NGAN IN LENG AND OTHERS v. CHU YUET WAH

HCA 388/2006

[2022] HKCFI 558

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 388 OF 2006

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JUDGMENT

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1.  This is an action by the Plaintiffs against the Defendant (“Mrs Chu”) for her alleged breach of an oral share purchase agreement made in January 2005 (“SPA”). The principle issue here is a factual one, namely, whether the SPA was made in the course of certain discussions which took place during the late evening of 5 January 2005 and the early hours of 6 January 2005.

Background

2.  The following background facts are not in dispute save indicated otherwise[1]. The Plaintiffs’ claim arose out of the sale of Hotel Casa Real in Macau (“Hotel”), along with its facilities which included a casino then operated by Sociedade de Jogos de Macau, S.A. (“SJM”).

3.  At the material time, the Hotel was beneficially owned by the Plaintiffs, via corporate vehicles. Following discussions in late 2004 and early 2005, the Plaintiffs sold their interests in the Hotel to Next Champion Ltd (“Next”), a wholly-owned subsidiary of Golden Resorts Group Ltd (“Golden Resorts”)[2], a company listed on the Hong Kong Stock Exchange. The consideration was HKD1.25 billion which was to be paid partly in cash (HKD750 million) and partly by the issue of 1.1 billion new shares in Golden Resorts (“Consideration Shares”). Those shares were valued, for purpose of the transaction, at HKD500 million (HKD 0.4545 per share).

4.  The Plaintiffs are members of the Ngan family. The 1^st Plaintiff (“Mr Ngan”) is the patriarch of the family. The 2^nd Plaintiff is his wife. The 3^rd Plaintiff (“Franky”) is their son. The 4^th (“Jane”) and 5^th Plaintiffs are their daughters.

5.  Prior to the sale, the Plaintiffs held their interests in the Hotel via the following structure. They each held one issued and fully paid-up share of Hang Huo Holdings Ltd (“Holdings”), a BVI company. Those five shares represented Holdings’ entire issued share capital. In turn, Holdings held 99% of the issued share capital of a Macanese company, Hang Huo Hotel Co Ltd (“Hotel Co”), with the remaining 1% held by Jane. The Hotel was owned and operated by Hotel Co.

6.  Holdings and Jane also each held one of the only two issued shares in a Hong Kong company, Hang Huo Hotel Co Ltd (“HK Co”), which provided reception and promotional services for the Hotel.

7.  The three companies, Holdings, Hotel Co and HK Co were thus the vehicles through which the Plaintiffs’ interests in the Hotel and its associated businesses were held (“Family Shares”).

8.  Mrs Chu is an experienced, wealthy and well-connected businesswoman. She moved to the US in about 1977 and returned to Hong Kong in 1992. During the stay in the US, she obtained a bachelor degree in science of management. She is the daughter of Mr Lee Wai Man (“Lee”), a well-known casino operator of VIP casino rooms in Macau known as “Golden Hall”. Mrs Chu was and is familiar with casino operations.

9.  The Plaintiffs say that Mrs Chu is the controlling beneficial shareholder of both Kingston Securities Ltd (“Kingston Securities”) and Kingston Capital Ltd (“Kingston Capital”), companies which carry on securities brokerage and related businesses in Hong Kong. Mrs Chu’s evidence was that she set up these companies in respectively 1993 and 1998 or 1999. In respect of Kingston Securities, she held 51% of its shares (until it became part of Golden Resorts in about April 2011) with the other 49% held by her mother. She conducted her securities brokerage business through this company. She held 499,999 out of 500,000 shares in Kingston Capital.

Plaintiffs’ case

10.  The Plaintiffs say that at all material times during 2005 and 2006, Mrs Chu, together with Lee, were the beneficial controlling shareholders of Golden Resorts and held herself out to the Plaintiffs as such.

11.  In about the beginning of January 2005, Mrs Chu expressed an interest in purchasing the Hotel and its associated business, which were available for sale. From around 4 to 6 January 2005, Mrs Chu engaged in negotiations with the Plaintiffs (conducted via Franky and Mr Ngan) with a view to purchase their interests in the Hotel and its associated businesses by Golden Resorts (through Next).

12.  In the course of those negotiations, Mrs Chu informed the Plaintiffs that: (a) she was an experienced, wealthy and well-connected businesswoman; (b) she was the controlling shareholder of Kingston Securities and Kingston Capital, which she described as amongst the top Chinese companies in the securities industry in Hong Kong; (c) she was the controlling shareholder and “the boss” of the Golden Resorts group; (d) she was the daughter of Lee; (e) she was familiar with casino operations; and (f) parts of Lee’s casino VIP rooms business would be injected into her Golden Resorts group in due course.

13.  The Plaintiffs and Mrs Chu agreed in principle that they would sell the Family Shares for HKD1.25 billion. Originally, the Plaintiffs required the entire consideration to be paid in cash, but Mrs Chu proposed that the consideration be paid by a combination of cash of HKD750 million plus Golden Resorts shares valued at HKD500 million.

14.  Late in the evening of 5 January 2005, the parties met at the presidential suite of the Hotel to continue their negotiations (“Meeting”). Mr Ngan expressed concern that the market price of shares in Golden Resorts might fall below HKD 0.4545 per share (the nominal value of each of the Consideration Shares). In order to induce the Plaintiffs to accept the Consideration Shares as part of the consideration for the sale of the Hotel, Mrs Chu represented to the Plaintiffs, inter alia, that :

(1)  The Golden Resorts group was in the process of making hotel and casino businesses in Macau its core business focus. For which purpose, it was acquiring the Grandview Hotel in Macau (“Grandview Acquisition”), the Hotel (“Casa Real Acquisition”) as well as Lee’s VIP casino rooms business (“Lee Acquisition”);

(2)  Since Mrs Chu was the controlling shareholder of Golden Resorts, shareholder approval of the Casa Real Acquisition was assured. After its announcement, Golden Resort’s share price would rise and after the Lee Acquisition the share price would rise further;

(3)  The market price of shares in Golden Resorts would not fall below HKD 0.4545 per share;

(4)  If Next was unable to complete the Casa Real Acquisition, Mrs Chu would take over the transaction (personally or through a nominee).

15.  Despite Mrs Chu’s assurances, the Plaintiffs remained concerned about the risk of downturn in the value of the Consideration Shares. In order to induce the Plaintiffs to accept the Consideration Shares as part of the consideration for the Casa Real Acquisition, Mrs Chu made them an offer, namely, that if at any time after the completion of the Acquisition, the price of Golden Resorts shares fell below HKD 0.4545 (“Trigger Price”), she would purchase (personally or through nominees) the Consideration Shares from the Plaintiffs at the Trigger Price (“Share Purchase Offer”).

16.  The Plaintiffs requested Mrs Chu to record the Share Purchase Offer in writing but she refused, stating that to do so might cause difficulties for Golden Resorts by reason of the SEHK Listing Rules.

17.  Induced by and in reliance on the Share Purchase Offer, the Plaintiffs entered into the SPA with Mrs Chu and accepted the Consideration Shares as part consideration for the Casa Real Acquisition. In the early morning of 6 January 2005, the Plaintiffs entered into a written preliminary sale and purchase agreement (“PSPA”) with Next to sell the Family Shares for HKD750 million in cash and HKD500 million in the Consideration Shares.

18.  Between 6 January 2005 and 19 February 2005, the Plaintiffs and Next engaged in negotiations and preparation for the formal sale and purchase agreement (“FSPA”) for the Casa Real Acquisition. The Plaintiffs repeatedly expressed to Mrs Chu their concerns about the falling market price of Golden Resorts’ shares, but they were repeatedly assured by her that the price would recover and were encouraged to retain the Consideration Shares.

19.  On 19 February 2005, the Plaintiffs and Next entered into the FSPA. The FSPA provided, inter alia, that Next would acquire the Family Shares for HKD1.25 billion (comprising HKD750 million in cash and HKD500 million in Consideration Shares) and that, on completion, the Plaintiffs should provide to Next a letter from SJM stating that it agreed to the change of proprietor and representative of the Hotel (clause 5.02(a)(iii)).

20.  On or around 21 March 2005, the Plaintiffs (through Mr Ngan) and Mrs Chu (through Mr Lee) orally agreed (“SJM Side Agreement”) that they would arrange for 120 million shares in Golden Resorts to be transferred to SJM to secure its approval to change the proprietor and representative of the Hotel and that the transfer shares would be provided by the Plaintiffs and Mrs Chu (or Mr Lee) in equal proportion (60 million shares from each side).

21.  On 31 May 2005, (a) the Plaintiffs and Next entered into a deed of undertaking (“Deed”) and agreed to proceed to completion of the FSPA (“Completion”) notwithstanding that certain conditions under the agreement had not been met; and (b) Completion took place, whereupon the Plaintiffs became shareholders of Golden Resorts.

22.  On 7 June 2005, there was a 10 for 1 consolidation (“Consolidation”) of the issued shares of Golden Resorts. Consequently, the 1.1 billion Consideration Shares were converted into 110 million shares in Golden Resorts and the Trigger Price was adjusted to HKD4.545 per share.

23.  On or around 12 September 2005, Franky transferred 6 million shares[3] in Golden Resorts to an account nominated by Mrs Chu for the benefit of SJM pursuant to the SJM Side Agreement.

24.  At all material times since the Completion and during 2006, the price of one Golden Resorts share was below the Trigger Price. The Plaintiffs expressed their concern about the share price to Mrs Chu, who reassured them that the price would recover following a Golden Resorts “road show” in July 2005 and the Lee Acquisition. On 30 December 2005, the closing price of one Golden Resorts share was HKD1.93.

25.  By a letter dated 25 January 2006, the Plaintiffs’ solicitors (“RB”) demanded that Mrs Chu honour the SPA and purchase the Plaintiffs’ remaining 104 million Golden Resorts shares (110m – 6m) at HKD4.545 per share. Mrs Chu has refused to do so. The undisputed evidence is that Golden Resorts’ share price had fallen below the Trigger Price since the 24 January 2005 and had not recovered by 25 January 2006.

26.  On 25 July 2006, Kingston Securities, acting on behalf of companies owned by Mrs Chu and Mr Lee, made a mandatory conditional general offer to all other shareholders of Golden Resorts to purchase their shares at HKD1.94 each. In order to mitigate their loss, the Plaintiffs accepted the offer and sold their shares in early September 2006.

27.  Consequently, the Plaintiffs claim loss and damage of HKD270.92 million, being 104 million shares multiplied by HKD2.605 per share (HKD4.545 – HKD1.94 = HKD2.605).

Mrs Chu’s case

28.  Mrs Chu denies that in 2005 and 2006 she was the beneficial controlling shareholder of Golden Resorts. Instead, from April 2004 until July 2006, Jenkin Cheung Yu Shum (“Jenkin”), through Perfect View Development Ltd (“Perfect View”), was the controlling shareholder of Golden Resorts, holding 67.36% of its issued share capital.

29.  Mrs Chu says that, in late December 2004, she became aware that the Hotel was being marketed for sale and she informed Jenkin of the same. Jenkin subsequently authorised her to proceed with negotiations regarding the purchase of the Hotel. It was Jenkin who decided that the price range of the Hotel should be HKD1 billion to HKD1.3 billion and the number of consideration shares to be issued would not exceed 10% of Golden Resorts’ issued shares.

30.  At meetings held on 4 January 2005 attended by Franky, Wong Hin Shek (“Hans”) and Mrs Chu[4], Franky understood that Mrs Chu was acting as the representative of Golden Resorts. Mrs Chu indicated that the purchase price could be HKD1.25 billion, which Franky indicated was acceptable. Franky suggested that the consideration be paid by cash and shares in equal parts. Mrs Chu declined and stated that the maximum amount of consideration shares would be HKD500 million only.

31.  In the evening on 5 January 2005, Mrs Chu (as the Golden Resorts group’s representative) travelled to Macau with Jenkin, her husband (“Mr Chu”) and Hans for a final round of negotiations with the Plaintiffs. Shortly after midnight, the Plaintiffs and Next signed the PSPA. Mrs Chu did not say that she was the controlling shareholder or the “boss” of the Golden Resorts group, or that Lee’s VIP casino rooms business would be injected into the group.

32.  Mrs Chu denies making the Share Purchase Offer or entering into the SPA. Further, a number other contentions have been advanced by her :

(1)  In entering into the FSPA, the Plaintiffs expressly acknowledged and confirmed that they did not rely on the alleged or any Share Purchase Offer or the SPA;

(2)  The SPA was not binding or enforceable because:

(a)  Mrs Ngan, Jane and Fiona were not privy to the SPA, and Mr Ngan and Franky had no authority to enter into the same on their behalf;

(b)  of lack of certainty; and

(c)  lack of consideration in that there was no mutuality of promises.

(3)  The Plaintiffs had unequivocally represented to Mrs Chu that they would not exercise their rights under the SPA and therefore had waived such rights by:

(a)  electing to enter into the FSPA without reference to or reliance on the SPA;

(b)  electing to complete the FSPA without any reference to or reliance on the SPA; and

(c)  deciding not to exercise such rights until 25 January 2006.

33.  On the SJM Side Agreement, Mrs Chu admitted that on or around 21 March 2005, a meeting took place in Hong Kong between Mr Ngan, Mr Lee and representatives of SJM, but denies the SJM Side Agreement. Mrs Chu contends that Mr Lee personally agreed with SJM to transfer 60 million shares in Golden Resorts to it, but it was an agreement between Mr Lee and SJM which did not concern the Plaintiffs or her.

34.  On the Plaintiffs’ case of loss, Mrs Chu’s case is that, if the Plaintiffs suffered loss, it was caused by their decision in not holding onto the Consideration Shares and/or their failure to mitigate by failing to sell the Consideration Shares at a price higher than HKD1.94 per share.

Issues

35.  There is an Agreed List of Issues filed pursuant to the directions of this court. I agree with Mr Barlow SC, who appeared with Mr Chen for the Plaintiffs, that the principal issue for determination in this trial is the factual question whether an oral SPA was made between the Plaintiffs and Mrs Chu. That issue had been elaborated into three questions by Mr Barlow (although he submitted that they were part of a single issue) as follows :

(1)  In January 2005, did Mrs Chu offer to purchase the Plaintiffs’ Consideration Shares at HKD 0.4545 per share should the market price of Golden Resorts shares fall below that Trigger Price (ie, the Share Purchase Offer)?

(2)  Were the Plaintiffs induced by the Share Purchase Offer to accept the Consideration Shares as part of the consideration for the sale of the Hotel?

(3)  Did the Plaintiffs and Mrs Chu conclude an oral contract in terms of the Share Purchase Offer, ie, the SPA?

36.  There is no serious argument between the parties that the resolution of this principal factual issue may render the various legal arguments advanced on behalf of Mrs Chu (see paras 32 and 34 above) superfluous.

Applicable legal principles

37.  Mr Whitehead SC, who appeared with Mr Chen and Mr Yau for Mrs Chu, referred the court to, firstly, Leung Chin Sing, Rabo & Anr v Ko Chun Hay, Kelvin [2021] HKCFI 2242 at §§41-44 where DHCJ Jin Pao SC summarised the principles relevant to the determination of dispute over the existence of an oral agreement :

“41. Since this case concerns the existence of an alleged oral agreement, and turns on my assessment of the credibility of witnesses, the legal principles on evaluating the truthfulness of an account given by a witness are relevant. …

(1) contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2) in deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(3) regard should be had to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence;

(4) care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness’ character;

(5) witnesses’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be had to their motives and to the overall probabilities.

42. It is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been purely by word of mouth but of which there is no contemporaneous documentary record of any kind. The prevalence of e-mails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint … Because the value of a written record is understood by anyone with business experience, its absence may, depending on the circumstances, tend to suggest that no contract was concluded …”

43. In Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) at [16-20], Leggatt J (as he then was) set out a detailed analysis on the unreliability of human memory and the impact on the civil litigation process on recalling past events. In view of these considerations, at [22], it was held that the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. …

44. I also bear in mind that the burden of proof rests on the Plaintiffs to prove and establish the oral agreement, including the manner in which it was concluded and on the terms as pleaded, on a balance of probabilities. There is no burden on the Defendant to persuade the Court that his alternative version of events should be accepted … ”

38.  Secondly, in Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at §135, Stock JA (as he then was) held as follows :

“135. In this case, the witnesses testified in February 2004. The events about which they testified took place in 1985, 1986 and 1987. That is a gap of 17 years and more. It is that delay, the delay between events and trial, a delay that does not lie at the trial judge’s door, that seems to me to be of particular significance in this case. It is an unusually long gap, for which reason the accuracy of the memory of witnesses was to be approached with especial caution. Comparison with contemporaneous documentation is always an aid to reliability of oral testimony, unless there is reason to believe that the documentation is contrived or materially incomplete; but where the passage of time between events and trial is as long as it was in the present case, and where there is such a host of contemporaneous documentation, as there was in this case, the documentation must, I would have thought, assume a special importance … I do not say that an assessment of the character of a witness plays no part in the fact-finding process, but it is a task that may sometimes be elusive even to the best trained eye and ear, and I would venture to suggest that the truth, in so far as one is able to reach it or, as is sometimes the case, to reach a version of it that is more likely to be correct than not, can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one would expect it to have been created, as well as to inherent probabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known. This is particularly so in a case such as the present, where events have taken place so long before trial and where there exists a mountain of contemporaneous documentation that can be used to point the way … That documentation, as well as conflicts within the evidence, inherent probabilities, and a study of how matters were originally pleaded and asserted in witness statements – these are the factors which in a trial such as this, so long removed from the time of the events in question, were likely to be of particular use in assessing the facts …”

39.  Mr Barlow did not quarrel with these principles but emphasised that they should not be applied rigidly. For evaluation of a witness’s evidence, he referred the court to Northampton Borough Council v Cardoza [2020] 2 BCLC 249 at [37] where Judge Simon Barker QC referred to factors relevant to the evaluation of a witness’s evidence :

“evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure”.

40.  Relying on Mercantile International Group plc v Chuan Soon Huat Industrial Group plc [2001] 2 All ER (Comm) 632 per Andrew Smith, J at [11] and [14]; Applause Store Productions Ltd v Raphael [2008] EWHC 178 per DHCJ Richard Parkes QC at [41]-[43]; and Otuka v Alozie [2006] EWHC 3493 per DHCJ David Donaldson QC at [26]-[29], Mr Barlow submitted that witnesses who signed witness statements which merely replicated the version of events of a party to the litigation or of a primary witness should be treated with special caution by the court. Such replicated evidence should not be regarded as the witness’s own evidence. He simply sang in unison from the same song sheet and had jettisoned the opportunity to provide his own evidence on the subject. In such circumstances, unless corroborated by contemporaneous documents, the “contributions” of the minor singers in the choir carry no evidential weight.

Witnesses

41.  For the Plaintiffs, Mr Ngan, Mr Chris Siew (“Chris”) and Mr Keith Lam (“Keith”) gave evidence as witnesses.

42.  Mrs Chu also gave evidence and called both Jenkin and Hans as her witnesses.

An overview of the evidence

43.  The SPA was not in any way evidenced in writing. The first written record of an allegation made against Mrs Chu that she had given a guarantee on the share price was in a letter from RB dated 3 November 2005 (“RB Letter”), nearly 10 months after the SPA was allegedly made. I shall come back to this letter below.

44.  The trial took place a full 17 years after the events. Plainly, the court has to be very careful with oral evidence which was unsupported by any document. Further, for the reasons stated below, I did not find the evidence of any of the witnesses reliable. Hence, the court has to rely heavily upon inherent probabilities in resolving the key factual dispute.

45.  I shall next set out what was described by Mr Barlow as the context of the Meeting, followed by assessment of the reliability of the witnesses’ evidence and the inherent probabilities.

Context of the Meeting

46.  Firstly, the witnesses were in agreement that in late 2004 and early 2005, the Macau gambling industry was much favoured by investors by reason of the opening up of the market by the government. That climate had generated considerable interest in the acquisition of gambling business. Before the acquisition of the Hotel, Golden Resorts was in the course of acquiring another hotel which operated a casino as part of its business, the Grandview Acquisition. Dr Stanley Ho was the ultimate beneficial owner of that hotel.

(A) Person(s) in control of Golden Resorts

47.  Secondly, it is necessary to look at the person(s) in control of Golden Resorts. It is controversial but I agree with the Plaintiffs that if Mrs Chu was the controlling beneficial owner of the company, there was an incentive for her to give a guarantee over the share price and it may explain why certain things were done.

48.  Fortunately, there were contemporaneous documents which would assist the court in deciding this issue, namely, public documents of Golden Resorts.

49.  Prior to Jenkin’s (via Perfect View) acquisition of a majority stake in Golden Resorts, it was at best a struggling company (described as a “distressed company” by Jenkin) – loss-making and had a very small asset base. Golden Resorts’ principal businesses were “manufacturing and trading of watches and watch components, the provision of electroplating services, investment holdings and property holding”. In the 2003 financial year, the company made HKD140,000 in profits. As of 31 December 2003, it had net assets (or shareholders’ equity) of HKD14.48 million. For the 6 months ended 30 June 2004, it incurred a loss before taxation of HKD3.19 million. For the 2004 financial year, its loss before taxation exceeded HKD11.08 million. Mrs Chu’s brother-in-law was on the board of Golden Resorts as en executive director.

50.  According to Jenkin, he was asked in late 2003 by the staff of Kingston Securities whether he was “interested in acquiring another listed company, ie by way of investment in further distressed assets to which [he] responded positively”.

51.  On 24 December 2003, Golden Resorts and Perfect View entered into a subscription agreement, whereby the latter agreed to subscribe for 5 billion new shares in the former for HKD50 million. Jenkin described this transaction as a “white knight rescue”. At the same time, in order to maintain its public float (following the subscription), Golden Resorts entered into a placing agreement with Kingston Securities to place 543.7 million shares to independent third parties.

52.  Following the completion of the subscription agreement and the placement in April 2004, Perfect View became the largest single registered shareholder of Golden Resorts, holding 67.36% of its issued share capital. The general public held 25% and the shareholding of the previous largest shareholder was reduced from 27.78% to 6.78%.

53.  It should be noted that, firstly, Perfect View’s acquisition of its shareholding in Golden Resorts was entirely funded by Kingston Securities and secured by the shares.

54.  Secondly, in a joint public announcement of Golden Resorts and Perfect View dated 9 January 2004 regarding the latter’s subscription, it was stated that Perfect View “intends that the Group will continue the existing watch business” and that the Golden Resorts’ Board believed that “the personal network of [Jenkin] in the PRC can assist the Company to procure more business”. It appears that Golden Resorts soon changed its direction radically.

55.  Grandview was marketed for sale in around November 2004. According to Jenkin, he was so informed by Mrs Chu. Mrs Chu had existing connections with Grandview in that, out of the 3 syndicates which provided gaming-related services at the hotel casino, she had interests in one of the syndicates and her father had interests in all three.

56.  Golden Resorts’ 11 November 2004 public announcement concerning a placement of shares and a top-up subscription stated :

“The net proceeds from the Top-Up Subscription of approximately HKD91.8 million will be used for possible acquisition of properties, traveling and entertainment related businesses or assets. The Company has commenced a preliminary discussion with a party, who is not a connected person (as defined in the Listing Rules), in relation to the Possible Acquisition.”

57.  Golden Resorts’ 18 November 2004 public announcement concerning a further placement of shares and an additional top-up subscription further explained :

“The net proceeds from the Top-Up Subscription of approximately HKD56 million, together with the net proceeds from the top-up subscription pursuant to the Previous Placing of approximately HKD91.8 million, that is in aggregate of approximately HKD147.8 million, may be used for possible acquisition of an equity interests in a hotel in Macau. The Company has commenced a preliminary discussion with a party … in relation to the Possible Acquisition. … There has not been any progress in the discussion since 11 November 2004.”

58.  It is reasonably clear that the acquisition target was Grandview. The provisional sale and purchase agreement for Grandview at HKD500 million was signed on 24 November 2004 between its owner and Futuremind Holdings Ltd (a wholly-owned subsidiary of Golden Resorts). On the same day, Golden Resorts and Mrs Chu entered into an agreement by which if Futuremind was unable to proceed with the purchase, Mrs Chu would complete the transaction by taking over Futuremind (“Grandview Side Agreement”). It was a very substantial obligation and one which an experienced businessperson would not lightly assume.

59.  Although there was dispute over the precise reason why the Grandview Side Agreement was made, it is reasonably clear that it was a requirement of Dr Ho to ensure the completion of the sale. It says something that Dr Ho chose to trust Mrs Chu rather than the majority shareholder of a listed company, Jenkin.

60.  From January to December 2004, Golden Resorts had 5 major finding raising activities (including Jenkin’s HKD50 million acquisition). They were all conducted with Kingston Securities as the placing agent. In total HKD746.60 million was raised (the vast majority was raised on 3 occasions between 11 November and 17 December 2004), which was a staggering achievement for a company in distress only shortly before those activities. The handsome fundraising was aided by the significant increase of share price from HKD0.01 per share to HKD0.34 per share.

61.  The Plaintiffs accused Mrs Chu of ramping up the share price of Golden Resorts, implying something sinister in the exercise. Jenkin’s evidence was that he had little involvement in the fundraising exercises which were handled by Kingston Group. I have little doubt that Mrs Chu had a pivotal role in the fundraisings but I do not see that being successful in promoting the shares of Golden Resorts in the exercises was inappropriate. It was her job and the evidence showed that some of the placement shares had gone to a well-known institutional investor.

62.  It appears that the optimism over Golden Resorts was fuelled, at least in part, by its anticipated entrance into the Macau gambling business. Jenkin’s evidence was that before the 2 placement exercises in November 2004, he was told by Mrs Chu about the availability of Grandview. On 17 November 2004, the media had already reported the “possible injection of casinos under the Golden Club in Hotel Lisboa or Hyatt Regency Macau [Mr Lee’s business] into [Golden Resorts]”. It is unlikely for such market sentiment to have anything to do with Jenkin, who admitted to having no standing in the Macau hotel and casino industries. More likely than not, it arose from Mrs Chu’s involvement with Golden Resorts and the fact that her father was a serious player in the Macau gambling business.

63.  On 14 December 2004, Golden Resorts made a composite announcement, namely, the Grandview Acquisition, Pefect View’s “gift” of shares to Mrs Chu and Mr Lee (“Share Gifts”), the grant of 8 million warrants by the company to Mrs Chu at the subscription price of HKD0.25 and the change of the company’s name from Medtech to Golden Resorts. Its share price increased by 32.6% from HKD0.26 per share to HKD0.345 per share on that day.

64.  The details of the Share Gifts were as follows. Jenkin’s evidence was that he gifted around one-third of his shares in Golden Resorts to Mrs Chu and Mr Lee (via their corporate vehicles) “as remuneration for their services” in the Grandview Acquisition.

65.  The shares gifted to Mrs Chu and Mr Lee, 1.2 billion shares and 400 million shares respectively, comprised 15.93% of Golden Resorts’ issued share capital following the completion of the Grandview Acquisition. Based on the closing price of Golden Resorts shares on 14 December 2004 of HKD0.26 per share, the Share Gifts were worth around HKD416 million. Based on the closing price on 15 December 2004 of HKD0.345 per share, the Gifts were worth HKD552 million.

66.  On any account, these were exceptionally generous gifts. Apart from the monetary size, by gifting one-third of his own shareholding in Golden Resorts Jenkin had reduced his holding to 26.21%, whilst those of Mrs Chu and her father had increased to 22.51% (including the exercise of warrants by Mrs Chu).

67.  Jenkin’s evidence (supplemental witness statement) was that the Gifts were to reward Mrs Chu and Mr Lee for their services relating to the Grandview Acquisition. However, under cross-examination, Jenkin said that he had problems with the word “services” because it “cause[d] confusion”. He explained that the “most important element” for the Gifts was the Grandview Side Agreement. Such explanation did not appear in Golden Resorts’ announcement (see below) for which, as Chairman, he was responsible. Nor did it feature in Mrs Chu’s witness statements.

68.  The Grandview Acquisition was a deal worth HKD500 million. The value of the Gifts nearly matched that deal, and had exceeded it with the 15 December 2004 share price.

69.  Golden Resorts’ 14 December 2004 public announcement stated that the Share Gifts were gratuitous rewards for Mrs Chu and Mr Lee agreeing “to be consultants of the Company in relation to the management of Grandview Hotel with gaming entertainment in view of their extensive experience in the Macau market”.

70.  Quite rightly, Mr Barlow pointed out that the explanation in the public announcement is difficult to understand. According to which, the 1.6 billion shares were gifts to Mrs Chu and Mr Lee, not consideration under an enforceable contract engaging them as consultants. Thus, Mrs Chu and Mr Lee could resign as consultants and yet still retain the shares.

71.  The Share Gifts may be contrasted with the reward derived by Jenkin as the Chairman and an executive director of Golden Resorts. He received only HKD200,000 in the 2005 financial year in salaries, allowances and benefits. It is noteworthy that Mrs Chu had received HKD2.87 million for the same reasons over the same period.

72.  The evidence does not admit a sound commercial reason for the Share Gifts.

73.  The change of name to Golden Resorts announced in December 2004 was important. Mrs Chu agreed in cross-examination that she chose that name because she wanted a name associated with “Golden” Hall. She agreed to having a plan to inject Golden Hall into Golden Resorts but there was no plan to do so in December 2004.

74.  Such evidence should be considered in the context that, at the time, Mrs Chu was only a 0.67% registered shareholder of Golden Resorts. Even taking into account the Share Gifts and warrants, she and Mr Lee would hold 22.51% of Golden Resorts’ issued share capital, less than Perfect View’s 26.21% shareholding.

75.  The probabilities were that the Company would not have changed its name to Golden Resorts unless there was a reasonable prospect that it would be able to acquire the Golden Hall businesses. That raises the question as to why Golden Resorts would have that expectation unless Mrs Chu and/or her father owned or controlled that Company.

76.  Turning to the SJM Side Agreement, there is no dispute that Mr Ngan and Mr Lee met with Dr Ho on 21 March 2005. Each of Mr Ngan and Mr Lee agreed to transfer 60 million shares in Golden Resorts to Dr Ho to secure his consent to the change of beneficial ownership and representative of the Hotel.

77.  Firstly, why would Mr Lee agree to transfer 60 million shares (worth HKD18.3 million at HKD0.305 per share) of his own shares to Dr Ho? Jenkin was not involved in the SJM Side Agreement at all. One would have expected Mr Lee to ask Jenkin to make the transfer to ensure the smooth completion of the Casa Real Acquisition.

78.  Mrs Chu’s evidence (cross-examination) was that Mr Lee transferred the shares to Dr Ho only on Mr Ngan’s request for “help”. This was contradicted by both her pleaded case and the question put by her leading counsel to Mr Ngan, both of which suggested that the transfer was made pursuant to an agreement. In any case, it did not explain why it Mr Lee should provide the assistance and not Jenkin or even herself who had received a much larger part of the Share Gifts.

79.  In cross-examination, Mrs Chu said that the 60 million shares came from Mr Lee’s own shareholding. On the other hand, according to Golden Resorts’ 2005 Annual Report, Mr Lee’s shareholding had not reduced during the relevant period.

80.  The evidence on the SJM Side Agreement is quite unsatisfactory. It is unlikely that the court had been given a true or complete picture.

81.  On 5 April 2005, Mrs Chu became the Managing Director of Golden Resorts. It was on that day that an Undertaking given by her to the SFC for 24 months lapsed. Although the Undertaking was given in relation to her involvement in Kingston Securities, it is difficult to accept Mrs Chu’s claim in cross-examination that the timing was mere “coincidence”. More likely than not, she was acting with abundance of caution not to attract any attention from SFC over her involvement with Golden Resorts during the period of the Undertaking.

82.  Finally, by 4 transactions which took place from 16 August 2005 to 10 February 2006, Jenkin sold all his shares in Golden Resorts about two years after he became its largest shareholder. According to Mr Barlow’s analysis[5], to which there is no demur from the Defendant, Jenkin had made over HKD500 million from this venture (assuming that he pocketed them all), one which had cost him no capital outlay.

83.  Jenkin was cross-examined on why this business opportunity was introduced to him. It was an opportunity introduced to him when Mrs Chu, according to Jenkin, did not know him. Jenkin was unable to provide a sensible answer to the question which was asked a number of times. His suggestion that it was him who introduced the gambling concept to Mrs Chu and her Kingston Group cannot be taken seriously.

84.  On 6 April 2006, Mrs Chu was appointed the CEO of Golden Resorts.

85.  After Jenkin’s (and Perfect View’s) exist from the Golden Resorts, by July 2006, Mrs Chu and Mr Lee together held 44.06% of Golden Resorts’ issued share capital and she then made the Mandatory Conditional General Offer.

86.  The above evidence established convincingly that Mrs Chu (via Kingston Securities) funded the acquisition of a struggling listed vehicle. She then promoted Golden Resorts with a plan to enter into the Macau gambling business and obtained very handsome funding. She was instrumental in acquiring both Grandview and the Hotel, and had a plan to inject Golden Hall into the Company. Her plan to gain a foothold in the Macau gambling business was achieved with the exit of her nominee (Jenkin) and formally taking control of the Company.

87.  It might well have been the case that Jenkin had a stake in the Company as his reward in the venture. The true picture was not revealed to the court. In any case, there can be little doubt that it was Mrs Chu who was pulling all the strings. See also the findings on the witnesses below.

88.  In the premises, I accept the Plaintiffs’ case that Mrs Chu was, at the time of negotiation over the purchase of the Hotel, the controlling beneficial owner of Golden Resorts.

(B) Negotiations over the terms of the PSPA

89.  There were drafts of the PSPA which evidenced the course of negotiations by the parties. It can be seen from the exchanges in respect of the first two drafts that the negotiations were based on the purchase price of HKD750 million in cash and HKD500 million in shares with the shares valued at HKD0.49 each.

90.  In the Ngans’ reply to the 3^rd draft, they proposed that the consideration be changed to cash of HKD800 million and HKD450 million in shares valued at HKD0.45 each. The 4^th draft, which was prepared by Hans, did not accept those changes. It was the draft taken along by Hans, in the company of Mrs Chu and others, to the Meeting for final negotiation.

(C) Things said by Mrs Chu at the Meeting

91.  Mrs Chu agreed in evidence that she flew over to Macau to attend the Meeting with the expectation of reaching an agreement for the Casa Real Acquisition. She said that most of the terms had been agreed at that time. This is largely supported by the drafts of the PSPA, although I would not agree with Mrs Chu that 95% of the Agreement had been agreed.

92.  At the Meeting, Mrs Chu was accompanied by her husband, Jenkin and Hans. On the other side, there were Mr Ngan, Franky and their senior employees, Chris Siew (“Chris”), Keith Lam (“Keith”), Eric Lo and Rex Chiu.

93.  Mrs Chu agreed that at the early stage of the Meeting, she introduced herself and her father, and explaining her father’s background and experience in the management of VIP gambling rooms in Macau. She also mentioned the Grandview Acquisition. She told Mr Ngan that after the Grandview Acquisition the share price of Golden Resorts was very good.

94.  In answer to question whether she also mentioned that the share price would go up more after the announcement of the Case Real Acquisition, she said that: “I mentioned that the share price goes up very good after the [Grandview Acquisition], but after the [Casa Real Acquisition] whether the price would go up would depend on the market. I did not say that the price of [Golden Resorts] would necessarily be as good as that after Grandview was acquired because it depends on the market.” From that answer, it is reasonably clear (and it was the most natural topic of discussion at the Meeting) that there were discussions between Mrs Chu and Mr Ngan about the anticipated share price movement of Golden Resorts after the Casa Real Acquisition.

95.  Despite her earlier denial about the intention of injecting Golden Hall into Golden Resorts because, inter alia, there was no such plan at the time, Mrs Chu was pressed further: “But that didn’t stop you talking about it, did it, Madam Chu?” She answered: “Maybe I would -- I would tell -- [Mr Ngan] that my father was running the Golden Hall very well. But there was still no plan at the time.” The ambiguous answer suggests that, more likely than not, Mrs Chu at least hinted to Mr Ngan that there was a prospect of injecting Golden Hall into Golden Resorts. This is, again, a natural subject of discussion at the Meeting. It is consistent with her discussion over her father’s business, as well as the fact that Mr Lee was 72 years old at the time and was likely to have considered passing his business to his daughter. I am not persuaded by Mrs Chu’s denial that her father had any plan to retire at the time.

Mr Ngan’s evidence

96.  Mr Ngan was 73 years old when he gave evidence. He was not in the best of health. The court was previously informed[6] that he was suffering form, inter alia, Parkinson deceased. It was apparent that he had some difficulty with the clarity of his speech and that his concentration span was shorter than one might have expected of a normal 73 year old person. However, I did not notice any serious difficulty with his power of comprehension, nor that he was inclined to answer any question in cross-examination without understanding it.

97.  Mr Ngan was clearly an experienced businessman of considerable wealth. Despite his reluctance to admit so, he was investing, directly or indirectly, in a wide range of businesses, including real estate, food processing and telecommunication. As an indication of his wealth, the documents before the court showed that in August 2002 he purchased about HKD200 million worth of shares in a Hong Kong listed company via a corporate vehicle. He was asked about the transaction in cross-examination, but he was unable to recall the amount of money involved because the transaction was handled by a staff. The evidence suggests that HKD200 million was not an unforgettable sum to Mr Ngan.

98.  I do not understand why Mr Ngan was not more forthcoming on his business experience. His reticence cannot, I believe, be explained by modesty.

99.  Mr Ngan was challenged in cross-examination on his credibility. For instance, he was asked why, in his application to give evidence via VCF, his solicitor had filed evidence on his behalf stating that due to his health condition he was staying in Macau and had not travelled outside it. After the evidence was contradicted by Mrs Chu, Mr Ngan filed another affirmation to correct the false picture given to the court. Mr Ngan sought to explain in cross-examination that the variation between the evidence of his solicitor and himself was due to misunderstanding. I am unable to accept the explanation because the solicitor must have been given some instructions before affirming that Mr Ngan had been staying at home since the outbreak of COVID-19. It is inconceivable for her to have given the evidence she did if she had any idea of the information contained in Mr Ngan’s subsequent affirmation. More likely than not, the information given to the solicitor was simply wrong.

100.  I bear in mind that at the time of the transaction Mr Ngan was in his mid-fifties and in good health. Not only was he a businessman of considerable experience, he had the experience of litigation in Hong Kong. His case went all the way to the CFA. Therefore, he was familiar with consulting lawyers and must have known the importance of protecting his business interest with legal advice. It will be seen below that when the inherent probabilities are analysed many of Mr Ngan’s actions were simply not consistent with someone with his background and available resources.

101.  It is convenient to deal with the absence of Franky as a witness for the Plaintiffs. Mr Whitehead submitted that (a) Franky was a critical witness who allegedly was given the oral guarantee on share price by Mrs Chu in the course of negotiations prior to the Meeting; and (b) an adverse inference should be drawn by reason of his absence. I am not inclined to agree. Firstly, there is sufficient evidence to allow the court to come to a factual finding on the central issue in this case. Secondly, there is evidence before the court that Franky was subject to an order of the Mainland court, which arose out of a civil action, which prevented his departure from the Mainland to attend this trial.

Chris’ evidence

102.  Chris was a highly qualified professional. He was a chartered accountant (as well as having a Master degree in accounting and finance) and had worked for one of the top international firm of accountants in both Australia and his home country, Malaysia, as a tax consultant and possibly also on compliance before coming to Hong Kong many years ago. He was Jane’s husband and the CFO of the Hang Huo Group (“Group”) of companies which belonged to the Ngan family.

103.  Chris was an important witness. His involvement with the sale of the Hotel started from the afternoon of the 5^th January 2005 when he, together with Franky, Keith, Mr Eric Lo (“Eric”) and Mr Rex Chiu (“Rex”) discussed the terms contained in a draft PSPA received from Hans. Chris confirmed that the five of them were the senior staff of the Group, and that as the CFO he had special responsibility to look after the financial interests of the Group in the sale. Against that backdrop, I regret to say that the inexplicable features in Chris’ evidence can only be magnified many times over compared with those found in Mr Ngan’s evidence.

104.  Chris accepted that the offer of a guarantee by Mrs Chu, which he was told by Franky, was extremely important. He was taxed in cross-examination about how the guarantee was going to work, eg, its duration, and the following answers were given after he explained that the guarantee was an undertaking that when the value of the Consideration Shares fell below HKD500 million, Mrs Chu would buy them back :

“Q. When would she do that?

A. Whenever.

Q. I’m sorry. Whenever -- no, my question is when would she to that?

A. When we wanted her to do that.

Q. So 10 years’ time, buy back the shares in 10 years’ time? That was the agreement?

A. I think realistically that was not what we were all thinking.

Q. Five years?

A. Probably not.

Q. No idea? You’ve got no idea when; is that right?

A. I wouldn’t say “no idea”.

Q. Would the shares -- would the obligation to buy the shares be automatically triggered as soon as the shares fell below the trigger price?

A. It could.

Q. It could?

A. Yes.

Q. So that’s a possibility, is it?

A. Yes.

Q. If Madam Chu was asked to buy back the shares, how much time did she have to raise the money to do this?

A. It wasn’t stated, or it wasn’t mentioned.

Q. Wasn’t stated. Rather important, isn’t it?

A. Sorry?

Q. It’s a rather important matter, isn’t it?

A. Yes.

Q. Yes. Was there any discussion on this occasion, on 5 January, about any lock-up period?

A. No.

Q. No. Why not?

A. I’m not sure.”

105.  Bluntly, I find it incredible that a highly qualified CFO of the Group (not to mention his wife’s interests in the transaction) would not have raised these matters very shortly, if not immediately, after learning of the offer of guarantee. Such a person would have ensured that his team of senior staff, especially Franky who was one of the negotiators representing the Group, recognised and discussed the issues which required clarification with Mrs Chu before accepting the extremely important offer. There was no evidence that Chris, or anyone of the other senior staff, had taken any such action.

106.  According to Chis’ evidence, he hardly raised any question or took any action about the guarantee offered by Mrs Chu, such as asking for her financial background to be checked to ensure that she would be good for guarantee.

107.  Chris’ evidence was that the decision makers of the Group, Mr Ngan and Franky, went to the meeting in the evening of 5 January 2005 with their advisors, namely, himself, Eric, Keith and Rex[7], and they all believed in what Mrs Chu said to them without any discussion amongst the team. Such evidence is very hard to believe.

Keith’s evidence

108.  He was the VP of the Group since 2005. He was qualified in accounting and worked under Chris. Like Chris, part of Keith’s job was to protect the interests of the Ngan family. Although Keith insisted that his recollection about some of the events of 2005 was very fresh, his evidence suffered from the same fragility as that of Chris. His action or non-action was at odds with his qualification, position held in the Group and common sense.

109.  Keith said that when the senior staff first learned about Mrs Chu’s undertaking on the share price from Franky, they did not believe it. The clear implication is that it was a little too good to be true. Keith regarded the undertaking as a deal-breaker because he had no faith in the shares of a 3^rd or 4^th tier listed company. Inexplicably, none of the senior staff nor Franky discussed about having the undertaking secured in written form (eg, a separate letter) or to check the financial background of Mrs Chu.

Mrs Chu’s evidence

110.  Mrs Chu was educated and lived in the US for over 10 years. Shortly after returning to Hong Kong, she set up and ran Kingston Securities. Three further related Kingston financial companies followed. Kingston Securities had become a successful and well-known securities company in Hong Kong. There is no doubt that Mrs Chu was a sophisticated and able person, as well as a highly successful businessperson.

111.  Mrs Chu was not a forthcoming witness at all. She gave the clear impression of having difficulty in recalling relevant events even with the contemporaneous documents in front of her, eg, the matters concerning the various share placements of Golden Resorts. I do not believe that it can be explained by the passage of time when there was an allegation against her that she was the controlling shareholder of Golden Resorts and had said so at the Meeting. One would expect that a person like Mrs Chu to have availed herself of the relevant information to refresh her mind on those matters before the trial. However, Mrs Chu displayed much hesitation when answering question designed to elicit the identity of the controlling shareholder of Golden Resorts.

112.  I believe that, based on the undisputed documents, a picture had emerged that, contrary to her denial, Mrs Chu was in control of Golden Resorts. The evidence in this regard has been set out above.

Jenkin’s evidence

113.  In the analysis above on Person(s) in control of Golden Resorts, some of the unsatisfactory aspects of Jenkin’s evidence concerning his professed controlling interest in Golden Resorts have been covered. In short, I do not find his evidence credible in light of the contemporaneous documents, and many of his answers in cross-examination were inconsistent with common sense.

114.  There is another inexplicable feature in Jenkin’s evidence. He basically took no part in the negotiations with the Ngans during the Meeting. Instead, the negotiations were conducted by Mrs Chu on behalf of Golden Resorts. Given that the Golden Resorts party went to the Meeting with the expectation of concluding the deal, and it was anticipated that the Ngans would become major shareholders of the company, one would have expected Jenkin to assert himself to them as the person-in-charge. The fact that he did nothing of the sort speaks volumes.

115.  Jenkin had a tendency to give long and irrelevant answers, which suggested that he was evading the questions. There is force in Mr Barlow’s criticism that both Jenkin and Hans were singing from the same songsheet as that provided by Mrs Chu. Their witness statements on what transpired during the Meeting were almost identical with that of Mrs Chu. I do not believe that the issue can simply be explained by the suggestion that the statements were drafted by the same person. Such evidence does not inspire confidence in its reliability.

Hans’ evidence

116.  Like Jenkin, Hans was a well-educated and sophisticated man. His evidence is less important. His role, according to him, was mainly to assist in the drafting of the PSPA. However, his evidence about the Meeting was almost identical with that of Mrs Chu. I do not believe that Hans’ evidence should prevail over the inherent probabilities.

Inherent probabilities

117.  I have set the scene of the Meeting in the discussions on Context above. Mr Barlow forcefully submitted that the Ngans wanted an all cash deal for the Casa Real Acquisition. I am unable to find sufficient evidential support for the proposition. It might have been the initial intention of the Ngans but the draft PSPA demonstrated that they were receptive to receiving shares in Golden Resorts.

118.  I do not believe that being a 3^rd or 4^th tier listed company, as described by the Plaintiffs’ witnesses, was a real deterrence to accepting Golden Resorts shares. The Ngans, with their team of well-qualified advisors, must have considered the recent changes of Golden Resorts’ share price (the contrary suggestion of Keith is rejected as improbable). They would have known that it rose significantly after the announcement of the Grandview Acquisition. They must have been well aware of the attraction of the Macau gambling business to investors at the time. There is no reason to believe that the Ngans would have agreed to sell the Hotel at anything less than the market value. The manner of payment was one of the constituents of the market value.

119.  The Grandview Acquisition provided a reference to gauge the composition of shares in the acquisition consideration. Although it was a smaller hotel, it was owned by Dr Ho who was plainly in a strong bargaining position[8]. Dr Ho was happy to accept Golden Resorts shares as part of the consideration.

120.  The probabilities are that, like Dr Ho, the Ngans were attracted by the prospects of having a stake in Golden Resorts to which (via a subsidiary) they were selling the Hotel. They knew about the significant hike in share price after the announcement of the Grandview Acquisition. Under the favourable environment for investing in Macau gambling business, they probably saw the opportunity as a positive one which may result in enhancement of the return on the Hotel. In any case, the Consideration Shares could be sold if they changed their mind. The above analysis is supported by the fact that the Ngans had subsequently purchased more Golden Resorts (worth HKD6.5 million) with their own money.

121.  The discount over the share price is an important factor which can assist the court in assessing the inherent probabilities of the factual dispute here. It is uncontroversial that the closing price of Golden Resorts shares on 5 January 2005 was HKD0.54. Thus, valuing the Consideration Shares at HKD 0.4545 each represented a discount of about 16%. That was potentially a handsome bonus if the share price remained unchanged. In the case of the Grandview Acquisition, the share price discount was about 23%.

122.  Mrs Chu’s evidence that at the Meeting Mr Ngan only wanted a steeper discount for the share price is supported by the final agreement to value the shares at HKD 0.4545 each (against the Ngans’ counter-proposal at HKD 0.45 (see para 90 above)). I have little doubt that in the course of the negotiations over the final price Mrs Chu was promoting the prospects of Golden Resorts with its plan to Mr Ngan, a task which she was good at judging by her success with Kingston Securities.

123.  In the premises, there is no objective indication of necessity for Mrs Chu to have made a personal guarantee on the share price. The terms of the SPA were almost too good to be true (Keith said that they (the senior staff) suspected that Patrick had lied about it when they heard about the guarantee from him). There was only upside for the Ngans. With the guaranteed share price, they could only stand to gain from any upward price movement, whilst downward movement would cause no loss to them.

124.  I am not convinced by the submission that Mrs Chu was prepared to do anything to conclusion the PSPA on 5/6 January 2005. Whilst she was no doubt keen to conclude that deal, she was unquestionably a shrewd businessperson and would not have exposed herself to very substantial liability without compelling reason. I can find no objective indication of such reason.

125.  The vagueness of the terms of the SPA (see para 104 above) militates against the parties, all sophisticated businesspersons, having reached such an agreement. For instance, why would Mrs Chu agree to an agreement when it was not clear how long her guarantee would last? Chris’ acceptance that such matter would have to be discussed between the parties, and the undisputed fact that there was no such discussion, put paid to the inherent likelihood of the SPA having been made.

126.  The lack of any written record of the SPA is another Achilles’ heel in the Plaintiffs’ case. Assuming that the Plaintiffs were right that at the Meeting Hans said that it was inappropriate to have the SPA recorded in writing because of potential conflict with the Listing Rules, I see no reason for the Ngans to have accepted the suggestion without checking with their own legal advisors. Both Mr Ngan and Chris accepted in cross-examination that their lawyers could have advised them on the legality of the SPA and how to protect their interests thereunder. Given the acceptance by the Plaintiffs that (a) Mrs Chu was a stranger to them; and (b) no financial check was carried out to find out if she was good for the guarantee, the Plaintiffs’ case that they simply accepted what was said is difficult to believe.

127.  I also find it incredible that, given its importance, there was no footprint of the SPA in Mr Ngan’s personal diary, nor in any internal emails passed between Franky and the senior staff. Whatever reason was given as to why the SPA should not be recorded in writing, there was nothing to stop them from discussing it (especially before the Meeting) and thereby leaving some written trail.

128.  I am not convinced by Mr Ngan’s evidence that in Macau an oral agreement was as good as a written one, certainly not one with a stranger involving HKD500 million. Mr Ngan’s own case is that he asked for the SPA to be recorded in writing.

129.  Even if the Ngans were happy to accept the suggestion that the SPA ought not be recorded in writing, there was no evidence of any discussion that it should at least be witnessed by a mutually agreed person. The introducer of Mrs Chu to the Ngans, Mr Lee Chi Keung, might be a suitable person. The Ngans were of equal bargaining power in the Casa Real Acquisition, their complete failure to take any action to safeguard (or try to do so) their interests under the SPA does not sit with common sense.

130.  The RB Letter (see para 43 above) was only written as a response to Next’s threat of legal action against the Plaintiffs for breach of the Deed, which was made as part of the Casa Real Acquisition. The timing and circumstances of the letter are certainly unhelpful to the Plaintiffs’ case. Mr Whitehead also relies on the fact that in the RB Letter it was alleged that the SPA was made between the Plaintiffs and Golden Resorts/Next. I do not find that the inconsistency is necessarily an important one because the identity of the parties to the oral agreement was something which required careful consideration after reviewing the details of the transaction, and the solicitors might not have had sufficient opportunity to do so prior to the issuance of the Letter.

131.  However, the RB Letter may provide an answer to Mr Barlow’s submission that the Plaintiffs lack any motive to advance a false case. They were probably unhappy about the alleged breach of the Deed (which involved a sauna business of the Hotel that was operated by an independent contractor), as well as the fact that Mrs Chu’s projection about the prospects of Golden Resorts’ share price had failed to materialise in a bad way. I can see that once the Plaintiffs had taken a position, they had the means to see it through in litigation.

132.  For these reasons, I am of the view that the inherent probabilities are against the Plaintiffs’ case, and it is rejected. Had I not rejected the Plaintiffs’ factual case, I would uphold their case on having been induced by the Share Purchase Offer to accept the Consideration Shares as part of the consideration for the Hotel (see para 35(2) above). The Offer was so good that any vendor in the Plaintiffs’ position would have been induced by it.

133.  By reason of the rejection of the Plaintiffs’ factual case, there is no need to consider the various legal arguments raised by Mrs Chu.

Disposition

134.  This action is dismissed with costs to Mrs Chu, with a certificate for 2 counsel.

135.  Lastly, I am grateful for the assistance rendered by counsel.