CHOW SAU HEI v. HO KEUNG YUEN, SMART CREATOR INTERNATIONAL LTD

HCMP 716/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 716 OF 2006

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J U D G M E N T

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INTRODUCTION

1. The three proceedings before me concern three companies, Smart Creator International Ltd ("Smart Creator"), Fintasy Ltd ("Fintasy") and Turbo Cheer Development Ltd ("Turbo Cheer").  For ease, I shall, where appropriate, refer to these three companies as “the Companies”.  All three proceedings are petitions brought under section 168A of the Companies Ordinance.  The principal relief sought in each of the actions is that Mr Ho Keung Yuen, 1st Respondent in each of the proceedings, do offer to sell his shares in the relevant company to Mr Chow Sau Hei, the Petitioner in each of the proceedings.  For ease, I shall refer to Mr Ho as "the Respondent" and Mr Chow as "the Petitioner".

2. The petitions relating to Smart Creator and Fintasy were first filed together in April 2006.  After the parties had filed and served their affirmation evidence and provided discovery pursuant to an Order for directions made in each of the proceedings and after a further Order for directions in November 2006 giving leave to set the petitions down for trial, pursuant to an agreement reached between the parties, it was ordered by consent (by Orders of Madam Justice Kwan dated 26 April 2007) that the proceedings be stayed pending the determination of the valuation of the Respondents’ shares in Smart Creator, Fintasy and Turbo Cheer according to the terms set forth in the Schedule attached to the Orders.

3. On 26 May 2008, Madam Justice Kwan ordered by consent that until the hearing of the petitions, a named representative respectively from the Petitioner’s solicitors and the Respondent’s solicitors be appointed joint receivers to enter upon, take possession of, collect and get in and receive the assets of the Companies, with powers to manage the assets to the extent that is unnecessary to save and maximise the interests of the Petitioner and the Respondents.

4. The stay of proceedings imposed by the Orders of Madam Justice Kwan dated 26 April 2007 were lifted by Orders of Mr Justice Harris dated 12 May 2010.  In the meantime, the petition relating to Turbo Cheer was filed on 6 May 2010.  In February 2011, Re‑Amended Petitions relating to Smart Creator and Fintasy were filed.

5. All three petitions are based on the Respondents’ alleged oppressive conduct and breach of duties to the Companies.  I shall consider these allegations in detail below.

THE COMPANIES

6. It is common ground that the Companies were acquired by the Petitioner and the Respondent for the purposes of holding retail shop properties which they had agreed to acquire.  The retail shop properties were then held by the Companies and the only business conducted by the Companies was the holding of these properties and letting them out.

7. The Petitioner and the Respondent each hold 50 % of the issued share capital of Smart Creator and of Turbo Cheer. They are also the only directors of these two companies.

8. The Petitioner holds 5000 shares, being 50 % of the issued share capital of Fintasy.  The Respondent holds 4999 shares whilst his wife holds one share.  The Petitioner, the Respondent and the Respondent’s wife are the only directors of Fintasy.

WITNESSES

9. The Petitioner and the Respondent both gave evidence as did Madam Chu Siu Ping ("Madam Chu").

The Petitioner

10. The Petitioner was born in Hong Kong in 1958.  He is an indigenous villager of Nam Bin Wai, Yuen Long and stated that he had emigrated to Holland in 1974 and had lived there until 1998 when he returned to Hong Kong.  Surprisingly for someone who had lived for 24 years in Holland and who appeared to have international connections or businesses (he claimed to have been at a meeting in Venezuela when he received a telephone call from the Respondent’s wife – see below), the Petitioner claimed that he did not know English.

11. In addition to co‑operating with the Respondent in investing in retail shop properties, the Petitioner also ran another business in Yuen Long.  Indeed, it was through his purchase of a property located at Hong Lok Square in Yuen Long (“the Hong Lok Square Property”) owned by the Respondent for use as the premises of such business that he got to know the Respondent.  The Petitioner appears to have been assisted by his younger brother, Mr Chow Sai On, in relation to his businesses in Hong Kong.  The younger Mr Chow shared at least one bank account with the Petitioner and the Petitioner also testified that he was given signing rights to one of the Petitioner’s bank accounts.

12. The Petitioner did not strike me as being an honest witness.  On certain points, his evidence was blatantly untruthful.  For example, in relation to the transactions involving the acquisition of the properties in Comet Mansion, he claimed not to have known the details of the sub‑sale of the three shops which were sub‑sold when he clearly must have known such details since it was he alone who signed and executed the three Agreements for Sub‑sale and Purchase.  His attempts, under cross‑examination, to explain why he had claimed not to have known such details were wholly unconvincing.

13. Another example of a blatant untruth told by the Petitioner was when he claimed to have no knowledge at all of a guarantee in favour of H P Financial Services (HK) Limited (“H.P.”) in giving instructions to previous his solicitors, Kenneth C C Man & Co ("KCCM"), to write to Top Executive Management Company Ltd (“Top Executive Management”) to seek an explanation as to why such a guarantee had been given when the guarantee had in fact been given in favour of H P for provision of financing to his own business.  When first confronted with this under cross‑examination, he claimed not to have had knowledge of the guarantee at the time when he instructed KCCM to write the letter but to have only learned of it later which again clearly could not be true.  I will refer to other instances of untruthful evidence given by the Petitioner in the course of my discussion of the facts below.

14. The Petitioner also struck me as someone who was prepared to tailor his evidence to match other evidence.  One example of this occurred very early in his evidence when he initially stated, in his 1^st Affirmation[1], that he had come to know the Respondent in August 1999 when he approached the Respondent with a view to purchasing the Hong Lok Square Property.  He then went on to explain that he agreed to make the first co‑investment in property with the Respondent because after acquiring the Hong Lok Square Property from the Respondent, he and the Respondent became closer friends and “[w]hen the value of the Hong Lok Road property subsequently appreciated, I began to place more trust in the Respondent”.  However, he was subsequently forced to accept that this was not the case because in fact the acquisition of the Hong Lok Square Property by him from the Respondent did not take place in 1999 but in the year 2000, at around the same time that the Petitioner and the Respondent agreed to co‑invest in retail shop properties.  I will refer to other instances of the Petitioner changing his evidence in the course of my discussion of the facts below.

15. One other matter caused me concerns about the credibility of the Petitioner.  In the Respondent’s 1^st Affirmation, in support of his explanation that he and his wife had honoured the spirit of the co‑investor relationship between him and the Petitioner, he referred to a deed of trust which he stated had been executed by his wife in favour of the Petitioner in respect of the subscriber’s share in Fintasy which had been transferred to her.  To prove that the deed had indeed been executed, the Respondent exhibited a copy of a fee note rendered by Messrs Au‑Yeung, Cheng, Ho & Tin ("AYCHT") in respect of the deed of trust.

16. In his 2^nd Affirmation made in reply to the Respondent’s 1^st Affirmation, the Petitioner challenged the Respondent’s recollection of the nature of the deed of trust.  He stated that he had approached AYCHT and had obtained a copy of the deed of trust referred to in the fee note exhibited by the Respondent.  He exhibited a copy of the deed of trust and pointed out that it in fact created a trust by Fintasy in favour of Smart Creator in respect of three shop premises located at Lee King Building in Yuen Long which formed the subject matter of the first joint acquisition of investment properties by the Petitioner and the Respondent and which were purchased in the name of and held by Fintasy.  However, despite the fact that he had himself referred to and exhibited the deed of trust to his affirmation, the Petitioner stated that he had been advised that the deed of trust sought to create an interest in land and that since it had not been stamped it was not receivable in evidence.  The deed of trust was, nevertheless, included in the trial bundles.

17. However, at the trial before me, no doubt having taken the view that the deed of trust, if taken into account, would be more favourable to the Respondent’s case, the Petitioner instructed his lawyers to apply to have the deed of trust struck out from the trial bundles (or accepted the advice of his lawyers that this should be done), invoking the provisions of section 15 of the Stamp Duty Ordinance.  Mr John Brewer, who appeared for the Respondents during the main part of the trial, found no answer to the submissions made by Mr Wong and conceded that the deed of trust had to be struck out.  The striking out of the deed of trust from the trial bundles then opened the way for Mr Wong to put to the Respondent in cross‑examination that the reason why two companies (Smart Creator and Fintasy) were used to purchase the properties located at Lee King Building was solely because the Respondent and his wife attempted to cheat the Petitioner by siphoning three shops off to Fintasy.

18. In my view, the above episode demonstrates the willingness of the Petitioner to take steps to ensure that relevant evidence which he considers may be damaging to his case is not placed before the court in order to run a case which he knows not to be true.  In this context, I see the force of the submission made by Mr Chan Chi Hung SC (who started to appear on behalf of the Respondents from 5 December 2011 during the adjourned hearing of the closing submissions), relying on the observations of Cons, JA in Lam Chi v Yip Ching (unreported) CACV No 125 of 1982, Judgment dated 14 December 1982 before Hon Leonard, VP, Cons & Fuad, JJA, that the Petitioner’s counsel should not, as a matter of convention, have taken the stamp duty point.

Madam Chu

19. In her affirmation, Madam Chu described herself as having been employed by the Respondent and his wife as an accountant for their investments and, in particular, the restaurants owned by them, namely, Kando Restaurant, Fu Do Restaurant and Capital Restaurant since 1998.  Although she described herself in her affirmation as having been employed as an accountant, she admitted under cross‑examination that she had only been educated up to Form Five and that she had had no training or professional qualification as an accountant.  She readily conceded that she was in fact just a bookkeeper.  Although she was not employed by the Companies, she assisted the Petitioner and the Respondent by keeping records of the receipts and payments of the Companies.

20. I found her to be a truthful and impressive witness.  She was obviously very familiar with the transactions involving the Companies’ bank accounts and had a good recollection of them.  Despite being subject to very lengthy and wide‑ranging cross‑examination by Mr William Wong, who appeared on behalf of the Petitioner with Mr Harry Liu, her testimony was unshaken and remained wholly convincing.  This was hardly surprising as she was the bookkeeper who assisted the Respondent to keep track of the income and expenditure of the Companies and also of the Respondent’s other restaurant businesses.  She was adamant that although she was not able to operate the Companies’ accounts, she had kept custody of all the bank passbooks and accordingly, she had to bring the passbooks to the bank whenever any withdrawal had to be made.  She was always therefore aware of any withdrawal made.

21. Under cross‑examination, it was also repeatedly put to her that she had read the Affirmations of the Respondent, the suggestion being that her testimony was based on or was tailored to be consistent with his.  I do not find this to be the case.  Madam Chu was the person who was in fact most familiar with all the transactions as she was the person tasked with keeping records of and documents relating to such transactions.  As was made clear under cross‑examination, she was also the person who actually prepared the various tables summarising transactions and payments exhibited to the Respondent’s 3^rd Affirmation. Accordingly, far from having to rely on reading the Affirmations of the Respondent, it was her who must have provided much of the information and underlying materials referred to by the Respondent.

22. It was submitted on behalf of the Petitioner that Madam Chu was "clearly a well‑rehearsed witness”.  I did not have that impression.  On the contrary, I found Madam Chu to have been a spontaneous and candid witness who testified based on her own clear knowledge and recollection of events.

23. An attempt was also made to undermine her credibility by reason of the fact that the last paragraph of her affirmation made reference to “the calculation prepared by me as exhibited here in" when in fact there were no exhibits to her affirmation.  I do not think that too much can be made of this. After all, Madam Chu is someone who was educated only up to Form 5 standard.  She candidly admitted that she was not in fact able to read and understand the affirmations in English and that the contents of her affirmation had to be interpreted and explained to her before she signed the same.  I had in fact asked Mr Brewer why there was reference in that paragraph to an exhibit when in fact there was none.  Mr Brewer was unable to provide me with an explanation.  It is thus obvious that the Respondents’ solicitors had made an error in drafting that paragraph.  That, however, does not in my view undermine the credibility of Madam Chu.  Being a lay person, she can hardly be faulted for not having spotted that in the English draft of her affirmation, there was reference to an exhibit when in fact there was no exhibit to her affirmation.  Indeed, I would very much doubt if a lay person with the education level of Madam Chu (and who has no legal training) would even know what an exhibit to an affirmation is.

The Respondent

24. The Respondent was born in Hong Kong and has lived in Hong Kong his entire life.  He received education only up to primary level.  By the time of the events relevant to the present proceedings, he had set up and was operating a number of restaurants in the Yuen Long area with his wife.  In addition to running his restaurant businesses, he had also invested in retail properties from time to time.  He appears to have a knack for identifying good property investments as demonstrated by the substantial growth in the value of the properties acquired through the Companies.  He had himself also made a healthy profit from the purchase and subsequent sale to the Petitioner of the Hong Lok Square Property within a short period of time (having acquired that property in April 2000 for $4,700,000 and sold it three months later for $5,600,000).

25. Business registration records relating to two of the restaurants set up and operated by the Respondent and his wife, Fu Do Restaurant and Capital Restaurant, show that the businesses of both of these restaurants were set up as partnerships and operated as such.  In the case of Fu Do Restaurant, it appears that for a period of time from September 2004, it was operated through a limited company, Billion Wealthy (Hong Kong) Ltd.  This probably explains the Respondent’s apparent lack of familiarity with the formalities and procedures required of limited companies which he appears to have left to Top Executive Management to deal with.

26. The Respondent appeared to me to be an unsophisticated person and an honest witness.  It was clear from his testimony under cross‑examination that whereas he had a good recollection of most of the main facts and figures, when it came to the formal accounts and draft accounts prepared by the professional accountants, he could not understand them.  Further, in some instances, he readily accepted that he had no recollection or knowledge of minor details and small figures and would need to refer to his records or enlist the assistance of Madam Chu.  However, when it came to the tenancies of the various premises which he had handled, he again demonstrated a clear knowledge of the same and was able to provide very clear explanations as to what happened.

27. In the circumstances, I concluded that where there was a conflict of evidence, I preferred that of the Respondent and Madam Chu to that of the Petitioner.

ACCOUNTING RECORDS & PRACTICE

28. Three items of evidence figured large during the trial.  These were the copies of the passbooks of the savings accounts opened and maintained by the Companies since they were respectively acquired by the Petitioner and the Respondent for the purposes of holding the properties jointly invested in by the Petitioner and the Respondent.  Indeed, they were considered of such importance that large, blown up copies were prepared and provided to the court.

29. There were numerous manuscript markings in pencil made against very many of the printed entries in the passbooks.  Madam Chu explained that it was her who made these manuscript markings in the passbooks and that these markings were made contemporaneously with the transactions or printed entries in the passbooks.  This was her simple and unsophisticated way of keeping records of the transactions involving drawings and deposits into the accounts.  She further explained that she made the manuscript markings in pencil so that if she made a mistake, she could easily erase and correct them.

30. It was suggested to Madam Chu in cross‑examination that the manuscript markings against the entries in the Companies’ savings account passbooks were written post‑litigation and not made contemporaneously, the suggestion, of course, being that these markings did not represent the true or correct description of these entries.  I have no hesitation in accepting her evidence that the manuscript markings were in fact made contemporaneously and represented accurate descriptions of the corresponding entries.  As Madam Chu stated in response to this suggestion, it would not have been possible for her to have made up all these markings post‑litigation.  In this regard, it is important to bear in mind that there are numerous manuscript markings in the companies’ savings account passbooks the truth and accuracy of which are not challenged or even questioned by the Petitioner.  Conversely, the entries or markings which have been challenged or questioned by the Petitioner represent only a small fraction of the very large number of entries and markings in the passbooks and pale in comparison to the number of manuscript markings the truth and accuracy of which are not challenged or questioned by the Petitioner.

31. Furthermore, that these manuscript markings were not made post‑litigation is in fact confirmed by the Petitioner’s own evidence.  Having all along contended that the Respondent had kept him in the dark about the income and expenses of the companies, in his 6^th Affirmation, the Petitioner finally admitted that he had been provided with summaries of income and expenditure of the Companies by Madam Chu.  However, he claimed that he could not recall clearly when he had started to receive these summaries but that it should have been some time in 2004 (that is to say, before any of these proceedings were commenced).  He also claimed that he no longer retained possession of all of the summaries provided to him but claimed that when he received them they were haphazard and confusing.  He then exhibited copies of what he said were samples of the summaries and documents which he admitted had been provided to him by Madam Chu. He did not explain why he had chosen to produce only samples of such summaries. However, even those samples which he did produce show that the Petitioner was provided with summaries of the Companies’ rental income, payments which had been made by the Respondent on behalf of the Companies as well as copies of pertinent supporting documents to back up the summaries.  Most pertinently, included in these documents which the Petitioner admits that he was provided with are copies of pages from the passbooks which bear exactly the same markings as those on the corresponding pages of the full sets of copies of the passbooks which have been adduced in evidence.  This is clear proof that the manuscript markings were not made post‑litigation.

32. The evidence of the Petitioner that it was only some time in  2004 that he was provided with summaries of the Companies’ income and expenditure and pertinent supporting documents (including extracts from the Companies’ savings accounts passbooks) conflicts with the testimony of Madam Chu who testified that she had started to give such documentation to the Petitioner or, in his absence, his younger brother from 2001.  (The Respondent had also adverted to this in affirmation evidence).  She stated that one or two months after the commencement of the business in 2001, the Petitioner had approached her to obtain copies of the relevant documentation and that thereafter, on the 10th of each month, the Petitioner and/or his brother would come and ask for copies of the relevant documentation.

33. I prefer the testimony of Madam Chu to that of the Petitioner.  After all, the Petitioner and the Respondent had agreed to co‑invest only very shortly after they had met.  It would therefore have been natural for the Petitioner to have asked to be provided with details of and documents relating to the income and expenditure of their joint business from 2001.  There would also not have been any reason for the Respondent to have refused to provide such information and documentation to the Petitioner.  It is also inconceivable that the Petitioner would only have waited until 2004 to request to be provided with the same.  Indeed, the Petitioner has provided no explanation as to why, if Madam Chu had not previously provided the relevant information and documentation to the Petitioner, she should have suddenly started to do so in 2004.

FACTUAL FINDINGS

Acquisition of Hong Lok Square Property

34. It is common ground between the parties that the Petitioner got to know the Respondent when the Petitioner approached the Respondent with a view to purchasing the Hong Lok Square Property from him.  It is also not in dispute that the Petitioner had found the contact details of the Respondent through conducting a land search against that property.  However, the Petitioner and the Respondent differed as to why the Petitioner had done this.  The Respondent understood the reason to be that the Petitioner wanted to approach him directly in order to avoid having to pay the estate agent’s commission but the Petitioner contended that he had decided to approach the Respondent directly because the estate agent had taken too long to come back to him.  This is not an issue which needs to be resolved for the purposes of these proceedings and I make no finding on it.

35. The land search records show that the Agreement for Sale and Purchase between the Respondent and Top Graceful Ltd (the corporate vehicle used by the Petitioner to acquire the Hong Lok Square Property) was entered into on 30 June 2000 and registered on 11 July 2000.  The assignment was executed on 24 July 2000 and registered on 24 August 2000.

Acquisition of Lee King Building Properties

36. It is common ground between the parties that shortly after the Petitioner came to know the Respondent as a result of the transaction relating to the acquisition of the Hong Lok Square Property, the Petitioner and the Respondent agreed to co‑invest in the acquisition of five shops, Shops D, E, F, G and H, on the ground floor of Lee King Building in Yuen Long (“the Lee King Shops”).

37. It is also common ground between the parties that Smart Creator was acquired with the intention that it would be used as the corporate vehicle to acquire and hold the Lee King Shops.  An Agreement for Sale and Purchase dated 14 July 2000 was entered into between Macho Company Limited (“Macho”), the vendor, and Smart Creator whereby Smart Creator agreed to purchase the Lee King Shops for a consideration of $38,000,000, with a scheduled completion date of 15 January 2001.  However, eventually, the completion date was moved forward to 10 January 2011 and the acquisition of the Lee King Shops was effected using Smart Creator as the corporate vehicle to acquire Shops D and E whilst Fintasy was used to acquire Shops F, G and H.  Fintasy was a company acquired for the purposes of this transaction and the Respondent and his wife became the only shareholders and directors of this company.

38. There are, however, various disputes between the parties as to the facts and circumstances relating to the acquisition of the Lee King Shops.

39. First, it is the Respondent’s case that his initial interest in purchasing the Lee King Shops arose in May 2000 and was expressed by way of a draft Provisional Sale and Purchase Agreement (“the 1st S&P Agreement”) in which the Respondent’s brother‑in‑law, Mr Cheung Chak Wai, was nominated as purchaser.  This document recorded on its face the receipt of a cheque (numbered 105831) dated 29 May 2000 drawn on HSBC for the sum of $500,000.  It is also the Respondent’s case that on learning from the Respondent of his decision to invest in the Lee King Shops, the Petitioner requested that the Respondent should admit him to join as an equal partner and the Respondent acceded to his request.  The 1st S&P Agreement was then superseded by a further Provisional Sale and Purchase Agreement dated 14 June 2000 (“the 2nd S&P Agreement”) which still named Mr Cheung Chak Wai as purchaser and named Macho as the vendor.  This also recorded receipt of the same HSBC cheque and a further Hang Seng Bank cashier order for $500,000.  There is no dispute between the parties that this latter cashier order was provided by the Petitioner.

40. The Petitioner, however, disputes the Respondent’s version of events and claims that the Respondent and his friend, Mr Simon Cheung, an estate agent, recommended to the Petitioner the purchase of the Lee King Shops in about June 2000.  He claims that prior to this, the 2nd S&P Agreement had been entered into.  The Petitioner disputes the authenticity of the 1st S&P Agreement.

41. It does not appear to me that anything in this case turns on which of these two versions of events is true.  However, I prefer the Respondent's version which appears to me to be more plausible and find that this represents the truth.  I do not see why the Respondent should have made up the existence of the 1st S&P Agreement and the fact that the HSBC cheque is dated 29 May 2000 does support the Respondent’s version of events.

42. A more important dispute between the parties is as to the reason why Fintasy was used to purchase two of the five Lee King Shops.

43. The Petitioner’s case is that it was during discussions between him and the Respondent regarding raising the necessary funding to complete the purchase that the Respondent represented to him that since he had been away from Hong Kong for such a long time, there would be insufficient credit reference for the banks to lend against his name.  He contends that it was at the suggestion of the Respondent that they agreed to the arrangement whereby the Lee King Shops would be split into two lots to be acquired by Smart Creator and Fintasy respectively.  As I have adverted to above, it was put to the Respondent in cross‑examination that the reason why the Respondent suggested this arrangement was solely because the Respondent and his wife attempted to cheat the Petitioner by siphoning three of the Lee King Shops off to Fintasy.

44. The Respondent’s case, however, is that pending the six months to completion, he and the Petitioner had discussions with a number of banks in order to obtain the requisite finance to complete the acquisition of the Lee King Shops.  The Petitioner encountered difficulties in doing so and it was therefore agreed between the parties that the completion of the purchase of the Lee King Shops would be accomplished through two separately funded arrangements.  This was effected through Smart Creator obtaining two loans totalling $12,800,000 from Wing Hang Bank Ltd (“Wing Hang Bank”) whilst Fintasy obtained a loan of $13,500,000 from the same bank.  The Respondent and the Petitioner guaranteed the loans of $12,800,000 granted to Smart Creator whilst the Respondent and his wife guaranteed the loan granted to Fintasy.  The Respondent explained that as it was he and his wife who provided the guarantee for the loan granted to Fintasy, the bank required them to be named as the shareholders on record of this company.

45. The Respondent repeatedly emphasised under cross‑examination that whilst the Lee King Shops were held in the manner described above, with the Petitioner ostensibly having no direct or indirect legal interest in Fintasy or the three shops held by it, he always acknowledged and considered that the petitioner had 50 % interest in the Lee King Shops.  I accept his evidence in this regard.

46. I find that the reason why the acquisition of the Lee King Shops was effected through Smart Creator and Fintasy and not only through Smart Creator as originally intended was as explained by the Respondent.  I wholly reject the Petitioner’s contention that the arrangements were proposed by the Respondent in an attempt to cheat the Petitioner by siphoning off three of the shops.  The Petitioner was at the relevant time a mature businessman.  He maintained and operated bank accounts in Hong Kong.  I find it incredible that he would have simply accepted a representation from the Respondent that since he had been away from Hong Kong for a long time, there would be insufficient credit reference for the banks to lend against his name.  I accept the Respondent's testimony that he had worked with the Petitioner in approaching banks for finance and that they had encountered the difficulty described by the Respondent.  If there had been no difficulty in securing for Smart Creator alone a bank loan (guaranteed by the Petitioner and the Respondent) sufficient to complete the acquisition of all of the Lee King Shops, I find it inconceivable that the Petitioner would have agreed to the arrangements.  Further, the Petitioner could and would easily have taken steps to secure and protect his 50 % interest in the three shops held under the name of Fintasy.

47. As a formal Agreement for Sale and Purchase had been entered into between Macho and Smart Creator on 14 July 2000 whereby Smart Creator had agreed to purchase all five of the Lee King Shops, a Nomination dated 5 January 2001 was executed whereby Smart Creator nominated Fintasy to take up and execute the Assignment in respect of Shops F, G and H.  The Petitioner claimed that this was done pursuant to the Respondent’s suggestion, that he was not aware of nor able to appreciate the technical details concerning the same and that it was only gleaned from documentation which came into his possession subsequently.

48. The Respondent testified that, like the Petitioner, he was not aware of nor able to appreciate the technical details concerning the Nomination but that they had been advised that it was a necessary and proper requirement in order that the three shops, bank funding for which the Petitioner was unable to provide security, could be conveyed to Fintasy.

49. I have little hesitation in accepting the Respondent’s testimony in this regard.  The Nomination is a formal legal document prepared by AYCHT and must have been executed on professional legal advice, not on the suggestion of the Respondent as claimed by the Petitioner.  The Petitioner’s claim that the Nomination was only gleaned from documentation which came into his possession subsequently is clearly false as both he and the Respondent signed the Nomination on behalf of Smart Creator.

50. A major dispute between the parties is as to their respective contributions towards the purchase price of the Lee King Shops and the expenses related to their acquisition.

51. The 2nd S&P Agreement provided that $1,000,000 should be paid upon the signing of the same as deposit, $2,800,000 should be paid upon the signing of the formal agreement for sale and purchase on or before 14 July 2000 as balance of deposit, $3,800,000 should be paid on before 14th of November 2000 as further deposit and the balance of the purchase price should be paid upon completion.

52. In his 1^st Affirmation, the Petitioner stated that the purchase of the Lee King Shops represented the first joint‑venture between him and the Respondent, the understanding between them being that the joint‑venture was to be on a 50‑50 basis in that each would contribute 50 % of the funding necessary for the purchase and in return be entitled to 50 % equity ownership.  He further stated that pursuant to the joint‑venture, both he and the Respondent contributed towards the purchase price for the Lee King Shops in equal shares, save for a sum of $1,000,000 which he had to lend to the Respondent just before completion.

53. In his 1^st Affirmation made in response to the Petitioner’s 1^st Affirmation, the Respondent stated that the initial $1,000,000 deposit was funded equally between the Petitioner and himself.  He further stated that the second deposit of $2,800,000 was paid equally by the Petitioner and himself on 3 June 2000 (he subsequently corrected himself and said that the correct date was 3 July 2000 as was evidently the case) and the further deposit of $3,800,000 was also paid in equal shares.  Referring to a completion Statement of Account which appears to have been prepared by AYCHT (as it referred to "our costs and disbursements" and "cost on account"), the Respondent pointed out that the balance of monies due to AYCHT, after accounting for the initial $1,000,000 deposit, the further deposits totalling $6,600,000, the mortgage loans of $12,800,000 (to Smart Creator) and $13,500,000 (to Fintasy) and AYCHT’s costs and disbursements, was $4,972,628.20.

54. The Respondent then stated that of this balance of $4,972,628.20, he paid $2,000,000 (which made up part of the $4,960,000 shown as "cost on account" in the completion Statement of Account) and $12,628.20 (which was the final "AMOUNT DUE FROM YOU" shown in the completion Statement of Account) whereas the Petitioner paid $2,960,000.  He pointed out that given that he had paid $2,012,682.80 whereas the Petitioner had paid $2,960,000, the Petitioner’s net contribution to cash amounts injected for the purchase of the Lee King Shops exceeded his by $947,371.20.  He therefore acknowledged that he was liable to repay to the Petitioner the sum of $473,658.20 and stated that he had subsequently done so.  Under cross‑examination, he stated that this was done after completion when he and the Petitioner worked out how much he should repay to the Petitioner and he repaid the Petitioner.  He denied that the Petitioner had lent him $1,000,000 over and above paying his share of the balance of the purchase price and pointed out that there was simply no evidence to support the Petitioner’s claim to this effect.

55. In his 2^nd Affirmation (made in reply to the Respondent’s 1^st Affirmation), the Petitioner’s case was re‑formulated as follows:

(1)   The Respondent owed him $473,658.20 “by reason of the additional sum advanced by [the Petitioner] to [the Respondent] personally before completion of the Lee King Shops”.

(2)   He contributed the entire sum of the second deposit of $2,800,000 paid on 3 July 2000.

(3)   The commission of $228,000 paid to the property agency, Centaline, was also advanced by him solely.

Thus, the Petitioner contended the contributions made by him and the Respondent were as follows:

	Contribution by the Petitioner	Contribution by the 1st Respondent
Dates (for paying deposits)
2000-6-13	$500,000.00	$500,000.00
2000-7-3	$2,800,000.00	--
2000-11-10	$1,900,000.00	$1,900,000.00
Commission
2000-12-29	$228,000.00	--
Balance paid on completion
2001-1-9	$1,960,000.00	$1,660,000.00
	$1,000,000.00	$340,000.00
2001-1-15	--	$45,753.20
	$8,388,000.00	$4,445,753.20
Total:	$12,833,753.20

56. The Petitioner’s case in his 2^nd Affirmation was accordingly a significant departure from his case in his 1^st Affirmation.  However, as the Petitioner’s 2^nd Affirmation was the last round of evidence filed before the Order for directions in November 2006 giving leave to set the petitions relating to Smart Creator and Fintasy down for trial, the Respondent did not file any further evidence on this issue in answer to the Petitioner’s new case.  The 5^th Affirmation of the Petitioner filed in 2010 in support of the applications for the stay of proceedings to be lifted and for leave to re‑amend the Amended Petitions did not directly address the issue of the parties’ respective contributions towards the purchase price of the Lee King Properties and the Respondent’s 3^rd Affirmation filed in response thereto accordingly did not directly address the issue either.

57. However, under cross‑examination, the Respondent’s testimony was that his half share of the $2,800,000 paid on 3 July 2000 was paid by way of set‑off for $1,400,000 which constituted part of the $5,600,000 which the Petitioner had to pay him for the purchase of the Hong Lok Square Property.

58. Remarkably, the full significance of the Petitioner’s contention that he had contributed much more to the purchase price of the Lee King Shops only emerged during Closing Submissions when Mr Wong argued that "this court is entitled to and in fact should judicially declared that the Petitioner holds 65.62 % of the beneficial ownership of the shares of the [Companies]" and that if this court were to find for the Petitioner and order a buyout, there should be a "31.43 % discount on account of the parties unequal contributions towards the purchase price of the Companies".

59. These were not contentions which were pleaded in the Petitions (even in the Petitions relating to Smart Creator and Fintasy which were re‑amended in 2011).  Nor were they contentions included in the Petitioner’s Opening Submissions.  Indeed, in these Opening Submissions, in the section headed “Discount”, there was no mention whatsoever of the point. Not only was there no mention of these contentions in the Petitioner’s Opening Submissions, in the section headed “Set‑off”, the Petitioner contended that it would seek directions for setting off against the purchase price (if the court ordered a buyout), inter alia, the sum of $1,000,000 allegedly loaned by the Petitioner to the Respondent.

60. In the circumstances, if I had found in favour of the Petitioner on the Petitions, I would have accepted the submissions of Mr Chan, SC that the above contentions are not open to the Petitioner.

61. In any event, I accept the Respondent’s account of what happened and reject that of the Petitioner.

62. In respect of the $2,800,000 paid on 3 July 2000, I find it incredible that the Petitioner would have contributed an extra $1,400,000 over and above his share of agreed contributions in circumstances where he had only very recently come to know the Respondent through the transaction relating to the Hong Lok Square Property.  The Petitioner has not provided any explanation why he should have done so (he has not even said that this was something requested by the Respondent) nor has he explained why he had deposed to the fact that both parties had contributed equally to the purchase of the Lee King Shops in his 1st Affirmation.  I find it inconceivable that if the Petitioner had indeed contributed $1,400,000 more than the Respondent, he would have forgotten this when making his 1st Affirmation.

63. Conversely, in the context of the factual scenario, the Respondent’s account is far more plausible.  The payment of $2,800,000 was made just three days after the Agreement for Sale and Purchase relating to the Hong Lok Square Property was entered into between the Respondent and Top Graceful on 30 June 2000 and three weeks before the completion date on 24 July 2000.  Further, the Petitioner has not explained why, if the payment of $2,800,000 was purely as the Petitioner’s contribution towards the purchase of the Lee King Shops and not as partial payment of the purchase price for the Hong Lok Square Property, the payment should have been made on 3 July 2000 when the 2nd S&P Agreement provided that this needed only to be paid by 14 July 2000 upon the signing of the formal agreement for sale and purchase.

64. Mr Chan, SC submitted that if the Petitioner had an explanation as to how he had paid for the Hong Lok Square Property, he should be recalled and the Respondent’s case be put to him.  Mr Chan, SC further challenged and invited the Petitioner to produce any document to rebut the Respondent’s case and to show how the Petitioner had otherwise paid for the Hong Lok Square Property.  None was produced nor was the Petitioner asked questions about this when he was subsequently recalled.

65. The only document which the Petitioner was able to produce and rely upon was the Assignment dated 24 July 2000 in which the Respondent acknowledged receipt of the consideration of $5,600,000.  I do not believe that this document is in any way conclusive as the Respondent merely acknowledged that by the date of the Assignment, the full consideration had been received but there is no indication as to when or how such consideration had been paid.  After all, as is demonstrated by all the other conveyancing transactions considered during the trial, it is normal practice in conveyancing transactions for a deposit/deposits to be paid upon the execution of the Agreement for Sale and Purchase and for the balance of the consideration to be paid on completion.

66. As regards the Petitioner’s claim in his 1^st Affirmation to have lent $1,000,000 to the Respondent, in his 2^nd Affirmation, latching onto the Respondent’s evidence in the Respondent’s 1^st Affirmation, this had morphed into an allegation that Respondent owed him $473,658.20 “by reason of the additional sum advanced by [the Petitioner] to [the Respondent] personally”. I accept the Respondent’s account of what happened and find that instead of there having been any loan of $1,000,000 having been made by the Petitioner to the Respondent, what happened upon completion was that the Petitioner’s net contribution exceeded the Respondent’s by $473,658.20.  I also accept the Respondent’s testimony that this had been repaid to the Petitioner.  It is otherwise strange that there is no evidence that the Petitioner had chased the Respondent for repayment of this large amount of money, especially since the Petitioner and Respondent had only recently got to know each other and had agreed that their respective contributions should be equal.  Further, it was over a year before the Petitioner and the Respondent again co‑operated to make another investment (see below).

ALLEGED UNAUTHORISED OVERDRAFT FACILITY

67. It is convenient at this juncture to consider one particular aspect of the Petitioner’s allegations of oppressive conduct and breach of duties.

68. In the Re‑Amended Petition relating to Fintasy, the Petitioner complained that in breach of his duty is to Fintasy, without any knowledge or consent whatsoever on the part of the Petitioner, the Respondent had “purportedly” caused or procure Fintasy to apply for and obtained an overdraft of $500,000 from Wing Hang Bank.  It was also alleged that in further breach of their duties to Fintasy, the Respondent and his wife had failed and refused to account to the Petitioner and Fintasy as to how the said overdraft have been utilised by the Respondents without any knowledge or consent on the part of the Petitioner.

69. The overdraft in question in fact formed part of the credit facilities applied for by Fintasy in the context of the acquisition of the Lee King Shops.  By its letter dated 2 January 2001 addressed to Fintasy (“the Facility Letter”), Wing Hang Bank referred to “our recent discussions” and stated that they were pleased to confirm their agreement to extend to Fintasy the credit facilities referred to in the letter.  These were stated to be an overdraft facility of $500,000 and an instalment loan of $13,500,000.  The instalment loan was, of course, the loan which was obtained by Fintasy as discussed above.

70. In his 2^nd Affirmation, the Petitioner alleged that he was first told of the Respondent and his wife using overdraft facilities by Top Executive Management (although it is not clear when he contends that he was told this by Top Executive Management).  He then claimed to have seen for the first time from perusing the Facility Letter exhibited to the Respondent’s 1^st Affirmation the existence of the overdraft facility of $500,000 and complained that the Respondent and his wife had not provided any explanation as to what happened to the overdraft.  He claimed that he was not aware of this overdraft and had never received any account from the Respondent for the application of the money.

71. The Respondent’s testimony under cross‑examination was that the Petitioner was aware of the overdraft facility as he was with the Respondent and his wife at the bank going through the formalities of applying for and obtaining the credit facilities for Smart Creator and Fintasy.  The Respondent further stated that the Petitioner was also subsequently with him and his wife at the solicitors’ office and through this attendance will also have known of the overdraft facility.

72. Additionally, the Respondent testified that the Petitioner agreed to the Respondent and his wife using the overdraft facility on condition that they should provide assistance to him to obtain a loan for him to use for the decoration of the Hong Lok Square Property for the use of his business and to purchase equipment.  The Respondent stated that they had in fact abided by this agreement by providing a guarantee in the sum of about $1,000,000.

73. I accept the Respondent’s testimony and find that the Petitioner was indeed aware of the overdraft facility and had agreed to the Respondent and his wife using the same.  In this regard, it is noteworthy that the Petitioner did not dispute the Respondent’s evidence that pending the six months to completion, the Petitioner and the Respondent had had discussions with a number of banks in order to obtain the required finance to complete the purchase of the Lee King Shops.  This is entirely consistent with the Respondent’s testimony that the Petitioner was with the Respondent and his wife at the bank going through the formalities of applying for and obtaining the credit facilities for Smart Creator and Fintasy through such an attendance learned of the application for and grant of the overdraft facility.  Indeed, I find it incredible that the Petitioner did not have sight of the Facility Letter until perusing it for the first time as an exhibit to the Respondent’s 1^st Affirmation.

74. Further, the Respondent’s testimony that the Petitioner had agreed to the Respondent and his wife using the overdraft facility on condition that they should provide assistance to him to obtain a loan for him to use for the decoration of the Hong Lok Square Property for the use of his business and to purchase equipment is consistent with and supported by the undisputed evidence that Fintasy had in fact arranged for Wing Hang Bank to provide a letter of guarantee to Compaq Financial Services (Hong Kong) Ltd (“Compaq”) in consideration of Compaq agreeing to grant credit facilities in respect of goods ostensibly to be supplied to Fintasy.  It is not in dispute that those credit facilities were in fact made use of by the Petitioner’s own personal business.  Further, as discussed above, Fintasy had also procured the provision of a similar guarantee to H P for provision of financing to the Petitioner’s own personal business.

75. I am of the view that there would have been no reason for the Respondent and his wife to have arranged for Fintasy (whose credit facilities from the Wing Hang Bank were guaranteed by the Respondent and his wife) to procure the provision by Wing Hang Bank of the letters of guarantee unless this was done as a quid pro quo for the Petitioner agreeing to Fintasy applying for and obtaining the overdraft facility for use by the Respondent and his wife as stated by the Respondent.

76. I therefore find that the Petitioner’s complaints that the Respondent had acted in breach of his duties to Fintasy in causing or procuring Fintasy to apply for and obtaining the overdraft facility and that the Respondent and his wife had acted in further breach of their duties to Fintasy by failing and refusing to account to the Petitioner and Fintasy as to how the said overdraft have been utilised by the Respondents without any knowledge or consent on the part of the Petitioner are not made out.

FURTHER FACTUAL FINDINGS

Tung Choi Street Property

77. In his 1^st Affirmation, the Petitioner stated that in about January 2002, the Respondent approached him and tried to persuade him to jointly purchase with him another property at Tung Choi Street (“the Tung Choi Street Property”) for a consideration of $13,500,000 and also on a 50‑50 basis.  He claimed that he went to the Standard Chartered Bank to apply for a mortgage to finance the purchase and was surprised when, a few days later, the bank manager replied by saying there would be a problem lending if the property was to be purchased in joint names but that it would not be a problem if he were the sole purchaser.  He therefore purchased the property by himself.

78. Interestingly, the Petitioner went on to say in the same paragraph of his affirmation that a sum of $500,000 was paid into the account of the Respondent’s Capital Restaurant because on 26 February 2002, when he was in Venezuela, the Respondent's wife had telephoned him to ask “in desperation” for a loan of this amount.  He claimed that she had said that she could not find the Respondent and was in urgent need of money.  He claimed that he therefore agreed and asked his younger brother to deposit the money into the account of the Respondent’s Capital Restaurant on 27 February 2002.

79. The Respondent, however, disputed the Petitioner’s account and stated that it was he who initially signed a Provisional Sale and Purchase Agreement to purchase the Tung Choi Street property in September 2001 at an agreed purchase price of $13,500,000, paying an initial deposit of $500,000.  The Respondent stated that it was the Petitioner who subsequently approached him to request to be permitted to become an equal co‑investor whereupon he agreed and the Petitioner paid a further $500,000.  The balance of $350,000 of the required 10 % deposit comprised funds drawn from Fintasy as to $150,000 on 31 August 2001, Smart Creator as $150,000 on 31 August 2001 and Fintasy as to $50,000 on 11 September 2001.

80. The Respondent went on to state that as the completion date approached, the Tung Choi Street Property had already risen in value and the Petitioner then informed him that the Standard Chartered Bank would offer a lower interest rate on the required property loan, but had insisted that the property would have to be purchased ostensibly by the Petitioner alone.  He agreed to this course of action on condition that the Petitioner honoured the co‑investment spirit of their arrangement and promised eventually to repay half the profit to him on resale.

81. The Respondent explained that the sum of $500,000 paid into the account of the Respondent’s Capital Restaurant on 27 February 2002 was not a loan to the Respondent’s wife as the Petitioner claimed but that it was reimbursement of the initial deposit of $500,000 which the Respondent had paid.  The Respondent further stated that the Petitioner asked him to account for the remaining $350,000 shared deposit as dividend equally to be drawn from Fintasy and Smart Creator.

82. The Respondent pointed out that the Petitioner had also withdrawn $60,000 from Smart Creator and $40,000 from Fintasy on 18 February 2002 in order for him to fund the completion of the purchase of the property.  Additionally, the property agent’s commission for the purchase of the property was paid on 30 January 2002 by a withdrawal of $40,000 from Smart Creator’s bank account and on 25 March 2002 by a withdrawal of $41,000 from Fintasy’s bank account.  The Respondent explained that although the payments had been made on those dates, the relevant receipts were not issued until 8 April 2002 and 4 October 2002.  However, although the property had eventually been purchased by the Petitioner alone, the Petitioner had not reimbursed to Smart Creator or Fintasy the amounts paid as commission.

83. In his 2^nd Affirmation, the Petitioner’s account regarding the purchase of the Tung Choi Street Property changed.  He claimed that in around August 2001, when the Provisional Sale and Purchase Agreement was executed, he was in Holland.  He claimed that the Respondent had called him and asked him if he might be interested in jointly purchasing the Tung Choi Street property.  He said that he gave the Respondent the go‑ahead and asked him to use the money from Fintasy and Smart Creator for the purchase.  He claimed that since reading the Respondent’s affirmation, he had retrieved relevant bank statements and was able to remember that the initial discussion on the purchase of the Tung Choi Street property took place in or about August 2001 and not January 2002 which he had previously stated in his 1^st Affirmation.

84. The Petitioner then referred to the Respondent’s account of having put down the initial deposit of $500,000 using his own money which was repaid to him when the sum of $500,000 was paid into the account of Capital Restaurant.  The Petitioner did not directly dispute or affirm what the Respondent had said.  Instead, he claimed that shortly after receiving the call from the Respondent, he had instructed his brother to withdraw a sum of $500,000 from his account which he did on 21 August 2001.  However, remarkably, the Petitioner stated that he was unable to recall if this had been used to fund the initial deposit, that he was still making enquiries with his bank and that as at the date of his 2^nd Affirmation (24 August 2006), he was still awaiting the bank’s reply.

85. The Petitioner confirmed that the balance of the deposit of $850,000 was paid in the manner described by the Respondent.

86. The Petitioner’s account of why the property had been purchased by him alone also changed from that set out in his 1^st Affirmation.  He stated that the Respondent had originally planned to resell the property prior to completion in order to reap a quick profit as confirmor.  However, despite all efforts and attempts, the respondent was not able to find a purchaser prior to completion which was originally scheduled for 8 January 2002.  Accordingly, the Respondent requested for an extension of the completion date to February to which the vendors agreed subject to the payment of an extra 5 % of the purchase price ($675,000).  The Petitioner produced documentation evidencing the payment of the said sum into the account of AYCHT on 7 January 2002.  He went on to state that as the Respondent still could not find a purchaser in February 2002 or obtain bank financing for the completion, he had to let go of the transaction and asked him to take it up instead only a few days before completion.

87. The Petitioner also produced a copy of a letter from the Standard Chartered Bank offering an investment loan to him to complete the purchase of the property three days before the original completion date.  He went on to say that the Respondent wanted more time to see if he could find a buyer and that the completion was subsequently postponed even though he could have just taken up the purchase himself, having already contributed most of the money and obtained the Standard Chartered Bank’s offer to lend him the balance of the purchase price by then.

88. The Petitioner disputed the Respondent’s account of the events as I have set out in paragraphs 80 and 81 above.  However, he provided no explanation as to how, according to him, the payments totalling $350,000 from the accounts of Smart Creator and Fintasy towards the deposit would be accounted for.

89. As regards the sums of $60,000 and $40,000 withdrawn from the accounts of Smart Creator and Fintasy respectively, the Petitioner claimed that the Respondent had told him at the time that they were part repayment of what the Respondent owed the Petitioner.  He further claimed that as he did not have possession of any of the bank savings passbooks and the sums were given to him in cash, he had no knowledge that they had in fact been taken from Smart Creator and Fintasy.  He then produced a copy of his bank account statement to show that there was sufficient money in his account at that time and that no assistance was needed for the additional sums of $60,000 and $40,000.

90. As submitted by Mr Chan, SC, the transaction relating to the acquisition of the Tung Choi Street Property is not directly pertinent to the complaints by the Petitioner of unfair prejudice.  Accordingly, whilst the Petitioner has provided differing accounts as to the circumstances under which he came to purchase the property in his own name, which accounts in turn differ from that of the Respondent, it does not appear to be necessary for me to express any view as to which of these accounts I prefer.  However, the allegations relating to the payments of money do have relevance and I set out my findings below.

91. I find that the Petitioner did not pay the initial deposit.  It is clear that the initial deposit was paid upon the execution of the Provisional Sale and Purchase Agreement in September 2001.  I note from the copy of the Provisional Sale and Purchase Agreement that it was noted that the initial deposit was paid by means of a “KPB Cashier’s Order”.  There is evidence that at the relevant time, the Respondent’s Capital Restaurant maintained an account with the Kwangtung Provincial Bank whereas the Petitioner maintained an account with the Hang Seng Bank.  Further there is a vast amount of documentary evidence showing that when the Respondent made payments, they were very often made from the accounts of his restaurants including the Capital Restaurant.  There is no evidence that the Petitioner maintained an account with the Kwangtung Provincial Bank.  In the circumstances, I find that the reference to "KPB” was a reference to Kwangtung Provincial Bank and that it was the Respondent who paid the initial deposit.

92. I also accept the Respondent's explanation that the $500,000 paid into the account of Capital Restaurant by the Petitioner on 27 February 2002 was not a loan to the Respondent's wife as he claimed but was in fact the repayment of the initial deposit which the Respondent had paid.  I find it incredible that the Respondent’s wife would have not been able to find the Respondent and therefore had to seek a loan “in desperation” from the Petitioner.

93. In this regard, I have borne in mind the observation I have made above that in his 2^nd Affirmation, the Petitioner did not directly dispute or affirm what the Respondent had said. Instead, he had merely stated equivocally that he had instructed his brother to withdraw a sum of $500,000 from his account, had produced a bank account statement showing that such sum had been withdrawn on 21 August 2001 and had very surprisingly stated that he was unable to recall whether this amount had been used to fund the initial deposit.  Furthermore, whilst he said that he was still making enquiries with this bank and awaiting the bank’s reply as at the date of his 2^nd Affirmation, there was no further evidence from him on this issue even by the time of the trial.  There is much force in Mr Chan, SC's submissions that the Petitioner’s approach to this issue was illustrative of the manner in which the Petitioner had tried to keep his options open with a the view to seeing whether he could drum up a case.

94. Further, if the payment of $500,000 made to Capital Restaurant was not repayment of the initial deposit on the Tung Choi Street Property and had nothing whatsoever to do with that transaction, it is also curious that the Petitioner would have mentioned it in the same paragraph and the same section of his 1^st Affirmation in which he dealt with the transaction relating to the Tung Choi Street Property.

95. Whilst the Petitioner himself had stated in his 2^nd Affirmation that he could not remember whether he had paid the initial deposit of $500,000, Mr Wong sought to argue that the Nomination dated 24 January 2002 by which the Respondent formally transferred to the Petitioner his rights to purchase the Tung Choi Street Property from the vendor under the Agreement for Sale and Purchase dated 12 September 2001 was evidence that the Petitioner had in fact paid the $500,000 initial deposit.  Specifically, he pointed to the clause in the Nomination in which the parties to the Nomination stated that they "confirm and declared that part payments of the purchase price to be paid by the Nominator were in fact paid by the Nominee or have been repaid by the Nominee to the Nominator prior to the date hereof (as the case may be)".

96. The Nomination was put to the Respondent in cross‑examination and he candidly stated that he did not have very much idea about the clause in the Nomination relied upon by the Petitioner.  However, he reiterated that as far as he could recall the formal sale and purchase of the Tung Choi Street Property took place on “20 something” February and that the Petitioner had reimbursed the $500,000 a few days after that.  This is consistent with the date of the assignment of the Tung Choi Street Property (22 February 2002) and the date when the Petitioner arranged for the payment of $500,000 into the account of Capital Restaurant (27 February 2002).

97. I accept Mr Chan, SC's argument that the Nomination was necessary to transfer to the Petitioner his rights to purchase the Tung Choi Street Property and to be effective, it would have to state that the part payments of the purchase price to be paid by the Nominator had in fact been paid by the Nominee or had been repaid by the Nominee to the Nominator and that the fact that the relevant clause put these in the alternative made it clear that it was not so much to record as to what had actually happened but to accomplish the effect of the Nominator renouncing all his rights in favour of the Nominee.  As further submitted by Mr Chan, SC, as the Petitioner and the Respondent were working together at the time, it was not surprising that the Respondent would have signed the Nomination notwithstanding that the Petitioner had not in fact already repaid to him the $500,000 but would only do so about a month later.

98. With regard to the drawings which the Respondent explained were made from the accounts of Smart Creator and Fintasy towards payment of the property agent’s commission as well as the drawings made from these accounts on 18 February 2002, I find that they were made for the purposes stated by the Respondent.  In respect of the drawings made for payment of the property agent’s commission, the manuscript markings made by Madam Chu in the bank passbooks clearly state that these drawings were for “中原佣通菜”.  In respect of the drawings made on 18 February 2002, the manuscript marking on the Smart Creator passbook was “小周恒生” and that on the Fintasy passbook was also “小周” followed by certain characters which are not legible on my copy of the same.  I believe and I find that the reference to “小周” was a reference to the Petitioner’s younger brother, Mr Chow Sai On.

99. I have made findings above that the manuscript markings on the savings accounts passbooks of the Companies were made by Madam Chu contemporaneously and that extracts from these savings accounts passbooks were periodically provided to the Petitioner or, in his absence, his younger brother.  In those circumstances, if the drawings had not been made for the purposes stated by the Respondent, the Petitioner will undoubtedly have queried the same.  There is no evidence of this happening.

100. On the contrary, the copy of a bank account statement produced by the Petitioner show that a cash deposit was made into the Petitioner’s Hang Seng Bank account on the very day when the withdrawals were made from the accounts of Smart Creator and Fintasy.  Further, the testimony of Madam Chu under cross‑examination, which I accept, was that on the day in question, she had brought the passbooks of Smart Creator and Fintasy to the Wing Hang Bank where she had met the Respondent and Mr Chow Sai On.  The sums of $60,000 and $40,000 were then withdrawn from the accounts of Smart Creator and Fintasy respectively and handed to Mr Chow by the Respondent.  She also explained that she had written “恒生” in the Smart Creator passbook because Mr Chow had told her that he was going to the Hang Seng Bank (which was very close to the Respondent’s Kan Do Restaurant) and they had walked together until she reached the restaurant and he went to the Hang Seng Bank.  If the account provided by Madam Chu of what happened is untrue, it is inexplicable that she would have known that the two amounts had been paid into the Petitioner’s Hang Seng Bank account.

101. I also agree with Mr Chan, SC that the fact that the $100,000 was paid into the Petitioner’s bank account on 18 February 2002 (just three days before the petitioner had to make payment to AYCHT to complete the purchase of the property) and around the time when the Petitioner was obviously gathering funds into his account from different channels to pay the completion money is further support that the $100,000 had in fact been made available to the Petitioner to assist him to fund the purchase.

102. I also note that the undisputed withdrawals of $150,000 each from the respective accounts of Smart Creator and Fintasy on 31 August 2001 were marked as “訂旺角” and of $50,000 from the account of Fintasy on 11 September 2001 was marked as “旺角訂” which is further support for my finding that the manuscript markings made in the bank account passbooks of the Companies were made contemporaneously and are accurate.

103. The last point relating to the acquisition of the Tung Choi Street Property pertains to the Petitioner’s claim to have paid $675,000 to obtain an extension of the completion date.  In the Petitioner’s Closing Submissions, the point was made that this $675,000 was clearly in addition to the purchase price of $13,500,000 which, it was argued, had already been accounted for by other payments totalling $13,546,250.  In his submissions, Mr Chan, SC pointed out that the figure of $13,546,250 was an erroneous calculation and that the sums paid (apart from the $675,000) only totalled $13,506,250 and that even taking into account the $675,000, the total paid was $13,721,250 which, Mr Chan, SC argued, merely represented the original price of $13,500,000 plus stamp duty and legal fees.  On this basis, Mr Chan, SC argued that this was another illustration of the Petitioner’s fabrication of cases by taking advantage of what the documents might, when divorced from their factual context, on their face show.  In reply, Mr Wong pointed out that Mr Chan, SC's calculation were incorrect but when I asked him what the correct calculation should be, he was unable to assist.  However, he submitted that this was simply a side issue.

104. I agree with Mr Wong that this is a side issue and I do not propose to make any finding on Mr Chan, SC's submission that the Petitioner had deliberately fabricated a case based on an incorrect calculation.

Shareholding in Fintasy

105. In his 1^st Affirmation, the Petitioner claimed that initially, he was content to be a passive investor as he had to travel to and from Holland.  He claimed that when he finally began to wrap up his business in Holland and decided to return to Hong Kong, he sought to participate more in the operation of Smart Creator and Fintasy.  He therefore began to ask the Respondent when he would transfer his portion of shares in Fintasy to him but the Respondent was evasive and avoided giving him an answer.  He claimed that in around June 2002, he sought the advice of a professional accountant and had her prepare some instruments of transfer and contract notes for signature by the Respondent.  He claimed that the Respondent refused to sign, with the explanation that he should trust him and then he would not cheat him under any circumstances, banging emphatically on the table as they talked.

106. The Petitioner also claimed that it was only after he threatened that he would not complete the transaction relating to the purchase of certain shop premises in Comet Mansion in Yuen Long (see below) unless the Respondent first procured the transfer to him of his 50 % shareholding in Fintasy that the Respondent finally agreed to have his shareholding transferred to him.  Two shares in Fintasy were then allotted to the Petitioner.

107. The Respondent disputed the Petitioner’s account and stated that it was not true that he had been evasive when the Petitioner handed him an instrument of transfer and contract note and requested that he effect a transfer of the Fintasy share held by his wife to the Petitioner.  He stated that he explained that any transfer first required the approval of the mortgagee bank as his wife continued to provide a guarantee to the bank but that the Petitioner had refused to accept this explanation.  He said that it was however true that he had assured the Petitioner that he would not cheat him under any circumstances.

108. The Respondent also stated that the Petitioner’s claim that he was able to use the threat of refusal to complete the transaction relating to the shop premises at Comet Mansion to force the Respondent to allot shares in Fintasy to him made no sense because it was the Petitioner himself who had asked if he could participate as equal co‑investor after the Respondent had identified the opportunity to invest in these shop premises and had arranged for his daughter, Gloria Ho, to enter into a Preliminary Agreement for Sale and Purchase relating to the same.

109. The Petitioner's response was that the Respondent had never told him the reason why he would not procure the transfer of the shares in Fintasy back to him.  However, he stated that he believed that the reason was so that the Respondent and his wife could continue to enrich themselves at his expense.

110. On the issue as to whether the Respondent had only acceded to his request to have shares in Fintasy allotted to him upon his threat of refusal to complete the transaction relating to the shop premises at Comet Mansion, the Petitioner’s testimony was that it was the Respondent who had approached him and tried to persuade him to buy the properties in Comet Mansion and that they had negotiated about this.  He further stated that as he was one of the joint signatories to Smart Creator and given the substantial contribution that Smart Creator made towards funding the transaction, his cooperation was vital.

111. I prefer the testimony of the Respondent and find that he did in fact explain to the Petitioner that any transfer of the share in Fintasy held by the Respondent's wife would require the approval of the mortgagee bank.  After all, it was because the Respondent’s wife had to be the guarantor of the loan granted to Fintasy that she was required to become a shareholder.  It therefore made perfect sense that the Respondent would have told the Petitioner that the mortgagee bank’s approval would be required for the transfer of the share to the Petitioner.  Conversely, there was no good reason why the Respondent would have tried to be evasive and not to have provided an explanation.  In my view, that the Respondent did explain is also evidenced by the manner in which the Petitioner was given his 50 % interest in Fintasy - two shares were allotted to him as opposed to having the share held by the Respondent’s wife transferred to him as was initially intended by the Petitioner (the Petitioner’s testimony being that the accountant he had instructed in June 2002 had prepared instruments of transfer and contract notes).

112. The Petitioner’s alleged belief that the reason why the Respondent had allegedly refused to transfer the share to him was so that the Respondent and his wife could continue to enrich themselves at his expense is, in my view, speculation unsupported by any evidence or facts and I reject the Petitioner's contention.

113. I also reject the Petitioner’s contention that the Respondent only acceded to his request to have shares in Fintasy allotted to him through his threat not to complete the Comet Mansion transaction.  I accept the Respondent’s testimony that it was he who identified the opportunity to invest in the Comet Mansion shop premises and that it was the Petitioner who had asked if he could participate as equal co‑investor after he had done so.  The fact that both the Preliminary Agreement for Sale and Purchase dated 20 December 2002 as well as the Agreement for Sale and Purchase dated 16 January 2003 were entered into by Gloria Ho is consistent with and supports the Respondent’s testimony in this regard.  Further, it is the Petitioner’s own evidence that the Respondent had explained to him that because of the increase in value of the Lee King Shops since their purchase, sufficient external borrowing could be raised without the Respondent and the Petitioner having to contribute any additional cash from their own pockets.  In those circumstances, the Petitioner evidently had very strong motivation and incentive to participate in the investment and I do not believe that he would have used or that he actually used a threat to refuse to complete the transaction to procure the allotment of the Fintasy shares to him.

Comet Mansion Shops

114. It is common ground between the parties that they utilised Turbo Cheer to acquire and hold the shop premises in Comet Mansion in Yuen Long which they acquired.  By the Preliminary Agreement for Sale and Purchase entered into on 20 December 2002, the vendor, Festival Land Investment Ltd ("Festival Land"), agreed to sell to Gloria Ho Shops 1 to 31 (except 27) on the Ground Floor of Comet Mansion ("the Comet Mansion Shops") for $23,600,000.  The said agreement provided, inter alia, for the payment of a deposit of $500,000 upon the signing thereof and there was recorded on the agreement an acknowledgement by Festival Land that it had received a cheque for $500,000 drawn on the Bank of China.

115. It is also common ground that Turbo Cheer had agreed to sub‑sell three of the Comet Mansion Shops (Shops 10, 11 and 13) before the completion of the sale and purchase so that these were not acquired by Turbo Cheer.  Further, Shop 12 was sold and disposed of on 9 October 2003.

116. In his 1^st Affirmation, the only complaint made by the Petitioner relating to these transactions was that after completion, the Respondent had never given him an account in respect of the shops which were sub‑sold.  The Petitioner said nothing about the $500,000 paid as initial deposit and certainly did not claim that it had been paid by him.

117. In his 1^st Affirmation, the Respondent provided an explanation of how the purchase of the Comet Mansion Shops was financed and stated, in particular, that it was he who provided the initial $500,000 deposit, with cash injections of $100,000 each from Smart Creator and Fintasy respectively.  He further explained that he only recovered this initial deposit when Shop 12 was sold.  He therefore pointed out that the Petitioner was able to enjoy 50 % participation in the investment without having to advance any further cash injection whatsoever.

118. The Respondent also disputed the Petitioner’s claim that no account had been given to him in respect of the three shops which had been sub‑sold before completion and exhibited the Statement of Account prepared by AYCHT on completion which clearly showed the proceeds of the sub‑sales of those shops and a surplus on completion of $306,177.50.

119. The Respondent also explained that after the sale of Shop 12, there was a balance of the sum of $1,000,000 in the bank account of Turbo Cheer.  He said that the Petitioner agreed to distribute the sum in two equal shares and each of them should therefore have received a sum of $500,000.  However, the Petitioner owed him $300,000 (being what was outstanding from a loan of $600,000) and also needed to repay him another $160,000 (subsequently clarified as $163,000) from proceeds from the sale of shares in which he and the Petitioner had jointly invested and other amounts due to him and the Petitioner therefore agreed for the Respondent to take his share of $500,000 in settlement of these amounts.  The Respondent produced a handwritten note showing calculations of how the proceeds from the share investment together with the sum of $300,000 totalled $463,022.21.  Under cross‑examination, the Respondent elaborated that the other amounts due to him consisted of rent for use of the Respondent’s Kingswood Villa property.

120. In his 2^nd Affirmation made in reply, the Petitioner stated that he did not accept the truth of what had been deposed to in the Respondent’s 1^st Affirmation regarding the transactions and pointed out that he was unable to verify if the Respondent did pay the initial deposit out of his own pocket.

121. He then stated that what the Respondent had said about his recovery of the initial deposit from the proceeds of the sale of Shop 12 was untrue and that Shop 12 had been sold for a sum of $1,525,000 and not $1,000,000 which he claimed was the price at which the Respondent had told him Shop 12 had been sold.  He further accused the Respondent of having kept $525,000 for himself.  In support of this accusation, the Petitioner produced a copy of a Chinese agreement between Turbo Cheer and the purchaser pursuant to which the purchaser agreed to pay $525,000 to take over the decoration of the premises as well as the formal Assignment which recorded that the property had been sold at $1,000,000.

122. The Petitioner further accused the Respondent of having unjustly enriched himself with the entire proceeds of $1,525,000 because he alleged that, contrary to what the Respondent had alleged, instead of the Petitioner having received a sum of $500,000 from the sale of Shop 12, the Respondent had represented to him that there was money due to him in the Comet Mansion transaction and requested for the entire consideration of $1,000,000 to be paid to the Respondent in order to "balance the equation" (whilst keeping the Petitioner in the dark on the "extra" $525,000).

123. The Petitioner also acknowledged that he had to repay $300,000 to the Respondent although he provided a different explanation for why this sum was due to the Respondent.  He claimed that the proceeds from the disposal of the shares was treated as a repayment from the Respondent to him.  However, under cross‑examination, the Petitioner conceded that he did in fact owe both the sums of $300,000 and $163,000 to the Respondent.

124. I find that the initial deposit was indeed paid by the Respondent.  As I noted above, the deposit was paid by a cheque drawn on the Bank of China.  There is clear evidence that the Respondent’s Fu Do Restaurant and Capital Restaurant maintained accounts with the Bank of China.  Neither Smart Creator nor Fintasy have accounts with that bank nor is there evidence that the Petitioner had an account with that bank either.  Indeed, even by the time of closing submissions, the Petitioner was not able to prove that the initial deposit was paid by anyone other than the Respondent.  He merely took the position that he would not admit that it was the Respondent who had paid the initial deposit.

125. I accept the Respondent’s evidence and find that the $500,000 initial deposit was recovered by the Respondent from the $525,000 paid under the side agreement whereby Turbo Cheer had agreed to sell the decorations of Shop 12 to the purchaser of that shop.  The acquisition of the Comet Mansion Shops being a joint investment, there was no reason why the Respondent should have paid $500,000 as initial deposit and not recovered it.  There is no evidence as to any other way in which the Respondent had recovered what he had paid.

126. I reject the Petitioner’s contention that he was kept in the dark as to the proceeds of the sub‑sale of Shops 10, 11 and 13 and his other evidence based on such contention.  As I have noted above in the discussion of the Petitioner’s credibility, the Petitioner was not only not kept in the dark but he alone signed the three Agreements for Sub‑Sale and Purchase.  Further, when he was re‑called and cross‑examined on this issue, he conceded that he might have known the details at that time but had forgotten.  He also admitted that he was present at the solicitors’ office on 7 August 2003 when the assignments relating to both the sub‑sale of Shops 10, 11 and 13 as well as Turbo Cheer’s acquisition of the remaining Comet Mansion Shops were executed.  He was in fact one of the signatories and it is in my view inconceivable that he would not have learned the details of the proceeds on that occasion if (which I reject) he did not do so when he signed the three Agreements for Sub‑Sale and Purchase.  His attempts under cross‑examination to try to provide explanations as to why he may not have done so were wholly unconvincing.

127. I also reject the Petitioner’s contention that the Respondent had secretly entered into and concealed from him the side agreement whereby Turbo Cheer had agreed to sell the decorations of Shop 12 to the purchaser of that shop and that the Respondent had wrongly kept the $525,000 payable thereunder for himself.  If indeed the Respondent had wanted to conceal and did conceal the side agreement from the Petitioner, it made absolutely no sense for him to have taken $500,000 and paid the balance of $25,000 into the account of Turbo Cheer.  Nor would there have been the manuscript notation on the savings account passbook of Turbo Cheer adverting to the total price of $1,525,000 received for the disposal of Shop 12 against the entry showing that the balance of $25,000 had been repaid by the Respondent.  Indeed, it makes absolutely no sense that the Respondent would have wanted to conceal the side agreement or the payment of $525,000 thereunder when all he did with that payment was to reimburse himself the $500,000 initial deposit which he was in any event entitled to recover.

128. I accept the Respondent’s account of why the sum of $1,000,000 was paid to him and the circumstances of such payment.  I find that the Petitioner agreed for his half share of the money to be paid to the Respondent to reimburse the Respondent for what the Petitioner owed him.  The Petitioner could not possibly have agreed for this payment to be made because he did not know the details of the sub‑sale of Shops 10, 11 and 13 and had therefore been misled by the Respondent’s representations that money was due to him in the Comet Mansion transaction and had requested to be paid the full sum of $1,000,000 to "balance the equation" as claimed by the Petitioner.  I find that the Petitioner did know the details of the sub‑sale since he had signed the three Agreements for Sub‑Sale and Purchase and also attended the formal completion when he also signed the relevant assignments.

129. My findings above deal with another of the Petitioner’s allegations of oppressive conduct and breach of duties

Alleged disappearance of Respondent

130. In his 1^st Affirmation, the Petitioner alleged that after the completion of the purchase of the Comet Mansion Shops in August 2003, the Respondent began to avoid him and it became increasingly difficult for him to locate or talk to the Respondent.  He went so far as to say that eventually, the Respondent disappeared altogether and abandoned the operation of the Companies.  He also alleged that he had discovered that the management of the Companies had partly been entrusted to Top Executive Management.

131. The Petitioner went on to contend that as the Respondent was responsible for the day‑to‑day management of the Companies, his disappearance and total neglect of their operation was in breach of his duties and the adverse consequences had been considerable.  In particular, the Petitioner highlighted that:

(1)   No annual general meeting had ever been convened since incorporation of the Companies and no board meeting had been called since the last quarter of 2003.

(2)   Smart Creator was prosecuted for failing to file its annual return for the year 2004.

(3)   On 7 May 2005, as the Companies’ bank accounts could not be operated by single signature and as the Respondent continued to be absent, he had to settle unpaid taxes totalling $238,504 which included a sum of $175,000 being profits tax payable for the years 2002/2003 and 2003/2004.

(4)   The Incorporated Owners of Lee King Building had commenced legal proceedings in 2005 against Smart Creator and Fintasy in the Lands Tribunal by reason of their failure to contribute their share towards repair costs approved by these Incorporated Owners.  By reason of the Respondent's absence, neither Smart Creator nor Fintasy was able to enter appearance resulting in judgments and Charging Orders been granted against them.

(5)   Due to non‑payment of electricity bills, supply to some of the units of the Lee King Shops had been suspended and despite his letters to the Respondent’s solicitors, including one dated 17 September 2005, no action was taken and he had had to pay China Light and Power a sum in excess of $40,000 and had since been paying the monthly electricity bills out of his own pocket.

(6)   Turbo Cheer had failed to pay Government rates in respect of the Comet Mansion Shops since 27 January 2006, which failure attracted a continuing penalty until payment.

132. In response, the Respondent stated that whereas the Petitioner was not happy with him shortly after December 2003 when the payments totalling $1,000,000 had been made to him from the account of Turbo Cheer as described above, there was no truth in the Petitioner’s allegations that he had begun to avoid the Petitioner after the completion of the Comet Mansion Shops purchase, that it became increasingly difficult for the Petitioner to locate or talk to him or that he had eventually disappeared and abandoned the operation of the Companies as alleged by the Petitioner.  He explained that other than a period in 2002 when he had taken medical leave in Guangzhou, he had always been managing his restaurant in Yuen Long and was contactable there.  He pointed out that the Petitioner had in fact been accustomed to taking lunch with his friends at the restaurant.

133. With regard to the specific allegations made by the Petitioner, his response was as follows:

(1)   Failure to hold either board or annual general meetings had been due as much to the Petitioner’s failure to meet him as his failure to meet the Petitioner.

(2)   Smart Creator’s management was assumed by the Petitioner in April 2005 after he had made various complaints and therefore the failure to file annual returns thereafter lay with the Petitioner.

(3)   The Companies’ accounts could not be operated because the Petitioner would not allow him to make any withdrawal until he had finished checking all the bank accounts.  However, even as of the date of the Respondent’s 1^st Affirmation, the Petitioner had not finished his checking and had thereby frustrated the Respondent’s offers to allow joint signatures to authorise payments.

(4)   The non‑payment of the contribution towards the repair costs approved by the Incorporated Owners of Lee King Building, the non‑payment of electricity bills and Turbo Cheer’s failure to pay Government rates were due to the Petitioner's refusal to join with him in authorising the necessary withdrawals.

(5)   He had never been absent and the Petitioner could easily have located him in order to convene board or general meetings if he had chosen to do so.

134. In his evidence in reply, the Petitioner did not directly respond to the Respondent’s explanations.  He certainly did not dispute that part of the Respondent’s evidence that other than a period in 2002 when he had taken medical leave in Guangzhou, he had always been managing his restaurant in Yuen Long and was contactable there.  Instead, he adduced in evidence a letter dated 7 May 2005 from Top Executive Management to the Commissioner of Inland Revenue, written on the instructions of the Petitioner, in which Top Executive Management stated that they have been instructed by the Petitioner that the Respondent had disappeared since the end of 2003.  He also adduced in evidence various correspondence passing between his and the Respondent's solicitors in 2005.

135. The statement in the letter dated 7 May 2005 from Top Executive Management that the Respondent had disappeared since the end of 2003 is, to say the least, more than a little surprising as Top Executive Management had filed Annual Returns signed by the Respondent on 3 February 2004 (Annual Return of Fintasy to 27 November 2003), 10 November 2004 (Annual Return of Smart Creator to 14 June 2004) and 8 December 2004 (Annual Return of Fintasy to 27 November 2003).  The Respondent had also signed the Annual Return of Smart Creator to 14 June 2005 on 14 July 2005.

136. I reject the Petitioner’s allegations that the Respondent began to avoid him after August 2003, that it became increasingly difficult for him to locate or talk to the Respondent and that the Respondent disappeared altogether and abandoned the operation of the Companies.

137. The allegation that the Respondent began to avoid the Petitioner after August 2003 is, in the very least, inconsistent with the Petitioner’s own evidence about the payment of the $1,000,000 from Turbo Cheer which he said was as a result of discussions with the Respondent.  That payment was made in December 2003.

138. The allegations that the Respondent had disappeared and abandoned the operation of the Companies is also patently false not only in the light of the fact that the Respondent had signed the Annual Returns of Smart Creator and Fintasy referred to above, but in the light of a vast amount of objective evidence which clearly prove that the Respondent was still very much continuing to manage the affairs of and operate the Companies.  In particular, there is clear evidence (summarized in Annexes 2 and 3 to the Supplemental Skeleton Submission of Counsel for the Respondents dated 28 November 2011) that in 2004 and at least the first half of 2005, the Respondent was still advancing monies to defray various expenses of the Companies including, but not limited to, rates payable on the Lee King Shops and the Comet Mansion Shops, the business registration fees of the Companies, electricity and water charges, as well as various other expenses of the Companies.  Further, it must have been the Respondent who had instructed Top Executive Management to prepare the Annual Returns which he signed in 2004 and 2005.

139. I also reject the Petitioner’s allegation that the Respondent had partly entrusted the management of the Companies to Top Executive Management.  He has produced no evidence of this and such evidence as has been placed before the court shows only that Top Executive Management were instructed to prepare the formal accounts of the Companies and also formal corporate documents and returns which had to be prepared and filed.

140. As I have rejected the Petitioner’s allegations that the Respondent had disappeared and abandoned the operation of the Companies, I do not need to consider the Petitioner’s allegations as to the alleged consequences of the Respondent’s alleged disappearance and abandonment of the operation of the Companies.  For the sake of completeness however, I deal briefly with these allegations as follows (my views being based not only on the Respondent’s responses set out above but the totality of the evidence):

(1)   That no annual general meeting has ever been convened since the incorporation of the Companies and no board meeting has been called since the last quarter of 2003 is as much the fault of the Petitioner as that of the Respondent.

(2)   The Petitioner bore as much responsibility as the Respondent to ensure that Smart Creator filed its annual return for 2004.  There is no evidence that the Petitioner has done anything in this regard.  Conversely, as I have noted above, the Respondent signed the Annual Returns of Smart Creator to 14 June 2004 and 14 June 2005.

(3)   The Respondent had clearly not "continued to be absent" and I accept the Respondent’s explanation that the Petitioner had refused to agree to withdrawals being made from the Companies' accounts.  Further, the Petitioner’s complaint about having to settle taxes on behalf of the Companies from his own funds must be viewed in the light of the Respondent having, over the years, made numerous payments on behalf of the Companies from his own funds and only recovered what he had advanced subsequently (and in any event, not even in full - see below).

(4)   I accept the Respondent’s explanation that the non‑payment of the contribution towards the repair costs approved by the Incorporated Owners of Lee King Building, the non‑payment of electricity bills and Turbo Cheer’s failure to pay Government rates were due to the Petitioner's refusal to join with him in authorising the necessary withdrawals.  Again, these complaints of the Petitioner must be viewed in the light of the fact that in 2004 and at least the first half of 2005, the Respondent was still advancing monies to defray various expenses of the Companies (see above).

ALLEGATIONS OF OPPRESSIVE CONDUCT AND BREACH OF DUTIES

141. I will now set out my findings relating to the various allegations of oppressive conduct and breach of duties made by the Petitioner as pleaded in the Re‑Amended Petitions in HCMP 716 and 717 of 2006 and in the Petition in HCMP 875 of 2010. (For ease, I shall refer hereinbelow to the Re‑Amended Petitions and the Petition as “the Petitions”.)  In so doing, I will consider the allegations as pleaded and not as sought to be argued by the Petitioner.  This is because the Petitioner’s Counsel have, in Closing Submissions, skilfully sought to argue various points which had not been pleaded in the Petitions.  I accept Mr Chan, SC’s submission that it would not be fair for the Petitioner to be allowed to do so.

142. I have already expressed my views and made findings in relation to some of the Petitioner’s complaints of oppressive conduct and breach of duties in my discussion and consideration above of the factual background.  Having considered all the evidence and the very able arguments made by Counsel both on the relevant legal principles and the facts and evidence (for which I am very grateful), I am of the view, for the reasons I set out below, that the other complaints of the Petitioner are also not made out.  In this regard, I should state that I have borne in mind the very detailed submissions made by Mr Wong on the proper approach to evidence and the authorities cited in support thereof.  However, as is apparent from my discussion and factual findings above and my findings below, I am of the view that many of the Petitioner’s complaints are based on speculation and are unsupported by evidence.  In some instances, the Petitioner has made complaints knowing them to be unfounded and/or based on allegations of fact which are known to him to be untrue.

143. In considering the Petitioner’s complaints, I also accept the submissions made on behalf of the Respondent that in the context of an application under section 168A, there is no “No‑fault divorce”: per Lord Hoffmann in O’Neill & Anor v Phillips & Ors, Re a Company [1999] 2 BCLC 1, at 13‑14.

144. There is much force in the arguments made on behalf of the Respondent that the Petitioner’s unfounded complaints appear to have been motivated by desire to acquire for himself alone what Mr Chan, SC called the “golden geese” comprising the properties acquired and held by the Companies which have substantially increased in value, but at a substantially discounted price.

145. There is also much force in the arguments made on behalf of the Respondent that the Petitioner’s complaints about the Respondent’s alleged failings, some of which relate to alleged technical breaches of the law, must be viewed and measured against the background of, and in the light of, what the Respondent has done on behalf of the Companies.  They must also be viewed in the light of the fact that the Petitioner is himself a director of the Companies and also owes duties to the Companies.

146. With regard to the points made in the previous paragraph, I should state that I reject the allegation pleaded in the Petitions that the Respondent has at all material times been and still is the managing director of the Companies.  Whilst the Respondent has admitted that he and the Petitioner had agreed, after the acquisition of the Lee King Shops, that he would be in charge of the day‑to‑day running of Smart Creator and Fintasy, I find that he was never appointed managing director of any of the Companies.  Further, I find that when the Petitioner eventually began to spend more time in Hong Kong, he did start to participate in the management of some of the affairs of the Companies and it is not the case that he was excluded from doing so by the Respondent.  That the Petitioner did start to participate in the management of some of the affairs of the Companies is clearly evidenced by the fact that he himself signed a surrender agreement dated 22 August 2002 and a tenancy agreement dated 1 September 2002 relating to Shop D and Cockloft of Lee King Building (matters which I shall consider in greater detail below).

147. I also accept the submission made by Mr Chan, SC that the evidence (summarised in Annexes 2 and 3 to the Supplemental Skeleton Submission of Counsel for the Respondents dated 28 November 2011) shows that over the years, the Respondent had made advances from his own funds to defray the expenses of the Companies and was then reimbursed from the funds of the Companies.  However, the reimbursements he has received have been insufficient to fully cover the amounts he has advanced.

148. With those general observations, I turn now to consider the specific pleaded complaints.

Alleged secret operation of bank accounts of Smart Creator and Fintasy without the consent and knowledge of the Petitioner

149. There are, in fact, two different groups of complaints encompassed under this heading.

150. Under the first group of complaints, it is contended that:

(1)   Whereas Smart Creator’s original bank accounts with the Wing Hang Bank were operable by the single signature of either the Respondent or the Petitioner, those accounts were agreed by the Respondent and the Petitioner shortly before 1 December 2003 to be closed and replaced by accounts operable by the Petitioner and the Respondent jointly.  It is contended that this agreement is evidenced by a board resolution of Smart Creator dated 1 December 2003.

(2)   Whereas Fintasy’s original bank accounts with the Wing Hang Bank were operable by the single signature of either the Respondent or his wife, those accounts were agreed by the Respondent and the Petitioner shortly before 1 December 2003 to be closed and replaced by accounts operable by the Petitioner and the Respondent jointly.

151. It is then alleged that unknown to the Petitioner until enquiries were made by him with the Wing Hang Bank in or about the end of 2004, the original bank accounts of both Smart Creator and Fintasy had not been closed and were still being used and controlled by the Respondent for the collection of rental income and for payments out.  It is therefore contended that the Respondent had thereby excluded Petitioner from the management of these original bank accounts without any consent or knowledge of the Petitioner.

152. Under the second group of complaints, it is contended that in breach of his duties to Smart Creator and Fintasy, the Respondent had without authority or excuse made or permitted the following payments from the original bank accounts of Smart Creator and Fintasy out of these companies’ funds:

Withdrawal from Fintasy Savings account 278658-100 Cash Withdrawals
Date	Nature		Amount
31 Aug 2001			150,000.00
11 Sept 2001			50,000.00
11 Oct 2001			40,000.00
11 Dec 2001			50,000.00
11 Feb 2002			50,000.00
18 Feb 2002			40,000.00
25 Mar 2002			41,000.00
10 Apr 2002			100,000.00
27 Apr 2002			25,000.00
30 Sept 2002			40,200.00
6 Nov 2002			66,899.00
29 Jan 2003			66,901.00
26 Jun 2003			88,200.00
25 July 2003			150,000.00
Other payments
10 Mar 2001	transfer-debit		70,000.00
10 Apr 2001	transfer-debit		40,000.00
7 May 2002	transfer-debit		25,000.00
14 Nov 2002	debit advice bank guarantee		15,363.12
7 Jan 2003	transfer-debit		100,000.00
21 Jan 2003	transfer-debit		5,000.00
26 Aug 2003	debit-advice		5,629.00
10 Oct 2003	debit-advice bank guarantee		7,966.50
13 Oct 2003	transfer-debit		50,000.00
28 Sept 2004			8,630.38
17 Mar 2005	debit advice		66,190.00
Fintasy Current account No.278658001 Withdrawal by cheque
20 Jan 2001			250,000.00
22 Jan 2001			100,000.00
23 Jan 2001			100,000.00
23 Jan 2001			30,000.00
17 Apr 2002			71,000.00
Other payments
9 Jul 2001	cheque deposit		5,000.00
9 Jul 2001	cheque deposit		25,000.00
5 Nov 2001	transfer-credit		10,000.00
24 Dec 2001	transfer-credit		10,000.00
11 Feb 2002	cheque-deposit		73,200.00
22 Feb 2002	cheque-deposit		26,800.00
14 Mar 2003	debit advice		2,000.00
9 Apr 2003	credit advice		30,000.00
30 Oct 2003	transfer credit		3,000.00
31 Oct 2003	transfer credit		497,842.12
Smart Creator Cash withdrawal
21 Apr 2001			70,000.00
28 Apr 2001			28,000.00
15 May 2001			100,000.00
31 Aug 2001			150,000.00
11 Oct 2001			60,000.00
17 Nov 2001			50,000.00
11 Dec 2001			50,000.00
30 Jan 2002			40,000.00
18 Feb 2002			60,000.00
10 Apr 2002			41,120.00
26 Aug 2002			143,335.00
7 Oct 2002			200,000.00
29 Jan 2003			45,277.00
2 May 2003			31,200.00
25 Jul 2003			100,000.00
Other payments
27 Aug 2001	transfer debit		3,332.50
16 Aug 2002	transfer debit		8,082.50
11 Oct 2002	debit advice		228,324.06
7 Jan 2003	transfer debit		100,000.00

153. In the case of the above withdrawals of $60,000 and $100,000 from Smart Creator’s savings account on 11 October 2001 and 25 July 2003 respectively, it is further specifically pleaded that the Respondent had withdrawn these sums for his own personal use but had recorded the withdrawals on Smart Creator’s bank passbooks as “Borrowed by Chow temporarily” (周暫借/周暫取) or simply as “Borrowed by Chow but taken by Ho” (何取周借).  This allegation was added by way of amendment when the Petition in relation to Smart Creator was Re‑Amended.

154. Further, by way of amendment when the Petition in relation to Fintasy was Re‑Amended, it was specifically pleaded:

(1)   that in the case of the above withdrawal of $40,000 from Fintasy’s savings account on 11 October 2001, this had been withdrawn by Respondent for his own personal use but recorded as a loan to the Petitioner, in breach of Respondent’s duties to Fintasy and without any knowledge or consent whatsoever on the part of the Petitioner; and

(2)   that in the case of the above withdrawal of $100,000 from Fintasy’s savings account on 10 April 2002, this had been withdrawn by Respondent for horse betting without any knowledge or consent whatsoever on the part of the Petitioner.

155. With the exception of the payment of $150,000 made on 25 July 2003 from the savings account of Fintasy, all the above payments had been complained of by the Petitioner in his 1^st Affirmation as being “apparently unauthorised transactions”.  In his 1^st Affirmation in response, the Respondent stated that the transactions were not unauthorised as alleged by the Petitioner and provided brief explanations as to what they related to by way of a table.  In respect of the cash payments dated 10 April 2002, 30 September 2002, 26 June 2003 from the savings account of Fintasy, the non‑cash payments dated 14 November 2002, 10 October 2003, 28 September 2004 and 17 March 2005 from the same account, the cash payments dated 21 April 2001, 28 April 2001, 30 January 2002, 10 April 2002, 26 August 2002, 7 October 2002, 29 January 2003 and 2 May 2003 from the savings account of Smart Creator and all the non‑cash payments from the same account, the Respondent also provided documentary evidence to back up his explanations.

156. The Respondent further pointed out that where the Petitioner had himself benefited from withdrawals or payments, he plainly knew their nature and purpose.  He further added that neither he nor his wife had drawn any fees for themselves and that such withdrawals and payments as had been made to them or on their behalf had been by way of reimbursement of monies advanced by them in respect of the property purchases or ongoing expenses.  He further pointed out that it was in fact the case that they had, to‑date, not yet been fully reimbursed.  As stated above, I find this to be the case.

157. Having seen and considered the Respondent’s explanations, the Petitioner replied with the following comments:

(1)   The Respondent had failed to condescend to particulars for many of the transactions and with hindsight, the Petitioner could see that the Respondent would allegedly draw money out from the accounts under the disguise of "Advance to Chow” when in fact the real purpose was to use company funds to repay a personal loan he allegedly owed the Petitioner. He commented that in many cases the Respondent did not provide further evidence to substantiate the various reimbursements yet claimed for monies paid out to various parties which, he had been advised, would require further discovery in due course.

(2)   Apart from the stock purchase on 11 October 2002, he had never asked for any company funds to be useful horseracing or betting.  As far as Smart Creator was concerned, he had no knowledge that any money had been employed for such purposes.  The Petitioner further alleged he might not even have been in Hong Kong around the time of betting was made.

(3)   As far as the bank guarantee charges were concerned, these had either been repaid by the Petitioner or otherwise treated as set off against the personal loan which the Respondent owed him.  The Petitioner expressed surprise that the Respondent had not reimbursed the company for those payments as he should have done.

(4)   With respect to the cheque payments in Fintasy’s current account, the Respondent had withdrawn a total of $480,000 all of which took place in January 2001 and was not repaid until October 2003.  These were payments drawn from the overdraft facility provided by the Wing Hang Bank.  The Respondent had not disclosed any bank statement for this current account nor provided any details on as to how these funds had been expended.

(5)   The transactions for which the Respondent claimed were “advances” to the Petitioner amounted in total to $200,000.  If he were to include the stock purchase incident, that would clearly show that the Respondent still owed him a substantial amount bearing in mind the sum he had hitherto lent the Respondent, which was close to $2,800,000.

(6)   There were 10 withdrawal entries under the heading of "reimbursement to Ho" out of which seven transactions did not provide any further explanation.  The sum total for the seven transactions amounted to $550,000.  None of these withdrawals had been authorised by the Petitioner.

(7)   In respect of the stock purchase on 7 October 2002, he had no knowledge whatsoever of this purchase and the Respondent had only disclosed the reimbursement to the company of the same amount he took out but did not disclose whether he had made it a gain on the disposal of the stocks and, if he did, what had happened to the money.

158. Madam Chu and the Respondent were subject to lengthy and extensive cross‑examination relating to many of the above payments and withdrawals and provided further elaboration of the Respondent’s explanations about the payments.

159. I will consider the second group of complaints first.

160. I accept the Respondent’s explanations and find that the payments and withdrawals were not unauthorised as alleged by the Petitioner.  I do not propose to further lengthen this already lengthy judgment by specifically dealing with each and every one of the payments.  I would, however, make the following observations:

(1)   I have already considered and made findings in relation to the cash withdrawals made on 31 August 2001, 11 September 2001, 18 February 2002, 25 March 2003 from the savings account of Fintasy and the cash withdrawals made on 31 August 2001, 30 January 2002 and 18 February 2002 from the savings account of Smart Creator in the context of my consideration of the transaction relating to the acquisition of the Tung Choi Street Property above.  Suffice it to say that it is surprising that the Petitioner maintained his complaint about the cash withdrawals made on 31 August 2001 and 11 September 2001 from the savings account of Fintasy and the cash withdrawal made on 31 August 2001 from the savings account of Smart Creator when, as I have observed above, the Petitioner had himself accepted that the payments were made for the purposes stated by the Respondent.

(2)   It is also surprising that having himself admitted that the amount of $228,324 paid out of Smart Creator’s savings account had been advanced to purchase listed shares as explained by the Respondent, the Petitioner still maintained the complaint in the Re‑Amended Petition that this was an amount paid without authority or excuse.

(3)   The Respondent has explained that the transfer debit from the savings account of Fintasy on 7 January 2003 was the $100,000 contribution made by Fintasy towards the purchase of the Comet Mansion Shops (along with the $100,000 contribution made by Smart Creator).  Although the Petitioner did not specifically admit this in his affirmation evidence, he did accept, that “a further deposit of HK$200,000.00 was payable on 7th January 2003”.  He provided no explanation himself as to where this came from but it is obvious that it was withdrawn from the accounts of Fintasy and Smart Creator respectively on 7 January 2003 as explained by the Respondent.  It noteworthy that the Petitioner has complained only about the withdrawal of the sum of $100,000 made from the account of Fintasy but not that from the account of Smart Creator made on the same day.  This is another example of the Petitioner making and/or continuing to make a complaint which he obviously knows to be unfounded and unmeritorious.

(4)   In respect of the Petitioner’s allegations regarding the bank guarantee charges, if it were indeed true that these had either been repaid by him or otherwise treated as set off against a personal loan that the Respondent allegedly owed him, it is surprising that the Petitioner cannot particularise which of these charges had been repaid by him and which had been treated as set off against the alleged personal loan that the Respondent allegedly owed him.

(5)   As I have noted above, in providing explanations about many of the payments and withdrawals, the Respondent had provided documentary evidence which quite conclusively demonstrated that the payments were made for the purposes and reasons stated by him.  Yet, the Petitioner continued to maintain that these were payments made without authority or excuse.

(6)   In respect of the transactions made using Fintasy’s current account No 278658001, the short answer is that these were transactions made utilising the overdraft facility which I have already discussed above and which I have found not to have been an unauthorised overdraft facility.

(7)   Insofar as the Petitioner contended that some of the sums taken from the accounts of Smart Creator and Fintasy had in fact been used to repay “the loan” to the Petitioner, I have already found above that the Petitioner did not make the alleged loans of $1,400,000 and $1,000,000 respectively in relation to the acquisition of the Lee King Shops.  I therefore reject the Petitioner’s contention that funds had been taken from the accounts of Smart Creator and Fintasy to repay the Petitioner’s allegedly loan to the Respondent.

(8)   In respect of the withdrawals made for betting on horseracing and the Mark Six, if these withdrawals had not been made for such purposes has agreed to by the Petitioner, it is inconceivable that Madam Chu or the Respondent would have kept the relevant slips or tickets relating to such bets or indeed entered details of the same on the bank passbooks.

(9)   In respect of the withdrawals relating to "reimbursement to Ho", I have already found above that the Respondent had in fact made numerous advances from his own funds on behalf of the Companies and that he has not been fully been reimbursed for such advances.

(10)  Under cross‑examination, Madam Chu and the Respondent have provided explanations about amount withdrawn on 7 October 2002 for the purpose of the stock purchase which I accept.

(11)  I accept the Respondent’s explanation about the payments made out of Fintasy and Smart Creator’s accounts on 11 October 2011.  These sums were clearly repaid (albeit into Smart Creator’s account in one sum) on 27 October 2011.  If the Respondent had wanted to misappropriate money, it is inconceivable that he would then have repaid the $100,000 into Smart Creator’s account.  In this regard, I note that the Petitioner has not been able to proffer any alternative explanation for this payment of $100,000 into Smart Creator’s account.  Further, the repayment was into Smart Creator’s account, not that of Fintasy which is the company which the Petitioner claims the Respondent had tried to exclude him from in order to deprive him of his interests.

(12)  As a general observation, the Petitioner having regularly been provided with copies of extracts from the savings passbooks to provide him with details of payments made from these accounts, if at the time he was provided with them he felt that there was a problem with any of the withdrawals or payments, he could have raised them but there is no evidence of his having done so.

161. In the light of the foregoing, I find that the second group of complaints made by the Petitioner has not been made out.

162. Turning to the first group of complaints, I accept the Respondent’s explanation that the original bank accounts of Fintasy and Smart Creator were not closed and continued to be used because certain tenants were still paying rent into these accounts by way of direct transfer.  Further, after one last withdrawal made from each of the original bank accounts on 25 July 2003, no further withdrawals were made from these accounts.  Insofar as the Petitioner seeks to rely on the board resolution of Smart Creator dated 1 December 2003, that only provided for the opening of the new bank accounts with joint signatories but did not provide that the original bank accounts should be closed.  I reject the Petitioner’s contention that it was unknown to him until enquiries were made by him with the Wing Hang Bank in or about the end of 2004 that these original bank accounts had not been closed and were still being used and controlled by the Respondent for the collection of rental income and for payments out and that he had thereby been excluded from the management of these bank accounts without his consent or knowledge.

163. It must have been known to the Petitioner that the original bank accounts would need to continue to be operated as some tenants were making payments by way of direct transfer.  In particular, he would have known this from seeing the copies of the bank accounts savings passbooks provided to him from time to time.  He would also have known that the accounts continued to be operated from such copies provided after December 2003.

164. I find the first group of complaints also not to have been made out by the Petitioner.

Alleged misappropriation of monies belonging to Turbo Cheer

165. The Petitioner contends that in breach of his duties to Turbo Cheer and/or in breach of trust, the Respondent had without prior consent or knowledge on the part of Turbo Cheer or himself, misappropriated the following sums by way of transfers from Turbo Cheer’s savings account and that Turbo Cheer had suffered loss and damage and the Respondent had reaped a secret profit at the expense of Turbo Cheer in these amounts:

13 Oct 2003		$17,195.00
13 Oct 2003		$112,700.00
1 Dec 2003		$500,000.00
1 Dec 2003		$500,000.00

166. I reject the Petitioner’s complaint.  I have considered and made findings in relation to the sums of $500,000 each paid on 1 December 2003 in the context of my discussion of the transaction relating to the acquisition of the Comet Mansion Shops.

167. Further, the Respondent has clearly shown by documentary evidence that the payments of $17,195 and $112,700 were made for legal fees and estate agent’s commission in relation to the acquisition of the Comet Mansion Shops.

168. The Petitioner must have been fully aware of these payments as the savings account of Turbo Cheer can only be operated by the joint signatures of the Petitioner and the Respondent or their representatives.  The amounts above were clearly not misappropriated by the Respondent without the prior consent or knowledge of the Petitioner.  I have to again record my surprise that the Petitioner has made and/or maintained this complaint.

Alleged gross mismanagement of the Companies’ tenancies

169. These allegations were introduced by way of amendment in the Re‑Amended Petitions relating to Smart Creator and Fintasy and by the petition filed in relation to Turbo Cheer in 2010.

170. As a matter of law, I accept Mr Wong’s submission that where mismanagement is sufficiently significant and serious so as to cause loss to the company, then it could constitute the basis for finding unfair prejudice : Re Macro (Ipswich) Ltd [1994] 2 BCLC 354.

171. The allegations of gross mismanagement in all three Petitions commence with the allegation that whilst in the management of the Companies, the Companies had no office premises or any office facilities or even a facsimile number.  It is then contended that as a result, no internal control system for management and financial reporting as regards the Companies’ tenancies had ever been instituted.  The Petitioner then goes on to allege that, as a result, the affairs of the Companies had been grossly neglected by the Respondent with numerous incidents of mismanagement.  The alleged incidents of mismanagement are then set out in the Petitions.

172. The Petitioner’s complaint that the Companies had no office premises or any office facilities or even a facsimile number is more than a little surprising and is, in my view, wholly unmeritorious.  It is quite typical of many of the complaints made by the Petitioner in these proceedings which are characterised by the apparent determination of the Petitioner to try to find fault and, in so doing, make as many complaints as possible, even complaints which the Petitioner must know are unfounded and unmeritorious.  As a co‑investor and director, it was and has always been open to the Petitioner to request that the Companies should have office premises, office facilities or a facsimile number if he felt that this was necessary or desirable.  However, there is no evidence that he has ever so requested, even after engaging his team of lawyers.  On the contrary there is evidence that he was quite happy for various bills to be simply sent to his own address.  Further, that the Companies had no office premises, office facilities or facsimile number was, in a way, of benefit to the Companies in the sense that they were saved the expenses for having and maintaining such premises and facilities.  The Petitioner was obviously happy for the Companies to enjoy such benefit until he decided to start his campaign of trying to find fault with the Respondent.

173. The same is true of his complaint that there was no internal control system for management and financial reporting as regards the Companies’ tenancies.  As a co‑investor and director, it was clearly open to him to request for such “internal control system” to be set up if he so wished.  Instead, it appears that he was quite content with the simple arrangements made by the Respondent with the assistance of Madam Chu until he decided to start his campaign of trying to find fault with the Respondent.

174. In any event, the Petitioner has not even alleged, let alone demonstrated with evidence, how the fact that the Companies had no office premises, office facilities, a facsimile number or internal control system for management and financial reporting as regards the Companies’ tenancies has resulted in the affairs of the Companies being allegedly grossly neglected by the Respondent.

175. The alleged incidents of mismanagement consist of:

(1)   allegations of mismanagement of certain tenancies of specific premises;

(2)   allegations that the Respondent had failed to secure renewal or granting of tenancies of certain premises held by the Companies on reasonable terms;

(3)   allegations of failure to maintain the Lee King Shops and Comet Mansion Shops since they were purchased so that the Companies are not and at all material times were not in a position to secure the best rent reasonably obtainable thereon;

(4)   allegations of failure to remedy water leakage at the leased premises belonging to Smart Creator and Fintasy;

(5)   allegations of failure to remove illegal structures within time;

(6)   allegations of failure to ensure proper supply of electricity and water to the leased premises belonging to Smart Creator;

(7)   allegations of unreasonable objection to proper offers of tenancy in relation to properties held by Turbo Cheer;

(8)   allegations of the alleged dilatory conduct and breaches of duty leading to wasted expenses incurred by Smart Creator and Fintasy; and

(9)   allegations of miscellaneous failures to exercise reasonable care and skill in managing the Companies.

176. The Respondent has provided explanations and responses to the allegations made by the Petitioner in his affirmation evidence.  He was also subject to lengthy and extensive cross‑examination.

177. Having considered all the evidence and the submissions made by Mr Wong on behalf of the Petitioner and the submissions made by Mr Chan, SC and Mr Brewer on behalf of the Respondent, I am satisfied and I find, in the light of the explanations and responses provided by the Respondent, which I accept, that the allegations of gross mismanagement of the tenancies of the Companies are not made out for the reasons set out below.

Allegations of mismanagement of certain tenancies of specific premises

178. I do not propose to set out a detailed analysis of all the allegations of mismanagement in respect of each of the tenancies of specific premises made by the Petitioner in this already lengthy judgment.  Suffice it to say that I have carefully considered the Petitioner’s complaints and find that they are not made out in the light of the Respondent’s explanations and responses.  I do, however, set out below, as illustrative of the nature of the Petitioner’s complaints and the Respondent’s explanations and responses, my detailed consideration of a few of these complaints.

Tenancy of Shop D and Cockloft of Shops D & E on the Ground Floor of Lee King Building

179. In his 5^th Affirmation, the Petitioner referred to a Provisional Tenancy Agreement and a Tenancy Agreement respectively dated 11 April 2001 and 30 May 2001 which he alleged had been “purportedly" signed on behalf of Smart Creator as landlord and one Lau Sze Ming (“Lau”) for and on behalf of a business named “Ichiban Come In” pursuant to which he alleged that the Respondent had “purportedly" granted to Ichiban Come In a tenancy Shop D and Cockloft of Shops D & E on the Ground Floor of Lee King Building for a term of 30 months from 1 May 2001 to 31 October 2003 at a monthly rent of $88,000.

180. In respect of this tenancy, the Petitioner alleges that the Respondent had acted in breach of his duties to Smart Creator as follows:

(1)   The Respondent had failed to pursue Ichiban Come In for punctual payment of rents with due care and skill, or at all, because whereas the tenant was obliged to pay rent on the 1st day of every month, as one could gather from Smart Creator’s bank passbook, it had never been punctual in paying its rent.

(2)   As from August 2002, without the knowledge or consent of the Petitioner, the Respondent had reduced the rent of Shop D and Cockloft of Shops D & E to $27,000 thereby causing Smart Creator loss in the sum of $61,000 ($88,000 minus $27,000) per month.

(3)   On 26 August 2002, without the knowledge or consent of the Petitioner, the Respondent had caused or procured Smart Creator to pay Ichiban Come In the sum of $143,335 in consideration of the latter's surrender of the tenancy.  The petitioner argued that prior to the payment of this surrender fee on 26 August 2002, Smart Creator had already been entitled to terminate the tenancy on account of Ichiban Come In’s repeated failures to pay rent punctually and its failure, even by 15 July 2001, to pay the rent due as early as in November 2001.

(4)   The Respondent had failed to recover any rent for the month of September 2002.  If he had recovered the said sum, he had misappropriated it without depositing it with Smart Creator’s bank account or otherwise accounting to Smart Creator for it.

181. The Respondent explained that the failure of the tenant to pay rent on time was addressed by the parties but without success.  Accordingly, Smart Creator entered into a surrender agreement with the tenant on 22 August 2002 which provided for the surrender by the tenant of the tenancy as from 31 August 2002.  A copy of this surrender agreement (the authenticity of which is not disputed by the Petitioner) has been adduced in evidence.  It is important to note not only that it was recited in this agreement that the tenant had failed to pay its monthly rent of $88,000 from 1 November 2001 to 1 July 2002 and the landlord reserved its right to seek recovery of the outstanding amount, the agreement was in fact signed on Smart Creator’s behalf by the Petitioner.

182. The Respondent further explained that even before agreeing to move out completely in accordance with the surrender agreement, an arrangement had been entered into whereby:

(1)   Ichiban Come In had agreed to vacate Shop D and retain only the cockloft part of the premises from August 2002 for which it would pay rent of $27,000.

(2)   One Ms. Chung Suk Yee (who was the tenant of Shop H3 under a one year tenancy agreement covering the period 15 December 2001 to 14 December 2002 at a monthly rental of $26,800) had agreed to take over and operate her business from Shop D at a monthly rental of $39,900 from August 2002.  Pursuant to this arrangement, Ms Chung had paid $44,900 representing one month’s deposit and electricity deposit and also the first month's rent of $39,900.

183. The Respondent further explained that the above arrangements were then overtaken by alternative arrangements whereby:

(1)   Ichiban Come In agreed to and did move out completely in accordance with the surrender agreement.

(2)   Whilst Ms Chung was still decorating Shop D after surrendering Shop H3, a new tenant, Rich Plan (Asia) Ltd, was found who was prepared to pay monthly rental of $60,000 to rent Shop D.  Accordingly, the Petitioner and the Respondent negotiated with Ms Chung and persuaded her give up her tenancy for Shop D from 26 August 2002 in return for the payment to her of $97,000 as compensation, the reimbursement of her rental deposit of $39,900 and unused rent in the sum of $6435 (making a total of $143,335).  These arrangements with Ms Chung are set out in another surrender agreement dated 22 August 2002.

184. The Respondent explained that he and the Petitioner agreed to these arrangements because as Rich Plan would pay $20,100 more in rent per month, the compensation to Ms Chung would be recovered within 5 months and the new tenancy arrangement was therefore more beneficial to Smart Creator.

185. The Respondent further explained that by a letter dated 16 December 2002, Ichiban Come In had acknowledged that it owed $802,402.75 (being the arrears of rent for the period 1 November 2001 to 1 July 2002) to Smart Creator and had agreed to repay $20,000 per month from 1 March 2003.  However, subsequently, by a letter dated 26 August 2003, and addressed to both the Respondent and the Petitioner, Lau and his partner, a Mr Lam, informed the Respondent and the Petitioner that they had been declared bankrupt.  In the letter, Lau and Lam thanked the Respondent and the Petitioner for their understanding and apologized to them for causing them loss.  Both these letters (the authenticity of which has not been disputed by the petitioner) have been put in evidence.

186. I accept the Respondent’s account of the events and, in the light, in particular, of the Petitioner’s signing of the surrender agreement with Ichiban Come In and the letter dated 26 August 2003 from the partners of Ichiban Come In, I accept the Respondent’s evidence that the Petitioner was fully aware of such events and the circumstances.  I also accept the Respondent’s explanation that he and the Petitioner had together tried to address the problem of the failure of Ichiban Come In to pay rent on time.

187. In the circumstances, I reject all of the Petitioner's complaints as set out above.  Insofar as the Petitioner complains about the Respondent’s alleged failure to pursue Ichiban Come In for punctual payment of rents with due care and skill, as the facts demonstrate, the mere fact that a tenant had not being punctual in paying rent does not necessarily prove that the Respondent had failed to pursue the tenant for punctual payment of rents with due care and skill.  A tenant may, as was the case with Ichiban Come In, be in financial difficulties and his failure to pay rent on time may not be due to any failure on the part of the Respondent.  Indeed, as is amply demonstrated by the circumstances surrounding the failure of Ichiban Come In to pay all the rent which it owed, even after the Petitioner himself had become personally involved, he was not able to get this tenant to pay its rent.

188. As regards the Petitioner’s complaint at that the Respondent had agreed to reduce the rent of Shop D and Cockloft D & E to $27,000, thereby causing Smart Creator loss in the sum of $61,000, in the light of the Respondent’s explanation and account of what had happened and the arrangements which had been put in place, there is simply no basis for the Petitioner’s complaint.

189. The Petitioner's complaint about the Respondent having caused and procured Smart Creator to pay Ichiban Come In a sum of $143,335 in consideration of the latter's surrender of the tenancy this is again wholly misconceived in the light of what had actually happened.

190. I should also mention that the evidence of the Petitioner's involvement in handling the situation regarding Ichiban Come In’s tenancy is proof that, contrary to what he claims, he was allowed to and did become involved in the management of the Companies’ affairs and in particular their tenancies.

Tenancy of Cockloft of Shops D & E Lee King Building

191. In respect of this, the Petitioner alleged that by a provisional tenancy agreement and a tenancy agreement dated 31 October 2002, signed “purportedly” on behalf of Smart Creator as landlord and one Kwok Yuen Man (“Kwok”) as tenant, the Respondent “purportedly” granted to Kwok a tenancy of Cockloft D&E for a term of 2 years from 1 September 2001 to 31 August 2004 at a monthly rent of $27,500.

192. The Petitioner then alleges that a Mr Fan of Grammy Record took over Kwok’s tenancy and that as from December 2003, Grammy Record have been paying rent of $27,500.

193. Based on the alleged “absence of any relevant entry in Fintasy’s and Smart Creator’s Passbooks”, the Petitioner accused the Respondent of having acted in breach of his duties to Smart Creator as follows:

(1)   The Respondent had failed to pursue Kwok for the deposit of $55,000 as agreed under the tenancy agreement.  If he had recovered the said sum, he had failed to deposit it into Smart Creator’s account or otherwise account to Smart Creator for it.

(2)   As from April 2003, without any knowledge or consent on the part of the Petitioner, the Respondent had reduced the rent to $22,500 thereby causing Smart Creator loss of $4500 per month.

(3)   The Respondent had failed to recover from Grammy Record due payment of electricity charges.  The Petitioner complained that the Respondent had failed to stipulate for and recover any consistent electricity charges so that the sums which Grammy Record paid varied.  Petitioner further accused the Respondent of having failed to recover from Grammy Record any electricity charges at all after 19 May 2005.  He then contended that if the Respondent had recovered such sums, he had misappropriated the same without depositing it into Smart Creator’s account or otherwise accounted to Smart Creator for the same.

194. The Petitioner’s contentions that by the provisional tenancy agreement and the tenancy agreement dated 31 October 2002 had only been “purportedly” signed on behalf of Smart Creator as landlord and that by these documents, the Respondent had “purportedly” granted to Kwok a tenancy of Cockloft D&E are again most surprising.  This is because both the provisional tenancy agreement and the tenancy agreement were in fact signed by the Petitioner himself on behalf of Smart Creator.  It therefore lies ill in his mouth to say that these documents had only been “purportedly" signed on behalf of Smart Creator and there is certainly no basis whatsoever for him to say that by these documents, it was the Respondent who had “purportedly” granted the tenancy to Kwok.

195. Given that it was the Petitioner himself who signed both the provisional tenancy agreement and the tenancy agreement, the Petitioner’s accusation and complaint that the Respondent had failed to pursue Kwok for the deposit of $55,000 under the tenancy agreement is also most surprising.  After all, since he was the one who signed the very documents which provided for the payment of this deposit, one would expect that he, too, would be responsible for ensuring that the tenant should pay the agreed deposit.

196. In any event, as the Respondent has explained, it is simply factually incorrect to say that the deposit of $55,000 had not been paid.  As the Respondent has explained, the $55,000 formed part of the sum of $70,000 paid into the account of Smart Creator on 9 September 2002.

197. Whilst the Petitioner made the point that a Mr Fan of Grammy Record had taken over Kwok’s tenancy, he does not appear to make any complaint about this.  In any event, I accept the Respondent’s explanation that Mr Fan is in fact a partner of Kwok. The Respondent has also pointed out that the Petitioner was well aware of this since he frequently visited Grammy Record to purchase music CDs.

198. As regards the reduction of rent, I accept the Respondent’s explanation that the rent was reduced by $5000 per month due to the financial impact of SARS and that the Petitioner was well aware of and agreed to this.  It is common knowledge that at that time, almost all businesses in Hong Kong suffered a huge decline.

199. Insofar as the Petitioner complains that the Respondent had failed to recover from Grammy Record due payment of electricity charges because the Respondent had failed to stipulate for and recover any consistent electricity charges, I accept the Respondent’s explanation that the tenants of Shop D on the ground floor and the cockloft shared the electricity bill.  The Respondent further explained that the initial agreement between the 2 tenants was that the tenant of Shop D would be responsible for 60 % of billed electricity charges whilst Grammy Record would be responsible for 40 %.  As the electricity bill was issued to the tenant of Shop D, it would pay the bill first and then deduct 40 % of the bill from the rent they had to pay Smart Creator.  Smart Creator would then recover the amount deducted from Grammy Record.  It was for this reason that the amounts paid by Grammy Record varied from month to month.

200. Insofar as the Petitioner complains the Respondent had failed to recover any electricity charges at all from Grammy Record after 19 May 2005, I accept the Respondent's explanation that whilst Grammy Record then initially accepted the above arrangements leading to the sharing of the electricity charges, Mr Fan of Grammy Record subsequently said that the percentage he was required to pay was not correct and refused to pay.

201. In this context, I have to say that I find that the position taken by the Petitioner of apparently equating every failure by a tenant to pay rent or any charges with a breach of duty by the Respondent in failing to recover such payment is wholly untenable.  As I have noted above in relation to the failure by Ichiban Come In to pay all rent due and owing, the Petitioner himself was not able to recover such rent from Ichiban Come In despite himself being involved closely with the grant of the tenancy to Ichiban Come In.

Tenancy With Spixworth Limited – Shop E, Comet Mansion

202. The Petitioner alleged that by a tenancy agreement dated 10 March 2000 executed by Macho as landlord, Macho granted a tenancy of Shop E for a term of 2 years from 22 August 1999 at a monthly rent of $58,000.  The Petitioner then contends that by a tenancy agreement dated 21 August 2001 executed by the Respondent purportedly on behalf of Smart Creator as landlord, the Respondent purported to grant a tenancy of Shop E for a term of 2 years from 22 August 2001 at a monthly rent of $70,000.  He further contends that by another tenancy agreement dated 27 February 2004 executed by the Respondent purportedly on behalf of Smart Creator as landlord, the Respondent purported to grant a tenancy of the same shop for a term of 2 years from 23 August 2003 at the monthly rent of $70,000.

203. Based on the alleged absence of any relevant entry in Smart Creator’s passbook, the Petitioner alleged that, in breach of his duties to Smart Creator, the Respondent had failed to recover from the tenant:

(1)   the monthly rent of $58,000 and management fees for the period of 11 to 20 of January 2001 and the rates for the period of January to March 2001;

(2)   the water charges for the period from 1 October 2003 (sic) to 6 June 2003.

The Petitioner contends that if the Respondent had recovered the said sums, he had failed to deposit the same into Smart Creator's bank account or otherwise account to Smart Creator for the same.

204. The Petitioner further contends that from the absence of any relevant entry in Fintasy’s and Smart Creator's passbooks, the Respondent had, in breach of his duties to Smart Creator, failed to recover from the tenant:

(1)   the shortfall of rent in the sum of $2000 due on 1 February 2002;

(2)   the shortfall of rent in the sum of $3000 due on 1 June 2002;

(3)   the shortfall of rent in the sum of $14,098.70 due on 1 August 2003;

(4)   the shortfall of rent in the sum of $15,065.82 due on 30 June 2005; and

(5)   the water charges for the period of 1 October 2003 (sic) to 6 June 2003.

The Petitioner contends that if the Respondent had recovered the said sums, he had failed to deposit the same into Smart Creator's bank account or otherwise account to Smart Creator for the same.

205. The Petitioner also complains that on the material supplied to him and his solicitors by the Respondent, it is impossible to decipher the purpose and nature of the sum of $75,423.94 paid by the tenant on 1 September 2001, as recorded in Smart Creator's passbook.

206. The Petitioner’s complaints and allegations in respect of this tenancy again demonstrate the Petitioner’s propensity to make unsubstantiated and unmeritorious allegations of misconduct on the part of the Respondent when he knew or ought to have known that such allegations are unfounded:

(1)   Insofar as the Petitioner alleges that the Respondent had “purportedly" executed the tenancy agreement dated 21 August 2001 on behalf of Smart Creator and had “purported” to grant a tenancy of Shop E for a term of 2 years from 22 August 2001, having himself exhibited a copy of the tenancy agreement to his affirmation, the Petitioner should have been well aware that the tenancy agreement had in fact being executed by both himself and the Respondent on behalf of Smart Creator.  It was clearly a genuine tenancy agreement and there is no question of the Respondent having only “purported" to grant a tenancy on behalf of Smart Creator.

(2)   Similarly, as regards the Petitioner’s complaint that the Respondent had failed to recover the monthly rent of $58,000 and management fees for the period of 11 to 20 January 2001, the Petitioner should have been well aware that there is neither merit nor substance in this complaint and the complaint is, as the Respondent contends, clearly misconceived.  This is because the Apportionment Account forming part of the completion statements upon the completion of the purchase of the Lee King Shops (which had been exhibited to the 1^st Affirmation made and filed by the  Respondent, long before the Petitioner introduced this complaint in his 5^th Affirmation and by way of amendment of the Petition ) already accounted for this.

207. As regards the Petitioner's other complaints, I accept the Respondent’s explanations as follows:

(1)   The tenant had in fact paid water charges for the period 1 October 2002 to 6 June 2003 as evidenced by the payment advice and calculation exhibited to the Respondent's 3^rd Affirmation.

(2)   There was no shortfall of rent of $2000 or $3000 as alleged by the Petitioner.  As is clearly demonstrated by the documents produced by the Respondent, these amounts were deducted from the rent paid by the tenant to account for rates which the tenant had paid in advance but which had been waived by the government for the relevant quarters.

(3)   There was no shortfall of rent of $14,098.70 due on 1 August 2003.  The Respondent has clearly explained and demonstrated why the sum of $56,201.30 was paid instead of $70,000.

(4)   There was no shortfall of rent of $15,065.82 due on 30 June 2005.  The Respondent has clearly explained and demonstrated why this sum was not shown as having been paid.

208. With regard to the Petitioner’s complaint that it was not possible for him to decipher the purpose and nature of the sum of $75,423.94 paid on 1 September 2001, this is again quite typical of the type of complaints made by the petitioner in the present case.  Simply because he does not understand something, he then assumes that it is something untoward.  The Respondent, has, however clearly explained and demonstrated how this figure which was paid by the tenant to Smart Creator was arrived at and I accept his explanation.

Allegations that the Respondent had failed to secure renewal or granting of tenancies of certain premises held by the Companies on reasonable terms

209. By reference to new rentals which the Joint Receivers had been able to secure on new tenancies entered into on various dates from February 2009, the Petitioner complains that in breach of his duties to the Companies, the Respondent had allowed many tenancies to expire with tenants holding over on previous terms, which were by the time of termination below market, even taking into account the fluctuations in the market during the years preceding the time of termination.  The Petitioner stated that this was evidenced by the new rental which the Joint Receivers had been able to secure.

210. The first problem with this head of the Petitioner’s complaints is that all he has produced in support thereof is a table setting out the details of the premises, the old rent, the new rent and the commencement date of the new tenancy.  There is no evidence as to when each of the tenancies expired or indeed what the market rentals were or should have been at the dates of expiration.  On this ground alone, it is difficult for me to make any finding that the Petitioner’s complaint is well grounded.

211. In any event, I accept the Respondent’s explanation that the actions of the Petitioner and his solicitors had frustrated his responsibilities in collection of rents and tenancy renewals and then after discussion with his wife, they had decided to let the Petitioner carry on management in rent collection and tenancy renewals.

Allegations of failure to maintain the Lee King Shops and Comet Mansion Shops

212. The Petitioner complains that there had virtually been no maintenance carried out on the Lee King Shops and Comet Mansion Shops since the purchase of the shops in 2001 and 2003 respectively.  Accordingly, the Joint Receivers could not secure the best rent reasonably obtainable on the renewal of the existing leases.

213. In my view, the failure to maintain the Lee King Shops and Comet Mansion Shops cannot be blamed on the Respondent alone.  As a co‑investor and a director of the Companies, and as someone who was involved in the management of the tenancies as from at least 2002, it was open to him to suggest that maintenance be carried out if he thought it advisable or necessary to do so.  Further, I accept the Respondent’s explanation that the Companies did not hold sufficient funds to carry out any maintenance or repair works at the commencement of investment.

214. I find that this head of complaint is not made out.

Allegations of failure to remedy water leakage at the leased premises belonging to Smart Creator and Fintasy

215. I find that this head of complaint is also not made out for the reasons set out above in relation to the allegations or failure to maintain the Lee King Shops and the Comet Mansion Shops.  Additionally, the only evidence adduced by the Petitioner are allegations that since the appointment of the Joint Receivers they had received numerous complaints from tenants of the Lee King Shops concerning the problem of water leakage which the Petitioner alleged that the tenants had said to be a matter which had fallen on deaf ears.  The Petitioner also alleged that an inspection carried out by him in the presence of the Joint Receivers one 22 October 2008, he had noted that Grammy Record had to place water buckets of different parts of the ceiling.  There is therefore no evidence as to exactly when the water leakage problem had commenced.

Allegations of failure to remove illegal structures within time

216. The Petitioner relies on building orders issued against Smart Creator and Fintasy on 10 February 2009 informing them of the existence of illegal structures over the Lee King Shops and requiring them to demolish the same within the time specified therein.  The Petitioner admitted that these illegal structures had existed even at the time when the Lee King Shops were first acquired but the matter was left unattended.  In those circumstances, I cannot see how the Petitioner can complain that it is the Respondent alone who should be blamed for the failure to remove the legal structures within time.  I find that this head of complaint is not made out.

Allegations of failure to ensure proper supply of electricity and water to the leased premises belonging to Smart Creator

217. I accept the Respondent’s explanation that it was the tenants’ desire to work out electricity among themselves as some tenants would not stay for long periods and do not wish to pay a deposit for separate meters.  The Respondent could not therefore force them to apply the new meters if they did not wish to do so.  Again, if the Petitioner had considered it desirable that separate electricity meters should be arranged for each tenant, it was certainly open to him to so request but he did not do so.  In those circumstances, I do not see how he can blame the Respondent and I find that this head of complaint is not made out.

Allegations of unreasonable objection to proper offers of tenancy in relation to properties held by Turbo Cheer

218. In respect of the first matter complained of by the Petitioner, the allegation is simply that the Respondent had refused to discuss the tenancy when approached by the Petitioner.  The Respondent however states that he has never been able to understand why the Petitioner was unable to come to an agreement with the potential tenant and that it was not the case that he had refused to discuss any tenancy renewal matter with the Petitioner.  I prefer the Respondent’s evidence and find this complaint is not made out.

219. The Petitioner’s case in relation to the second matter complained of is that in May 2009 he had obtained a potential offer for the tenancy of Shop 9 of Comet Mansion and accordingly instructed his solicitors to write and convey the said offer to the Respondent’s solicitors.  The Petitioner said that the Respondent had objected to the proposed terms, asserting that he could obtain a better offer.  However, in the end, despite such claim, the Respondent had failed to secure a better offer and his original offer was not tendered.  The premises were therefore left vacant until shortly before the Petitioner made his 5^th Affirmation in March 2010.

220. I have considered the exchange of correspondence between the parties’ respective solicitors on this issue.  Whilst it is true that the Petitioner’s solicitors did write to the Respondent's solicitors conveying an offer of a tenancy relating to Shop 9 (at a rent of $9500 per month), it is not the case, as alleged by the Petitioner, that the Respondent had merely asserted that he could obtain a better offer but had failed to do so.  In fact, after receipt of the Petitioner’s letter conveying the original offer of a tenancy, the Respondent's solicitors had, under cover of a letter dated 11 June 2009, conveyed an offer from a potential tenant (at a rent of $10,000 per month) which the Respondent had secured.  However, eventually the negotiations with this tenant fell through.  It is therefore not true that the Respondent had unreasonably objected to the tenancy proposed by the Petitioner’s solicitors.

Allegations of the alleged dilatory conduct and breaches of duty leading to wasted expenses incurred by Smart Creator and Fintasy

221. Under this head, the Petitioner complains of the alleged failure by the Respondent to ensure due payment of charges and liabilities owed by the Companies causing various penalties and surcharges to be levied against the Companies.  Details of such charges and penalties are set out in Schedules to the Re‑Amended Petitions.

222. I reject the Petitioner’s complaint.  As is clear from the Schedules, the invoices for the charges which the Petitioner complains of not having been settled all date from 2006. By this time, the Petitioner had started his campaign and the Petitioner’s solicitors had become closely involved in the affairs of the Companies.  Indeed, one of the Schedules show that show that even up until March 2005, there was no late payment.  I find that the blame for the late payment of the charges cannot be laid solely on the Respondent.

223. The same can be said of the allegation that the Respondent had failed to cause prompt payments of loans owed to the Wing Hang Bank causing overdue interest charges to be levied by the bank and incurred by Fintasy.  All these charges are said to have been levied on or after 12 June 2008 by which time the Joint Receivers had been appointed.

Allegations of miscellaneous failures to exercise reasonable care and skill in managing the Companies

224. The allegations under this heading consists of a repetition of some of the allegations made relating to the alleged disappearance of the Respondent which I have already considered above, a repetition of the allegation that the overdraft facility discussed above was not properly part of Fintasy’s business, an allegation that Smart Creator had failed to pay Property Tax for the years of assessment 2004/2005 and 2005/2006 with the result that the Commissioner of Inland Revenue had commenced proceedings against Smart Creator for recovery of the tax as well as allegations that the Companies had failed to do various things resulting in breaches of various provisions of the Companies’ Ordinance.

225. In so far as the Petitioner relies on matters I have already considered above, I repeat my findings above.

226. As regards the other matters complained of, the Petitioner has not made clear to me and has failed to convince me that the Respondent alone should bear the responsibility of the failure by Smart Creator to pay Property Tax in question or for the alleged breaches of the Companies Ordinance.  These matters appear to me to be as much the responsibility of the Petitioner as that of the Respondent.

227. In the circumstances, I reject this head of complaint.

Alleged failure to explain

228. The final complaint pleaded in the Petitions is that despite numerous enquiries by the Petitioner’s solicitors made of the Respondent, he had failed and neglected to proffer any explanation for the allegations considered above that the Respondent had without authority or excuse made or permitted payments to be made from the bank accounts of Smart Creator and Fintasy and the matters complained of under the allegations of miscellaneous failures to exercise reasonable care and skill in managing the Companies.

229. I reject the Petitioner’s complaint.  I find that in so far as the Petitioner has made enquiries of the pertinent matters, these have been explained by the Respondent.  In so far as the matters in respect of which he has not made enquiries, there is no substance in his complaint of a failure to explain.

CONCLUSION

230. In the light of my findings above, I dismiss the Petitions.

231. I make an order nisi that the Petitioner do pay the costs of the Petitions, with a certificate for two counsel.

232. There remains for me to thank counsel for their able assistance for which I am very grateful.