XIAO LONG v. GREAT WALL SECURITIES LTD (formerly known as COLORS SECURITIES LTD)

HCA 369/2018

[2019] HKCFI 2769

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 369 OF 2018

________________________

________________________

________________

JUDGMENT

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I.  INTRODUCTION

1.  The plaintiff (“P”) was born and received tertiary education in Mainland China. He was a director and general manager of Shenzhen Morgan Era Buster Fund Management Co, Ltd (深圳摩根時代創富基金管理有限公司) that was engaged in the business of financial investments. P was the holder of securities trading account no 7xxxxx-xxx1 (“Account”) with the defendant (“D”). D was a participant of The Stock Exchange of Hong Kong Limited, a licensed corporation under the Securities and Futures Ordinance Cap 571 (“SFO”), a licensed brokerage and a participant (“Participant”) of the Central Clearing and Settlement System (“CCASS”) operated by the Hong Kong Securities Clearing Company Limited (“HKSCC”). D admitted it had control over its clients’ shares under CCASS, and operated the Account as a CCASS Participant through which P might freely buy/sell securities held in such account.

2.  P claimed to be the legal/beneficial owner of 17,360,000 ordinary shares (“Shares”) in a listed company Jete Power Holdings Limited (“ListCo”) with corresponding share certificates nos 1565-1572, 1973 and 2144-2160 issued on 30 April 2015 (“Share Certificates”). P averred the Shares and Share Certificates (collectively, “Shares/Certs”) were held in D’s custody on his behalf.

3.  D agreed P was the beneficial owner but not the legal owner of the Shares as (a) the Shares were held in electronic form in CCASS on P’s behalf, and (b) the Share Certificates were in the name of HKSCC Nominees Limited (HKSCC’s subsidiary nominee company for electronically holding all eligible listed shares on the Hong Kong Stock Exchange (“HKSE”) for trading, clearing and settlement under CCASS, “HKSCCN”) as the legal owner and registered shareholder until P gave instructions for D to deal with, withdraw or transfer the Shares whereupon D would take certain steps to convert the electronic shares back to physical scrips. D therefore claimed that whilst CCASS gave D (as a brokerage/Participant) control over the Shares, there was never any transfer of legal and/or beneficial title/ownership of the Shares/Certs to D, or to put in other words, D was just a “middle man” who executed orders on P’s behalf. D denied it had physical custody of the Share Certificates on P’s behalf at least until P would make a share withdrawal request as explained in (b) above.

II.  UNDISPUTED OR INDISPUTABLE BACKGROUND

4.  On 14 April 2015, P and D (then known as Colors Securities Limited) entered into a Cash/Margin Clients Agreement (“Agreement”) whereby P opened a cash/margin Account with D. The following matters were of note in respect of the Agreement:

(a)	D’s then executive director and responsible officer (regulated activities 1, 4 and 9) Lui Wai Man Raymond (“Lui”) witnessed P’s execution of the Agreement. P confirmed he read, fully understood and accepted in full the terms of the Agreement.
(b)	In a box marked “FOR OFFICIAL USE ONLY” at the bottom on page 15 of the Agreement, there was a remark “Introduced by: 770026” (“Remark”).
(c)	By the Correspondence Address Authorisation attached to the Agreement, P authorised D to send all combined contract note and daily statement, monthly statement and further correspondence to his specified email address, and confirmed “[any] correspondence from [D] to the aforesaid address shall be regarded as being to [P]”.
(d)	Copies of P’s PRC identity card (“ID Card”) and his Exit/Entry Permit for Travelling to and from Hong Kong and Macau (with permit no C0xxxxxx0, “Permit”) were attached to the Agreement. Also attached to the Agreement were (i) a visitor’s slip issued by the Hong Kong Immigration Department (“ImmD”) showing P arrived in Hong Kong on 14 April 2015 and was permitted to remain in Hong Kong until 21 April 2015 pursuant to the Permit (“Travel Document Number C0xxxxxx0”), and (ii) a Ping An Bank statement dated 15 February 2015 giving P’s address in Shenzhen, Mainland China.

5.  The Agreement contained the following implied terms as to D’s duties, which duties D admitted were general duties owed by all licensed brokers to their clients when handling clients’ shares and share certificates and represented general standards of good conduct under the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“SFC Code”) that D had to follow (“Duties”):[1]

(a)	D shall exercise due diligence and care in handling the Shares/Certs;
(b)	D shall keep the Shares/Certs in safe custody;
(c)	D shall not part with possession or otherwise dispose of the Shares/Certs except with P’s express instruction/authority;
(d)	upon P’s request D shall promptly deliver/transfer the Shares/Certs to P or to any party as P directed.

6.  In April 2015, P deposited HK$4,000,000 into the Account. On 30 April 2015, P bought 18,800,000 ListCo shares through the Account.

7.  By 31 July 2015, only 17,360,000 ListCo shares remained in the Account as evident from the monthly statements that charted trading activities for the Account[2] (“Monthly Statements”) issued on 30 April 2015 (which showed P’s acquisition of 18,800,000 ListCo shares) and 31 July 2015 (which showed 17,360,000 ListCo shares in the Account). These ListCo shares were electronically held under the name of HKSCCN.[3]

8.  The Monthly Statements issued on 30 June and 31 July 2015 showed some sale and purchase of the ListCo shares through the Account, which eventually resulted in 17,360,000 ListCo shares remaining in the Account. The Monthly Statement issued on 31 August 2015 showed the Shares/Certs were withdrawn on 25 August 2015 leaving nil stock in the Account. The Monthly Statements after August 2015 up to December 2015 for the Account did not show any listed stock holding (ie nil balance of listed shares) in CCASS.[4]

9.  On 11 September 2015, the Shares held under the name of HKSCCN in CCASS were transferred out to a third party as confirmed by a letter dated 19 July 2018 from ListCo’s Share Registrar, ie Tricor Investor Services Limited (“Tricor”) (see paragraph 73 below).

10.  On 8 July 2016, ListCo conducted a 5 for 1 share sub-division, ie 17,360,000 ListCo shares were subdivided into 86,800,000 shares (see ListCo’s announcements dated 31 May and 7 July 2016).

11.  In/about January 2017,[5] P went to D’s offices to request for information regarding the withdrawal of the Shares, and took photographs of some related documents with his mobile telephone. D claimed P asked to review the Share Certificates, SW Receipt (referred to in paragraph 26 below) and Transfer Form (referred to in paragraph 27 below) (collectively, “Withdrawal Documents”), but P claimed D asked for transaction record of the Account and SW Instruction (referred to in paragraph 24 below).

12.  P made further visits to D’s offices to make enquires about the Shares/Certs. D claimed P made 2 further visits on 11 October 2017 and in/about November/December 2017, but P claimed there were 3 more visits on 8 September, 11 September and 11 October 2017.

13.  P did not report the alleged loss of the Shares/Certs to the Hong Kong police (“Police”) until 14 September 2017 (even though by the end of 2016 or January 2017 P on his own case must have suspected the 17,360,000 ListCo shares in the Account were missing – see paragraph 11 above and paragraph 37 below). On 13 November 2017, Liu gave a statement to the Police stating inter alia the Shares/Certs were withdrawn/received by P on 25 August 2015.

14.  On/about 8 December 2017, D received from P a letter of the same date in simplified Chinese titled “Apology Letter” with P’s signature and thumb/finger prints in red ink (“Apology Letter”) as follows:[6]

“道歉書

香港長城証券有限公司:

本人肖龍曾向貴單位騷擾及態度惡劣。影嚮到了長城證券的工作, 現在確認和長城證券所有的事情純屬誤會。本人確認與貴司之間所有事情均處理完畢, 到此為止。由此給貴司工作造成的不便, 我深感歉意。

此致

確認人: [P’s thumb/finger print] [P’s signature]

身份證號碼: 4xxxxxxxxxxxxxxxx6 [P’s thumb/finger print]

2017年12月8日”

By the Apology Letter, P expressly confirmed all matters between P and D had been completely resolved.

15.  On 11 January 2018, P’s solicitors (“PSols”) wrote to D to ask for return of the Shares/Certs. On 17 January 2018, D’s solicitors (“DSols”) replied to enclose copy Apology Letter that had been forwarded to the Securities and Futures Commission (“SFC”) and Police to assist their investigations. On 18 January 2018, PSols wrote to DSols to reiterate demand for return of the Shares/Certs. On 25 January 2018, DSols replied that D was “bound by the secrecy obligations under section 378 of the [SFO] with regard to the ongoing investigations”, and so was “unable to disclose any further details regarding the investigation or any facts and matters arising therefrom”. On 26 January 2018, PSols claimed P “[as] legal owner of the Shares” was entitled to enquire as to the whereabouts of the Shares held by D for him and to request D to return the Shares to him, so P was surprised by D’s evasion of enquiries and reiterated demand for return of the Shares/Certs. On 5 February 2018, DSols replied to deny any liability. The above letters dated 11, 18 and 26 January 2018 by PSols are collectively referred to below as “Demand Letters”.

III.  P’s CASE

16.  In the Statement of Claim (“SoC”) endorsed on the Writ of Summons (“WoS”), it was pleaded as follows:

“2. [P] is a merchant and a holder of a securities trading account No. 7xxxxx-xxx1 (‘Account’) with [D] and the legal and beneficial owner of 17,360,000 ordinary shares in [ListCo] ...... (‘Shares’) and the corresponding share certificates issued on 30 April 2015 (certificate no. 1565-1572, 1973 and 2142-2160) (‘Share Certificates’). The Shares and the Share Certificates were held in custody by [D] on behalf of [P].” (my emphasis)

Plainly, P averred he was the “legal and beneficial owner” of 2 things: (a) a particular block of 17,360,000 ordinary ListCo shares (ie the Shares “corresponding” to the share certificates in (b) below), and (b) ListCo’s share certificates nos 1565-1572, 1973 and 2142-2169 (ie the Share Certificates “corresponding” to the shares in (a) above). On such basis, it was said that P was entitled to the return of the Shares/Certs.

17.  P also pleaded in paragraph 3(5) of the SoC it was an implied term of the Agreement that where D failed to or was unable to deliver/transfer to P the Shares/Certs upon request, P would be entitled to seek damages against D and/or to request D for delivery/transfer of the Identical Shares/Certs/Rights (see footnote 1(a) above). On plain reading of the SoC, such implied Damages/Replacement Duties as pleaded (see footnote 1(a) above) were predicated on alleged primary obligation on the part of D to deliver/transfer to P the particular block of ListCo shares being the Shares and the “corresponding” physical scrips being the Share Certificates such that if D failed to do so, P could alternatively call upon D to pay damages and/or to deliver/transfer the Identical Shares/Certs/Rights.

18.  P’s further/alternative case in paragraph 4 of the SoC was based on D “as bailee of the Share Certificates” owing to P the Bailee Duties (see footnote 1(b) above) “insofar as the same relate to the Share Certificates”. I bear in mind that paragraph 2 of the SoC defined “Share Certificates” as the particular ListCo share certificates nos 1565-1572, 1973 and 2144-2160 issued on 30 April 2015 “corresponding” to the particular block of 17,360,000 Shares which P claimed to be the legal and beneficial owner.

19.  Further/alternatively, P averred that (a) in breach of the Agreement/Duties (and despite the Demand Letters), D failed to return/ transfer the Shares/Certs (as explained in the paragraphs 16 and 18 above) to him and failed to inform him their whereabouts, and (b) by failing to return the Share Certificates (as explained in paragraphs 16 and 18 above) to P upon request, D wrongfully deprived P of the use/possession of such Share Certificates that D converted to its own use.

20.  In short, P claimed that by disposing of the Shares/Certs without P’s instruction/authority D was in breach of the Duties and various principles/provisions in the SFC Code,[7] and as a result of D’s breach of the Agreement, breach of the Duties and/or wrongful conversion, P suffered loss and damage, “in particular the loss of the Shares, the Share Certificates and the proprietary rights deriving from and/or arising out of the Shares (including but not limited to all the dividends (whether in cash or by way of shares), bonus shares and warrants)” (my emphasis).

21.  Quite clearly, the above pleas (including the pleas on breach of the Bailee Duties, wrongful conversion and P’s loss/damages in paragraphs 18, 19(b) and 20 above, and on breach of the Agreement/Duties and P’s loss/damages in paragraphs 19(a) and 20 above) were predicated on P’s allegation that he was the legal and beneficial owner of the Shares/Certs (as explained in paragraphs 16 and 18 above) that gave rise to “proprietary rights” in (a) the particular block of 17,360,000 Shares “corresponding” to the Share Certificates in (b) below, and (b) the specific Share Certificates nos 1565-1572, 1973 and 2144-2160 “corresponding” to the Shares in (a) above. This was also borne out by the prayer of reliefs in the SoC which sought (i) an order for delivery/transfer to P the Shares/Certs, (ii) alternatively an order for delivery/transfer to P the Identical Shares/Certs/Rights, and (iii) “further and/or alternatively, damages to be assessed”. Indeed, the written submissions of Mr Lam (and with him Mr Hui), counsel for P, claimed P suffered loss and damages because “the beneficial and legal ownership of the Shares have been passed to a third party”.

22.  But apart from the further/alternative relief for damages to be assessed in the prayer of reliefs in the SoC, there were no pleaded material facts and/or particulars in P’s SoC and/or Reply for such claimed loss and damages apart from an averment in paragraph 7 of the SoC that “[P] suffered loss and damages, in particular the loss of the Shares, the Share Certificates and the proprietary rights deriving from and/or arising out of the Shares (including but not limited to all dividends (whether in cash or by way of the shares), bonus shares and warrants)”. It was only in paragraph 21 of the P 1^st Aff (as referred to in paragraph 43 below) that P stated the market value of the Shares were as follows (but without any clarification as to how the aforesaid loss and damages were to be calculated):

Date	Closing price (HK$)	No of shares	Market value (HK$)	Source of closing price
25/08/2015 (alleged withdrawal date)	1.01	17,360,000	17,533,600	D’s Consolidated Daily Statement issued on 25 August 2015
12/02/2018 (issuance of WoS)	0.195	86,800,000	16,926,000	HKSE
18/04/2018	0.185	86,800,000	16,058,000	HKSE

IV.  D’s DEFENCE

23.  As explained below, D claimed to have faithfully performed the Duties, and upon P’s express instructions handed over the Shares/Certs to P on 25 August 2015.

24.  In the Amended Defence filed on 11 April 2018 (verified by Lui), it was averred that on/about 24 August 2015 D received by mail a Stock Withdrawal Instruction (on bilingual printed form) for share certificate withdrawal (but D did not know who sent it) with account number, stock code, number of shares completed and with P’s signature thereon (“SW Instruction”),[8] which signature was verified by D’s settlement officer Athena Li Ka Wing (“Li”) who wrote “s.v.d.” on the SW Instruction to signify P’s signature thereon was verified against his signature on record (ie that on the Agreement).[9] D’s other staff filled out name of client (in English), stock name (in English), handling charges and date in the SW Instruction.[10] I set out the SW Instruction (in English only) as follows:

“To: Great Wall Securities Limited (Settlement Dept.)

......

STOCK WITHDRAWAL INSTRUCTION

Name of Account: Xiao Long Customer’s A/C No.: 770034

Stock Code	Name of stock	Quantity	Handling	Number of shares
8133	JETE POWER	17,360,000	43407+20	1565-72, 1973,
				2144-60
Total handling fee			4360	cash/debit account

s.v.d.

Customer’s: 肖龍     Signature(s)	Checked by (A.E.):        Signature(s)
Date: 24/8/15	Approved By: [signatures of Lui and Woo[11]] Signature(s)
	[name:]

---

* I/We have received the shares mentioned above, and have checked it accurately.

Customer’s/Authorized person: 肖龍           Signature(s) Date: 25 Aug 15

[Name]

---

DATE INPUT	CCASS	[initials] 24/8	Time to call
	SYSTEM		Contact By

 

Remarks:	1. Our Company will contact the client by phone to collect the physical scrip when the physical scrip is ready. Client must self-collect or authorize a third party to collect the physical scrip at instructed place WITHIN ONE WEEK. If client cannot pick up the physical scrip in a particular period, our company will re-deposit the above scrip into CCASS. Handling fee will be charged again when the client makes another physical withdrawal instruction for the re-deposited stock(s).
	2. For stock withdrawal, please collect and transfer the shares promptly without any responsibility against our company.
	3. Client may self-collect the physical scrip at the Company; or client may authorize a third party to collect the physical scrip with original authorization letter. The authorization letter must include the third party name, ID number, stock code, stock name, number of shares and the ID copy of the account holder.”

25.  However, in the original Defence filed on 21 March 2018 (also verified by Lui) and in the Lui 1^st Aff (referred to in paragraph 42 below), D alleged that on 24 August 2015 it received P’s instructions to withdraw the Shares, so D’s staff drew up the SW Instruction with stock code, name of stock, quantity, handling charges and number of shares filled in. P then signed to confirm this was his instruction, which was then countersigned by Lui and Wallis Woo (D’s then responsible officer but later compliance officer, “Woo”).

26.  On the same day, D as Participant input the share withdrawal instruction into CCASS for withdrawal of 17,360,000 ListCo shares, which resulted in a printout of a stock withdrawal receipt (“SW Receipt”) dated 24 August 2015 at 16:56 hours on HKSE and HKSCC letterhead. The SW Receipt referred to Share Certificates nos 1565-1572, 1973 and 2144-2160 for the Shares. D collected the physical scrips of such Share Certificates from HKSCC on 25 August 2015 as marked on the SW Receipt with a chop (in English/Chinese) that read as follows:

“Note to the Beneficial Owner

You are reminded to promptly cause the securities withdrawn from CCASS to be registered in your own name before the next book close due to avoid subsequent claim procedures and extra handling fees.”

27.  On 25 August 2015, D made copies of the physical scrips of such Share Certificates for its own records, and arranged to meet P at the ground floor of the building where D’s offices were located[12] (“Handover Site”). On the same day, Lui met P at the Handover Site and personally gave the physical scrips of such Share Certificates (with HKSCCN still named as shareholder) and the SW Receipt to P, and reminded P to submit such documents to Tricor to have the Share Certificates registered in P’s name (and for such purpose Lui gave P a Standard Form of Transfer (“Transfer Form”) with HKSCCN’s name filled in as transferor so P could sign in the blank space for transferee). P acknowledged what Lui told him, and countersigned the SW Instruction to acknowledge receipt of the physical scrips of such Share Certificates which he had checked accordingly (see paragraph 24 above). As seen in paragraph 24 above, the SW Instruction contained inter alia a bilingual remark that “[for] stock withdrawal, please collect and transfer the shares promptly without any responsibility against [D]”.

28.  Further, when the Shares were withdrawn and delivered to P on 25 August 2015, D successfully emailed a daily activity summary report to P, so D claimed it had timeously informed P about the status/activities of the Account. D thought that was the end of the matter because with all relevant transfer documents and physical scrips of the Share Certificates given to P, it was P who should present the same to Tricor to have the Share Certificates registered in his own name.

29.  D did not hear further from P until P went unannounced to D’s offices in/about January 2017 to ask for review of the Withdrawal Documents, and he took photographs of the same with his mobile telephone. On 11 October 2017, P (accompanied by a PRC-based legal adviser) attended D’s offices to ask Lui the place where the Withdrawal Documents were handed over to him, and Lui replied it was at the Handover Site. At P’s request, D gave him colour copies of the Withdrawal Documents for which he signed to acknowledge receipt. D also made copies of these documents, which copies were chopped with a “copy” mark, countersigned by P and dated 11 October 2017. In/about November/December 2017, P (accompanied by the same PRC-based legal adviser and a third companion) attended D’s offices to ask Lui how he allegedly collected the Shares, and Lui gave the same answer as before, ie P gave the signed SW Instruction to D, Lui delivered to P the physical scrips of the Share Certificates at the Handover Site, and P countersigned the SW Instruction. Lui said P was calm and well-mannered on each visit, and only requested information from him.

30.  On/about 13 November 2017, Lui was invited to give a statement to the Police, which he did by giving the same account as above, ie D had returned the physical scrips of the Share Certificates to P.

31.  On 8 December 2007, D received the Apology Letter from P, and Lui understood the subject matter of such letter that concerned the alleged missing Shares/Certs (which was the only dispute D had with P that explained why P would get the copy Withdrawal Documents from D and file police complaint against D) had been concluded.

32.  By reason of the above matters, D denied it failed to inform P of the whereabouts of the Shares/Certs. Lui claimed there was no reason for D to withhold the Shares/Certs which were not used as collateral for margin financing. D as a brokerage simply executed P’s instructions, and had no interest in the Shares/Certs which could not be legally/beneficially transferred to D without going through CCASS and thus leaving an electronic/paper trail. Indeed, D as brokerage and Lui as responsible officer would be subject to the SFC Code with risk of fines and disciplinary sanctions if client’s orders/instructions were not carried out promptly/diligently.[13]

33.  As for the Demand Letters, Lui said that on 18 October 2017 he was invited to give a statement to SFC no doubt because P complained to the SFC about this matter. On 26 October 2017, Lui gave a statement to the SFC, and was advised that due to SFC’s ongoing investigation, D as a brokerage and Lui as its responsible officer were under secrecy obligations by section 378 of the SFO, so D did not say more than needed in DSols’ replies to the Demand Letters (but D was prepared to provide copy Lui’s statement to the SFC if so ordered by the court).

V.  P’s REPLY

34.  P claimed he was a PRC citizen without any other citizenship, and between 14 July and 15 September 2015 he was in Mainland China. P claimed that during such period his only travel documents (ie ID Card, Permit and his PRC passport no E4xxxxxx9 (“Passport”)) (collectively, “Travel Documents”) were with him, and he had never lent/lost his Travel Documents. P said he did not have any other travel documents whether issued by Mainland China or other countries.

35.  Pursuant to P’s Application for a Statement of Travel Records dated 19 January 2018 submitted to the ImmD (“ImmD Application”), ImmD issued P’s Statement of Travel Records dated 29 January 2018 (“ImmD Record”) which P claimed sufficiently showed he was not in Hong Kong from 14 July to 15 September 2015 (including the whole of August 2015). I pause to note the ImmD Application particularly referred to P’s travel document no E4xxxxxx9, and a copy page of P’s Passport which showed such travel document number was annexed to the ImmD Application. The ImmD Application did not refer to P’s Permit and/or corresponding permit number. Although the ImmD Record did not specify any travel document or travel document number, the ImmD Record was plainly issued pursuant to the ImmD Application which made no mention of P’s Permit or its permit number. But in paragraph 4(3) of the Reply P averred that “[he] would only enter Hong Kong using his [Passport] or [Permit]” (my emphasis). Indeed, P came to Hong Kong in April 2015 by using the Permit as his travel document (see paragraph 4(d) above).

36.  P claimed D never returned/delivered the Shares/Certs to him on 25 August 2015 or at all,[14] so D still retained responsibility over the Shares/Certs which responsibility never extinguished nor shifted to P:

(a)	P did not give D any verbal/written instruction to withdraw and/or part with the Shares/Certs, and did not authorise anyone to do so on his behalf;
(b)	P did not by himself or direct anyone to fill out / sign / send to D any SW Instruction in respect of the Shares/Certs;
(c)	D failed to verify the signature on the SW Instruction against P’s signature on record;
(d)	if D received the SW Instruction (which P denied), D wrongfully acted upon an incomplete SW Instruction which bore a “false signature” of P;
(e)	D carried out stock withdrawal transaction with CCASS for the Shares/Certs without P’s authority/instruction;
(f)	P was not in Hong Kong and could not have met Lui or any D’s officer on/about 25 August 2015 at the Handover Site;
(g)	by reason of (f) above, on 25 August 2015 (i) P could not have collected the physical scrips of the Share Certificates, SW Receipt and/or original Transfer Form from Lui and could not have checked/countersigned the SW Instruction in Lui’s presence, and (ii) Lui could not have sighted P’s ID Card in Hong Kong;
(h)	D failed to verify the identity of the person who allegedly collected the Shares/Certs.

37.  P claimed he intended his investments in ListCo to be a long term one, so he did not intend to have frequent transactions for the Shares. At/about the end of 2016, P was considering to sell some of the Shares as the price was good. It was then that P discovered the Shares were missing (but P did not say how he made such discovery). P visited D’s offices to find out what happened, to request for copy relevant documents and to confirm the whereabouts of the Shares/Certs on the following 4 occasions, and he claimed that before the 2^nd/3^rd visits he still hoped the Shares/Certs were in D’s safe possession, power, control and/or custody:

(a)	on 12 January 2017, P requested D to provide the Account’s transaction record and SW Instruction for his inspection, which D did and P took photographs of the same;
(b)	on 8 September 2017, P asked D the whereabouts of the Shares/Certs, and Lui replied to say for the 1st time that on 25 August 2015 the physical scrips of the Share Certificates were allegedly handed to P who acknowledged receipt of the same in Tsimshatsui, Hong Kong, and D provided the SW Instruction for P’s review;
(c)	on 11 September 2017, P again asked D to explain the whereabouts of the Shares/Certs, and Lui again explained the physical scrips of the Share Certificates had been returned to P in person;
(d)	on 11 October 2017, P asked D for copies of the Share Certificates, SW Instruction and Transfer Form, and P initialled a copy set of such documents (which did not include the SW Receipt) with the date of 11 October 2017 to acknowledge receipt of the copies provided to him.

38.  P claimed there was no progress in recovery of the Shares/Certs and no acceptable explanation by D as to their whereabouts, so he sought assistance from regulatory/enforcement authorities including the Police.

39.  P claimed the Apology Letter did not confirm receipt of the Shares/Certs or constitute waiver of P’s rights over the same:

(a)	On 8 December 2017, P met a Mr Mao (“Mao”) in Shenzhen, Mainland China, and Mao told P he represented D. Mao presented for P’s signature a confirmation/apology letter for P to confirm the Shares had been returned to P so D could show such letter to the Police/SFC, but P refused as its contents were untrue.
(b)	Mao told P D would promptly return the Shares to him if he agreed to sign the confirmation/apology letter.
(c)	P refused to confirm the Shares had been returned to him, but agreed to apologise for his bad/rude manners when he met D’s officers on his visits in paragraph 37 above, so Mao revised the confirmation/apology letter to become the Apology Letter, which P signed because he wanted to promptly resolve the matter.
(d)	The Apology Letter was sent to D on the basis that D would promptly return the Shares/Certs to P, but they were not so returned to P.
(e)	On 17 January 2018, DSols informed PSols D had forwarded copy Apology Letter to Police/SFC.

40.  A number of matters were of note. First, in respect of (a)-(b) above, the name of Mao, whom Mr Chan SC (and Mr Yung with him), counsel for D, described as mysterious, only came up in the account in the above paragraph, but there was no evidence as to the purpose, circumstances and reasons for P to meet Mao in Shenzhen, Mainland China. As Lui said, P did not even give Mao’s full name or exhibit Mao’s business card. Secondly, in respect of (c) above, there was no affidavit evidence to suggest P’s manners at his various meetings with Lui and/or other D’s officers were bad, rude and/or unruly. Thirdly, in respect of (d) above, there was no mention in the Apology Letter that the quid pro quo for P signing such letter was the prompt return of the Shares/Certs to him, and no explanation why it was not so recorded in the Apology Letter.

41.  P claimed that as registered shareholder (but see paragraph 67(c) below that confirmed he was never a registered shareholder) / beneficial owner of the Shares and holder of the Account, he was entitled to ask D to confirm the whereabouts of the Shares/Certs, but D was evasive and refused to answer his enquiries even though P/PSols never asked for disclosure of information that D gave to the SFC. It was only on 13 April 2018 that DSols wrote to confirm the Shares/Cert were returned to P on/about 25 August 2015 (which P denied). P invited D to disclose the status of investigations by the Police/SFC in relation to the Shares/Certs and/or to consent to disclosure of the same by the Police/SFC, but it appeared D/Lui just repeated to the SFC their contention that P had collected the physical scrips of the Share Certificates from D on 25 August 2015.

VI.  PROCEDURAL HISTORY

42.  On 12 February 2018, P commenced the present action. On 21 March 2018, D filed its Defence and also a summons to seek security for costs against P (“Security Summons”). On 21 March 2018, D filed Lui’s affirmation in support of the Security Summons (“Lui 1^st Aff”). On 11 April 2018, D filed its Amended Defence. On 13 April 2018, D filed its Reply to Request for Further and Better Particulars of the Defence (“1^st FBP”).

43.  On 20 April 2018, P filed his Reply and also a summons for summary judgment for inter alia (a) delivery/transfer to him the Shares[15]/Certs or Identical Shares/Certs/Rights, or (b) “damages to be assessed” (“O14 Summons”). On 20 April and 8 August 2018, P filed his 1^st and 2^nd affirmations to oppose the Security Summons and to support the O14 Summons (“P 1^st and 2^nd Affs”). On 14 May 2018, D filed Lui’s 2^nd affirmation to support the Security Summons and to oppose the O14 Summons (“Lui 2^nd Aff”). D claimed it had a real and bona fide defence to P’s claim which was not suitable for summary judgment.

44.  At the hearing on 28 November 2018 (“Master Hearing”), Master Kot dismissed the Security Summons. At the same hearing, Master Kot granted summary judgment in favour of P and ordered D to pay P HK$17,533,600 (“Judgment Sum”) with interest thereon at judgment rate from the date of WoS until payment with costs of the action including costs of the O14 Summons with certificate for counsel to be taxed if not agreed (“Master Order”). In light of the relief sought in the O14 Summons in paragraph 43(b) above, the Judgment Sum plainly represented assessed damages in favour of P.

45.  On 3 December 2018, D filed Notice of Appeal for appeal against the Master Order, and to seek order to dismiss the O14 Summons or to have unconditional leave to defend (“Appeal”). The Appeal was scheduled to be heard by this court on 29 January 2019 (“Appeal Hearing”).

46.  On 10 December 2018, D filed a summons to stay execution of the Master Order pending the Appeal (“Stay Summons”). On 10 and 28 December 2018, D filed the 1^st and 2^nd affirmations of Se Yung Yee David Carven (D’s director and responsible officer (regulated activities 1, 4 and 9), “Se”) (“Se 1^st/2^nd Affs”) for urgent stay of execution of the Master Order and injunction to restrain P from presenting a petition to wind up D pending the outcome of the Appeal. On 12 December 2018, P filed the affidavit of Hui Cheuk Kit Frederick (P’s solicitor, “Hui”) (“Hui Aff”) to oppose such application.

47.  On 21 December 2018, DHCJ William Wong SC granted inter alia the following order (“Wong Order”):

(a)	D do at/before 11:00am on 31 December 2018 pay the sum of HK$17,533,600[16] into court (“Payment Into Court”);
(b)	there be stay of execution against the Master Order pending the outcome of the Appeal to be heard at the Appeal Hearing;
(c)	if D failed to comply with (a) above, (b) above shall cease to have effect and P could continue to enforce the Master Order;
(d)	save that D could make payments for necessities in its ordinary course of business (eg salaries, rentals and legal costs) up to HK$1,100,000/month, D shall not dissipate or remove from Hong Kong any of its assets;
(e)	within 7 days D shall disclose to P its audited financial statements for the past 3 years and disclose by affirmation its assets worth over HK$50,000;
(f)	D shall seek P’s written approval prior to incurring or paying out any sums or accumulated sums of over HK$50,000.

48.  On 28 December 2018, D made payment into court and filed Se’s 3^rd affirmation in compliance with the orders in paragraph 47(a) and (e) above under the Wong Order.

49.  On 22 January 2019, D filed a summons for leave to adduce the affirmation of Zhang Chengzhou (張承周, “Zhang”) in or substantially in the form of the draft annexed to such summons (“Draft Zhang Aff” or “New Evidence”) at the Appeal Hearing for the purpose of the Appeal (“Leave Summons”). On the same day, D filed Se’s 3^rd affirmation in support of the Leave Summons (“Se 3^rd Aff”).

50.  D claimed the New Evidence (which was said to contradict P’s case in that it showed P actually sold the Shares to a third party on 11 September 2015 and received substantial payment for such sale) could not have been previously obtained with reasonable diligence as it was never expected to exist. Mr Chan SC submitted the New Evidence was consistent with D’s case that it had duly handed over the physical scrips of the Share Certificates to P in Hong Kong on 25 August 2015, which enabled P to later sell the Shares with stamping date on 11 September 2015, and which in turn meant P’s present claim was a false one by having a second bite of the cherry (ie he sold the Shares in September 2015 for payment received and then turned around in February 2018 to sue D for inter alia damages for alleged loss of the Shares/Certs). On such basis, it was said the New Evidence would have an important if not decisive influence on the result of the Appeal.

51.  The Appeal and Leave Summons came before this court at the Appeal Hearing. Since (a) the Leave Summons hijacked hearing time at the Appeal Hearing originally intended for the Appeal, and (b) submissions to support/oppose the Leave Summons necessarily had to canvass the subject matters of P’s claim, D’s defence and the O14 Summons in order to assess the impact of the New Evidence, Mr Chan SC and Mr Lam agreed that to avoid further delay both the Appeal and Leave Summons should be heard together on the following basis:

(a)	if this court were to determine the Appeal in D’s favour (ie allow the Appeal and grant unconditional/conditional leave to defend or dismiss the O14 Summons) upon the existing evidence and without reference to any New Evidence, this court would not have to deal with the Leave Summons except for the issue of costs;
(b)	if this court would have dismissed the Appeal (ie not determine the Appeal in D’s favour as explained in (a) above) upon the existing evidence, this court would have to go on to deal with the issue of admissibility of the New Evidence under the Leave Summons;
(c)	if this court had to deal with the Leave Summons pursuant to (b) above but would refuse leave for D to adduce the New Evidence, then this court would dismiss the Appeal;
(d)	if this court had to deal with the Leave Summons pursuant to (b) above but would have granted leave for D to adduce the New Evidence, then this court would further (i) grant case management directions for P to file/serve affirmation in response to the New Evidence and for D to file/serve affirmation in reply, and (ii) adjourn the Appeal for further argument.

52.  Mr Chan SC and Mr Lam also agreed on the following matters:

(a)

should this court allow the Appeal and either dismiss the O14 Summons or grant unconditional leave to defend (see paragraph 51(a) above), this court should (i) grant leave for the Payment Into Court (see paragraphs 47(a) and 48 above) to be paid out of court for return to D, and (ii) the orders in paragraph 47(d) and (f) above under the Wong Oder be discharged;

(b)

should this court allow the Appeal and grant conditional leave to defend (see paragraph 51(a) above) with the relevant condition being payment into court (“Condition Sum”), then this court should (i) direct that the Condition Sum out of the Payment Into Court be retained in court and the balance of the Payment Into Court (if any) be paid out of court for return to D, and (ii) the orders in paragraph 47(d) and (f) above under the Wong Order be discharged.

There was some debate between Mr Lam and Mr Chan SC as to what should happen if the court should uphold the Master Order and dismiss the Appeal (see paragraph 51(c) above). Mr Lam submitted I should order the Payment Into Court be paid out to P, but Mr Chan SC submitted I should leave it to P to make proper application for such purpose.

53.  In the course of oral submissions at the Appeal Hearing, it transpired there was need to refer to the transcript of the Master Hearing (“Transcript”) on 2 issues: (a) whether at the Master Hearing counsel for D (not Mr Chan SC or Mr Yung, “D’s Counsel”) abandoned the contention that P might have entered Hong Kong illegally for the alleged meeting with Lui on 25 August 2015, and (b) whether at the Master Hearing the quantum of damages was agreed between P and D. At the Appeal Hearing, I granted directions for the Transcript to be obtained, and for counsel to lodge further written submissions on the same, which written submissions were received on 7 March 2019.

VII.  AFFIRMATION EVIDNECE

54.  P claimed the Share Certificates were in the possession, control and power of D who as custodian held them on his behalf and who was bound by the SFC Code in handling clients’ investments. P said D mis-delivered the Shares/Certs and failed to take active steps to search for / recover them (as evident from inter-solicitors’ correspondence) such that D’s case was a wholly incredible one of “賊喊捉賊” (a thief crying “stop thief”) to cover up its misdeeds by shifting blame/burden to P. Fortunately, P was able to prove he was not in Hong Kong on 25 August 2015 (when D alleged the Shares/Certs were purportedly delivered to him) otherwise he would have been “啞巴吃黃蓮” (ie a dumb to suffer losses/bitterness in silence) and unable to reveal D’s lies.

55.  P noted the following alleged triable issues were highlighted in the Lui 2^nd Aff:

(a)	whether P actually suffered any loss in respect of his Shares/Certs such that he had a valid claim (“Issue 1”);
(b)	whether P signed/issued the SW Instruction (“Issue 2”);
(c)	whether P’s signature on the SW Instruction was forged (“Issue 3”);
(d)	whether P received and signed for the physical scrips of the Share Certificates on 25 August 2015 (“Issue 4”);
(e)	what was the nature/purpose of the Apology Letter and whether it confirmed settlement of matters against D (“Issue 5”).

56.  Mr Lam submitted Issues 1-4 hinged on the ultimate question of whether P received the Shares/Certs on 25 August 2015 as alleged or at all because if P did not, D would have been in breach of the Duties as a result of which (a) the “legal and beneficial ownership in the [Shares/Certs] were wrongfully transferred to some unknown third party ......”, and (b) P thereby suffered loss so P’s claim must have been a valid one. It was said that if P did not receive the Shares/Certs then he would not have issued/signed the SW Instruction, so Issues 2-3 would be irrelevant.

57.  Mr Lam also placed emphasis on the 4 “irreducible cores” highlighted in the Hui Aff as follows:

(a)	D shall not part with possession of or otherwise dispose of the Shares/Certs unless with P’s express instruction and authority;
(b)	D shall upon request promptly deliver/transfer the Shares/Certs to P or any party as P directed;
(c)	the Shares/Certs were given to someone;
(d)	P was not in Hong Kong when the Shares/Certs were given away.

(a) Issue 1

58.  D’s evidence Although P claimed he was the registered/ beneficial owner of the Shares, Lui alleged P had not proved (a) he suffered “loss and damage” as a result of “wrongful conversion” and loss of “proprietary rights deriving from and/or arising out of the Shares”, (b) D “wrongfully deprived” him of “use and possession of the Share Certificates and converted the Share Certificates to [D’s] own use”, and/or (c) D “disposed of the Shares and Share Certificates”.

59.  Lui claimed P’s pleadings did not aver his alleged registered ownership over the Shares (which were not bearer shares) had changed, and did not specifically allege the ownership of the Shares was changed to D/Lui or D/Lui facilitated change of such ownership to some third party. In Hong Kong, listed company shares were electronically held in CCASS, so any transfer/change of title would have left electronic/paper trail, and could not have happened without CCASS or the Share Registrar knowing about it.

60.  So if P were the alleged registered owner on record for the Shares/Certs, all dividends/benefits accrued to the Shares would still be his, and D (a) could not have returned to him or deprived what still belonged to him, and (b) could not have converted or disposed of the Shares to D’s own use or otherwise. Lui claimed at most P would have lost the paper on which the Share Certificates were printed.

61.  For loss of share certificates,[17] an owner would have to make declaration of loss to the Home Affairs Department, place newspaper advertisements over several months to publicise such loss, and follow specific replacement procedure under Part 4 Division 5 of the Companies Ordinance Cap 622. If P had lost the Share Certificates, Lui claimed D would have gladly assisted P to follow the appropriate procedure to replace such lost certificates without need for the present action. Lui considered P failed to make sufficient enquiries with CCASS/Tricor as to the current status of the Shares/Certs, but D as brokerage and not registered owner of the Shares did not have standing to make such inquiries.

62.  Lui reiterated that D as a brokerage was only a custodian in handling clients’ shares and share certificates or a middleman acting on clients’ instructions, so it would not have derived benefit from depriving clients of their shares and/or share certificates, especially when any transfer to another would have to involve CCASS/Tricor and would have to leave a paper trail, which might expose D to police criminal investigation and/or SFC enforcement action, and might further expose D/Lui to disciplinary action that might end up in imposition of fine and/or suspension of licence. So Lui claimed it made no sense for D or him (as a responsible officer for over 10 years) to engage in such conduct. As to whether D breached any duties as a brokerage, Lui said this was still under SFC investigation, and as at the date of the Lui 2^nd Aff there were no formal disciplinary proceedings against D.

63.  P’s evidence  P said that as early as the call-over hearing for the O14 Summons on 21 May 2018 Master J Wong enquired about the whereabouts/ownership of the Shares/Certs. P claimed D tried to give a false impression of a triable issue at such hearing by alleging P had not proved the registered ownership of the Shares had changed (such that P had been deprived of the benefits and proprietary rights in the Shares/ Certs), and tried to shift blame on P by alleging P failed make sufficient enquiries as to the whereabouts of the Shares/Certs.

64.  P claimed that even before commencement of the present action, PSols made numerous written requests for D/DSols to explain the whereabouts of the Shares and to return the Shares to him but to no avail since D asserted it was bound by secrecy obligations as a result of SFC investigations, so P was forced to commence the present action to recover the Shares and compel D to provide an explanation. P also complained against D’s refusal to make inquiries as to the whereabouts of the Shares/ Certs (even though they were lost in D’s custody) by alleging it had no standing to do so, and by telling P to make its own investigations, to declare loss of the Share Certificates and to apply for their replacement.

65.  P said PSols in fact made numerous telephone/written enquiries with the Tricor (Share Registrar of ListCo), HKSCCN (holder of the Share Certificates) and HKSCC (operator of CCASS), and the results were as follows:

(a)	P was never a registered shareholder of the Shares;
(b)	the Shares registered in the name of HKSCCN were transferred to another on 11 September 2015, so legal and beneficial title of the Shares passed to a third party;
(c)	there was no record of P’s registered ownership of the Shares in CCASS, and the Shares were no longer in CCASS;
(d)	as the Shares were transferred to a third party, P was unable to ask for replacement of the Share Certificates;
(e)	as P was never a registered shareholder of the Shares, P could not ascertain the identity of the transferee(s) of the Shares and/or details of such transfer(s) of the Shares.

66.  On such basis, P claimed he lost the beneficial ownership of the Shares and could not declare loss of the Share Certificate(s), so he could only sue D for compensation as a result of loss of the Shares and rights/benefits thereof for (a) D’s breach of the Duties in disposing the Shares/Certs without P’s authority and (b) D’s failure to return the same to P. It was said D’s actual loss was “the value of the Shares to be assessed by this Honourable Court” (see paragraph 18 of the P 2^nd Aff), which amounted to a valid claim against D.

67.  P summarised PSols’ enquiries with Tricor as follows:

(a)	on 24 May 2018, PSols wrote to formally enquire with Tricor (with copies of P’s Passport, ID Card and Permit, Monthly Statements issued by D for July/August 2015, SW Instruction, Transfer Form, and Share Certificates) about the ownership/ whereabouts of the Shares/Certs: (i) whether P had at any time been or was a registered shareholder of ListCo, (ii) whether there had been any dealings of any of the Shares/Certs on/after 25 August 2015, and if so, what were the dates/details of such dealings, and (iii) whether at any time P had been or was the registered owner of any Share Certificate(s), and if so, which Share Certificate(s) was/were registered under P’s name;
(b)	PSols submitted to Tricor a “Request for Inspection of Register of Members” of ListCo dated 31 May 2018, and on 7 June 2018 PSols inspected ListCo’s register of members and obtained a copy thereof which showed P was not a registered shareholder;
(c)	Tricor replied on 13 June 2018 to say P was never a registered shareholder of ListCo according to ListCo’s register of members up to that date, so Tricor could not provide the information requested in PSols’ letter dated 24 May 2018 and in PSols’ telephone enquiries as Tricor had to protect personal data/ information of ListCo’s registered shareholders;
(d)	on 15 June 2018, PSols made enquiries with Tricor (on the basis of not obliging Tricor to disclose details of any transaction involving the Shares/Certs) on (i) whether Tricor ever received the original Share Certificates, SW Instruction and Transfer Form for the Shares on/after 25 August 2015, (ii) whether there was a change of registered ownership of the Shares/Certs from HKSCCN to another person/entity on/after 25 August 2015, and (iii) whether P could declare loss of the Share Certificates and if so, what were the relevant procedures;
(e)	Tricor replied on 4 July 2018 that an instruction/authorisation letter from the related registered shareholder would be required before Tricor could provide PSols with the requisite information, but if P wished to declare loss of the Share Certificates, P would have to submit to Tricor (i) a completed/signed “Report Loss of Certificates and Request for Issue of Replacement” form (“Declaration of Loss Form”) and (ii) the original SW Receipt by CCASS Deposit Services of HKSCC or true copy thereof certified by the broker ie D.

68.  P summarised PSols’ enquiries with HKSCCN and HKSCC as follows:

(a)	on 20 June 2018, PSols wrote to HKSCCN as registered holder of the Shares/Certs together with copy supporting documents to make the following enquiries: (i) whether HKSCCN remained as the registered holder of the Shares/Certificate, and (ii) whether there had been any transfers or dealings of the Shares/Certs on/after 25 August 2015, and if so, what were the dates/details of such transfers/dealings;
(b)	on 29 June 2018, HKSCC replied to PSols that (i) it did not recognise any rights/interests of any person other than a CCASS Participant (but P was not any such Participant), (ii) it had no information/knowledge of any transfer/dealing of any listed shares registered in P’s name, (iii) the Share Certificates registered in HKSCCN’s name were withdrawn from CCASS depository on 25 August 2015, (iv) HKSCC had no information as to the identity of the transferee(s) of the Shares, and (v) P was urged to contact ListCo or its Share Registrar for matters relating to the legal ownership and/or registration of transfers of the withdrawn Shares;
(c)	on 12 July 2018, PSols wrote to inform HKSCC (enclosing copy letter dated 4 July 2018 from Tricor to PSols and draft authorisation/instruction letter for HKSCC’s consideration) that Tricor required an authorisation/instruction letter from HKSCCN being the registered shareholder of the Shares before Tricor could provide the requested information, and to ask HKSCC to send them such authorisation/instruction letter by HKSCCN to authorise PSols to make enquiries with Tricor regarding the whereabouts of the Shares;
(d)	on 25 July 2018, HKSCC replied to confirm the Shares were no longer registered in the name of HKSCCN, and it had no information as to the identity of the transferee(s) of the Shares as the Shares were no longer in CCASS, so it was not in a position to take any action as requested by PSols, and suggested PSols to contact ListCo and/or its Share Registrar.

69.  Consequently, P claimed he was unable to ascertain the identity of the transferee(s) of the Shares.

70.  As for D’s allegation that P could have declared loss of the Share Certificates and applied for replacement share certificates, P explained that to make such an application to Tricor, an applicant had to submit to Tricor the original SW Receipt or true copy thereof certified by the broker together with a completed Declaration of Loss Form, so P had to seek the assistance of D (who kept the SW Receipt) before he could declare loss of the Share Certificates.

71.  By their letter dated 20 June 2018, PSols informed DSols that a certified true copy of the SW Instruction had to be submitted to Tricor for declaration of loss of the Shares/Certs and for checking whether the Share Certificates were still registered in HKSCCN’s name, and PSols went on to ask whether D was willing to attend to Tricor’s request and if so, D was urged to provide the certified true copy within that week. By a further letter dated 21 June 2018, PSols requested D to take steps to declare loss of the Shares/Certs, and enclosed a blank Declaration of Loss Form for DSols’ handling. On 26 June 2018, DSols replied that D was obliged to assist Tricor, and asked for copies of Tricor’s written request “for use to provide certified copies of the [SW Instruction]”. But by a 2^nd letter on the same date, DSols denied the allegations in the letter by PSols dated 21 June 2018, and said D was unable to entertain P’s request to declare loss of the Shares/Certs.

72.  On 27 June 2018, PSols sent 2 letters to inform DSols they had to submit to Tricor the original or true copy of the SW Receipt certified by D to declare loss of the Share Certificates, and to invite DSols to make telephone enquiries with Tricor’s Loss Section to ascertain Tricor’s requirements. PSols stressed that DSols were better placed to make direct enquiries with Tricor as P was never a registered shareholder of ListCo. P claimed D had a duty to declare loss of the Shares/Certs which were lost while in D’s possession, or at least D should proactively assist in the process of declaring loss of the Share Certificates.

73.  On 28 June 2018, DSols replied D would provide the requested certified copy of the SW Receipt. But nothing further was heard from D, so on 10 July 2018 PSols wrote to DSols to (a) chase for the certified true copy of the SW Receipt, (b) enclose PSols’ correspondence with Tricor, HKSCCN and HKSCC between 24 May and 29 June 2018, (c) invite DSols to make their own enquiries if they considered P’s enquiries insufficient, and (d) request D to show basis/proof for saying P never lost his ownership over the Shares/Cert. It was only by a letter dated 12 July 2018 that DSols provided a certified copy of the SW Receipt. On the same day, PSols submitted a completed Declaration of Loss Form signed by P together with the certified copy of the SW Receipt to Tricor. On 19 July 2018, Tricor replied that the Shares registered in HKSCCN’s name were transferred out on 11 September 2015, so Tricor could not process P’s application.

74.  P claimed that as at the date of the P 2^nd Aff D had not provided any basis/proof for alleging P was still the registered owner of the Shares/Certs whereas P had shown he had never been the registered owner of the Shares/Certs.

75.  P next claimed D had no excuse for failing to make enquiries as to the whereabouts of the Shares/Certs, and disagreed with Lui’s allegation (which P considered to be an excuse for inaction) that P as registered owner of the Shares was entitled to make enquiries with Tricor/HKSCC whereas D had no standing to do so. P said since he was never a registered shareholder of the Shares nor a CCASS Participant, he had no right/entitlement to make enquiries with Tricor, HKSCCN or HKSCC. But D as a licensed broker and CCASS Participant would have been familiar with the proper procedures to make such enquiries, and D also kept the original SW Receipt, so it was in a position to provide a certified copy to Tricor. P considered it wrong for D to have P shoulder all responsibility to investigate the whereabouts/ownership of the Shares/Certs at his own costs (and even blame P for not carrying out such investigations), especially when D delayed provision of certified true copy of the SW Receipt to P, failed to take any of the above steps to make enquiries with Tricor, HKSCCN and HKSCC, and failed to assist in declaring loss of the Share Certificates, inspecting ListCo’s shareholders’ list, and making enquiries with Tricor, HKSCCN and HKSCC as to the whereabouts and ownership status of the Shares.

(b) Issue 2

76.  D’s evidence  On P’s denial of having issued the SW Instruction and his allegation that his signature thereon was false/forged (but without accusation against D of such forgery), Lui claimed it was for P to show the signature was forged. Lui suggested this was a triable issue as a false/forged signature would implicitly suggest it would have been used for dishonest purpose.

77.  Lui claimed whenever D received an instruction with client signature, it would follow the SFC Code to cross-match such signature with the accounting opening signature to make sure the instruction was valid before it would process the client’s instruction. But if these 2 signatures looked similar, D would not have been able to suspect forgery. Here, D’s staff checked and verified the signature on the SW Instruction. Lui noted P did not accuse D of forgery, so Lui said D did nothing wrong in acting on the valid or purportedly valid SW Instruction. Lui disagreed D disposed of the Shares/Certs “without [P’s] authority or instructions” (see paragraph 19 of the P 1^st Aff). Lui claimed even the Police did not raise query over alleged false/forged signature when he gave his statement to the Police. In all, Lui believed P recently made up such allegation of forgery, which P did not mention in his 3-4 visits to D’s offices, and noted P did not produce/exhibit his statement to the Police.

78.  Lui suggested P’s claim turned on whether he signed the SW Instruction and whether D acted on proper authority/instruction, so the key issues were whether P’s signature on the SW Instruction was false/forged (which also had bearing on whether or not P was in Hong Kong in August 2015) and/or whether D breached any duties in carrying out client’s instructions or purported client’s instructions, so it was for P to prove the alleged forgery and then to give D opportunity to prove otherwise at trial.

79.  P’s evidence  P disagreed he only recently made up the allegation of forgery on the basis that the Police never asked Lui questions regarding false/forged signatures. In fact, P’s statement to the Police dated 14 September 2017 raised the issue of false/forged signature as follows (but P could not control how the Police would investigate the matter):

(a)	upon enquiry with D as to the whereabouts of the Shares, P was told that on 24 August 2015 he personally attended D’s offices and signed the SW Instruction;
(b)	but P never attended D’s offices as he was not in Hong Kong on 24 August 2015, so P suspected someone forged his signature to withdraw the Shares;
(c)	upon enquiry with D, P understood from D that D claimed he attended D’s offices to present his original identity document before he withdrew the Shares, but P never lost his Permit or ID Card, so he suspected forged identity document was used to withdraw the Shares.

80.  P claimed this showed that even before the commencement of the present action he already insisted the signature on the SW Instruction was not his, and the account he gave to the Police was consistent with his affirmation evidence. P further claimed that in August 2017 he made numerous enquiries with D’s compliance department by email as to the whereabouts of the Shares, and he proposed to have the signature on the SW Instruction examined by a handwriting expert, but D did not provide any assistance in this regard:

(a)	on 15 August 2017 at 2:08 pm, P emailed D’s compliance department to ask whether D could provide voice/video recording for the alleged stock withdrawal and whether D could provide originals of the signed documents for handwriting examination;
(b)	on 16 August 2017 at 3:57 pm, D’s compliance department emailed its reply letter saying D no longer kept the requested video/voice recording, but did not reply to P’s enquiry for handwriting examination except to reiterate P had reviewed the original documents and collected copies thereof;
(c)	on 16 August 2017 at 4:22 pm, P emailed D’s compliance department saying the signatures on the stock withdrawal document were not his, and asked whether D was willing to provide the original documents for handwriting examination at P’s cost;
(d)	on 17 August 2017 at 3:18 pm, D’s compliance department emailed its reply letter saying it had a duty to keep all original clients’ documents in safe custody and to keep a complete set of operation records, so it would not provide “loan out service” for such original documents, but D did not address the matter of handwriting examination;
(e)	on 28 August 2017 at 3:42 pm, P emailed D’s compliance department to request for an update of D’s internal investigation;
(f)	D emailed its reply on 29 August 2017 at 10:55 am to inform P that D had followed all established procedures for P’s alleged stock withdrawal, including issuing daily statement to P’s email address, and verifying his signature and his instruction.

P also claimed that during a meeting with Lui on 11 September 2017 he informed Lui he had not withdrawn the Shares and did not attend D’s offices for such purpose, but Lui repeatedly alleged P personally attended D’s offices to collect the original Share Certificates.

81.  P said the above account showed that as early as August 2007 D was fully aware he complained the signature on the SW Instruction was forged, so it was strange for Lui to say P never mentioned about false/forged signature until recently. P said it was unfair for D to now say P failed to prove the signature on the SW Instruction was forged and/or the false/forged signature raised a triable issue when (despite P’s repeated requests) D failed/refused to cooperate with P’s investigations to arrange for handwriting examination of such signatures. Since D (who retained the SW Instruction) had sufficient opportunity to ascertain whether the signatures on the SW Instruction were false/forged, it could not say the present action should proceed to trial so as to afford opportunity for handwriting experts to verify such signatures. P claimed D’s current insistence on handwriting expert examination was a delaying tactic with a view to create complication and hence a false impression of an arguable defence or triable issue when there was none.

82.  P said in any event handwriting expert evidence based on the expert’s educated deduction/guess as to the genuineness of the signatures on the SW Instruction by comparison with P’s control signatures was not necessary in the present action because the ImmD Record was strong and compelling evidence that proved P was not in Hong Kong between 14 July and 15 September 2015, which meant P could not have (a) signed the SW Instruction in Lui’s presence or collected the physical scrips of the Share Certificates from Lui on 25 August 2015, and/or (b) personally submitted the physical scrips of the Share Certificates and original Transfer Form to Tricor for transfer of the Shares to a third party on/about 11 September 2015.

83.  Although P did not assert D intentionally deprive him of the Shares/Certs or D forged his signatures on the SW Instruction, P claimed D breached its Duties owed to him by disposing of the Shares/Certs without his authority and by failing to keep them in safe custody. P claimed at the very least upon receipt of the purportedly signed SW Instruction sent by mail from an unknown sender, D should have confirmed P’s instructions before acting on the same to withdraw the Shares from CCASS. P said D also failed to confirm the identity of the person who purportedly authorised withdrawal of the Shares and collected the physical scrips of the Share Certificates on 25 August 2015.

(c) Issues 3-4

84.  D’s evidence  As to P’s denial of being in Hong Kong in August 2015, Lui said although the ImmD Record apparently suggested P was not in Hong Kong during August 2015, it was well known from publicised cases in the news (eg the case of the missing Causeway Bay bookseller) that people could come to Hong Kong and return to Mainland China through illegal means (ie not via immigration checkpoints). Lui also noted P lived in Shenzhen which was a stone’s throw away from Hong Kong. Lui did not know whether P might have other identities for immigration control purposes or not. Mr Chan SC fairly accepted there was no precise/particular evidence that P came to Hong Kong on another passport issued by another country or that P came to Hong Kong illegally, but suggested there was enough red flags in the evidence before court to point to the need for discovery and trial.

85.  Lui claimed the occasion he met P on 25 August 2015 was an ordinary one that would not have excited him to consider whether or not P came to Hong Kong illegally, and in dealings with D’s overseas clients Lui simply assumed they came to Hong Kong legally. Lui said it defied common sense for him to pass the physical scrips of the Share Certificates to someone other than P (whom he recognised from the 2 occasions they met, ie when P opened the Account with D on 14 April 2015 and at ListCo’s listing dinner at/about end of April 2015 such that he could not have mistaken anyone else for P) without P’s authorisation, especially as (a) he checked P’s ID Card as required under the SFC Code before passing him the physical scrips, and (b) P signed receipt for the same on the SW Instruction in his presence, which was the end of the matter as far as he was concerned. Lui said there was no reason for him as a responsible officer to risk his/D’s reputation, finances and livelihood and expose himself to criminal investigation and possible imprisonment by cheating/swindling P of the Shares/Certs. Instead, Lui said D received P’s authorisation to withdraw the Shares by the signature-verified SW Instruction. Lui further reminded that P did not have to be Hong Kong to send the SW Instruction by mail to D. Lui claimed these disputes ought to be investigated at trial.

86.  Lui believed it was necessary to have forensic handwriting expert evidence to rebut the inference P sought to draw from the ImmD Record. If it turned out the signature in the SW Instruction for acknowledging receipt of the Shares was made by the same person who gave the signature on the account opening form (ie the Agreement), it would go a long way to show it was P who signed the SW Instruction to acknowledge receipt of the Share Certificates on 25 August 2015, and it could then be inferred that he came to Hong Kong on another travel document or he breached Hong Kong immigration laws by not coming through proper immigration channels.

87.  On the above basis, Lui claimed it was not such an open and shut case as suggested since the ImmD Record did not tell the full story of P’s whereabouts. Lui argued there was a triable issue, and urged for handwriting expert evidence. It was said that if P were confident about his stance, he would not have any concern for handwriting expert investigation into the alleged forgery and should have looked forward to expert evidence to vindicate his alleged absence in Hong Kong in August 2015.

88.  P’s evidence  P claimed the ImmD Record clearly showed he was not in Hong Kong on 25 August 2015, so it was impossible for him to have signed the SW Instruction to give instruction to withdraw the Shares and/or to acknowledge receipt of the physical scrips of the Share Certificates on 25 August 2015. Instead, P claimed on that day he was in Shenzhen, Mainland China. He drove from his home at “深圳市龍崗區龍城大道育龍庭C棟301” to a club house known as “歐景城水療健身會所” (“Club House”) at “深圳市龍崗區龍崗中心城龍福西路39號” where he stayed overnight on 25 August 2015 before leaving on the following day (ie 26 August 2016), and on the way to the Club House P filled up his car with gas at “中國石油(鹽龍加油站)” at “深圳市龍崗區鹽龍大道與協同路交口”.

89.  P exhibited his Union Pay credit card e-statement as re-issued by Ping An Bank on 3 August 2018 which showed he used such credit card to personally pay (a) RMB300 to “深圳市中油潤德銷售有限公司” on 25 August 2015 (transaction date was 25 August 2015 and posted date was 26 August 2015), and (b) bills of the Club House, gas stations, hotels and restaurants in the Mainland China for August 2015. P explained that to effect each such payment he had to input a personal identity number (“PIN”) into a credit card machine and then sign on a receipt. P said he never lent his Union Pay credit card to anyone, and did not tell anyone his PIN on 25 August 2015 or on any other date.

90.  P also exhibited copies of (a) his online bank transaction record for his Union Pay debit card issued by Ping An Bank for the period between 15 and 29 August 2015, and (b) his transaction record for payment made on 26 August 2015 at 10:25:44 am to “深圳市歐景城有限公司” for his stay at the Club House, which had a chop by “平安銀行深圳龍崗支行” that confirmed the correctness of the transaction details. P said he personally made such payment by inputting his PIN to a POS machine and signing for such transaction. P said he never lent his Union Pay debit card to anyone and did not tell anyone his PIN on 26 August 2015 or on any other date.

91.  Thus, P said it was nonsense to say he entered Hong Kong illegally. P said there was no reason for him to commit such serious criminal offence to withdraw his own Shares from his own securities account when he had valid Travel Documents and had validly come to Hong Kong many times previously. P said D’s contentions, which were tantamount to suggesting that P withdrew the Shares from the Account and then made a dishonest/fraudulent claim against D for the value of the Shares, was a serious allegation that required D to adduce cogent supporting evidence. The fact there were publicised cases in the news about illegal entries into Hong Kong did not mean P came to Hong Kong illegally. Likewise, it would be illogical to say that just because there were publicised news of fraudulent scams involving brokers/brokerages. Therefore, D was possibly a fraudster.

(d) Issue 5

92.  D’s evidence  On the matter of Mao and the Apology Letter, Lui said P’s version of events did not make sense: (a) P did not exhibit Mao’s business card, (b) there was no reason for P to apologise for making inquiries about the Shares which P claimed were his, and (c) there was no need for P apologise for his manners when his attitude at the meetings were not unruly and he did not disrupt D’s business. Lui confirmed no one called Mao worked for or represented D, so P’s allegation of Mao’s involvement was just a bare allegation. Lui noted the account in the P 1^st Aff on the Apology Letter was the same as the bare assertions in the Reply without any further particulars. According to P’s Reply, P attended D’s offices 4 times with the last time on 11 October 2017 to inquire about the SW Instruction, to take copies of documents and to ask for the whereabouts of the Share Certificates. Later, Lui was invited to give a statement to the Police, which he did on 13 November 2017. On 8 December 2017, D received the Apology Letter. In such context, Lui claimed the only reason for P to send the Apology Letter was (a) to wrap up the matter of withdrawal of the Shares and whereabouts of the Share Certificates, and (b) to apologise for having inconvenienced D with police involvement, which was the only incident that resembled any sort of dispute with D serious enough to warrant police involvement. Lui said all along the parties’ broker-customer relationship was pleasant and cordial, and Lui provided the requested information each time P came to D’s offices. Lui said a client normally would not have to apologise by letter in having asked a brokerage for information about his/her stock holdings/withdrawals, and in particular to end such apology letter with “confirmation of complete resolution of the dispute and matters arising from the captioned matter”. In the circumstances, Lui believed there was a triable issue as to the nature/purpose of the Apology Letter, and the surrounding circumstances of Mao’s involvement.

93.  P’s evidence  P claimed he sent the Apology Letter to D to apologise for his manner during meetings with the D’s officers on his visits to D’s offices to have D return the Shares to him. As stated in the Apology Letter, P caused inconvenience to D’s operation and his manner was unpleasant (see paragraph 14 above). In any event, P believed the Apology Letter did not have any legal/binding effect and did not constitute a waiver of his rights over the Shares/Certs, and he was fully entitled to insist on his rights to claim against D for loss of the Shares and to demand for damages. In any event, Lui’s allegation about P’s reason for sending the Apology Letter was mere speculation, and reflected a poor attempt in using a marginally relevant documents to complicate matters.

(e) Summary of P’s stance

94.  In summary, P alleged D/Lui made the following untrue and misleading allegations which P said were not made out:

(a)	P came to Hong Kong by illegal means on/before 25 August 2015 (but P claimed D failed to provide any proof for such serious allegation);
(b)	P signed the SW Instruction and collected the physical scrips of the Share Certificates from D in Hong Kong on 25 August 2015 (but P claimed the ImmD Record showed P was not in Hong Kong between 14 July and 15 September 2015);
(c)	D withdrew the Shares on P’s instructions (but P claimed (i) when D received by mail the half-completed SW Instruction on 24 August 2015 from an unknown sender, it failed to make any enquiries to confirm P’s instructions and instead it just proceeded to withdraw the Shares from CCASS, and (ii) D had no authority from P to fill in and complete the SW Instruction);
(d)	Lui checked P’s identity document in Hong Kong on 25 August 2015 (but P claimed he was not in Hong Kong on 25 August 2015 and never lost his Travel Documents, so Lui could not have checked his identity document as alleged);
(e)	P recently made up the story about the false/forged signatures on the SW Instruction (but P claimed D knew P had already complained to D about the false/forged signatures as early as in August 2017);
(f)	P failed to prove the signatures on the SW Instruction were false/forged (but P claimed that despite his repeated requests D failed to provide original stock withdrawal documents (eg the SW Instruction) for expert handwriting examination of relevant signatures before commencement of the present action);
(g)	P as registered owner of the Shares was entitled to make enquiries with CCASS/Tricor (but P claimed he was never a registered shareholder of the Shares/Certs so he had no unique standing to make enquiries with Tricor, HKSCC and HKSCCN);
(h)	D had no standing to make enquiries with HKSCC/Tricor (but P claimed D as broker/Participant of CCASS could have arranged for inspection of ListCo’s register of shareholders, made direct enquiries with Tricor, HKSCC and HKSCCN, and assisted in declaring loss of the Shares/Certs by completing a Declaration of Loss Form and providing certified copy of the SW Receipt).

95.  P concluded D must have handed over the physical scrips of the Share Certificates and Transfer Form to a third party without taking sufficient steps to confirm P’s purported instructions and to verify P’s purported signatures in the SW Instruction. P said Lui also seemed to be forgetful about how the Shares were withdrawn, and did not explain why it was averred (a) in paragraphs 6(b)-(c) of the Defence filed 21 March 2018 that on/about 24 August 2015 P telephoned to instruct D to withdraw the Shares/Certs whereupon D drew up the SW Instruction dated 24 August 2015 by filling in the stock code, name of stock, quantity, handling fee and share certificate numbers, and (b) in paragraph 6(b) of the Amended Defence filed on 11 April 2018 that on/about 24 August 2015 D received by mail the SW Instruction which had account number, stock number and number of shares filled in and which P allegedly signed. Interestingly, Lui signed the Statement of Truth for both the Defence and Amended Defence.

96.  P also noted D by the 2^nd FBP confessed it did not know who sent the SW Instruction (which was not accompanied by any other document) by mail to D who did not further communicate with P to confirm P’s instructions whether before or after D allegedly received the SW Instruction. P claimed D’s bare allegation that it had verified P’s signature, confirmed P’s instructions and checked P’s identity document before processing the withdrawal and delivery up of the Shares were unbelievable bare assertions, and it flied against commercial/common sense for Lui to have met P casually at the Handover Site for about 5 minutes on 25 August 2015 to check P’s identity document, to verify P’s instructions for stock withdrawal, to ask P to countersign the SW Instruction, to handover to P the Transfer Form and physical scrips of the Share Certificates for the Shares worth over HK$17,000,000, and to explain to P the procedure with Tricor for transfer of the Shares.[18]

97.  P also complained Lui failed to ascertain how D responded to P’s complaints about false/forged signatures and/or Lui knowingly made untrue allegation that P recently made up a story of false/forged signatures, which allegation was unfounded/misleading although Lui as D’s responsible officer claimed to value his reputation. P also claimed that D clearly gave the Shares to a third party on 25 August 2015 such that D could/should have reported the matter to the Police for criminal investigation, but P believed D had not done so for reasons unknown. P said in such circumstances he had no alternative but to sue D for damages to compensate for loss of his rights/benefits in relation to the Shares, and there was no arguable defence or triable issue for the present action to proceed to trial. P contended that even if D was defrauded by others or the Shares were stolen by another, it would not be a defence to P’s claim. But Lui disagreed and claimed there were triable issues and a strong defence that was likely to succeed at trial.

VIII.  AFTER THE MASTER ORDER

98.  Se took over as responsible officer on 11 June 2018, and Lui left D on 6 September 2018. On 28 November 2018, Master Kot granted the Master Order.[19] On the same day, P served a statutory demand on D for the Judgment Sum. D was unable to pay the Judgment Sum, and Se claimed that without a stay of execution D might be wound up or the SFC might suspend its licence. But D claimed it had good prospects on the Appeal:

(a)	P pleaded the signatures on the SW Instruction were false/forged, so the whole case boiled down to D’s authority for withdrawing and handing over the Share Certificates, which engaged the fraud exception and thus raised triable issue.
(b)	The Master Order effectively determined that the 2 signatures on the SW Instruction were forgeries and that D acted without authority in withdrawing and handing over the physical scrips and Transfer Form to P, but in finding it was unbelievable that P would have sent the SW Instruction Master Kot effectively rejected (without any cross-examination) Lui’s evidence that subsequent confirmation of signed stock withdrawal instructions was not required under the SFC Code.
(c)	Master Kot ignored the Monthly Statement issued on 31 August 2015 that showed stock withdrawal on 25 August 2015, which suggested P ought to have found out in August/September 2015 about the withdrawal of the Shares from the Account and his alleged loss of the Shares worth over HK$17,000,000. Se reminded that (i) P was university-educated and the director/general manager of an investment fund business with enough experience to open a margin web trading Account, and (ii) he would have logged onto his web trading Account from time to time to check its status. And yet P merely asserted he “discovered” his alleged loss in December 2016, but without denial that he had received/read the Monthly Statements and without explanation as to what happened in the 1 year and 4 months between August 2015 and December 2016.

99.  Se said there were other matters that Master Kot failed to appreciate in her decision, eg:

(a)	there was query whether, despite the ImmD Record, Lui met with and passed the physical scrips of the Share Certificates to P on 25 August 2015 (and an affirmative answer would have discredited P’s claim that he only had the Travel Documents);
(b)	P admitted he visited D’s offices 4 times on 12 January, 8 and 11 September and 11 October 2017, but did not explain the 8-month gap between the 1st and 2nd visits or why he was not eager to find out why the Shares were lost (from which it could be inferred that P knew about the share withdrawal and what happened to the Shares);
(c)	P did not make report to the Police until 14 September 2017, ie some 9 months after discovery of the loss, which did not sit well with the picture of someone who lost the Shares worth about HK$17,000,000, but which sat well with the picture of someone who knew about the share withdrawal and what happened to the Shares so there was no rush to deal with the matter or to build a bogus case against D;
(d)	Master Kot failed to properly consider the nature/purpose of the Apology Letter which at the very least amounted to P’s representation that matters were indeed settled (perhaps after P reviewed the Monthly Statements and Withdrawal Documents) in light of (i) P’s bare assertion that he wrote the Apology Letter to secure the release of the Shares after the meeting in Shenzhen with Mao who said such letter was needed to secure such release, (ii) query over any need to apologise for P’s manner/attitude when there was no evidence of bad attitude/manners in the first place, and (iii) strong inference that the story of Mao was made up.

100.  Se reiterated it made no sense for Lui as responsible officer (and perhaps also Li as compliance officer who verified the signature on the SW Instruction) to risk police criminal investigation and SFC disciplinary action with possible penalties, loss of career and even imprisonment to pass the physical scrips of the Share Certificates to a third party when D/Lui had nothing to gain from this (and there was no allegation that they did). But the Master Order effectively decided D/Lui acted without authority when not even the SFC and Police made any pronouncement on this.

101.  On the other hand, Hui claimed Master Kot made the Master Order after full consideration of the evidence/submissions, and there was no merit in the Appeal as D only repeated arguments in the submissions of D’s Counsel for the Master Hearing. Hui referred to the irreducible cores in paragraph 57 above, and said D had no answer to the ImmD Record that showed P left Hong Kong on 13 July 2015 and returned on 16 September 2015, so P was not in Hong Kong on 24 August 2015 when the SW Instruction was mailed, and on 25 August 2015 when D delivered the Shares/Certs to someone purporting to be P in Hong Kong. D’s only answer was to suggest P entered Hong Kong illegally, but Hui said such speculative but serious allegation was without basis and bound to be rejected:

(a)	P had no reason to enter and leave Hong Kong by illegal means;
(b)	cogent evidence was required to discharge the onerous burden to prove such serious allegation;
(c)	in the context of an Order 14 application, the burden fell on D to condescend upon the particulars of its defence assertions with cogent evidence, but there were no particulars/evidence as to how P entered/ left Hong Kong by illegal means.

P claimed D merely tried to delay the inevitable and offered no explanation why Lui suddenly/coincidentally left D’s employ which made it unclear whether Lui would be willing and/or able to attend trial if there was one.

IX.  LEAVE SUMMONS

102.  The Leave Summons sought leave to adduce the New Evidence for the purpose of the Appeal. The Se 2^nd/3^rd Affs explained how the Draft Zhang Aff came about.

103.  The Master Order was made on 28 November 2018. In view of the draconian consequence of a winding petition against D that might follow from P’s statutory demand issued on the same day as the Master Order, Se desperately went through D’s files/records relating to P again to see if, by any chance, there would be any information that might be relevant. One of the documents Se reviewed was the Agreement P signed when he opened the Account in April 2015. Se claimed he understood from Lui that the focus at the time was on P’s place of residence for the Security Summons, and it did not occur to D the Agreement would have particular relevance to the withdrawal of the Shares being the focus of the O14 Summons.

104.  But when Se reviewed the Agreement he noted the Remark, ie “Introduced by: 770026”. Se explained “770026” was a client code, and the Remark meant P was referred to D by another client. Se then found out it was Zhang[20] who introduced P to D. Se did not know Zhang, but Lui (who knew Zhang) recalled Zhang was present at ListCo’s listing ceremony. Although at the time it still seemed rather unlikely that Zhang would have anything to do with matters in the the present action, Se asked Lui to reach out to Zhang, and Lui (despite having left D) agreed to arrange a meeting with Zhang. Lui later reported to Se when he contacted Zhang,[21] Zhang was surprised to hear that P sued D for loss of the Shares/Certs because Zhang knew as a fact P had sold the Shares and Zhang had paid for them. Zhang agreed to have a meeting with D to further discuss the matter, and at this meeting (see paragraph below) Se understood Zhang did not buy the Shares himself but introduced a third party to buy the Shares from P, but Zhang paid for the Shares on behalf of such third party.

105.  Se explained that on 7 December 2018 he together with DSols’ Paul Yau (“Yau”) met Zhang at DSols’ offices, which was the 1^st time Se met Zhang. At such meeting, Zhang told Se/Yau that P sold the Shares to a company called Victory Spring Ventures Limited (“Victory Spring”) that was controlled by one Ye Zhichun (“Ye”),[22] and Zhang on behalf of Victory Spring paid P HK$11,947,000 for the Shares. Zhang also passed copies of the following documents to D:

(a)	a set of Bought and Sold Notes dated/stamped on 11 September 2015 for transfer of 17,360,000 ListCo shares at a consideration of HK$18,922,400 to Victory Spring with P’s signature as “Transferor” (“B&S Notes”);
(b)	cheque no 4xxxx5 dated 29 December 2015 drawn on Zhang’s account with The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in favour of P for the sum of HK$11,947,000 (“Cheque”);
(c)	extract of HSBC Premier Banking Account Statement for account no. 6xx-xxx-xx5 being the same account number shown on the Cheque with an entry on such statement for withdrawal of HK$11,947,000 for the Cheque;
(d)	an official receipt dated 11 September 2015 issued by Tricor to Victory Spring for payment of HK$5 being registration fee for registering the Memorandum & Articles of Association of Victory Spring.

106.  The Se 2^nd Aff noted that the number marked on the B&S Notes and on the back of the Cheque was the permit number of P’s Permit (a copy of which was annexed to the Agreement), which clearly showed the payee of the Cheque was P who presented the Cheque for payment (irrespective whether it was Zhang or the bank teller who wrote such number on the back of the Cheque). In the Se 3^rd Aff, it was said the New Evidence showed inter alia that (a) pursuant to the B&S Notes P sold all the Shares to Victory Spring on/about 11 September 2015, ie within a month after (on D’s case) P collected the physical scrips of the Share Certificates from D, and (b) P was paid HK$11,947,000 for the sale of the Shares. Se noted that the number of ListCo shares on the B&S Notes exactly matched the number of the Shares, and the stamping date of the B&S Notes matched Tricor’s letter dated 19 July 2018 to P that stated the Shares were transferred out on 11 September 2015 (see paragraph 73 above), which Se claimed could not have been mere coincidence.

107.  Se claimed the New Evidence directly contradicted P’s allegations in paragraphs 16-17 of the P 2^nd Aff that he did not know to whom the Shares had been transferred (ie P must have known when he signed the B&S Notes), which would explain why so far P had not offered any real explanation for his inaction from 25 August 2015 up to his alleged discovery of the “missing” Shares in December 2016, and why it took him another 9 months to report the matter to the Police.

108.  Se said that after the meeting on 7 December 2018, he left it to DSols to follow up with Zhang to prepare an affirmation of his evidence. But such effort was affected by D’s need to seek stay of execution of the Master Order and D’s decision to engage new solicitors to act for them in the Appeal, so it was not until 15 January 2018 that D was able to arrange for Zhang to come to Hong Kong again to meet with the new DSols to discuss the matter in more detail. Due to time constraints, D had not yet been able to arrange for Zhang to affirm the Draft Zhang Aff, but endeavored to do so by the time of the Appeal Hearing.

109.  Se claimed that even with reasonable diligence the New Evidence (which came to light after Se reviewed the Agreement and then identified/contacted Zhang as explained above) could not have been obtained for use at the Master Hearing on 28 November 2018. Se reminded that paragraph 18 of the Lui 2^nd Aff explained that D as a brokerage did not have standing to make inquiries with Tricor/HKSCC about the Shares because D was not the registered shareholder, which view was confirmed by correspondence from both Tricor and HKSCCN that refused P’s requests for information or for replacement of the Share Certificates on the basis that P was neither a CCASS Participant nor registered shareholder of the Shares, so D could not have known what happened to the Shares/Certs. D would not have been notified of the sale of the Shares, and so would not have known the New Evidence would end up in Zhang’s hands. D did not know and no one told D the Shares were transferred to Victory Spring.

110.  Se was advised that the New Evidence would have an important influence on the result of the Appeal as it would show that irrespective whether or not P collected the physical scrips of the Share Certificates on 25 August 2015 at the Handover Site (though Se claimed the New Evidence suggested P or someone who looked very much like him and possessed his Travel Documents did collect the physical scrips of the Shares Certificates that day), P was able to and did subsequently sell the Shares and receive payment for the sale. In any event, P did not have to be in Hong Kong to sign the B&S Notes. But even if P were to allege P’s signature thereon was false/forged, this would only add reason for the present action to proceed to trial. Se claimed D should be allowed to trace the crossed Cheque to confirm the identity of the payee. Se urged that leave should be granted for D to adduce the New Evidence from Zhang who was an independent third party and whose evidence was supported by documents and hence prima facie credible in support of the Appeal.

X.  DRAFT ZHANG AFF

111.  The Draft Zhang Aff confirmed that Zhang learned about the present action and Appeal from Se. Zhang said “我大約於2009年於中國內地深圳成立了一間投資公司, 主要從事投資業務, 包括房地產, 實業及香港上市公司股票。我公司大約有200名員工”. He became D’s client in April 2015 and opened a “證金戶口” with D pursuant to a Cash/Margin Clients Agreement. Zhang all along used his securities account to buy and sell the ListCo shares because D was the underwriter and joint lead manager for the initial public offering of ListCo in April 2015. Zhang explained his relationship with P as follows:

“6. 我與原告人[P]是湖北恩施的同鄉，但是我不是直接認識[P]的。大約於2015年，湖北恩施商會(Hubei Enshi Chamber of Commerce in Guangdong)舉行了一場商會，我當時是該會的副會長。[P]來到我公司進行考察。因為我公司生意龐大，[P]不斷送我禮物，希望與我打好關係。但是，我都沒有直接與[P]接觸，他都是經我的助理向我轉達訊息。

7. 我的助理告訴我，[P]當時多番表示也想像我一樣投資香港上市公司股票。我於是叫我的助理向他介紹[D]。我得知[P]也像我一樣用每股港元$0.20認購了[ListCo]的股份。

8.         我與[P]於[ListCo]上市當天，即2015年4月30日，見過一次面。現向本人出示及展示標明為證物「ZC-3」的是上市當天所拍的照片。”

112.  The Draft Zhang Aff went on to explain why Zhang approached P to purchase Listco shares as follows:

“9. 大約於2015年8月，我的助理告訴我[P]有意放售他手上的17,360,000股[ListCo]股份，但一直都沒有找到買家。在那時段，[ListCo]在市場上的交投太少，[P]也無法在市場上售出股票。及後，我在香港的生意合作伙伴及好朋友莊惠滿（下稱「莊先生」）替[P]找到[Ye]。[Ye]同意購買[P]的[ListCo]股份。

10. 現向本人出示及展示標明為證物「ZC-4」的是[B&S Notes]的副本。[B&S Notes]中顯示買家是[Victory Spring]。以我所知，這是[Ye]的公司。現向本人出示及展示標明為證物「ZC-5」的是Victory Spring作為[ListCo]大股東的權益披露通知，當中顯示[Ye]為Victory Spring的控制股東。

11. 後來，應莊先生的要求，我於2015年12月29日我代[Ye]支付了港幣11,947,000元給[P]，作為Victory Spring購買[P]的[ListCo]股份的代價。該款項是以支票支付給[P]。現向本人出示及展示標明為證物「ZC-6」的是[Cheque]的副本。支票號碼是486225；收款人是[P]。現向本人出示及展示標明為證物「ZC-7」的是我的[HSBC]戶口的月結單，顯示出上述號碼4xxxx5為的支票已經被兌現。

12. 以我所知，[B&S Notes]上所寫的金額是以[ListCo]當時每股股價（港幣1.09元）計算的金額，但雙方同意以一個較低價格交易。

13. 此外，現向本人出示及展示標明為證物「ZC-8」的是卓佳證券登記有限公司於2015年9月11日所發出的一張正式收據的副本，確認收到 Victory Spring因成為[ListCo]股東而需登記公司章程所需的費用。

14. 那次交易後，我與[P]沒有討論過任何有關交易及[ListCo]的情況。”

113.  Zhang in the Draft Zhang Aff said that in early December 2018, his assistant received a telephone call from Lui who “表示希望向我了解一些有關[P]的事情。其後[Lui]告訴我本案的情況, 我聽後感到十分驚訝,因為如上述於2015年的時候, [P]已把他的17,360,000[ListCo]股票向售予[Ye] / Victory Spring, 我也為此代[Ye]支付了港幣11,947,000元”. Zhang said D “表示希望我可以提供手上的資料並就此事作證”, so Zhang made the Draft Zhang Aff.

XI.  LEGAL PRINCIPLES

114.  Appeal against master’s decision  I have set out the relevant principles in paragraph 51 of my judgment in Ng Ting Kwok  v Ng On Kwok & anor,[23] which I adopt but do not repeat here.

115.  Summary judgment: general principles  I have also set out the relevant principles in paragraphs 52-54 of my judgment in Ng Ting Kwok, which I also adopt but do not repeat here. Mr Chan SC helpfully referred me to 周軍英 v 樊少皇 & anor,[24] but the principles canvassed by DHCJ Keith Yeung are trite and no different from that set out in Ng Ting Kwok.

116.  Summary judgment: Miles v Bull  Sometimes there are features in the case to show there is some other reason for trial under Order 14 rule 3 of the Rules of the High Court (“RHC”). As explained in Hong Kong Civil Procedure 2020,[25]

“It sometimes happens that the defendant may not be able to pin-point any precise ‘issue or question which ought to be tried,’ nevertheless it is apparent that for some other reason there ought to be a trial (see, per Megarry J. in Miles v. Bull [1969] 1 Q.B. 258), ...... that the defendant reasonably and properly requires to interrogate or cross-examine the plaintiff ...... Whenever there are circumstances which require close investigation, there ought to be a trial and judgment should not be given under O.14 ......

......

...... Where it is contended that there are circumstances which require close investigation, such circumstances must be relevant to an issue in dispute: Nice Plan Development Ltd. v. Ke Jun Xiang (unrep., CACV 259/2014, [2015] H.K.E.C. 1222), [19].

Whilst the Court of Appeal in Nice Plan (supra) at [25] said that a defendant relying on ‘some other reason for trial’ is not absolved from the duty to show that his case and his defence are credible, it does not appear that the Court was suggesting that a defendant who relies on ‘some other reason for trial’ to resist summary judgment nevertheless has to show a triable issue in addition; but rather, that a defendant cannot resist summary judgment by claiming that there are circumstances requiring investigation if ultimately he simply does not have any credible basis to resist the claim.

On the other hand, lack of evidence as to a possible defence does not justify granting leave when there is nothing devious or artificial in a claim even though such evidence would lie within the power of the party seeking summary judgment ......”

117.  This echoed paragraph 15 of Mr Chan SC’s written submissions that a trial will be warranted in case where “there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct”.

118.  Summary judgment: fraud exception  Order 14 rule 1(2)(b) of the RHC provides that “...... this rule applies to every action begun by writ other than ...... (b) an action which includes a claim by the plaintiff based on an allegation of fraud”. Hong Kong Civil Procedure 2020 sets out the relevant principles as follows:[26]

“In respect of the scope of the fraud exception, in Pacific Electric Wire & Cable Co Ltd b. Harmutty Ltd [2009] 3 H.K.L.R.D. 94, the Court of Appeal held that O.14, r.1(2)(b) applied to exclude summary judgment proceedings where one claim was based on an allegation of fraud even though there might be another claim which was not. It also held ...... that the rule was not confined to excluding actions in which there was a claim for damages for fraud; what was excluded was any action where there was a claim in respect of which the underlying allegations on which the claim was based constituted an allegation of fraud. In that case, although the claims made were framed in respect of constructive trust, resulting trust and money had and received, the claims were based on allegations of fraud which included deliberate dishonesty. Furthermore, allegations of the concealment of facts from the plaintiff when there was a duty to disclose, and the connivance at the preparation of false financial statements and accounts, were clear allegations of fraud for the purposes of the rule.”

119.  Mr Lam referred me to Universal Capital Bank v Hongkong Heya Co Ltd[27] in which DHCJ Burrell held that the underlying reason for the fraud exception was to prevent summary judgment in a case where serious allegations of dishonesty were made or implied against a party so that such party might have an opportunity to answer such allegations. The learned judge went on to say at paragraph 18 on pages 762-763 as follows:

“(4) Whilst it is true that the Hong Kong courts have adopted a fairly wide and liberal interpretation of ‘fraud’ when considering the application of O.14, rule 1(2)(b), it should not be applied automatically merely because there are allegations of fraud or dishonesty in the bigger picture. The question remains, does the underlying allegation of fraud (which does exist here) on which the claim is based (which it is not in this case) constitute an allegation of fraud against the defendant? It seems that the answer to this question in this case is in the negative.

(5) To say otherwise would take away from a plaintiff an opportunity to utilise the O.14 procedure in cases where it might be clearly merited.”

120.  Yuen JA in Zimmer Sweden AB v KPN Hong Kong Ltd summarised the principles as follows:

“18. In my view, having regard to the cases discussed above, the following points are clear.

(1) The court should determine whether ‘the fraud exception’ applies at the time when the application for summary judgment is heard. Therefore the court should not be restricted to a consideration of the statement of claim only, but should examine all relevant materials existing at the time of the hearing, including subsequent pleadings and the affidavits. (It would be noted that in Pacific Electric Wire, the court even took into account the skeleton argument of the plaintiff’s counsel at first instance. With respect I tend to the view that given the nature of skeleton submissions, they should be considered only where they serve to clarify an ambiguity in the plaintiff’s case).

(2) Having regard to all the relevant materials, the question to be asked by the court is ‘does this action include a claim for which an allegation of fraud would have to be made by the plaintiff in order to establish or maintain that claim?’¹ If the answer is affirmative, ‘the fraud exception’ is engaged and the court has no jurisdiction to hear the summary judgment application, even if the plaintiff seeks to hive off that claim from another claim (eg for dishonoured cheque) for which summary judgment would have been available. That consequence follows from the wording of ‘the fraud exception’ (Pacific Electric Wire at [19]).

(3) In considering whether an allegation of fraud would have to be made to establish or maintain a claim, one must look at the substance, and not the mere form, of the plaintiff’s case. If all the factual constituents of fraud are alleged and relied upon, it does not matter whether the actual word ‘fraud’ has or has not been used (Newton p.1301).

(4) The court must consider whether those factual constituents of fraud are relied upon in order to establish or maintain a claim. In Newton, the court accepted that the factual constituents of a Derry v Peek fraud had been set out in the pleadings. However in order to establish the plaintiff’s claims of breach of contract, breach of fiduciary duty and negligence, it did not need to make any allegations of fraud. On the facts of that case, the breach of contract, breach of fiduciary duty and negligence would still be established, even if the defendant had been completely honest, and was only mistaken (p.1302). It would appear from the report that the defendant had not pleaded a defence which the plaintiff needed to reply to by alleging fraud on the part of the defendant. This may be contrasted with A-1 discussed below.

(5) It may be that originally a claim (eg breach of fiduciary duty) may be established without the plaintiff having to make an allegation of fraud (as in Newton). But the nature of the defence (whether disclosed in a pleading or an affidavit) may be such that in rebuttal (whether in a Reply or in an affidavit in reply), the plaintiff would have to allege fraud, in which case, ‘the fraud exception’ would be engaged. So for example, in A-1 the defence was that there was no breach of fiduciary duty because the receipt of money was pursuant to a declaration of dividend. In reply to this defence, the plaintiff alleged that the declaration was an ex post facto fabrication. Consequently, by the time of the hearing of the summary judgment application, the plaintiff would have to make out an allegation of fraud by the defendant in order to maintain the claim for breach of fiduciary duty.

(6) Finally, as to what is an allegation of fraud for the purpose of ‘the fraud exception’, this court is bound by the judgment in Pacific Electric Wire to adopt the wide/liberal meaning.  The rationale for adopting a wide meaning had been suggested by Kaplan J in Skink and adopted by this court in the Pacific Electric Wire judgment. That judgment cannot be said to be plainly wrong.  Further if the narrow meaning is adopted, the anomaly observed in Newton would arise, viz summary judgment would not be available for only one type of dishonest conduct, but available for all other types of dishonest conduct.  To conclude, ‘the fraud exception’ would be engaged where what is alleged is an intentional or reckless dishonest act (or omission) done with the purpose of deceiving.”

121.  From the above exposition by the Court of Appeal. Chow J in 張才奎所託管中國山水投資有限公司股份相關員工 v 張才奎 & anor noted 3 points as follows:[28]

“(1) In considering whether the fraud exception applies, the court is not restricted to a consideration of the statement of claim only, but should examine all relevant materials existing at the time of the hearing, including subsequent pleadings and affidavits. If pleadings and affidavits can be considered, I can see no reason in principle why allegations raised in letters before action cannot also be considered.

(2) The court should consider the substance, and not the mere form, of the plaintiff’s case in deciding whether the fraud exception applies.

(3) For this purpose, ‘fraud’ means an intentional or reckless dishonest act (or omission) done with the purpose of deceiving.”

122.  This court is bound by Pacific Electric Wire & Cable Co Ltd v Harmutty Ltd[29] and Zimmer Sweden AB, and must similarly adopt the wide/liberal meaning of “an allegation of fraud” in the present case. As Lok J in Zhongtai International Wealth Management Limited v Royal Moon International Company Limited & ors explained, “...... it is clear from the Court of Appeal’s judgment in Zimmer Sweden AB v KPN Hong Kong Limited that the court is required to consider the substance, and not the mere form, of the plaintiff’s case in deciding whether the fraud exception applies”.[30] 

123.  When studying Zhongtai International Wealth Management Limited, my attention was drawn to Arboit (Liquidator) v Hu Yan.[31] In that case, the company which carried on foreign exchange business was wound up. The 1^st defendant and her mother were the sole directors/shareholders, and the 2^nd defendant (ie the 1^st defendant’s brother) also worked in the company. The company contracted with X to exchange a substantial amount of Japanese yen for Singaporean dollars. The defendants collected the Japanese yen and signed receipt on behalf of the company, but the company only paid X the equivalent of 56% of the exchanged sum. X obtained judgment against the company for the outstanding amount, and the company was wound up on X’s petition. The liquidators commenced an action against the defendants in conversion, claiming that the balance of the exchanged sum had not been accounted for in the company’s books/accounts, and the defendants misappropriated such sum or converted it to their own use.

124.  DHCJ To at pages 784-785 held that the “fraud exception” did not apply as this was a simple case of conversion in which the defendants failed to hand over the sum to the company. The liquidators’ cause of action was a tort of strict liability, and they did not allege fraud or dishonesty, not even in the broad sense of the words. The defence was just a denial alleging that the sum had been handed over to the company and not one which the liquidators would have to rebut by pleading fraud.

XII.  APPEAL / O14 SUMMONS

125.  In this Part, I will deal with the Appeal on the existing evidence without reference to the New Evidence. Mr Chan SC submitted that even without the New Evidence, the fraud exception was engaged and in any event there were triable issue and arguable defence.

(a)  P’s pleaded claim

126.  Order 14 rule 1(1) of the RHC provides as follows:

“Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has given notice of intention to defend the action, the plaintiff may, on the ground that the defendant has no defence to a claim included in the writ, or to a particular part of such a claim, or has no defence to such a claim or part except as to the amount of damages claimed, apply to the Court for judgment against that defendant.” (my emphasis)

This makes clear that an application for summary judgment must be based on the pleaded claim. Hong Kong Civil Procedure 2020 explained that “[summary] judgment will only be granted on the claims set out, and facts pleaded in the statement of claim ......”[32] It is trite that in an application for summary judgment, the statement of claim must be good and complete in itself.[33] Any defect or omission in the statement of claim cannot be corrected or supplemented by the plaintiff’s affidavit,[34] and had to be amended before one can seek summary judgment.[35]

127.  It is also a necessary condition for the grant of summary judgment that the supporting affidavit must verify the facts on which the deponent believes that there is no defence to the pleaded claim or, where appropriate, no defence except as to the amount of any damages claimed (see Order 14 rule 2(1) of the RHC). So if a plaintiff seeks summary judgment on a basis different from his pleaded case (ie on a basis that has not been pleaded), mere verification of the facts pleaded in the plaintiff’s pleadings do not serve the purpose of verifying the facts on which the summary judgment is based, and consequently such mandatory requirement under Order 14 rule 2(1) of the RHC is not met.

128.  Following on such legal principles, Mr Chan SC submitted that starting point must be P’s claim as pleaded in the SoC. Mr Chan SC quite fairly would not say P had no cause of action at all, but he emphasised the need to ascertain precisely P’s pleaded case in the SoC because if P was unable to make out such pleaded claim or if there was arguable/triable basis to so suggest, then the O14 Summons ought to be dismissed or at least leave to defend ought to be granted.

129.  As seen in paragraph 16 above, P pleaded he was the “legal and beneficial owner” of 2 things: (a) a particular block of 17,360,000 ListCo shares (ie the Shares “corresponding” to the Share Certificates in (b) below), and (b) ListCo’s share certificates nos 1565-1572, 1973 and 2142-2169 (ie the Share Certificates “corresponding” to the Shares in (a) above). By so defining the Shares Certificates in paragraph 2 of the SoC as ListCo’s share certificates nos 1565-1572, 1983 and 2142-2169, P was referring to physical scrips of the Share Certificates D collected from CCASS and delivered to P (according to D) or someone else (according to P) on 25 August 2015. By so defining the Shares in paragraph 2 of the SoC as ListCo shares linked to such specific Share Certificates, P was referring to the particular block of Shares corresponding to such numbered Share Certificates.

130.  This emphasis on legal and beneficial ownership over (a) such particular block of 17,360,000 Shares corresponding the numbered Share Certificates and (b) such Share Certificates nos 1565-1572, 1983 and 2142-2169 linked to the Shares was a running theme throughout the SoC as explained in paragraphs 17-21 above. P’s pleaded case on breach of the Agreement/Duties (vis-à-vis the Shares/Certs) and on wrongful conversion (vis-à-vis the Share Certificates) was predicated on D’s obligation to deliver/transfer to him such particular block of Shares and the physical scrips of the corresponding Share Certificates. The Damages/Replacement Duties and Bailee Duties (see footnote 1(a)-(b) above) and claim for loss of the Shares (ie the particular block of Shares corresponding to the aforesaid numbered Share Certificates), Share Certificates (ie the numbered Share Certificates linked to the aforesaid Shares) and “proprietary rights” deriving from and/or arising out of the Shares all spoke to P’s reliance on his legal and beneficial ownership of such particularly identified block of Shares and corresponding Share Certificates, and grounded the primary relief sought in the SoC for delivery/transfer to him of the particular Shares/Certs. It was only if P were unable to establish his claim for such particular Shares/Certs that he sought the alternative relief for delivery/transfer of the Identical Shares/Certs/Rights. Indeed, Mr Lam’s submissions encapsulated P’s case by saying P suffered loss and damages because “the beneficial and legal ownership of the Shares have been passed to a third party” (see paragraph 21 above).

131.  On such understanding of P’s claim in the SoC, I next turn to the true nature of company shares and shares certificates before returning to the question whether P was the legal and beneficial owner of the particular Shares/Certs as pleaded and defined above.

132.  In respect of shares, Lord Scott of Foscote NPJ in Cheung Pui Yuen v Worldcup Investments Inc[36] explained as follows:

“13. Shares in a company are legal choses in action. They are not chattels. ......the rights and obligations of the owners of shares in a company, the owners of the legal choses in action that the shares constitute, depend on the articles of association of the company and the terms on which the shares in question were issued – provided, of course, that the terms of issue were authorized by the articles. ...... Registered shares are transferable by an instrument of transfer leading to the registration of the transferee in the books of the company as the owner of the shares transferred.” (pages 38-39)

“26. ...... A transfer of shares in a company may be complete as between the transferor and transferee but incomplete as between transferee and the company. In such a case the equitable title to the shares may be vested in the transferee, but with the legal title to the shares remaining vested in the transferor. The vesting in a transferee of the legal title to shares in a company will depend upon the requirements for transfer imposed by the company’s articles supplemented by the terms on which the shares were issued and, if necessary, by any relevant provisions of the law governing the company ......” (page 46)

133.  In respect of share certificates, Lord Scott of Foscote NPJ in Cheung Pui Yuen explained as follows:

“13. ...... Share certificates, the pieces of paper issued by the company which record the issue of the shares to which they relate, are, ...... chattels. ...... Share certifciates are chattels but their role in relation to the shares themselves is evidential (see Longman v Bath Electric Tramways Ltd [1905] 1 Ch 646 at pp.659, 660 and 665, 666). In Longman Romer LJ said at p.665, uncontroversially I would have thought, that ‘ ... a certificate of shares is not a negotiable instrument ...’. He was not speaking of bearer shares but of registered shares ......” (pages 38-39)

“28. ...... A transfer of the legal title to chattels requires, it is common ground, an act of, or equivalent to, delivery of the chattels to the transferee coupled with the requisite intention on the part of the transferor to transfer ownership. ...... Share certificates, the pieces of paper evidencing the issue of and title to the shares, are chattels. They may be sold or pledged or made the subject of a gift as may be any other chattels. ...... But an effective gift, or sale or pledge, of the share certificates could not, in my opinion, by itself vest in the transferee the legal title to the shares themselves. The transfer would entitle the transferee, as against the transferor, to the benefit of the transaction, whatever that might be, and to retain the share certificates accordingly, but in order to perfect the legal title of the transferee to the shares notice to the company of the transfer would, in principle, be necessary. The rights of a shareholder as against the company depend upon the articles of the company but, subject to that, would be expected to include the right to notice of company meetings, the right to vote at company meetings, the right to receive a dividend if a dividend were declared, the right to participate in any capital distribution, and so on. None of these rights could be enforced by a transferee against the company unless the legal title to the shares had vested in the transferee, or, perhaps, unless an order giving effect to the rights were made in an action in which the legal owner was a party.” (page 47)

134.  In the absence of any evidence as to ListCo’s situs and/or the articles of association and terms on which ListCo’s ordinary shares were issued, I refer to section 112(3) of the Companies Ordinance Cap 622[37] which provides that a person becomes a member (shareholder) of a company when he so agrees and his name is entered in the company’s register of members. Thus, a legal owner of shares is a person in whose name the shares were registered with the company. If a person is not a registered shareholder, he is not the legal owner irrespective whether he has any other interests (including equitable/beneficial interests) in the shares.

135.  By its letter dated 13 June 2018, Tricor (ie ListCo’s Share Registrar) confirmed P was never a registered shareholder of ListCo according to ListCo’s register of members up to 13 June 2018 (see paragraph 67(c) above), so plainly P was never registered with Tricor as the shareholder of the particular block of 17,360,000 Shares in ListCo as pleaded and defined in paragraph 2 of the SoC. I cannot see how P could be said to be the legal owner of the Shares.

136.  The indisputable evidence was that P deposited HK$4,000,000 into the Account and instructed D to buy 18,800,000 ListCo shares (which D did on behalf of P) through the Account on 30 April 2015 (see paragraph 6 above). Such purchase was made at the time of ListCo’s listing (see paragraph 85 above in which Lui said the listing dinner was at the end of April 2015), which (bearing in mind D was the underwriter and joint lead manager for ListCo’s initial public offering) suggested the purchased 18,800,000 ListCo shares might have been allotted at the initial public offering, and which in turn might explain why (a) D (presumably on P’s instructions) as broker and Participant directly deposited the 18,800,000 ListCo shares purchased via the Account in CCASS (which did not recognise any rights/interests of any person other than a CCASS Participant of which P was not – see paragraph 68(b) above) under the name of HKSCCN (which electronically held eligible listed shares as nominee) without any change of shareholder’s name to P, and (b) the 18,800,000 ListCo shares so purchased/allotted were never registered in P’s name (as confirmed by Tricor – see paragraph 67(c) above). There was no evidence that the physical scrips for the specific Share Certificates nos 1565-1572, 1973 and 2144-2160 were ever issued before 25 August 2015, and even if such physical scrips had been issued, they certainly could not have been issued in P’s name (as he was never a registered shareholder). There was also no evidence that such physical scrips were delivered to D or delivered to P (and then onward delivered to D as his broker) for custody on behalf of P pending future dealings. In my view, there was arguable or triable issue as to whether P was the legal owner of the specific Share Certificates nos 1565-1572, 1983 and 2142-2169 pleaded/defined in paragraph 2 of the SoC prior to 24-25 August 2015.

137.  On the affirmation evidence before the court, the particular block of 17,360,000 ListCo Shares corresponding to the numbered Shares Certificates nos 1565-1572, 1983 and 2142-2169 pleaded/defined in paragraph 2 of the SoC first surfaced on 24 August 2015 when D input withdrawal instructions into CCASS and generated the SW Receipt that mentioned such 17,360,000 Shares and such numbered Share Certificates. But it was a fundamental premise of P’s case that he never gave any instructions to D (whether by way of the SW Instruction on 24 August 2015 or otherwise) to withdraw the Shares/Certs and to deliver up the same to him, and P was pains to emphasise in his pleadings/affirmations that D withdrew from CCASS the particular block of 17,360,000 Shares “corresponding” to the specifically numbered Share Certificates nos 1565-1572, 1973 and 2144-2160 and gave them to a third party without his knowledge/instructions. So P could not say (and certainly it was not part of P’s case) that D so acted on his instructions which crystallised the particular Shares/Certs and made him the legal and beneficial owner of (a) the designated block of 17,360,000 Shares corresponding to the particular Share Certificates nos 1565-1572, 1973 and 2144-2160 and (b) the physical scrips of such numbered Share Certificates that were withdrawn by D from CCASS on 25 August 2015. In my view, there was arguable force in Mr Chan SC’s submissions that “[on] P’s evidence and P’s denial of having signed the [SW Instruction] on 24.8.2015, P is not entitled to any proprietary interest in the Shares and the Share Certificates claimed in the [SoC]”.

138.  Mr Chan SC fairly accepted P might well have an alternative cause of action on the basis that he purchased 18,800,000 ordinary shares of ListCo via the Account which were placed with D for custody (and for such purpose D kept them in CCASS), that D failed to deliver up 17,360,000 ListCo shares remaining in the Account upon demand, and that D ought to account to him 17,360,000 ListCo shares missing from his Account. Such cause of action rested on 17,360,000 non-specific ListCo shares bought via and disappeared from the Account without reliance on any particular block of shares and/or particular share certificates. But I agree with Mr Chan SC that I need not consider this alternative basis because, quite simply, it was not P’s pleaded claim. Rather, P in his pleadings squarely relied on his legal and beneficial ownership of (a) the particular block of 17,360,000 Shares corresponding to the numbered Share Certificates in (b) below, and (b) the particular Share Certificates nos 1565-1572, 1973 and 2144-2160 linked to such block of Shares. And on the above analysis, there was triable issue as to whether P was such legal and beneficial owner.

139.  But Mr Lam asked me to look at D’s Amended Defence which, he submitted, admitted P’s beneficial ownership of the Shares, and he asked me to note there was no dispute (a) the Shares were in the Account, (b) D owed P the Duties (and on P’s case D also owed P the Damages/Replacement Duties and Bailee Duties), and (c) P was entitled to the Shares in the Account and to the Share Certificates to be drawn from the Account, so Mr Chan SC’s argument that the Shares/Certs did not belong to P was not understood. Mr Lam submitted D withdrew the Shares/Certs from CCASS depository on 25 August 2015, and upon such withdrawal P no longer had any listed stock in the Account, so P’s loss must have been the Shares/Certs that necessarily came from the Account.

140.  In my view, Mr Lam’s submissions were tantamount to saying that because the 17,360,000 ListCo shares that remained in P’s Account went missing due to D’s breach of the Agreement/Duties, P must have suffered loss of the Shares/Certs that D withdrew from CCASS on 25 August 2015 (albeit not on P’s instructions), so the Shares/Certs must have been legally and beneficially owned by P. As seen in paragraph 138 above, Mr Chan SC quite fairly had no quarrel that it might be possible for P to frame a cause of action for account of loss of non-specific ListCo shares that disappeared from the Account, but this was arguably quite different from the cause of action presently pleaded in the SoC,[38] which after all must be the starting point for the O14 Summons.

141.  Mr Lam had no answer to Mr Chan SC’s contention that P was never the legal owner or registered shareholder of the Shares. I have also explained in paragraph 136 above why it was arguable/triable that P might not be the legal owner of the Share Certificates. Turning to the matter of beneficial ownership, (a) there was no evidence P ever delivered the physical scrips of the Share Certificates to D for custody (see paragraph 136 above), (b) a particular block of ListCo Shares electronically kept in CCASS corresponding specifically to the numbered Share Certificates was P’s since CCASS/HKSSCN did not recognise such non-Participant interests (see paragraph 68(b) above), and (c) P never asked for withdrawal of such particular block of the Shares. In my view and explained above, there was arguable/triable basis to say P had not shown he was the beneficial owner of the particular Shares/Certs as pleaded/defined in paragraph 2 of the SoC.

142.  The position is clearer still if one viewed the matter from another perspective. Mr Lam’s essential complaint was that there should have been 17,360,000 ListCo shares in the Account which had disappeared because of D’s breach of Agreement/Duties, but such complaint would not necessarily have given rise to a claim for delivery/transfer of specific Shares, specific Share Certificates and proprietary rights in such specific Shares in contra-distinction to a claim based on a different cause of action against D as broker for account and damages.

143.  Turning to Mr Lam’s suggestion that D made certain admissions in its pleadings, upon careful scrutiny of the Amended Defence, I am not persuaded such complaint would aid P’s contentions at the Order 14 stage. The Amended Defence only admitted “the descriptions of the Account, Shares and Share Certificates” but not the factual averments in the paragraph 2 of the SoC.[39] Although D admitted P was “the registered shareholder ...... of [ListCo]”, it transpired both parties were mistaken as P was never such registered shareholder as now confirmed by Tricor. D admitted P was the “...... beneficial owner of [ListCo]”[40] (presumably due to his purchase of 17,360,000 ListCo shares through D as broker), but D carefully did not agree that P was the beneficial owner of any particular block of Shares corresponding specifically to the numbered Share Certificates nos 1565-1572, 1973 and 2144-2160 as pleaded/defined in paragraph 2 of the SoC.

144.  It was further explained in the Amended Defence that D (presumably as a Participant) had control over all listed shares of its clients electronically placed in CCASS under HKSCCN’s name (which echoed HKSCC’s confirmation that it did not recognise the rights/interests of any person other than a CCASS Participant – see paragraph 68(b) above, and which suggested P would not have been able to point to any particular block of Shares held in CCASS corresponding to specific numbered shares certificates as beneficially belonging to him), but pursuant to the Agreement and under the Account D recognised P was the “beneficial owner of [ListCo]” for 17,360,000 ordinary ListCo shares which D would have to account to P upon receipt of P’s instructions to deal with, withdraw or transfer such 17,360,000 ListCo shares.[41] It arguably followed from such averments that it was D’s case that as a result of D acting on P’s instructions to withdraw 17,360,000 ListCo shares from CCASS (ie the Shares), and P consequently receiving the physical scrips of  specifically numbered Share Certificates for such particular block of 17,360,000 Shares from CCASS that P’s ownership of such particular block of Shares became crystallised and P became the beneficial owner of the Shares by virtue of his instructions to D to withdraw 17,360,000 ListCo shares and the delivery/transfer to him the SW Receipt and the corresponding physical scrips, which he would have been entitled to transfer into his name via the Transfer Form to be submitted to Tricor. This also explained why the pleas in paragraph 3(e)-(f) of the Amended Defence were predicated on instructions from P to D to deal with, withdraw and/or transfer the shares to P. It was also emphasised in paragraph 3(g) of the Amended Defence that whilst D operated a stock trading Account through which P could buy/sell the ListCo shares, D did not have the physical scrips “until each time as a share withdrawal request is made by [P]”.

145.  But P’s case (not D’s case) was that he never gave instructions to D to deal with, withdraw or transfer the 17,360,000 ListCo shares in his Account whether in August 2015 or at all, so there was at least credible argument that P could not yet point to any particular block of 17,360,000 ListCo shares kept in CCASS under HKSCCN’s name as the specific Shares with corresponding numbered Share Certificates that were beneficially owned by him. I am persuaded D had raised a triable issue over the vitality of the P’s own claim premised on alleged legal and beneficial ownership of specific Shares linked to specific Share Certificates such that summary judgment ought not to be entered on P’s case as pleaded.

(b) Assessment of damages

146.  At the Master Hearing, P abandoned the primary relief sought in the SoC and O14 Summons for delivery/transfer to him the Shares/Certs or alternatively the Identical Shares/Certs/Rights. That left the further/alternative relief sought in the SoC and O14 Summons which was “damages to be assessed”. Mr Chan SC complained that apart from an assertion of loss and damage (see paragraph 7 of the SoC referred to in paragraph 22 above) and a claim for relief for damages to be assessed, no material facts and/or particulars were averred as to any substantial loss suffered by P. Quite rightly, Mr Lam accepted no material facts were pleaded as to any substantial loss/damages claimed.

147.  The P 1^st Aff gave the market value of the Shares (see paragraph 22 above), but there was nothing in P’s pleadings and/or P 1^st Aff that explained the measure of loss/damages P claimed. The only enlightenment was in the shape of a letter dated 19 November 2018 (ie 9 days before the Master Hearing) from PSols to DSols (“Damages Letter”), which was neither pleadings nor affirmation evidence:

“In relation to damages resulting from the tort of conversion, it is trite that:-

(1) The normal measure of damages for conversion is the market value of the goods converted: see McGregor on Damages (20^th ed ) §38-006.

(2) The time for valuation of the goods is in general the time of the conversion: see McGregor on Damages (20^th ed) §38-011.

(3) Where the market value has since fallen, the damages remain measured as at the date of the conversion: see McGregor on Damages (30^th ed) §38-014 - §38-015.

(4) Where the market value has risen, the Court has discretion to award the damages on the risen value: see McGregor on Damages (20^th ed) §38-018.

In order to narrow down the issue between the parties, we write to confirm that for quantum, our client shall, at the [Master Hearing], choose the lowest amount, that is, the value of the shares as at the date of the conversion (ie 25 August 2015) deposed to in paragraph 21 of the [P 1^st Aff] dated 19 April 2018.”

According to the P 1^st Aff, the value of 17,360,000 ListCo shares as at 25 August 2015 was HK$17,533,600. By the Master Order, Master Kot awarded the Judgment Sum (HK$17,533,600) in favour of P against D with interest, which presumably reflected the value of 17,366,000 ListCo shares as at 25 August 2015.

148.  Mr Lam made 2 points: (a) the Judgment Sum was the value of the Shares on 25 August 2015 (being the date of the alleged conversion) which was the lowest possible value and P waived any dividends declared in the Shares, and (b) D did not dispute quantum and at the Master Hearing D’s Counsel had no submissions despite express invitation by Master Kot to address on the matter of quantum. On such basis, it was said there was no disputed issue on quantum left for assessment, so Master Kot was fully justified in awarding assessed damages in the Judgment Sum under the O14 Summons. Mr Lam also reminded that in the Se 1^st Aff filed for the Stay Summons that canvassed the merits of the Appeal, there was no mention of dispute on quantum. I disagree with Mr Lam’s submissions for reasons set out below.

149.  As a starting point, P’s stance on the quantum of damages is not readily understood. According to paragraphs 5-6 of the SoC (see also paragraph 25 of Mr Lam’s written submissions), P pleaded that he suffered loss of the Shares/Certs as a result of D’s breach of the Agreement/Duties, and further/alternatively he suffered loss of the Share Certificates due to wrongful conversion. Thus, P’s pleaded cause of action on wrongful conversion only concerned loss of the Share Certificates (ie the chattels being the physical scrips that evidenced the Shares but not the choses in action) and not loss of the Shares (ie the choses in action). Indeed, Mr Lam referred me to Yuan Chu Chen & ors v Chen Min Chun & ors in which Chow J held as follows:[42]

“Conversion only lies in respect of dealings with corporeal (tangible) personal properties, but not intangible properties or choses in action such as shares (as distinct from physical documents evidencing the choses in action such as share certificates): see Clerk & Lindsell on Torts, 21^st Edn, paragraphs 17-35, 17-36 and 17-38. There cannot, in law, be a conspiracy to commit ‘conversion of the right and interest in the shares of FNT Foundation Corp’.”

Wrongful conversion (vis-à-vis the Share Certificates) being a tort of strict liability would give rise to tortious measure of damages. But P’s pleaded cause of action for loss of the Shares rested on breach of contract and breach of implied contractual duties, which should therefore give rise a contractual measure of damages. Yet for P’s claim for loss of the Shares, no measure of loss/damage was pleaded in the SoC, and the enlightenment by the Damages Letter strangely adopted a tortious measure of damages, ie the value of the Shares as at the date of the alleged wrongful conversion (see paragraph 33 of Mr Lam’s written submissions and PSols’ letter dated 19 November 2018 to DSols – see paragraph 147 above).

150.  No explanation was given as to why a tortious measure of damages was adopted for P’s claim for breach of contract and breach of implied contractual duties for loss of the Shares, especially when there was no such plea of tortious loss of the Shares in the SoC. Even more importantly, there were no plea in the SoC and no submission from Mr Lam as to what the contractual measure of damages for loss of the Shares might be. There was also no plea/evidence as to the appropriate measure of damages for loss of the physical scrips of the Share Certificates, ie the pieces of paper issued by ListCo which recorded the issue of the Shares to which they related, in contra-distinction to the Shares. There was no explanation why the value of the loss of such chattels being pieces of paper would be equivalent to the value of the corresponding Shares being choses in action and not chattels. On such basis, there was plainly arguable/triable contention that the assessed damages being the Judgment Sum were unsustainable.

151.  But Mr Chan SC raised even more fundamental criticism by referring to Born Chief Co (trading as Beijing Restaurant) v George Tsai & anor.[43] In that case, it was held at trial that flooding damage to premises below the defendant’s property was caused by the defendant’s negligence. Damage was caused in 1991, the action was commenced in 1994 and particulars of the damage claimed were furnished in July 1995. When the case came for trial in October 1995, documents of alleged loss/expenses were disclosed and admitted, but no separate trial was sought or ordered. The defendant invited the judge to award nominal damages, but the trial judge ordered damages to be assessed by a master. On appeal, it was held that P already had a protracted period to prepare/prosecute its claims against the defendant, and since no attempt was made at trial to link the documents of alleged loss and expenses to the flooding damage, the plaintiff was not entitled to anything more than nominal damages. The Court of Appeal considered it was not right for the judge to order damages to be assessed by the master as this would provide further opportunity to the plaintiff for proving damages at the expense and to the prejudice of the defendant, and the plaintiff should bear the consequences of failing to establish its claim at trial.

152.  Mr Chan SC submitted there were 2 takeaways from this authority: (a) if a plaintiff could not recover damages at trial in the absence of proper pleadings on loss and damage, then there was all the more reason for summary judgment not to be granted, and (b) even if the court found judgment on liability in the context of a summary judgment application, in the absence of proper pleadings/particulars of damages, the court would not even have to grant order for damages to be assessed. On such basis, even if P succeeded in establishing liability (which Mr Chan SC disagreed), it was said that Master Kot erred in awarding final judgment with assessed damages and not, say, interlocutory judgment to be assessed.

153.  As a preliminary observation, I am not sure Born Chief Co (trading as Beijing Restaurant) stood for the proposition in (a) above because it seemed that particulars of damages claimed were furnished in that case, and the claim for damages fell down on the evidence rather than the pleadings because “no attempt was made at trial to link the documents of alleged loss and expenses to the flooding damage”. But that said, the proposition in (a) above is a trite legal principle. I have summarised the relevant principles for pleading special and general damages in Lam Sik Ying, administrator for the estate of Lam Tim alias Stan Lam Tim, deceased v Lam Sik Shi & anor, which I set out as follows:[44]

“25 In Bodum AG v Renco Trading Limited, I have discussed the difference between special and general damages in terms of pleadings. The basic test of whether damage is general or special is whether particularity is necessary/useful to warn the defendant of the type of claim and evidence or the specific amounts of claim, which he will be confronted at trial.

26. Special damage is such loss that the law will not presume to be the consequence of the defendant’s act, but it depends in part, at least, on the special circumstances of the particular case. Further, where the precise amount of a particular item of damage has become clear before the trial, either because it has already occurred and so become crystallised or because it can be measured with complete accuracy, this exact loss must be pleaded as special damage. Special damage must always be explicitly claimed on the pleading with all necessary particulars. On a strict view, the plaintiff will not be allowed at trial to give evidence of any special damage which is not claimed explicitly in his pleadings. But even if there is a greater degree of leniency under the modern approach, a claim for special damage will only be allowed to be proved if the existence of such claim is clear from the statement of claim. On the other hand, general damage is such as the law will presume to be the natural and probable consequence of the defendant’s act. It arises by inference of law and may be averred generally.

27. But whether the damage be general or special, if the plaintiff is able to base his claim for damages upon a precise or perhaps estimated calculation, he must plead particulars of the facts which make such a calculation possible. But the level of precision required in pleading a particular head of damage should be determined by the need to provide a fair and sufficient indication of the case that was being brought and that the opposing party had to meet.

28 In Perestrello E Companhia Limitada v United Paint Co Ltd, it was held that although the claim for loss of profits was one for unliquidated damages and not for special damage, the plaintiffs could not, without amending their pleadings, adduce evidence of the alleged loss of profits. .......

29 In Hayward & anor v Pullinger & Partners Ltd, the plaintiffs claimed damages for wrongful dismissal being loss of salary and commission which they would have earned during the period of notice to which they claimed to be entitled if it had been given. It was held that since the damage complained of was special damage, the statement of claim was defective in the absence of ‘any paragraph specifically alleging damage’. Devlin J further held there was no obligation on the part of the other party to ask for particulars of the special damage, and ‘the true position is that, unless they are contained in the statement of claim, evidence leading to damage in respect of which damages are claimed cannot technically be relied on at the trial’.” (my emphasis)

154.  In the present action, P did not claim for payment of a debt or demand for special loss eg a specific sum of money due and payable under or by virtue of a contract[45] (see paragraph below). It seemed that here P claimed for damages but contended that the precise amount of his loss had become clear because it could be measured (ie the value of the Shares as at 25 August 2015 as evident from D’s consolidated daily statement issued on 25 August 2015 – see paragraph 22 above). Even for a claim for “damages”, as a matter of pleadings, the alleged loss should be pleaded as general loss with particulars of the facts that make calculation possible. This was not done in this case, so it was arguable that at a trial or assessment of damages (let alone an application for summary judgment) P could not lead evidence of the alleged loss without amending his pleadings.

155.  But putting aside pleadings and turning to the nature of P’s claim for “damages” in the present action, such claim was not a debt claim or liquidated demand, but rather it was a claim for unliquidated damages for loss of the Shares/Certs the amount of which (according to P) could somehow be quantified. The distinction between “debt or liquidated demand” and “unliquidated damages” was explained in Hong Kong Civil Procedure 2020 as follows:[46]

“A liquidated demand is in the nature of a debt, ie a specific sum of money due and payable under or by virtue of a contract. Its amount must either be already ascertained or capable of being ascertained as a matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a ‘debt or liquidated demand’, but constitutes ‘damages’ ......

The words ‘debt or liquidated demand’ do not extend to unliquidated damages, whether in tort or in contract, even though the amount of such damages be named at a definite figure (Knight v. Abbott (1883) 10 Q.B.D. 11; affirmed in Winston Camera & Radio Co. Ltd v Veart Design Ltd (unrep., HCA 11595/1995, [1996] H.K.E.C. 5), applied in Byatt (t/a MBP Byatt & Co.) v. Nash [2002] E.W.C.A. Civ. 1321, Onway Engineering Ltd v. Shun Wing Construction & Engineering Company Ltd (H.C.A. 88/2008, [2008] H.K.E.C. 1942), and Lee Kwok Wing v. Chung Chuen Hei [2012] 4 H.K.L.R.D. 917). ......”

156.  In respect of a claim for unliquidated damages (even if liability was established and the damages were quantified), the appropriate course is for the court to grant interlocutory judgment on liability for damages to be assessed. Hong Kong Civil Procedure 2020 set out the trite principle as follows:[47]

“Where, in an action for unliquidated damages, the liability of the defendant is clearly established, whether by the evidence or by admission or by submission, the court should give judgment for the plaintiff with costs for damages and interest thereon to be assessed.”

As Suffiad J explained in Alco International Limited v Akai Electronic Co Ltd, the counterclaim for loss of profits under 2 purchase orders in that case “although quantified by the defendant, are not liquidated claims but must be assessed by the court”.[48]

157.  Likewise, in Winston Camera & Radio Company Limited v Veart Design Limited,[49] the plaintiff claimed for loss caused by the defendant’s poor workmanship in renovation works that led to water leakage and damage to furniture and fittings. “The Statement of Claim pleaded that the Plaintiff had been quoted the sum of $1,508,812.00 as being the cost of remedying the Defendant’s poor workmanship, and the primary relief which the Plaintiff claimed against the Defendant was (a) the sum of $1,508,812.00 and (b) damages [for the replacement/repair of the damaged furniture and fittings]”. Default judgment was entered for the plaintiff for (a) the sum of $1,508.812.00 plus interest and (b) damages to be assessed. Keith J held as follows:

“...... In my view, the only judgment which the Plaintiff was entitled to enter in default of defence was judgment for damages to be assessed. That was because the only relief which the Plaintiff could claim for the Defendant’s alleged breach of contract was damages. The fact that the estimated cost of remedying the Defendant’s poor workmanship was capable of being quantified easily merely meant that the amount of damages was capable of easy assessment. It did not entitle the Plaintiff to claim that amount as a liquidated sum. ...... The term ‘liquidated demand’ does not extend to unliquidated damages, even though the amount of the damages is named as a specific figure: Knight v. Abbott, Page & Co. (1883) 10 QBD 11. ......”

158.  This explained why, in an Order 14 scenario, Order 14 rule 1(1) of the RHC allows an application for summary judgment to be made on the ground that the defendant has no defence to the plaintiff’s claim “except as to the amount of damages claimed” (see paragraph 126 above). In an Order 14 application of this nature, the parties are not expected to condescend upon facts/matters that relate to the quantum of damages. This was also reflected in the usual verification of the claim in the plaintiff’s affidavit in support of the application for summary judgment:[50]

“The affidavit must fulfil the following two requirements:

......

2. it must state the deponent’s belief that there is no defence to that claim or part, or no defence except as to the amount of any damages claimed.

......

If the claim is for damages, the deponent should swear to his belief that there is no defence except as to the amount of damages claimed ......”

159.  In Sam Nickolas David Hing Cheong v Lowe Edwin Ryan,[51] the plaintiff and the defendant agreed to invest in real property and to contribute equally for the purchase of a residential flat. The defendant decided to back out from the investment and refused to pay further for his share of contributions, and as a result the plaintiff sued the defendant to claim for the unpaid contributions under the joint-venture agreement and the damages resulting from the defendant’s repudiation of such agreement. The plaintiff claimed for 2 sums: (a) $153,108.48 being the amount owed to the plaintiff under the agreement prior to the repudiation, and (b) $389,166.50 which represented the defendant’s half share of the difference between the purchase price of the subject property and the market value of the subject property as at 24 August 2009 when the plaintiff accepted the defendant’s repudiation of the agreement. The master granted summary judgment for these 2 sums. On appeal, HH Judge Lok (as he then was) inter alia set aside the final judgment in (b) above and granted interlocutory judgment against the defendant for damages to be assessed:

“49. It is trite law that if the claim of a plaintiff is the form of a liquidated demand, i.e. a specific sum of money due and payable under or by virtue of a contract, then the court should, in the case of a successful O.14 application, grant final judgment in favour of the plaintiff for the fixed sum claimed. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, evn though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a ‘debt or liquidated demand’, but constitutes ‘damages’ ...... In the latter case, the court should grant interlocutory judgment for damages to be assessed.

......

56. In the decision above, I have already ruled that the Plaintiff is entitled to claim for such damages. However, the market value of the Property as at 24 August 2009 is not a figure which can be ascertained as a mere matter of arithmetic. In assessing such damages, the court has to conduct an investigation beyond mere calculation, and so in my judgment it is wrong in principle for the learned Master to grant final judgment for such damages.

57. In paragraph 13 of the Defence and Counterclaim, the Defendant admits that the Property suffered a negative equity of approximately $749,000 as at February 2009. However, as there is no admission about the value of the negative equity at the time of the termination of the Agreement, the court still has to hold an inquiry about the actual loss suffered by the Plaintiff at the material time.”

In my view, P’s claim herein was plainly more than a mere matter of arithmetic, and one had to ascertain the relevant market value which required investigation beyond mere matter of arithmetic. This was especially significant when there is triable/arguable issue over the relevant date for ascertaining the market value as explained in paragraphs 161-162 below.

160.  In my view, the above analysis amounted to further reason why Master Kot fell into error in entering final judgment on the basis of assessed damages. Interestingly, even the O14 Summons itself only asked for damages to be assessed, and even up to the Master Hearing P made no attempt to amend the O14 Summons to lay out the precise final relief he asked Master Kot to grant.

161.  Mr Chan SC went further to submit that damages as assessed by Master Kot were in any event erroneous. He argued that even if D were liable for loss of the Shares/Certs and the relevant measure of loss based on wrongful conversion was the value of the Shares, D should only have been liable for the value of the Shares as at the date of P’s demand for their return. Mr Chan SC submitted that since there was never any demand by P for withdrawal/delivery of the Shares to him on 24-25 August 2015, so whatever happened on 24-25 August 2015 had nothing to do with P, and the relevant date was P’s demand for the return of the Shares, which would have been the date of the Demand Letters in January 2018 or the date of issuance of the WoS (12 February 2018). The price of the Shares as at the date of the WoS was HK$16,926,000 (see paragraph 22 above), which was less than the Judgment Sum.

162.  Mr Chan SC reminded that conversion is an intentional act against the true owner’s (ie the claimant’s) property to which the claimant has immediate right to possession. “The defendant must have wrongfully appropriated another person’s goods for his own use or for a third party’s use, or unlawfully deprived the owner permanently of the use or possession of them or for a substantial or indefinite period, or destroyed them or changed their quality. ...... the claimant only needs to prove that the defendant’s conduct was inconsistent with the claimant’s right over the chattel.”[52] This highlighted the significance of the precise nature of P’s claim as discussed in Part XII(a) above. I have found there was triable/arguable basis to challenge P’s pleaded case that he was the legal and beneficial owner of the particular block of Shares corresponding to the specifically numbered Share Certificates. It would follow from such arguable dispute that the withdrawal/delivery of such Shares/Certs to a third party on 25 August 2015 might not be the relevant moment in time to calculate loss of P’s “right over the chattel”, and there was a reasonably arguable contention that the true loss was when P made demand for the Shares/Certs (eg by way of the Demand Letters in January 2018) but D failed to comply with such demand. On such basis, the Judgment Sum was arguably excessive and hence erroneous.

163.  But Mr Lam submitted that all these concerns did not matter because D did not dispute quantum of damages. I disagree. It is true that Master Kot did ask D’s Counsel whether he would address her on quantum and D’s counsel said “No, I have no submissions to make”. Mr Chan SC suggested Master Kot’s invitation was directed at the quantum of any security for costs (as the Security Summons was also argued before her at the Master Hearing). But for the present purpose, I am prepared to proceed on the basis that Master Kot invited D’s Counsel to address on the quantum of damages for the O14 Summons. Having read the Transcript, it was plain D’s Counsel in declining to make submissions on quantum (even when read against PSols’ letter dated 19 November 2018 to DSols) fell far short of any admission or agreement over the quantum of damages. It also could not mean that damages were not in issue when the ordinary and appropriate course was for judgment on liability to be entered for damages to be assessed. Indeed, it would have been premature to canvass matters on quantum in either affidavit evidence or in counsel’s submissions, especially in face of the O14 Summons that only asked for damages to be assessed. The fact D’s Counsel made no submissions on quantum at the Master Hearing would not have precluded Mr Chan SC from making the submissions he did at the Appeal Hearing since the Appeal was by way of rehearing. As Mr Chan SC also submitted, the proper date to assess loss and damages was a matter of law, and his submissions in this regard would not have been affected even if D’s Counsel made a concession (which he did not) as there was no disturbance of any underlying factual basis.[53] In my view, the Master Order must be set aside.

(c) Fraud exception

164.  Mr Chan SC accepted P did not make any allegation of fraud in the SoC, but submitted P relied on fraud and/or dishonesty in rebutting D’s defence. He noted it was D’s case that Lui verified P’s identity document and handed over the Shares/Certs to P in person on 25 August 2015, but P disputed such contention on the basis that he was not in Hong Kong. In practical terms, P was in effect saying D defrauded him by passing the Shares/Certs to someone other than P, and Lui (who must have known the person he saw on 25 August 2015 was not P whom he recognised from previous meetings) was dishonestly lying by insisting that person was P and by alleging he even witnessed P countersign the SW Instruction to acknowledge receipt of the Share Certificates and Transfer Form. In his Reply, P disputed D’s such averments by pleading that the SW Instruction bore “false signatures” (which was referred to “forged” signatures in the P 2^nd Aff). Mr Chan SC also submitted P’s criticisms in the P 2^nd Aff that D failed to accede to his request for expert handwriting examination of the signatures on the SW Instruction also amounted to allegation that D had concealed facts from P. On such basis, Mr Chan SC submitted these averments/allegations of fraud fell within the “fraud exception” (which was reflected in P’s own summary of his stance as set out in paragraph 54 above), so the O14 Summons ought to be dismissed.

165.  On the other hand, Mr Lam submitted P did not accuse D of defrauding P, and did not suggest D exercised or was implicated in any fraud. P averred that D delivered the Shares/Certs to someone who purported to be P, and fraud was alleged against the imposter and not D. It was sufficient for P’s claim to demonstrate (a) D was in breach of the Agreement and the Duties (including not to part with possession of or otherwise dispose of the Shares/Certs without P’s express instructions and authority) in handing over the Shares/Certs, and/or (b) Lui might have been careless and was thereby misled into believing the imposter was P without need to allege fraud.

166.  I bear in mind the guidance by the Court of Appeal discussed in paragraphs 118-120 above, and in considering the substance and not merely the form of P’s claim as well as all the pleadings and affirmation evidence, I am not persuaded the fraud exception was applicable. Whilst D’s defence might elicit issues of falsity/forgery in response when read in light of P’s Reply and affirmation evidence, as Mr Lam explained, an allegation of fraud by D was not required to establish or maintain P’s claim. There might well be some falsity or fraud, but quite simply, there was no need for P to assert D was the fraudster in order to establish or maintain his claim. In such circumstances, the fraud exception was not applicable.

(d) Other triable issue or arguable defence

167.  One question that loomed large was whether P had taken delivery of the 17,360,000 Shares on 25 August 2015. Lui affirmed he personally handed over the Shares/Certs together with the SW Receipt and Transfer Form to P at the Handover Site on 25 August 2015, but P complained that (a) D failed to even confirm P’s instructions when D received by mail the “purportedly signed” SW Instruction, and (b) in fact P was not in Hong Kong on the relevant date, which meant that if Lui/D released the Shares/Certs they did so to someone else and not P.

168.In my view, but for P’s assertion that some documentary evidence suggested otherwise (which documentary evidence will be discussed in further detail in paragraphs 170-184 below), there was such stark contradiction in the affirmation evidence (see (a)-(b) below) as to whether P was or was not in Hong Kong and/or consequently whether P did or did not collect the Shares/Certs in person that the matter ought to go for trial:

(a)

Lui clearly affirmed it was P who collected the Shares/Certs, and Mr Chan SC submitted it was inherently improbable for Lui to have mistaken P as anyone else (and indeed there could not have been better verification of P’s identity) because (i) Lui recognised P from having previously met him twice, and (ii) he checked P’s ID Card before he handed over the Share Certificates to P. It was said D had used its best endeavours to verify P’s identity/instructions under the SFC Code, and fulfilled all its duties in handing over the Share Certificates upon P’s instructions. Lui/D claimed there was no reason for them to risk personal, professional and business reputation with risk of Police/SFC investigation and possible penalties, loss of career, imprisonment by uttering such lie when they had nothing to gain from such ominous risk, and when they must have known there would have been an inevitable electronic/paper trail of any withdrawal/transfer of the Shares/Certs.

(b)

P’s affirmation evidence was equally adamant that he was not in Hong Kong on the relevant date, and he essentially relied on the ImmD Record (and some other documents to be discussed below) to rebut D’s case and to bolster his claim that he could not have collected the Shares/Certs at the Handover Site in person as he was not in Hong Kong for the whole of August 2015. On the basis that P was absent from Hong Kong on 25 August 2015, Mr Lam submitted (i) it could be reasonably inferred that (even assuming P sent the SW Instruction which P denied) Lui delivered the Shares/Certs to someone other than P, but (ii) since it was clear P did not receive the Shares/Certs it could be reasonably inferred P did not sign/send the SW Instruction (because P would not have asked to collect the Shares/Certs on a date when he would not be and was not in Hong Kong), and in either case D would be in breach of the Duties owed to P.

169.  Mr Lam made the following further submissions in an attempt to undermine D’s contentions, but in my view, apart from the documentary evidence to be considered below, these arguments went to suggest there were factual disputes and need for assessment of witness credibility to be resolved at trial:

(a)	Mr Lam reminded that D’s 2nd FBP confirmed (i) D did not know who mailed the SW Instruction (which was not accompanied by any other document), (ii) P and D had no further communications to confirm the instructions before/after D received the SW Instruction, (iii) D did not verify P’s signature on the SW Instruction in P’s presence, and (iv) P was not present when D’s staff filled in other blank fields in the SW Instruction.
(b)	Mr Lam criticised Lui for not explaining why he would be able to recognise P whom he met only twice when there was no suggestion that D merely had a few clients who were easily recognised.
(c)	Mr Lam submitted it was unlikely Lui checked P’s ID Card at the Handover Site on 25 August 2015 as (a) it was improbable for D to hand over Shares/Certs of substantial value in such cavalier manner in about 5 minutes or so (see 1st FBP), and (b) no copy was made of P’s ID Card.
(d)	Mr Lam argued that D’s present account in the Amended Defence and the Lui 2nd Aff were undermined by the different factual assertions in the original Defence and the Lui 1st Aff (see paragraph 25 above).

170.  It was D’s contention that notwithstanding the ImmD Record, P might have entered Hong Kong (a) legally with another travel document (whether in another name or not) or (b) illegally which was not impossible, such that he was present in Hong Kong on 25 August 2015, so these matters would have to be investigated at trial in light of Lui’s affirmation evidence.

171.  In respect of (a) above (ie legal entry into Hong Kong), for the purpose of the O14 Summons, I am not persuaded the ImmD Record was so obviously unequivocal as P / Mr Lam would have this court accept. Mr Chan SC was right in saying that the ImmD Record only showed someone in P’s name with date of birth on 5 November 1986 did not enter Hong Kong via immigration checkpoints. But the ImmD Record must be read in light of its genesis, ie the ImmD Application. By the ImmD Application, P called upon the ImmD to generate the ImmD Record with reference to his travel document being his Passport. P gave his Passport’s travel document number in the ImmD Application and annexed a copy page of his Passport showing the passport number for the ImmD to process the ImmD Application (see paragraph 35 above). The ImmD Application made no reference to any other travel document and/or travel document number. The logical inference must be (or at least there was strongly arguable basis to suggest such logical inference) that the ImmD Record provided pursuant to the ImmD Application was in relation legal entry/exit to and from Hong Kong by P using his Passport.

172.  However, as pleaded in paragraph 4(3) of the Reply, P claimed “[he] would only enter Hong Kong using his [Passport] or [Permit]” (my emphasis). Indeed, P came to Hong Kong in April 2015 by using his Permit as his travel document (see paragraph 4(d) above). There was no evidence before this court that P had ever made application to the ImmD for P’s statement of travel records in relation to use of the Permit as his travel document (which on P’s admission was an alternative travel document to the Passport for entering/leaving Hong Kong) and/or that the data in the ImmD Record included P’s entry/exit to and from Hong Kong using the Permit. In view of such lacuna in the evidence and the fact that P did visit Hong Kong a few months before August 2015 by using his Permit, I am not persuaded that for the purpose of the O14 Summons, the ImmD Record was so definitively unequivocal as to destroy D’s defence contentions.

173.  Mr Lam reminded that P also produced the transaction records of his credit/debit cards on 25-26 August 2015 to supplement the ImmD Record for P’s assertion that he was in Shenzhen on those days (see paragraphs 88-90 above). But no time was marked for the relevant entries, so Mr Chan SC submitted these records at best showed P was in Shenzhen at some time on those 2 days, but this would not necessarily mean P was not in Hong Kong (given its proximity to Shenzhen) on 25 August 2015 at the material time to personally collect the Shares/Certs from Lui. In light of the analysis of the ImmD Record, I am not persuaded these additional documents would tip the balance as Mr Lam suggested.

174.  Further, Lui/D alluded to the possibility of another passport from a different issuing authority. On the other hand, Mr Lam submitted there was no pleading or evidence to support the suggestion that D might have other travel documents (apart from the Permit). In my view, on the state of the evidence before this court, the ImmD Record did not preclude this possibility, and these are matters for trial.

175.  In respect of (b) above (ie illegal entry into Hong Kong), D alluded to the possibility of P having entered Hong Kong by illegal means, but P’s response was denial of what he described as speculative allegation by Lui/D. Mr Lam went further to submit D abandoned such allegation at the Master Hearing, and therefore should not be allowed to revive such contention at the Appeal Hearing.

176.  I note from the Transcript that at the Master Hearing Mr Lam made submissions that criticised the allegation of illegal entry. D’s Counsel then submitted as follows:

“...... we say that that becomes a triable issue because our responsible officer said he had physically seen the plaintiff ...... Even with the [ImmD Records] because that will be an issue of credibility because here the plaintiff has said he only owns one set of travel documents. Then, of course, we can put that to the test. I fully agree with my learned friend that the claim of the plaintiff coming in illegally is probably not going to pass muster. It is quite a difficult allegation to assert. But at last the plaintiff has said he only has one set of travel documents and by saying we gave him the physical share certificates on the 25^th and if the court or whoever decides that that must be the case or that based on what I will submit further that the credibility of the plaintiff is in question, then it shows that that assertion that he only has one set of travel documents may not be true.”

177.  I disagree that by such submissions D’s Counsel abandoned the contention that P might have illegally entered Hong Kong. An abandonment must be clear. What the above submissions suggested was that D’s Counsel acknowledged the argument based on P’s illegal entry to Hong Kong was weak, ie “probably not going to pass muster” (my emphasis). Hence, it was still open to D to argue this point on the Appeal which was by way of rehearing. Further, Master Kot in her oral ruling dealt with the allegation of possible entry to Hong Kong by illegal means as a live argument, but rejected it as a “bare assertions without basis and far-fetched” (see page 24H-I of the Transcript). In any event, D’s Counsel maintained as a live point the possibility that P had another travel document / passport.

178.  Mr Lam then submitted D’s contention of illegal entry was nothing more than unsustainable bare allegation because P had no reason to enter/leave Hong Kong by illegal means. Mr Lam argued that even though the burden was on D to establish a triable/arguable basis for such allegation, D failed to condescend upon the particulars of such speculative but serious allegation and failed to adduce any cogent evidence in this regard. Mr Lam reminded D did not seek to file any Rejoinder to assert any illegal entry to rebut P’s averment in the Reply that he only had the Travel Documents and he was not in Hong Kong from 14 July to 15 September 2015. There was also no rebuttal evidence to paragraph 17(4) of the P 1^st Aff and paragraph 28 of the P 2^nd Aff to similar effect. On the other hand, Mr Chan SC suggested these matters would be within P’s exclusive knowledge, and not matters to which D would have ready access to relevant factual evidence. But Mr Chan SC argued there was enough evidence from Lui/D and indeed from P’s own case (as discussed in Part XII(d) herein) that made it clear the matter ought to be properly investigated at trial. I agree there were sufficient countervailing considerations that invited close investigation at trial on the Miles v Bull ground. In any event, the contention about P’s possible illegal entry into Hong Kong now paled in significance in light of the analysis in paragraphs 171-174 above.

179.  Mr Chan SC pointed out there were other unexplained features of P’s case which detracted from its vitality and raised triable issues. He noted that Lui affirmed (and P did not dispute) that the Monthly Statement dated 31 August 2015 and the daily activity summary report dated 25 August 2015 that showed the Shares had been withdrawn from the Account in August 2015 had been successfully emailed to P’s specified email address as provided in the Agreement (see paragraph 4(c) above). Indeed, each of the Monthly Statements after 31 August 2015 also showed there was nil stock in the Account. But even though P said he discovered the loss of the Shares/Certs at/about the end of 2016, ie more than a year after the withdrawal/transfer of the Shares/Certs, he did not say how he allegedly discovered such loss at the end of 2016 when he allegedly had a wish to sell the Shares. For example, P did not say whether he made such discovery by reviewing the Monthly Statements, and if not, how he found out since it was not said he contacted Lui/D. But if he was alerted upon review of the Monthly Statement(s), P did not explain why he found this out only at the end of 2016 (ie more than a year later), especially when he was university-educated, was a director / general manager of an investment fund business, had a margin web trading Account with P and particularly designated his email address for receipt of Monthly Statements and other notices from D, which factors Mr Chan SC submitted all suggested that P would have checked his email account and statements from D some time before the end of 2016. P’s only explanation for the long period of inaction was that he intended his investments in ListCo to be a long term one (which Mr Lam submitted was credible when viewed against the ImmD Record that showed P was not in Hong Kong on 24-25 August 2015), but such explanation arguably did not sit well with the undisputed fact that P withdrew and disposed of 1,400,000 ListCo shares in June/July 2015 (ie a few short months after he acquired such shares at the end of April 2015). I also refer to the analysis in paragraphs 167-178 above which suggested that on the present evidence the ImmD Record was not as unequivocal as P would have let this court accept.

180.  Mr Chan SC next argued P’s subsequent enquiries also added uncertainty to P’s case, which matter should be investigated/ resolved at trial. Mr Chan SC argued that even on the basis of P’s own case, his attention was drawn to the SW Instruction and the transaction record of the Account during his visit to D’s offices on 12 January 2017 (which was also consistent with D’s case that P made enquiries with D in January 2017 and D gave him the Withdrawal Documents – see paragraph 11 above). If, as P claimed, (a) he never signed/gave the SW Instruction on 24 August 2015 nor countersigned the SW Instruction on 25 August 2015 or at all, especially when he allegedly was not in Hong Kong for the whole of August 2015, and (b) he ought to have noticed from the transaction record of the Account that there was nil stock in the Account (ie the Shares were missing), there was little rational explanation for (i) P taking another 7-8 months until August 2017 to make further enquiries about the SW Instruction by email (see paragraph 80 above) (which meant P knew or should have known of the SW Instruction since the 1^st visit in January 2017) and until September 2017 to make further visit to D’s offices to enquire about the whereabouts of the Shares/Certs, especially having Lui to inform him only then that the Shares/Certs were “allegedly handed to [P] and that [P] allegedly acknowledged receipt of the same in person in Tsim Sha Tsui on 25 August 2015” (see paragraph 6(3) of P’s Reply), (ii) P still having hope that the Shares/Certs were with D prior to his visits to D’s offices in September 2017, and (iii) P taking time to report to the police only in September 2017. It was said such behaviour arguably did not sit well with a customer who just found out that his entire stock holding in his brokerage account that was worth over HK$17,000,000 went missing without his instructions for withdrawal on a day when he was not in Hong Kong, but P did not offer any arguably convincing explanation for the lackadaisical approach to enquiries and police complaint, which it was said would have lent support to D’s suggestion of need for further investigation.

181.  D placed even stronger weight on the Apology Letter of 8 December 2017 (ie more than 2 years after the withdrawal of the Shares on 25 August 2015 and almost 11 months after P’s alleged discovery of such withdrawal in January 2017). As Mr Chan SC submitted, the Apology Letter at the very least represented acknowledgment by P of misunderstanding towards D, but by then all issues between P and D were resolved. In view of the sequence of events that happened before the Apology Letter, I find there was at least arguable basis to suggest the issues that were resolved concerned P’s allegation against D having lost or given away the Shares/Certs.

182.  P’s answer in relation to the Apology Letter was two-fold: (a) P was approached by Mao who told P he represented D (but even up to the Master/Appeal Hearings Mao was not identified, eg there was no evidence of Mao’s full name (such as his name card), his particular connection with D and/or how and why P met up with him in Shenzhen, Mainland China), and (b) Mao required P to make the confirmation/apology letter which was later revised to be the Apology Letter as condition precedent for prompt release of the Shares/Certs, but the Apology Letter expressly stated that “本人確認與貴司之間所有事情均處理完畢, 到此為止” and not that there was still the outstanding matter of return of the Shares/Certs upon presentation of the Apology Letter. Indeed, on P’s case, he knew by then D had given away the Shares/Certs to an unknown person, but no explanation was forthcoming as to why such alleged condition precedent was not set out in the Apology Letter, whether he took any follow-up action to press for performance of such condition precedent, and why he did not retract the Apology Letter when D did not perform the condition precedent of promptly returning the Shares/Certs to him.

183.  On the other hand, Mr Lam submitted there were 4 theoretical possibilities in relation to the Apology Letter, ie (a) P was induced by Mao to issue the Apology Letter, (b) P waived the right to claim for the Shares/Certs, (c) P was estopped from claiming for the Shares/Certs, and (d) P and D had reached settlement to resolve the matter in relation to the Shares/Certs. Mr Lam relied on what he termed as the 4 “irreducible cores” (see paragraph 57 above) to say there was no merit in (b)-(d) above because if P was not in Hong Kong on 24-25 August 2015, then there would be no sensible contention for any waiver, estoppel or settlement. Mr Lam went further to say the Apology Letter was irrelevant as (i) it was not D’s case that it had reached any settlement with P, (ii) so there was no or no binding agreement to settle the matter, and (iii) at best the Apology Letter amounted to a representation that P thought the dispute had come to an end which would not constitute consideration for any waiver, estoppel (as there was no evidence D acted upon such representation and as a result altered its position)[54] or settlement, so given the ImmD Record which P claimed showed he was not in Hong Kong to receive the Shares/Certs on 25 August 2015, this court should comfortably accept P’s explanation that he was misled into issuing the Apology Letter.

184.  From the above account, it appeared P’s arguments in this respect rested primarily on the ImmD Record that fed the so-called “irreducible cores” to brush aside the Apology Letter. But as Mr Chan SC submitted, by tying up arguments in relation to the Apology Letter with the vitality of D’s case that the Shares/Certs had been handed over to P (which was the only discernible dispute between the parties especially when there was no affirmation evidence that P’s attitude was actually rude and/or unruly at the meetings between P and D’s officers), the fate of such arguments was adversely affected at the Order 14 stage by the fact that the ImmD Record was not as unequivocal as P thought, which in my view served to raise triable/arguable issues for close investigation at trial, and which at least lent weight to a triable/arguable inference that upon digestion of the explanation given P by the Apology Letter recognised  there was no basis to claim against D. But, of course, whether this was actually so would be a matter for trial.

185.  For the aforesaid reasons, I am persuaded D had established a real or bona fide basis to raise some other reason for trial on Miles v Bull ground. The above matters including the diametrically different stance of P and D warrant close investigation and cross-examination at trial. The circumstantial evidence after 25 August 2015 (including the daily statements / Monthly Statements, P’s enquiries and visits to D’s offices, the unidentified Mao, and the Apology Letter) suggested D’s case had some credible basis, especially when on the current evidence the ImmD Record was shown to be not as completely unequivocal about P’s non-entry into Hong Kong as P suggested. Ultimately, it would be a matter of credibility of the parties’ respective case/witnesses in the context of the documentary/circumstantial evidence at trial.

(e) Conversion of the Share Certificates

186.  Turning to P’s alternative contention that delivery of the Share Certificates to someone other than P was also a tort of conversion, Mr Chan SC noted it was evident from the P 2^nd Aff that P did not say D intentionally deprived him of the Shares/Certs or D forged his signatures, and P only alleged D was in breach of the Duties by failing to keep the Shares/Certs in safe custody and/or disposing of them without P’s authority. Mr Chan SC argued D’s case on conversion would fall away because an essential element of such tort is that the tortfeasor’s conduct being inconsistent with the rights of the true owner has to be deliberate. In support of such argument, Mr Chan SC referred me to Bokhary, Sarony SC and Srivastava, Tort Law and Practice in Hong Kong as follows:[55]

“...... In Kuwait Airways Corp v Iraqi Airways Co (No 6) the House of Lords held that it would be impossible to formulate a precise definition of liability for conversion of goods which would be applicable in all circumstances. But it provided three basic features of the tort of conversion, ...... namely that the defendant’s conduct had to be inconsistent with the rights of the true owner of other person entitled to lawful possession; deliberate; and such as to have excluded the true owner or such other person from the use and possession of the goods. In other words, conversion is an ‘act of deliberate dealing with a chattel in a manner inconsistent with another’s right whereby that other person is deprived of the use and possession of it’. Inconsistent or wrongful manger would denote that the defendant did not seek or obtain the owner’s permission for such use and the action therefore constitutes a wrongful tort, but there is no conversion if there is fraud. In one of the Canadian cases it was held that ‘the essence of the tort of conversion, which is a strict liability tort, is a ‘wrongful act of dealing with the goods of another in a manner inconsistent with the owner’s rights’ ’. Thus, conversion is not constituted even where the defendant or someone else is guilty of fraud if the owner intended to pass the title of the chattel to the defendant or had not sanctioned the defendant’s action. However, the claimant would have to show that the defendant had an intention and did assert dominion over the chattels inconsistent with the claimant’s right as proprietor and thus deprived the claimant permanently of her property. Thus, an action in conversion will lie where the defendant has an intention to exercise dominion and deny the claimant her title in receiving ...... sale and other disposition including misdelivery of cargoes ......” (my emphasis)

187.  But as explained in Clerk & Lindsell on Torts, the defendant need not intend to question or deny the claimant’s rights; it is enough that his conduct is inconsistent with those rights.[56] A demand and refusal to deliver up the goods are the usual way of proving an intention to convert the goods adverse to the owner, but this not the only way.[57] Clerk & Lindsell on Torts went on to state as follows:[58]

“Conversion does not lie for mere negligent loss or damage, even if the goods are in the defendant’s hands. However, a person who without authority actually delivers another’s goods to a third party by way of sale or gift, or otherwise in a manner adverse to the right of the person really entitled, is treated differently and is presumptively guilty of conversion.

It is the duty of a bailee ...... to deliver the goods with which he is entrusted to or to the order of his bailor. To deliver them to an imposter (eg a fraudster presenting a forged bill of lading) or to anyone else is prima facie a conversion. ......”

188.  In my view, the “deliberate” nature of the tortfeasor’s conduct to sustain a claim for conversion is not subjective intention to convert the goods, but a conscious act that was inconsistent with the owner’s rights. Under Part XII(a) above, I found there was triable issue as to whether P was shown to be the legal and beneficial owner of the Share Certificates. But if he were such, then I do not believe Mr Chan SC’s above arguments would dent P’s case premised on the above arguments on conversion of the Share Certificates.

(f) Summary

189.  In light of the above analysis, I would have allowed the Appeal, set aside the Master Order and granted unconditional leave to defend on the existing evidence without having to turn to the New Evidence. However, I am not persuaded that I should dismiss the O14 Summons or that any condition should be imposed. In my view, this was a matter deserving of proceeding to trial such that there should be unconditional leave to defend. In such circumstances, there is no need for me to deal with the Leave Summons, but I will do so briefly for completeness.

XIII.  NEW EVIDENCE

(a) Legal principles

190.  Order 58 rule 1(5) of the RHC provides that “[no] further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds”. The phrase “special grounds” is the same expression as in Order 59 rule 10(2) of the RHC and requires the conditions laid down in Ladd v Marshall[59] to be satisfied.[60] The Ladd v Marshall conditions are: (a) the evidence could not have been obtained with reasonable due diligence for use at the hearing below, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed, ie it need not be incontrovertible and it is sufficient that it is apparently credible.

191.  In the Order 14 scenario, the Ladd v Marshall conditions are still applicable to appeals from summary judgment and fresh evidence cannot be admitted in an Order 14 appeal without special grounds, but some modifications are required as set out in the guidance by Lord Bridge in Langdale & anor v Danby:[61]

“In the situation arising on an appeal to the Court of Appeal from a summary judgment, the application of these conditions and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue. But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced.” (my emphasis)

192.  Poon JA (as he then was) in Bank of New York Mellon v Sun Jiangrong[62]held that in considering the 1^st limb of the Ladd v Marshall conditions the court will take into account all relevant factors, “such as the time available to the defendant to gather the evidence, the nature of the evidence, the difficulty encountered in obtaining the evidence, and the effort that the defendant had used in gathering the evidence. (The list is of course not exhaustive)”, but “if the defendant has been given ample time to gather all the evidence in opposition but has unreasonably failed to do so, we doubt very much if an appellate court would be prepared to relax the reasonable diligence requirement in his application to adduce fresh evidence on appeal simply because it is an appeal from summary judgment”. This was because it would cause injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced.[63]

193.  The observations of Lord Bridge emphasised in paragraph 191 above also found support in Law Kwok Fai Paul & ors v Wellmei (HK) Plastics & Electronics Industrial Limited & anor in which Yuen JA dismissed an application for adducing fresh evidence on appeal on the ground that the 1^st condition of Ladd v Marshall could not be satisfied, but in any event she would have exercised the court’s discretion to refuse such late application made on 20 October 2014 to adduce evidence for an appeal to be heard on 5 November 2014:[64]

“18. Even if the application had satisfied the conditions in Ladd v Marshall, I would have dismissed it in the exercise of the court’s discretion.

18.1 Order 1A r.3 of the Rules of the High Court requires parties and their legal representatives to assist the court to further the underlying objectives of the Rules. One of the underlying objectives is to ensure that cases are dealt with as expeditiously as is reasonably practicable and to ensure that the resources of the court are distributed fairly. It is common sense that the less time there is between the filing of an application to adduce fresh evidence on appeal and the hearing of the appeal proper, the greater the risks of not finding a slot for a judge to hear the application in good time before the appeal.

18.2 If a slot can be found at short notice, this gives the judge less reading and preparation time. And an appeal from the single judge’s decision would lead to further complications as it would be difficult to find time for it before the appeal proper is heard.

18.3 If no slot can be found, the application would have to be heard at the same time as the appeal proper. If the application is granted, the appeal may well have to go off, and a hearing day which may have benefited other litigants would be lost. It is perhaps time for legal representatives to be made aware that late applications for leave to adduce fresh evidence may be refused on this ground only, and with attendant costs orders to reflect the court’s discouragement of this practice.”

This is also relevant to applications to adduce fresh evidence for appeal from master’s decision.[65] It has been said that to allow last-minute evidence would not sit well with the underlying objectives of ensuring a case is dealt with as expeditiously as is reasonably practicable (see Order 1A rule 1(b) of the RHC) and/or ensuring fairness between the parties (see Order 1A rule 1(d) of the RHC).[66]

(b) Draft Zhnag Aff

194.  Mr Lam submitted that since D did not apply to adjourn the Appeal Hearing the fact Zhang had not yet affirmed the Draft Zhang Aff meant there was no affirmation by Zhang to be adduced at the Appeal Hearing, so the Leave Summons would fail in limine. However, by the time of the Appeal Hearing, Zhang had affirmed his affirmation before a solicitor in Hong Kong on 25 January 2017.

(b) 2^nd and 3^rd Ladd v Marshall conditions

195.  Mr Chan SC submitted that the tenor of the New Evidence would debunk P’s key allegation that he had no idea to where D transferred the Shares/Certs, and would show P had retaken the Shares and was in possession of the Share Certificates such that he sold the exact number of 17,360,000 ListCo shares to a third party Victory Spring on exactly the same day on 11 September 2015 that Tricor confirmed the Shares were transferred out. This was borne out by the number of ListCo shares and the stamping date on the B/S Notes produced by Zhang. Further, Zhang on behalf of Victory Spring paid for the Shares at a discount (but the Stamp Office would not have raised query over the market price adopted in the B/S Notes) by way of the Cheque payable to P with P’s name and Permit number marked on the reverse of the Cheque, and such Cheque was cleared for payment as evident from Zhang’s corresponding bank statement (see paragraph 105(c) above).

196.  Thus, Mr Chan SC submitted that the New Evidence (in particular the documents disclosed by Zhang) added credibility to D’s case that the Shares/Certs were released to P on 25 August 2015, but undermined P’s assertion that he only thought of possible sale of the 17,360,000 ListCo shares in the Account at the end of 2016, and raised critical query over the alleged conclusiveness of the ImmD Record that P was not in Hong Kong on 25 August 2015. Mr Chan SC suggested P’s sale of the Shares in September 2015 to a third party would also explain P’s inaction over the “missing” Shares/Certs for a lengthy period for over a year until January 2017, and why for a lengthy period afterwards P made elaborate attempts to ascertain what evidence as to the withdrawal/transfer of the Shares/Certs that D had to hand before P commenced the present action against D on 12 February 2018. To put it simply, it was said the New Evidence gave credible basis to D’s contention that the Shares/Certs were already released to P, and he received payment for sale of the same to a third party, but by the present dishonest claim against D, P was now trying to a have a second bite of the cherry.

197.  Mr Lam disagreed and suggested the New Evidence was not credible. First, Mr Lam noted D advanced inconsistent versions of the alleged sale by the Shares by P as the Se 2^nd/3^rd Affs alleged Zhang approached P because he wanted to buy the Shares via Ye’s company (see footnote 22 above), but the Zhang Draft Aff alleged P was unable to find a buyer for the Shares, so Zhang’s business partner helped P to find a buyer, ie Ye (see paragraph 112 above). Mr Lam submitted such unexplained inconsistency undermined the credibility of the New Evidence. Secondly, Mr Lam suggested it was inherently improbable that P would withdraw the publicly listed Shares to sell the same to a third party at a discount of about HK$7,000,000 and then to wait for the price to be paid several months later in December 2015 instead of selling the same to the public at market value. Mr Lam submitted D did not adduce objective evidence to show trade volume of the ListCo shares was small. Thirdly, Mr Lam said it was “alarming” that D did not procedure any supporting affirmation by Ye who either allowed his company to purchase the Shares and/or by Lui to support Se’s account of how the New Evidence came about.

198.  As Mr Chan SC submitted, in the Se 2^nd Aff, Se only claimed that at the initial meeting with Zhang he understood Zhang wanted to buy ListCo shares and approached P, which Zhang corrected and clarified in the Draft Zhang Aff which was now affirmed. But in my view, quite irrespective of who initiated the sale and purchase, Zhang was able to produce documentary evidence of such sale including the B&S Notes which (a) named P as vendor (with signature), (b) tallied with the actual number of 17,360,000 ListCo shares in the Account and (c) had a stamping date of 11 September 2015 that tallied with the time of transfer out as confirmed by Tricor.

199.  As for criticisms of the manner of sale and discount in price, I am not able to say the New Evidence was therefore not credible. Zhang went on affirmation to explain the discount, and more importantly, payment of the discounted price was bolstered by documentary evidence to the effect that a sum of over $11,000,000 was paid to and received by P by way of the Cheque. Given the documentary evidence of such payment and the bulk sale of 17,360,000 ListCo shares, the affirmation evidence that there was no active market interest for bulk acquisition of ListCo shares and hence need for discount in price for sale to a third party who already had some interest in the ListCo could not be said to be not credible.

200.  In my view, the documentary evidence referred to above and the coincidence of the matters in paragraph 198(a)-(c) above that supported Zhang’s affirmation evidence conspired to show that the New Evidence was apparently believable and/or credible even though it might not be (and it need not be) incontrovertible. I find such evidence if adduced would tend to have important influence on the case because it might suggest P’s claim was a false one in the sense that P had retaken possession of the Shares/Certs and had sold them to a third party for consideration received. I am satisfied that conditions (2)-(3) of the Ladd v Marshall requirements would have been satisfied.

(c)  1^st Ladd v Marshall condition

201.  Mr Lam submitted D had plenty of time between the O14 Summons filed on 20 April 2018 and the Master Hearing on 28 November 2018 (ie about 7 months) to gather evidence to oppose the application for summary judgment, so there was no time pressure. The only explanation as to why the New Evidence was not unearthed during such period but was revealed shortly after the Master Order came from Se’s evidence in the Se 3^rd Aff, ie Se went through D’s records again to see whether there was anything that might offer help and chanced upon the Remark, which led to inquiries through Lui and discovery of the New Evidence (but this was not confirmed by affirmation from Lui). Mr Lam suggested such explanation meant that before the Master Hearing D had previously gone through D’s records, so had D exercised due diligence it ought to have noticed the Remark in the Agreement (which document was adduced before Master Kot at the Master Hearing). It was said the fact it did not occur to D that the Remark had any significant relevance showed lack of due diligence. Mr Lam reminded that D did not get hold of the New Evidence by luck but by going through D’s records again, which was something D could have done any time before the Master Hearing. The fact the alleged “relevance” dawned on D after the Master Hearing was not a good or justifiable excuse, especially when D was all along legally represented/advised.

202.  On such basis, Mr Lam suggested D failed to discharge his burden to establish the 1^st Ladd v Marshall condition, and it should not be given a second chance on the Appeal when it missed a defence despite having ample time. If D thought it could succeed on the O14 Summons before Master Kot on the existing evidence and thereby did not carry out further investigation, such misjudgment on D’s part (especially when there was no criticism of negligence against DSols) would not lead the court to smile kindly on the Leave Summons on the Appeal. It was said D, who was under legal advice, should have recognised the draconian effect of any summary judgment that might be granted under the O14 Summons, and should not leave out any possible defence.

203.  There was no dispute that the Leave Summons was a late application (but by the Se 2^nd Aff P already alluded to the intended introduction of fresh evidence for the purpose of the Appeal with an outline thereof). The key question was whether there was justifiable reason for the lateness, and whether D had exercised reasonable diligence to obtain such fresh evidence.

204.  Mr Chan SC submitted that in light of the parties’ pleadings, D (with reasonable diligence) would only focus on finding evidence in relation to the direct dealings and history of correspondence between P and D themselves in relation to the dispute of whether or not the Shares/Certs had been returned by D to P on 25 August 2015. D had hoped to be able to resist the O14 Summons on the basis of such evidence, but it was due to the dire consequences of the Master Order that D looked into its records again even in relation to matters that were outside the disputed issues that it chanced upon the Remark that led D to Zhang (via Lui) and the New Evidence. It was said that on the face of the Remark (ie P was introduced by another customer of D) there was little expectation that anything relevant would surface, and it was therefore only fortuity that the New Evidence was revealed.

205.  As regards the requirement of reasonable diligence in the 1^st Ladd v Marshall condition, Kwan JA in Sky Joy Investment Limited v Zheng Dunmu & ors said as follows:[67]

“13. ...... The degree of reasonable diligence which the court expects the defendant to have exercised ‘must be assessed against the overall circumstances of the case’ and ‘the court will take into account all relevant factors, such as the time available to the defendant to gather the evidence, the nature of the evidence, the difficulty encountered in obtaining the evidence, the effort the defendant had used in gathering the evidence’. We agree ...... that should be the test to be applied in considering if condition 1 is met.”

206.  In Johnson Electric International Limited v BEL Global Resources Holdings Limited,[68] the new evidence satisfied the 2^nd and 3^rd conditions, but on the 1^st condition the Court of Appeal at paragraphs 17-21 said as follows:

“17. Whilst Mr Burns was correct in pointing out that most of the evidence now relied upon was in the possession of the Defendant and could be said to be within the knowledge of Pat Sze, and that there were several months between the setting up of the Special Investigation Committee by the Defendant and the hearing of the Order 14 summons, and that the issue of lack of knowledge on the part of the Plaintiff had been flagged by it in its evidence, we do not think these pointed conclusively against the exercise of reasonable diligence by the Defendant. The important issue is: should the Defendant have knowledge as to the significance of these information or documents which were accessible to it at the time of the Order 14 proceedings in light of the handicaps it suffered as mentioned above.

18. Ms Sze and Mr Wong explained how the discovery of some documents found at the work station of Ms Chong, the personal assistant of Sunny Sy after the Order 14 hearing led to a train of inquiry which unearthed records in the possession of the Defendant enabling it to put forward a case of knowledge against the Plaintiff: ...... The significance of these documents, as submitted by Mr Joffe, was that it was the first piece of the jigsaw which led to the other pieces to be found in order to build up a formidable picture. This is a case where each piece of evidence, considered in isolation, is not enough directly or inferentially to establish a case of knowledge, but when they are considered collectively an arguable case emerged.

19. We accept ...... there was no reason why the Defendant should have searched the work station of Ms Chong or to examine the records of shareholdings and conversion notices prior to the Order 14 hearing.

20. In the circumstances, even though some of the information is indeed within the knowledge of Pat Sze and the possession of the Defendant, in view of the scale of the operation of the Defendant and the difficulties it faced at the time the Order 14 application was made, we do not find it surprising that no effort had been made by the Defendant to produce the documents now put forward as ‘new evidence’. Based on what it had uncovered at that stage, the Defendant did not have enough bases to raise a case of knowledge on the part of the Plaintiff. Ergo, it also explains why there was no affirmation from Pat Sze for the purpose of the Order 14 hearing below.

21. We are satisfied that on the special circumstances in this case, the ‘new evidence’ should be admitted as evidence for the purpose of this appeal in accordance with the modified Ladd v Marshall test of Lord Bridge.” (my emphasis)

207.  In applying the test expounded by the Court of Appeal, it is plain that reasonable diligence did not require the defendant to turn over every single stone or pebble. Rather, the relevant consideration would be whether D should have knowledge as to the significance of the information or documents which were accessible to it at the time of the Order 14 proceedings in light of the relevant circumstances at that time. In my view, dealing with the O14 Summons and the disputes in the pleadings and affirmation evidence, D would not have been expected to check who introduced P to D. The crux of the factual debate was whether or not P collected the Shares/Certs on 25 August 2015, and the relevance of who introduced P to D to such issue was remote. I accept there was no particular reason why D would have been alerted to investigate the Remark. Based on D’s knowledge at the time, it did not have sufficient basis to assert that P had on-sold the Shares and received payment for the same. This piece of jigsaw was put in place only as a matter of fortuity after the Master Hearing as the Remark posed no significance in the context of the dispute at the material time. I am therefore satisfied on the special circumstances of this case that, if required, the New Evidence should be admitted for the purpose of the Appeal in accordance with the modified Ladd v Marshall test of Lord Bridge in Langdale & anor.

(d) Requirements of justice and fairness

208.  But even if I am wrong, I bear in mind that the Ladd v Marshall considerations whilst relevant are not absolute. In The Hong Kong and Shanghai Banking Corporation Limited v Leung Chi Kit trading as Leung Pui Form Mould Works (formerly known as Leung Pui Brick Mould Works), the Court of Appeal in discussing the Ladd v Marshall conditions said as follows:[69]

“Sir John Donaldson MR in R v Home Secretary, ex p Momin Ali [1984] 1 WLR 663 at p 670 referred to the principles being subject always to the discretion of the court to depart from them if the wider interests of justice so require.”

In Sky Joy Investment Limited, Kwan JA referred to a number of English cases cited by counsel for the appellant and said as follows:

“11. ...... On a proper reading of the English cases cited ......, they do not cast doubt on the normal application of the Ladd v Marshall conditions in the great majority of cases. The passages particularly relied on by him were said in the context in which the courts were considering the ‘rare cases in which the application of the rules might give rise to injustice and, where that was the case, the courts had the power to exercise their wide discretion so as to permit new evidence to be adduced’ (Saluja at §28).[70] Examples of such rare cases are where a party deliberately misleads the court in a material matter (Meek v Fleming [1961] 2 QB 366); where a strong prima facie case of wilful deception is disclosed (Skone v Skone [1971] 1 WLR 812). Indeed, the quotation from the judgment of Butler-Sloss LJ in Hamilton v Brodie Brittain Racing Ltd mentioned above was preceded by the words: ‘Fraud goes to the root of the issue’, and her ladyship went on to say ‘in case of fraud, condition one is considered with a greater degree of flexibility’. That is plainly not the situation here.

12. Similar submissions were made in Wong See Lung v Huang Hua Jiang & Ors, CACV 194 & 196/2014, 22 October 2015, at §9 and were rejected by Chu JA at §23. Further, as noted by Chu JA, whilst in the UK, CRP rule 52.11(2) no longer requires that special grounds be shown, under our Order 59 rule 10(2), it is still necessary to show ‘special reason’ for admitting new evidence on appeal.” (my emphasis)

209.  In my view, the underlying rationale for the Ladd v Marshall considerations must be (a) the interest of finality in litigation and (b) the fair administration of justice. In respect of (a) above, a final judgment in favour of the successful party should not be lightly disturbed unless there is good reason to do so. In respect of (b) above, the strictness of the Ladd v Marshall conditions requires litigants to advance their entire case at the first instance hearing and not leave over points on appeal, which is in line with the underlying objectives in the RHC. But these rationales, however laudable, are not unassailable if in a particular case they are inconsistent with the ends of justice. As explained in the English cases referred to in the above paragraph, the court retains an overarching discretion to act as required in the interests of justice, which includes the discretion to admit fresh evidence on appeal despite an applicant’s failure to meet all of the Ladd v Marshall conditions. Such cases will be rare, but an example cited in the English cases referred to above is where the fresh evidence reveals that fraud was perpetrated on the court below, eg when some deception or deliberate suppression of material evidence was perpetrated on the court below by a party, but such fresh evidence should be crucial to or determinative of the final outcome of the appellate court.

210.  Here, if the New Evidence were admitted, it would support an argument that P’s claim was a fraudulent one in that it tended to show P had received the Shares/Certs so that he was able to and did sell them to a third party for payment received, and P then turned back to sue D for loss of the Shares/Certs. I am convinced this would have been one of the rare cases in which the New Evidence arguably revealed deception on the court below by suppression of evidence that tended to show P’s claim was fraudulent. In such circumstances, had it been necessary, leave ought to be granted for the admission of the New Evidence for the purpose of the Appeal.

211.  Mr Lam complained that the Leave Summons was a late application introduced a few days before the Appeal (ie on 22 January 2019), but there was no justifiable reason for the delay, especially when (a) D met Zhang with DSols as early as on 7 December 2018, (b) at the call-over hearing of the Stay Summons on 14 December 2018 DSols alluded to D’s intention to adduce fresh evidence, and (c) the Se 2^nd Aff filed on 21 December 2018 already referred to further evidence to be adduced.

212.  It was true that the Se 2^nd Aff had alluded to D’s intent to rely on the New Evidence. But it was quite impossible for D to make an immediate application to the court at that stage, especially in light of P’s complaint even now against hearsay evidence. It appeared that whilst D had taken a bit of time to take instructions from Zhang to put together the Draft Zhang Aff and file/serve the Leave Summons, there were interruptions as a result of the intervening public holidays, the diversion of energies to deal with the Stay Summons, D’s change of solicitors, and the need to firm up instructions from Zhang.

213.  In all the circumstances, I find this was one of the rare cases in which leave ought to have been granted to adduce the New Evidence for the Appeal had it been necessary. But as explained above, it was not necessary since I have found the Master Order ought to be set aside and the Appeal be allowed with unconditional leave to defend on the existing evidence.

XIV.  CONCLUSION

214.  I therefore allow the Appeal and set aside the Master Order. I also grant D unconditional leave to defend, and further direct the parties to respectively serve List of Documents within 21 days from today, and there be inspection of documents within 7 days thereafter.[71] I also (a) grant leave for the Payment Into Court and interest accrued thereon to be paid out of court to DSols on behalf of D, and (b) discharge paragraphs 4 and 7 of the Wong Order.

215.  As for the Leave Summons, there is no need for me to grant any substantive relief except to deal with the matter of costs.

216.  There is no reason why costs should not follow event. As for the Leave Summons, I grant a costs order nisi as follows: (a) save for the cost provision in (b) below, D shall pay P costs of and occasioned by the Leave Summons, and (b) P shall pay D costs of and occasioned by the opposition of the Leave Summons at the Appeal Hearing to be taxed if not agreed with certificate for two counsel.

217.  As for costs of the Appeal, I grant a costs order nisi as follows: (a) costs of and occasioned by the O14 Summons (including all costs reserved if any) be costs in the cause, (b) costs of and occasioned by the Appeal (including all costs reserved if any) be paid by P to D to be taxed if not agreed with certificate for two counsel.