LI KIN KEUNG v. YAT FAT LTD AND ANOTHER

HCA 341/2013 & HCA 873/2013

(Heard together)

[2019] HKCFI 1226

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 341 OF 2013

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(By Original Action)

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(By Counterclaim)

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 873 OF 2013

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JUDGMENT

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1.  This is the trial of the 2 actions which essentially involve disputes between Mr Li Kin Keung (“Li”) and Madam Pu Mei Lee Teresa (“Pu”).

2.  Li and Pu were in a relationship since 1990 and became married in 2000.  In 2007, Pu suspected Li to have extra-martial affairs and they have separated ever since.  There is yet formal divorce between them.

3.  HCA 341/2013 concerns 30% of the shares in a Hong Kong company known as Yat Fat Ltd (“Yat Fat”), joined as the 1^st Defendant in that action.  Yat Fat is a corporate vehicle for acquiring lands in Lamma Island for development.  Li claims specific performance of an oral agreement by which Pu agreed to sell 30% Yat Fat shares to him.

4.  There is a counterclaim by Pu for 50% of the shares in King Wong Development Ltd (“King Wong”), a property development company controlled by Li which also owns certain lands in Lamma Island.  Pu says that it was part of the agreement with Li relating to the Yat Fat shares that Li would transfer to her 50% of his interest in King Wong.

5.  HCA 873/2013 concerns the beneficial ownership of the sole issued share in a BVI company known as General-Lite Group Corp (“General-Lite”), joined as the 2^nd Defendant in that action.  General-Lite holds a minority interest in a company, T & L Securities Ltd (“T&L”), which in turn holds a property development project (“the Lot 868 Project”) in Lot 868 of District Lot 1 in Nga Kau Wan (牙較灣), Lamma Island (“Lot 868”).  In short, Li claims to be the owner of the 1 bearer share which was purportedly exchanged into a registered share in Pu’s name by documents not signed by him.

6.  Li and King Wong are jointly represented.  General-Lite and Yat Fat are not represented and have not taken steps in the actions.

7.  At the commencement of the trial, I have expressed my query as to whether it is wise for the parties to pursue the present actions.  As there may be divorce proceedings in the future, the distribution of assets between Pu and Li will have to be determined in the Family Court.  Hence, no matter what will be the result of the present case, the financial positions of the parties will not be finalized.  Unfortunately, the parties still decide to resolve their disputes through the present two actions and so this trial cannot be avoided.

8.  The facts of the present case are a bit complicated.  In particular, it involves a lot of transfers of shareholding of various corporate vehicles.  In his opening submissions, Mr Man, SC, counsel for Li’s camp, has provided the court with a very useful summary of the background and issues, and I will therefore adopt the same structure and approach in addressing the background and issues involved in the present case.

BACKGROUND

(i)   Li’s property development business

9.  There can be little dispute that Li was involved in the business of property development and that he has been acquiring lands in Lamma Island over the years for this purpose.

10.  Li has explained that he would use different companies as vehicles to acquire different lots of land in Lamma Island, and that he would also bring in outside investors to provide funds to the development business.

(ii)   King Wong 

11.  King Wong is a Hong Kong company which was acquired by Li in 1991.  He was all along a director and the majority shareholder of King Wong, holding 70% shares from 1991 to 2014.  Since 2014, his shareholding became 45%.

12.  A table showing the history of the shareholding and directorship of King Wong, based on the information obtained from the Companies Registry documents, can be found at Appendix 1 to Li’s witness statement in HCA 341/2013.

13.  The other 2 shareholders in King Wong are Mr Lam Yuk Tat (林育德) (“Lam”) and Affluent Castle Ltd (“Affluent Castle”).  Pu asserts that Lam is an employee of Li and holds such shares under his name on trust for Li, and that Affluent Castle is in the absolute control of Li.  On the other hand, Li says that Lam is only his business partner and that Affluent Castle is owned by another investor, Mr Wu Yu Ming (胡裕明).

14.  It is common ground that King Wong had acquired landed properties in Lamma Island for development purposes over the years.

15.  Li’s case is that King Wong, apart from acquiring and holding lands, also carried on the business of property developer for various development projects in Lamma Island.  As supported by documentary evidence, King Wong also carried on other miscellaneous businesses such as property investments outside Lamma Island and provision of management, property dealing, construction and renovation services.

(iii)   Yat Fat

16.  Yat Fat is a Hong Kong company incorporated in 1995.  It is common ground that Yat Fat was a corporate vehicle used for acquiring landed properties in Lamma Island.

17.  There is no dispute that Yat Fat had acquired various lands since 1997.

18.  A table showing the history of the shareholding and directorship of Yat Fat can be found at Appendix 2 to Li’s witness statement in HCA 341/2013. From the said table, it can be seen that:

(i)   At the time when it was incorporated, Yat Fat was owned in equal shares by Li and Pu.

(ii)   Subsequently there were various outside shareholders, including Mr Leung Chi Fat (梁熾發) (“Leung”) (1997-2014), Mr Tsai Yuan Hui (蔡源揮) (“Tsai”) (1998-2005) and Mr Liang Guangyi (梁廣義) (“Liang”) (1999-2007).

(iii)   Since 1999, Pu only had a minority shareholding in Yat Fat.  From 2005, she held and still holds 30% shares, which is the subject matter in HCA 341/2013.

19.  Pu’s case is that Yat Fat was a company originally wholly owned by her (because she paid for all the pre-incorporation and post-incorporation expenses), and that the various subsequent shareholders were investors or business partners who cooperated with her.

20.  On the other hand, Li’s case is that Yat Fat was one of the companies run by him for acquiring lands in Lamma Island. He was the person making the decisions in Yat Fat relating to the property acquisition and development matters, and the outside investors, such as Leung, Tsai and Liang, would deal with him and not Pu.

21.  Li and Lam have since acquired the remaining 70% shares in Yat Fat.  On Li’s evidence:

(i)   By an agreement made in 2007, King Wong had acquired Leung’s 20% shares in Yat Fat.  The agreement was disputed by Leung, and King Wong had to bring legal proceedings against Leung under HCMP 658/2013 to enforce the agreement.  King Wong eventually succeeded in its claim in 2014.^[1]

(ii)   Liang held 50% shares in Yat Fat since 1999.  His shares were transferred to a vehicle called Tkeen Property Development Co Ltd (“Tkeen”). Liang later withdrew his investments, and in 2012 the shares in Tkeen were transferred to Lam.

(iv)   “The Linkan Development Project”

22.  “The Linkan Development Project”, as defined below, is not the crux of this case.  Nevertheless, the parties constantly referred to this project in their evidence.

23.  In 2007, Agile Property Holdings Ltd (雅居樂) (“Agile”) and Li reached an agreement for a property development project in Lamma Island (“Linkan Development Project”). The main terms of the project are as follows:

(i)   The main participating parties of the Linkan Development Project were Join Billion Development Ltd (“Join Billion”) (a company held by King Wong as to at least 80%) and Linkan Enterprises Ltd (“Linkan”) (a subsidiary of Agile).

(ii)   The Linkan Development Project would cover various lots of land in DD Lot 7 and DD Lot 9 in Lamma Island.  Some of these lands were already held by King Wong, Yat Fat, and Lamma Island Holdings Ltd (“LIHL”), and they would inject these lands into the project company held by Join Billion.

(iii)   Linkan would provide a loan of up to $420 million to Join Billion.  The loan would be secured by a mortgage over the project lands.

(iv)   Linkan would be given an option to acquire 60% shares in the project company held by Join Billion.

24.  The various stakeholders in King Wong, Yat Fat and LIHL entered into an agreement dated 29 March 2007 (“the JV Agreement”) amongst themselves to govern their rights in this project.  The parties of the JV Agreement were King Wong, Fast Wealth International Ltd (“Fast Wealth”)^[2], Leung and Mr Yeung To Lai Omar (“Yeung”).  In summary:

(i)   A new company called Eagle Faith Holdings Ltd (“Eagle Faith”) would be incorporated, which would be the shareholder of Join Billion.  King Wong, Fast Wealth, Leung and Yeung would become shareholders in Eagle Faith, through which they would hold their interest in the project indirectly.

(ii)   Their respective shareholdings in Eagle Faith were agreed to be: King Wong 79.88%, Fast Wealth 15.18%, Leung 3%, Yeung 1.94%.

(iii)   The JV Agreement also provided for the terms for the injection of lands into the project company, including that the lands held by King Wong, Yat Fat and LIHL would all be sold to the project company at the uniform price of $538.46 per sq ft.

25.  The first phase of the Linkan Development Project was implemented in 2007:

(i)   A loan agreement dated 31 March 2007 was executed between Linkan and Join Billion.

(ii)   The project company, known as Wealthy Honest Development Ltd (“Wealthy Honest”), acquired various lots of land from King Wong, LIHL and Yat Fat:

(a)    from King Wong at a price of $89.7 million;

(b)   from Yat Fat at a price of $52.2 million;

(c)    from LIHL at a price of $205.9 million.

26.  After this sale, Yat Fat still held various other lots of land.

(v)   General-Lite and T&L

27.  General-Lite is a BVI company incorporated in May 2002.  On 12 June 2002, 1 bearer share was allotted and Li was appointed as sole director.

28.  On 25 June 2002, General-Lite acquired 40% shares in T&L (30% from Liang, 10% from Tsai).

29.  T&L is a Hong Kong company incorporated in 1992.  The initial shareholders of T&L were Pu (90%) and her mother, Madam Keung Po Hung (“Keung”) (10%).

30.  In August 1997, T&L acquired Lot 868 in Nga Kau Wan.  It is common ground that a property development of luxury houses (i.e. the Lot 868 Project) has since been completed on Lot 868.

31.  Like the position in Yat Fat, T&L also introduced outside investors as shareholders:

(i)   Mr Li Wang Pong Franklin (“Franklin Li”), which according to Pu was her business partner, became a 50% shareholder in September 1997, whereupon Pu and Keung held 40% and 10% shares respectively.

(ii)   Tsai became a 10% shareholder (transferred from Pu) and director in June and July 1998.

(iii)   Liang became a 30% shareholder in January 1999 (transferred from Pu and Keung), whereupon Pu retained 10% shares.

(iv)   As mentioned above[3], the 40% shares of Liang and Tsai were transferred to General-Lite in June 2002.

THE PARTIES’ RESPECTIVE CASE AND THE ISSUES INVOLVED

(i)   Li’s claim in HCA 341/2013

32.  Li’s case is that he entered into an agreement with Pu in November 2008 and agreed to purchase Pu’s 30% shares in Yat Fat at a consideration of $15 million (“the Yat Fat Agreement”):

(i)   The Yat Fat Agreement was entered into orally at a coffee shop near Li’s office in Causeway Bay, and also evidenced by a written undertaking signed by Li dated 24 November 2008 (“the Undertaking Letter”).

(ii)   The Yat Fat Agreement expressly provided, as stated in the Undertaking Letter, that completion shall take place on 30 June 2009, and the consideration would be paid by 3 instalments before the completion date.

(iii)   The Undertaking Letter further stated that if Li could not complete the purchase by 30 June 2009, Li and Pu would further discuss the relevant matters.

(iv)   It was not stated in the Undertaking Letter that, as part of the Yat Fat Agreement, Li would have to transfer half of his shareholding in King Wong to Pu.

33.  There is no dispute that as at 9 July 2009, payment had been made and accepted under the Yat Fat Agreement in the total sum of $13,166,800.  The payment receipts were signed by Pu and produced at the trial.

34.  Li’s case is that:

(i)   He entered into a further agreement with Pu on or about 29 September 2009 to postpone the payment of the balance of the purchase price and the completion date until the end of 2012.

(ii)   By a letter dated 17 October 2012, he gave notice to Pu and requested her to complete the sale and purchase on 30 November 2012, whereupon he would pay the balance of the purchase price by cashier’s order.

(iii)   By a letter dated 23 November 2012 from his solicitors, Tony Kan & Co (“TKC”), Li repeated the request and made time of completion on 30 November 2012 of the essence.  This letter was also copied to the solicitors’ firm, Cheung Chan & Chung (“CCC”),who were acting for Pu in other matters at the time.

(iv)   Completion never took place.

(v)   On 5 February 2013, Li made payment of the outstanding $1,383,200 by depositing the same into Pu’s account.

35.  On 7 February 2013, Pu, through a letter by CCC, returned the payment of $1,383,200 by way of a cashier’s order.  No mention was made in the said letter about the alleged promise to transfer the 50% King Wong shares.

36.  As Pu refused to transfer the 30% Yat Fat shares to him, Li claims for, inter alia, specific performance of the Yat Fat Agreement.

(ii)   Pu’s counterclaim in HCA/2013

37.  Pu’s case is that the agreement she made with Li included a promise by Li to transfer 50% shareholding in King Wong to her over a series of 3 agreements made since 2001.

38.  The first agreement was made in about 2001 or 2002 (“Pu’s 1^st Agreement”):

(i)   Li would agree to have King Wong continue to acquire lands in Lamma Island.

(ii)   Pu would agree to have Yat Fat continue to acquire lands in Lamma Island.

(iii)   Li would look for investors who would jointly develop the lands of King Wong and Yat Fat.

(iv)   Li would be in charge of making all the plan and arrangement, including corporate restructuring for putting through the development scheme.

(v)   Li and Pu as investing parties would have equal share of interest and benefit in the development scheme.

39.  The second agreement was made in about early 2007 (“Pu’s 2^nd Agreement”):

(i)   Li would line up Agile to take part in the development scheme.

(ii)   There would be corporate restructuring and injection of lands in Lamma Island owned by King Wong, Yat Fat and LIHL into a project company.

(iii)   Agile was to participate in the development scheme by advancing a loan for the acquisition of lands by the project company and Agile would have an option to acquire shares and interest in the holding company of the development scheme.

(iv)   Li and Pu as investing parties would have equal share and interest in the development scheme and Li would transfer and vest in Pu her half share and interest.

40.  The third agreement was made in November 2008 (“Pu’s 3^rd Agreement”):

(i)   Li orally represented to Pu that he would like to acquire Pu’s 30% shares in Yat Fat as part of the step for the implementation of the development scheme.

(ii)   Pu told Li that she could sell those shares to Li if it was indeed required to do so for the development scheme and provided that Li would transfer half of the shares and interest of King Wong free from encumbrance to her as agreed under the 2^nd Agreement.

(iii)   Li orally reassured Pu that the sale of the Yat Fat shares to him was part of the step for the implementation of the development scheme and he would transfer half of the shares and interest in King Wong free from encumbrances to Pu concurrently when Pu transferred her shares in Yat Fat to him.

(iv)   Li further orally suggested that the price for the sale of Pu’s shares in Yat Fat to be $15 million for which he would pay by instalments within a short period of time.

(v)   Pu accepted his term and hence an agreement was made.

41.  Pu also claims that, when she received the Undertaking Letter, she took that it was “to evidence the making of the 3^rd Agreement albeit it did not spell out Li’s promised obligation to transfer half of the shares and interest in King Wong free from encumbrances to her”.

42.  Pu’s case is therefore that:

(i)   She was entitled not to complete the sale of her 30% shares in Yat Fat as Li had not indicated that he would transfer half of the shares and interest in King Wong to her which was a concurrent condition.

(ii)   She counterclaims for the transfer and vesting of half of the shares and interest of King Wong to her.

(iii)   She claims she is entitled to 5,000 shares (being 50%) in King Wong, on the basis that Lam and Affluent Castle held their shares as nominees of Li.

43.  Li denies Pu’s case, in particular the existence of the 1^st to 3^rd Agreements.  In short, Li’s case is that:

(i)   Yat Fat was one of the corporate vehicles used by him to acquire lands in Lamma Island.

(ii)   The shareholding in Yat Fat would be allocated at his direction to outside investors who contributed towards the property development business as a whole.  Pu had no say in these matters, and she had no interest in these shares and would not receive any consideration for those shares.

(iii)   Li was the person who made all the decisions in Yat Fat as to the acquisition of lands and participation in the property development project.

(iv)   Li denies that Lam or Affluent Castle held their shares in King Wong on trust for him.

(v)   If it was a part of the agreement that Li would have to transfer 50% King Wong shares to Pu, such important obligation should have been expressly stated in the Undertaking Letter, or at least Pu should have mentioned such obligation in reply to Li’s demands for the transfer of the 30% Yat Fat shares.

(iii)   Li’s claim in HCA 873/2013

44.  Li’s case is that General-Lite was incorporated as his vehicle to hold his interest in T&L, and indirectly his interest in the Lot 868 Project.  The pre-incorporation expenses were paid for by him or on his behalf. As a result, he was all along the beneficial owner of the sole bearer share in General-Lite.

45.  The bearer share certificate was deposited with Pu for safe custody and was held by her on his behalf, and Li remained the owner of the certificate and the share.

46.  In 2009, the sole bearer share was exchanged for a registered share in Pu’s name, and the bearer share certificate was cancelled.  A new share certificate no. 001 in respect of the registered share was issued in the name of Pu.

47.  This was purportedly effected by the following documents bearing signatures purportedly of Li (“the Disputed Documents”):

(i)   Written request dated 11 December 2009 purportedly by Li, qua bearer of the bearer share, to the board of General-Lite to exchange the bearer share for a registered share in Pu’s name.

(ii)   Resolution dated 11 December 2009 by the sole director of General-Lite approving the exchange of the bearer share for a registered share.

(iii)   Share certificate no. 001 dated 11 December 2009 certifying that Pu was the owner of 1 share in General-Lite.  The exchange of such share was also recorded in the register of shares of General-Lite.

(iv)   Letter dated 15 December 2009 by Li to the registered agent of General-Lite directing it to update General-Lite’s statutory records.

48.  Li’s case is that he had not signed these documents and he had no knowledge of and had not authorised the execution of these documents.  The Disputed Documents therefore had no effect.  Li therefore claims a declaration that he remains the beneficial owner of the sole share in General-Lite, and asks for an order for the transfer of the share now registered in Pu’s name to him.  Li also claims that the subsequent removal of him as director and appointment of Pu as director in 2011 were void.

49.  Pu denies Li’s claim.  Her case is essentially that General-Lite was incorporated as her vehicle and not Li’s.  She had paid all its pre-incorporation and post-incorporation expenses, and she was all along the beneficial owner of the bearer share.  The exchange of the bearer share into a registered share was necessitated by a change in BVI law prohibiting bearer share companies.  She claims that she instructed Li to pass the relevant board resolutions for the exchange of the bearer share into a registered share, and that pursuant to her instructions, such resolutions were passed and the arrangements were then made with the BVI agent to effect such exchange.

(iv)   The shareholdings of Liang and Tsai in Yat Fat and T&L

50.  A common feature in both actions is that Tsai and Liang were both at one stage the shareholders in the companies the shareholdings of which are in dispute: Yat Fat and T&L.  In particular, for both Tsai and Liang, they became a shareholder in Yat Fat and T&L at the same time:

(i)   Tsai became a 10% shareholder of T&L and a 25% shareholder of Yat Fat on 31 July 1998.  Tsai transferred his shares in T&L to General-Lite on 15 June 2002, and his shares in Yat Fat to Pu on 19 January 2005.

(ii)   Liang became a 50% shareholder of Yat Fat and 30% shareholder of T&L on 28 January 1999.  Liang transferred his shares in T&L to General-Lite on 15 June 2002, and the interest in Yat Fat, then held through Tkeen, to Lam in 2012.

51.  In the case of Tsai:

(i)   Pu’s case is that Tsai was introduced by Li, and she transferred 25% shares in Yat Fat to Tsai in 1998 at $8.75 million, but the money was received by Li and never by her.  The 25% shares were transferred back to her pursuant to the advice and arrangement of Li in 2005.

(ii)   For Tsai’s shares in T&L, Pu’s case is that she transferred 10% shares to Tsai to hold those shares on trust for her “pending the final confirmation and agreement of the detailed terms and conditions of the investment to be reached” between her and Tsai.  Subsequently, Tsai decided not to participate in the investment in T&L and thus Tsai transferred the 10% shares in T&L to General-Lite in June 2002 at her direction.

52.  In the case of Liang:

(i)   Pu’s case is that Liang was also introduced by Li, and she transferred 50% shares in Yat Fat to Liang in 1999 at $22.5 million, but the money was received by Li and never by her.

(ii)   For Liang’s shares in T&L, Pu’s case is that she and Keung transferred 30% shares to Liang to hold those shares on trust for her and Keung “pending the final confirmation and agreement of the detailed terms and conditions of the investment to be reached” between her and Liang. Subsequently, Liang decided not to participate in the investment in T&L and thus Liang transferred the 10% shares in T&L to General-Lite in June 2002 at her direction.

(iii)   There is a document produced by Pu that shows that Liang paid for the 25% shares in Yat Fat at $22.5 million, and the 30% shares in T&L at $19.2 million.

53.  Li’s case is that:

(i)   For the purpose of his overall property development business in Lamma Island, he would use different corporate vehicles to acquire lands in Lamma Island, and he would invite investors to cooperate with him in such acquisitions.

(ii)   His arrangements with such investors were informal and based on oral agreements.  Generally, the investors would inject the funds into King Wong and not the individual project companies.  Li would then allocate shareholdings in different companies to them to represent their interests in the development project.

(iii)   Both Tsai and Liang were investors found by him to invest in the overall property development business in Lamma Island.  Li then allocated shareholdings in Yat Fat and T&L to them.  Pu was not involved in these matters.

54.  In the case of Tsai:

(i)   Li’s case is that Tsai had provided funds of about $10 million to King Wong in 1998.  The stated consideration of $8.75 million for Yat Fat’s shares was part of these investments.  Tsai’s interest was only limited to the project held by T&L, although Li also allocated shares in Yat Fat to him.

(ii)   In 2002, Tsai decided to withdraw from the project held by T&L.  He therefore transferred his T&L shares in 2002 and his Yat Fat shares in 2005 to persons nominated by Li.

(iii)   As Li did not have sufficient funds, it was agreed that Li would repay Tsai later.  As evidenced by a receipt issued by Tsai dated 8 June 2010, King Wong did pay Tsai $12 million in 2010 as repayment of his investments and interest in the Lot 868 Project.

55.  In the case of Liang:

(i)   Liang actually held his shares on behalf of a company known as “廣東天健實業集團有限公司” (“GZ Tkeen”).

(ii)   From 1997 to 2007, GZ Tkeen invested from time to time and paid a total of about $67 million into King Wong, and Liang was given shares in Yat Fat and T&L.   The stated consideration of $22.5 million for Yat Fat’s shares was part of these investments.

(iii)   In 2002, GZ Tkeen decided to withdraw part of its investment, and thus the shares in T&L was transferred to General-Lite as Li’s vehicle.

(iv)   Later in 2007, GZ Tkeen decided to completely withdraw its investments.  As evidenced by the receipt issued by GZ Tkeen on 28 July 2008 and the related payment records, Li caused King Wong to repay $62 million in total to GZ Tkeen in 2007 and 2008.

(v)   GZ Tkeen’s interest in Yat Fat, held through Tkeen, was then transferred to Lam in 2012.

(vi)   Li has produced records of payments by GZ Tkeen executed by GZ Tkeen and King Wong in 2005, 2006 and 2007.  There is also a cooperation memorandum dated 6 October 2007 (“the GZ Tkeen Corporation Memorandum”) executed by Li, for himself and on behalf of King Wong, and GZ Tkeen regarding GZ Tkeen’s investments in Lamma Island.

(v)   Authenticity of the Disputed Documents

56.  One of the key issues in HCA 873/2013 is the authenticity of Li’s signatures on the Disputed Documents.

57.  Both parties produced an expert report on handwriting in respect of the Disputed Documents.  At the PTR, I gave leave to the parties to adduce the reports without calling the experts.

58.  The experts have essentially reached a consensus that what appear on the Disputed Documents as Li’s signatures are forged.

59.  Li’s report dated 4 October 2016 was produced first.  Upon comparing 10 control samples of 17 known signatures of Li on 10 documents (“Common Control Samples”), Li’s expert concluded that the signatures on the Disputed Documents were not written by Li.  His view was expressed on a 9-point scale at the highest level of certainty of a forgery.

60.  Pu’s report dated 11 January 2017 was produced in response to Li’s report.  Pu’s expert reached the same conclusion that the signatures on the Disputed Documents were not written by the person who wrote the signatures on the Common Control Samples.  The level of certainty of his views was “highly probable” or “virtual certainty”.

61.  However, for unexplained reasons, Pu submitted an additional “sample signature” to her expert.  The view of Pu’s expert is that the additional sample, referred to as “15C” (“the 15C Sample”), was so different from the Common Control Samples that it was excluded as a control writing of Li.  He concluded that the 15C Sample was probably written by the same person who wrote the signatures on the Disputed Documents.  He further noted that the 15C Sample reflects a “2002” date, and if the date was accurate, it would not be contemporary to the signatures under consideration as the Disputed Documents are all dated at various times in 2009.

(vi)   The ledger documents

62.  There is also an issue about the ledgers of King Wong in relation to the Lot 868 Project for the years 2006 to 2013 (“the Ledger Documents”), produced by Li after obtaining such leave at the PTR.  According to Li, the Ledger Documents go to support his case that King Wong incurred construction costs of about $73.3 million on the Lot 868 Project.

WITNESSES AT THE TRIAL

63.  Both Li and Pu testified at the trial.

64.  Apart from these two key witnesses, Liang and Tsai had prepared their respective witness statements in support of Li’s case. However, Li, on 21 June 2018 which was about 10 days before the trial, took out a summons for: (i) the evidence of Liang to be taken via video conferencing facilities (“VCF”); and (ii) leave to file his 2^nd supplemental witness statement which sought to confirm the evidence contained in the witness statements of Liang and Tsai.

65.  According to Li, the application was necessitated because both Tsai and Liang were unable or unwilling to attend the court to give evidence in person at the trial.  Tsai, who resides in Taiwan, apparently did not want to come to Hong Kong due to his health problems. However, Tsai finally decided to testify in person at the trial and so it was not necessary for the court to deal with the application insofar as it related to evidence of Tsai.

66.  In the case of Liang, who resides in the Mainland, it seemed that he was unable to come to Hong Kong because of the travel restriction imposed by a Mainland court in the Guangdong province.  Further, according to the relevant order dated 6 February 2108 (“the Mainland Order”), Liang cannot, without the approval of the authority, meet or communicate with any other person.  As I see it, the giving of evidence via VCF may amount to a breach of the said prohibition.  At the commencement of the trial, I had ascertained from Mr Man whether Li could obtain further clarification from the Mainland court.  Given some time, Mr Man still could not provide the clarification.  As the giving of evidence via VCF would on the face amount to a breach of the Mainland Order, I refused the VCF application.

67.  That leaves the issue as to the status of Liang’s evidence.  In this regard, Li has filed the 2^nd supplemental witness statement with a view to confirm, inter alia, the evidence contained in Liang’s witness statement.  Pu’s position, as confirmed in the final submissions of Mr Chen, counsel for Pu, is that the contents of Liang’s witness statement are admissible as hearsay evidence and the court can and should consider its contents.  However, since no opportunity has been given to Pu to cross-examine Liang, no weight should be given to Liang’s witness statement as corroborating evidence.

68.  In the Judgment below, I will analyse, in some details, the evidence in this case and the arrangements between the parties throughout the years.  But before I do so, I will give some preliminary observations on the evidence given by Li and Pu.

69.  Li and Pu are experienced businessman and businesswoman.

70.  Li was aged 66 at the time of the trial.  He only received primary education.  He started to work as an estate agent in 1989.  According to him, he earned a handsome income by way of commission.

71.  When Li first met Pu, Pu was already a successfully businesswoman engaging in securities and forex trading business. She was living in a flat in Hong Kong Island of over 2,000 square feet in size, whilst Li was living in a much smaller apartment.

72.  Both Pu and Li liked Lamma Island.  Starting from 1995, Li started to invest in landed properties and development projects in Lamma Island.  There is a dispute as to whether Pu had any interests in such business.

73.  In my judgment, the evidence clearly shows that it was Li who ran such business.  He was the one making the decisions relating to investments, finding investors for the projects, negotiating the deals with the landowners, arranging the finances and dealing with the transfers of fund for the acquisitions.

74.  Li frankly admits that Pu did support his business by providing finances for the acquisitions of certain lands.  It is also clear that Pu had by then some corporate vehicles (some bearing the name “美多利” which was a trade name used by Pu for her securities business), and Li used those vehicles for his business in Lamma Island.  Li acknowledges the contributions made by Pu at the initial stage of his business, and I am sure that the judge handling the divorce proceedings in the future will certainly take such factor into account in determining the question of financial provisions between them.

75.  Given his background, I accept Li’s evidence that he was not good in handling administrative work and paper work relating to these corporate vehicles and so Pu helped him to take care of those matters. Li therefore did not know the details of the operation of these vehicles.

76.  In my judgment, the evidence of this case is more consistent with Li’s case that the property development business in Lamma Island has all along been his own business.  As the then relationship between them was de facto husband and wife, Pu was only providing assistance to Li to set up and operate his business, including using her corporate vehicles to run the business.

77.  The land development projects involved Tsai and Liang, and there were fund flows and transfers of shareholding between the relevant parties and the corporate vehicles.  Whilst Li and his witnesses could provide a sensible and complete account to explain these transfers of funds and shares, Pu’s explanations on these matters are either unreasonable or lacking particulars.  The shifting of her stance in the course of the trial also undermines the credibility of her case.

78.  Both parties have attacked the other side for the inability of producing documentary proof in support of their respective case.   In this regard, I accept that when the relationship of Pu and Li was still very good at the initial stage of the land development business, they were dealing with each other in an informal way.  There might not be written documents to record their dealings, and they might not pay attention to the payment records between them.  However, when the relationship started to turn sour in about 2007, they, being experienced businessman and businesswoman, should have paid more attention to the contents of the documents between them and other documentary proof.

79.  In this case, both Pu and Li have sought to provide various explanations as to why certain events took place in the past.  Since some of these events occurred many years ago, these explanations, both from Pu and Li, are not free from difficulties.  However, as I will further elaborate in the latter part of this Judgment, I find the evidence of Li to be more credible.  His evidence also sits well with the other more objective evidence in this case, including the flows of funds and the transfers of shares.

80.  As forcibly pointed out by Mr Man in his final submissions, some of the explanations offered by Pu simply does not make sense at all.  Even with the able handling of the defence by Mr Chen, he cannot provide any satisfactory answers, or indeed any answers, to these challenges.  He simply suggests that, though the explanations given by Pu may be perceived as unreasonable, one cannot be too critical with her answers in light of the personal relationship between Pu and Li.  But in my judgment, this cannot be a blanket excuse, in particular some of these transactions involved other third parties with whom Pu hardly knew.  Further, some of these events occurred after the deterioration of the relationship between the parties in 2007.

81.  With these observations, I will go one to analyse the evidence in more details.  Mr Man has again provided the court with a very useful analysis of the evidence in his final submissions.  Since I agree with his analysis, I will adopt the same structure and approach in addressing the various issues in the present case.

FACTS GATHERED FROM THE EVIDENCE

82.  The present case concerns 2 distinct development projects in Lamma Island.

83.  The first is a joint venture between King Wong and Agile which is the Linkan Development Project.  In very broad terms, various companies in which Li was interested injected different lots of land in Lamma Island into this project in May 2007.  The stakeholders in these land-owning companies then became shareholders in Eagle Faith which held an indirect interest in this project.

84.  Yat Fat was one of the companies which sold land to the project company.  It entered into an agreement to sell various lots of land to Wealthy Honest (the project company) in May 2007 at $52.2 million.  Completion took place in June 2007.  King Wong and LIHL (formerly known as South Pacific) also sold lands to Wealthy Honest at $89.7 million and $205.9 million respectively.

85.  The other project is the Lot 868 Project which involved the construction and development of 11 luxurious houses.  This development has been completed before the commencement of this action.    This project is held by T&L and is separate from the Linkan Development Project.

(i)   King Wong

86.  It is common ground that King Wong is and was at all material times a company controlled by Li, and Pu had never held any shares and was never a director in this company.

87.  The unchallenged evidence of Li is that King Wong was his company he used to run the property development business both in and outside Lamma Island.

88.  From the evidence, it is also clear that King Wong was involved in both projects.  King Wong injected lands into the Linkan Development Project in 2007.  According to Li, which is supported by the Ledger Documents, King Wong also paid for the construction and renovation costs of the 11 houses of the Lot 868 Project in the total sum of over $70 million.  Indeed, there was no suggestion in the cross-examination of Li that anyone other than King Wong paid for such expenses.

(ii)   Yat Fat

89.  Upon the incorporation of Yat Fat in 1995, the company was held by Li and Pu as to 50% each.

90.  There is no dispute that the company remained dormant until it first acquired lands in the financial year ending 31 March 1997.  At that time, Yat Fat was held by Pu as to 80% and Leung as to 20%.

91.  On 31 July 1998, Tsai acquired 25% shares in Yat Fat from Pu.  On the same day, Tsai also acquired 10% shares in T&L from Pu.  This took place shortly after the payment by Tsai of $10 million to an account at Li’s direction.

92.  On 28 January 1999, Liang acquired 50% shares in Yat Fat from Pu.  Again, Liang also acquired 30% shares in T&L from Pu and Keung on the same day.  This again took place shortly after the first payment made by GZ Tkeen to King Wong on 5 January 1999.  In particular, there was a document recording the transfers of shares in both companies signed by Liang, Pu and Keung, which clearly suggests that these transfers were part of the same transaction.

93.  In 1999, Yat Fat entered into 2 provisional sale and purchase agreements to acquire various lots of land in Lamma Island.  These purchases were later completed with some lots in 1999 and some lots in 2004.

94.  In 2003, Yat Fat sold some lands at $5.2 million to LIHL.

95.  On 19 January 2005, Tsai’s 25% shares in Yat Fat were transferred back to Pu.

96.  On 8 March 2007, Liang’s 50% shares in Yat Fat were transferred to Tkeen which was a BVI company.  The unchallenged evidence of Li is that this was a company related to GZ Tkeen.

97.  As mentioned above[4], the sale of lands by Yat Fat to Wealthy Honest was completed in May to June 2007.

98.  In 2012, Liang caused the shares in Tkeen to be transferred to Lam.

99.  In 2014, Leung’s 20% shares were transferred to King Wong after King Wong succeeded in HCMP 658/2013 against Leung.[5]

(iii)   T&L

100.  T&L’s full name is “T&L Securities Ltd”, which is different from two other Pu’s companies known as “T&L Holdings Ltd” and “T&L Investment Ltd”.

101.  T&L was incorporated in 1992 as Pu’s company.  The shares were at that time held by Pu and Keung (her mother).

102.  There is no evidence that this company had any economic significance until September 1997, when it purchased Lot 868 in a land auction.

103.  In September 1997, there was a new allotment of shares and the shareholding became Pu with 40%, Keung with 10% and Franklin Li with 50%.

104.  As mentioned above[6], in July 1998, 10% of Pu’s shares were transferred to Tsai, and in January 1999, 30% of Pu’s and Keung’s shares were transferred to Liang.  Pu held 10% shares after this.

105.  On 13 June 2002, Pu’s 10% shares were transferred to a BVI company called “Legend Times Ltd” which was Pu’s company.  On the same day, Franklin Li’s 50% shares were transferred to a BVI company called “Bio-Land Investment Ltd”.  Shortly thereafter on 25 June 2002, Tsai’s and Liang’s 40% shares were transferred to General-Lite.

(iv)   General-Lite

106.  General-Lite was only incorporated on 13 May 2002 which was shortly before the above transfers.  On 12 June 2002, a bearer share was issued and Li was also appointed the sole director of General-Lite which he remained until 2011.

107.  On 26 June 2002, which was one day after the transfer of the 40% T&L shares to General-Lite, T&L executed a building mortgage over Lot 868 in favour of Bank of East Asia to secure a banking facility of up to $30 million.  Li and Pu were both guarantors to this loan.

THE ROLES OF LIANG AND TSAI IN THE INVESTMENT PROJECTS

108.  Liang and Tsai both played significant roles in the events involved in both actions, as they had been the shareholders in Yat Fat and T&L and their shares were respectively transferred to them by Pu and her mother at the same time.

(i)   Pu’s evidence on the roles of Tsai and Liang

109.  Pu claims that she transferred 10% shares to Tsai in July 1998 to hold the said shares on trust for and on her behalf “pending the final confirmation and agreement of the detailed terms and conditions of the investment to be reached between [her] and [Tsai]”.

110.  Similarly, Pu says that she and Keung transferred 30% shares to Liang in January 1999 to hold those shares on trust for and on her and her mother’s behalf “pending the final confirmation and agreement of the detailed terms and conditions of the investment to be reached between [her] and [Liang]”.

111.  She further says that in June 2002, Tsai and Liang transferred the total 40% shares to General-Lite at her direction, as they decided not to participate in the investment project.

112.  Obviously, Pu’s case must be premised upon some sorts of investment plan between Liang, Tsai and Pu, and yet there is no evidence before the court as to what these plans were.  There was also no mention whatsoever of Li’s role in relation to the T&L’s shares.  Indeed, Pu insists that Li never had any beneficial interest in T&L.

113.  In my judgment, Pu’s evidence in this regard is totally unconvincing.  Apart from perhaps getting Franklin Li involved in the Lot 868 Project, there is no evidence to show that Pu had played any significant part in the property investment business in Lamma Island.  Further, if the investment plans only involved Pu and not Li, Pu should be able to provide the court with more particulars about the plans and her arrangements with Tsai and Liang.  After all, the alleged cooperation agreements involved substantial amounts of money, and the vague allegations mentioned in §§109 and 110 above simply do not make a lot of sense.

114.  Further, there is ample evidence to show that Li played a substantial part in the property investment projects in Lamma Island including the Lot 868 Project.  Apart from making the business decisions relating to the acquisitions of the land, he was also responsible for finding other investors for the projects.  All such evidence does not sit well with Pu’s allegation that Li had no beneficial interest in T&L.

115.  In relation to the shares in Yat Fat, Pu claims that:

(i)   The 25% shares were transferred to Tsai on 8 July 1998 at the consideration of $8.75 million “upon the introduction and advice of [Li]”, and that she never received the purchase money.  These were transferred back to her on 19 January 2005 (after 6.5 years) “pursuant to the advice and arrangement of [Li]”.

(ii)   The 50% shares were transferred to Liang on 28 January 1999 at the consideration of $22.5 million “upon the introduction and advice of [Li]”, and that she never received the purchase money.  “All matters concerning this transference and payment were handled by [Li] for and on [her] behalf.” In other words, Pu has now parted with these shares for 19 years.

116.  Again, I find Pu’s evidence unconvincing. Pu has never explained why these transfers took place, and there is simply no suggestion that these shares were held on trust for her.

(ii)   The evidence of Li, Tsai and Liang on the investment projects

117.  According to the evidence adduced by Li, the investments of Tsai and Liang in the Lamma Island projects, whether relating to Lot 868 or generally other lands, were made with Li and not Pu, and that their shareholdings in Yat Fat and T&L were transferred to them originally, and transferred away subsequently at Li’s and not Pu’s direction.

118.  According to Tsai, he invested $10 million in the Lot 868 Project, and hence he was given 10% shares in T&L.  As T&L was by then holding only undeveloped land, Li arranged for 25% shares of Yat Fat to be transferred to Tsai as a “protection”.  Tsai withdrew from the investment in 2002 and agreed to transfer the T&L shares back to Li.  Hence he transferred the shares to General-Lite, which he understood was owned by Li. Tsai further explained that the reason for his withdrawal was because his business partners did not see the prospects of the project. Tsai relayed this to Li, who made the suggestion to Tsai to withdraw his entire investments. Li then agreed to repay Tsai his investments when he had funds. Tsai also explained that the additional $2 million was offered by Li as profit. Tsai therefore denied holding the T&L shares on trust for Pu.

119.  Tsai had also given detailed evidence as to how he came to get involved in the Lot 868 Project.  He was very clear that he had never discussed any investment project with Pu.  From the beginning to end, he only discussed the investment project with Li.

120.  As compared with Pu’s evidence, the evidence of Li and Tsai is more convincing.  Li and Tsai provided detailed particulars about their cooperation arrangement, which fit into the other surrounding facts of the present case.  On the other hand, Pu cannot provide any particulars to support her alleged dealings with Tsai and Liang.

121.  Furthermore, as shown by the receipt signed by Tsai dated 8 June 2010, there is incontrovertible evidence that Tsai did in 2010 receive $12 million from Li to repay his $10 million investment.   It was clearly stipulated in such receipt that the moneys were the principal and profit for Tsai’s investment in the Lot 868 Project.  In my judgment, such receipt contradicts Pu’s case that the T&L shares were held by Tsai on trust for her pending the final agreement of the terms of Tsai’s cooperation arrangement with her. Tsai did pay substantial money for his investment in the Lot 868 Project, which was repaid by Li and not Pu.

122.  I therefore accept Tsai’s evidence as the truth.

123.  To challenge Li’s case, Mr Chen submits that, since Tsai was able to spend a few days in the Philippines for holidays before coming to Hong Kong to testify, Tsai has suffered no serious health problems.  The previous explanation given in support of the application for the filing of the 2^nd supplemental witness statement of Li as mentioned in §§64 and 65 above was therefore only a pretext put forward by Tsai, or was a lie told by Li on behalf of Tsai.

124.  I do not accept such submission.  According to Tsai, he had a number of medical appointments to attend in Taiwan around the time of the trial.  It was only because of the changes of these schedules that he could come to Hong Kong to testify.  During cross-examination, it had not been seriously suggested that Tsai was lying in this regard.  As he originally had scheduled medical appointments, I do not accept that he was making a pretext not to come to Hong Kong.  Neither can it be seriously suggested that Li was lying when he told the court the reason for Tsai not coming to Hong Kong to testify.

125.  Li had also been extensively cross-examined about his relationship with Tsai and their arrangement under the Lot 868 Project.  In particular, Li said:

(i)   While Tsai did not get back his $10 million until 2010, he nevertheless transferred the T&L shares back to General-Lite at Li’s direction in 2002.  They trusted each other, and Li would also need to get back the shares so that if he was able to find new investors, he could allocate the shares to them.

(ii)   Li did not pay back Tsai with the funds King Wong received from the Linkan Development Project in 2007 because King Wong was required to acquire further lands with the funds.  As set out in §§3, 5.2 and 6.4 of the JV Agreement, Li’s side was required to acquire and inject lands into the project beyond the 620,000 square feet of lands injected by King Wong, Yat Fat and LIHL.

(iii)   The 25% Yat Fat shares were transferred back to Pu by Tsai, whereupon Li treated that the shares had been gifted to Pu, and he agreed to buy back those shares from Pu in 2008 to help her.

(iv)   After 2005, Tsai no longer held any shares as “protection”.  Li and Tsai were content with such arrangement because they trusted each other.

126.  Pu suggests that the transaction was imprudent, because there was no concrete investment plan, timetable or expected investment return, and no valuation was done before the investment.  She also complains that the cooperation arrangement was poorly documented.  However, businessmen may have different ways of doing things.  Taking into account the relationship between Li and Tsai and their background, I find nothing unusual that they decided to conduct their business in such informal manner.  Actually, it lies ill in the mouth of Pu to make this sort of complaint.  As compared with Pu’s story which hardly contains any details about their alleged investment plan and arrangement, Li and Tsai’s version of events, which is supported by the other circumstantial evidence such as the flow of funds and the transfers of shares, is much more credible.  Indeed, it has not been suggested that the investment did not take place.

127.  I then turn to Liang’s evidence.  It is common ground that the contents of Liang’s witness statement are admissible as hearsay evidence.

128.  According to Liang, he was the Chairman (董事長) of GZ Tkeen at the material time. Unlike Tsai, GZ Tkeen intended to invest in various Lamma Island lands, and Liang went to visit these lands with Li.  Originally GZ Tkeen was to invest $150 million to $200 million in the projects, and would have about 50% share in the overall Lamma Island project and 30% share in the Lot 868 Project.  Liang was thus given 50% shares in Yat Fat and 30% in T&L, and GZ Tkeen made total payments of $67 million to King Wong from 1999 to 2007.  In June 2002, GZ Tkeen decided to withdraw its investment in the Lot 868 Project, because it could not inject the originally anticipated sum of $150 million to $200 million on time.  Thus the shares in T&L were transferred to General Lite.  In 2007, GZ Tkeen wanted to withdraw all its investments.  Li agreed to return $62 million after deducting $5 million as operating expenses.  After King Wong received funds from Agile under the Linkan Development Project, it returned $35 million to GZ Tkeen in June 2007.  Since a subsidiary of GZ Tkeen was a listed company and to protect the interest of GZ Tkeen, the GZ Tkeen Corporation Memorandum was signed between GZ Tkeen and Li (on his behalf and on behalf of King Wong).   King Wong further returned $27 million to GZ Tkeen in July 2008.  Hence, Liang denied holding the T&L shares on trust for Pu.

129.  Though there was no opportunity to test Liang’s evidence by way of cross-examination, I accept his evidence as the truth.

130.  The key part of Liang’s evidence is corroborated by unchallenged documentary records:

(i)   There were payment records signed by King Wong and GZ Tkeen in 2005 to 2007 to show that GZ Tkeen had paid total investment sum of $67 million from 1999 to February 2007.

(ii)   GZ Tkeen and Li signed the GZ TKeen Cooperation Memorandum regarding GZ Tkeen’s cooperation with Li in the various land development projects in Lamma Island, which included lands held by Yat Fat and Lot 868 held by T&L.  This document recorded that GZ Tkeen invested $67 million in the projects.

(iii)   The above shows that these payments were paid to King Wong, and they had nothing to do with Pu and everything to do with Li.

(iv)   According to the receipt signed by GZ Tkeen and payment evidence, King Wong made repayments of $62 million in total in June 2007 and July 2008.  Though the purpose of the repayments were not stated on the receipt, it is clear that the repayments must relate to the Lamma Island development projects.  Li has in court given clear evidence that he repaid $62 million by instalments to Liang or GZ Tkeen, though he could not remember the details of the payments such as the payees in the cheques which is quite understandable.

131.  This is further supported by the fact that the reason for a $5 million deduction has been explained, i.e. the operating expenses of King Wong in relation to the Lamma Island projects over the years. In any event, it has not been put to Li that he did not repay the investments to GZ Tkeen.

132.  I agree with Mr Man that all these contradict Pu’s case.  The sums invested by Liang and GZ Tkeen covered the investments in the Lot 868 Project and other projects involving Yat Fat, which were repaid by Li and not Pu.  Under such circumstances, the shares in T&L could not have been held on trust for Pu.  Likewise, the 50% shares in Yat Fat were beneficially owned by Liang and GZ Tkeen when they were transferred to Liang in 1999, but their investment was subsequently repaid by Li.

133.  In assessing the weight of the hearsay evidence of Liang, no adverse inference should be drawn against Li for Liang’s absence at the trial. At least, Li was not afraid for Liang to give oral evidence by way of VCF, and it was only because of the Mainland Order that Liang was not able to testify in court or give evidence via VCF.

134.  For the reasons given above, I accept Liang’s evidence as the truth.  Apart from the support of the various documentary evidence, his version of events sits well with the surrounding circumstances of this case.  It is clear that Liang did invest in the property development projects in Lamma Island and all the relevant discussions took place between Li and him.  On other hand, Pu cannot provide any detailed particulars as to her dealings with Liang.

135.  Further, Pu’s counsel was able to cross-examine Li on his relationship with Liang.  Mr Chen submits that the transaction between Liang (or GZ Tkeen) and Li (or King Wong) was not commercially sound or reasonable.  However, it is clear from the evidence that there was mutual trust between Li and Liang who conducted their business in an informal manner.  They had not engaged lawyer to draft a deed to record every agreement they made, but that was the way they did business.  Such kind of trust between businessmen is not unusual.  Notably, Li, Liang, and indeed Tsai, were all happy with the arrangements.  As compared with Pu’s story which is lacking particulars, the version of events put forward by Tsai, Liang and Li is more credible.  Ultimately, the contemporaneous documentary evidence shows that Liang did make the investments which were repaid by Li and not Pu, and the investment arrangement was made between Liang and Li.  Indeed, it was never put to Li that the payments were not made or that the investments were not for the Lamma Island projects.  Hence, I accept Li’s case as the truth.

(iii)   Pu’s new case in her oral testimony

136.  In her oral testimony, Pu put forward a new case before the court:

(i)   The transfers of shares of both Yat Fat and T&L to Tsai and Liang were all sale transactions with Pu as the vendor and Tsai and Liang as the respective purchaser.

(ii)   Pu had no direct dealings with Tsai and Liang as all the arrangements were made by Li.  From the documents signed by Tsai and Liang, she could see that there were stated purchase prices.  By then, she thought the prices were fair, and so she was willing to sell the shares and thus signed the transfer documents.

(iii)   Pu did not receive any purchase moneys from Tsai or Liang.  She accepted that they might have paid Li, but she did not know the details.

(iv)   As to the fact that Pu did not immediately receive the purchase moneys, she put this down to her being in a good relationship with Li, such that the transactions were not done in a normal business manner.  She also thought that the documents signed and the fact that she was the sole signatory of Yat Fat’s bank account provided some protection for her.

(v)   Under such circumstances, as she had not received the purchase moneys, she should be able to get back the shares and the shares would be held on “trust” for her.

137.  I agree with Mr Man that this is a complete change of case from the one disclosed in her witness statements.  Pu did not even bother to file a supplemental statement to correct her previous evidence before the trial.  Indeed, this was not the case put to Li and Tsai. It has never been put to them that there were outstanding purchase moneys to be paid for the transfers of the shares, and the “trust” put to Tsai was on the basis that there were investment plans and arrangements between them.  Hence, I have reason to believe that Pu’s new case is actually a recent fabrication.

138.  Further, the new case is actually inconsistent with the version of events as stated in her witness statements which she confirmed as true in her examination-in-chief.  In particular, she described the trust as one “pending the final confirmation and agreement of the detailed terms and conditions of the investment to be reached”.  Her evidence now is that these were simply sale transactions arranged by Li, and what was pending was only the payment of the purchase prices.  She seems to have abandoned the allegation of any investment project with Tsai or Liang.

139.  In the case of Tsai, there were bought-and-sold notes for the transfer of the 25% Yat Fat shares, which stated that a consideration of $8.75 million had been received.  In contrast, Pu has not produced any documents in relation to the transfer of the 10% T&L shares. It was only in court that she said for the first time that this was a sale and that the price was $10 million.  Unfortunately, her new case was not put to Tsai.

140.  Pu’s case now is that the transfers of the Yat Fat shares and the T&L shares were of the same nature.  Yet she was wholly unable to explain why her witness statements described them differently.

141.  There is another problem with Pu’s new case, as the “sale transactions” now claimed by her make little commercial sense, for the shares were transferred to third parties who had no previous dealing with her before the receipt of the purchase moneys, and with no agreed time for the payment of such purchase moneys.

142.  In addition, the idea that, if the purchase moneys were not paid to her and then there would be a trust so that she can somehow get back the shares, is clearly wrong.  As a matter of law, in the case that these were sales of shares following which she had already parted with the shares, her only remedy is to sue for the unpaid purchase prices.  What she may possibly have is an unpaid vendor’s lien, but that is not a trust and she cannot get back the shares.

143.  Having now accepted that the shares were sold to Tsai and Liang, Pu cannot possibly claim any further beneficial interest in the shares.  Given Tsai’s and Liang’s clear evidence that they transferred their shares back according to Li’s direction in return for repayments made or to be made by Li, this can only mean that Li would become the owner of the shares in Yat Fat and T&L which were transferred from Tsai and Liang.

144.  Another problem with Pu’s case is that, if Tsai and Liang had never paid the purchase moneys to her, it is extremely strange that Pu has never chased them for the alleged unpaid purchase moneys or the return of the shares. This is particularly so in the case of the 50% Yat Fat shares transferred to Liang which were later transferred to Tkeen.  Pu has parted with these shares for 19 years and they were never returned to her.

145.  Pu accepts that she knew about these transfers, and she knew that Li’s case is that Tkeen now belongs to Lam.  Pu’s excuse was that she thought she was still a director and the sole signatory of the bank account and that Yat Fat still owned lands, and so if there was a sale, she could deduct sums due to her from the sale proceeds.  Given that Pu is an experienced and successful businesswoman, it is very difficult for me to accept such explanation as these were transactions with third parties she hardly knew, not her husband.  Further she is unable to explain why she still took no action after she was removed as a director of Yat Fat in 2014, and when she had already brought a counterclaim for the transfer of the 50% King Wong shares.

146.  For these reasons, I reject Pu’s evidence.

OWNERSHIP OF GENERAL-LITE (MAIN ISSUE IN HCA 873/2013)

147.  The main issue concerning the ownership of General-Lite is the validity of the exchange of the bearer share to a registered share.  This also raises another issue as to who was the beneficial owner of the bearer share in the first place, because it is no part of Pu’s case that there was anything in 2009 (after Li and Pu had separated) which would constitute any reason for Li to pass the beneficial ownership in the sole share in General-Lite to her.  Both sides say that General-Lite was incorporated to be their respective vehicle for holding the 40% shares in T&L transferred from Liang and Tsai in 2002.

(i)   Li’s involvement in General Lite and T&L

148.  Pu’s case is that Li never had any involvement in T&L or the Lot 868 Project.  However, I reject such allegation for the following reasons.

149.  First, there is no serious dispute that Li was appointed as the sole director of General-Lite from the beginning.  There is no conceivable reason why Li should be appointed the sole director when, on Pu’s case, Li had no involvement in the daily administration of the corporate vehicles and had all along acted at her “absolute instructions”.

150.  Second, Li has also given clear evidence that King Wong paid for the construction costs for the 11 houses of the Lot 868 Project in the total sum of over $70 million.  No contrary case has been put to Li during cross-examination.  There was some suggestion that Li did not prepare the Ledger Documents himself, but that alone cannot destroy the credibility of Li’s evidence.  Li’s case is that the payment was made pursuant to a cooperation agreement with Franklin Li and Pu for this project.  If Li had no interest in the Lot 868 Project, there would be no reason for King Wong to pay for the construction costs.

151.  Mr Chen also points out that the expenses were not reflected in the annual financial statements of King Wong.  However, there may be a lot of different reasons as to why that was the case, in particular the court has no idea as to how the statements were prepared.  After all, someone had to pay for such construction and renovation costs, and there was no suggestion in the cross-examination of Li that anyone other than King Wong paid for such expenses.

152.  Further, the payment of the construction costs is clearly something within the knowledge of Pu and Franklin Li, who were the directors or the controller of the corporate directors of T&L.  During cross-examination, Pu accepted that she knew there was this issue about construction costs, but was wholly unable to give any good explanation why she did not produce the documents and accounts of T&L which, if Pu’s case is correct, would show that they paid for the construction costs and not Li, or why she did not even respond to Li’s evidence in his witness statement made in 2015 that King Wong paid for the construction costs.

153.  During her oral testimony, Pu came up with the explanation that she somehow thought Li’s evidence was that King Wong incurred $70 million construction costs on top of the $80 million costs incurred by her and Franklin Li, so that this would be for Li to prove.  In my judgment, this cannot be a reasonable reading of Li’s witness statement.  In any case, there is no reason why, if her case is true, she should not have been able to produce the records of T&L to contradict Li’s case.  In particular, the documents about construction costs are plainly relevant and ought to have been disclosed, whether she puts Li to strict proof of his allegation or not.

154.  Third, as mentioned above[7], Li stood as a guarantor together with Pu of T&L’s building mortgage taken out by T&L in June 2002, which was around the time when General-Lite acquired the 40% shares from Tsai and Liang.  There was a letter from Bank of East Asia about the loan, and Li also signed a Guarantee and Funding Agreement and a Completion Guarantee dated 26 June 2002, which was one day after Tsai’s and Liang’s 40% shares were transferred to General-Lite.  King Wong even paid for the $20,000 extension fee for the loan in 2009.

155.  During her oral testimony, Pu tried to explain that the bank manager requested Li to be a guarantor because the manager had learnt from newspapers that Li claimed to be the owner of the Lot 868 Project, and when she asked Li about the bank’s request, to her surprise, Li agreed.  Mr Chen also submits that, given their husband and wife relationship, there is nothing unusual for Li to have agreed to guarantee a loan for his wife’s business.

156.  In my judgment, these are not convincing explanations.  Obviously, the bank made the request because they saw indications that Li was an owner of T&L.  Further, given that Li was not just dealing with his wife but a third party Franklin Li, I do not accept that Li would have agreed to take up a potential liability of up to $30 million if he did not own part of the project. Finally, despite the clear evidence of Li in his witness statement, Pu has not put her new story to Li which certainly undermine the credibility of her case.

157.  Fourth, there is evidence that King Wong paid for the corporate fees of General-Lite for the years 2008 and 2009.  This was accepted by Pu in cross-examination.  She initially had no explanation, then blamed it on something Li was “planning”, and said that somehow, Li would offer to pay her these annual fees to appease her because she complained that she never received moneys for her investments in Yat Fat.  Pu’s story is especially incredible when Li could not tell one company from another, and should not, on Pu’s own case, even know of the existence of General-Lite.  Further, these were very small sums compared to the alleged sums due to Pu in Yat Fat, and so the “appeasement” allegation simply lacks credibility.  The logical conclusion is therefore Li has an interest in General-Lite.

158.  For the above reasons, I reject Pu’s evidence and find that Li has interest in General-Lite, T&L and the Lot 868 Project.  This can only be the case when he is the real owner of the 40% shares in T&L held through General-Lite.

(ii)   The shareholdings of General-Lite and Legend Times in T&L

159.  In June 2002, the shares in T&L were all transferred to be held by BVI companies: Legend Times and General-Lite.  Legend Times, which was Pu’s company, took over the 10% share in T&L under her name.

160.  I agree with Mr Man that, if all the shares were owned by her, there is no conceivable reason why Pu would acquire another BVI company, i.e. General Lite, to hold the 40% shares, when she could have held the 40% shares also through Legend Times.  Obviously expenses would have to be paid for the incorporation and the continuing operation of General-Lite.

161.  During cross-examination, Pu gave the excuse that it was her “habit” to have two different shareholders holding the shares for her, giving her mother’s 10% holding as an example.  However, a BVI company is different from her mother, as the operation of foreign company requires the payment of additional expenses.  There are also additional filing obligations.  It does not appear to me to be a sensible business decision made by an experienced businesswoman.  Indeed, Pu has disclosed no document showing any example where she divided her shareholding in a company between two different overseas companies.

162.  Pu said it was “worth it”, because (1) she could appoint more directors if the shareholding was held equally, and (2) it would be easier to transfer the shares to other investors.  Again, I reject such explanation.  During cross-examination, Pu was forced to agree that whether one can appoint directors depends on one’s shareholding, not how many different persons holding the same number of shares.  Further, she could not possibly predict how many shares the new investor would want to purchase in the future.  In the case of T&L, it would only work if the new investor wanted to buy 10% or 40% shares from Pu.  Ultimately, Pu cannot explain what difficulty there is for any investor just to acquire the shares in T&L.  These are additional reasons as to why I reject Pu’s case as the truth.

(iii)   The Disputed Documents and the handwriting evidence

163.  The Disputed Documents are the documents which effected the exchange of the bearer share into a share registered in Pu’s name.  The signatures on these documents purporting to be Li’s are disputed.

164.  The first point to note is that even on the request by the bearer to exchange for a registered share, which is one of the Disputed Documents, the signature of the bearer was a signature purporting to be Li’s.  On Li’s case, this document was signed by Pu forging Li’s signature.  On Pu’s case, this document was signed by Li at Pu’s direction.  In either case, the person who signed the document regarded Li to be the bearer and not Pu.

165.  When cross-examined, while Pu said it was the BVI agent who prepared the documents, she accepted that she was the one arranging the documents to be sent to Li for his signature.  She simply asserted that her understanding was that the documents were for the director to sign, which was plainly not the case for a document titled “Request in writing by bearer to exchange bearer shares(s) for registered shares(s)” dated 11 December 2009, and gave the wholly irrelevant answer that the bearer share certificate was also signed by the director.  Pu’s explanation therefore lacks credibility.

166.  Further, both handwriting experts concluded that Li did not sign these documents which plainly contradicts Pu’s case.

167.  Pu seeks to introduce further expert evidence by reference to an additional sample, i.e. the 15C Sample, which appears to be taken from the bearer share certificate allegedly signed by Li bearing a date of 12 June 2002. However, Li has throughout maintained, even before the filing of the expert reports, that he did not sign this document.  In fact, it has not been put to him that he signed the certificate back in 2002.  The questions asked of him only danced around the idea that if he had been asked to sign such document in 2002, there was no reason for him to refuse.

168.  Further, there is no evidence that the bearer share certificate existed back in 2002.  No original of the same has been produced by Pu.  According to the evidence before the court, it was in 2009 that the bearer share certificate was for the first time sent to a third party, as part of the documents used for the exchange of the bearer share to the registered share.  Pu confirmed in her oral testimony that there was no occasion where the certificate was sent to anyone before 2009.  The overwhelming likelihood is that this document was also created at the same time as the Disputed Documents in 2009 for the purpose of exchanging the bearer share into a registered share.

169.  Some cases about burden of proof relating to the authenticity of signature in a will are cited.[8] I do not see the need to deal with these cases.  As pointed out by Mr Man, the court has live witnesses from both sides about the authenticity of the signatures.  This is different from a case concerning the authenticity of a will, where the person who signed the will (the deceased) cannot give evidence, and there will only be one set of factual witnesses who compete with the handwriting evidence.  In this case, I prefer to accept the evidence of Li rather than that of Pu, and Li’s case is simply that the Disputed Documents were not signed by him.  On the other hand, Pu claims that she sent the documents to Li to sign.  However, if the signatures were forged, it certainly supports Li’s case on the beneficial ownership of General-Lite.  It also contradicts Pu’s case that the Disputed Documents were signed by Li himself.

(iv)    Payment of acquisition costs of Lot 868 and share allotment price in T&L, etc

170.  A large part of the cross-examination of Li is focused on the payment of: (1) the initial acquisition costs of Lot 868 by T&L and the allotment price of new shares in T&L; and (2) the purchase price of various lands acquired by Yat Fat.  Indeed, Pu relies heavily on the fact that it was she who provided the initial acquisition costs of Lot 868 to support that she was the beneficial owner of General-Lite.

171.  First, Li does not dispute that Pu paid the deposit of $5 million for the purchase of Lot 868 in the government auction, and the allotment price of $8 million for the new T&L shares allotted to Pu and Keung in September 1997.  However, Li’s evidence is that Pu paid these moneys on his behalf, and Li had subsequently repaid those sums to Pu.  Part of such repayments came from the $10 million investment from Tsai.  On the other hand, Pu denies that Li had made such repayments to her.

172.  I have great reservation about Pu’s evidence in this regard.  As mentioned above, it is clear from the evidence that Li and King Wong were substantially involved in the Lot 868 Project.   It is also clear that Liang and Tsai were investors introduced by Li to invest in such project in 1998 or 1999.  Li’s evidence is that he and Lam did attend the auction of Lot 868, which is not challenged by Pu.

173.  These clearly support Li’s case that he was involved in the Lot 868 Project from the beginning, even prior to 2002 when General-Lite received the shares.  Given that Pu’s business was in the wholly different field of securities trading, and that Li was already undertaking other land developments in Lamma Island, it was more likely that the Lot 868 Project was also Li’s project.  As the then relationship between Li and Pu was de facto husband and wife and Pu was a successful businesswoman engaging in forex trading, there is nothing surprising that Pu did make financial contributions on behalf of Li towards the project, and that he would repay Pu for any contributions she had made.

174.  Mr Chen submits that Li only made the admission about Pu’s contribution before the trial, after Pu was able to produce the relevant payment records.  Yet Li claimed that he had repaid Pu for her contributions.  Mr Chen argues that such allegation must be a recent fabrication on the part of Li.  On the other hand, Li explained that, when he prepared his witness statements, he did not think that such issue was important and so he did not mention it in the statements.

175.  I accept Li’s explanation in this regard.  The main issues in the present dispute are the beneficial ownership of General-Lite, and whether Li had made a promise to transfer the 50% King Wong shares to Pu.  In the eyes of Li, no matter what contributions made by Pu at the initial stage of his business, he regarded the land investment business in Lamma Island as belonging to him.  The evidence of this case does support Li’s case in this regard.  Furthermore, there must have been a lot of money transfers between Pu and Li throughout the years when they were either lawful or de facto husband and wife, and so it is understandable that he did not mention the repayments to Pu in his earlier witness statements.  At the trial, he frankly and genuinely acknowledged the contributions of Pu, which would certainly be taken into account in the possible divorce and financial provision proceedings in the future.

176.  Mr Chen attacks Li’s evidence on the ground that Li would not have made the promise to repay Pu’s contributions, because back in 1997, Li would not have been able to know whether he was able to find any new investors, as Tsai and Liang only came into the picture in 1998 or 1999. However, taking into account the scale of the investment anticipated by Li, it was quite clear that the investment projects could not be financed by the funds of Li and Pu alone.  It was only natural to involve outside investors for the projects.  As Li had some experience in the property development business, it should not have been too difficult for Li to find such outside investors as indeed what happened in 1998 and 1999.

177.  Mr Chen also submits that Li’s evidence on the repayments is incredible due to the lack of supporting documentary evidence. He also argues that Li’s evidence is vague.

178.  Li’s explanation is that he did not ask for a receipt from Pu as they were then de facto husband and wife, and he could no longer locate the payment records.  Further, he could not recall exactly how these repayments were made and the sources of the funds for these repayments.  Given the then relationship between the parties and that they would not have expected to have legal proceedings in the future, there is some truth in such explanation.  Further, these transactions took place about 20 years ago in 1997 and 1998.  It is understandable that the records might have been lost.

179.  As I have mentioned above[9], Li is not a person who is good in handling formal documentation and matters relating to daily operation of the corporate vehicles.  Quite understandably, he had genuine confusion about the name of General-Lite, which was known to him simply as the overseas company (海外公司), and various other details.  On the other hand, Pu, given her background, had more experience in handling these matters, and Li therefore relied on her to take care of the same.  However, it does not alter the fact that the land investment business was Li’s business and Pu was only helping her then de facto husband in developing his business.

180.  Finally, the same criticism can be made against Pu herself for failing to keep or produce detailed payment records regarding her alleged contributions for the acquisitions of land by Yat Fat, as I will further elaborate below in this Judgment.[10] She explained that, as the payments were made a long time ago, no one could expect then that the records would be relevant to a trial some 21 years later.  The same can be said about Li’s evidence as to the repayments of Pu’s contributions.  Hence, the lack of supporting payment records applies both to Li’s and Pu’s case, and I do not accept that this factor alone would undermine the credibility of Li’s evidence.

181.  I want to make one point clear.  Whether Li had repaid Pu for all her contributions is not a matter that needs to be decided here.  Such dispute may have to be revisited and litigated upon in the future.  For the purpose of this trial, I accept that: (i) Li had repaid at least part of Pu’s contributions; and (ii) General-Lite was Li’s vehicle for holding his interest in the Lot 868 Project.  This would be sufficient for the court to find in favour of Li in HCA 873/2013.

(v)   Possession of the bearer share certificate

182.  Pu also relies on the fact that it was she who possessed the bearer share certificate.  However, this fact alone is not decisive.  As mentioned many times above, Li had relied on Pu to take care of the various matters relating to the incorporation and the daily operation of the corporate vehicles.  Thus, even if Pu had possession of the bearer share certificate, she held it on Li’s behalf.  Further, no matter who signed the document, the bearer certificate was held in the name of Li.  If General-Lite was Pu’s company, why was it necessary to put Li’s name in the bearer share certificate?

(vi)    Payment of the corporate fees

183.  In a further attempt to establish her alleged beneficial ownership of General-Lite, Pu claims that it was she who paid the corporate fees relating to the setting up and operation of General-Lite. However, I agree with Mr Man that the payment of corporate fees is neither here or there.  Pu was helping Li to take care of the paper works relating to the corporate vehicles, and so I do not find it surprising if Pu also paid for the related expenses as well, which involved very small sums in the overall scheme of the land investment business.  As I see it, the parties did not pay much attention to such minute details.

184.  This is very different from a case that a person is providing the purchase money in the character of a purchaser.  It is the parties’ intention regarding the beneficial ownership of the company that is most important.  As mentioned above, there is ample evidence to show that, though Pu might have provided assistance in setting up the company, General-Lite was intended to be used as a vehicle of Li in running his land investment business in Lamma Island.

185.  In any event, I accept Li’s evidence that he paid for the pre-incorporation expenses of General-Lite of about $10,000.  Li also recalled in his oral testimony that he bought this overseas company, i.e. General-Lite, and paid the sum of $10,000 to Pu.  No contrary case has been put to him during cross-examination.

186.  Further, the payment of post-incorporation fees might shed some light as to who was actual owner of General-Lite.  The evidence shows that King Wong paid for the annual fees of General-Lite for 2008 and 2009, and Pu might have paid the fees for the year 2007.   In cross-examination, Li’s evidence is that he believed most of the annual fees were paid by King Wong or him.  Pu might have paid part of it, and Li would pay her back later.  If Li had no interest in General-Lite, and that on Pu’s case Li should not even know about such company, it is difficult to understand why he had to pay for such expenses.  I also find no inconsistency in Li’s evidence as to who or how the annual fees of General-Lite were paid.

187.  For the above reasons, I find that Li is the beneficial owner of General-Lite and his claim in HCA871/2013 must succeed.

PU’S CASE ON THE 1^ST TO 3^RD AGREEMENTS (MAIN ISSUE IN HCA 341/2013)

188.  It is common ground that Li and Pu had made an agreement in November 2008 for Li to purchase Pu’s 30% shares in Yat Fat at $15 million.

189.  Li’s case is that in November 2008, Pu was in financial difficulty due to the financial crisis and asked Li to give her $15 million to help her, and she would give him back the 30% shares in Yat Fat.  Li agreed in light of their past relationship.  Li might not have the money to pay Pu immediately, and yet he agreed to pay Pu whenever he had the money to do so.

190.  The key issue in HCA 341/2013 is, therefore, whether Pu’s case on the three agreements is true, with the effect that Li is required to transfer 50% shares of King Wong to her.

191.  I reject Pu’s case for the following reasons.

(i)   There was no mention of the alleged promise in the Undertaking Letter or other documents before the filing of pleading

192.  First, given that the relationship of the parties had already turned sour in 2008, I find it extremely strange that there was no mention of such promise either in the Undertaking Letter or the subsequent reply to Li’s demands for the completion of the Yat Fat Agreement.

193.  The agreement between Li and Pu was evidenced by the contemporaneous Undertaking Letter dated 24 November 2008, which was signed by Li and was received by Pu at the time.

194.  There is no trace of the alleged promise to transfer the King Wong shares to Pu in the Undertaking Letter.  This is most surprising.  At the trial, Pu said she thought the Undertaking Letter did not reflect the whole agreement and then gave a number of explanations: (1) the version she received was not signed, so she thought she could ignore it; and (2) she preferred to talk to Li in private as this was a family matter, and that she had orally and repeatedly chased Li for the transfer of the King Wong shares.

195.  This cannot be the case.  The first point is contradicted by Pu’s own witness statement, which stated that she received a signed version.   Pu further explained her reaction to this document, which was that she “took that the Undertaking Letter was to evidence the making of the 3^rd Agreement albeit it did not spell out [Li]’s promised obligation to transfer half of the shares and interest of Kong Wong” to her.  This is contrary to her version at the trial that the Undertaking Letter did not reflect the agreement.

196.  More surprisingly, Pu did not mention the alleged promise when she was pressed to complete the Yat Fat Agreement.  For most people in Pu’s position, the simple and natural response to make would be: if Li wants to complete the sale, Li should first transfer the 50% King Wong shares to her.

197.  Starting from late 2012, Li, or through his solicitors TKC, began writing to Pu offering to pay the remainder $1.3 million odd consideration and asking for the sale and purchase to be completed: letters dated 17 October, 20 & 23 November 2012 and 5 February 2013.  The response from Pu only came by way of a letter from her solicitors (i.e. CCC) dated 7 February 2013, which simply contained a blanket denial of Li’s case set out in his or his solicitors’ letters.  Quite surprisingly, there was no mention in this letter about the alleged promise by Li to transfer 50% shares of King Wong to her.  She never made any demand for such transfer, despite she had already engaged solicitors to handle the matter for her.  The first time she put forward the alleged promise was in her Defence and Counterclaim in HCA 341/2013.

198.  In trying to justify the omission in the letter, Pu said that she had learned a lesson in other litigations that the better approach was not to put everything in correspondence in the early stage of litigation, as this would waste costs.  Despite that, she had repeatedly made oral demands to Li for the transfer of shares.  Mr Chen also submits that Pu is a person who would try to avoid confrontation, and that explains why she did not put down the request in the reply letter.

199.  I cannot accept such explanation.  The request to transfer 50%  King Wong shares to her was a very simple request, and it would only take a short paragraph to make the demand in the letter.  Pu accepted that on her case now, the onlyreason for not acceding to Li’s request for completion was that he had not transferred the King Wong shares to her.  If Li were to honour his alleged “promise”, it would have solved all the problems.  That would have been the natural response to put into any letter in reply to Li’s letters of demand.

(ii)   Payments of purchase price for 30% of Yat Fat shares were made by King Wong

200.  Further, if Li had made the alleged promise, it does not make sense that it was King Wong who paid for the purchase price for the 30% Yat Fat shares.

201.  There is no dispute that Li had paid over $13 million to Pu from November 2008 to July 2009, which is supported by the various payment records and contemporaneous receipts signed by Pu and the cheques drawn by King Wong.

202.  However, on her own case under the 3^rd Agreement, Pu would be given 50% of King Wong, and it would be plainly wrong for Li to use King Wong’s moneys to pay for the purchase of the 30% shares in Yat Fat, as he would be using half of her money to pay for such purchase.

203.  The problem with Pu’s case is that, if her case was true, Pu must have seen this and complained about it.  She denied noticing this at the time, but this cannot be true given (i) the vast sums involved, (ii) her bad relationship with Li at the time, and (iii) the multiple occasions on which such cheques were used.  More importantly, if her case was true, Li would not have used King Wong’s money to pay.

(iii)   Pu was not the owner of Yat Fat

204.  Another factor negating the existence of the alleged promise is that Pu was not the owner of Yat Fat.

205.  Pu’s case on her witness statements is that she, together with Leung, were using Yat Fat to acquire lands in Lamma Island.  Pu’s case of the alleged 1^st and 2^nd Agreements proceeds on the basis that Yat Fat was Pu’s company (in cooperation with Leung only), whereas King Wong was Li’s company.  This was expressly put to Li during cross-examination.  The idea appears to be that they would use their respective company to acquire lands independently, and then put the lands together for the development scheme.

206.  But this was not what happened.

207.  First, at the time of the 1^st Agreement in 2001 or 2002 and the 2^nd Agreement in early 2007, Pu only had a small or minority shareholding in Yat Fat.  Tsai (25%) and Liang (50%) became shareholders in 1998 and 1999, and Pu only had 5% shareholding in Yat Fat in 2001 or 2002.  As mentioned above, Pu said that these shares were sold to Tsai and Liang.  While Tsai’s 25% shares were transferred back to Pu in 2005 (Li says this was at his direction), Pu still had only 30% shares by the time in early 2007 when Li cooperated with Agile.  It is difficult to see how Pu could make the 1^st and 2^nd Agreements with Li as if she was the owner of Yat Fat.  Further, there is no reason why Li would need Pu’s agreement for Yat Fat to cooperate with Agile, since he only need to secure the agreement of Liang and Leung.

208.  When cross-examined on this, Pu said she thought it was sufficient protection that she was the sole bank signatory of Yat Fat.  This obviously makes no sense when she could easily be outvoted and removed. Pu could not possibly have believed this when she has been running her own business.   She then said that she thought this was fine because of the relationship with Li, but this fails to explain the fact that there were outside shareholders whom in combination held a majority stake.  Eventually she was resorted to saying that she was not clever enough.  Again that is wholly unbelievable given her background and experience.

209.  Second, there is incontrovertible evidence that Li and Lam were involved in the acquisitions of land by Yat Fat in 1999, i.e. before the making of the alleged 1^st Agreement.  The provisional sale and purchase agreements dated 8 March and 2 November 1999 were signed by Lam and Li respectively on Yat Fat’s behalf.  The lands covered by these provisional agreements were assigned to Yat Fat by 4 assignments: 2 assignments signed by Pu dated 11 and 23 June 1999, and 2 assignments signed by Li dated 23 and 29 June 2004.

210.  Li gave evidence in re-examination that he took a long time, which started as early as 1995, to negotiate with the indigenous villagers to purchase these lands from them, and Pu was never involved.  He also mentioned that, on some occasions, deposits in cash would be paid even before the signing of provisional sale and purchase agreements.  In her oral testimony, Pu essentially agreed with these points and accepted that she was not involved in any negotiations with the villagers at all.  In fact, the evidence shows that, apart from perhaps getting Franklin Li to participate in the Lot 868 Project, Pu did not have any significant involvement in the land investment projects in Lamma Island.

211.  In addition, there is evidence to show that King Wong or companies controlled by Li paid for the deposits and completion balance for some of these provisional sale and purchase agreement or assignments which were all made in 1999:

(i)   cheque dated 8 March 1999 issued by King Wong (Holdings) Ltd for the payment of the deposit of the provisional sale and purchase agreement of the same date;

(ii)   fee note issued by Terry Yeung & Lai dated 31 May 1999 and payment advice dated 11 June 1999, both showing the payment by Superb Billion Ltd (also a company of Li’s) of the balance of the purchase price for the lots covered by the 2 assignments dated 11 & 23 June 1999.

212.  Third, Pu had let slipped during cross-examination on two occasions that she thought that Yat Fat was Li’s “vehicle”.

213.  The first occasion was when Pu was cross-examined on the items booked as commission to certain companies owned by her: $2.2m (paid) in 2003 after Yat Fat’s sale of land to LIHL and $15 million (booked as a liability) in 2008 after Yat Fat’s sale of land to the Linkan Development Project.  Pu’s explanation of these items was that Li requested these items to be booked for his tax purpose, and that these items were later reversed and she never received these sums.

214.  When she was further pressed on as to why the tax position of Yat Fat would be a matter of Li’s concern if he had no interest in it, Pu was obviously unable to provide a satisfactory explanation and gave an incomprehensible answer about how the land in Yat Fat was sold to the Linkan Development Project, and that Yat Fat was Li’s “vehicle” for the Linkan Development Project.  This does not explain why Li was concerned with Yat Fat’s tax position.  In a later answer, she even said that maybe Li already knew or planned that Liang’s 50% shares would eventually go to Li, when the shares in GZ Tkeen were only transferred to Lam much later in 2012.

215.  The second occasion was when Pu was attempting to explain why Li and Lam were involved in signing the provisional sale and purchase agreements entered into by Yat Fat.  She tried to explain the term “vehicle” away by saying that Yat Fat had lands which King Wong bought for the purpose of the Linkan Development Project.  She then backtracked by saying that maybe she misused the term.  This is obviously not true.  Given Pu’s experience in the business field, she clearly understood what the word “vehicle” means and her description actually reflects the truth of what happened.

216.  Fourth, Leung, who was a 20% shareholder in Yat Fat from 1997 to 2014, gave evidence by way of affirmation in HCMP 658/2013 against Li that he was all along cooperating with Li in Yat Fat.   There was no mention of Pu at all.  This affirmation is admissible as hearsay evidence in the present proceedings.  Obviously Li cannot be expected to call Leung as his witness, and there is no conceivable reason why Leung would say anything other than the truth on the question of who was the owner of the majority stake in Yat Fat.

217.  For the above reasons, it is clear that Yat Fat was Li’s vehicle for acquiring lands in Lamma Island.  Li’s case is further that the shares in Pu’s name were held on trust for him, and that he agreed to pay her money to get back the 30% shares in 2008 to help her, even though technically those were his shares.  Yat Fat and King Wong were both involved in acquiring lands simply because of Li’s strategy for acquisitions of land.  He had explained that he would use one company where he was shown to be the shareholder (King Wong), as he had good relationship with some owners who might be more willing to sell to him.  At the same time, he maintained another company where he could not be seen as a shareholder (Yat Fat) to deal with those landowners who would inflate the price if they knew it was Li behind the company.  This strategy was adopted before the first acquisition of land.

218.  Mr Chen submits that such explanation cannot be believed, as the villagers could easily find out that Li was a director of Yat Fat by making a search in the Companies Registry.  However, there is no evidence that Li was devising a sophisticated scheme with a view to deceive the villagers.  He just wanted to avoid the impression that one single buyer was going to acquire all the lands.  Hence, such observation cannot undermine the credibility of Li’s evidence.

(iv)   There were disproportionate contributions of land into the Linkan Development Project

219.  Further, the alleged 1^st and 2^nd Agreements were that Yat Fat and King Wong would continue to acquire lands independently in Lamma Island, and then they would eventually pool their lands together for a development project with Agile, and both Li and Pu would have equal interest in the development project.  This would only make sense if Li and Pu were to make similar contributions to the project.

220.  Yet it is obvious that Yat Fat’s contribution into the Linkan Development Project was much less than the contribution by companies controlled by Li, not to mention that Pu only held 30% shares at Yat Fat.  In May or June 2007, when King Wong, Yat Fat and LIHL injected lands into the project company Wealthy Honest, the sale prices of the lands injected were respectively $52.2 million for Yat Fat, $89.7 million for King Wong, and $205.9 million for LIHL. According to clauses 5.2 to 5.4 of the JV Agreement, the sale prices were calculated on the uniformed basis of $538 (or $7,000/13) per square feet. Further, King Wong all along owned 50% of LIHL and 47% of its economic interest.

221.  Leaving aside the fact that King Wong had other assets or businesses, the alleged 3^rd Agreement would involve Pu getting 50% of the total lands contributed into the project (about $173.9 million) by only contributing $52.2 million, not to mention that she held only 30% of Yat Fat.  This is wholly disproportionate and makes no commercial sense for Li at all.  Pu was unable to provide any satisfactory explanation for this during her cross-examination.

(v)   King Wong had other businesses apart from the Linkan Development Project

222.  Further, King Wong was not only a property holding company for the purpose of the Linkan Development Project.  It was also the planner and property developer for various land development projects in Lamma Island, and it further had other businesses and cooperation projects outside Lamma Island. This is Li’s unchallenged evidence.  The documentary evidence also shows that King Wong had other substantial landholdings after the completion of the Linkan Development Project.

223.  Thus, even if there was an agreement for Pu to have an interest in 50% of the Linkan Development Project as alleged in Pu’s 2^nd Agreement, it would not make sense for Li to have agreed to give 50% interest of King Wong to Pu.  The reason for the transition from an interest in the development scheme (under the 1^st and 2^nd Agreements) to an interest in King Wong (under the 3^rd Agreement) is wholly unexplained.

224.  In fact, if the 1^st and 2^nd Agreements did exist, the obvious thing would be for Pu to get a share in Eagle Faith when the Linkan Development Project was completed, just like other stakeholders such as Leung who was also a shareholder in Yat Fat.  When being asked for an explanation, Pu simply said she did not know as this was arranged by Li, which is hardly a satisfactory explanation.

(vi)   Pu’s reason for the purchase of Yat Fat’s 30% shares is incredible

225.  As to the reason for the purchase of Yat Fat’s 30% shares, Li’s evidence is that Pu made a suggestion to buy back the shares because she was in financial difficulty due to the financial crisis in 2008.  Li agreed out of their long term relationship.  Li also considered that it would be better to get back the shares to sever the business ties with Pu in the long term.  Li explained that the Yat Fat Agreement was reached orally at a cafe next to his office in Causeway Bay.  As he did not have sufficient cash to make immediate payment, he could only pay Pu by subsequent instalments.  This is consistent with Li’s case that the Yat Fat shares were all along held by Pu on trust for him, and it was only because he wanted to help her that he agreed to buy her shares back at the price set by her.

226.  Pu’s case is that Li represented to her that the lands held by Yat Fat would be required for the Linkan Development Project, and thus he wanted to buy them back.   This is clearly not the case, as the lands held by Yat Fat required for the project had already been injected into the project in 2007.  The lands to be acquired in the future were not held by Yat Fat.[11] Li must have known about this and there was no reason for him to make such “misrepresentation” to Pu.  As compared with Pu’s story, the reason put forward by Li for the purchase of the shares is more credible.

(vii)   Payment of acquisition costs of land of Yat Fat

227.  As mentioned above, one of the main attacks against Li’s case relates to who paid for the lands acquired by Yat Fat.  I have dealt with such issue briefly in §§170-181 above when I discussed the question about the financial contributions made by Pu in purchasing Lot 868 and injecting capital into T&L.  In fact, who paid for the lands acquired by Yat Fat has no direct relevance as to whether the Yat Fat Agreement did contain the alleged promise for the transfer of the 50% King Wong shares.

228.  In any event, the evidence is now clear that Pu did not pay for all of the purchase moneys for the lands acquired by Yat Fat and that Li paid for at least some of them.  As mentioned above, companies controlled by Li, i.e. King Wong Holdings Ltd and Superb Billion Ltd, actually paid for some of the deposits and completion balance for the acquisition of lands by Yat Fat.[12]These lands, as put by Pu’s counsel to Li, formed part of the lands sold by Yat Fat to the Linkan Development Project.

229.  Further, Pu is equally unable to produce the relevant payment evidence.  It is common ground that Pu was the person in control of Yat Fat who handled the bookkeeping matter, and so I find it surprising that Pu cannot produce any documentary records to show that she paid for the lands acquired by Yat Fat.

230.  Pu seeks to rely on the audited accounts of Yat Fat to show that the directors’ loans booked therein reflect some of her contributions for the acquisitions of land.  However, the accounts do not show to whom the directors’ loans were owed.   Yat Fat all along had other directors including Li (save for the financial year ended 31 March 1997) and Leung, and Pu herself accepted that Leung had contributed funds for Yat Fat. The only document which shows that Pu had a director’s loan is the 2008 management accounts of Yat Fat, which was produced by Li.

231.  In contrast, Pu, though shortly before the PTR, was able to produce payment records including bank statements and bank transfer forms back in 1997 to support the payment of the deposit for the purchase of Lot 868 and the share allotment price of T&L shares. In such case, I wonder why she cannot provide the court with similar documents supporting her alleged contributions for the lands acquired by Yat Fat.

232.  Further, there are clearly doubts as to the accuracy of Yat Fat’s accounts.  In cross-examination, Pu was pointed to 2 entries in Yat Fat’s accounts which recorded “commission” payable to Pu’s companies following sale of land by Yat Fat.  Her evidence is that these items were made at the request of Li, that she never received them, and that the items had been subsequently reversed.  However, the 2003 item was stated to have been paid and the account was audited.  It is clear from the subsequent accounts that the item was never reversed.  The 2008 item was only booked as a liability and was not paid, and it is difficult to understand how this could save tax for Yat Fat.

233.  Given the clear evidence given by Li that he was not versed in documents and accounting matters, he could not possibly have made such request.   I also agree with Mr Man that these 2 entries are clear examples that Pu would book the accounts of Yat Fat in a manner most favourable to her.  The 2008 item also means that the amount owed to Pu was artificially inflated from $15 million to $30 million.

234.  As there is incontrovertible evidence that Li paid for at least some of the lands acquired by Yat Fat, I have serious doubt about Pu’s story as to whether Yat Fat was really her company for the purpose of the three alleged agreements.

(viii)   Other miscellaneous issues relating to the claim under HCA341/2013

235.  There may be an issue as to whether Li can now demand for the specific performance of the Yat Fat Agreement when the Undertaking Letter states that the completion should take place before 30 June 2009.  In my judgment, this should not be a factor barring Li’s claim.

236.  While Li was unable to recall the details of the agreement to extend the completion date when the matter was put to him during his oral testimony, Li’s evidence was that after the payment deadline on 30 June 2009, Li discussed the matter with Pu and it was agreed that Li would pay Pu when he had the money.  In response to Li’ case, Pu’s evidence appears to be that there was no deadline about when Li should transfer the 50% King Wong shares to her.

237.  In any event, since both sides are seeking specific performance, neither Li or Pu is saying that the Yat Fat Agreement has been terminated by repudiation.    Whether there had been a specific agreement to extend the completion date does not affect Li’s claim.

238.  For the above reasons, I find that Li had not made the alleged three agreements with Pu.  Neither did he promise to transfer the 50% King Wong shares to her as part of the Yat Fat Agreement.

239.  Based on such findings, it is not necessary for me to consider the question as to whether the other shareholders of King Wong, ie Affluent Castle holding 35% shares and Lam holding 20% shares, are holding their shares on behalf of Li.  In any event, as I have demonstrated above, I find Li to be a more reliable witness and prefer to accept his evidence over that of Pu.  In such case, I find Lam to be Li’s business partner, and neither Affluent Castle or Lam is holding their shares in King Wong on behalf of Li.

CONCLUSION

240.  For HCA 341/2013, I therefore make an order in favour of Li for specific performance of the Yat Fat Agreement, i.e. Pu shall transfer the 30% Yat Fat shares held in her name to Li upon payment by Li of the outstanding price of $1,383,200.  I also dismiss Pu’s counterclaim.

241.  For HCA 873/2013, I find that Li is the beneficial owner of the General-Lite.  I therefore grant the order and declaration as sought in §§(1A), (1B) and (2) of the Prayer for Relief of the Amended Statement of Claim.

242.  I have heard the parties’ submissions on costs. Both sides agree that costs should follow the event.  I therefore order that the costs of both actions, including the counterclaim in HCA341/2013, be paid by Pu to Li and King Wong (in the case of the counterclaim in HCA341/2013).

243.  There is an issue about certificate for 2 counsel.  I agree that the present case mainly involves factual issues with no difficult points of law.  On the other hand, the disputes possibly involve substantial amounts of money and Pu’s Defence and Counterclaim in HCA 341/2013 was actually settled by senior counsel.  The factual issues involved are also complicated.  In such case, I agree that it was necessary and reasonable for Li to engage 2 counsel to conduct the case on his behalf and I grant the certificate accordingly.