CHAN YUET MING v. TANG SAU KING AND ANOTHER

HCCW858/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.858 OF 1999

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J U D G M E N T

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1. This is a petition brought pursuant to section 168A or alternatively section 177(1)(f) of the Companies Ordinance, Cap.32.

BACKGROUND

2. Sharpart Company Limited ("the Company") is a company incorporated in Hong Kong on 23 September 1986. Until 1 January 1995, the shareholders and directors of the Company were Mr Lau Chi Fai, deceased ("the Deceased") and the 1st respondent, each holding one of the two issued shares. The Deceased died on 1 January 1995. Letters of Administration of the Deceased's estate was granted to the petitioner, who was the Deceased's wife, on 21 June 1996.

3. It is common ground that the Company was acquired by the Deceased and the 1st respondent for the purpose of making joint investments in landed properties. Between 1986 and 1995, the Company had purchased three pieces of land. The first was Lot Nos.3667, 2471 and 2473 RP in D.D. No.120 ("the 1st Property"). The second was Lot No.762 RP in D.D. No.120 ("the 1st Suit Property") and the third one was Lot No.759 RP in D.D. No.120 ("the 2nd Suit Property"). The 1st Property was sold in 1987. Hence as at the death of the Deceased, the 1st and 2nd Suit Properties were the only properties and valuable assets held by the Company.

4. On 17 December 1996, the 1st respondent, as the only remaining director, appointed his wife, Madam Lau Kwan Fong, ("Madam Lau") as a director of the Company. No notice of the appointment had been given to the estate of the Deceased or the petitioner.

5. On 12 March 1997, the Company sold the 1st and 2nd Suit Properties realising a profit of $15,480,905. The amount was paid out to the 1st respondent. It was recorded in the Company's accounts as an unsecured interest free loan advanced by the Company to the 1st respondent. The sale and the making of the loan had not been communicated to the estate of the Deceased or the petitioner.

6. The petitioner brought these proceedings in her capacity as the administratrix of the Deceased's estate. Her case is that the Company had always been a joint investment co-operation between the Deceased and the 1st respondent. The common understanding and expectation had always been that the Deceased and the 1st respondent would be entitled to participate in the management of the Company and to share in the profits made by the Company. The petitioner complains that the 1st respondent's conduct in relation to the sale of the 1st and 2nd Suit Properties and the application of the sale proceeds thereof and also the appointment of Madam Lau as the other director is unfairly prejudicial to the interest of the Deceased's estate or successor in that it runs contrary to the common understanding and legitimate expectation of the members of the Company.

7. The 1st respondent's case is that it had been agreed between the Deceased and him that, in relation to properties acquired in the name of the Company, whoever provided for the purchase money would be entitled to have all the proceeds of sale. Since the 1st and 2nd Suit Properties were beneficially owned by him, he was entitled to retain and apply the profits derived from the sale of them to the exclusion of the petitioner. As to the appointment of Madam Lau, the 1st respondent's contention is that this was necessitated by the Deceased's death, which reduced the number of directors to below the minimum requirement of two and the appointment is permitted by the constitution of the Company. The 1st respondent also denies there was any common understanding and expectation among the members in relation to the management of the Company's affairs. The 1st respondent further suggests that the payment of the profits from the sale of the 1st and 2nd Suit Properties to him by way of a loan is not unfair prejudicial conduct in that the Deceased had previously applied the profits from the sale of the 1st Property in similar way.

THE ISSUES

8. The questions to be determined in these proceedings are therefore :

(1) whether the affairs of the Company have been conducted by the 1st respondent in a manner which is unfairly prejudicial to the interest of the Deceased's estate as represented by the petitioner;

(2) if so, whether the appropriate remedy is to order the 1st respondent to purchase the petitioner's share; and

(3) if so, on what basis the price for the shares should be arrived at.

9. In the context of the first question, counsel agree that the fundamental issue is whether the 1st respondent owned the entire beneficial ownership of the 1st and 2nd Suit Properties such that he is entitled to deal with them to the exclusion of the petitioner. If the answer is in the negative, the second issue is whether the sale of the 1st and 2nd Suit Properties and the application of the profits from the sale by the 1st respondent are contrary to the common understanding and expectation of the members of the Company. The final issue under the first question is whether the appointment of Madam Lau is in breach of the common understanding of the shareholders and had deprived the successor of the Deceased of the legitimate expectation to be involved in the management of the Company.

THE BENEFICIAL OWNERSHIP OF THE 1st AND 2nd SUIT PROPERTIES

10. It is trite that the burden of establishing the beneficial ownership of the 1st and 2nd Suit Properties rests with the 1st respondent.

(1) The 1st Suit Property

11. The 1st respondent's case and evidence in relation to this property is that he had contributed a sum of $163,805 towards the purchase price of $388,990. Then in about March 1988, it was orally agreed between the Deceased and the 1st respondent that the 1st respondent shall have the entire interest of the 1st Suit Property in return for the 1st respondent giving up his interest in another piece of land in Lau Fo Shan at Lot Nos.163A, 163B, 164, 165RP, 166RP, 167RP, 168 to 197 in D.D.128 ("the Lau Fo Shan Property"). According to the 1st respondent, the circumstances leading to this oral agreement are this : In 1986, the Deceased, the 1st respondent and a Mr Cheng entered into a joint venture to acquire the Lau Fo Shan Property. Their respective shares in the property are 40:40:20, based upon the amount of their contributions. The sale and purchase agreement was entered on 1 December 1986 by the 1st respondent as the purchaser. On 7 April 1987, the 1st respondent executed a Nomination in favour of a Hang Hoi Development Limited ("Hang Hoi") of which the Deceased was a 95% shareholder with the remaining 5% being held in the name of a Madam Chan Yuk Ching, who was cohabiting with the Deceased. The Lau Fo Shan Property was eventually assigned to Hang Hoi. Out of the purchase price of $1,246,686, the 1st respondent said he had contributed a total of $560,000, of which $260,000 was paid to the vendor by way of initial deposit and another $300,000 was paid to the Deceased by way of a cheque dated 20 February 1987. On 22 March 1998, the Lau Fo Shan Property was sold at $6,713,032. The 1st respondent said that as the Deceased was in grave financial difficulties due to the 1987 stock crash, he asked to have the 1st respondent's 40% share of the $5.5 million profit also to himself and in exchange he offered to let the 1st respondent have all the benefit in the 1st Suit Property, and the 1st respondent agreed.

12. The petitioner, who had no involvement in the Company before the death of the Deceased, understandably has no idea of these alleged transactions and is in no position to confirm nor dispute them. The veracity of the 1st respondent's assertions has therefore to be tested against the documentary and other objective evidence and circumstances.

13. In relation to the contribution of $163,805 towards part of the purchase price for the 1st Suit Property, it is plain that the 1st respondent's assertion and evidence are contradicted by the contemporaneous documentary evidence. While the 1st respondent said that it was paid under a cheque dated 16 June 1987 made out to Messrs Ford Kwan & Co., which he claimed was the solicitor for the Company, the conveyancing documents and receipts issued for the transaction show that both the vendor and purchaser were represented by another firm of solicitors, Messrs K.M. Lai & Li, and there is no evidence, other than the 1st respondent's assertion, that Messrs Ford Kwan & Co was involved in the transaction. Further, the receipts for the purchase of the 1st Suit Property, the statements of the Company's bank account with Kwangtung Provincial Bank and the accounting records of the Company show that the entire purchase price and the legal costs and expenses were all met by funds from the Company's bank account. As a result of these payments, the Company's bank account was overdrawn and the indebtedness was cleared a few months later by the sale of the 1st Property, a matter that I shall return to deal with later. The Company had also taken out a legal charge of $100,000 secured by the 1st Suit Property to finance its purchase. In the circumstances, despite the 1st respondent's reluctance to accept that the $163,805 in favour of Messrs Ford Kwan & Co. has nothing to do with the purchase of the 1st Suit Property, it cannot be disputed that the 1st respondent had not contributed that amount to the purchase of the 1st Suit Property or at all, and I so find.

14. As to the alleged oral agreement arising from the Lau Fo Shan Property, the 1st respondent's evidence and assertion also do not sit comfortably with the contemporaneous documentary evidence. While the 1st respondent claimed that he had paid the initial deposit of $260,000 out of his own funds, the Declaration dated 6 April 1998 made by him stated in unambiguous terms that the 1st respondent entered into the sale and purchase agreement on behalf of Hang Hoi and the initial deposit was provided by Hang Hoi. The 1st respondent's explanation is that he does not understand English, that he could not remember and he was not sure how it came to be so stated. In addition, the 1st respondent declared in the Declaration that he had no interest in the Lau Fo Shan Property. The Declaration was also silent on and made no reference to the $300,000 contribution allegedly made by the 1st respondent. The 1st respondent only said he could not remember when confronted with these discrepancies. The plain fact is this Declaration was signed at a solicitors' office and it recited that the contents had been duly interpreted to the 1st respondent before execution. Indeed the 1st respondent does not dispute this. The inconsistencies between the Declaration and the 1st respondent's oral assertion therefore call for an explanation, but none has been proffered throughout these proceedings.

15. It is to be noted that the subject matter of the Lau Fo Shan Property and the alleged oral agreement was first brought up by the 1st respondent in his affirmation. The reference to the 1987 stock crash and the alleged financial difficulties of the Deceased were however only introduced in the evidence-in-chief of the 1st respondent. The existence of another partner, Mr Cheng, in the acquisition of the Lau Fo Shan Property was only revealed in the cross-examination of the 1st respondent. The piece-meal fashion in which the circumstances surrounding the purchase of this property was introduced causes one to doubt whether the 1st respondent has been totally forthcoming in his account.

16. There are also some inexplicable features in the account given by the 1st respondent. According to the 1st respondent, he had a 40% interest in the Lau Fo Shan Property by reason of his contribution to 40% of the purchase price. 40% of the purchase price is $498,674.40, but it is the 1st respondent's oral evidence that he had paid $560,000 towards the purchase price. The 1st respondent's explanation is that he always paid more than his fair share. On the other hand, the 1st respondent accepted that he did not know the exact value of the 1st Suit Property when he agreed to exchange it for his 40% interest in the Lau Fo Shan Property. Although he claimed the Deceased had told him that it had a better potential than the Lau Fo Shan Property, the 1st respondent also said that he personally knew the Lau Fo Shan Property was more valuable. He claimed he was prepared to suffer the disadvantage since he was helping a friend. But admittedly the 1st respondent was also suffering from the 1987 stock crash. Not only that, if indeed the 1st respondent was so generous and easy-going in terms of money and these property transactions, it will be difficult to understand why allegedly he had this agreement with the Deceased that whoever contributed to the purchase price of the properties acquired in the Company's name would be entitled to the sale proceeds and profits to the exclusion of the other. Such an agreement will suggest that the Deceased and the 1st respondent drew a clear line between their monies, even though they were making investments and operating a company together. Furthermore, it is difficult to understand why the Nomination was made in favour of Hang Hoi in which neither the 1st respondent nor Mr Cheng had any shareholding, when the Lau Fo Shan Property was said to be a joint investment by three of them. While the position about Mr Cheng is unclear, the evidence suggests that the Deceased and the 1st respondent had throughout the years been using various corporate vehicles to make joint investments. They could have, to say the least, used the Company or other corporate vehicles in which they were shareholders to acquire the Lau Fo Shan Property. This is particularly so when the Land Registry record does not reveal that any mortgage had been secured to finance the purchase so that the financial strength of the corporate vehicle does not appear to be a matter of relevance.

17. The inconsistencies and difficulties on the evidence surrounding the Lau Fo Shan Property and the alleged oral agreement are such that I do not find the 1st respondent's account credible or reliable and I reject it. It follows from my findings on the provision of funds for the purchase of the 1st Suit Property and on the 1st respondent's allegation of the oral agreement to exchange his interest in the Lau Fo Shan Property for the 1st Suit Property that the 1st respondent has failed to make out a case that the 1st Suit Property was beneficially solely owned by him.

(2) The 2nd Suit Property

18. The documentary evidence relating to this property reveals that two cheques in the amounts of $46,090.60 and $200,000 were issued by the Deceased in favour of the vendor, Wong Loy Fat, on 13 and 14 December 1988. These cheques were cashed by or deposited into the vendor's account. On 13 December 1988, however, the 1st respondent had issued a cheque in the amount of $246,090.60 in favour of the same vendor, but this cheque was deposited into the Deceased's bank account. The consideration for the purchase was $246,090.60 and completion took place on 14 December 1988. In addition, the documents also showed a sum of $4,070 had been paid to the handling solicitors by the 1st respondent's cheque. In the books and accounts of the Company, there was no entry in relation to the $246,090.60 cheque issued by the 1st respondent. The purchase price was recorded to be provided by the Deceased in the form of the two cheques mentioned above and the 1st respondent's $4,070 cheque in payment of the solicitors' bill was posted to the Deceased's current account.

19. Again, the petitioner is in no position to explain what had transpired in 1988 as she was not privy to the transaction. It is incumbent upon the 1st respondent, who bears the burden of proof, to clarify the position and to make out his case on the 2nd Suit Property. In this regard, the 1st respondent's case is that he had provided the full purchase price since it was agreed that the Company should be his and his alone. Notwithstanding this, it is totally unclear as to how the alleged agreement came about. The 1st respondent made no elaboration on this in his affirmation. He was unable to offer any detail, whether in terms of the time of and circumstances leading to this agreement, when being cross-examined. All that the 1st respondent was able to say was that the agreement did exist but there was no formal documentation or record. While he said at one stage that it was not after the alleged oral agreement to exchange his interest in the Lau Fo Shan Property for the 1st Suit Property that the Company became his, he resiled from that position within the next round of cross-examination and agreed that it was after March 1988 that he treated the Company as his. It will appear that the 1st respondent does not have a clear idea of this assertion and its basis. If indeed his assertion is premised on the alleged oral agreement relating to the Lau Fo Shan Property, which I have rejected, it simply cannot stand in view of the unsatisfactory evidence regarding the alleged oral agreement to exchange the interest in the land.

20. The conduct of the Deceased and the 1st respondent with regard to the Company after March 1988 up to the death of the Deceased is also incompatible with the claim that the Company was the 1st respondent's. Admittedly, the Deceased continued to be responsible for the accounts of the Company and, according to the 1st respondent, held all the accounts and ledgers in his possession. The 1st respondent claimed he had no idea as to how the accounts were managed or made out. Not only that, the Deceased had been paying such Company expenses as business registration fees, profit tax and accountancy fees. All these are inconsistent with the claim that the Deceased ceased to have any or any substantial share or interest in the Company. It will also appear strange that the Deceased should maintain his one share and his directorship in the Company when the Company belonged to the 1st respondent entirely. Likewise, it is difficult to understand why the 1st respondent did not acquire the one share from the Deceased or appointed another director to replace the Deceased until almost two years after the latter's death. On the other hand, if the 2nd Suit Property was solely acquired by the 1st respondent, there is no perceivable reason for it to be acquired in the Company's name in view of the Deceased's continued active interest and participation in the Company. There is also no apparent reason why the purchase money had to be passed to the Deceased for onward transmission to the vendor as claimed by the 1st respondent. The 1st respondent is unable to tell how the Deceased came to issue cheques to the vendor for the purchase price and how it came about the purchase price was posted to the current account of the Deceased in the Company's ledger. His explanation is simply that he had left all these to be handled by the Deceased. The undeniable fact, however, remains that he had approved and signed the Company's audited account and financial statement. He had also in the 1997 audited financial report acknowledged the accuracy of the account relating to the amount due from the Deceased, which had taken into account the purchase price for the 2nd Suit Property previously recorded to be provided for by the Deceased. This acknowledgement was made at a time when the 1st respondent had taken over the Company's accounts and financial matters and was dealing with the auditor directly.

21. There is finally one particular feature in this case which plainly contradicts the 1st respondent's case that both the 1st and 2nd Suit Property were beneficially owned by him. Had this been the case or had the 1st respondent believed this to be the case, there is no convincing reason for the profits derived from the sale of the two properties to be recorded as a loan by the Company to the 1st respondent. It should and could have simply been recorded as profits distributed or paid out to the 1st respondent instead of a liability incurred by the 1st respondent to the Company. This is particularly so in view of the fact that the Company has another 50% shareholder.

22. I am not persuaded on the totality of the evidence before the court and for the reason stated above that the 1st respondent has established on a balance of probabilities that he had contributed to part or the whole of the purchase price for the 1st and 2nd Suit Properties. There is therefore no need to go into the 1st respondent's allegation of an agreement between the Deceased and him to the effect that whoever provided for the purchase price of the properties acquired in the Company's name would be entitled to all the profits arising therefrom. It also follows from my finding on the contributions to the purchase price that there is no room for the application of the presumption of resulting trust in favour of the 1st respondent. The 1st respondent has simply not made out a case that the beneficial interest in the 1st and 2nd Suit Properties was owned by him.

THE APPOINTMENT OF MADAM LAU AS DIRECTOR

23. It is not in dispute that as a result of the Deceased's death, the number of directors was reduced to below the minimum requirement of two. It is also not disputed that Article 102 of Table A of the Companies Ordinance, which is adopted by the Company as part of its Articles of Association, provides that the 1st respondent may, in his capacity as the continuing director, appoint another director to fill the vacancy arising from the Deceased's death. The appointment of Madam Lau is therefore procedurally in accordance with the constitution of the Company. But it does not necessarily follow that the appointment is neither unfair nor prejudicial because the interests of a member are not necessarily limited to his strict legal rights under the constitution of the Company : Re a Company [1986] BCLC 376, 378h-379f. It depends on whether such appointment is contrary to any common understanding and/or expectation of the members of the Company, a matter which I shall now turn to.

COMMON UNDERSTANDING AND LEGITIMATE EXPECTATION

24. Counsel for the 1st respondent is correct in pointing out that the burden is on the petitioner to establish that there was this common understanding and expectation among the members that they would participate in the management of the Company's affairs and share in the Company's profits. The petitioner is clearly in no position to adduce positive evidence as to the existence of any such common understanding or expectation given that she never took part in the Company before the Deceased's death. The matter will therefore have to be approached as a matter of inference.

25. Both parties accept that the Company is a small private joint venture between two individuals for the sole purpose of investing in and holding land. Given that there were only two shareholders, each holding 50% of the shares, and that the nature of the Company business is limited to investment holding, prima facie the members' understanding and expectation are to share in the profits derived from the investments. This is a matter which, in my view, is self-evident and does not require any elaboration. It will also follow that the members would expect to be informed and consulted as to the application of any profit derived from the investments of the Company. The 1st respondent had argued that as the Company is only a separate entity to hold land, the members' expectation differs from time to time depending on the contributions they made to the purchase price. This argument is of course premised on the 1st respondent's assertion that he and the Deceased had agreed that whoever provided the purchase price would be entitled to the sale proceeds. Assuming this to be the case, it will only affect the ratio and amount of profits to be shared by the members. It does not affect the basic expectation that the members are to share in the profits made by the Company and to be involved in decisions on the disposal or utilization of the profits.

26. As to whether there is any common understanding and expectation relating to the management of the Company, counsel for the 1st respondent argued that the Company cannot be regarded as a quasi-partnership on the basis of the evidence before the court. In my view, the evidence of the 1st respondent clearly establishes that the Company was formed and run on the basis of a relationship of trust and confidence between the Deceased and him. Throughout, the two of them were the only members of the board. The Company's accounts were jointly signed by them. It is not suggested by the 1st respondent that the property transactions carried out by the Company were without his knowledge and consent. Although he asserted he did not take part in managing the Company's accounts and ledgers, he did not suggest that he was prevented from doing so. What the 1st respondent maintained throughout his evidence is that he trusted the Deceased and he was contended to leave this aspect of the Company's affairs to the Deceased, so he did not enquire about it. In my judgment, the Company is a typical example of a small joint venture association formed with an understanding that the members would co-operate and undertake joint decisions on investment and other corporate affairs. The necessary inference is that the members do expect to participate and be involved in the management of the Company. It was submitted that because the Company has no trading activity, there is nothing for the members to manage. That cannot be right. Decisions relating to the investments and activities of the Company are clearly an aspect of the Company's affairs that requires management, even though the Company is not a trading concern.

27. Counsel for the 1st respondent had taken a further point, namely, whatever understanding or legitimate expectation the Deceased may have, it would not be transmitted to his successors or the petitioner. I agree that not all rights and expectations enjoyed by the Deceased are capable of being assigned or passed on to his estate and successors and the petitioner. Rights and expectations which are personal in nature or based upon the exercise of personal skill and judgment, by reason of the personal element, will be incapable of so transmitting : Murray's Judicial Factor v. Thomas Murray & Sons (Ice Merchants) Ltd [1993] BCLC 1437, 1449f-g, 1455a-c. But each case depends on its own facts. It will not be appropriate to generalize that an expectation to participate in the management of a company cannot enure for the benefit of the widow or successor of a shareholder.

28. On the facts of this case, it will be fair to say that while the Deceased would no doubt have a legitimate expectation that he would participate in the management of the Company, it is unlikely that he had any legitimate expectation that his administratrix or successors should have such right, given that the association is built upon the personal relationship between him and the 1st respondent and having regard to the Company's business being limited to property investment holding, which involves the exercise of personal skill and judgment. Accordingly, had it been a case that the Deceased were removed from the board, he would surely be able to complain that his legitimate expectation had been deprived. It will, however, be a different matter where the deceased's successor or administratrix was not appointed to the board to fill his vacancy. It will not be open to the petitioner or the estate to complain that the appointment of Madam Lau or the fact that the Deceased's estate is not represented on the board is in breach of any legitimate expectation on the part of the Deceased.

29. This point on the legitimate expectation not being capable of transmitting to the Deceased's successors or the petitioner, however, has no application to the common understanding and expectation in relation to the sharing of the profits of the Company. The understanding and expectation in this regard are independent of any personal element, and are prima facie to be inferred from the fact the Deceased was a shareholder.

UNFAIR PREJUDICIAL CONDUCT

30. It follows from the foregoing discussions that the appropriation of the profits from the sale of the 1st and 2nd Suit Properties by the 1st respondent is in breach of the common understanding and legitimate expectation of the members to share in the profits of the Company. Counsel for the 1st respondent argued that even then it does not give rise to a s.168A remedy in that the conduct complained of is not conduct in the affairs of the Company, and that the Deceased had adopted similar conduct in the past in relation to the 1st Property.

31. On the first argument, there can be no doubt that the appropriation of the profits by way of a loan to the 1st respondent is a corporate act. It was no doubt done with the sanction of the board of directors under the inference of the 1st respondent. It cannot be a conduct by the 1st respondent in his personal capacity. He was clearly using his influence and controlling position on the board to bring about the advancement of the profits to him in the form of a loan.

32. Before dealing with the second argument, it will be necessary to look at the facts surrounding the acquisition and disposal of the 1st Property. The documentary evidence, including the Company's books and accounts, shows that the 1st Property was purchased at $978,390. This together with the legal fee ($10,955), stamp duty ($26,372.50) and commission ($21,000) were all paid by the Deceased. A legal charge of $300,000 was created on the 1st Property to meet part of the purchase price of the 1st Suit Property. The legal fee for the legal charge ($5,240) was also paid by the Deceased. The total contribution of the Deceased was therefore $1,041,957.50. The 1st Property was later sold at $2,146,793.60. The net proceeds, after deducting the legal costs and expenses and paying off the legal charge, came to $1,717,434.88. At around the time the 1st Property was sold, the Deceased withdrew three sums from the Company, totalling $1.75 million, as reflected in the Company's ledgers.

33. Based on these facts, the 1st respondent argued that the Deceased had in effect reaped the profit of the sale of the 1st Property and he had never fully repaid the same to the Company. The 1st respondent further submitted that what he did in relation to the profits of the sale of the 1st and 2nd Suit Properties is in substance similar to what the Deceased had done in the past. It is, therefore, not unfair prejudicial conduct.

34. There are a number of fallacies in the 1st respondent's argument. Firstly, purely on the figures set out above, the extent of advancement or loan made to the Deceased as a matter of fact was only up to $708,042.50, after taking into account all the money he had paid for the purchase of the 1st Property. Secondly, it is factually incorrect to say that the Deceased did not repay the amount advanced or withdrawn by him. He had since the incorporation of the Company and until his death regularly made contributions to the Company to meet the operation expenses and other expenses, such as land improvement costs and so on. The amount due to the Company as at his death, as confirmed by the board of directors in the 1997 audited report, was $175,410. Thirdly, the sale of the 1st Property and the withdrawals made by the Deceased were not done to the exclusion of the 1st respondent in that the relevant facts and amounts were all recorded in the Company's books and accounts and reflected in the audited annual financial report, to which the 1st respondent had given his approval by signing it. The situation in relation to the sale and appropriation of the profit of the sale of the 1st and 2nd Suit Properties is wholly different. Not only was the petitioner unaware of their occurrence, but also she was not notified of the same subsequently until she made enquiries through her solicitors. The petitioners have never agreed to or sanctioned them. In any event, what the Deceased might have done in relation to the 1st Property is not causative of the 1st respondent's conduct now under complaint. In my view, the reference to the 1st Property does not assist the 1st respondent at all.

35. It is common ground between counsel that the test of unfair prejudicial conduct is an objective one as judged by a reasonable bystander : Dicta of Re Bovey Hotel Venture Ltd Ch.D. 31 July 1981 (unreported) cited in Re RA Noble & Sons (Clothing) Ltd [1983] BCLC 273 and followed in Re Tai Lap Investment Co. Ltd [1998] 4 HKC 438. Prima facie and without any explanation, the 1st respondent in selling the 1st and 2nd Suit Properties and appropriating the entire profits to himself is acting in his self interest. By not communicating these decisions to the other shareholder in the Company, the 1st respondent had also acted oppressively. The 1st respondent's conduct, by the standard of a reasonable bystander, is unfair and prejudicial to the petitioner's interest.

REMEDY

36. By reason of the matters aforesaid, it is an appropriate case to grant a section 168A remedy and the 1st respondent is ordered to buy out the petitioner's share in the Company. It is, therefore, not necessary to go into the alternative relief of a winding-up order prayed for by the petitioner.

37. On the question of the valuation of the petitioner's share, counsel for the petitioner contends that it should be based on the Company's unappropriated profit for the year ended 31 December 1997. The petitioner is contented with a 50:50 split on that amount. The petitioner also asks for an award of interest on the amount to be paid at 10% per annum as from the date of the petition. The 1st respondent made no submission on these questions. Considering the relatively limited activities of the Company and the fact that the Company has maintained clear and systematic accounts throughout these years, as well as the fact that neither the petitioner nor the 1st respondent had disputed the integrity of the Company's books and accounts, I am prepared to dispense with a formal valuation of the petitioner's share in the Company. In this regard, I also take into account the fact that the 1997 audited account had been approved by the 1st respondent in his capacity as a director.

38. The petition herein was presented on 27 November 1999. It will therefore be more appropriate to adopt the unappropriated profit of the Company as at 31 December 1998, which is the latest financial report of the Company before the court and nearest in time to the date of the petition. The figure stated in the 1998 audited financial statement is $15,795,486. 50% of that is $7,897,743. Accordingly, the 1st respondent is to buy out the petitioner's share at the price of $7,897,743. Following the judgment in Re Tai Lap Investment Co. Ltd, supra, at p.447B-G and to reflect the fact that the 1st respondent has the use of the petitioner's entitlement in the unappropriated profit since the date of the petition, I further order that the 1st respondent is to pay interest on the sum of $7,897,743 at 10% per annum from the date of the petition.

CONCLUSION

39. There will be judgment for the petitioner on the petition for an order that the 1st respondent buys out the petitioner's share in the Company at the price of $7,897,743 together with interest thereon at 10% per annum from the date of the petition. There will be liberty to the parties to apply for further directions in relation to the carrying out of the buy-out order. There will also be an order nisi that the 1st respondent pays the petitioner the costs of these proceedings, to be taxed if not agreed.