  Liu signed as the “Client”, and was described as the “CEO”, which description is consistent with the positions she held with AIM and Shanghai Weicon;

(e)  Chien signed for Rising Dragon, and was described as the “Managing Director”;

(f)  The four contractual parties were clearly Liu, AIM, Shanghai Weicon and Rising Dragon;

(g)  The Impugned Words relate only to a representation and warranty that Liu (as the Client) gave. It was objectively not meant to define the parties;

(h)  At the time when the Services Agreement was signed, no “intermediary company” had been formed, and Liu controlled no company other than AIM and Shanghai Weicon;

(i)  I agree with Mr Hew that the reference to “any intermediary company(s)” should be read in conjunction with Preamble §2, that at the time of the Services Agreement, the mode of effecting the Transaction had not been completed, so that the reference to “any intermediary company(s)” was to preserve flexibility in relation to the structure of the Transaction;

(j)  It is perfectly possible, legally and practically, to give to the Impugned Words and the Services Agreement sensible contents;

(k)  I see no ambiguity; nor do I have any doubt as to the identities of the contractual parties. I see no application of the contra proferentem principle;

(l)  The Services Agreement had been partly executed. The defence of total failure of consideration is no longer being pursued;

(m)  In any event, and if necessary, I would apply Clause 9.3 of the Services Agreement and sever from the Services Agreement the Impugned Words. Clause 9.3 of the Services Agreement provided as follows:

“9.3 Severability. If any provision of this Agreement, or the application thereof to any person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, such provision shall be enforced to the maximum extent possible so as to effect the intent of the parties, or, if incapable of such enforcement, shall be deemed to be deleted from this Agreement, and the remainder of this Agreement and such provisions as applied to other persons, places and circumstances shall remain in full force and effect.”

M.3.  Conclusion

59.  For the above reasons, I answer Issue #4 in the negative.

N.  The 2^nd Agreements

60.  I consider first of all the circumstances in which the 2^nd Agreements were executed.

61.  There is no dispute that the 2^nd Agreements had in fact been executed.

62.  Ps’ case is that they were induced by the 2^nd Alleged Misrepresentations to enter into the 2^nd Agreements. Parties had no intention to create any legal relationship.

63.  More particularly, Liu says:

(a)  at §§21 to 33 of Liu/WS1, that:

(i)  soon after the signing of the Services Agreement, Chien was introduced to the staff of Shanghai Weicon. He had only been to Shanghai Weicon’s office about 15 times. He did not have a permanent desk or room. It was thought that that was not necessary as he would only be working there temporarily for a short period of time. He was informed of matters relating to Shanghai Weicon that were outside his scope of work. The reason was that Chien’s role as their consultant required him to liaise with banks, potential investors and other third parties. It was therefore important that he was fully aware of and up to date in respect of all relevant aspects of Shanghai Weicon’s business;

(ii)  Around September 2013, Chien told Liu and Guan that it was absolutely necessary that he be given the titles of a director, CFO and CEO so that he could represent AIM and Shanghai Weicon to negotiate with potential purchasers. Chien asked for name cards with those titles, without which the Transaction would fail. He further made it clear that he would not be a real CFO or acting CEO, and that the only purpose of the business cards is for showing to the potential purchasers only. She in the end reluctantly agreed to print Chien such name cards because she knew that the titles were not real. She asked her personal assistant Fandy Mok (“Fandy Mok”) to do so around the beginning of November 2013;

(b)  at §§34 to 40, that:

“34. Soon afterwards, Mr Chien told us that it is insufficient to only provide him with the business cards purporting to show that he is the CFO and acting CEO because the potential purchasers and other third parties (including the banks) will check the legitimacy of Mr Chien’s position as the CFO and acting CEO during due diligence. Mr Chien said that it is necessary to have the agreements purporting to show that he is a director, CFO and acting CEO of AIM and Shanghai Weicon and that it is also necessary to have an agreement purporting to show that that he is also a shareholder of AIM as it is common practice. Mr Chien explained that the agreements are not intended to be legally binding or used for any other purposes.

35. At the time, I was extremely busy with running the daily operations of Shanghai Weicon, as well as with meeting with the banks and potential purchasers of Shanghai Weicon. I repeatedly told Mr Chien that he would not be a director, CFO, acting CEO or a shareholder of AIM or Shanghai Weicon. However, Mr Chien continuously gave me pressure to have the said agreements and said it would not be possible to complete the sale of Shanghai Weicon without it.

36. On the 9^th November 2013, Mr Chien sent an email to Ms Guan and I attaching [the 2^nd Agreements] …

…

38. Mr Chien told us that the 3 Agreements are necessary to enable him to represent to the potential purchasers and other third parties for the purpose of procuring sale of the Shanghai Weicon and that the 3 Agreements are not intended to be legally binding or enforced in anyway. Mr Chien explained that his purported engagement under the 3 Agreements as a director, CFO or acting CEO of AIM or Shanghai Weicon are also not real and that there would be no need to pay him a salary or to transfer any shares to him under the 3 Agreements since the same are only created for showing to the potential purchasers and to other third parties.

39. It should be noted in his email dated the 9^th November 2013 and in his subsequent email dated the 11^th November 2013, Mr. Chien made it clear that he does not intend to be paid under the 3 Agreements. Mr Chien explained in both the emails that ‘the law does not allow for a zero amount of salary for any formal employment’ and ‘to get around this minor issue’ and therefore he has had to put an amount in the agreements as his monthly salary. Mr Chien goes on to explain that he won’t have any problem repaying that amount back to me every month. The amount of salary put in by Mr Chien in the HK Employment Agreement and PRC Employment Agreement are HK$20,000 and RMB50,000 respectively …

40. After a lot of pressuring from Mr Chien, I eventually signed the 3 Agreements on the 20^th November 2013 when we were in Hong Kong holding an investors’ presentation. Although the 3 Agreements were signed on the 20^th November 2013, Mr. Chien asked me to back-date it to the 15^th November 2013 because he said it had to be before the date of the investors’ presentation in case he had to show it to the potential purchasers during the investors’ presentation.”

64.  Guan’s evidence in Guan/WS is again materially and substantially the same with that of Liu. When giving evidence before this Court, Guan repeated on multiple occasions that the 2^nd Agreements were for show, to give Chien face, and that they were not meant to be enforced.

65.  In contrast, Chien’s case and evidence are that his engagement as director, CFO and acting CEO of AIM and Shanghai Weicon was to assist with managing and improving the business as well as to add credibility to the Transaction process. He did not make the 2^nd Alleged Misrepresentations. The 2^nd Agreements reflected the true bargains between the parties, and were legally binding.

N.1.  Discussion and findings

66.  For the reasons set out below, I reject Liu and Guan’s versions of events leading to the execution of the 2^nd Agreements. I find their evidence on material aspects inherently improbable, inconsistent both internally and with contemporaneous documents, and repugnant to commercial and common sense. I accept Chien’s evidence in those regards in so far as there are differences. I set out my reasons and findings below.

67.  I find that upon the execution of the Services Agreement, Chien as the managing director of Rising Dragon provided consultancy work pursuant to the same. As mentioned above, total failure of consideration of the Services Agreement is no longer pursued as a separate defence by Ps, and I have found that there had been performance.

68.  I find that among those work, in the morning of 21 October 2013, BOAML (represented by Lin and other of his colleagues), Liu, Guan and Chien had a full-blown project discussion meeting at BOAML’s office in Hong Kong to discuss the way forward for the Transaction. During that meeting, Liu was told by Lin and his team (and repeated on other occasions) that it was important for the business to be sold to have extra, credible, experienced, and senior level management resources to be added to ensure development of the business and to add credibility in relation to the Transaction. In Chien’s words given during cross-examination, the BOAML team suggested that it was very important for Shanghai Weicon to “beef up its internal and external resources”.

69.  I find that after that meeting, Liu invited Chien to lunch at the Conrad. Guan joined. During the meeting, Liu raised the possibility of Chien being appointed as a director, CFO and interim or acting CEO of the business.

70.  I specifically accept Chien’s evidence that on 2 November 2013, there was another meeting amongst Lin, Liu, Guan and Chien at the Conrad. That meeting was requested by Guan[74]. During the meeting, Lin reiterated his suggestion of the business hiring a CFO and/or CEO to provide more resources for the business operations and to add credibility to the Transaction. After Lin’s departure in the middle of the meeting, Liu, Guan and Chien continued with their discussion on the possibility of appointing Chien. Chien informed Liu that given his experience, past practice, background, the opportunity cost, potential work required, and reputational risk for him, he would only agree to the appointments if he was to receive an equity stake of 6% in AIM which would vest over 3 years. He further provided both Liu and Guan with the Term Sheet which contained his proposed terms. After some further discussions, Liu gave him instructions to prepare draft documentation to formalize the employment and appointment.

71.  The subsequent transmissions of drafts and related discussions are evidenced by the emails and WeChats produced.

72.  On the evidence before me, the material aspects to be explained below, I specifically reject Liu and Guan’s evidence that Chien had made the 2^nd Alleged Misrepresentations. Their evidence in those regards is inherently improbable, and is inconsistent with the contemporaneous correspondence and conduct between and of the parties.

73.  I note first of all this. In the course of cross-examination, and when being asked as to whether she was concerned that appointing Chien just to give him face to facilitate the Transaction might mislead potential purchasers, Liu sought to suggest that that idea came from BOAML. She said:

“Actually, it was kind of impliedly suggested to me by Merrill Lynch, firstly to hire Mr Chien as a consultant, but he has to be given some nice titles so as to stay in the company, so that he would have a lot of face to deal with people, both internally and externally. So that was not my idea.”

74.  I do not accept that evidence. That has not been her case, and has not appeared in any of her witness statements.

75.  Coming back to the 2^nd Alleged Misrepresentations, there was no documentary record of or reference to the same, whether in the 2^nd Agreements, any of the drafts, or the contemporaneous correspondence between the parties. Similar to the 1^st Alleged Misrepresentations, Liu and Guan had not even requested for their confirmation or inclusions.

76.  The drafts of the 2^nd Agreements were first provided to Liu and Guan via email on 9 November 2013[75]. The email started with the words “As discussed earlier”. The drafts were provided to Liu and Guan for their “review and comment”. Draft documentation for Chien’s appointment as a director was also attached. Chien also said that “Once you approve the documents, I will prepare the copies and bring them up to Shanghai for our signing when we meet there on 15 Nov.”

77.  According to the WeChat message Guan sent to Chien on 11 November 2013[76], she and Liu had both read the documents. She said the draft PRC Employment Agreement and the letters appointing Chien as a director of AIM were “both fine”. There was no reference to the 2^nd Alleged Misrepresentations, or any prior understanding that the 2^nd Agreements were not meant to be enforced, whether expressly or tacitly. Quite the contrary, she sought clarifications in relation to the drafts, including whether Chien had found an agent stipulated in the draft Share Award Agreement for “transfer and vesting of the awarded shares”, the related costs, and the salaries arrangements. None of those information and details would have been relevant if the 2^nd Agreements were not intended to be enforced.

78.  When asked why she did not raise in the WeChat message the 2^nd Alleged Misrepresentations, Guan said that she did not want to broadcast to the whole world that the documents were “faked documents”, and that they were doing something not quite aboveboard. She claimed that she had intended to raise the matter with Chien orally face to face.

79.  But the WeChat group concerned comprised only Guan, Liu and Chien. Raising the 2^nd Alleged Misrepresentations therein was hardly any broadcasting.

80.  Guan was further not able to give any particulars on the occasions when she allegedly raised the matters subsequently with Chien orally, which she said she could not remember apart from asserting that they had taken place on at least 2 occasions between 11 November 2013 and the execution of the 2^nd Agreements. There is no documentary record of such occasions, and no mention of them in Guan/WS. Her evidence in this regard is incredible.

81.  In response to Guan’s request for clarifications in the WeChat message, Chien sent an email to Guan and Liu on 11 November 2013[77] detailing the total monthly payments to him under the Services Agreement, the Hong Kong Employment Agreement and the PRC Employment Agreement before and after the anticipated completion of the Transaction. In response, Guan wrote with no reservation “Thank you Allen!”[78]. For Liu, she said in a voice message that “OK, Allen, 收到。And 很清楚。Ok, I agree on the extra $20,000。Ok, for AIM。Thank you。我們就可以prepare the papers，好嗎？！謝謝。” Again, there was no reservation or query of any nature.

82.  On 12 November 2013, Chien sent to Liu and Guan another email[79]. He provided them with details on the set-up and annual maintenance costs for the escrow arrangements in relation to the Awarded Shares. None of those would have been relevant if the Share Award Agreement was not intended to be enforced. Again, there was no written query from either Guan or Liu as to the need for and relevance of the information.

83.  When that email was put to Liu during cross-examination, she claimed variably that she did not read it, that she was “reminded of this matter by my daughter”, that Guan as a graduate from a university in the US could not quite understand the contents in relation to the Escrow Account, that she did not understand why Chien would have made such a suggestion on escrow arrangement, that she did not respond, that she did not respond “because I was very angry”, and that that was her.

84.  I find those answers evasive, inherently improbable, and make no sense. If she did not understand the contents, she could have asked Chien for clarifications. But if she in fact did not understand and had not asked, she would not have felt angry. If she had in fact felt angry because she thought that Chien was acting in ways inconsistent with the 2^nd Alleged Misrepresentations, there would have been all the more reasons for her to have written back and confronted Chien. Liu did not. Nor did Guan. Their conduct was entirely inconsistent with their case about the existence of the 2^nd Alleged Misrepresentations, or that parties had no intention to act on them. All these would also have to be considered in conjunction with Guan’s unparticularized and incredible evidence about her having orally raised the matter with Chien.

85.  On 19 November 2013, Chien by email[80] forwarded to Liu and Guan an email from a “law firm who assists us preparing and managing the escrow account.” Payment of expenses for the setting up of the same was mentioned. It was obvious that Chien was taking steps to set up the Escrow Account. Still, there was no written reply from Liu or Guan, or any document recording their objection or query of the same.

86.  Then, on Ps’ case, the 2^nd Agreements were signed on 20 November 2013. Their contents did not reflect the 2^nd Alleged Misrepresentations. Liu nonetheless signed them.

87.  But even as to where and when the 2^nd Agreements were executed, Liu was evasive and inconsistent:

(a)  When under cross-examination, she claimed initially that Chien took her and Guan to the ground floor of BOAML’s office after a meeting, either at a corner or to a coffee shop, because Chien did not want to do it in front of the BOAML people. But upon further questioning, she was not prepared to commit as to whether there was in fact a meeting with BOAML beforehand, that it might have been just to deliver something or to see somebody, and could not tell when she first met Chien that day, or whether he went to BOAML with her;

(b)  That version is different from what she claims in §40 of Liu/WS1;

(c)  That version is also different from the version put forward by her BVI lawyers in their letter of 26 May 2014[81], that:

“However, each day of investor meetings and presentations proved to be long and intensive and no such review took place. Instead, at the end of the final round of meetings on 17 November, Mr Chien simply approached Madam Liu with the documents, signed them first and then persuaded her to sign them forthwith without any further consideration by assuring her that it would be fine for her to do so. In reliance on his assurance and in circumstances where she was both exhausted and pre-occupied, she trusted him and signed them without checking.”

(d)  Further, according to Chien’s evidence[82], supported by contemporaneous WeChat and travel records, Chien was in Shanghai on 20 November 2013 and did not fly back to and land in Hong Kong until earliest 8:30pm;

(e)  I note further that during cross-examination, to the suggestion put to her that the discussions she mentions in §§34 and 35 of Liu/WS1 did not take place, her answer was “I totally forgot but I agree”, and that in respect of those discussions mentioned in §§37 and 38 of Liu/WS1, only “part of it” happened.

88.  I do not accept Liu and Guan’s evidence that the 2^nd Agreements were signed in Hong Kong on 20 November 2013 but backdated to 15 November 2013. I accept Chien’s evidence that they were signed at Liu’s home on 15 November 2013 in Shanghai. That is consistent with Chien’s email of 9 November 2013 mentioned above and his travel records.

89.  In the meantime, Fandy Mok on 5 November 2013 made arrangements for the setting up of a Shanghai Weicon email account for Chien, and for the provision of sample business cards showing Chien to be the CFO and acting CEO of AIM and Shanghai Weicon. On 8 November 2013, she further sent an email to Chien entitled “[AIM] – Appointment of Director”. An earlier email from AIM’s company secretary to her was thereby forwarded to Chien. Attached to the company secretary’s email were documents in relation to the appointment of Chien as director, which included inter alia the board resolution approving the appointment and the consent to act.

90.  I do not accept Liu and Guan’s evidence as to why business cards were prepared for Chien. I find that they were prepared on the background of the then on-going discussions between Liu, Guan and Chien on his appointment, and in particular those on 2 November 2013 as per the Term Sheet.

91.  According to the resolution of AIM dated 15 November 2013[83], signed by Liu and Chien, the directors of AIM resolved that Chien be appointed as a director with effect from 15 November 2013.

92.  The management presentation prepared for presentation to potential investors are also relevant:

(a)  Between 21 and 26 November 2013, there was a presentation to potential purchasers of the business;

(b)  The management presentation prepared for that purpose is among the trial bundles. In both the version updated to 15 November 2013 for internal discussion and rehearsal (the “15/11/2013 Version”)[84] and the final version[85] (the “Final Version”), Chien was described as the CFO and acting CEO, and Cao, described as the financial controller, were shown to be under him;

(c)  Liu originally claims[86] that:

“… the initial draft of the management presentation drafted by Ms Tang Sui of BOAML shows that Mr Chien is the corporate consultant. I subsequently found out that Mr Chien had told Ms Tang Sui to amend management presentation to show that he is the CFO and acting CEO of Shanghai Weicon. I did not authorise Mr. Chien to make such amendment.”

(d)  That evidence is clearly untruthful. The 15/11/2013 Version was circulated on 15 November 2013 by email which Liu was one of the recipients. During cross-examination, she accepted that she was aware of the contents during the internal rehearsal. She also accepted that whilst there had been some amendments to the drafts, “Eventually I agreed that Mr Chien could be described as CFO and acting CEO instead.” I do not accept her explanation that she was confused in her witness statement;

(e)  If Chien’s appointment were only to give him face and for show, all the potential investors would have been misled. This would be a matter with serious consequences. I do not find the existence of what was in effect a plan amongst the parties to mislead the potential investors into a substantial acquisition inherently probable;

(f)  The management presentation was also put to Cao during cross-examination. In addition to her position within the accounts department of Shanghai Weicon, Cao was also the “supervisor” (監事) under the articles of association of Shanghai Weicon. She accepted that the 15/11/2013 Version was circulated to her. Her answers were otherwise convoluted and confusing. She claimed that there had been some amendments. But when the Final Version was put to her, she repeatedly claimed that she did not regard Chien’s positions described therein as false, that it was done upon Chien’s request as the title of consultant was not sufficient for him, that the titles of CFO and acting CEO were to give him face, to give a better presentation and the picture of a stronger team for the purpose of completing the Project Flying Horse, and those were done for the greater good. The following questions and answers are illustrative, that:

“MR HEW: Can you look at page 868 in the bundle in front of you.

A. Yes.

Q. You will see Mr Chien is in the middle of the page as CFO and acting CEO and you are listed as the financial controller --

…

A. Yes, I see that.

Q. Is it the case that no-one objected to these descriptions?

A. Correct but I have just explained, it's just for the sake of having face.

Q. But now you know that by this point, say the 20^th, that the management presentation is to be used for external investors; correct?

A. Yes.

Q. Don't you think it's important to tell people the truth if you are asking them to spend a lot of money buying shares in Shanghai Weicon?

A. The content therein was.

Q. So it's true that Mr Chien was CFO and acting CEO of Shanghai Weicon; right?

A. I have already said that the title of CFO and acting CEO is just given for the sake of having face, just to present to people. It doesn't represent the decision of Shanghai Weicon internally. Because we had to complete the transaction of the sales and that's why we had to do it, for the greater good.

Q. So it's perfectly fine to describe someone with false titles; is that what you are saying?

A. It's false from the perspective of Shanghai Weicon internally but for outsiders, it's just the appearance. It did not represent any actual situation.

Q. So you are accepting that it's fine to mislead investors?

A. It was just my own thinking, because we have to do it for the project and do it for the greater good.”

(g)  I fail to see how those descriptions could be regarded as false on the one hand internally but at the same time not misleading to outside investors, or that that could be done “for the greater good”. I find Cao’s evidence in this regard to be contrived and nonsensical.

93.  On 23 November 2013, Mr Chien provided Madam Liu and Guan with his bank account details. In an email of that date to them[87], he said, “Regarding the payee account for my AIM employment contract, please kindly arrange the monthly salary payment to … [with details provided]”. Chien also alerted Liu and Guan of that email by WeChat[88]. He said therein that “For your future reference, my AIM employment contract salary payee account has been send to your personal email account.” Liu acknowledged receipt by two okay signs and one thank-you sign. No query was raised. For Guan, she said in cross-examination that she “pretty much ignored it.” I find that answer incredible.

94.  On 23 November 2013, Chien also by email provided to Cao (copied to Liu and Guan) his Mainland bank account details for payment of salary under the PRC Employment Agreement[89]. He alerted Cao of that email via WeChat. Cao acknowledged receipt of the email. There was otherwise no query whether from Cao, Liu or Guan.

95.  On 30 November 2013, Chien circulated to Liu and Guan an updated draft of the documents for setting up the Escrow Account[90]. It was pointed out therein that the draft Share Award Agreement had been revised by updating Liu’s address and passport number. The documents were expressly said to be provided for their “review and comment/agreement”. Chien further offered therein to walk them through the documents should they preferred. None of those again would have been necessary, and Liu and Guan would have raised query if it were their understanding that the Share Award Agreement would not be enforced. None had been raised.

96.  Subsequently, Chien complained about Ps’ non-payment of his salaries under the Hong Kong and PRC Employment Agreements and the delay in the setting up of the Escrow Account. He did so in writing at least on 16 December 2013 via WeChat[91], and by emails of 14 January 2014[92] and 16 February 2014[93]. There is no written reply from Ps to any of them. Again that was inherently most improbable, and against commercial sense, if the 2^nd Alleged Misrepresentations had in fact been made.

97.  In arguing that the 2^nd Alleged Misrepresentations had been made, Mr Chong relies heavily on the intention on the part of Liu to effect a sale of the business as quickly as possible[94]. He submits that entering into the 2^nd Agreements was consistent only with the necessity of conferring credible status to Chien and to impress potential purchasers. I have considered those submissions. I do not accept them. I accept Chien’s explanations that whilst that might be Liu’s wish to have a quick sale, there was the possibility that her wish could not be fulfilled, and the business should go on till the company could be sold. The purpose of his engagement was to add to AIM and Shanghai Weicon’s capabilities and credibility. Further, as I have observed above, accepting Ps’ case on the 2^nd Alleged Misrepresentations would entail finding that parties entered into a plan to mislead potential investors, which conclusion I find inherently not probable.

98.  Mr Chong further argues that Chien’s duties under the Services Agreement and the Employment Agreements overlapped, that the word “Group” in the Hong Kong Employment Agreement covered Shanghai Weicon, that AIM was only a holding company and otherwise carried on no business, and that the terms of the Share Award Agreement were one-sidedly onerous against Liu, so that there would have been no reason for her to have entered into the 2^nd Agreements but for the 2^nd Alleged Misrepresentations.

99.  I have considered those submissions. The scope of Chien’s duties under the Services Agreement, the Hong Kong Employment Agreement and the PRC Employment Agreement were different. In particular, in respect of the Hong Kong Employment Agreement, the management of AIM’s investment on a macro basis and seeing to the assets it had were within his duties, while any management duties under the PRC Employment Agreement would have been on a more hands-on day-to-day basis. §9 of Exhibit A to the Services Agreement, which Chong relied on, related to “such additional assistance as may be reasonably required by Client in connection with the Transaction and as agreed between the parties in writing”, is clearly different in scope. All his services have value to Liu, Shanghai Weicon and AIM. The Share Award Agreement by its very nature suggests that it was the equity incentive for Chien to enter into the Employment Agreements. Its terms are in my view reasonable and commercially sensible for the protection of the allottee and potential minority shareholder. I accept Mr Hew’s submissions[95] that there is no basis for any suggestion that all work done by Chien in relation to the 2^nd Agreements would somehow fall within the terms of the Services Agreement.

100.  I have considered Mr Chong’s submissions that “as a matter of law, on construction of documents against extrinsic evidence to explain their contents”[96]. I have reservations as to the intended breath and application of that submissions of his. I state nonetheless that I am not considering any extrinsic evidence to add to, vary or contradict the express terms of any agreement. I have been considering the contemporaneous documents and contemporaneous conduct of the parties to gauge the credibility and reliability of the witnesses. Having done so, and for the reasons set out above, I do not find Liu, Guan or Cao to be credible or reliable witnesses.

101.  I have further considered Mr Chong’s submissions[97] that “in respect of post-contract conducts, the rule against self-collaboration precludes a party from relying upon conducts generated subsequently to support his own case”, so that “Chien’s demands for performance of the 2^nd Agreements after 15 November 2013 … would either be inadmissible or alternatively no weight should be given to them.” The 2 cases cited by Mr Chong do not support any “rule against self collaboration”. In Siu Chun Wah, Alice & Another v Malahon Credit Co Ltd [1988] 1 HKLR 196, the court was concerned about a declaration by one of the co-owners of a flat to a manager of the mortgagee that he had an absolute right to the property since he had paid for it – see p 200 A-E. The other case is the well-known case of Wong Tak Yue v Kung Kwok Wai & Another (No.2) (1997-98) 1 HKCFAR 55 wherein Li CJ warned that the courts in the context of adverse possession should approach any self-serving statement by the occupier on his intention to possess. The facts of those cases are far removed from the contemporaneous conduct which Mr Hew has invited this court to consider. I accord weight to them as contemporaneous conduct which this Court takes into account when determining witnesses’ credibility and reliability. In particular, I accord weight to Liu and Guan’s reaction to Chien’s messages and demands, which, even on Mr Chong’s submissions, tantamount to “acts and declaration against interest”.

102.  I have also considered those facts set out in Mr Chong’s submissions[98] which he submits to be relevant. I have taken them into account. As pointed out by Mr Hew in reply, there was no term requiring Chien to attend office at a particular location. There had been delay in the application for his work visa in the Mainland. According to the Articles of Shanghai Weicon, it had no board of directors, but only an executive director[99], so that an amendment might be required before Chien could be appointed as a director of Shanghai Weicon. I accept Mr Hew’s submissions[100] in those regards. On the totality of the evidence, Ps’ subsequently conduct of non-fulfilment of the 2^nd Agreements (which Mr Chong relies on) in my view points towards their breach of the same rather than the existence of the 2^nd Alleged Misrepresentations.

N.2.  Conclusion

103.  For reasons set out above, and on top of the findings set out in Section N.1 above (or reiterating some of them), I specifically:

(a)  reject Liu and Guan’s evidence that Chien had made the 2^nd Alleged Misrepresentations;

(b)  accept Chien’s evidence that he had not;

(c)  find that a resolution dated 15 November 2013 had been signed by Liu and Chien appointing Chien as a director of AIM pursuant to the Hong Kong Employment Agreement;

(d)  find that the 2^nd Agreements were executed at Liu’s home in Shanghai on 15 November 2013. I accept Chien’s evidence at §124 and 125 of Chien/WS1 on the circumstances in which the 2^nd Agreements were signed and how he and Liu then handled the signed agreements. I reject Liu and Guan’s evidence that they were somehow signed in Hong Kong on 20 November 2013 but backdated to 15 November 2013; and

(e)  find that Cao was only the financial controller of Shanghai Weicon, which is, as shown on the Final Version (of the management presentation) different from the position of CFO.

O.  Issue #5

O.1.  The applicable legal principles

104.  Mr Hew has set out the applicable legal principles in §§55-57 of his written opening. Mr Chong does not appear to dispute them[101].

105.  In First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569, Lord Collins NPJ observed at §53 that:

“The common law rule is that the law applicable to a contract is the system of law by which the parties intended the contract to be governed, or, where their intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its closest and most real connection … The line between the search for the inferred intention and the search for the system of law with which the contract has its closest and most real connection is a fine one which is frequently blurred. In theory, in the absence of an express choice as the first test, the court should consider as a second test whether there are any other indications of the parties’ intention, and only if there is no such indication to go on to consider the third stage, namely with what system of law the contract has its closest and most real connection. But in practice the same result can be reached by the application of the second or third tests, and frequently the courts move straight from the first stage to the third stage. This is largely because the tests of inferred intention and close connection merged into each other, and because before the objective close connection test became fully established the test of inferred intention was in truth an objective test designed not to elicit actual intention but to impute an intention which had not been formed: Dicey, p.1539 para.32-006.”

106.  In Fong Chak Kwan v Ascentic Ltd [2020] HKCFI 679 at §135, Marlene Ng J cited Johnston on Conflict of Laws in Hong Kong, (3^rd ed.) §5.009 which sets out a non-exhaustive list of factors to be considered in determining the applicable law of a contract, which factors include:

“(i) the location of the subject matter of the contract, (ii) the location of intended performance, (iii) the place of making or negotiating the contract, (iv) the domicile or the residence of parties, (v) the adoption of particular legal terminology, (vi) the language, (vii) the express choice of dispute resolution, (viii) the exemption clauses, (ix) the currency, and (x) the related transactions.”

107.  In relation to a contract which subject matter is shares, the following observations of Lord Collins NPJ in First Laser are relevant, that:

“… the subject matter was shares in Mainland companies, and the only possible place of performance was the Mainland. The intended place of performance has always been of great weight at common law … The fact that the agreement was executed in Hong Kong is of little weight in modern circumstances.”

108.  I apply the above.

O.2.  Discussion

109.  No intention in relation to the applicable law has been expressed.

110.  I proceed to consider inferred intention and closest connection, which would yield the same result.

111.  Mr Chong argues that the applicable law of the Share Award Agreement is Hong Kong law. He relies on the following matters[102], (1) Liu, being the directing and controlling mind of AIM, is a permanent resident of Hong Kong despite being a US citizen; (2) despite being a Canadian citizen, Chien is a Hong Kong resident; (3) the Share Award Agreement was negotiated by the parties in Hong Kong; and (4) “apart from AIM being a BVI company”[103], neither Liu nor Chien had any connection with BVI.

112.  AIM is a BVI company. That is an important consideration. Mr Chong cannot brush that aside by simply submitting that “apart from AIM being a BVI company”.

113.  The fact that AIM is a BVI company is important because:

(a)  The Share Award Agreement concerns shares in AIM;

(b)  Not only that, it involves the issue, allotment and transfer of AIM shares;

(c)  The registered agent of AIM has always been Offshore Incorporation Ltd in the BVI[104];

(d)  The Register of Members[105] must be kept at the office of AIM’s Registered Agent;

(e)  The transfer would be subject to the Memorandum and Articles of AIM[106];

(f)  According to Rule 175(2) of The Conflict of Laws, “All matters concerning the constitution of a corporation are governed by the law of the place of incorporation”;

(g)  Clause 3.1(c) of the Share Award Agreement provided that:

“The Company hereby warrants, undertakes and represents to Mr Chien that:

…

(c) the Company has obtained the requisite corporate approval to enter into and perform this Deed and is fully capable of entering into this Deed and to perform all obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party.”

I accept Mr Hew’s submissions that those matters would be governed by BVI law;

(h)  The place of performance of the Share Award Agreement is in my view BVI.

114.  The other factors Mr Chong relies on (the residence of Liu and Chien and place of negotiation) are of very minor significance. In modern times, business-persons travel. Negotiations can also be conducted online from any corner of the world where there is internet coverage.

115.  Mr Chong relies further on some alleged practice which he sets out at §111 of his written closing. I agree with Mr Hew that that alleged practice would need to be proved before Ps could be permitted to rely on them. They have neither been pleaded, nor otherwise proved or canvassed with any witness. Ps cannot seek to rely on it.

116.  In my view, the system of law which the Share Award Agreement has its closest and most real connection is that of the BVI. Those other factors put forward by Mr Chong are of little consequences.

O.3.  Conclusion

117.  For the above reasons, whether relying on the tests of inferred intention or closest connection, I find that the applicable law for the Share Award Agreement is BVI law, and I so conclude.

P.  Part 1 of Issue #6

118.  Issue #6 comprises two parts. I deal with part 1 first – whether the 2^nd Agreements were executed by Ps due to fraudulent misrepresentations of Mr Chien.

119.  I have considered the facts in Section N above. I repeat the conclusions set out in Section N.2. I reiterate my rejection of Liu and Guan’s evidence that Chien had made the 2^nd Alleged Misrepresentations, and my finding and acceptance of Chien’s evidence that he had not.

120.  On those factual findings, I answer part 1 of Issue #6 in the negative.

Q.  Part 2 of Issue #6

121.  The balance of Issue #6 asks whether “there was no intention of any of the contracting parties to create a legal relationship”.

Q.1.  The applicable legal principles

122.  Mr Hew’s submissions on the applicable law are at §§60-62 of his written opening. Mr Chong has not seriously disputed them. I summarize them as follows.

123.  When considering whether the parties intended to create legal relationship, the test to apply is an objective one. As observed by per Coleman J in Yu Man Fung Alice §§33-35 and 37:

“33. … the question is to be resolved by considering what was communicated between the parties in all the circumstances and deciding whether, as understood by a reasonable person, the true inference is that they intended to create legal relations.

34. That is an objective test, making it unnecessary to prove any positive subjective intention to contract - so that the objective test may be satisfied even though neither party had any actual subjective intention that there be a contract, in the sense that neither party gave any thought to the matter …

35. For the purpose of determining the parties’ intention at the material time, evidence of their subsequent conduct is admissible: see Blue v Ashley [2017] EWHC 1928 (Comm) at §64. As it was put in [Jones v Padavatton [1969] 1 WLR 328] at 336H, the subsequent history may give the ‘best guide’ to the parties’ intention at the material time. Sometimes, the fact that the transaction was performed on both sides may point to an intention to enter into legal relations, and the same might apply to partly executed transactions …

…

37. Evidence of the subjective understanding of the parties is also admissible, in so far as it tends to show whether, objectively, the agreement was intended to be legally binding ...”

124.  In New World Development Co Ltd v Sun Hung Kai Securities Ltd (2006) 9 HKCFAR 403 at §14, Ribeiro PJ described the onus of proving an express agreement of a commercial nature as one not intended to have legal effect is a heavy one, that:

“Parties reaching an express agreement of a commercial character are presumed to intend it to have legal effect unless the contrary is shown … In such cases, assuming that the other requirements for constituting a contract are present, it is clear that ‘the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one’: Edwards v Skyways Ltd [1964] 1 WLR 349 at p.355. ‘In deciding whether the onus has been discharged, the courts will be influenced by the importance of the agreement to the parties, and by the fact that one of them acted in reliance on it’: Chitty on Contracts (29^th ed., 2004) Vol.1, p.199 §2-154; and see Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 at p.181.”

125.  I apply the above.

Q.2.  Discussion

126.  I have considered the facts in Section N above.

127.  The 2^nd Agreements are all express written agreements of a commercial character.

128.  On their face, they have all been properly signed.

129.  An objective reading of their terms suggests that they were regular, meant to govern parties’ rights and obligations as stipulated, and were intended to have legal effects.

130.  Mr Chong submits that the terms of the Share Award Agreement were one-sidedly onerous against AIM and Liu. I reiterate my view that they are reasonable and commercially sensible provisions for the protection of Chien as an allotee and potential minority shareholder.

131.  An objective consideration of the contemporaneous communication and correspondence between parties, and the subsequent conduct of theirs, reinforce that conclusion.

132.  Ps’ case that parties had no intention is based factually on the principal allegations that Chien had made the 2^nd Alleged Misrepresentations, and that they entered into the 2^nd Agreements in reliance of the same, so that parties did not intend to enforce them. This appears to be the reason why the existence of the 2^nd Alleged Misrepresentations and parties’ intention to create legal relationship are rolled up into one single issue.

133.  I have rejected those allegations.

134.  On an objective appraisal of the facts, and upon my rejection of Ps’ case in relation to the 2^nd Alleged Misrepresentations, I find that the contents of the 2^nd Alleged Misrepresentations represented the bargains between and the true intentions of the parties. I find that parties did by the 2^nd Agreements intend to create legal relationship.

135.  In so far as necessary, I will also make reference to the discussion below on Issue #10.

Q.3.  Conclusion

136.  I answer Part 2 of Issue #6 in the negative.

R.  Issue #7

137.  As I have recorded above, Issue #7(a) is no longer pursued upon Mr Chong’s concession that the 2008 Resolution had no application to the Hong Kong Employment Agreement. I note in any event that according to Article 10.7 of the Articles of AIM[107], Liu as its single director at the time when the Hong Kong Employment Agreement was executed had full power to represent and act for the company in all matters. I find that the Hong Kong Employment Agreement had been validly executed.

138.  In so far as Issue #7(b) is concerned, and as clarified by Mr Hew in the course of closing submissions, it will only be engaged if this court finds on any of the grounds Ps rely on (e.g. lack of intention to create legal relationship) that the Hong Kong Employment Agreement is invalid or unenforceable. As can and will be seen from above and below, I find that the Hong Kong Employment Agreement is valid and enforceable. Issue #7(b) is therefore not engaged.

S.  Issue #8

139.  I have ruled that BVI law is the governing law of the Share Award Agreement.

140.  I have set out above Ps’ case as pleaded in §§21, 24 and 28 of the SoC.

S.1.  The authenticity of the Challenged Resolutions

141.  Issue #8 is premised largely upon the existence of the 2008 Resolution.

142.  As I have recorded above, the 2008 Resolution is one of the Challenged Resolutions.

143.  The existence and genuineness of the 2008 Resolution has therefore to be determined first. This, together with the authenticity of all the other Challenged Weicon Resolutions, are predominantly factual issues. I deal with them together here.

144.  On the question of onus of proof, Ps are the parties who put forward and rely on the 2008 Resolution (and the other Challenged Weicon Resolutions). The overall consideration is to ascertain whether Ds have adduced sufficiently cogent evidence to raise the issue that it was not genuine, and, if the evidential burden is discharged, whether Ps have discharged the legal burden of persuading the court that the 2008 Resolution (and that other Challenged Weicon Resolutions) is genuine: see Choi Lisa Mei Yin v Yau Pak Kin [2020] 2 HKC 228 at §§67-68 per Kwan VP, and Lee See Woo v Chan Chun Fai (CACV 10/2013, 9 May 2014) at §24 per Barma JA.

145.  For the reasons set out below, I rule that Ps have failed to prove the authenticity of any of the Challenged Resolutions:

(a)  The originals of the Challenged Resolutions have not been produced;

(b)  By email of 15 May 2014, Simon Shi of BOAML asked for copies of all resolutions signed by the board of Shanghai Weicon[108]. Cao responded on the same day that according to Shanghai Weicon’s articles, the company did not have a board of directors, but only one executive director;

(c)  In May 2014, some of the potential purchasers raised a number of questions as part of their due diligence. The questions were grouped together by BOAML via email of 21 May 2014 to Cao[109]. In one of the questions, the following were sought:

“過去三年公司及上海衛康光學有限公司(“舊合資公司”)股東、董事會或類似治理機構的會議記錄及書面決議”[110]

(d)  The term “公司” was clearly defined at the top of the questionnaire as being Shanghai Weicon;

(e)  To that request, the written answer provided by Cao was “Nil”;

(f)  When under cross-examination, Cao claimed that she understood the request as being for resolutions “between” Shanghai Weicon and the old Weicon, which alleged understanding is clearly inconsistent with the clear language of the request. I reject that explanation. I note that the words “之間” did not form part of the request, and it clearly asked for resolutions etc. “of” the two companies, but not those “between” them;

(g)  I attached weight to the contemporaneous responses given by Cao;

(h)  I regard as also relevant that:

(i)  in respect of the alleged resolutions of 17 February 2014[111], the contents are incorrect and inconsistent with other evidence, as Project Flying Horse had not been suspended by that date, and the application for work visa for Chien was also on-going[112];

(ii)  In respect of the alleged resolutions of 15 November 2013[113], Chien did not need a visa to travel in and out of the Mainland;

(iii)  two purported resolutions with the same contents but bearing different signatures have been produced, and that one bears a company seal or chop whilst the other does not[114]. The contents suggesting that certain consortium had been chosen for the Transaction are also inconsistent with other evidence;

(i)  Cao’s repeated explanations about resolutions being internal documents are in my view not convincing at all;

(j)  Specifically in respect of the 2008 Resolution:

(i)  At §§4 and 5 of Liu/WS2, Liu claims that between September and November 2013, she “personally provided” Chien with many of AIM and Shanghai Weicon’s key documents. She claims that the 2008 Resolution was one of them. She describes it as being “also a core important document”. She says that after providing Chien with those core documents, she asked him “to study them to ensure that the proposed sale of the business is in compliance with the company’s constitutions …”

(ii)  At §§6-8 thereof, Liu further claims that:

“6. It can be clearly seen from the AIM’s constitutional documents and the said board resolution of AIM that it has always been AIM’s requirement that all deeds entered into by AIM must be affixed with the company seal for it to be validly executed. Mr Chien is and has always been fully aware of this requirement as he has been provided with a copy of the AIM’s constitutional documents and the said board resolution.

Deed of Share was not sealed

7. In paragraph 44 of my 1^st Witness Statement, I pointed out that AIM's company seal was never affixed to it to the Deed of Share even though it was formed as a deed. At the time of the signing the Deed of Shares, Mr Chien and I both agreed that it was unnecessary to affix AIM's company seal because the document was only created to show to the potential purchasers and other third parties and there was no intention to enforce it.

8. Soon after signing the Deed of Shares, Mr Chien asked me on several occasions to affix the company seal on the Deed of Shares ‘to make it more real’. I refused because it was never our intention to enforce the Deed of Shares. On several other occasions, Mr Chien asked me to ‘borrow’ the company seal. I also refused and began to have suspicions about Mr Chien’s intentions.”

(iii)  The 2008 Resolution was first disclosed only in May 2016 in Ps’ 2^nd Supplemental List of Documents, and first pleaded only upon re-amendment of Ps’ Statement of Clam in March 2017. That is inherently most improbable if the 2008 Resolution had in fact existed since 2008, and that Liu had attached so much importance to it;

(iv)  The 2008 Resolution was, as pointed out by Mr Hew[115], not pleaded in the BVI Proceedings started in 2014[116];

(v)  On the issue as to how the 2008 Resolution was provided to Chien, Liu’s oral evidence is materially inconsistent with Liu/WS2. When being cross-examined, she said that she could not remember how she provided the 2008 Resolution to Chien. She raised 3 possibilities: asking her personal secretary to get the documents and deliver them to him, asking Chien to attend the secretariat company to collect them himself, or getting Guan to deliver them to him. None of the scenarios is consistent with his evidence in Liu/WS2;

(vi)  Further, when asked about how and when she gave those instructions to Chien as described in Liu/WS2, she claimed that she believed it was given orally, as she did not normally write things, but had no recollection as to when;

(vii)  When Mr Hew suggested to her that she never provided the 2008 Resolution to Chien before they signed the 2^nd Agreements, she said she could not recall;

(viii)  Liu further agreed to the suggestion put to her that she and Chien never discussed whether the company seal should be affixed to the Share Award Agreement.

S.2.  Chien’s knowledge of the 2008 Resolution

146.  On the basis of my finding that Ps have failed to prove the authenticity of the 2008 Resolution, it must follow that Ps have failed to establish that Chien had knowledge of the same.

147.  On the evidence before this Court as discussed above, I in any event reject Liu’s evidence as to how she claims the 2008 Resolution was provided to Chien. I reject her evidence that she had told him to study it. I reject further her evidence that she and Chien had discussed about the need to affix the company seal to the Share Award Agreement. I accept Chien’s evidence he had not been provided with a copy of the same as alleged. I find that at the time when Chien executed the Share Award Agreement, he did not have knowledge of the 2008 Resolution.

S.3.  Issue #8(a)

148.  I now focus upon Issue #8(a).

149.  Leave has been granted to parties[117] to adduce expert evidence on the following questions, namely, pursuant to BVI law, what must the Court determine in order to assess whether the Share Award Agreement is (as a deed or other agreement) valid and binding on, and enforceable against, AIM and Madam Liu, in particular with regard to the following subjects:

(a)  Affixing of the seal of AIM to the Share Award Agreement;

(b)  Delivery of the Share Award Agreement as a deed by AIM;

(c)  The signing of the Share Award Agreement by the director(s) of and on behalf of AIM;

(d)  The authority of AIM and/or Madam Liu (on behalf of AIM) to enter into the Share Award Agreement;

(e)  Whether AIM and Madam Liu are estopped from denying the validity and/or enforceability of the Share Award Agreement; and

(f)  The effect of any prohibition on AIM giving financial assistance to any person in connection with the acquisition of its own shares[118].

S.3.a.  The requirement to seal

150.  Issue #8(a) involves 2 sub-issues: (1) the requirement to seal, and (2) the requirement to deliver.

151.  I consider the requirement to seal first.

S.3.a.i.  The BVI Business Companies Act 2004

152.  On its face, the Share Award Agreement was intended to be executed as a deed, in that:

(a)  It states that “THIS DEED OF SHARE AWARD is made on …”;

(b)  In various clauses therein, it is referred to as a deed;

(c)  The execution block refers to the document as being executed as a deed and being sealed and delivered;

(d)  Specifically, the execution block of AIM reads “SEALED with the COMMON SEAL of [AIM] and SIGNED BY”.

153.  The Share Award Agreement has not been sealed with the common seal of AIM.

154.  The experts agree that as a matter of BVI law, there is no requirement that a contract to allot, issue or transfer shares in a BVI company should be effected by way of a deed. Hence, even if the Share Award Agreement is not a valid deed, the existence of consideration and intention to create legal relationship assumed, it can still be valid, binding and enforceable as a contract under hand.

155.  The question remains whether the Share Award Agreement was validly executed as a deed, as that may bear upon Issues #8(c) and 9 on the question of consideration.

156.  The expert agree that the relevant BVI statue is section 103 of the BVI Business Companies Act 2004 (as amended) (the “BCA”) and in particular ss 103(3) and (4) thereof. Section 103 of the BCA stipulates as follows[119] (with emphasis on the word “only” added):

“(1) A contract may be entered into by a company as follows:

(a) a contract that, if entered into by an individual, would be required by law to be in writing and under seal, may be entered into by or on behalf of the company in writing under the common seal of the company, and may be varied or discharged in the same manner;

(b) a contract that, if entered into by an individual, would be required by law to be in writing and signed, may be entered into by or on behalf of the company in writing and signed by a person acting under the express or implied authority of the company, and may be varied or discharged in the same manner; and

(c) a contract that, if entered into by an individual, would be valid although entered into orally, and not reduced to writing, may be entered into orally by or on behalf of the company by a person acting under the express or implied authority of the company, and may be varied or discharged in the same manner.

(2) A contract entered into in accordance with this section is valid and is binding on the company and its successors and all other parties to the contract.

(3) Without affecting subsection (l)(a), a contract, agreement or other instrument executed by or on behalf of a company by a director or an authorised agent of the company is not invalid by reason only of the fact that the common seal of the company is not affixed to the contract, agreement or instrument.

(4) Notwithstanding subsection (1)(a), an instrument is validly executed by a company as a deed or an instrument under seal if it is either

(a) sealed with the common seal of the company and witnessed by a director of the company or such other person who is authorised by the memorandum and articles to witness the application of the company’s seal; or

(b) it is expressed to be, or is expressed to be executed as, or otherwise makes clear on its face that it is intended to be, a deed and it is signed by a director or by a person acting under the express or implied authority of the company.

(5) The provisions of subsection (3) shall be without prejudice to the validity of any instrument under seal validly executed before, on or after the date on which this section comes into force.”

157.  The main difference between the experts arises from the word “only” (as bolded above):

(a)  In Millett/1 at §§35 and 36[120], Millett expresses the following opinion (note his use of the abbreviation “DSA” to denote the Share Award Agreement):

“35. The DSA does not bear AIM’s seal. However, by reason of section 103(3) of the BCA, in my opinion the BVI Court, applying BVI law, would hold that the absence of AIM's seal on the DSA does not render it invalid as a deed.

36. On the contrary, the BVI Court would conclude that the DSA will be positively validated as a deed binding AIM, so far as concerns the formalities of execution, by section 103(4)(b) of the BCA, provided that its conditions are met. In my view the BVI Court would hold that the DSA was clearly intended on its face to be a deed, and so the only remaining question for the purposes under section 103(4)(b) is whether the DSA was signed by a director or by a person acting under the express or implied authority of the company. If Madam Liu was a director of AIM at the material time (as to which there is no dispute), then I consider that the BVI Court would hold that the DSA was validly executed by AIM as a deed under BVI law, subject to the written director's resolution dated 18 August 2008, to which I turn next, and subject to the further points at paragraph 66 below.”

(b)  Hardwick expresses agreement to Millett’s conclusion[121];

(c)  Fay expresses a different view. His focuses upon the word “only”. In effect, he is of the view that the wording of the Share Award Agreement suggests an intention on the part of the parties that the Share Award Agreement be executed by both the signature of the director and by the affixing of the corporate seal, so that s 103(3) is not applicable. I note in particular his opinion at §41 of Fay/1, that “it is the agreed requirement of the parties that the corporate seal should be applied together with the failure to apply the corporate seal that is, in my opinion as a matter of BVI law, fatal to the proper execution of the Deed of Share Award by AIM.”[122] The following extracts from Fay/1 are representative of his opinion (note his use of the “Deed of Share Award” to denote the Share Award Agreement, and with emphasis added):

“37. As noted above section 103(3) provides that a deed executed by or on behalf of a company by a director is not invalid by reason only of the fact that the common seal of the company is not affixed to the deed. The critical word is ‘only’, and the section means that an assertion cannot be made that the deed is not validly executed by a BVI company if the only reason relied on it support of such assertion is that the corporate seal has not been affixed to the deed.

38. It follows that if the Deed of Share Award had been drafted so that it should have been executed as a deed by AIM merely by the signature of its director (without any mention of the corporate seal), then the signature of the director on the deed would be an effective execution of the deed by AIM. However, the question that arises in this matter is whether the fact that (i) the Deed of Share Award contemplates that it is to be sealed with the common seal of AIM, and (ii) the letters ‘C/S’ appear on the face of the document, mean that the Deed of Share Award is only effectively executed by AIM when its corporate seal is applied to the document.

39. Insofar as I am aware, there is no authority of the BVI Court on the point, and it is therefore necessary to consider the matter from basic principles. Notwithstanding that a deed can be valid if a director signs it as a deed without a seal being affixed, it does follow that a deed will be valid if the deed contemplates on its face that it should be executed under seal and no seal is in fact applied. The question is essentially whether the company has in fact executed the deed merely by the signature of the director, or whether execution would only be completed once the seal was affixed to the deed.

40. It is possible to determine what the intention and/or requirements of the parties to the Deed of Share Award were as to how and when it should be executed by simply looking at the words of the execution clause that are used in the Deed of Share Award itself. As a matter of BVI law, it is my view that the agreed wording required that the Deed of Share Award be executed by both the signature of the director and by the affixing of the corporate seal. In my opinion, and ignoring section 103(3) for the moment, it follows that unless and until both those acts had occurred, the Deed of Share Award would not be executed in the manner required by the parties when they agreed the wording of the execution clause.

41. It is then necessary to consider whether section 103(3) has the effect of overriding the requirements of the parties as to how the Deed of Share Award should be executed. Section 103 provides that neither of the parties are able to assert that the Deed of Share Award is not executed by reason only of the fact that the common seal of the company is not affixed to the deed. However, it seems to me that section 103(3) does not prevent either party from asserting that the Deed of Share Award was not properly executed by AIM because the agreed execution clause required that AIM should executed both by the signature of a director and affixation of the corporate seal. As I noted above, sections 103(3) & (4) did not abolish the concept of a corporate seal. In seeking to assert that the Deed of Share Award is not executed by AIM, I understand from my instructions that the assertion is not just only that the corporate seal is not applied, but that the agreed wording of the execution clause required that the corporate seal be applied and that it was not applied. If the execution clause was silent as to the need for the corporate seal to be applied, then the Deed of Share Award would have been properly executed as a matter of BVI law - however, it is the agreed requirement of the parties that the corporate seal should be applied together with the failure to apply the corporate seal that is, in my opinion as a matter of BVI law, fatal to the proper execution of the Deed of Share Award by AIM.

42. In the circumstances, and for the reasons I have sought to explain above, it is my opinion that AIM did not execute the Deed of Share Award because the agreed wording of the execution clause required that it be signed by a director and that the corporate seal be affixed ...”

(d)  Millett disagrees. At §19 of the BVI JR1[123], Millett expresses the following opinions:

“19. As to paragraphs 39 and 40 of Mr Fay’s first report:

(i) I agree that the issue he raises has not so far been covered by any BVI authority we have been able to find;

(ii) accordingly, the approach Mr Fay takes is an argument of construction rather than an opinion as to what BVI law is;

(iii) subject to that overall observation or objection, I do not disagree that the form of the execution block of the DSA required that the company’s seal be attached. However, in my opinion the language of the execution block in the DSA does not go so far as to amount to an expression of an intention that the document would not be valid as a deed in the absence of the company’s seal;

(iv) I agree that the absence of the corporate seal would mean that the DSA was not executed in the manner contemplated by the draft document, which requires both the signature of the director and affixing of the corporate seal. However, I disagree that this means that, as Mr Fay says, ‘unless and until both those acts had occurred, the [DSA] would not be executed in the manner required by the parties when they agreed the wording of the execution clause.’ To my knowledge there is no ‘agreed wording’ of the execution clause unless and until the document is executed. There was no prior agreement as to the form of the DSA, and the only agreement is that contained in the DSA itself. The parties therefore agreed to do without the corporate seal notwithstanding that the draft DSA contemplated that the corporate seal would be affixed. Mr Fay’s argument is therefore circular.”

(e)  Hardwick also disagrees:

(i)  For presentation purposes he refers to the part of §40 of Fay/1 as italicized above “the Sealing Agreement”, and §41 of Fay/1 as the “the s103 Argument”;

(ii)  Neither the Sealing Agreement nor the s103 Argument are in reality expressions of BVI law: they are formulations of legal arguments under BVI law and which do not in fact feature in the pleading of AIM and Liu [§43 of Hardwick Report];

(iii)  He agrees with Millett that there was in any event no evidence of prior agreement as to the form of the Share Award Agreement. While the execution clause might contemplate the affixing of the Common Seal, it does not in his view suggest any sealing agreement. In his view, the fact that parties nonetheless signed the Deed without any seal suggests that there was no such agreement [§44 of Hardwick Report];

(iv)  The s103 Argument places unwarranted weight on the word “only” and misstates the function of the word in the context of s103(3). He explains at §47 of Hardwick Report[124] that (with emphasis added):

“Even if there were a Sealing Agreement (which in my view there was not) the function of the word ‘only’ is clear. Section 103(3) deals exclusively with the impact on the validity of an instrument or deed of the absence of the company’s seal. The purpose, and only purpose of Section 103(3), is to make it clear that the absence of the seal does not render that instrument ‘invalid’. The significance of the word ‘only’ is to make it clear that Section 103(3) is only dealing with the impact on validity of the absence of the seal (and not with any other formality requirement). There is nothing about the words or structure of Section 103 which suggests that the draftsman intended that if there was an ‘agreed requirement’ for sealing, precisely the contrary legal result would follow from the absence of the seal and the instrument would be ‘invalid’ after all …”

158.  I prefer the opinions of Millett and Hardwick. They in my view accord with the language, structure and overall interpretation of the relevant sections of the BCA as presented to me. I am particular impressed by Hardwick’s opinion at §47 of Hardwick as underlined above. Indeed, in the course of cross-examination, Fay accepted that if his views were correct, it would mean that while ss 103(3) and (4) of BCA could save a deed statutorily required to be executed by deed but not sealed and otherwise silent on that requirement, but would not be applicable to save the same deed if the statutory requirement had been expressly incorporated. I find that eventuality odd, and could not have been intended by the draftsman.

159.  I refer back to Fay’s opinion cited above that “it is the agreed requirement of the parties that the corporate seal should be applied together with the failure to apply the corporate seal that is, in my opinion as a matter of BVI law, fatal to the proper execution of the Deed of Share Award by AIM”. I find that interpretation and conclusion contrived, and as opined by Millett, circular[125]. I accept Mr Hew’s submissions[126] that even if there were any Sealing Agreement, that would merely be the explanation for the absence of a seal, but not a different reason for invalidity. I agree with the straight-forward analysis expressed by Hardwick[127], that “the DSA was not sealed and Section 103(3) of the BCA expressly provides that it is not invalid as a result.”

160.  There is further the following reason for my rejection of this aspect of Ps’ case:

(a)  As is obvious from the above discussion, an important plank of the s103 Argument is the existence of the Sealing Agreement;

(b)  As Millett and Hardwick have both pointed out, no Sealing Agreement features in Ps’ pleadings;

(c)  Recognising the problems Ps faced, Mr Chong on the 16^th day of the trial at 4:45 pm, after all factual and expert evidence had been heard, applied to amend §21(a) of the SoC by adding at the end the underlined words:

“The Share Award Agreement, although was formed as a deed, it was not validly executed as a deed in that:

(a) [P1’s] seal has not been affixed to the Share Award Agreement which suggests the existence of a sealing agreement therein;”

(d)  I refused the application on the basis that it was late, without explanation on the lateness, inadequately particularized (that even the proposed term “sealing agreement” was not defined), and prejudice (that Ds would be deprived of the chance to plead to it);

(e)  Despite my rejection of the application to amend, Mr Chong at §122 of his written closing still sees fit to make the submissions that “applying the principle of statutory interpretation, the deliberate choice of the word ‘only’ to qualify the saving provision denotes that, other than the mere absence of a seal, an instrument can be invalid for reasons other than the want of a seal and this must necessarily include anything inclusive of any prior agreement/arrangement between the parties that a seal is necessary or mandatory for that instrument”;

(f)  I reject those submissions, on the bases that (1) “Sealing Agreement” does not form part of Ps’ pleaded case, (2) my non-acceptance of Fay’s opinions in the above-mentioned regards, and (3) that, in any event, the evidence and the contents of the Share Award Agreement do not support the existence of any sealing agreement.

S.3.a.ii.  The 2008 Resolution and §66 of Millett/1

161.  I come back to §36 of Millett/1. As can be seen from the same, Millett’s conclusion on the validity of the Share Award Agreement is subject to 2 matters: (1) the 2008 Resolution, and (2) those further points at §66 of Millett/1.

162.  I now deal with them.

163.  At §§40 and 41 of Millett/1, Millett expresses the following opinions:

“40 On the assumption that the Resolution is genuine (as to which I am not asked to express any opinion), then in my view the BVI Court would hold that it has been passed in accordance with the M&A and would therefore be a valid director's resolution.

41. If the Resolution is genuine, the BVI Court would conclude that Madam Liu as the sole director of AIM would therefore have failed to comply with the company’s own rules and procedures in the execution of the DSA. The question is whether, as a matter of BVI law, that invalidates her act of signing the DSA as a director on behalf of AIM for the purposes of section 103(4)(b) of the BCA.”

164.  I have ruled that Ps have failed to establish the authenticity of the 2008 Resolution. The parts of Ps’ case in reliance upon the same fails.

165.  For the reasons set out below, even if I were wrong on the question of authenticity of the 2008 Resolution, I would still conclude that the validity of the Share Award Agreement as a deed is, under BVI law, in any event not affected by the absence of sealing or any alleged want of authority by Liu.

166.  At §§42 and 43 of Millett/1, Millett continues to express the following opinions:

“42. In my view, the BVI Court would hold as a matter of BVI law that unless AIM or Madam Liu can prove that Mr Chien had actual knowledge of the defect in her authority to sign on behalf of AIM by reason of his knowledge of the terms of the Resolution, her act of signing the DSA as a director on behalf of AIM was valid and binding on AIM. The Resolution reflects an internal rule and regulation of AIM. A failure to comply with the restrictions imposed by it accordingly does not automatically render the deed invalid because:

(a) The substantive law (section 103(3) of the BCA, referred to above) states that the failure to affix a common seal will not, by itself, render the deed invalid;

and

(b) The ‘indoor management rule’, which is applicable by the operation of both common law[128] and under the BCA[129], the effect of which is to provide protection to third parties acting in good faith and dealing with corporations by entitling that third party to assume that the relevant procedures of ‘indoor management’ have been complied with.”

167.  I have in any event rejected Liu’s evidence as to how she claims the 2008 Resolution was provided to Chien, and found that at the time when Chien executed the Share Award Agreement, he did not have knowledge of the 2008 Resolution.

168.  At §66 to of Millett/1[130]:

(a)  Millett makes reference to Article 10.7 of AIM’s Articles;

(b)  That Article reads:

“If the Company has only one director the provisions herein contained for meetings of directors do not apply and such sole director has full power to represent and act for the Company in all matters as are not by the Act, the Memorandum or the Articles required to be exercised by the shareholders. In lieu of minutes of a meeting the sole director shall record in writing and sign a note or memorandum of all matters requiring a Resolution of Directors. Such a note or memorandum constitutes sufficient evidence of such resolution for all purposes.”[131]

(c)  Having referred to that Article, Millett expresses the following opinion:

“In my opinion, as a matter of BVI law, Madam Liu’s non-compliance with Article 10.7 would mean that she had no actual authority to bind AIM to the DSA by her signature. However, both the rule in Turquand and section 31 operate to protect Mr Chien as a third party dealing with the company.”

169.  It is also relevant to note the warranty given by AIM in Clause 3.1(c) of the Share Award Agreement, which I have referred to above.

170.  Fay does not seek to suggest otherwise in relation to the rule in Turquand. At §53 of Fay/1[132], he expresses the following opinions (the emphasis being his own):

“53. In the present matter, Madam Liu was the sole director of AIM on 15 November 2013.

a. applying Duomatic principle, it follows that her signature on the Deed of Share Award can be taken as equivalent to a resolution of the directors of AIM approving the Deed of Shares Award and authorising her to execute it. However, such authorisation would in the particular circumstances of the wording of the execution clause, and the wording of the resolution of directors dated 18 August 2008, be authorisation for her to execute the Deed of Share Award by signing it and affixing the corporate seal.

b. applying the rule in Turquand, Mr. Chien was entitled to presume, unless he knows to the contrary, that Madam Liu had followed all internal procedures and obtained all internal approvals before concluding the Deed of Share Award on behalf of AIM. This begs the question as to whether Mr. Chien knew about the resolution dated 18 August 20008. Whether he did know about the resolution is a question of fact for the trial judge in Hong Kong and is not a matter of expert evidence.”

171.  In relation to §53.a of Fay/1:

(a)  As opined by Hardwick[133] which I agree, Fay is there raising the same point of inter alia the Sealing Agreement;

(b)  During cross-examination, Fay accepted and conceded that the validity of his views expressed there would require the court to find a sealing agreement;

(c)  I have explained why I do not accept Fay’s opinion on the interpretation of s 103 of the BCA, why I refused Ps’ application to amend its SoC to plead a sealing agreement, and that my view is that the evidence and the contents of the Share Award Agreement in any event do not support the existence of any sealing agreement. I reject the related submissions made by Mr Chong at §§129 and 130 of his written closing.

172.  In relation to §53.b. of Fay/1, I repeat my ruling that Chien at the material time did not know about the 2008 Resolution.

S.3.b.  Delivery

173.  In §§45 to 46 of Fay/1[134], Fay expresses the following opinions:

“45. There are no specific statutory provisions of BVI law dealing with what is necessary to deliver a deed …

46. Thus, the common law test of whether a deed has been delivered is applicable. At common law delivery of a deed requires that the party to the deed expressly or impliedly acknowledge, by words or conduct, an intention to be bound by its provisions. The test is essentially a matter of fact for the trial judge - a factor such as the omission of a corporate seal on a deed that expressly provides that it should be sealed by the corporate party is a matter that could persuade a Judge that the deed has not been delivered.”

174.  At §24 of the BVI JR1[135], Millett expresses the following opinions:

“I agree with paragraph 45 of Mr Fay’s first report, and also paragraph 46 save the last sentence. To my mind, it is a non sequitur to suggest that the absence of a corporate seal on a deed which expresses the intention that it should be sealed is evidence that it has not been delivered. If it is not valid as a deed because of the absence of a corporate seal, then delivery is irrelevant; and if it is valid notwithstanding the absence of a seal then the absence of a seal cannot be relevant to whether it was validly delivered.”

175.  I agree with Millett and accept the opinions he expresses.

176.  As submitted by Mr Hew[136], a deed is delivered so long as there are acts or words sufficient to show that the party executing the deed intended to be bound – see e.g. Chitty §1-088. On the evidence as discussed above, there are in my view clearly such acts and words. I find that the Share Award Agreement had been delivered.

S.3.c.  Conclusion on Issue #8(a)

177.  For the above reasons, I answer Issue #8(a) in the affirmative.

S.4.  Issue #8(b)

178.  In the light of my findings and conclusion on Issue #8(a), Issue #8(b) is not engaged. If necessary, I would accept Mr Hew’s submissions at §58 of his written closing and find that Liu and AIM are so estopped.

S.5.  Issue #8(c)

179.  In so far as Issue #8(c) being premised upon the Share Award Agreement being an invalid deed, so that it constituted a gift of AIM’s shares and/or was an imperfect gift, I answer it in the negative. On the question as to whether there was consideration in support of the Share Award Agreement, I will deal with the same when I come to Issue #9.

T.  Issue #9

180.  At §22B(5) of the D&CC, it is pleaded that the Share Award Agreement, the Hong Kong Employment Agreement and the PRC Employment are inter-related agreements and collateral contracts.

181.  As commented in Chitty at §15-020, “[c]onsideration for the collateral contract is normally provided by entering into the main contract.”

182.  As further explained in Chitty at §15-030, which this Court applied in Asia Develop Ltd v Glory Mark Investment (Group) Ltd [2021] HKCFI 1572 at §32:

“Even though the parties intended to express the whole of their agreement in a particular document, extrinsic evidence will nevertheless be admitted to prove a contract or warranty collateral to that agreement. The reason is that “the parol agreement neither alters nor adds to the written one, but is an independent agreement”

183.  On the face of the Share Award Agreement, there are clear references to Chien’s engagement by the “Group” and his services to it – see clauses 2.2 to 2.4, the material terms of which I have set out above.

184.  In the Term Sheet, the stock incentive is also included as part of Chien’s compensation package.

185.  I also accept Chien’s evidence in relation to the execution of the Share Award Agreement. I refer to his evidence on the meeting amongst Lin, Liu, Guan and himself at the Conrad on 2 November 2013, which I have acceded. I also accept his evidence at §139 of Chien/WS1[137], where he says that:

“… starting from around 15 November 2013, and relying on the fact that my employment terms and equity incentive arrangements had been validly concluded, I immersed myself in the Business and further into the Transaction management, including by doing work that went way beyond the scope of work that Rising Dragon was meant to do pursuant to the Services Agreement.”

186.  I do not regard as correct to approach each of the 2^nd Agreements on its own and in isolation, as Mr Chong seeks to do in his written closing. I also do not find it helpful to focus on the term “significant contribution” used in the recital of the Share Award Agreement.

187.  For the above reasons, I accept Chien’s case that the Share Award Agreement, the Hong Kong Employment Agreement and the PRC Employment are inter-related agreements and collateral contracts. Valuable consideration for the Share Award Agreement was provided by Chien’s agreeing to and entering into the Employment Agreements.

188.  I answer Issue #9 in the affirmative.

189.  I come back to Issues #8(a) and #8(c). We can now have an overview of those 2 issues together with Issue #9:

(a)  I have found and concluded based on BVI law that the Share Award Agreement had been validly executed as a deed;

(b)  On that finding and conclusion, the Share Award Agreement is legally binding and enforceable as a deed, irrespective of the presence or otherwise of consideration;

(c)  I have now in any event found that the Share Award Agreement was supported by valuable consideration;

(d)  Hence, even if, contrary to my finding and conclusion, the Share Award Agreement had not been validly executed as a deed, it would remain legally binding and enforceable as a contract underhand;

(e)  One way of the other, the Share Award Agreement was not a gift or an imperfect gift, and was supported by good consideration.

U.  Issue #10

190.  Mr Chong’s submissions in relation to Issue #10 have become a very limited one:

(a)  Ps accept that the duplication of service rendered by Chien under the Services Agreement on the one hand and the Employment Agreements on the other was only partial, so that “no question would arise that there would be total failure of consideration to support the 2 groups of agreements inter se”[138];

(b)  He submits that different consideration applies to the relationship between the Hong Kong Employment Agreement and the PRC Employment Agreement;

(c)  In gist, Mr Chong is not suggesting that no services had been provided by Chien under the Employment Agreements. His submissions are that “the service provided under the PRC Employment Agreement would be the performance of an existing contractual obligation of Mr Chien under the Hong Kong Employment Agreement.”[139] In further elaboration, Mr Chong submits that:

“135. When Mr. Chien’s service rendered to Shanghai Weicon under the PRC Employment Agreement, if paid, would be covered under the Hong Kong Employment Agreement, it is submitted that there would be no consideration for payment of RMB50,000 a month to him. The reason being that the consideration for which he be paid under the PRC Employment Agreement would be the discharge of his existing obligation under the Hong Kong Employment Agreement which required him to provide service not only to AIM but also to the ‘Group’ as well – inclusive of the Shanghai Weicon.

…

136. When performing the duty under the Hong Kong Employment by Mr Chien would involve performing works under the PRC Employment Agreement and for which Mr Chien would be entitled to payment (HK$20,000/HK$315,000/month), it is submitted that by entering into the PRC Employment Agreement under which he would be paid another RMB50,000/month) (a) AIM would receive no additional benefit and (b) Mr Chien would suffer no additional burden. Hence, there would be no consideration for which Shanghai Weicon entering into the PRC Employment Agreement with Mr Chien and to pay him RMB50,000/month.”

191.  Issue #10 hence may now be analyzed as follows:

(a)  As said, Ps do not dispute that the Employment Agreements as a group are supported by consideration;

(b)  There is in any event ample evidence in support that Chien had performed work and rendered services under the Employment Agreements. They are described in details at §§141-155 of Chien/WS1[140], which evidence I accept. But given the stance which Mr Chong is taking in his closing submissions, I see no need to detail them out here;

(c)  What Ps are submitting are that as between the Hong Kong Employment Agreement and the PRC Employment Agreement, the work and services rendered by Chien under the Employment Agreements were all covered by the terms of the Hong Kong Employment Agreement, so that there was total failure of consideration in respect of the PRC Employment Agreement;

(d)  But as Mr Hew has pointed out[141], Ds are not claiming for the outstanding wages under the PRC Employment Agreement, but only those under the Hong Kong Employment Agreement;

(e)  Even if there had been total failure of consideration in respect of the PRC Employment Agreement, AIM would still be liable under the Hong Kong Employment Agreement.

192.  In any event, I do not accept that there had been total failure of consideration in relation to the PRC Employment Agreement:

(a)  I have set out above Clause 2.2 of the PRC Employment Agreement. The concluding words are “負責召集和主持辦公會議，協調、檢查和督促各部的工作”. There are no equivalent duties under the Hong Kong Employment Agreement;

(b)  As pointed out by Mr Hew[142] which I agree and the related evidence I accept, Chien’s involvement in the meeting on 24 December 2013 with Liu and other senior members of Shanghai Weicon in discussing matters including a new packing project (異型瓶生產線改造), a research and development project (藍光阻斷鏡片開發項目) and a technology transfer project (半車削鏡片項目) fell within his duties under the PRC Employment Agreement but not the Hong Kong Employment Agreement;

(c)  There has not been a complete overlap of the work and services rendered under the PRC Employment Agreement and the Hong Kong Employment Agreement;

(d)  Further, as a matter of law, “[it] is now generally accepted that actual performance of a contractual duty owed to a third party can constitute consideration” – Chitty §6-079. In Pao On v Lau Yiu Long [1980] AC 614 (UKPC from Hong Kong) at 632B-C, Lord Scarman observed as follows:

“Their Lordships do not doubt that a promise to perform, or the performance of, a pre-existing contractual obligation to a third party can be valid consideration. In New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. (The Eurymedori) [1975] A.C. 154, 168 the rule and the reason for the rule were stated:

‘An agreement to do an act which the promisor is under an existing obligation to a third party to do, may quite well amount to valid consideration ... the promisee obtains the benefit of a direct obligation.... This proposition is illustrated and supported by Scotson v. Pegg (1861) 6 H. & N. 295 which their Lordships consider to be good law.’ ”

(e)  Apply that principle explained in Pao On, I accept Mr Hew’s submissions that even if there were a complete overlap of the Hong Kong Employment Agreement and the PRC Employment Agreement, Chien’s performance of the former amounted to valid consideration in support of the latter, in the sense that Shanghai Weicon obtained the benefit of a direct obligation, so that there was no total failure of consideration.

193.  For the above reasons, I answer Issue #10 in the negative.

V.  Issues #11 and 12

194.  I deal with the 2 issues together.

195.  Mr Chong accepts, if this Court is to find in favour of Ds under Issues #5-8, which this Court now has, “that latest by April 2014, Mr Chien would have been constructively dismissed by AIM under the Hong Kong Employment [Agreement]”[143], and that “[on] the same basis, Ps accept that the same constituted termination of Mr Chien’s service by AIM ‘without cause’ under Clause 2.4 of the Hong Kong Employment Agreement [CB3/82/662][144] [sic.] triggering vesting of the awarded shares”[145].

196.  Those concessions on constructive dismissal and the consequential vesting of the Awarded Shares are clearly correct. The evidence on constructive dismissal is overwhelming. No salary under the Hong Kong Employment Agreement had been paid. That remained so despite Chien’s requests seeking payment. On 18 February 2014, Cao informed Chien that Liu had requested her to delay the approval process of Chien’s Mainland working permit. On 25 February 2014, and as recorded in Chien’s WeChat message to Liu and Guan on 26 February 2014[146], Liu requested Chien to “leave all my operational management responsibilities to your and other senior officers’ care.”. By May 2014, Chien’s access to his Shanghai Weicon email account had been terminated. On 24 June 2014[147], Chien wrote to AIM and gave notice that he terminated the Hong Kong Employment Agreement for constructive dismissal.

197.  I hence answer Issue #11 in the affirmative.

198.  I have set out Clause 2.4 of the Share Award Agreement above. Relevantly, it provided, and I repeat, that:

“In the event of the occurrence of (i) the services of Mr Chien in the Group being terminated by any Group Company without cause, … all unvested Awarded Shares, notwithstanding anything herein to the contrary, shall not vest on the relevant Vesting Date but shall be immediately vested in Mr Chien on the date of occurrence of such event (the ‘Event Date’), whether or not at which time Mr. Chien remains to be engaged by the Group.”

199.  I have ruled that BVI law applies to the Share Award Agreement.

200.  As recorded above, Mr Chong accepts that that same constructive dismissal constituted termination by AIM “without cause” under Clause 2.4 of the Share Award Agreement. That concession is consistent with the approach which the BVI Courts would adopt – see §§102-104 of Millett/1, which I accept.

201.  For the above reasons, I answer Issue #12 in the affirmative.

W.  Issue #13

202.  Mr Chong accepts, if this Court is to find in favour of Ds under Issues #1, 2 and 4, then Ps would have breached the Services Agreement by April 2014 for non-payment of his monthly remuneration.

203.  That must be right, and that is what is being claimed by Rising Dragon. I allow Rising Dragon’s counterclaim in this regard and grant it judgment for 4 months of Outstanding Retainer Fees, in the total sum of HK$1,260,000 (HK$315,000 x 4).

204.  I have taken into account Mr Hew’s oral submissions on interest. I order that interest on that sum shall run at prime plus 1% from 26 August 2014 (that being the date when the Services Agreement was terminated by effluxion of time) till judgment, and at judgment rate from then till payment.

X.  Issue #14

205.  On the findings and conclusions reached above, there has clearly been breach of the Hong Kong Employment Agreement. Mr Chong again does not dispute that[148].

206.  I find that AIM has been in breach of the Hong Kong Employment Agreement. I award to Chien the following:

(a)  Arrears of Wages between 15 November 2013 (the date which I have found the 2^nd Agreements were executed) until 24 June 2014 when Chien terminated the Hong Kong Employment Agreement for constructive dismissal, in the total sum of HK$146,666.66;

(b)  Wages in Lieu of Notice in the sum of HK$59,938.83:

(i)  I accept, in the absence of any express provision in the Hong Kong Employment Agreement on the length of any notice period, that 3 months would have been a reasonable period;

(ii)  3 months of the average monthly wage for the period of employment, as pleaded in §44(4) of the D&CC, would have been HK$59,938.83;

(c)  Annual Leave Pro Rata Payment, in the sum of HK$4,728.01 (HK$130,666.66/198 days) x (20 days x 222/365 – 5), as pleaded in §45 of the D&CC.

207.  I have again taken into account Mr Hew’s oral submissions on interest. I order that interest on the above sums shall run at prime plus 1% from 24 June 2014 (that being the date when Chien gave notice that he terminated the Hong Kong Employment Agreement for constructive dismissal) till judgment, and at judgment rate from then till payment.

Y.  Issue #15

208.  On the findings and conclusions reached above, there has clearly been breach of the Share Award Agreement. Mr Chong again does not dispute that[149]. The Awarded Shares should have been vested and delivered under the terms of the Share Award Agreement, but they have not been. That is the breach.

209.  Until the trial, there had been substantial dispute between the parties as to the date to be adopted for assessment. As we have seen above, quite a number of alternatives have been put forward. Had there not been an order for a split trial, it would have been necessary for parties to file expert evidence covering all those alternative dates, which exercise would have been wastefully costly. In the course of the trial, parties have reached consensus that the date of 2 July 2014 should if necessary be adopted as the assessment date. I accept that, and will not direct otherwise given parties’ consensus.

210.  In the circumstances, I accept Mr Hew’s submissions at §68 of his written closing, and conscious of §4 of my Order of 26 March 2019, I hold that Chien is entitled to damages for breach of the Share Award Agreement, in the value of 6% of shares in AIM as at 2 July 2014, to be assessed. The actual assessment would be left to the quantum stage of this action. The applicable law for the assessment of the values of those shares will remain BVI law.

Z.  The Declarations sought

211.  In the D&CC, Ds pray for a substantial number of Declarations, like Chien did not make the 1^st Alleged Misrepresentations, did not make the 2^nd Alleged Misrepresentations, that Ps did not enter into the Services Agreement and the 2^nd Agreements by reason of them having been made, etc. I have covered those matters in the body of this Judgment. I see no utility in making any Declarations along those lines. I refuse to grant them in the exercise of my discretion.

AA.  Overall disposition

212.  For the reasons set out above:

(a)  All of Ps’ claims are dismissed;

(b)  In respect of Ds’ Counterclaim:

(i)  Judgment to Rising Dragon against AIM, Liu and Shanghai Weicon on a joint and several basis for breach of the Services Agreement, in the sum of HK$1,260,000, with interest at prime plus 1% from 26 August 2014 till judgment, and at judgment rate from then till payment;

(ii)  Judgment to Chien:

(1)  against AIM for HK$146,666.66, HK$59,938.83 and HK$4,728.01 for breach of the Hong Kong Employment Agreement, with interest on those sums at prime plus 1% from 24 June 2014 till judgment, and at judgment rate from then till payment; and

(2)  against AIM and Liu on a joint and several basis for damages for breach of the Share Award Agreement in the value of 6% of shares in AIM as at 2 July 2014 to be assessed, with the applicable law for the assessment of the values of those shares being BVI law;

(c)  Liberty to apply for the purpose of assessment of damages.

(d)  On a nisi basis, to be absolute within 14 days, that Ps shall bear the costs up to the date of this Judgment of the action, including both the claim and counterclaim, to be taxed if not agreed, with certificate for 2 counsel, but that the taxation shall not be commenced until after the conclusion of the assessment exercise.