PACIFIC BULK SHIPPING LTD AND ANOTHER v. TOPMOVE LTD AND ANOTHER

HCA 1431/2015

[2025] HKCFI 532

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1431 OF 2015

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HCA 228/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 228 OF 2017

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(Heard Together)

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J U D G M E N T

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1.  This is the trial of two actions, namely, HCA 1431/2015 (“1431/15”) and HCA 228/2017 (“228/17”). The main protagonists are Mr Chu (“Chu”), the 2^nd Defendant in 1431/15 and the Plaintiff in 228/17, and Mr Lau (“Lau”), the 2^nd Plaintiff in 1431/15 and Defendant in 228/17. There is substantial overlap between the two actions.

2.  Chu and Lau were friends and business partners in a successful shipping business. The root dispute between them arose from their business divorce when their relationship turned sour. They are resourceful and litigious. Their dispute had spawned no less than 33 actions in Hong Kong. They also engage in litigations in the BVI and Singapore. Most of the Hong Kong actions had been stayed by this court pending the resolution the present actions[1], which will resolve the core dispute between the former business partners.

Background (with references to the parties’ pleaded case)

3.  Two Statements of Agreed Facts had been filed pursuant to the directions of the court. Unless indicated otherwise, the following background facts are not in dispute.

4.  A few points should first be made. First, Chu and Lau had the habit of using corporate vehicles to hold their interests in their business, investments and assets. The court was informed that at the height they owned over 100 companies. Some of the companies of their shipping business had identical or very similar names. Different monikers were used in different documents for the same company. Second, it is conducive to the understanding of the complex background of these cases to identify the pleaded cases of the parties. There is no issue that in these actions, Lau was (and is) the directing mind and will of the 1^st Plaintiff in 1431/15 (“PBHK”) and Chu was (and is) that of 1^st Defendant (“Topmove”). The cases of Lau and Chu are also the cases of these companies. Third, Chu’s pleaded cases in 1431/15 and 228/17 are not entirely consistent. For simplicity, primarily his pleaded case in 228/17 will be referred to below.

5.  Back in 1995, Chu and Lau were working in a major shipping company based in Hong Kong, Transfield. They became friends. In around 2000, Lau left Transfield and started his own shipping business and for which purpose he incorporated 3 companies, namely, (i) Pacific Bulk Shipping Ltd incorporated in Bahamas (“PB Bahamas”); (ii) Pacific Bulk Shipping Co Ltd in BVI (“PB BVI”); and Pacific Bulk Chartering Ltd in Hong Kong (“PB Chartering”) (collectively, “Old PB Companies”). These companies were equally owned beneficially by Lau and a passive investor, Mr Gao (“Gao”), although Gao was a 50% shareholder in PB Bahamas only. According to Lau, such shareholding represented Gao’s 50% interest in Old PB Companies.

6.  PB BVI was the cash management company for PB Bahamas. The latter did not have any bank account. It is not in dispute that PB Bahamas was the business operation entity – entering into contracts with cargo owners and chartered vessels from ship owners to perform the contracts. PB Chartering was the service provider – employing staff, acted as agent for PB Bahamas in dealings with cargo owners and ship owners and paying the office and sundry expenses for which it would be reimbursed by PB Bahamas via PB BVI.

7.  In around 2002, Chu also left Transfield and later joined Old PB Companies. He paid US$250,000 to acquire a 25% interest in these companies. According to Lau’s case, the beneficial interests of his and Gao’s were correspondingly reduced to 37.5% each. Chu’s case is that he was not informed and did not know about Gao’s interest in these companies. Chu was not allotted any share in Old PB Companies. Indeed, no document was executed to reflect Chu’s shareholding or interest in Old PB Companies.

8.  In around March 2003, 3 companies were incorporated by Chu, namely, (i) Pacific Bulk Maritime Holdings Co Ltd (“PB Maritime”); (ii) Pacific Bulk Maritime Inc (“PBMI”); and (iii) Pacific Bulk Logistics Ltd (“PB Logistics”) (collectively, “New PB Companies”). They were BVI companies, save that PB Logistics was incorporated in Hong Kong. It was agreed by Chu and Lau that these companies would use the name “Pacific Bulk”.

9.  It is not in issue that the operation of the New PB Companies mirrored that of Old PB Companies. PBMI played the role of PB Bahamas as the business arm; PB Maritime played the role of PB BVI as the cash manager; and PB Logistics, like PB Chartering, was the service provider.

10.  It is Lau’s case that the New PB Companies were incorporated under the following circumstances. In early 2003, Chu made known to Lau that it had been difficult for him to procure business from cargo owners in the Mainland, because he was not considered as a real boss. He proposed to Lau that he should establish PB Group[2] companies on his own so that he could tell cargo owners he was their boss to attract business, and the new companies would be part of the PB Group. On his understanding that the new companies would be part of the PB Group, Lau agreed. With trust and confidence reposed in Chu, Lau allowed Chu to be registered as the only shareholder of New PB Companies[3], and on 7 May 2003 transferred US$100,000 from PB BVI to PB Maritime as working capital for the new companies.

11.  Chu’s case is that in around Chinese New Year of 2003, Lau made known to him that he did not appear to have made much contribution to the business, and that they would need more time before working together as partners. As a result, Chu withdrew from the PB Group at Lau’s request with US$100,000 paid to him as partial refund of his contribution (US$150,000 was (and remains) outstanding). Chu disagrees he had not contributed to the PB Group and says that the PB Group had a substantial increase in profit since his joining.

12.  However, according to Chu, he and Lau agreed to collaborate by operating their own companies to increase the market presence of the “Pacific Bulk” brand. Hence, Chu started his own business in March 2003 with the New PB Companies.

13.  It is agreed that Chu and Lau shared the same office at Wing Lok Street, Sheung Wan, where the books and records of the Old PB Companies and New PB Companies were kept. However, the books and records were separately maintained for operation and accounting purposes. Moreover, different company secretaries were employed by the two sets of Companies.

50:50 Agreement

14.  According to Lau, in early 2004 Chu repeatedly suggested to him that the two of them should have equal ownership in and jointly operate the PB Group without Gao. After discussions, they reached an oral agreement (“50:50 Agreement”) that they would (i) buy out Gao’s interests in the PB Group; (ii) become 50:50 owners of the companies in the PB Group and hold all shares and interests in them equally; (iii) operate and manage the PB business as joint partners with equal participation in major or strategic decisions; and (iv) each be entitled to one half of all profits and jointly bear the losses of the PB business as from 1 April 2004 equally.

15.  It is Lau’s case that he and Chu subsequently acquired Gao’s 37.5% interest in PB Bahamas at the price of US$1.76 million. Although there is a record of the payment, Gao’s shareholding in PB Bahamas was never transferred to Lau or Chu (these facts are not in dispute). Thereafter, according to Lau, he and Chu became joint and equal beneficial owners of the PB Group. It is uncontroversial that their beneficial interests in the Group companies were often held via corporate vehicles.

16.  Chu’s pleaded case in respect of the 50:50 Agreement had undergone changes, which will be dealt with below. In short, his case is that there was no agreement reached in 2004. Although Lau had solicited his interest in a merger of their businesses, nothing materialised. Chu and Lau continued to operate their own business separately.

17.  It is common ground that Chu and Lau did not take any steps to change the registered shareholding of the companies from 2004 to mid-2007.

18.  On 22 November 2006, Chu and Lau incorporated Pacific Bulk Shipping (Singapore) Pte Ltd in Singapore (“PB Singapore”), which was jointly owned by them in equal shares.

2007 Reorganization

19.  Towards the end of 2007, Chu and Lau discussed the reorganization of companies. It was intended, inter alia, that a new corporate structure would be formed whereby PB Maritime (one of New PB Companies) would become the holding company. Annual audits of several companies were prepared.

20.  Chu and Lau intended for PB Maritime to allot one share to Lau such that they would each hold one share in PB Maritime as equal shareholders. In 2007, one share in PB Maritime was allotted to Lau accordingly.

21.  In around the end of 2007, City Secretarial Services Ltd (“City Secretarial”) effected the following :

(1)  The aforesaid allotment of one share in PB Maritime to Lau. The allotment was backdated to 22 February 2005;

(2)  Lau was appointed as a director of PB Maritime on around 19 December 2007;

(3)  In around the end of 2007, the shares of PB Logistics, PB Chartering, PBMI and PB BVI were transferred to PB Maritime[4]. The transfers were backdated to various dates in 2003 or 2004.

22.  Lau’s case of the Reorganization is that it was for the expansion of the PB Group business (including the purchase of dry bulk vessels for the PB Group) and to recognise the 50:50 ownership between him and Chu. PB Bahamas was not included in the reorganization for reasons, amongst which was that Gao remained a shareholder of that company despite having been bought out. PB Bahamas’ business would be taken over by new companies.

23.  On 8 November 2007, PBHK was incorporated in Hong Kong. It should be noted that PBHK’s name was identical to that of PB Bahamas. Initially, PBHK was solely held by PB Maritime. Since 7 November 2008, PBHK was beneficially wholly owned by Chu and Lau in equal shares via their corporate vehicles.

24.  On 17 January 2008, another company with the same name as PB Bahamas, Pacific Bulk Shipping Ltd (“PB Cayman”) was incorporated in the Cayman Islands. At that time, PB Cayman was directly held by Chu and Lau in equal shares. Subsequently, their interests in PB Cayman were held via corporate vehicles. PB Cayman changed its name to “Pacific Bulk Shipping (Cayman) Ltd” on 4 December 2008.

25.  Lau’s case is that PBHK and PB Cayman were incorporated with the same name as BP Bahamas with the intention of taking over its business.

26.  Also, Lau’s case is that it was agreed by him and Chu to use PB Maritime as a corporate vehicle to hold their joint investments in other businesses and ventures in addition to the business of the PB Group. In his evidence, Chu agreed that PB Maritime was the holder also of non-shipping businesses.

27.  Lau and Chu were appointed the authorised bank signatories for PB Maritime and PB BVI (the cash management company for PB Bahamas)[5].

28.  Chu’s amended case is that there was only an intended merger of his and Lau’s businesses in 2007. They took steps to “attempt to merge” their companies with the intent that PB Maritime would be the holding company for PB Bahamas, PB Chartering, PB BVI, PBMI and PB Logistics. The intended merger was to take place in two phases :

(1)  First, the “Consideration Determination” stage during which annual audits of the relevant companies, including PB Maritime, PB Logistics and PB Chartering, for 2003 to 2007 would be carried out. The consideration to be paid for the merger would be determined according to the book value of these companies and taking into account the profits or losses from “Remaining Voyages”. For the purpose of calculating the consideration, Lau and Chu must provide the relevant financial statements and accounts of their respective companies.

(2)  Second, the “Corporate Restructuring” stage where all the shares in PB Logistics, PBMI, PB Chartering, PB BVI and PB Bahamas would be transferred to PB Maritime. PB Maritime would allot one share to Lau, such that Chu and Lau would become equal shareholders in PB Maritime, and there would be some adjustments in the roles of the merged companies.

29.  According to Chu, the intended merger failed due to the following circumstances :

(1)  On 5 October 2007, Chu discovered from City Secretarial that Gao was a 50% shareholder of PB Bahamas. Upon his enquiries, Lau told him that PB Bahamas could not take part in the intended merger due to Gao’s 50% shareholding, nor could PB BVI because it was holding the earnings/interests of PB Bahamas.

(2)  The Consideration Determination could not be completed since Lau failed to supply the financial statements of PB Bahamas and PB BVI without any explanation[6].

30.  However, Chu’s case is that he and Lau still wanted to cooperate with each other in doing shipping business. After further negotiation, they agreed as follows[7] :

(1)  Two new PB companies would handle their joint shipping operations, and they were PBHK and PB Cayman.

(2)  City Secretarial was instructed to procure the allotment of 1 share in PB Maritime to Lau. Lau had informed Chu that he was still interested in completing the intended merger, and would use his best endeavours to deal with Gao’s 50% shareholding in PB Bahamas. As Chu trusted Lau and anticipated that the intended merger would be completed eventually, he instructed City Secretarial to allot the PB Maritime share to Lau, but it was understood by them that the allotment was subject to “conditions subsequent that the Consideration Determination and the Corporate Restructuring … could be completed”.

(3)  All the shares in PB Logistics, PBMI, PB BVI and PB Chartering (but not PB Bahamas) were transferred to PB Maritime.

31.  Further, Chu’s case is that due to the inability to complete the Consideration Determination, the failure to satisfy the “Conditions Subsequent” and the lack of consideration paid by Lau for the PB Maritime allotment, Lau and Chu understood that the former would have no beneficial interest in PB Maritime and held his PB Maritime share on behalf of the latter until completion of the intended merger. Also, they agreed that Chu had no beneficial interest in PB Chartering, PB BVI and PB Bahamas.

32.  Returning to the agreed facts, PBHK was used to operate Cape-size vessel shipping business, whereas PB Cayman operated shipping business of all sizes of vessels (Panamax and Supramax vessels), excluding Cape-size vessels. Chu and Lau also stopped using PB Bahamas and PBMI (the two business arms) since PBHK and PB Cayman came into operation.

33.  In around late 2009, Chu and Lau invested in a joint venture with a PRC state-owned company, Guangxi Beibu Gulf Intemational Port Group Co., Ltd (“Guangxi BBG”). Substantial funds were invested in the joint venture in 2010 to 2011. Chu and Lau each holds 50% beneficial interest in a BVI company, Ocean Sino Ltd (“Ocean Sino”), which holds 100% shares in PBM Asset Management Ltd, which in turn holds 49% shares in the joint venture company named Beibu Gulf Ocean Shipping (Group) Ltd (“BBGOS”).

34.  BBGOS was purportedly renamed as BGA Holdings Ltd in late 2016, after Guangxi BBG had allegedly sold its 5l% shareholding to Bright Good (Asia) Ltd. These transactions are the subject matters of other litigation(s) between Chu and Lau.

35.  BBGOS held a number of BVI and Hong Kong subsidiaries, as well as 4 vessels separately held by 4 corporate vehicles. The group of companies including BBGOS and their subsidiaries can be described as the “BBG Group”, with Ocean Sino being the ultimate holding company for the indirect 49% interests of Chu and Lau in the BBG Group.

PB Restructuring

36.  Since around the end of 2013 to early 2014, serious differences arose between Chu and Lau. They engaged in communications and correspondence on splitting their shipping business and assets jointly owned. These included (i) a meeting between Chu and Lau at Lau’s home on 21 January 2014; (ii) a meeting attended by Chu, Lau, Ms Bonnie Wat (“Wat”), Ms Iris Wong (“Wong”) and Mr Lam Siu Kwan (“Lam”) on 22 January 2014; (iii) an email circulated by Lau to Chu (copying Wat, Wong and Lam) titled “关于刘永人先生与朱江先生共同所持资产分配及公司业务分家的协议” on 13 February 2014; (iv) an email from Chu to Lau dated 17 February 2014; and (v) a memorandum prepared and circulated by Chu in respect of the restructuring of the business on 24 February 2014 titled “關於劉永人先生與朱江先生共同所持公司股權和/或資產重組備忘錄”.

37.  This is the central dispute in these actions. Lau’s case is that he and Chu came to an oral agreement on the Restructuring on 27 or 28 January 2014. For the present purpose, the key terms agreed were that with effect from 1 January 2014 the PB Group would be solely owned by Lau and their interest in the BBG Group would be solely owned by Chu. The consideration of the Restructuring would depend on the audited book value of the companies.

38.  On his part, Chu says that whilst he had agreed with Lau about splitting their business and assets, there was no agreement reached.

39.  The details concerning the evidence on this issue will be considered below.

40.  On about 25 February 2014, Lau incorporated in Hong Kong (i) Pacific Bulk Cape Company Ltd; (ii) Pacific Bulk Enterprises Company Ltd (“PB Enterprises”); (iii) Pacific Bulk Panamax Company Ltd; and (iv) Pacific Bulk Supramax Company Ltd to conduct shipping business.

41.  On 26 February 2014, Chu and Lau signed a document titled “Golden beijing golden queen wash out memorandum”. The document stated, inter alia, that (a) Lau was to withdraw from BBG Group and Chu would be accountable for all profits and losses of the BBG Group from 1 January 2014 onwards; and (b) Chu would withdraw from PBHK, PB Cayman and PB Chartering, and Lau would be accountable for all profits and losses of those companies from 1 January 2014 onwards.

42.  Between March and May 2014, Chu and Lau had discussions on the audit exercise for various jointly owned companies, yet formal audit did not take place. Lau protested with Chu that there were misappropriations by Chu from various companies jointly owned by the two of them. It appears from the documentary evidence, which is not in dispute, that Chu had also made allegation of misappropriation against Lau.

43.  At the risk of diversion, it is agreed that Lau procured the transfer of US$4 million and US$5 million from PBHK to Prosperous Elite Venture Ltd, which had no connection with Chu, on 30 April 2014 and 29 May 2014 respectively. Chu’s case is that these funds were misappropriated by Lau. Whereas Lau’s case is that the transfers took place after PB Restructuring and Chu was no longer concerned with PBHK.

44.  Starting from April 2014, Chu began to set up his own shipping and logistics business.

45.  In May and June 2014, Lau and Chu corresponded in relation to Lau’s contention that Chu had misappropriated US$70 million from their jointly owned companies for personal benefit and/or the benefit of his associates.

46.  On 30 June 20l4, by a letter signed by Lau under the letterhead of PB Cayman, Lau informed Chu that Chu had been removed as a director of PB Cayman on 24 June 2014.

47.  On 26 September 2014, the then directors of PB Singapore, including Tan Hui Sze Alice, Liu Hui and Kan Mun Leong Eddie passed a board resolution removing Chu as the authorized bank signatory of PB Singapore’s bank accounts with DBS Bank Ltd.

48.  Between October 2014 and November 2015, PB Enterprises applied for the registration of the trademark carrying the words “PACIFIC BULK”, “亞太海運” and “亚太海运” in Hong Kong and the Mainland. PB Enterprises also applied for the registration of the domain name “PACIFICBULK.COM”.

49.  On 6 October 2015, Messrs DLA Piper Hong Kong, acting for Lau, wrote to Chu and PB Maritime Co Ltd, a Hong Kong company owned by Chu (not PB Maritime which was incorporated in BVI), demanding them to, inter alia, cease and desist from using the trade name of “Pacific Bulk” or “亞太海運”, and any other trademark or trade name which contained the words “Pacific Bulk”, “亞太海運” or any similar variation thereof, for all and any of their respective business.

50.  By a letter dated 20 January 2017, Messrs Sit, Fung, Kwong & Shum for Chu demanded Lau to assign or transfer his one share in PB Maritime and deliver up the relevant title documents to Chu.

51.  On 25 September 2020, Chu commenced proceedings in the High Court of Singapore against, inter alios, the directors of PB Singapore (see para 47 above). On 6 September 2022, Chu and Lau agreed to a settlement of those proceedings on a without admission as to liability basis as recorded by a Tomlin Order executed on 6 September 2022.

52.  1431/15 overlaps with 228/17 on the question of ownership of the PB Group. However, the former also concerns an alleged debt due by PBHK to Topmove and the beneficial ownership of Topmove.

53.  Topmove was incorporated in BVI on around the 8 August 2008. On about 22 August 2008, PBHK and Louis Dreyfus Commodities Suisse SA (“Louis Dreyfus”) entered into a Contract of Affreightment (“COA”) pursuant to which Louis Dreyfus was to nominate and provide 2 vessels to ship 2 consignments of iron ore from Brazil to China, and PBHK was to (a) tender each consignment for shipment within the contractual shipment period; and (b) pay a net freight rate of US$56.05 (after commissions) per metric ton shipped.

54.  Due to the collapse of the shipping market at that time, PBHK did not nominate the shipment to Louis Dreyfus and narrow the laycan spread pursuant to the COA. Consequently, Louis Dreyfus alleged that PBHK committed a repudiatory breach of the first voyage under the COA and that it had accepted PBHK’s repudiation of the first voyage, subject to its rights to claim damages against PBHK (“Louis Dreyfus’ Claim”).

55.  On 20 October 2008, Louis Dreyfus filed a claim against PBHK in the US District Court (Southern District of New York) for damages in the sum of US$9,172,689.94.

56.  On 21 October 2008, upon an ex parte application of Louis Dreyfus, the New York Court issued a “Process of Maritime Attachment and Garnishment” against PBHK (“Attachment Order”) as security for Louis Dreyfus’ Claim. The effect of the Attachment Order was that any telegraphic transfer or remittance of funds in US currency to and from PBHK’s bank accounts as well as the bank accounts of PB BVI, an affiliate of PBHK, in New York would be intercepted and attached pending the resolution of Louis Dreyfus’ Claim.

57.  After PBHK was notified of the Attachment Order, Lau and Chu discussed the matter urgently and they agreed to implement certain temporary measures or a contingency plan to reduce the impact of the Louis Dreyfus’ Claim and the Attachment Order on the companies with the brand name of “Pacific Bulk”. They were concerned that Louis Dreyfus would go against any assets however loosely connected with PBHK.

58.  Lau and Chu decided to use a company called Central Mineral Holdings Ltd (“CMH”), which was majority owned by Chu and Lau indirectly, to act as the receiver of the funds of PBHK and other Pacific Bulk companies. In 2008, a number of companies were incorporated in BVI, including Topmove, Able Cheer Ltd (“Able Cheer”) and Pretty Rainbow Ltd (“Pretty Rainbow”).

59.  On 23 October 2008, the sum of US$11,400,000 was remitted from PBHK’s bank account to the bank account of CMH. Significant amount of monies were also transferred by PB BVI[8], PB Maritime, Pacific Bulk Investment Ltd[9] and Pacific Bulk Carriers Ltd[10] to CMH on or around 23 October 2008. The total amount transferred by PBHK and these other companies to CMH on or around 23 October 2008 was US$67.1 million. The purpose was for CMH to hold the funds temporarily to mitigate the effect of Louis Dreyfus’ Claim on these companies.

60.  In order to have the Attachment Order discharged as early as possible, Messrs More Fisher Brown (“MFB”), the solicitors advising PBHK on Louis Dreyfus’ Claim, was instructed to negotiate with Louis Dreyfus.

61.  On 24 October 2008, Ms He Ting Ting (“He”) was appointed the sole director of PBHK to replace Lau and Chu who ceased to act as directors of PBHK.

62.  On or about 27 October 2008, when it was expected that an escrow agreement to secure Louis Dreyfus’ Claim could soon be reached, Chu procured CMH to transfer the sum of US$12,688,000 to Topmove (“CMH Remittance”) for the purposes of (a) enabling Topmove to remit the sum of US$9,172,689.94 (“Sum”) to MFB so that once the parties were able to execute the escrow agreement, the Sum could immediately be transferred to the agreed escrow account and the Attachment Order could be discharged; and (b) PBHK’s business operations.

63.  After Topmove had received the CMH Remittance, Chu procured Topmove to transfer the Sum to the account of MFB on 27 October 2008.

64.  On 29 October 2008, PBHK entered into an escrow agreement with Louis Dreyfus (“Escrow Agreement”), and the Sum (in the bank account of MFB) was subsequently transferred to the joint escrow account pursuant to the terms of the Escrow Agreement.

65.  On or about 30 October 2008, Louis Dreyfus applied to discharge the Attachment Order.

66.  After 3 November 2008, Lau and Chu had some discussions regarding how the Sum should be recorded or accounted for in the books of PBHK and Topmove.

67.  On 7 November 2008, for corporate restructuring purpose, PB Maritime transferred all its shares in PBHK to Profit Far Ltd (“Profit Far”) and since then, Profit Far has become the sole shareholder of PBHK. Profit Far was incorporated in BVI. Chu and Lau were its ultimate beneficial owners (each holding 50% beneficial shareholding) from its incorporation to January 2014, whereupon its beneficial ownership as well as that of PBHK became the subjects of dispute between Lau and Chu (see also para 23 above).

68.  The transfer of all shares in PBHK by PB Maritime to Profit Far was part of a corporate restructuring exercise for better control of PBHK’s operation and limitation of its risk exposure to potential claims stemming from the financial crisis at the time.

69.  Messrs Ince & Co was subsequently instructed by PBHK and Topmove jointly to draft the documents to record a “loan” and a “debenture” between PBHK and Topmove (the latter being the lender). After Ince & Co sent the finalized draft Loan Agreement (“Loan Agreement”) and Debenture (“Debenture”) to PBHK and Topmove on about 19 November 2008, they were signed by Chu’s wife on behalf of Topmove and He on behalf of PBHK, and were both backdated to 27 October 2008.

70.  Clause 6 of the Debenture provided that the security in the form of the Debenture shall immediately become enforceable and the power of sale and other powers conferred under the terms of the Debenture shall be immediately exercisable at any time after any “Secured Indebtedness” (ie the loan and the interest thereon) became due.

71.  Clause 7 provided that Topmove as chargee may by writing under the hand of any of its officer or manager appoint any person(s) to be receiver of the charged property or any part thereof. Clause 7 went on to specify the powers of the receiver.

72.  Chu transferred 50% of his shareholding in Able Cheer and Pretty Rainbow to Lau in around May 2009 such that they became the registered equal shareholders of these companies.

73.  PBHK did not made any repayment under the Loan Agreement or the Debenture. The repayment date under the Loan Agreement was extended for 2 years to 2 November 2011.

74.  In October 2013, Chu signed a declarution of trust (“Declaration of Trust”), which stated that he had been holding 50% shareholding in Topmove on trust for Lau since its incorporation.

75.  In 2015, Topmove sought to enforce the Loan Agreement and the Debenture. On 23 and 24 April 2015, Chu procured Topmove to enforce the Loan Agreement and the Debenture over the assets of PBHK, and to appoint receivers of PBHK.

76.  Lau’s case in respect of the Loan Agreement and the Debenture is as follows. After the Attachment Order was obtained by Louis Dreyfus, Lau, Chu as well as others in PBHK’s management had a meeting on 23 October 2008 and agreed to implement the following temporary measures (“Temporary Measures”):

(1)  All funds in PBHK’s bank accounts would be transferred to bank accounts of a new company affiliated with it to meet PBHK’s contractual obligations; the new company’s name must not bear the reference of “Pacific Bulk” to avoid any risks of its bank accounts being affected by the Attachment Order or any other actions taken by Louis Dreyfus. Ms He would urgently contact City Secretarial to incorporate or acquire the new affiliated company.

(2)  PBHK’s bank accounts would cease to be used to receive monies from or pay monies to its contracting parties, and the new company would be used instead for such purposes.

77.  According to Lau, Topmove, Able Cheer and Pretty Rainbow were soon acquired with Chu as sole registered shareholder and director. Chu (a) explained to Lau that this arrangement would be more convenient because Lau was travelling frequently in the Mainland; and (b) undertook to Lau he would take all steps to register Lau as 50% shareholder and appoint Lau as director. In view of Chu’s assurance, Lau agreed to use Topmove as the new company for the Temporary Measures and to set up a bank account for it.

78.  The transfer of funds to CMH set out in para 59 above was to implement the Temporary Measures. Lau says that the funds came from companies jointly owned by him and Chu. At the time, Lau and Chu did not discuss how the remittances from PBHK to CMH and from CMH to Topmove should be accounted for. After 3 November 2008, they agreed that the Sum should be booked as a loan advanced by Topmove to PBHK, in exchange for a debenture to be granted by PBHK in favour of Topmove. However, such transactions were not intended to have any legal effect and were created only for book-keeping purposes and to give the impression to third parties that Topmove was a secured creditor of PBHK in respect of the Sum.

79.  Chu’s case on the Loan Agreement and the Debenture had undergone changes. For the present purpose, his case is that the Sum was his own money which was provided to rescue PBHK. Topmove was Chu’s own company and it was used as a channel for his personal funds to PBHK.

Overview of the two actions

80.  Against the above background, 228/17 essentially concerns the beneficial ownership of some of the companies within the PB Group. Chu’s claim concerns the beneficial ownership of the 1 share in PB Maritime held by Lau. Lau’s counterclaim concerns the beneficial ownership, after 1 January 2014 (pursuant to the PB Restructuring), of shares in 12 companies in the PB Group referred to in his pleading as the “PB Companies”[11].

81.  These 12 companies are :

(1)  Old PB Companies (PB Bahamas, PB BVI and PB Chartering);

(2)  New PB Companies (PB Maritime, PBMI and PB Logistics);

(3)  PBHK and PB Cayman;

(4)  Pacific Bulk Lines Co Ltd (“PB Lines”) (Chu’s evidence is that it was involved in the PB shipping business); and

(5)  3 intermediary holding companies – Profit Far which held PBHK, Smartplace Ltd (held PB Cayman) and Eagle Valour Ltd (held 30% of PB Lines).

82.  Amongst these 12 companies, Chu’s case is that the New PB Companies were (and are) wholly owned by him.

83.  1431/15 arose against the background of PBHK being sued by Louis Dreyfus and the rescue action of the PB Group. The disputes concern (i) the beneficial ownership of Topmove, in respect of which Chu executed the Declaration of Trust; and (ii) the enforcement of the Loan Agreement and Debenture, including the validity of debt recovery actions against PBHK in 2015 upon Chu’s instructions. Topmove by way of counterclaim seeks (i) payment by PBHK of the Sum (US$9,172,689.94) under the Loan Agreement[12]; (ii) a declaration that the appointment of Receivers is valid; and (iii) ancillary orders.

Issues

84.  List of Issues (consisting of agreed and non-agreed issues) had been filed in both actions pursuant to the directions of the court. The issues are, with respect, unnecessarily numerous.

85.  For 228/17, I agree with Mr Joffe SC, who appeared with Mr Lui SC and Mr Chan for Lau, that the court will have to resolve the disputes about the basis on which Lau and Chu operated their business from 2003 to 2013 in determining Chu’s claim; and the findings in that regard will have a bearing on Lau’s counterclaim premised on the PB Restructuring Agreement. The essential issues are :

(1)  The setting up of New PB Companies (Agreed Issues 1-2);

(2)  The 50:50 Agreement and 2007 Reorganization (Agreed Issues 3-7);

(3)  The PB Restructuring (Agreed Issue 8);

(4)  Lau’s counterclaim (Agreed Issue 9).

86.  In respect of 1431/15, the findings as to the basis on which Lau and Chu operated their business from 2003 to 2013 will be relevant. The essential issues are :

(1)  The beneficial ownership of Topmove and the Declaration of Trust (Agreed Issues 1-3);

(2)  Source of the Sum which was paid into Topmove (Lau Issue 1 and Chu Issues 4-5)[13];

(3)  Enforceability of the Loan Agreement and Debenture (Agreed Issues 4-7);

(4)  Topmove’s counterclaim (Chu Issue 6).

Witnesses

87.  The issues in this case primarily turn upon findings of facts. Chu and Lau were the only witnesses who gave evidence. There was a witness for Lau (He), she was not called and no weight is to be placed on her witness statement.

Applicable principles

88.  The court was reminded by the parties of the following principles :

(1)  Whether there is a binding contract between the parties, and if so upon what terms, depends not on subjective state of mind but on consideration of what was communicated by words or conduct, and whether that leads objectively to a conclusion that they did intend to create legal relation and agree on all terms that they regarded or the law requires as essential for the formation of legally binding relations: Devani v Wells [2020] AC 129, [17]-[18]; RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH Co KG (UK Production) [2010] 1 WLR 753, [45], [48]-[49].

(2)  Subsequent conduct is admissible to prove whether an oral agreement was made or on what terms: Chitty on Contracts, 35^th edn, [16-061].

(3)  In assessing the parties’ cases on the existence of oral agreement, and in evaluating witnesses’ evidence, “contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility”: Leung Chin Sing v Ko Chun Hay [2021] HKCFI 2242, [41].

(4)  In view of the unreliability of human memory and the impact of litigation process on recalling past events, “the best approach for a judge to adopt in the trial of a commercial case is to place little, if any, reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts”: Leung Chin Sing, [43].

(5)  “The principle for deciding when agreement is incomplete in a manner which prevents it from being a legally binding contract was stated by Viscount Dunedin in the House of Lords in May and Butcher Ltd v R [1934] 2 KB 17 at 21 as follows: ‘To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties.’”: New World Development Co Ltd v Sun Hung Kai Securities Ltd (2006) 9 HKCFAR 403, [28]. “Similarly, an agreement may be held to fail for uncertainty … [The court will hold that there is no contract where] the language used was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention”: New World Development, [31].

(6)  In a contract for sale, “undoubtedly price is one of the essentials of sale, and if it is left still to be agreed between the parties, then there is no contract. It may be left to the determination of a certain person, and if it was so left and that person either would not or could not act, there would be no contract because the price was to be settled in a certain way and it has become impossible to settle it in that way, and therefore there is no settlement”: May and Butcher Ltd, p 21.

89.  For the formation of a trust (it is Lau’s case that Chu was holding his interests in the 12 companies subject to the PB Restructuring on trust for him) :

(1)  Under a contract for the sale of unquoted shares, a constructive trust arises over the shares by the seller in favour of the purchaser upon the contract being entered into (subject to the seller having a lien for the price): Xiamen Xinjingdi Group Co Ltd v Eton Properties Ltd (2020) 23 HKCFAR 348, [174]; Lewin on Trusts, 20^th edn, [4-010]-[4-011].

(2)  An express trust can only be created if three certainties are present, namely, certainty of intention (or words); certainty of subject matter; and certainty of objects: Lewin on Trusts, [5- 003]-[5-004].

Analysis

Viva voce evidence

90.  In respect of the oral evidence of Chu and Lau, I am not impressed by them as witnesses. Fortunately, there is ample documentary evidence on the most important issues. For the other issues, it is much more reliable to base the court’s findings on inherent probabilities, objective pointers and common and commercial sense instead of the recollection of witnesses over events which took place many years ago. Further, the recollection of the witnesses was liable to corruption by the years of extensive and bitter litigations.

91.  In any case, Chu was a very difficult witness who would not focus on the questions asked in cross-examination (“XXn”) or to provide succinct answers to the same. Instead, he would say whatever he thought was relevant (and in his favour) in answer to questions which he frequently did not fully understand due to his lack of focus. Much of what he said did not appear to be in answer to the questions and was difficult to understand. However, his adherence to his way of “answering” despite the repeated advice and warning by the court tends to suggest that he was genuinely incapable of doing what he was advised to do by the court.

92.  As for Lau, after observing him in the witness box for 2 ½ days, I have little doubt that whilst he is a good businessman, especially in shipping, he is not hands on with the details. I have no reason to doubt his evidence that matters of finance of the joint business was left to Chu. As for legal matters and accounting, they were areas with which he was not altogether familiar, and on which he placed much reliance on his colleagues.

93.  Both witnesses harboured, I believe, a genuine sense of grievance against the other. At one point in the course of XXn, Chu became emotional. Lau tried hard to appear composed throughout the XXn but the undercurrent of emotion was apparent.

94.  On balance, if the court has to rely upon the viva voce evidence of the witnesses. I prefer that of Lau over Chu. Compared with Chu, more care and restraint were exercised by Lau with his testimony. Possibly, he had the advantage of seeing what not to do during days of Chu’s evidence. However, I do have the impression that he is the more reliable of the two witnesses. Save for Lau’s evidence on PB Restructuring, I detected less inconsistency between his evidence and the documents.

Development of the PB Group

95.  In answer to the court’s question, both Mr Joffee and Mr Wong SC, who appeared with Mr Liu for Chu, agreed that the events from the time when Chu became a 25% owner of the Old PB Companies in 2002 until January 2014, just before the PB Restructuring, were so interwoven that the court should either accept the case of Chu or that of Lau on the development of the PB companies over that period of time. It will be seen below that this agreement is supported by the analysis on the evidence.

96.  In respect of PB Restructuring, it is common ground that this is a standalone issue. Mr Joffe submitted that unless the PB shipping business was jointly owned there was no need for any restructuring. On the other hand, it is common ground that there were jointly owned companies which held other investments or assets of Chu and Lau, eg, Annex 4, which is referred to in paras 144-146 below, set out various joint assets such as landed properties and wine. Therefore, shipping business aside, there was a need to split the joint assets. Restructuring the companies was one way of doing so.

97.  Another point to note is that if there was no valid agreement for the Restructuring, the ownership of the PB Group and the BBG Group would be as of the time immediately prior to the PB Restructuring. Mr Wong had accepted that be the position. Mr Joffe had expressed no disagreement.

New PB Companies

98.  The events took place over 20 years ago. Unsurprisingly, there was little documentary evidence. Inherent probabilities would be a much better guide for the determination of the controversies, especially when the witnesses’ recollection was liable to be corrupted by the extensive and bitter litigations over the years.

99.  In respect of how the events were unfolded, I am of the view that Lau’s version is inherently more probable. I find Chu’s case that he was asked to leave the business by Lau because he had failed to make much contribution to the same rather strange, to say the least. Chu had only joined the business for no more than a year, and it was unusually blunt and unkind for one to tell a friend, in whom one had sufficient confidence and trust to do business together, to leave the business in which he had invested a substantial sum. In any case, Chu disagreed that he had failed to make contribution to the business. To the contrary, he said that he had contributed substantially to the profits of the business. If that was the case, Lau must have known and there was no reason to ask Chu to leave to the detriment of his own interest.

100.  Further, Chu’s evidence is that when it was wrongly said that he had made little contribution to the business, he simply kept quiet. This is not one would expect as a reaction from a person who was wrongly accused, especially when the accuser was his friend and business partner. I find such evidence improbable.

101.  It is equally strange that after he was asked to leave Chu almost immediately set up the New PB Companies with the use of the name “Pacific Bulk” (for which he sought and obtained Lau’s consent) for the purpose of collaboration with Lau and to increase the market presence of the brand “Pacific Bulk”. Again, that is not what people normally do after being excluded on a false premise. Why would Lau agree to collaborate with Chu and allow him to use the brand when he did not want to be in business with him? Also, why would Chu want to build up the “Pacific Bulk” brand unless he had a stake in it?

102.  It is not in dispute that the New PB Companies shared the same office with Old PB Companies. According to Chu’s evidence, some of the staff were also shared. I agree with Mr Joffe that there would be a huge potential for confusion, rivalry and competition, a totally unattractive and uncommercial proposition for both sides.

103.  I do not accept Chu’s evidence that there was no rivalry between the two sets of companies because the New PB Companies specialised in Cape size vessels and Old PB Companies specialised in smaller vessels. Even if Old PB Companies did not at the time conduct business with Cape size vessels, surely it was an area for potential expansion. Unless Lau had a stake in the New PB Companies, I see no commercial reason for him to agree to collaborate with Chu.

104.  As to the lack of allotment of shares in the New PB Companies to Lau (or Gao), I believe that it was the way in which Chu and Lau conducted their business, namely, one based on trust and they spent their energy on growing the business with little spent on paperwork. This is consistent with the fact that no share was allotted to Chu in the Old PB Companies.

105.  There are some objective pointers to which of the two versions before the court is more credible :

(1)  The office used by the two set of companies was rented by PB Chartering (one of the Old PB Companies). PB Chartering never sublet to the New PB Companies, which never paid rent to PB Chartering (see also paras 108-109 below). Chu (on behalf of PB Chartering) signed the leases dated 14 May 2007, 19 April 2010 and 20 April 2012, though he was no longer its director after November 2008.

(2)  In XXn, Chu drew a distinction between leases before and after “restructuring” in late 2007, claiming it was natural for him to sign post-2007 leases for PB Chartering since there was one group of companies and Lau had authorised him to do so. However, this explanation could not apply to the signing of the lease dated 14 May 2007 since it was before “restructuring”.

(3)  Chu and Lau used the same email address for shipping business. Chu accepted in XXn that if a broker sent a cargo opportunity to the email address, both he and Lau could read it at the same time.

(4)  There was a telefax dated 10 January 2007 addressed to PB Bahamas (one of Old PB Companies in which, on Chu’s case, he had no interest) attention to Chu in which some documents were asked for. By his reply under the letterhead of PB Logistics (one of the New PB Companies), Chu enclosed a bank reference letter of PB Maritime (one of the New PB Companies), a certificate of incorporation of PB Bahamas as well that of PB Maritime.

106.  The above evidence suggest that it was not merely a case of collaboration or close collaboration but one where the New PB Companies were part of the PB Group of companies jointly owned by Lau, Gao and Chu.

107.  Two further points should be made. First, I am unable to accept Chu’s evidence that he was not told about Gao’s interest in the Old PB Companies. Chu’s evidence is that he knew Gao, although not well. I can see no reason for Lau not to be candid about Gao’s interest and, according to Chu, misled his friend and business partner. It was something which would easily be discovered.

108.  Second, Chu referred to a payment of US$2,000,000 from PB Maritime to PB BVI in May 2004. His explanation in re-examination for the payment was that :

“Because I made a lot of money, so this is a one-go lump sum to pay for the agent fees and the offices and miscellaneous expenses, to support its continuous expansion or development, to let Mr Lau to continue the development.[14]”

109.  I do not find such evidence credible. US$2,000,000 was a very large sum of money. I see no reason why Chu would have casually spent his hard earned money. There was no suggestion of even an estimation of the “agent fees” or “offices” (which presumably referred to the rent) due from Chu or the New PB Companies. Further, why would Chu be paying for the expansion and development of the Old PB Companies unless he had a stake in them? There must have been a reason for the payment, but the reason was not what Chu told the court.

110.  The only evidence which may support Chu’s case is a document[15] under the hand of Lau to Wat, who was responsible for finance. It was undated but written on a re-used paper with a date, 19 March 2004. Therefore, it is likely to have been produced after that date. According to that document, Lau gave instructions to Wat to “transfer back” to Chu various sums of money. Item 1 was a sum of US$150,000 “(shareholder’s investment)”. Item 2 referred to the calculation of 25% net profits for the period from 1 June 2002 to 31 March 2003. Relying on these items, Chu’s evidence was that they support his case that he left Old PB Companies in March 2003.

111.  The document also referred to other net profits, loss and “entertainment” by reference to vessels. No explanation was offered by Chu in respect of these items. Lau’s evidence was that he could not remember the purpose of the document. He did no keep a copy of it (it was produced by Chu). He said that: “At the end, no money was being returned or transferred” and “… during this time, I was discussing with Mr Chu as to how we were going to buy out Mr Gao. We were talking about how we can perform this buying out of Mr Gao’s shares”[16].

112.  Lau’s evidence that no money was returned or transferred was not challenged. Indeed, Chu’s evidence was that he was never paid the US$150,000. Given the timing of the document, there could be other explanation for its existence, eg, working out the resources for buying Gao’s interests.

113.  It is not for the court to speculate on why the document was created. The evidence concerning this document is not altogether satisfactory. I bear in mind the fact that Chu had never sued for the US$150,000 despite having this document as proof and the multiplicity of actions between him and Lau. Chu agreed in XXn that there was no agreement between him and Lau that his investment would be refunded if he left the Group. In all, I am not satisfied that this document outweighs the other evidence and analysis discussed above.

114.  One final point to be made is that in the analysis below the court rejects Chu’s case that the New PB Companies were solely owned by him. This lends credence to Lau’s case on the beneficial interest in the New PB Companies when they were set up.

115.  On balance, I believe that it is more likely than not that the New PB Companies were part of the PB Group, and the beneficial interest therein followed the 35%, 35% and 25% division in favour of Lau, Gao and Chu as of the time Chu joined the Old PB Companies.

50:50 Agreement

116.  First of all, there is much force in the submission of Mr Joffe that there was a change in Chu’s pleaded case on this issue, which was of a fundamental character :

(1)  Originally, Chu’s case in 228/17, which was verified by a statement of truth and maintained for over 5 years prior to amendment, was that he and Lau in around May 2004 “verbally agreed” to jointly establish a dry bulk shipping operation with the merger of PBMI, PB Bahamas, PB Logistics and PB Chartering[17]. In 1431/15, such agreement was also pleaded and referred to as “2004 Oral Agreement”, which covered not only these four companies but also PB Maritime and PB BVI[18]. However, it was averred that no active step was taken to complete the merger as Lau and Chu were busy “concentrating on their respective business”, and they simply continued to operate their own business “separately” [19].

(2)  By amendments made in May 2022, Chu now contends that in early 2004, Lau asked him whether he was interested in merging their shipping operations, and he insisted that any “potential merger” must be on the basis that he would own at least 50% of the merged business[20]. Hence, Chu’s amended case is that there was no agreement reached in 2004, and the overture made by Lau did not materialise.

(3)  The change in Chu’s case is surprising because his original case even referred to the companies to be included in the merger. They had since been deleted in both actions.

117.  Chu was XXned on the above change of his case. In his lengthy and convoluted explanation, the only point one can understand from it, and said to be the most important by Chu, was that Lau had changed his case by alleging that he had misappropriated about US$70 million. Clearly, that was no answer to the change in Chu’s case. There is force in Mr Joffe’s submission that Chu had admitted that the change was purely tactical such that he could defend the claim of misappropriation from PB Maritime. The following exchange took placed under Chu’s XXn[21] :

Q: “Is the change of case to provide a response to the misappropriation – to claim of misappropriation from PB Maritime so that you could claim that it was only owned by you rather than, as you had originally said, owned by you and Mr Lau 50:50?”

A: “This is one of the reasons, and for the other reasons I have already explained in my previous answers.”

118.  Further, there is documentary evidence on the appointment of PB Bahamas as the agent for PBMI on an exclusive basis, ie, the former could not act as agent for anyone else, at the fee of US$5,000 per annum. There are a number of features to these documents which support the proposition that PB Bahamas and PBMI were in the same group of companies, and not merely in collaboration as suggested by Chu :

(1)  The annual agency agreement started from 1 April 2004 until 31 March 2008.

(2)  Chu agreed that under this arrangement the income and profits from contracts which PB Bahamas entered into since 1 April 2004 would belong to PBMI.

(3)  I accept Lau’s evidence, based on inherent probabilities and commercial common sense, that US$5,000 was not a realistic fee.

119.  Furthermore, there are other incontrovertible pointers in the evidence in support of Lau’s case :

(1)  In PBMI’s Financial Statements for 2004, PB Bahamas was stated to be one of the “entities under common control”. The same record can be found in the Financial Statements for 2005-2007. All the Financial Statements were signed by Chu as the director of PBMI.

(2)  In November 2006, PB Singapore was set up with equal ownership by Chu and Lau. It engaged in shipping business, just like the Old PB Companies and the New PB Companies.

(3)  Pursuant to the 2007 Reorganization, 50% of the share in PB Maritime was allotted to Lau but the transfer was backdated to February 2005. The transfers of the shares of PB Logistics, PB Chartering, PBMI and PB BVI to PB Maritime were also backdated to divers dates in 2004[22]. The backdating is a strong indicator that the business was jointly owned since 2004 as contended by Lau.

(4)  I agree with Mr Joffe that if PB Maritime was not jointly owned by Lau and Chu, it is inconceivable that Lau would have agreed to use PB Maritime as the holding company of his own companies (according to Chu’s version), PB Chartering and PB BVI.

(5)  Mr Joffe also made the point that there would have been no reason for Chu to agree to let PB Maritime (if it was his own company) to act as guarantor of the Golden Ocean charterparties entered into by PBHK[23].

(6)  It will be seen below on the analysis of the 2007 Reorganization that there is much evidence, including Chu’s admissions, to support Lau’s case that the PB companies were jointly owned by him and Chu.

120.  The only document which contradicted Lau’s case indirectly is a one page document which set out the entitlement of Gao when he was bought out in 2004[24]. It is apparent that the calculations contained in the document was made on the basis that Gao owned 50% of the business, not 37.5%. Moreover, on its face the calculations only concerned PB Bahamas, and not any of the other 5 companies. At that time PBMI had “total assets” of US$30 million and “total equity” of US$14.9 million according to its audited financial statements.

121.  Under XXn, Lau explained that Gao, who was a very rich man, was very angry on being asked to leave the business. He eventually agreed and sent his accountant to Lau’s office to find out about his entitlement. Lau did not know about how the figures came about. They were worked out by the accountant with the companies’ finance department staff. Lau said that he discussed the calculations with Chu. They dared not challenge them. They were happy to buy out Gao at the calculated sum, because they would be owning the business on 50:50 basis, which they intended to expand and profit from.

122.  I believe there are three features in the calculation sheet which may be consistent with Lau’s case :

(1)  At the material time, Gao was a 50% shareholder in PB Bahamas but not in the other two Old PB Companies. Amongst the Old PB Companies, PB Bahamas was the company doing the shipping business with the other two acting as support. In particular, the money earned was parked with PB BVI. Therefore, it is plausible that, as stated on the calculation sheet, the calculation of PB Bahamas’ “undistributed profits” actually embraced the profits of Old PB Companies.

(2)  Lau said (without challenge) that the 4 vessels included in the calculation “belonged to Chu”. It probably meant that they were transactions involving New PB Companies. I can see no other explanation for it. If so, at least part of the profits of those companies was included in the calculation.

(3)  The calculation covered the period from 2001 to 31 March 2004. This is consistent with Gao exiting the PB Group after 31 March 2004. I can see no other explanation from the evidence.

123.  At the end of the day, the court is left with a document made over 10 years ago the contents of which may not be entirely against Lau’s case. Balancing the totality of the evidence on this area, I accept Lau’s case on the 50:50 Agreement.

2007 Reorganization

124.  I start with the shift in Chu’s pleaded case. Chu had maintained for over 5 years that he and Lau in October 2007 implemented the “2007 Re-Organization” by way of a series of share transfers that was “undertaken” so that (i) PB Maritime would be the holding vehicle of the “new merged group of companies” and be owned equally by Lau and Chu; (ii) the other companies (PB Bahamas, PB Chartering, PB BVI, PBMI and PB Logistics) would be the wholly owned subsidiaries of PB Maritime; and (iii) after such reorganization, Lau and Chu would own all those subsidiaries equally[25].

125.  By amendments made in May 2022, Chu now avers that there was only a “2007 Intended Merger” in that Lau and Chu simply took steps to “attempt to merge” the companies. It is difficult to understand this new claim because various corporate restructuring steps actually took place.

126.  The rest of Chu’s pleaded case has been summarised in paras 28 to 31 above. It suffices for the present purpose to point out that the claim of Conditions Subsequent was introduced by the amendment.

127.  Chu’s case on the Reorganization does not sit well with inherent probabilities :

(1)  His case is that the first stage of the exercise was to determine the consideration, but that determination was inexplicably overtaken by the actual “Corporate Restructuring” with the allotment and transfers of shares. It is a matter of basic commercial common sense that without the determination of price, a merger cannot be implemented.

(2)  Chu discovered from City Secretarial on 5 October 2007 Gao’s shareholding in PB Bahamas. A matter on which he was allegedly misled. Yet, on the next working day (8 October 2007), City Secretarial was instructed to effect the restructuring “asap” with the backdating to 1 April 2004[26].

(3)  Allegedly, the “Consideration Determination” could not be completed since Lau failed to supply the financial statements for PB Bahamas and PB BVI without any explanation. In 1431/15, the pleaded case was different. It was averred that Lau told Chu that he could not produce the audited financial information of PB Bahamas (but not PB BVI) with the consequence that a fair consideration could not be determined[27]. In such circumstances, it is quite odd that Chu still wanted to cooperate with Lau in doing shipping business[28].

128.  There are sound pointers based on inherent probabilities and documentary evidence that Lau’s case on the 2007 Reorganization is the more credible :

(1)  The agreed facts set out in paras 19 to 21, 23 to 24, 27 and 32 above.

(2)  The fact that PB BVI and PB Chartering were transferred to PB Maritime. If Chu was right that he had no interest in these companies, the transfer should not have taken place.

(3)  Chu agreed that PB Maritime was also used to hold joint assets of his and Lau’s.

(4)  The matters stated in para 118 above about the agency agreements.

(5)  There were 42 unfinished PB Bahamas term contracts which were transferred to PBMI with PB Maritime receiving payments. I agree with Mr Joffe that had it not been the case that there was only one corporate group, such massive transfer of contracts was inconceivable. Chu had no satisfactory answer to these transfers.

129.  Further, Chu admitted in various documents and communications that PB Maritime and other companies in the PB Group were owned by him and Lau in equal shares :

(1)  Chu’s draft restructuring memorandum emailed to Lau on 24 February 2014[29] proposing that the assets of, intter alia, PB Maritime, PBMI and PB Logistics should be split 50:50 between him and Lau.

(2)  Chu’s subsequent emails dated 5 March 2014[30], 22 April 2014[31] and 4 June 2014[32].

(3)  Paras 2 and 4 of the Statement of Claim in HCA 1413/2014, which was verified with a statement of truth by Chu[33].

(4)  Chu’s 3^rd affidavit filed in BVI proceedings dated 21 August 2015, [69][34].

(5)  The letter dated 9 December 2014 from Chu’s former solicitors[35].

(6)  Chu’s letter dated 29 October 2015 under PB Maritime letterhead to the Companies Registry[36].

(7)  A corporate data sheet of PB Maritime dated 28 February 2019 and signed by Chu which stated that he and Lau were its equal ultimate beneficial owners[37].

130.  Chu was XXn on some of these documents, eg, the corporate data sheet. He failed to provide any viable answer to explain his inconsistent stance.

131.  Taking a step back and review the whole of the evidence on the events from Chu joining Old PB Companies to the 2007 Reorganization, Lau’s case is coherent, consonant with common and commercial sense as well as largely consistent with the documents. On the other hand, Chu’s case is artificial and contradictory with his own previous statements, let alone the documents.

132.  In the premises, I have no hesitation in accepting Lau’s case on the 2007 Reorganization.

PB Restructuring

133.  It is common ground that there was a breakdown of relationship between the two business partners and they had discussions about separating their business and jointly owned assets. Whilst Chu accepted that he had in principle agreed with Lau that they would divide their business such that the interest in the BBG Group would be owned to him and the PB shipping business would go to Lau, there was no agreement reached, eg, on which PB companies would be included.

134.  According to Lau, he and Chu orally reached agreement on the PB Restructuring in the following terms[38] :

(1)  Chu would withdraw from management of the PB Business[39] as operated by the PB Group immediately;

(2)  Lau would be solely responsible for the management, operation and profit and loss of the PB Business as operated by the PB Group with effect from 1 January 2014, except that he and Chu would each continue to bear half of the recurring losses from the “Golden Ocean Charterparties” (which were long-term charterparties of MV Golden Beijing and MV Golden Queen) prior to their early termination, which they would discuss and agree with the Golden Ocean Group. The “Pacific Bulk” brand would belong to Lau, who would have the exclusive right to use it for his business;

(3)  All of Chu’s shareholdings and interests in the 12 PB companies would be assigned to Lau, at a price equivalent to 50% of the total audited net asset value of the PB Business as of 31 December 2013;

(4)  Lau and Chu would take steps to audit all relevant jointly owned companies to determine the values of the same.

135.  Fortunately, there are much contemporaneous documents in relation to the Restructuring. Plainly, they constitute reliable evidence for the adjudication on this topic, especially when many of the documents came from Lau. It will be seen below that the documents flatly contradict Lau’s case. Under XXn, Lau did not have any reasonable or acceptable explanation for the inconsistencies. I shall examine below some of the documents in a chronological manner.

136.  After the meeting on 22 January 2014, which was attended by Chu, Lau, Wat, Wong and Lam, meeting minutes (in Chinese) were prepared by Lam (“Minutes”). The first version of the Minutes was sent out by Lam to Wong on 23 January 2014 at 2:50am. It was a short document of 4 pages. Due to its importance and evidential value as a document produced shortly after the meeting. It is set out in full below[40] :

“關於劉永人先生與朱江先生共同所持資產重組的會議紀要

鑒於

在過去十多年來，劉永人先生與朱江先生共同經營多家企業，並在大部分項目公司中以共同行動方的方式群策群力，經歷過多次市場大起大落，驚濤駭浪，依然頑強地成長，取得了驕人的成就，隨著2013年和預計2014 年環球經復蘇的經濟環境下，面臨企業發展新的挑戰，雙方基於擴充業務和賦予各自更靈活的發展，有需要建立一個更有靈活性的經營框架，因此雙方同意按下述原則，對於所有共同持有份額的公司（雖然雙方可能在不同的專案中所持有的份額，股權等不一） 進行重組

一，重組的方式

1.1 劉永人先生與朱江先生共同所持資產重組的方式將參照在持有公司註冊所在地法律框架下，進行財產分割協議，或稱分單，分產契約的正式的法律檔為依據，是共同財產共有人之間就各所有人應獲財產份額進行分割，或者部分所有人從共同財產中分出自己的份額時所訂立的文書。分單須經共同財產共有人協商一致後方能訂立，按雙方共同認可的財務報表記錄和相關法律文書所規範，和本著友好協商的的方式進行。

1.2 成立5 人重組工作小組，由劉永人先生，朱江先生為聯席組長，Bonnie Wat女士，林小軍先生， 王 [ ]小姐為小組成員，

1.3 小組將按需要和其他管理人員或者專業人員成立專項小組已確定某些專案的處置方式和辦法．

1.4 小組將定期召開會議，就各個所涉及是次重組的公司和專案進行重組方法方式的決定，實施細節，制定行動專案等方面逐步展開工作．

1.5 小組的會議紀要需由聯繫組長簽署確認所決定的內容，並以此為依據準備各種正式法律文書。其他小組成員為會議紀要的證人。小組所有成員為執行者，按小組制定的方針和方式進行重組的工作．

1.6 重組小組將在2014 年2月舉行一個春茗和公佈會向各界友好公佈重組的安排，雙方都本著互惠的原周繼續互相支持各自的業務繼續發展．

二﹑重組的原則

2.1 朱江先生在亞太系列公司（參見附件一：亞太系列公司的名單）將出讓給劉永人先生

2.2 劉永人先生在北部灣遠洋集團有限公司以及其下轄予公司（附件二，北部灣遠洋集團有限公司以及其下轄子公司名單） 中所持有的股權將出讓給朱江先生

2.3 在上述1.1以及 1.2中的出讓價格按2013年 12月31日審計報表中的所有者權益為價格的依據，原則上受讓方就審計報表中資產的商譽不支付任何溢價．

2.4 出讓的價格將參照審計報表中的出讓人的股東貸款，已繳資金本，和累積盈為主要的依據．

2.5 劉永人提出在其受讓了亞太系研公司的權益後，朱江先生將不能使用亞太的名稱涉足船舶租賃的業務。 朱江先生對於次提案原則上同意．

2.6 朱江先生提出其出讓了亞太系列公司的權益後，允許其取得 [Pacific Bulk Logistics Limited]的權益進行其名下資產的進一步重組，但是承諾他將Pacific Bulk Logistics Limited改變一個完全不同的名稱，朱江先生得到此間公司的主要用途是作為維護和延續其多年於各家銀行建立的信譽，同時承諾將不用此公司混淆亞太在船舶租賃運市場的營運和經營．對此提案劉永人先生將需要考慮．

2.7 會議並形成了一個初步的行動專案（附件三：重組行動項目）”

137.  It is plain from the contents of the document that no agreement was reached on 22 January 2014 (see clause 1.1). Indeed, a lot of work had to be done before an agreement could be reached. Hence, the setting up of a working group chaired jointly by Chu and Lau with Wat, Lam and Wong as members (clause 1.2). It was intended that legal document(s) would have to be executed (clause 1.5). The list of PB companies to be sold to Lau by Chu had not been agreed (clause 2.1). The consideration for the Restructuring would be based mainly on the vendor’s shareholder’s loan, paid capital and accumulated profits as set out in audited financial statements (clause 2.4). These are some of the examples demonstrating the state of affairs as of 22 January 2014.

138.  The Minutes referred to 3 annexures which had yet to be prepared. Hence, in the covering email, Wong (the Company Secretary) was asked by Lam to prepare annexes 1 and 2, and annex 3 would be prepared by him.

139.  Whilst it is plain that the Minutes were not copied to Chu or Lau on 23 January 2014, I do not believe that no weight should be placed on them. It was (a) contemporaneous; (b) provided by Lam, who according to the undisputed evidence of Chu was a qualified accountant and thus unlikely to have got things badly wrong; and (c) provided an important reference on how the events were subsequently unfolded.

140.  The first version of the Minutes was followed by no less than 5 later ones. Much time was spent in the XXn of Chu on the minor amendments of the Minutes. I find nothing sinister with the amendments. It was something to be expected.

141.  After versions 2 and 3 of the Minutes were sent to Wong by Lam on 23 January 2014 (10:30am) and 27 January 2014 (1:13am), version 4 was circulated on 27 January 2014 (8:42pm) to Lau, Chu, Wat and Wong for their comments. There was no major revision to version 1 which might have changed the record that there was no agreement reached on 22 January 2014. All the clauses identified in para 137 could be found in version 4, save that clause 2.4 was rearranged as clause 2.3.2.

142.  Under XXn, Lau said that although he had received the document, he did not read it because he was busy, it was chaotic and he trusted Chu. Further, Lau could not recall if anyone, in particular Wat and Wong, had asked him for his comments on the Minutes. I find such explanation wholly unconvincing. However busy and chaotic life was at the time, the Restructuring must be one of, if not the most, important things on Lau’s mind. There is no reason to believe that the Minutes (version 4) was not read by Lau, and he knew that he was asked to comment on the same.

143.  For completeness, version 5 of the Minutes was sent by Lam to Wong on 6 February 2014 (3:27pm). Version 6 was sent by Wong to Lam on 7 February 2014. Although Chu and Lau were not copied in the emails, it is highly unlikely that Lam and Wong were merely acting on their own without consulting the joint Chairmen of the working group.

144.  It will be recalled that in version 1 of the Minutes, there were 3 annexures which had yet to be produced. In version 2, an annex 4 was added: “Annex 4: Restructuring action items”.

145.  On 24 January 2014 (11:16am), Lam sent to Wong a draft of Annex 4. In a tabulated form a number of companies and assets were listed out.

146.  On 28 January 2014 (12:50pm), two revised drafts of Annex 4 were sent by Wong to Lau, Chu, Wat and Lam. The date of the email is significant because, according to Lau the PB Restructuring oral agreement was reached with Chu on 27 or 28 January 2014. Annex 4 was clearly an important but unfinalized document which was peppered with tracked changes. It set out the companies and assets involved in the Restructuring. Only 4 of the 12 companies said by Lau to be part of the Restructuring were mentioned (PBHK, PB Cayman, PB Logistics and PB Lines).

147.  On 29 January 2014, Lau emailed Chu and stated, inter alia, that he and Chu had agreed to the “principle(s)” of the Restructuring. It was written shortly after the Restructuring Agreement had allegedly been reached. If there was an agreement on the Restructuring, it is inconceivable for Lau to have referred only to principle(s) having been agreed but not referred to the Agreement itself.

148.  On 31 January 2014, Chu wrote an email to Lau stating, inter alia, (i) in respect of PBHK, its restructuring was subject to a restructuring framework agreement to be executed by Chu and Lau after the holidays; and (ii) prior to the completion of share transfer, all business and financial decisions should be made with the unanimous consent of the shareholders’ committee made up of Chu and Lau.

149.  Up to the end of January 2014, there was no contemporaneous document in support of a concluded Restructuring Agreement. Instead, the documents demonstrate that there was no concluded agreement. The documentary evidence after January 2014 reinforces the fact that the discussions remained on-going, and at a preliminary stage.

150.  I need only focus mainly on the documents emanating from Lau :

(1)  On 3 February 2014, Lau wrote to Chu[41], stating, inter alia, that if Chu refused to investigate the case involving Mr Lu Zhongzhi[42], there would be no basis for them to continue discussion. It is noteworthy that Lau was using very blunt language in this email, which suggests that his relationship with Chu had broken down irretrievably and there was little trust left between them.

(2)  On 5 February 2014, Lau sent an email to Chu[43] stating, inter alia, that the whole Restructuring and negotiation had been destroyed by Chu, and that he would consider measures against the relevant companies, such as winding-up and other legal actions.

(3)  On 7 February 2014, Ms Sun Min (“Sun”)[44] sent an email to City Secretarial enclosing a “notice” from Lau. It is reasonably clear from the terms of the notice that it was probably drafted by Sun. The notice referred to Lau and Chu being “in the process of implementing a restructure” and City Secretarial was instructed not to process any change to the directorship, etc, of the companies in which Lau and Chu were direct or indirect shareholders, including Topmove, without Lau’s approval.

(4)  On 13 February 2014, Lau provided a draft written agreement[45] to be signed by himself and Chu under the attestation of their respective family members. It was never signed. The preamble of this document referred to the framework agreement reached between Chu and Lau in discussions during January and February 2014. Clause 1 referred to Chu selling his shares in PB companies the list of which was “to be prepared by the Company Secretary”. Clause 3 stated that audited reports would be used as reference with which the consideration would be further negotiated. Clause 8 referred to the appointed of own team of experts to deal with the subject matters of the agreement.

(5)  On 14 February 2014, Sun, on behalf of Lau, wrote to Chu[46], and warned him that Lau feared that it would be very hard to continue the discussion on a peaceful split if Chu persisted with his attitude.

(6)  On 15 February 2014, Sun wrote to Chu[47] to inform him that Lau’s lawyers are “preparing the legal document for transferring 45% of [PB Lines]”. PB Lines was one of the 12 companies said by Lau to fall within the Restructuring.

(7)  On 16 February 2014, Sun wrote to Lau[48], copying to Chu, Wat, Wong, Lam and Chang Dafa, stating that if Chu adopted a double standard in the implementation process even if a framework agreement could be successfully reached, it would be impossible to implement any of its provision or the spirit of the framework agreement. She questioned whether there was any need to discuss or execute a framework agreement. She went on to suggest whether Chu’s previous proposal of winding-up all the companies jointly invested by Chu and Lau would be more efficient and fairer.

(8)  On 17 February 2014 (1:18am), Chu sent an email to Lau[49] acknowledging receipt of Lau’s draft agreement, and pointed out that the terms did not fully express the original intent of the discussion. Chu suggested that a meeting be held with the working group, and prior to which he would complete annexes 1 to 3 which was mentioned in the last meeting.

(9)  Later on the same day (19:48), Lau emailed Chu[50] and complained about the lack of progress of the negotiation on Restructuring, and stated that he would give Chu and himself a last chance to resolve the Restructuring peacefully. In that email, Lau also stated that he always took the view that for such a large corporate restructuring, each side should appoint their lawyers.

(10)  On 24 February 2014 (12:13am), Chu circulated a draft restructuring memorandum to Lau and other members of the working group[51]. In the covering email, Chu expressed the aim of speeding up the Restructuring and to have the relevant legal documents prepared for the implementation thereof.

(11)  At 2:58pm on the same day, Lau emailed Chu and stated, inter alia, that for over 1 month, the only agreement reached between them was that the PB brand would belong to him and he would not be concerned with the “Beibu Gulf Ocean/Shipping” brand.

(12)  On 25 February 2014, in an email from Lau to Chu[52], it was stated that (a) the parties had made no progress in the negotiation on the Restructuring, save that the Pacific Bulk brand would be owned by Lau, and he would exit from BBG; (b) no matter how the business is to be split, through peaceful agreement or legal means, eventually the accounts of the companies would need to be clarified; and (c) Lau disagreed with the memorandum sent by Chu to him on 24 February 2014.

(13)  On 26 February 2014, Lau and Chu signed a one page agreement under the heading “Golden beijing golden queen wash out memorandum”[53]. Although the document was concerned with the hire of 2 vessels (Golden Beijing and Golden Queen), para 1 of that document is important :

“Mr Lau Wing Yan Mr Chu Kong have reached preliminary agreement on the corporate restructuring, starting from 1 January 2014, the profits and losses derived from the Beibu Gulf Ocean Shipping Group 49% shareholding jointly held by Mr Lau Wing Yan and Mr Chu Kong shall be the responsibility of Mr Chu Kong and has nothing to do with Mr Lau Wing Yan, Mr Lau Wing Yan will gradually withdraw from the operation and management of Beibu Gulf Ocean Shipping Group. Starting from 1 January 2014, all the profits and losses of PACIFIC BULK SHIPPING LTD., PACIFIC BULK SHIPPING (CAYMEN) LTD., PACIFIC BULK CHARTERING LTD. shall be the responsibility of Mr Lau Wing Yan and has nothing to do with Mr Chu Kong. Mr Chu Kong will gradually withdraw from the abovementioned three companies, how to resolve other Pacific Bulk companies shall wait for further negotiations. However, the profits and losses of the charter of Golden Beijing and Golden Queen will still have to be allocated according to the shareholding ratios until the washout is completed.”

[emphasis added]

151.  There were later documents (after February 2014) which also demonstrate that Lau’s case of an oral Restructuring Agreement concluded on 27 or 28 January 2014 is unsustainable[54]. With one exception, it is unnecessary to set them all out. One of the disputes between Lau and Chu was whether the consideration for the Restructuring was to be based on the NAV[55] as verified in audited reports. In a letter from Lau to Chu dated 30 May 2014, para 2 stated as follow :

“I have never agreed that the consideration of shareholding rights should be “ultimately subject to the audit report”, I only agreed for it to be based on the audit report. This was specified in the previous emails very clearly. The shareholding rights in the audit report and the actual value of the shareholding may differ to a certain extent, this is common sense.”

152.  In the face of the above documents, the only reasonable conclusion is that there was no concluded agreement reached on the Restructuring. It follows that Lau’s counterclaim in 228/17 has no leg to stand on. Likewise, there is no basis for Lau’s trust claim arising from PB Restructuring.

153.  For completeness, first, I agree with Mr Wong’s submission that the documentary evidence clearly show that there was no agreement on (a) the 12 companies said to be covered by the Restructuring; (b) the price, a critical constituent of any sale; (c) immediate withdrawal from the PB shipping business by Chu or from the BBG Group by Lau; and (d) the parties would rely on an oral agreement. In respect of the last point, at the material time the parties’ relationship was no longer what it was, and they were trying to reach an agreement to split their very substantial joint business and assets. It is consonant with common sense that they would like to have a formal legal document for the purpose.

154.  Second, I am unable to agree with Mr Joffe that the parties’ subsequent conduct had reinforced the existence of the Restructuring, eg, Lau and Chu set up their separate shipping businesses after January 2014. My understanding of the evidence is that the parties soon ran into an impasse after having agreed in principle to split their business and assets. Serious allegations of misappropriation were made, relationship turned from bad to worse and the intended audit exercise was in a stalemate. Under such circumstances, the parties took unilateral actions to protect their interest. For instance, the new shipping businesses were to allow them to continue with what they were doing.

155.  If there was a Restructuring Agreement, why would Lau subsequently petition for the winding-up of Ocean Sino, which owned his and Chu’s interest in the BBG Group, on the ground that he was excluded from the management of that company by Chu?

Topmove

156.  The above findings and the agreed facts provide the backdrop to the acquisition of Topmove. Topmove was acquired with Able Cheer and Pretty Rainbow. It was part of a temporary measure to minimise the impact of the fallout with Louis Dreyfus. Substantial amount of money was transferred from PB companies, including PBHK, to Topmove which, on common ground, had no business other than being used as the cash holder and dispenser. In these circumstances, even without the Declaration of Trust, it is reasonably plain that Topmove was jointly and equally owned by Chu and Lau.

157.  Mr Joffe submitted that if the court finds that (i) the PB Group was by then owned 50:50 by Lau and Chu; and (ii) Topmove was acquired for the benefit of the PB Group, it would follow that Topmove itself was also owned 50:50 by Lau and Chu. Whilst I may not go as far, it is right that these factors at least fortify the proposition that Topmove was equally owned by Chu and Lau.

158.  Mr Joffe had also made the following points to which I agree :

(1)  If Topmove was not jointly owned 50:50 by Lau and Chu, it is inconceivable that Lau would have agreed to let Topmove make and receive payments on behalf of PBHK, which was owned 50:50 by himself and Chu.

(2)  The fees for the incorporation of Topmove in 2008 were paid by PB Maritime and not out of Chu’s personal funds. This is supported by 2 debit notes dated 23 October 2008 from City Secretarial to Topmove with handwritten annotation: “PBM paid on behalf of Topmove”[56].

(3)  On 24 February 2014, Chu circulated his draft restructuring memorandum (see para 150(10) above) in which he proposed to divide Topmove’s assets on a 50:50 basis between Lau and himself and eventually close the company.

(4)  Chu’s own email dated 22 April 2014 which listed Topmove (and certain other Pacific Bulk companies) as being jointly owned by Lau and himself (see para 129(2) above).

The Sum

159.  Very fairly, Mr Wong accepted that the Sum could be traced to PBHK’s transfer of US$11.4 million to CMH on 23 October 2008 (see paras 59 to 62 above), putting aside the legal nicety about mixing of funds which businessmen like Chu and Lau would unlikely have in mind. Therefore, Topmove was, in effect, lending PBHK its own money under the Loan Agreement.

160.  Taking a step back, it is very logical that Topmove was using the funds of PBHK when it remitted the Sum to MFB for the purpose of discharging the Attachment Order against PBHK.

161.  The accounts of CMH and Topmove are largely supportive of the above analysis :

(1)  In CMH’s general ledger for 1 April 2008 to 31 March 2009[57], it was recorded that (a) on 27 October 2008, US$12,688,000 was transferred to Topmove “on behalf of [PB Maritime], [PB Cayman] and [PBHK]”; and (b) on 26 October 2008, two sums of US$387,000 and US$800,000 were transferred to Topmove. Topmove’s unaudited accounts (which was referred and relied upon by Chu in his witness statement[58]) as at 31 December 2008[59] showed a liability in the sum of US$13,875,000 owed to CMH, which liability remained in its unaudited accounts until January 2014[60].

(2)  This liability included the US$12,688,000, as the difference between US$13,875,000 and US$12,688,000 is US$1,187,000 (US$387,000 plus US$800,000). I agree with Mr Joffe that this is clearest evidence that the US$13,875,000 owed by Topmove to CMH comprised only jointly owned funds.

162.  For completeness, I do not accept Chu’s case that he was using his personal funds for the purpose of resolving Louis Dreyfus’ Claim. Chu’s pleaded case is convoluted, added by way of amendment 3 years later and not supported by any objective or documentary evidence. I believe that the amendment was made to bolster Topmove’s claim against PBHK for the Sum.

The Declaration of Trust

163.  Again, very fairly, Mr Wong accepted that Chu has an uphill battle in respect of this document which clearly stated that he was holding 50% shares in Topmove on trust for Lau. I agree with Mr Joffee that as a person of full age and understanding Chu is bound by the documents he signed, unless he can establish a recognised vitiating factor: Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334 at [84]-[87]. Chu does not rely upon any vitiating factor in these actions.

164.  The above analysis on Topmove and the Sum go a long way to fortify Lau’s case that he owns 50% of the shares in Topmove beneficially. I simply see no reason to doubt Lau’s case or any good reason to accept Chu’s convoluted one.

165.  As to the deletion of the 3^rd paragraph of the Declaration of Trust, which provided for the transfer and disposal of the trust shares and dividends and proceeds thereof in accordance with Lau’s instructions, Lau’s evidence was that Chu wanted the paragraph struck out and he did not know why[61]. Be that as it may, I fail to see how Chu can rely upon the deletion to deny Lau’s 50% interest in Topmove. As submitted by Mr Joffe, if there is a trust, Lau as a beneficiary under the trust must be entitled under the rule in Saunders v Vautier to call for transfer of 50% shares in Topmove to him. This is a legal consequence, regardless of whether the Declaration of Trust contains the 3^rd paragraph or not.

166.  In the premises, I hold that the beneficial interest in 50% of the shares of Topmove belongs to Lau.

Enforcement of the Loan Agreement and Debenture (Collateral Agreement)

167.  Lau has abandoned his case on sham transactions. His case is confined to that of an oral Collateral Agreement[62], which is based upon Chu’s agreement to the following part of Lau’s witness statement on which he was XXned[63] :

“70. At the time, the shipping market remained very volatile and many shippers and charterers were unwilling to perform existing contractual obligations. Legal actions were frequently commenced by contract counterparties who wanted to get out of existing contractual obligations and/or gain financial advantage by putting legal pressure on counterparties to pay settlement sums. Mr Chu therefore suggested to me during a number of telephone calls and also face to face discussions from around 3 November 2008 that it would help us to protect the assets of PBHK (which had a relative higher risk of being sued) by creating a priority “loan” and “debenture” arrangement between Topmove Limited and PBHK. …

71. During these telephone calls and face to face discussions in early November 2008, Mr Chu mentioned to me that, if for whatever reason, there were priority issues over the assets of PBHK as between the beneficial owners of PBHK (i.e. myself and Mr Chu) and any external creditors of PBHK in the future, he would further discuss and agree with me as to what actions Topmove Limited should take in respect of the “loan” and “debenture” in order to enable myself and Mr Chu (being also the beneficial owners of Topmove Limited) to have priority in the recovery of assets of PBHK over other external creditors. Mr Chu also told me that once there was no further need for the “loan” and “debenture” to exist or it became necessary at a later time to evidence PBHK’s repayment of the “loan” from Topmove Limited, he would discuss and agree with me what should be done to formally forgive and/or discharge the “loan” owed by PBHK to Topmove Limited. Since these suggestions of Mr Chu would seem to be intended to protect our joint interests in PBHK, I told Mr Chu during our discussions that I agreed to them. As mentioned above, Mr Chu and I also had face-to-face conversations to discuss the above and we both clearly understood that the sole purpose of the “loan” and “debenture” was to try to protect and preserve our position (as equal beneficial owners of PBHK) as against external creditors of PBHK. They were not meant to be enforceable unless and until subsequently agreed by Mr Chu and I for the purpose of protecting our interest against external creditors.”

168.  It should be pointed out that in respect of the last sentence of para 71, Chu said that: “It seems that it was not so clearly stated”.

169.  These paragraphs of Lau’s witness statement are largely consistent with his pleaded case[64]. Essentially, Chu and Lau agreed that the Loan Agreement and Debenture would not be enforced other than when priority issues arose (in a liquidation of PBHK) and with their joint agreement. Such agreement is inherently probable and consonant with common sense because both PBHK and Topmove were jointly owned by Chu and Lau. I do not believe that Chu’s reservation over the last sentence of para 71, which was basically a comment, takes anything away from what was agreed between him and Lau. As pointed out by Mr Joffe, Chu had also agreed in XXn that the repayment by PBHK to Topmove would be subject to his and Lau’s agreement[65].

170.  It must be said that the fact the PBHK was borrowing its own money from Topmove under the backdrop of a temporary measure to ring-fence its assets from Louis Dreyfus goes some way to support the Collateral Agreement.

171.  As for the extension of the repayment date under the Loan Agreement by Chu unilaterally, I do not see how it detracts from Lau’s case on Collateral Agreement.

172.  Finally, I agree with Mr Joffe that there was an inordinate period of inaction on the part of Chu. He never sought to enforce the Loan Agreement or the Debenture until April 2015, 3 ½ years after the extended repayment date of 9 November 2011. The lack of enforcement action for such a long period of time is an indicator that there was no intention for enforcement to occur without Lau’s agreement.

173.  In the premises, I find the Collateral Agreement established and neither the Loan Agreement nor the Debenture can be enforced without an agreement by Chu and Lau. There is no such agreement and those documents cannot be enforced. Topmove’s counterclaim must be dismissed.

Disposition

174.  By reason of the aforesaid, for 1431/15: (a) I grant a declaration that Topmove and Chu are not entitled to enforce the Loan Agreement and the Debenture against PBHK without the agreement of Chu and Lau; (b) I grant the declarations sought under prayer (4), (5) and (8) of the Amended Statement of Claim; (c) the injunction under prayer (9) is granted; (d) the Counterclaim is dismissed; and (e) I make an order nisi that the costs of the action be to PBHK and Lau, and the costs of the Counterclaim be to PBHK, with a certificate for 2 counsel for both the costs of the action and Counterclaim.

175.  In respect of 231/17, both the action and the Counterclaim are dismissed. I make an order nisi that there be no order as to costs.

176.  Last but not least, first, I am grateful to counsel for their assistance in these complicated cases. Second, both Chu and Lau had expressed concern about the drain on their resources by legal expenditures. With the resolution of these actions, perhaps they may consider that their resources would best be employed to hammar out a Restructuring Agreement and put an end to their litigations.