SIME WINNER HOLDINGS LTD AND ANOTHER v. TAN WAN HONG AND ANOTHER

HCA 793/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 793 OF 2005

----------------------

----------------------

(By Counterclaim)

------------------------

J U D G M E N T

------------------------

The proceedings:

1.  In these proceedings the plaintiffs, (collectively, Sime Winner), sue Mr Tan for breach of fiduciary duty in his capacity as an officer/employee of Sime Winner, and CM2 for breach of fiduciary duty in its capacity as an agent of Sime Winner.  Sime Winner seeks to recover from Mr Tan two sums, US$1,463,496.41, and HK$2,348,427, which Sime Winner says were received by CM2 as an agent of Sime Winner.  The case for  Sime Winner is that Mr Tan misappropriated those sums for himself. 

2.  Mr Tan represented himself during the trial. CM2 was unrepresented in the proceedings.  The case for Sime Winner was that Mr Tan had, throughout, effective control of the affairs of CM2, an assertion that was denied by Mr Tan.  Although the trial had begun on 16 February 2009, with CM2 then unrepresented, in his final speech, made on 26 February 2009, Mr Tan told me, for the first time, that he had been appointed a director of CM2, “to take effect from 19 February 2009”.  The appointment, Mr Tan said, was at the request of Boardroom Services Ltd, a company that provided accounting and nominee services for CM2.  Mr Tan did not explain precisely how he had been appointed nor did he explain how Boardroom Services had come to make the “request”.  Other than that, throughout the trial, Mr Tan did not purport to represent the company. 

3.  Sime Winner sues CM2 for the same two sums, which it says CM2 should have paid to Sime Winner because CM2 merely collected the sums as an agent for Sime Winner.  Sime Winner also sues CM2 for a further sum of HK$106,394,433.99 received by CM2 as an agent of Sime Winner, which has not been paid over to Sime Winner.  CM2 offered no defence to the claims.

The brief facts and the issues:

4.  From 1992, Sime Darby Berhad (SDB), later the ultimate parent company of Sime Winner, was involved in importing cars into the People’s Republic of China.  After 1998, SDB did so through a subsidiary, Sime Darby China Ltd (SDC), (also known at different times as Sime Darby Hong Kong Ltd (SDHK)), through Free Trade Zones (FTZs), in the PRC, by way of two joint-venture companies, with a PRC motor vehicle distributor, Tianjian Zhong Yin Mechanical & Electrical Equipment Company Ltd (TJZY).  The individuals on the PRC side of the joint-venture may be collectively referred to as the Chinese Partners. The joint-venture vehicles were Sime Winner.

5.  In late 2001, issues had arisen as to potential illegality in the business being carried on.  These were, first an allegation of the under-declaration of the value for customs purposes, of motor vehicles imported into the FTZs, and second an allegation in relation to the methods being adopted for the remittance of funds from the PRC to Hong Kong.

6.  The case for Sime Winner is that CM2 was established for its purposes, at its expense, and that Sime Winner is the true beneficial shareholder of CM2.  The primary purpose for the establishment of CM2, Mr Yu says, was to distance SDC from the potential illegalities.  Mr Yu says that CM2 was merely an invoicing agent for Sime Winner, and that all funds coming into the possession of CM2 were funds belonging to Sime Winner. The case for Sime Winner, denied by Mr Tan, is that Mr Tan, at all material times, had effective control over the affairs of CM2, and in particular CM2’s bank accounts and the transfer of funds from those bank accounts to third parties.

7.  Mr Tan says that CM2 was established by the Chinese Partners for their own purposes and benefit, and that neither Sime Winner, nor the SDB Group, including SDC, has any interest in CM2.  If that is the case, Mr Tan says, he owes no fiduciary duty to Sime Winner in relation to any conduct on his part in respect of funds passing through CM2.  Mr Tan says that at the request of the Chinese Partners he was appointed the authorised representative of CM2, and that in that capacity he acted at all times on the direction of the Chinese Partners.

8.  The first issue is whether or not CM2 was an agent of Sime Winner, as Mr Yu asserts, or an independent company, owned by the Chinese Partners, acting on its own, carrying on its own business, and free from any fiduciary relationship with Sime Winner, as Mr Tan asserts.

9.  Two particular sums were remitted to CM2 from the PRC in February 2002.  They are sums of US$1,467,128.91 and HK$2,348,427.  Mr Yu says that these sums were remitted by TJZY from the PRC to CM2, being funds due to Sime Winner by TJZY in relation to the importation of motor vehicles into the PRC, and that those monies belong to Sime Winner.

10.  With the exception of those two sums, all funds remitted by TJZY through CM2 during the relevant period were deposited in CM2’s ordinary bank account.  The two sums at issue however were not deposited to that account.  On 31 January 2002, before the two sums were remitted to CM2, on the instructions of Mr Tan, RSM Nelson Wheeler, chartered accountants in Hong Kong who were operating CM2’s bank accounts, opened a No. 2 account for CM2.  This account was, on Mr Tan’s instructions, kept secret from Sime Winner.

11.  There is no argument that the two sums in question were ultimately deposited in the No. 2 account.  The first sum of US$1,467,128.91 was initially deposited in the CM2 No. 1 account, but on the instructions of Mr Tan, it was transferred to the No. 2 account.  The second sum of HK$2,348,427 was deposited directly to the CM2 No. 2 account.  There is no dispute that virtually the whole of the two sums were withdrawn on Mr Tan’s instructions and applied in payments in respect of himself and his some time mistress, Ms Loh Poi Yan.

12.  The case for Sime Winner is that these two sums belonged to Sime Winner.  At trial, the case for Mr Tan was that the two sums paid into the No. 2 account were the property of one of the TJZY partners, Mr Ding Ning.  Mr Tan says further that he withdrew the sums from the No.2  account, and applied them for the purposes for which they were applied, on the instructions of Mr Ding.

13.  The second issue is whether the two sums belonged to Sime Winner, or Mr Ding.  If they belong to Mr Ding, then Mr Tan will have no liability to Sime Winner.

14.  The case for Mr Tan is that if the sums at issue belong to Sime Winner, the court should not give relief to Sime Winner because, he says, the relationship between Sime Winner and CM2 is void for illegality. 

15.  It is not alleged that the illegality arises under Hong Kong law.  Mr Tan says first, that the importation of motor vehicles into the PRC by CM2 involved the under-declaration of the value of vehicles for PRC customs purposes, a form of smuggling and an illegal act under PRC law.  Second he says that the remittance of funds from the PRC, by TJZY to CM2, constituted, in part, the remittance of funds illegally obtained as a result of the under-declaration of the value of the vehicles, and consequently another offence under PRC law.  Third, he says that the use of the “underground banking system” to remit funds from the PRC by TJZY to CM2, constituted a breach of PRC currency control regulations.

16.  All of these illegalities, Mr Tan says, mean that the funds held by CM2 are tainted with illegality, and the court should not act in favour of Sime Winner because to do so would be to enable Sime Winner to recover monies paid under an illegal contract.

17.  The third issue therefore is whether or not any of the alleged illegalities taints the transaction in such a way that the court should deny Sime Winner relief.

The standard and burden of proof:

18.  As the claim against Mr Tan involves an allegation of breach of fiduciary duty, in this case, an assertion of misappropriation of funds belonging to Sime Winner by Mr Tan, it is necessary to note the appropriate standard of proof.  I have borne in mind that the standard of proof in cases such as this is that laid down by the House of Lords in Re H (Minors) [1996] AC 563, and applied in Hong Kong by the Court of Final Appeal in Solicitor v The Law Society of Hong Kong [2008] 2 HKLRD 576.  The determination of the facts in this case is to be judged on  the balance of probabilities, bearing in mind that the more serious the allegation, the less likely it is that the event occurred, and hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probabilities.

19.  There is no doubt that an allegation of misappropriation of funds by the managing director of a company which is a subsidiary of a publicly held company is a very serious allegation, all the more so when that managing director is a professional man, qualified as a chartered accountant.  I have duly taken this aspect into account.

20.  Sime Winner has the burden of proving that the money in question belonged to it, and that it was Mr Tan who has misappropriated the money.

21.  In his pleaded defence Mr Tan asserted that the funds in dispute were not the assets of Sime Winner.  Instead, he asserted, (see para 9(e) of the defence) that funds in the possession of CM2 were funds belonging to the “Chinese Partners”.  He further asserted, (see para 21(a) of the defence) that the funds were the assets of a “Mr Ding Ning or if not him of the persons who beneficially owned CM2 or one or more of those persons”.

22.  At trial Mr Tan’s position was that the relevant funds were funds which belonged to Mr Ding Ning.  The burden of proof for the establishment of that positive assertion lies upon Mr Tan, on the balance of probabilities.

23.  I did not find Mr Tan to be a credible witness.  Where there was any dispute or difference between his evidence and that of the Sime Winner witnesses, I preferred the evidence of the Sime Winner witnesses.  Throughout this judgment I shall refer from time to time to various matters upon which I have based this conclusion.  Neither did I find Ms Loh to be a credible witness.  Again, I shall refer to the various matters upon which I have based this conclusion.

The parties and their relationships:

24.  The plaintiff companies are companies within the Group.  The Group is a multinational conglomerate trading in over 20 countries across the world.  One of the core business activities of the Group is the sale and distribution of motor vehicles, and it is in relation to this aspect of the Group’s business that these proceedings had their genesis.

25.  The ultimate parent company of the Group is SDB, which is incorporated in Malaysia.  The shares of SDB are traded on the Malaysian stock exchange.  SDC is a wholly-owned subsidiary of SDB, and was the company in the Group responsible for importing and distributing motor vehicles in Hong Kong, Macau and the PRC.

26.  Mr Tan was first employed by the Group in April 1986, as Chief Accountant, based at the head office in Kuala Lumpur, Malaysia.  In December 1987, he transferred to employment with SDC, (then known as SDHK), as corporate finance manager, a posting that was expected to last two to three years, following which he would have returned to Malaysia.  However in December 1988, Mr Tan was promoted to finance director of SDHK, remaining in Hong Kong.  In March 2002, Mr Tan was appointed managing director of SDC, as the company was then known.

27.  The breaches of fiduciary duty are alleged to have occurred between June 2002 to December 2003, during which time Mr Tan, as managing director of SDC, was the overall person-in-control of the Group’s operations in Hong Kong and the PRC.  It is beyond argument, and not challenged, that Mr Tan owed a fiduciary duty to SDB, and all its subsidiary companies, particularly SDC, of which he was managing director.

The motor vehicle import business:

28.  The Group’s business in the PRC began in 1992, with the establishment of motor vehicle repair and service centres in the Mainland.  In September 1998, the Group began to explore ways to expand its operations in the PRC to include the importation and distribution of motor vehicles.  At that time PRC regulations did not permit foreign entities to conduct retail motor vehicle sales outside the FTZs. 

29.  In late 1998, in order to extend its business beyond the FTZs, SDC decided to enter into a joint venture with a group of mainland Chinese individuals who, through TJZY operated retail motor vehicle dealerships in the PRC through a number of subsidiaries.  The shares in TJZY were held equally by a Mr Ding Ning, Mr Chen Weiguo and Ms Helen Chan, the latter holding her shares through a relative, Ms Mai Li Jie. It was Mr Tan who was the main person within the Group who negotiated with TJZY, and the establishment of the joint-venture with them.  Under the joint-venture arrangement, the first plaintiff acquired TJZY and its subsidiaries by arranging for the three shareholders of TJZY to execute declarations of trust in favour of the first plaintiff.

30.  The joint-venture vehicle, Sime Winner Holdings Ltd (the first plaintiff) was incorporated in Hong Kong.  SDC held 60% of the shares, through certain subsidiaries, and the remaining 40% were held by a BVI company called Grand Consultants Limited  According to the share register of Grand Consultants its shareholders were Ms Helen Chan, Xi Yucheng, Chen Weiguo, Ding Ning, He Wenru, Shan Yuhan, Xu Chenxi, and a Hong Kong company, I-Style Holdings Limited.  With the exception of I-Style Holdings, each of the individuals holding shares in Grand Consultants were engaged in the motor vehicle retail trade in various parts of the PRC.  These persons have been collectively referred to by Mr Tan as the “Chinese Partners”.  I-Style Holdings is a company owned by Ms Loh.

31.  Sime Winner Nissan Autocrafts Ltd is an identically held joint-venture vehicle, its activities being exclusively limited to the importation of Nissan vehicles into the PRC.  The only distinction between the two plaintiffs is that the second plaintiff confined its activities to Nissan vehicles, an irrelevant distinction for the purpose of these proceedings.  It is for that reason that it is convenient to refer to the two plaintiff companies collectively, as Sime Winner.

32.  Mr Tan was appointed a director of each of the plaintiff companies, the first plaintiff on 12 August 1998, and the second plaintiff from 1 January 1989.  It is not in dispute that Mr Tan held these directorships until his resignation from the Group on 14 December 2004.  Mr Tan did not dispute that at all material times he owed the fiduciary duties of a director to each of the plaintiffs. 

The establishment of CM2:

33.  The establishment of the joint-venture network allowed the Group to use its franchise network to enable Sime Winner to purchase and import into the PRC a number of motor vehicle brands.  These would then be sold by the TJZY Group through its network of dealerships subsidiaries.  The proceeds of sale would then be repatriated back to Sime Winner in Hong Kong with the distribution of profits to the joint-venture partners, by way of dividends.

34.  The joint-venture resulted in a significant increase in the number of motor vehicles to be sold to the TJZY Group dealerships.  The expansion of the business with such that a capital injection of RMB30 million was made by SDB into the TJZY Group.

35.  All vehicles imported into the PRC were imported through the FTZs.  A practice had arisen whereby customs officials in the PRC FTZs would accept the figure stated in the import application as the value of an imported vehicle for customs duty purposes.  By understating the purchase price of the vehicle, customs duty would be saved.  But the PRC importer would still be required to pay the full purchase price to Sime Winner for the vehicle.  If, as was probable, the PRC authorities were to compare the sums being remitted from the PRC to Sime Winner in Hong Kong, with the amounts stated in the import licences as to the value of vehicles imported, it would become obvious that the amount of money being sent to Hong Kong exceeded the declared customs value of the vehicles imported.  Permission to remit funds would only be given to the extent of the declared customs value.

36.  Between 1998 and late 2001, Sime Winner imported into the PRC to the TJZY Group without the interposition of CM2.  However the differential between the declared cost for customs purposes and the actual cost of a vehicle to the TJZY Group meant that substantial sums of money due to Sime Winner could not be easily remitted back to Hong Kong from the PRC.  These sums of unrepatriated profits, accumulated in the PRC.

37.  In February 2000, the Group set up a company known as Tianjian Dong Hui, (TJDH), in the FTZ.  The purpose of this company was to provide services to the dealers such as marketing and after sales support.  This company would issue invoices to the PRC dealers for service fees.  As I understand it, the intention was that the invoices would be, in reality, in part at least, equivalent to the difference between the real cost of a vehicle and customs declared cost of the vehicle.  The purpose of the exercise was to provide a means to demonstrate, purportedly legitimately by way of service charges, that a service had been provided, and thereby the accumulated funds remitted to Hong Kong.  Whilst some services were provided, the value of the services were not sufficient to absorb all of the accumulated price differentials.  Again, difficulties were encountered in the remission of funds out of the PRC.

38.  In these circumstances it is not surprising that the parties resorted to what is commonly known as the underground banking system in an effort to return these funds.  This system involved the marrying up of apparently unrelated debtors and creditors inside and outside the PRC to achieve the circumvention of currency control regulations in the PRC.

39.  Within the accounts of the TJZY Group the various dealers maintained so-called “private ledgers”, which recorded funds received by the TJZY Group from the dealers for the acquisition of motor vehicles, but not yet able to be remitted back to Hong Kong.  These “unrepatriated profits” have generally been referred to as a “Cost Difference”.

40.  SDC were concerned about the situation.  It was arguable that they were engaged in smuggling, in the sense that motor vehicles were being imported into China at a declared cost below the true cost, the purpose of declaring a lower cost being to evade import duties.  It was also arguable that they were engaged in the breach of PRC currency control regulations by the use of the underground banking system for the remission of funds from the PRC into Hong Kong.

41.  There is no evidence to establish precisely that it was Mr Tan who advised SDC that the interposition of another company between the TJZY Group and Sime Winner would resolve these issues.  But it is plain that the purpose of the establishment of CM2 was to distance Sime Winner from the TJZY Group and from the arguably illegal activities that were taking place.

42.  The establishment of CM2, a Hong Kong company with BVI shareholders, meant that sale transactions to the PRC would be made through that company, which would be responsible in the event of any illegality, either in respect of the declaration of the value of vehicles that import, or the remission of funds to Hong Kong.  These acts being taken by CM2 would have the effect of distancing Sime Winner from the transactions.  Sime Winner could say that they merely dealt at arms length with CM2, who then remitted funds to Sime Winner, and that they were not directly involved in either importation of vehicles to the PRC or the remittance of funds from the PRC.

43.  CM2 is a Hong Kong company, on its face, held by BVI corporate shareholders, and administered by BVI corporate directors.  Consequently, in the event of any issue of illegality in relation to the importation of vehicles into the PRC by CM2, or the remittance of funds from the PRC to CM2 by illegal means, being raised, there would be no identifiable direct link between Sime Winner or the Group and the mainland transaction.  By using a Hong Kong registered company with BVI corporate shareholders and directors, anybody investigating the transaction would be met with the usual blank wall that is encountered with the BVI companies, where there is no legal requirement to disclose the identity of the shareholders of the company.  It would be extremely difficult to ascertain who really owned and operated CM2.  The appropriate “distancing” would be achieved.

The beneficial ownership of CM2:

44.  What is not in doubt is that CM2 was introduced by the Group in late 2001, and that notwithstanding Mr Tan’s assertions that CM2 was beneficially owned by the Chinese Partners, the true beneficial owner of CM2 was the Group.  The case for Sime Winner was that CM2 functioned simply as an invoicing agent and conduit for funds due to Sime Winner by the TJZY Group for the sale of motor vehicles into the PRC.  I accept that was the situation.

45.  It is clear that CM2 was established by Mr Tan in his capacity as the managing director of SDC.  He admits as much: see defence paragraph 9(f).  He was authorised by Sime Winner and the Group to establish the company.  If CM2 was beneficially owned by the Chinese partners, Mr Tan would not have been engaged in the establishment of CM2 in his capacity as the managing director of SDC.  With only one exception, (see para 50 below), the is no documentary evidence whatsoever to substantiate Mr Tan’s assertion that CM2 was established on the instructions of the Chinese Partners or Mr Ding.

46.  CM2 had been set up by Asialink Corporate Services Ltd, a subsidiary of the accounting firm RSM Nelson Wheeler, with two BVI companies, Hei Yip Enterprises Ltd & Kirkowen Ltd as its shareholders.  It is a company incorporated in Hong Kong on 25 May 2001, then known as China Merchant Trading Limited  The name was subsequently changed to CM2.  Nothing turns on the change of name and for convenience it has been referred to throughout as CM2. 

47.  The directors of CM2 were two further BVI companies, Callumberg Ltd & Thornpool Ltd.  There is no evidence as to the beneficial owners of any of these four BVI companies.  It is the case for Mr Tan, in the absence of any evidence other than his own assertion, that the beneficial owners of both the shareholder and director companies, are the Chinese Partners.

48.  The documentary evidence supports the proposition that CM2 was established by SDC, for its purposes.  Mr Tan, in his capacity as managing director of SDC, gave instructions to RSM Nelson Wheeler in relation to the acquisition of CM2.  Mr Tan authorised the payment of RSM Nelson Wheeler’s fees and the expenses for the acquisition of CM2, by SD Far East (1991) Ltd, a wholly owned subsidiary of SDB.  That fact alone raises a very strong inference that CM2 was formed for the purposes of, and is beneficially owned by the Group.  If established by the Chinese Partners for their own benefit, as a separate and independent enterprise, there is no sensible reason why the fees and expenses to the acquisition of the company would be met by SDB or the Group.

49.  It is not without significance that RSM Nelson Wheeler, whose subsidiary established CM2 originally, and who were paid by a subsidiary of the Group for the acquisition and establishment of CM2, subsequently carried out all accounting functions for CM2.  There is not the slightest suggestion from Mr Dunlop of RSM Nelson Wheeler, who was directly engaged in the accounting functions of CM2, that the Chinese partners had any involvement in the matter whatsoever.  Had they been involved, I have no doubt at all that Mr Dunlop would have known of that involvement.

50.  The only evidence to which Mr Tan was able to point to substantiate his assertion that CM2 was established by the Chinese Partners was an Asialink document purporting to appoint Mr Tan as the “authorised person” of CM2.  This document, dated 25 May 2001, purports to be signed by Ms Helen Chan on behalf of Grand Consultants, on the face of this document, a principal shareholder in CM2.

51.  It has been clear from the commencement of the proceedings that Sime Winner does not accept that the signature on that document is the signature of Helen Chan and Mr Tan has been put to formal proof of that fact.  He has demonstrably failed to establish that the signature is that of Helen Chan.  He did not call Ms Chan, nor did he put any document to the court in which Ms Chan asserted that the signature was hers.  In fact the evidence establishes the contrary.  Sime Winner relied upon a letter dated 22 March 2004, in which Ms Chan, on behalf of 24% of the shareholders in Sime Winner, plainly stated that:

“We do not have any direct or indirect interest in CM2 Limited nor involve in the daily operation of the company.  As minority shareholders of Sime Winner, we urge to carry a full investigation of the company and to report to the shareholders accordingly;” (sic)

52.  It is right that the assertions in that letter are hearsay, Ms Chan not having been called to give evidence.  But it has been known by Mr Tan since well before the trial that Sime Winner intended to rely upon the letter and not to call Ms Chan.  Other than his own pleadings and his own evidence, Mr Tan led no evidence to contradict the letter.

53.  It is plain from the terms of Ms Chan’s letter that an assertion that Ms Chan had authorised Mr Tan to be the authorised person of CM2 is unsustainable.  In all the circumstances I am satisfied that it is appropriate place weight upon the from Ms Chan letter as part of the evidence leading to the conclusion that I have reached that the Chinese Partners had no interest in CM2.

54.  That CM2 was beneficially owned by the Group is entirely consistent with the minutes of a meeting of the Audit Committee of SDC on Monday 9 September 2002, at which Mr Tan was present, which recorded the following:

“Business Risks and Efficiency

Sime Winner Holdings Limited (“SW”)

a).  China Merchant Trading Limited

To address the risks of, inter alia, underdeclaration of import prices, sales transactions were restructured with effect from January 2002 through a Hong Kong company, China Merchant Trading Limited (“CMT”) so that SW could bill and receive the full value of the vehicles sold.”

If CM2 were not established by and for Sime Winner, there would be no need for such consideration by the Audit Committee.

55.  The most telling evidence as to the fact that CM2 was merely an invoicing agent and conduit for Sime Winner came from Ms Eliza Man, a former staff member of RSM Nelson Wheeler, and the individual in RSM Nelson Wheeler who dealt with the accounts of CM2.  Her evidence was that CM2 would only make out invoices based upon details provided by Sime Winner staff, that CM2 would inform Sime Winner of all remittances it received, and that CM2 would reconcile with Sime Winner on their respective accounts. 

56.  If, as Mr Tan asserted, CM2 was a completely independent company, beneficially owned and controlled by the Chinese Partners, none of these actions would have taken place in this way.  It would have been up to the Chinese Partners to make their own arrangements for invoicing, and there would have been no need at all for RSM Nelson Wheeler, who prepared CM2’s documentation, to make contact with Sime Winner to ascertain the details to be included in the documentation.  If the Chinese Partners controlled CM2, any information to the purpose of invoicing Sime Winner would have come from mainland sources.  Most importantly, there would have been no need at all for CM2 to inform Sime Winner that it had received funds from the mainland.  If anybody was to be informed of that fact, it would have been the Chinese partners.  But there is no evidence that any contact whatsoever was made with any of the Chinese partners by RSM Nelson Wheeler in their dealings with CM2.

57.  For the greater part of the relevant period all funds received by CM2 were received into its ordinary bank account and virtually immediately paid to Sime Winner.  That is clear beyond argument from the accounting information.  If, as Mr Tan asserted, CM2 was an independent company with its own separate business, the coincidence of these payments to Sime Winner, virtually immediately upon receipt, from CM2, would be simply unbelievable.  With the exception of the two payments in dispute, the accounts of CM2 demonstrate no other business on the part of CM2, other than business conducted with Sime Winner.

58.  Next, in an agreement made between CM2 and Sime Winner on 23 March 2005, CM2 acknowledged that all funds it had received and would receive belonged to Sime Winner.  This document, signed for CM2 by Mr Bruce Dunlop, a partner in RSM Nelson Wheeler, is quite plain.  I have no doubt at all that Mr Dunlop clearly understood the import of the document, and that he would not have signed it in its terms were the assertions contained in it not correct.  Mr Dunlop made an affidavit in the proceedings.  He did not assert otherwise, and was not called by Mr Tan to give evidence to contradict the plain meaning of the agreement.

59.  This agreement, which came into existence following concerns expressed within SDB in relation to funds received by CM2, was an agreement between the Group and CM2.  Mr Tan was involved during the preparation of the agreement.  There was not the slightest suggestion from Mr Tam, either at the time, or subsequently, that the Chinese Partners would need to be consulted about such an arrangement or the terms of the agreement.  If, as Mr Tan now asserts, CM2 was beneficially owned by the Chinese Partners, I have no doubt that they would have been involved in this documentation.  They were not.

60.  Mr Tan attempted to assert, in cross-examination of Sime Winner witnesses, that sales of Mercedes motor vehicles by CM2 into the PRC indicated that CM2 was not an agent of Sime Winner.  Although not specifically put by Mr Tan to the witnesses, the basis of that cross-examination must have been that, as is well known, the Sime Darby Group are not the Mercedes agents in Hong Kong.  That is a privilege belonging to Zung Fu.  But Mr Tan had no answer to subsequent evidence that demonstrated that notwithstanding that the Group were not the Mercedes agents in Hong Kong, it had exported Mercedes vehicles to the PRC through CM2.  In fact that evidence established that other brands of vehicle, not normally part of the Group franchises, were also exported by the Group through CM2 into the PRC.

61.  The fact that Mercedes and other non-Group franchise vehicles formed part of the inventory of vehicles exported to the PRC by CM2 does not raise any doubt in my mind that CM2 was an agent of Sime Winner.

62.  I am satisfied, to the appropriate standard, that CM2 was established by Sime Winner, for its own benefit, at its own expense, in order to distance Sime Winner and the Group from the PRC transactions.  This distancing was achieved by the use of a Hong Kong registered company with BVI shareholders and directors, thereby effectively concealing from any enquiry the true ownership of CM2.

63.  I am equally satisfied, to the appropriate standard, that in carrying out its activities, CM2 was merely an invoicing agent of Sime Winner and the conduit through which funds due to Sime Winner would be received from the PRC and paid to Sime Winner.  The establishment of CM2 enabled Sime Winner to say, at least superficially, that it was not a party to any allegedly illegal transaction, whether by way of the understatement of the value for customs duty purposes or breach of currency control regulations.

64.  That being the case, it must have been the intention that any monies received by CM2 in its role as an invoicing agent for Sime Winner were held specifically for Sime Winner.  Mr Yu relied upon Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 HCA, for that proposition.  He referred me to two passages, first at p 30, where Dixon J said:

“In equity the relation of agent would carry with it a duty to account, and, as a rule, a duty, if moneys are received in the course of the agency, to hold them specifically for the principal.  At law the relation would be that of debtor and creditor……The reason why in equity the proceeds of property may be followed by the owner and treated as a fund held upon a constructive trust in his favour is that his beneficial ownership of the thing gives him prima facie an equitable interest in its proceeds.”

And second, at p 15 where Latham CJ said:

“The moneys which the company received from the customers the plaintiffs moneys, representing the proceeds of the plaintiff’s goods which the company was authorised to sell.”

65.  I am accordingly satisfied that all funds received by CM2 were funds belonging to Sime Winner.

The control of CM2:

66.  Both Mr Tan, and CM2 in its pleadings just up to prior to the commencement of trial when it was represented, denied that Mr Tan was the person who had the real control of and responsibility of the affairs for CM2.

67.  I reject that contention.  First, as Mr Yu put it, it is fundamental to note that both Mr Tan and CM2 were represented by the same legal advisers throughout these proceedings while there was representation.  As recently as 2 January 2009, the former solicitors for both Mr Tan and CM2 confirmed to the court that they received their instructions in relation to CM2 from Mr Tan alone.  There was not the slightest indication any of the Chinese partners gave any instructions to the solicitors or to Mr Tan, (other than his own unsupported assertion), or that they took any interest in the proceedings whatsoever.

68.  In particular, if as Mr Tan asserted, the relevant funds belonged to Mr Ding, I have no doubt at all that he would have taken some appropriate steps to put that information before the court.  It was plainly in his interest to do so, the total sum involved exceeded US$1.7 million. He put nothing before the court at all.

69.  Second, it was Mr Tan from whom RSM Nelson Wheeler sought instructions in relation to the establishment and set up of CM2.  I have already referred to the complete lack of involvement of the Chinese partners with RSM Nelson Wheeler, and any of the instructions were given to them, or any of the reports that were made by RSM Nelson Wheeler; (see para  56 above).

The source of the two payments:

70.  Mr Tan asserted that the two sums at issue did not in fact come from TJZY, but from Mr Ding personally.  I reject that assertion.

71.  First, as Mr Tan was obliged to accept in cross-examination, all of the contemporaneous documentary evidence demonstrated that the staff of TJZY, and Sime Winner, treated the two relevant sums as payments relating to the motor vehicle trade that was being undertaken by Sime Winner and TJZY.  There is no contemporaneous evidence whatsoever to indicate that those funds belonged to Mr Ding.

72.  In particular, an e-mail dated 7 February 2002, from Mr P C Lim, a Group employee seconded to the Financing Accounts Department of Sime Winner in its Beijing office, demonstrates that he, a person directly involved in the remittance of funds between TJZY and Sime Winner, understood that the sum of US$1.4 million belonged to Sime Winner.  A further e-mail, dated 11 August 2004, from Mr Ernest Chow, who was Mr PC Lim’s accounting counterpart for Sime Winner based in Hong Kong, demonstrates that Mr Chow plainly understood that both of the sums in issue were monies which should be transferred to Sime Winner.

73.  Eliza Man, the RSM Nelson Wheeler employee who dealt with the books of CM2, believed that the funds belonged to Sime Winner.  On 17 March 2003, she sent an e-mail to Mr Tan seeking confirmation that the two sums “should be accounted for as management fee income” of CM2. 

74.  A number of documents generated in the PRC show that the two remittances were from unrepatriated profits.  These include the ledger of BHAP, the entity within the TJZY group where the unrepatriated profits were mainly kept, the balance sheet of TJZY, TJZY’s “Current Account related to Cars Movement by Location” document, maintained by Sime Winner accounting staff in the PRC, a Cost Difference Analysis as at March 2002, an analysis prepared by Sime Winner accounting staff in the PRC, a document entitled “Difference with TJZY for Cash Received from CM”, a document maintained by Sime Winner accounting staff in Hong Kong, and a cost account reconciliation from March 2003 showing the reconciliation between TJZY Group books and Sime Winner books.  All of these were contemporaneous documents prepared prior to the dispute arising, through which the obligation to pay the relevant funds from the TJZY to Sime Winner in Hong Kong is plainly demonstrated.

75.  Mr Tan had no proper answer to these documents, being able to assert only that Mr Ding had more money in his private ledger than the amount which Sime Winner were entitled.  That is an assertion was quite unsupported by any evidence whatsoever.

76.  Between February 2002, the time of the first of the funds was received, and the trial, Mr Tan has offered a number of different explanations in respect of the money in the No. 2 account of CM2.  These different explanations are quite inconsistent and demonstrate why Mr Tan has no credibility in this matter.

77.  The sum of US$1,463,496.41 was received by CM2 on 7 February 2002.  On 9 February 2002, Mr Tan sent an e-mail to Mr P C Lim, copied to Mr Ernest Chow, in these terms:

“All of these remittances non trade-related although we could structures these as past profits, internal ledgers etc. So I suggest that all these be kept at No. 2 account.”

The reference to past profits can only be a reference to the sum being an amount due to Sime Winner, and the past profits of Same Winner.

78.  On 18 August 2003, Mr Dunlop sent an e-mail to Mr Tan seeking an explanation in relation to the sum of US$1,463,496.41 that had been received from a company known as Leadway Fuzzy Control by CM2.  Mr Tan responded on 20 August 2003, asserting:

“This represents the amount received from one of the Chinese partners and relates to the capital to be injected into a future venture.  That venture has however not proceeded and it is likely that this amount will be transferred to another party for other investments.  I am awaiting further advice on this matter.”

79.  At trial, Mr Tan said that when the sum was first received he believed that it related to the motor vehicle trade and profits due to Sime Winner, and doubted an assertion made by Mr Ding that the money belonged to Mr Ding.  Mr Tan went on to say that a few weeks later, he satisfied himself that the money did belong to Mr Ding.

80.  On 8 April 2003, Mr Tan had used the sum of US$470,980.78 from the funds that had been received, and transferred to the CM2 No. 2 account, to make a payment due in Singapore, by Glarner Investments Pte Ltd, (Glarner).  Subsequently, in December 2003, Mr Tan would transfer a further sum of US$922,515.63 from the No. 2  account to Singapore in further settlement of a Glarner obligation.  Both payments were made at a time when Mr Tan was under extreme pressure from a Singapore creditor of Glarner the repayment of substantial sums.

81.  Glarner was described by Mr Tan in an e-mail at that time as his own personal investment vehicle.  The shares in Glarner were at that time owned by Mr Tan and Ms Loh.  Subsequently Mr Tan has transferred his shares in that company to Ms Loh, and now asserts that he has had no interest in the company, but held the shares merely on trust for Ms Loh.

82.  It is entirely inconsistent with Mr Tan’s assertions by e-mail to Sime Winner employees that the funds belonged to Sime Winner, as past profits, that the funds should have been used to pay a personal debt of Mr Tan or his mistress Ms Loh.  It is equally inconsistent with Mr Tan’s assertions in evidence in the funds belonged to Mr Ding, that they should have been applied in that manner without a shred of evidence from Mr Ding that might in any way support Mr Tan’s claim that Mr Ding had agreed to the funds being used in that manner.

83.    If as Mr Tan asserted in his e-mail to Mr Dunlop on 20 August 2003, the sum represented an amount received from one of the Chinese partners to be injected into a future venture there was simply no basis upon which he could have applied the funds for the purposes of Glarner.  Further, both the assertion in the e-mail on 9 February 2002, that the sum represented past profits and the e-mail assertion on 20 August 2003, as to the funds constituting capital for a future venture in the e-mail were quite inconsistent with the position adopted by Mr Tan at trial, that he initially thought the money was related to motor vehicle sales, and that he doubted Mr Ding’s assertion that the money was his, but that “a few weeks later” he satisfied himself the money did belong to Mr Ding. 

84.  I accept Mr Yu’s submission that the position adopted by Mr Tan at trial was a false assertion, made up in a hopeless effort to cover the inconsistency realised by Mr Tan, between the various assertions he made as to the true ownership of the funds.

85.  At a late stage in the preparation prior to trial, further documentation became available in relation to the remittance of US$1,463,496.41 to CM2 by Leadway Fuzzy Control.  That documentation tended to indicate the payment somehow related to Sony Corporation.  For the first time, and only in the course of the trial, Mr Tan now asserted that Mr Ding had a business arrangement with Sony and that the payment was a payment made by Sony for Mr Ding.  Again I accept Mr Yu’s submission that that was a false assertion, made purely opportunistically by Mr Tan, upon him, at a late stage, seeing a document with a reference to Sony in relation to the payment.  I am satisfied that the payment by Leadway Fuzzy Control was nothing more than a payment of money properly due by TJZY to CM2 on behalf of Sime Winner, through the underground banking system.  Leadway Fuzzy Control was merely the vehicle participating in the mutual matching of debts, inside and outside the PRC, that was required for the underground banking system to work.

86.  There being nothing in the evidence to justify the payment of either of the relevant sums, the first from Leadway Fuzzy Control, and the second from Chan Sze Wai, as the payment of obligations due by those parties for any purpose at all to CM2, the plain inference that arises is that they were merely debtors who had assisted TJZY and Sime Winner in the transmission of funds through the underground banking system.

87.  The evidence as to the source of the funds alone is more than ample evidence to support the case on the part of Sime Winner that the relevant funds belong to Sime Winner.  The inference that may be drawn from that evidence is made stronger when regard is had to Mr Tan’s false assertions in relation to the funds.

88.  In his pleadings and in the affidavits filed by Mr Tan and CM2 prior to the trial, the assertion was made that the funds belonged to Mr Ding Ning or if not him of the persons who beneficially owned CM2 or one or more of those persons.  At trial Mr Tan finally narrowed this assertion down to an assertion that the funds belonged to Mr Ding.

89.  In anticipation of that position, Sime Winner had sent its employees, Mr Lawrence Lee and Mr Peter Wei to discuss the matter with Mr Ding.  Mr Ding is now living in New Zealand, and is reluctant to come to Hong Kong or China as he fears arrest in China.  He was visited in New Zealand by representatives of Sime Winner who made enquiries of him generally as to the affairs of TJZY, and specifically in respect of the remittance of funds to Hong Kong.

90.  Again, as with Ms Helen Chan’s letter, that evidence was hearsay, but Mr Tan knew, well before the trial, the precise nature of the evidence that would be led.  Other than cross-examining the Sime Winner witnesses as to their ability to understand Mr Ding’s Putonghua, a challenge that failed dismally as no evidence was led by Mr Tan to contradict their assertions that they understood Mr Ding, Mr Tan offered no evidence to contradict the statements made to them as witnesses by Mr Ding.  In those statements Mr Ding denied all knowledge of the relevant funds.

91.  Mr Tan asserted that he applied the sums from CM2’s No.2 account on the instructions of Mr Ding.  He was quite unable to explain why Mr Ding would provide to Glarner with a sum of over US$1.2 million, nearly six years ago, without any security or formal record, without any interest, and without any arrangements for repayment.  That Mr Ding should do so was simply unbelievable and, I am satisfied, a lie on the part of Mr Tan.

92.  Apart from the payments to Glarner, the payments from the CM2 No.2 account were demonstrably for Mr Tan’s personal use or to the benefit of his mistress, Ms Loh.  Again he was quite unable to explain why Mr Ding would give him funds for the purposes for which they were used.  Mr Tan used the money for travel, golf, and to pay Ms Loh’s rent, what appears to be a monthly sum, and other expenses on her behalf.  Mr Tan offers no explanation for cash cheques drawn totalling over $200,000, other than to say, without any evidence to support the assertion, that these were payments made on behalf of Mr Ding.

93.  Ms Loh’s assertion that the payment of HK$480,000 made to her on her birthday, was a gift from Mr Ding, was equally unbelievable.  The amount alone is extraordinary.  There was simply no evidence to suggest that the relationship between Mr Tan and Ms Loh, and Mr Ding, or even the relationship between Ms Loh and Mr Ding, was such that a birthday gift of that magnitude might be made to Ms Loh.

94.  It is simply incredible, and beyond belief, that Mr Ding would allow his personal money to be used for those purposes, or in that manner, without any record being kept.  It is especially incredible that Mr Ding would advance over US$1.4 million to repay Glarner’s responsibilities in Singapore, without any documentation to record the arrangement, without any apparent requirement for repayment, or without interest.  That is especially so when it is noted that nearly 6 years has now passed since that sum was paid and, as Mr Tan was obliged to acknowledge, Mr Ding has apparently taken no steps to recover the advance.

95.  When Ms Loh was cross-examined on the source of the funds she stated, for the first time, that there had been a meeting in Beijing during which she, Mr Tan and Mr Ding were present, at which Mr Ding indicated that he was about to deposit personal funds in CM2’s accounts.  Mr Tan gave no evidence of such a meeting, it had not featured in any witness statement, and was contradicted by Mr Ding’s assertions to the Sime Winner people that he had not paid such funds.

96.  Ms Loh’s efforts to explain that funds were paid to her because of her assistance to Sime Winner in the establishment of its business, to which the Chinese partners were grateful, became confused, illogical, unjustifiable in terms of the effort expended, and simply unbelievable.  They were nothing short of lies.  Ms Loh had every reason to lie.  She had been a major beneficiary of the misappropriated funds and had good reason to suspect that an argument could be mounted that she knew of the real source of the funds when she received them, thus implicating her in the dishonesty.  Further, she admitted that she still retained “feelings” for Mr Tan, her benefactor, thus giving her additional reason to lie on his behalf.

97.  In his witness statement, at paragraph 49, and at paragraph 45 of his second affirmation, Mr Tan asserted that the CM2 No. 2 account was opened on the instructions of the shareholders of CM2 for their personal transactions.  He was unable to explain why, if that was the case, he should have sent an e-mail on 1 February 2002, to Mr PC Lim in Beijing, instructing him that:

“The No.2 account is meant for past profits and other transactions including the one-off items.”

Neither could he adequately explain the e-mail to Mr Lim on 9 February 2002, set out at paragraph 77 above.

98.  When faced with these e-mails in cross-examination, Mr Tan realised that they were inconsistent with his assertion as to the purpose of the No.2 account.  Both e-mails plainly assert the funds to be Sime Winner funds, and make no suggestion that the funds belong to the Chinese partners, or Mr Ding, personally.  It  was only during cross-examination, and for the first time, that Mr Tan said that initially he did not believe Mr Ding’s statement that the monies that were remitted belonged to Mr Ding, (see para 83 above).

99.  Weighing the whole of the evidence I am completely satisfied that not only were the two relevant sums money belonging to Sime Winner, but also that Mr Tan has misappropriated those sums for his, and Ms Loh’s personal benefit.  That misappropriation constitutes an actionable breach of fiduciary duty on the part of Mr Tan.

The issue of illegality:

100.  The final matter to be considered is the question of illegality.    Both sides called expert evidence on Chinese law.  At the end of the day I am satisfied that it is irrelevant as to whether or not the steps taken were in breach of Chinese law, and without making any finding to this effect, I proceed on the basis that the steps complained of were illegal in the PRC.

101.  There are two reasons why I reject the argument made by Mr Tan based upon illegality.  First, I am satisfied that there was nothing in the relationship between Sime Winner and CM2 that was illegal under Hong Kong law.  Second, I am satisfied that even if the funds received by CM2 for Sime Winner are tainted by illegality, that illegality is merely a part of the background and does not afford a defence to a claim by Sime Winner against either Mr Tan or CM2.

102.  Both Sime Winner and CM2 are incorporated in Hong Kong.  It is clear from the evidence of Eliza Man that the relationship between Sime Winner and CM2 was managed in Hong Kong.  There is nothing to suggest that the performance of any contracts between Sime Winner and CM2 were governed by anything other than Hong Kong law.  There is nothing to suggest that Mr Tan’s obligations to either Sime Winner or CM2 were governed by any law other than Hong Kong law.  The action seeks to enforce the performance of obligations on the part of Mr Tan in Hong Kong, which obligations are governed by Hong Kong law.

103.  There is not the slightest suggestion that any of the conduct of any of the parties in relation to the sale of motor vehicles into the PRC, or the remittances funds to Hong Kong, is in any way in breach of any Hong Kong law.

104.  In those circumstances, there being nothing in the performance of the contracts or responsibilities of the parties that is in contravention of Hong Kong law, there is no reason for the Hong Kong courts not to enforce those contracts or responsibilities: see Ralli Brothers v Compania Naviera Sota Y Aznar [1920] 2 KB 287 and Dow MFB Ltd v Detrick Ltd [1988] 1 HKLR 344.

105.  Next, I am satisfied that any illegality merely forms part of the background to the circumstances in which CM2 came to be in possession of funds belonging to Sime Winner.  Even if the funds were illegally obtained, it is absolutely plain that the funds in question belonged to Sime Winner.  Mr Tan’s obligations to Sime Winner, and CM2’s obligations to Sime Winner, are judged not upon any illegality in the obtaining of the funds, but upon their relationships at Hong Kong law.  Thus if the illegality merely forms part of the background, the illegality cannot afford a defence to breach of fiduciary duty: see Peconic Industrial Development v Chio Ho Cheong (unreported, HCA 16255/99), per A Cheung J at para 537-541.

106.  Mr Tan, although unrepresented, had the assistance of lawyers outside court in preparing written submissions on illegality.  The primary authority relied upon in that submission was the old case of Scott v Brown, Doering, McNab [1892] 2 QB 724.  It appears that the person who gave Mr Tan his assistance was not aware that the House of Lords in Tinsley v Milligan [1994] AC 340, has greatly reduced the scope of the decision in Scott v Brown.  It is now clear, as appears from the judgment of Lord Jauncey, at p 366, that there is an important distinction to be made.  Lord Jauncey said:

“At the outset it seems to me to be important to distinguish between the enforcement of executory provisions arising under an illegal contract or other transaction and the enforcement of rights already acquired under the completed provisions of such a contract or transition.  Your Lordships were referred to a very considerable number of authorities both ancient and modern, from which certain propositions may be derived.

First, it is trite law that the court will not give its assistance to the enforcement of executory provisions of an unlawful contract whether the illegality is apparent ex facie the document or whether the illegality of purpose of what would otherwise be a lawful contract emerges during the course of trial: Holman v Johnson 1 Cowp 341, 343 per Lord Mansfield CJ; Pearce v Brooks (1886) LR 1 Ex 213, 217-218 per Pollock CB; Alexander v Rayson [1936] 1 KB 169, 182; Bowmakers Ltd v Barnet Instruments Ltd [1945] KB 65, 70.

Second, it is well established that a party is not entitled to rely on his own fraud or illegality in order to assist a claim or rebut a presumption.  Thus when money or property has been transferred by a man to his wife or children for the purpose of defrauding creditors and the transferee resists his claim for recovery he cannot be heard to rely on his illegal purpose in order to rebut the presumption of advancement: Gascoigne v Gascoigne [1918] 1 KB 223, 226; Pallanippa Chettiar v Arunasalam Chettiar [1962] AC 294, 302; Tinker v Tinker [1970] P 136, 143, per Salmon J.

Third, it has, however, for some years been recognised that a completely executed transfer of property or of an interest in property made in pursuance of an unlawful agreement is valid and the court will assist the transferee in the protection of his interest provided that he does not require to found on the unlawful agreement: Ayerst v Jenkins LR 16 Eq 275, 283; Alexander v Rayson [1936] 1 KB 169 184-5; Bowmakers Ltd v Barnet Instruments Ltd [1945] KB 65; and Singh v Ali [1960] AC 167, 176.  To the extent, at least, of this third proposition it would appear that there has been some modification over the years of Lord Eldon’s principles.”

107.  It is clear that the claim by Sime Winner against both Mr Tan and CM2 is a claim for the enforcement of rights acquired under the completed provisions of a contract which is arguably illegal.  In Tinsley, the House of Lords held that a claimant to an interest in property, whether legal or equitable, was entitled to recover if he was not forced to claim or rely on an illegality, even though it transpired that the title on which he relied was acquired in the course of the carrying out of an illegal transaction.

108.  I have already held that the contracts upon which Sime Winner relied are not illegal under Hong Kong law.  Sime Winner do not need to rely upon any contract which might be illegal under mainland law to bring their claim against either Mr Tan or CM2.  They simply say that CM2 was in possession of the monies belonging to Sime Winner, and that both Mr Tan, in his fiduciary duty to Sime Winner as an officer of both SDB and Sime Winner, and CM2 in its fiduciary duty arising out of agency with Sime Winner, were obliged to pay those monies to Sime Winner.  How Sime Winner came to be in possession of the monies, legally or illegally, is simply irrelevant.

109.  The wide scope of the assertions in Scott v Brown, relied upon in the submissions from Mr Tan, were disposed of in the judgment of Lord Browne-Wilkinson in Tinsley at p. 376H-377C:

“Finally, I should mention a further point which was relied on by Miss Tinsley.  It is said that once the illegality of the transaction emerges, the court must refuse to enforce the transaction and all claims under it whether pleaded or not: see Scott v Brown, Doering, McNab [1892] 2 QB 724.  Therefore, it is said, it does not matter whether a plaintiff relies on or gives evidence of the illegality: the court will not enforce the plaintiff’s rights.  In my judgment, this submission is plainly ill founded.  There are many cases where a plaintiff has succeeded, notwithstanding that the illegality of the transaction under which she acquired the property has emerged: see for example: Bowmakers Ltd v Barnet Instruments Ltd [1945] KB 65 and Singh v Ali [1960] AC 167.  In my judgment the court is only entitled and bound to dismiss a claim on the basis that it is founded on an illegality in those cases where the illegality is of a kind which would have provided a good defence if raised by the defendant.  In a case where the plaintiff is not seeking to enforce an unlawful contract but founds is his case on collateral rights acquired under the contract (such as a right of property) the court is neither bound nor entitled to reject the claim unless the illegality of necessity forms part of the plaintiff’s case.”

110.  The application of that dictum to this case is plain.  CM2 had received funds to which Sime Winner were entitled.  That the funds might have been received as a result of illegal transactions in which CM2 was engaged with other parties, in another country, is entirely beside the point.  Once CM2 received funds to which Sime Winner were entitled, it was lawfully obliged to pay those sums to Sime Winner.  Mr Tan, in his capacity as an officer of both Sime Winner, and CM2, was under a fiduciary duty to pay those sums to Sime Winner.

111.  In failing to pay the monies to Sime Winner both Mr Tan and CM2 in breach of their obligations to Sime Winner.  The argument based upon illegality must fail.

Counterclaim:

112.  In a counterclaim Mr Tan sought rectification of a Settlement Deed recording an agreement reached between himself and SDB, upon Mr Tan’s resignation from SDB.  In the course of the trial Mr Tan abandoned that counterclaim.  Sime Winner are entitled to judgment on the counterclaim, which is dismissed.

Judgment:

113.  Sime Winner have succeeded on the claim in all respects, Mr Tan’s defence to the claim fails.  There will be judgment for Sime Winner against Mr Tan in the sum of US$1,463,496.41 and HK$2,348,427. 

114.  Sime Winner sought an account of all secret or unauthorised profits commission or other payments received by Mr Tan as a result of his position.  No other sums were identified in the course of the trial.  If an account is still sought by Sime Winner leave is reserved to apply.

115.  Sime Winner have succeeded in all respects against CM2, who offered no defence to the claim.  There will be judgment against CM2 in the sum of US$1,463,496.41, HK$2,348,427, and HK$106,394,433.99, in accordance with the prayers for relief.

116.  Sime Winner sought tracing orders.  It was not clear to me at the end of the trial whether or not those orders are still pursued.  Leave is reserved to apply.

117.  The amounts for which judgment has been entered will bear interest in the usual way.

118.  There will be an order nisi that both Mr Tan and CM2 must pay Sime Winner’s costs on a party and party basis.