CHEUNG KAM WA v. DRANSFIELD HOLDINGS LTD

HCA 1399/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1399 OF 2002

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J U D G M E N T

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Introduction

1.  In this action, the plaintiff claims damages against the defendant for breach of an option agreement to subscribe for 20,000,000 shares of the defendant at $0.10 per share.

The relevant facts

The directors’ power to manage and to grant options

2.  The defendant is a company incorporated in the Cayman Island, and its shares were listed on the Hong Kong Stock Exchange. 

3.  The par value of its shares is $0.10.

4.  Clause 104 of the defendant’s Articles of Association provides, inter alia, that the business of the company shall be managed by the directors and that it is expressly declared that the directors shall have the power to:-

“give to any person the right or option of requiring at a future date that an allotment shall be made to him of any share at par or at such premium as may be agreed”.

The option scheme

5.  At a general meeting held on 3 April 1993, the defendant resolved to adopt a share option scheme (“the Scheme”).  It was a 10-year scheme expiring on 2 April 2003.

6.  Clause 2 provided that the Scheme was conditional upon the approval by the Listing Committee:-

“This Scheme … is conditional upon the Listing Committee of the Stock Exchange granting approval of this Scheme and any Options which may be granted under this Scheme, and the listing of and permission to deal in any Shares to be issued pursuant to the exercise of Options under this Scheme.”

7.  The Scheme, not just any particular option or any specific allotment of option shares, was conditional upon the approval of the Listing Committee.

8.  The Listing Committee must grant approval of:-

(a) the Scheme;

(b) the options which might be granted under the Scheme; and

(c) the listing of and permission to deal in shares to be issued pursuant to the exercise of options under the Scheme.

9.  There was nothing in the Scheme to prevent the Listing Committee granting a global approval at the inception of the Scheme (or the listing of the defendant if this took place after 3 April 1993) of:-

(a) all options which might be granted under the Scheme; and

(b) the listing of and permission to deal in all shares to be issued pursuant to the exercise of options under the Scheme.

10.  Business and common sense dictated the seeking and granting of such global approval.  In the absence of evidence to the contrary, I infer that the Listing Committee has granted such global approval. 

11.  Clause 4.01 provided that “on and subject to the terms of the Scheme” the defendant’s Board was entitled to grant options to an employee, defined in clause 1.01 to mean an employee (including an executive director) of the defendant or its subsidiaries.

12.  The earliest date on which an option might be exercised was 12 months after acceptance by the employee of the option offer, and, subject to the 2 April 2003 deadline, the period during which an option might be exercised was 3 years, not a day more and not a day less, see the definitions in clause 1.01 of “Commencement Date” and “Option Period” which read as follows:-

“	Commencement Date	”	-	“	in respect of any particular Option, the date upon which the Option is accepted in accordance with the Scheme”.
“	Option Period	”	-	“	a period of 3 years commencing on the expiry of 12 months after the Commencement Date and expiring on the last day of the 3 year period or 2nd April, 2003, whichever is the earlier”.

13.  An option might be exercised during the option period, subject to the following:-

“	6.03	Subject as hereinafter provided in this Scheme, the Option may be exercised by the Grantee at any time during the Option Period provided that:
		(a)	in the event of the Grantee ceasing to be an Employee for any reason other than his or her death or the termination of his or her employment on one or more of the grounds specified in Clause 7(d), the Grantee may exercise the Option up to his or her entitlement at the date of cessation (to the extent not already exercised) within the period of 1 month following the date of such cessation, which date shall be the last actual working day with the Company or the relevant Subsidiary whether salary is paid in lieu of notice or not”.

14.  An option might lapse.  Clause 7 provided that:-

“	An Option shall lapse automatically (to the extent not already exercised) on the earliest of:
	(a)	the expiry of the Option Period;
	(b)	the expiry of the periods referred to in Clause 6.03(a) …
	(c)	…
	(d)	the date on which the Grantee ceases to be an Employee by reason of the termination of his or her employment on any one or more of the ground that he or she has been guilty of misconduct, or has committed an act of bankruptcy or has become insolvent or has made any arrangement or composition with his or her creditors generally, or has been convicted of any criminal offence involving his or her integrity or honesty or on any other ground on which an employer would be entitled to terminate his or her employment at common law or pursuant to any applicable laws or under the Grantee’s service contracts with the Company or the relevant Subsidiary …”

15.  Clause 12 provided that the Board might alter the Scheme.  However, there was no power to depart from the Scheme on a case by case basis by granting an option on more favourable, or less favourable, terms.  The Scheme must be altered as a whole.  Clause 12 provided that:-

“The Scheme may be altered in any respect by resolution of the Board except that the provisions of the Scheme as to:
(a)	the definitions of ‘Employee’ and ‘Grantee’ and ‘Option Period’ in Clause 1.01; and
(b)	the provisions of Clause 3.01, 4.01, 4.02, 4.03, 5, 6, 7, 8, 9 and this Clause 12
shall not be altered to the advantage of the Grantees or prospective Grantees except with the prior sanction of a resolution of the Company in general meeting, provided that no such alteration shall operate to affect adversely the terms of issue of any Option granted or agreed to be granted prior to such alteration except with the consent or sanction of such majority of the Grantees as would be required of the shareholders of the Company under the articles of association for the time being of the Company for a variation of the rights attached to the Shares and provided further that any alterations to the terms and conditions of the Scheme which are of a material nature shall first be approved by the Stock Exchange, except where such alterations takes effect automatically under the existing terms of the Scheme.”

Past non-compliance with the Scheme requirements on the exercisable period

16.  It is clear from the evidence that the defendant had (almost) always failed to comply with the Scheme requirements on the period during which the option could be exercised.

(a)	Cases marked “*” in the table below contravened the 12-month requirement in that the option was exercisable before the expiry of the 12-month period.
(b)	Cases marked “#” contravened the 3-year requirement in that the period during which the option could be exercised had a commencement or expiry date which was different from the commencement or expiry date under the Scheme.
(c)	Cases marked “%” contravened the 2 April 2003 deadline.

The 20% general mandate

17.  Notice was given to consider as special business and, if thought fit, to pass the following resolution as an ordinary resolution at the annual general meeting of the defendant to be held on 28 September 2000:-

“that the exercise by the Directors during the Relevant Period of all the powers of the Company to issue, allot and dispose of additional shares of the Company and to make or grant offers, agreements and options which would or might require shares to be allotted, issued or disposed of during or after the end of the Relevant Period be and is hereby generally and unconditionally approved, provided that … the total nominal amount of additional shares issued, allotted, disposed of or agreed conditionally or unconditionally to be issued, allotted or disposed of (whether pursuant to an option or otherwise) shall not in total exceed 20% of the total nominal amount of the share capital of the Company in issue on the date of this Resolution and the said approval shall be limited accordingly …”

18.  The “Relevant Period” was defined to mean, subject to 2 provisos one of which was subsequent variation or revocation by ordinary resolution of the shareholders in general meetings, the period from the passing of the resolution to the conclusion of the next annual general meeting, which in the event took place on 29 September 2001.

19.  There was no evidence on whether the proposed resolution was passed at the annual general meeting held on 28 September 2000.  It was not unusual for boards of directors of listed companies to seek and obtain a general mandate.  If the proposed resolution had not been passed or had not been passed in its original form, the defendant could easily have adduced evidence on the point.  However, the defendant chose to adduce no evidence on what transpired at the meeting on 28 September 2000.  The defendant’s board of directors sought and obtained a similar mandate at the annual general meeting in the following year.  The inference that the proposed resolution was passed without amendment is compelling and irresistible and I draw the inference.

The plaintiff’s employment contract

20.  By letter dated 16 July 2001, Mr Horace Yao Yee Cheong, then chief executive officer of the defendant, made an offer for and on behalf of the defendant to employ the plaintiff as chief operating officer of the defendant’s Victorison Tradeport at Futian, Shenzhen, PRC, on terms which included the following terms on commencement of employment, stock option and termination of service:-

“	2.	Commencement of Employment
		You will commence employment on or around July 16, 2001.”
“	5.	Stock Option
		You will be awarded 20,000,000 shares in [the defendant] with a strike price of around HK$0.10/share upon acceptance of this engagement with a vesting schedule governed by [the defendant’s] stock option scheme.”
“	11.	Termination of Service
		Your employment may be terminated by either party giving the other party a written notice of three (3) months in advance.
		Notwithstanding the above, [the defendant] reserves the right to terminate your employment with immediate effect in the event of gross misconduct, an indictable offence.  In such event, only the salary accrued up until the date of termination will be payable without any compensation or consideration whatsoever.”

21.  The letter dated 16 July 2001 contained no provision for termination by payment in lieu of notice.

22.  The plaintiff signed accepting the appointment and the terms and dated her acceptance 16 July 2001.

23.  On 3 August 2001, the plaintiff was appointed an executive director of the defendant.

Minutes of directors’ meeting held on 6 September 2001 resolving to grant option to the plaintiff

24.  The minutes of a meeting of the board of directors of the defendant held on 6 September 2001 attended and signed by Mr Horace Yee Cheong Yao and Mr Alexander Tack Huen Tse recorded, inter alia, that:-

“3.	GRANTING OF STOCK OPTION
	There was tabled before the Meeting a copy of the Share Option Scheme (the ‘Scheme’) adopted by the Company on April 3, 1993 which empowered the directors of the Company to grant options (“the Option”) to the directors and/or employees of the Company or its subsidiaries to subscribe for shares of common stock of the Company subject to the conditions as stipulated therein.
	It was noted that Ms Cheung Kam Wa [i.e. the plaintiff] the newly appointed executive director of the Company would be granted stock option for 20,000,000 shares of HK$0.10 per share as a condition of the appointment.
	Pursuant to the Scheme, it was resolved that 20,000,000 shares of stock option be hereby granted to Ms Cheung Kam Wa at the exercise price of HK$0.10 per share and exercisable during the period from December 1, 2001 to April 2, 2003, subject to her acceptance and payment of HK$10.00 as consideration within a period of 28 days from the date of offer to be made.
	It was further resolved that Mr. Horace Yao Yee Cheong be authorized to issue the offer letter to Ms Cheung Kam Wa and prepare any other relevant documentation to implement the aforesaid.”

25.  The option period that the board expressly authorised was to commence on 1 December 2001.  This did not comply with the 12-month requirement under the Scheme.  This non-compliance is neither exceptional nor remarkable in view of the defendant’s consistent failure over the years to comply with the Scheme requirements on the exercisable period. 

The plaintiff’s option agreement

26.  By letter dated 6 September 2001, Mr Horace Yao, then a director of the defendant, wrote for and on behalf of the defendant and advised the plaintiff that “pursuant to a resolution of the Board of Directors meeting held on September 6, 2001”, the board had accepted a recommendation to grant to the plaintiff a share option on terms which included the following:-

“	1.	Share option granted to you equals to 20,000,000 shares.
	2.	This share option carries with it the following conditions:
		a.	The option can be exercised any time between December 1, 2001 and April 2, 2003.
		b.	The option price per share shall be as follows:
			December 1, 2001 to April 2, 2003 HK$0.10 per share
	3.	Your share option shall expire, if not exercised, on April 2, 2003 or upon termination of your employment with the Group whichever comes first.
	…
	If you wish to accept the stock option granted to you, please sign and return the duplicate of this letter together with HK$10 on or before October 4, 2001”

27.  The letter made no reference to the Scheme or the plaintiff’s employment contract.

28.  The plaintiff gave evidence on how she came to sign the letter on 7 September, 2001.  I shall return to this below to state my finding on her evidence and the effect of my finding.

29.  The plaintiff’s payment of the $10 consideration was admitted in paragraph 15 of the Amended Defence.

The defendant’s interim report 2001

30.  In the defendant’s interim report 2001 dated 28 December 2001, Dr Robert Fung Hing Piu, then chairman of the board of directors, reported “on behalf of the Board” the plaintiff’s interests in shares in these terms:-

“Pursuant to the Company’s share option scheme approved by shareholders at the extraordinary general meeting on 3 April 1993, the Company granted options in favour of the following directors, all of which remained unexercised at 30 September 2001, as set out below:

Name of Director	Number of shares of the Company to be issued upon exercise of outstanding options	Exercise price per option	Exercise period
Cheung Kam Wa	20,000,000	HK$0.10	1 December 2001 to 2 April 2003”

The plaintiff’s departure

31.  Mr Andy Pang Kwong Wah signed the letter dated 21 January 2002 which read as follows (written exactly as it stands in the original):-

“Ms Cheung Kam Wa

(Present)

Jan. 21, 2002

Dear Ms Cheung Kam Wa,

Please be informed that The Company (Dreasfield Holdings Ltd.) had decided to Terminate your employment contract with our Victorison Tradeport at Futian, Shenzhen, PRC, with immediate effect.

According to your employment contract, we herby serve you the three months notice Period effective to-day, Jan. 21, 2002.

Yours truly,

For & on behalf of

Dransfield Holdings Ltd.

Andy Pang

Acting Chief Executive Officer”

32.  The plaintiff declined to resign as an executive director of the defendant.

33.  On 22 January 2002, she attended the meeting of the defendant’s board of directors.

34.  On 29 January 2002, she was removed as a director of the defendant.

The plaintiff’s exercise of her option and the defendant’s decision to allot shares

35.  On 25 February 2002, the plaintiff, having paid $2 million into the defendant’s bank account, gave notice on the prescribed form of her intent to exercise her option to acquire 20 million shares.  Under special instructions, she wrote as follows:-

“Please issue the share certificate(s) in one board lot under the name of Leung, Kam Hing Elsa at the address of ... (by hand) 

To exercise the option share at the moment, it will be helpful for the company.”

36.  By letter dated 28 February 2002, Mr Y S Kwok, then company secretary of the defendant, wrote for and on behalf of the defendant to the plaintiff:-

“We refer to your notice of intent to exercise share option of 20 million shares of HK$0.1 each and subsequent telephone conversations in connection with the matter and knowledge (sic) receipt of your remittance of HK$2 million as the subscription monies, to our account today.

We confirm that we shall, inter alia, apply to the Securities & Futures Commission for an approval to issue the said option shares to your name and the allotment will be processed in accordance with the Share Stock Option Scheme of the Company.

If such approval is not granted by the SFC or the allotment is not successful, we shall refund the said subscription monies without interest to you or to such person at your written instruction.”

37.  By letter dated 28 February 2002, Mr Y S Kwok wrote for and on behalf of the defendant to the Securities and Futures Commission; informed the latter that the defendant had received 3 notices of intent to exercise share options (including the plaintiff’s); stated that all the options were granted prior to the execution of a subscription agreement; applied for a waiver of the requirements of Rule 4 of the Takeover Code; and stated that:-

“The above allotments of the option shares have to be made by the Company for reasons that:-
1.	it is a prior contractual obligation of the Company to allot the shares as the options were granted well before the execution of the subscription agreement; and
2.	the subscription monies will help ease the cash-flow of the Company because the cash-flow problem of the group is at present very crucial.”

38.  On 4 March 2002, the board of directors of the defendant met and resolved, among others, that the plaintiff’s option shares be allotted and relevant share certificates be issued.  Mr Andy Pang Kwong Wah attended this meeting as a director and as the acting chief executive officer.  Mr Y S Kwok and 2 persons from the defendant’s solicitors were among those in attendance.  The minutes recorded that:-

“	7.	SHARE OPTIONS
	7.1	Mr Kwok reported that application has been made to the Securities and Futures Commission (‘SC’) for approval of the issue and allotment of shares (the ‘Shares’) of HK$0.10 each in the capital of the Company to ... Ms Emma Cheung [i.e. the plaintiff] pursuant to the exercise of share options (the ‘Share Options’) granted to them under the share option scheme of the Company adopted on 3 April 1993.
	7.2	Mr Kwok reported that the total number of shares to be issued under the Share Options is 25.5 million shares.
	7.3	Mr Pang said that the Share Options were granted with proper minutes on record:
		(a)	...
		(b)	...
		(c)	Ms Emma Cheung, an ex-Director, exercised on 26 February 2002 (which was within 30 days of her removal from the Board on 29 January 2002) an option to subscribe for 20 million Shares exercisable at HK10 cents each.
	7.4	It was resolved that the option shares be allotted and relevant share certificates be issued to these persons pursuant to the exercise of the Share Options Subject to the approval of the SFC.”

39.  By letter dated 12 March 2002, Mr Y S Kwok wrote to the share registrar and transfer office of the defendant informing it that the plaintiff and 2 other persons had properly exercised the options granted to them; that the board of directors of the defendant had approved the allotment of the option shares and that the Securities and Futures Commission had granted consent orally.  Mr Y S Kwok also instructed the share registrar to issue share certificates to the plaintiff in her name and not to the person she requested.

The defendant reneged

40.  Pausing here for one moment, had the defendant issued the option shares to the plaintiff, the parties would not have been in Court.  However, Mr Andy Pang Kwong Wah, the defendant’s then acting chief executive officer, instigated the defendant’s board of directors to re-open and to reverse the board’s earlier decision.  Mr Andy Pang Kwong Wah was the director and acting chief executive officer who reported to the board at the earlier meeting held on 4 March 2002 that the plaintiff’s share option had been granted “with proper minutes on record” and that she had exercised her option on “26 February 2002 (which was within 30 days of her removal from the Board on 29 January 2002)”.  Since Mr Andy Pang Kwong Wah told the board that the plaintiff’s option was properly minuted, he should have satisfied himself that the board meeting was validly held.  He should have read the minutes.  If he had read the minutes, he should have seen from the minutes that the plaintiff’s option was exercisable within the 12-month period.  As the acting chief executive officer, and from what he told the board about the plaintiff exercising her option within 30 days, he should have been fully conversant with the terms of the Scheme.

41.  Be that as it may, Mr Andy Pang Kwong Wah succeeded.  The defendant’s board met on 18 March 2002 and concluded that the board could not issue shares to the plaintiff.

42.  On 21 March 2002, Mr Andy Pang Kwong Wah, with input from the defendant’s solicitors, wrote as the defendant’s director and acting chief executive officer for an on behalf of the defendant to the plaintiff asserting that her “purported” exercise of the option was invalid and that her option had lapsed:-

“...

We regret to inform you that the board of directors of the Company had resolved at its meeting held on 18 March 2002 that your purported exercise of the Option is not valid in accordance with the rules of the share option scheme of the Company adopted on 3 April 1993 (the ‘Scheme’).  According to the Scheme, the Option is not exercisable until the expiry of 12 months after the Commencement Date as defined in the Scheme.  In your case, such Commencement Date should be 7 September 2001 and the Option is exercisable one year thereafter.

We also advise that since you have ceased to be an Employee (as defined in the Scheme) effective 29 January 2002, the Option has now elapsed in accordance with Clause 7 of the Scheme and shall no longer be exercisable.”

court’s judgment

Whether plaintiff’s option agreement valid and binding on the defendant

43.  The letter dated 6 September 2001 was an offer by the defendant to the plaintiff.

44.  The proposed option agreement was not ultra vires the defendant as a company.

45.  The reference in the 6 September 2001 letter to “a resolution of the Board of Directors” was a matter of the defendant’s indoor management of no concern to the plaintiff.

46.  If there is any need to go further, I would hold that the board had authority and had resolved to grant the plaintiff the option exercisable as from 1 December 2001.

47.  The defendant challenged the validity of the board meeting held on 6 September 2001 and sought to rely on a fax dated 27 May 2002 from Dr Robert Fung Hing Piu to the defendant’s solicitors asserting that he was a director of the defendant as at 6 September 2001 and that he had not been given notice of the meeting held on 6 September 2001 and that he had not been given or waived any notice.  Dr Robert Fung Hing Piu was not called as a witness.  No reason was given why he had not been called.  His assertion contradicted what he himself reported on behalf of the board in the defendant’s interim report 2001 and what Mr Andy Pang Kwong Wah said at the board meeting on 4 March 2002.  I attach no weight to this fax from Dr Robert Fung Hing Piu.

48.  The defendant’s board had 3 sources of authority to enter into option agreements, under the Articles, under the Scheme and under the general mandate.  The board clearly intended to offer an option to the plaintiff exercisable as from 1 December 2001.  The board plainly had authority under the Articles and also under the general mandate.  The board did not lose its authority to offer an option to the plaintiff exercisable as from 1 December 2001 simply by citing the wrong authority.

49.  The plaintiff gave evidence to the effect that:-

(a)	on 7 September 2001 she asked Mr Horace Yao about the situation if her employment was terminated not for any fault on her part;
(b)	Mr Yao represented and clarified to her that the termination of employment referred to in the letter applied only to termination of her employment in situations where she could be summarily dismissed without compensation, by reason of misconduct, bankruptcy, dishonesty or commission of criminal offence on her part; and that in other situations of termination, she would receive proper notice from the defendant and she could still exercise her option during the notice period;
(c)	she believed what Mr Yao told her and in reliance on what Mr Yao told her, she signed the letter.

50.  I have carefully considered whether I accept her evidence.

51.  I bear in mind the usual reasons given for adoption of option schemes.  I also bear in mind that the plaintiff’s oral evidence, if accepted, effectively amounted to a variation of the written terms of the letter.

52.  On the other hand, there is no evidence contradicting the plaintiff’s evidence.  The board resolution contained no provision on the expiration of the option upon termination of the plaintiff’s employment.  The gist of what Mr Yao allegedly said was generally in line with clauses 6.03(a) and 7(d) of the Scheme.

53.  Not without some initial hesitation, I accept her evidence.  As chief executive officer and as a director, Mr Horace Yao had ostensible authority to explain the ambit of the option offer.  The effect is that the plaintiff’s option would not expire until 2 April 2003 unless she should be summarily dismissed before that date.

54.  The plaintiff accepted the defendant’s offer, as explained to her by Mr Horace Yao on 7 September 2001, and furnished consideration in the sum of $10.

55.  It is a textbook case of the formation of a binding contract.

56.  Whether the terms of this option agreement were different in any material respect from the employment contract dated 16 July 2001 was irrelevant and did not assist the defendant for the simple reason that contracting parties were at liberty to vary an earlier contract by another contract.

Whether option validly exercised

57.  The plaintiff exercised her option on 25 February 2002.  Her option had not expired and she had not been summarily dismissed.  I find that she exercised her option in time and her exercise was valid and binding on the defendant.

58.  Quite apart from what Mr Horace Yao told the plaintiff, on the evidence before me, I am not satisfied on a balance of probabilities that her employment contract with the defendant had been terminated by 25 February 2002.

59.  I have drawn attention to the fact that the plaintiff’s employment contract contained no provision for termination by payment in lieu of notice.

60.  In giving evidence in Court, Mr Andy Pang Kwong Wah repeatedly spoke of terminating the plaintiff at the meeting during which he gave the letter dated 21 January 2002 to the plaintiff.  What is in issue is whether, and if so when, the plaintiff’s employment contract with the defendant was terminated, not when Mr Andy Pang Kwong Wah thought he had terminated the plaintiff.

61.  The letter dated 21 January 2002 was sloppy and ambiguous.  It stated that the defendant [name wrongly spelt] had decided to terminate the plaintiff’s “employment contract with [their] Victorison Tradeport at Futian, Shenzhen, PRC with immediate effect”.  To start with, the plaintiff’s employment contract was with the defendant, not the Tradeport at Futian.  More importantly, Mr Andy Pang Kwong Wah went on to state that “according to your employment contract we herby (sic) serve you the three months notice Period effective to-day, Jan. 21, 2002”.  This indicates quite clearly that the defendant was terminating the plaintiff’s contract by giving 3 months’ notice.  Construing this document against its writer, I hold that the defendant was given 3 months’ notice and that her employment had not been terminated when she exercised her option on 25 February 2002.

62.  It is common ground that the plaintiff remained an executive director of the defendant on 21 and 22 January 2002.  An executive director is an executive and a director.  It follows that the termination of her employment and her employment contract with the defendant could not have taken effect on 21 January 2002 by payment in lieu of notice.

Other points raised by the defendant

63.  I have concluded that the plaintiff’s option agreement is binding on the defendant and that the plaintiff validly exercised her option.  I have dealt with some of the points raised by the defendant under the main section heading of “The Relevant Facts”.  It is not necessary for me to deal with the other points raised by the defendant, many of which are bad and some are unarguably bad.  The following are some examples. 

64.  The defendant tried to make something out of the plaintiff’s special instructions to issue the option shares to a named person.  This matter had already been resolved by the time of the letter dated 12 March 2002 to the defendant’s share registrar and transfer office.  Even if the plaintiff had been in breach of her employment contract, this would not have resulted in the forfeiture of her option entitlement.

65.  There was a vague suggestion that the consent of the Securities and Futures Commission was required.  Such consent was not a term of the plaintiff’s option agreement.  Furthermore, the defendant’s 12 March 2002 letter recited consent by the Commission.

66.   The defendant also contended that the required consent of the Listing Committee had not been obtained.  This has been dealt with above under the sub-section “the option scheme”.  Even if there was no consent, the defendant could not rely on its own failure to seek consent.

Damages

67.  The plaintiff contended that damages should be assessed by reference to the prices of the shares of the defendant traded on the Hong Kong Stock Exchange on 22 March 2002 (Friday), with a high of $0.285, a low of $0.245 and closing at $0.26.

68.  The defendant contended that damages should be assessed by reference to the prices of the shares of the defendant traded on the Hong Kong Stock Exchange on 25 March 2002 (Monday), with a high of $0.27, a low of $0.243 and closing at $0.245.

69.  79,656,000 shares of the defendant were traded on 22 March 2002.  There is no evidence on the number of shares traded on 25 March 2002.  Taking the turnover of 79,656,000, a purchase order on 22 and/or 25 March 2002 to purchase up to 20,000,000 shares would in my judgment have caused the share price to go up.  In my judgment, the price per share of $0.265 suggested by Mr Yeung Ming Tai is just and reasonable and I assess damages at $3,300,000 [20,000,000 x ($0.265 - $0.10)].

Order

70.  I order that judgment be entered in favour of the plaintiff against the defendant in the sum of $3,300,000 with interest at 1% over the prime rate of The Hongkong and Shanghai Banking Corporation Limited from 25 March 2002 until the date of this judgment and thereafter at judgment rate.

71.  I make an order nisi under Order 42 rule 5B(6) of the Rules of the High Court, Cap. 4, that the defendant do pay the plaintiff the costs of the action.