GUANGZHOU ZHOUTOUZUI DEVELOPMENT LTD v. SUN ZHICHUN AND OTHERS

HCA 1039/2023

[2024] HKCFI 1940

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1039 OF 2023

BETWEEN

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DECISION

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Introduction

1.  By summons dated 7 February 2024 (“the Summons”), Guangzhou Zhoutouzui Development Ltd (“the Company”) applies for summary judgment against Mr Sun, Ms Chen and Ms Deng (collectively “Ds”) in respect of its claim arising from the removal of Ds as its directors.

2.  Ds resist this application and insist on the invalidity of the special resolution (“the Special Resolution”) passed in the extraordinary general meeting of the Company on 23 June 2023 (“the EGM”).

3.  The Special Resolution was passed in the wake of the appointment of Ms Wing Sze Tiffany Wong (“Ms Wong”) and Ms Yeung Ka Man (“Ms Yeung”) (collectively “the Receivers”) as the Joint and Several Receivers and Managers of the entire issued share capital (100 ordinary shares) of the Company by Industrial Bank Co Ltd (Hong Kong Branch) (“the HK Branch”) pursuant to a Deed of Appointment dated 23 May 2023 (“the Deed of Appointment”).

4.  The Deed of Appointment was executed by Mr Meng of the HK Branch.

5.  Mr Lau, for Ds, helpfully indicates to this court that, for present purposes, Ds focus on one core issue only, i.e. whether it is arguable that the Deed of Appointment was invalidly executed by the HK Branch.

6.  The principal prank of Ds is that Mr Meng was not duly authorised by the HK Branch to execute the Deed of Appointment. They contend that even if he was, his execution of the same complied with neither Hong Kong law, namely, section 20(2) of the Conveyancing and Property Ordinance. Cap.219 (“the CPO”) nor PRC law.

Background facts

7.  There are a great deal of background facts underlying the claim of the Company. Save that the authority of Mr Meng and the validity of the execution of the Deed of Appointment are under challenge, there is little factual dispute. The following account is largely based on the agreed chronology, the summary in the skeleton submissions of Ms Ho and Mr Poon appearing for the Company and the pleaded case of the Company as admitted by Ds in their Defence.

8.  The Company is a locally incorporated company and is a wholly-owned subsidiary of Fortunate Start Investments Limited (“Fortunate Start”). Fortunate Start was and is at all material times a company incorporated in the British Virgin Islands (“the BVI”) and has been registered as a registered non-Hong Kong company since 29 November 2018. Ds have been the directors of Fortunate Start since 2 June 2022.

9.  Fortunate Start is a wholly-owned subsidiary of Skyfame Realty (Holdings) Limited (“Skyfame”).

10.  Skyfame is and was at all material times a non-Hong Kong company incorporated in Bermuda and a listed company on the Hong Kong Stock Exchange.

11.  Industrial Bank Co., Ltd (“the Bank”) is a company incorporated in the People’s Republic of China (“PRC”) and a licensed bank carrying on business in Hong Kong through the HK Branch. The HK Branch is also a company incorporated in the PRC.

12.  Pursuant to a facility agreement dated 19 December 2018 (“the Facility Agreement”) entered into between the HK Branch as the lender and Skyfame as the borrower, the HK Branch provided a multicurrency term loan facility to Skyfame (“the Loan”).

13.  The Loan is secured, among other things, by a share charge dated 18 February 2019 granted by Fortunate Start as charger in favour of the HK Branch as chargee (“the Share Charge”) whereby Fortunate Start charged the entire issued share capital (100 ordinary shares) of the Company (“the Charged Property”) in favour of the HK Branch.

14.  Clause 10.1 of the Share Charge provides that upon and after the occurrence of an Event of Default, the HK Branch may by deed or otherwise (acting through an authorised officer of the HK Branch), without prior notice to Fortunate Start, appoint one or more persons to be a receiver of the whole or any part of the Charged Property.

15.  Upon execution, the Share Charge has been duly registered in the Register of Registered Charges of Fortunate Start in the BVI on 22 February 2019 and the Register of Charges in Hong Kong on 27 February 2019.

16.  Form 21 December 2018 and 25 January 2019, the HK Branch advanced the full amount of the Loan (i.e. HK$750,000,000) to Skyfame in 3 tranches.

17.  Pursuant to 3 amending deeds dated 29 January 2021, 25 February 2022 and 29 April 2022 respectively, the HK Branch agreed to extend the repayment date to 21 June 2022 (“the Final Repayment Date”).

18.  In the 3^rd amending deed, the parties confirmed that as at 24 March 2022, having repaid HK$410,000,000, Skyfame shall repay all outstanding Loan of HK$340,000,000 on the Final Repayment Date (“the Outstanding Loan”).

19.  It is common ground that the Outstanding Loan remains unpaid up to the date of the present application.

20.  Pursuant to Clause 10.1 of the Share Charge, the HK Branch appoints Ms Wong and Ms Yeung as the Receivers by the Deed of Appointment executed by Mr Meng on its behalf.

21.  In accordance with Article 193 of the Bank’s Memorandum of Association, the Bank is responsible for managing its operation. At the material times, Mr Tao Yiping (“Mr Tao”) was the president of the Bank.

22.  Mr Tao issued an authorisation letter dated 17 October 2022 to Mr Chen Caidong (“Mr Chen”). Mr Chen was the president of the HK Branch. By the authorisation letter (“the Mainland Authorisation Letter”), Mr Chen was authorised to claim and recover all debts, goods and properties and to take corresponding actions for such purposes. In case of disputes and inability to make repayments on the part of its clients, Mr Chen was authorised to try mediation, arbitration, making legal claims and appoint liquidators. Moreover, Mr Chen was authorised to delegate his powers within the HK Branch in accordance with the management and development of the business of the HK Branch.

23.  It was expressly provided in the Mainland Authorisation Letter that the Bank could have the exclusive right of interpretation of the Mainland Authorisation Letter and the applicable law was PRC law.

24.  Pursuant to the Mainland Authorisation Letter, Mr Chen issued to Mr Meng an authorisation letter dated 25 October 2022 (“the HK Authorisation Letter”). Mr Meng was the Chief Risk Officer of the HK Branch.

25.  In the HK Authorisation Letter, specific reference is made to the Facility Agreement and the default of Skyfame. The following provisions in the HK Authorisation Letter are of particular relevance:

“現因借款人未能履約償款剩餘貸款本金和欠付利息… 委托人遂因此需要對此所引發的糾紛採取相應行動以維護興業銀行香港分行的權益”;

“委托人現特此授權委託受托人孟慶波 (任職：「興業銀行股份有限公司香港分行」首席風險官) 作為委托人及興業銀行香港分行的有權簽字人，全權處理興業銀行香港分行與借款人及擔保人的糾紛相關的全部事項…”;

“孟慶波代為處理與借款人及/或擔保人糾紛相關的一切其他法律事務。”

26.  Purportedly empowered by the HK Authorisation Letter, on 23 May 2023, Mr Meng exercised the rights of the HK Branch under the Share Charge to appoint receivers over the Charged Property by the Deed of Appointment.

27.  On the same day, the Receivers and three other persons were appointed to be directors of the Company (“the Current Directors”).

28.  On 23 June 2023, none of Ds attended the EGM. The Company duly passed the Special Resolution in their absence and removed Ds and one Mr Jin from the Board.

29.  By a letter dated 27 June 2023 sent to each Ds, Ms Wong asked them to, among other matters, provide to the board a detailed list of all the books, accounts, records and other documents currently in their possession or under their custody or control and a detailed list of all the assets currently held by them. Ds were also requested to provide a written undertaking that they would not hold out or act as a director of the Company.

30.  None of Ds complied with the requests. On 29 June 2023, Ms Wong was even denied access to the registered office of the Company.

31.  The Current Directors could only resort to legal proceedings. On 7 July 2023, the Company applied to DHCJ Winnie Tsui (as she then was) for (1) an interim-interim injunction restraining Ds from acting/holding out as directors of the Company; (2) an interim-interim injunction restraining Ds from obstructing the Current Directors’ access to the registered office of the Company and (3) a delivery-up order that Ds do deliver up 4 categories of documents/properties. Its application was granted.

32.  The Company filed its Statement of Claim on 7 August 2023 and Ds filed their Defence on 14 December 2023. Ds managed to raise a few defences in the Defence and thanks to Mr Lau’s adoption of a realistic approach, this court only has to determine the validity of the Deed of Appointment.

Applicable legal principles

33.  The legal principles relating to applications for summary judgment are well-settled. Mr Lau refers to Lesnina H.D.O.O. v Wave Shipping Trade Co. Limited & Ors [2022] HKCFI 1070 where DHCJ Victor Dawes SC (as he then was) said this at §36,

“Order 14 is for clear cases only, which mean cases in which there is no serious material factual or legal dispute. The procedure is entirely inappropriate where the plaintiff’s entitlement to recover any sum is the subject of any serious dispute, whether of law or fact.”

34.  Of course, the defence has the onus to show that their defence is arguable and bona fide or that there are triable issues.

Purported lack of authority of Mr Meng

35.  The first objection is that Mr Meng was not authorised to execute the Deed of Appointment. It follows that the Receivers were not duly appointed. Nor were the Current Directors. The Special Resolution has no effect and the removal of Ds from the board is unlawful.

36.  Mr Lau points out that there are two problems with the purported authorisation of Mr Chen. First, in relation to the Mainland Authorisation Letter, Mr Chen was entitled to deal with security assets but only with the head office approval. Mr Lau refers to Clause 2(2) which provides,

“在按總行年度綜合授權規定的審批權限及程序等通過審批後， 可採取出售、轉讓、變賣、拍賣及其它方式予以處置債權、抵(質)押品等，以維護授權人及/或香港分行的利益。”

37.  Mr Lau submits that there is no evidence that such approval of the Head Office was ever given.

38.  Mr Lau further refers to Clause 8 of the Mainland Authorisation Letter. He submits that whilst it is stipulated that there are limits of the power of delegation, there is no express stipulation as to what power cannot be delegated and it is unclear whether the power to execute the Deed of Appointment is one such non-delegable power.

39.  I can find no merit in these submissions. I am unable to accept the submission that Mr Chen of the HK Branch was not authorised by the Bank to appoint receivers by his delegation of such power to Mr Meng. The HK Branch is now seeking to enforce the Share Charge against Fortunate Start in this action and there is little doubt that the HK Branch is entitled to do so in accordance with the terms of the Share Charge. Whether or not the Bank, a non-party to the Share Charge, expressly authorises the HK Branch to take such actions in the Mainland Authorisation Letter is not material.

40.  Turning to the Mainland Authorisation Letter, the applicable provisions should be Clauses 2(1) and 2(2) in its entirety. Appointing receivers over the Charged Property clearly falls within these two provisions except the very part referred to by Mr Lau. The appointment of the Receivers did not involve any sale, assignment, auction or disposal of the Charged Property and, thus, no approval of the Head Office is required.

41.  I have perused Clause 8 of the Mainland Authorisation Letter. There are express limits of the power of delegation conferred to Mr Chen indeed. For example, Mr Chen could not delegate those powers that are not conferred on him or contrary to the rules and laws applicable to the delegate. I fail to see how Mr Chen’s delegation of his power to Mr Meng to execute the Deed of Appointment is beyond such limits.

42.  Next, Mr Lau submits that the Hong Kong Authorisation Letter only authorizes Mr Meng to deal with the borrower (借款人) (i.e. Skyfame) and the guarantor (擔保人) on behalf the HK Branch, but not with Fortunate Start or the Charged Property. He stresses that neither Fortunate Start nor the Share Charge is even mentioned in the HK Authorisation Letter. It follows that Mr Meng has never been authorised to exercise any power in the Share Charge.

43.  It is common ground that Guangzhou Yucheng Real Estate Development Company Limited (“Yucheng”), another subsidiary of Skyfame, agreed with the HK Branch to provide its assets as security for the Loan. By 4 separate written agreements, Yucheng agreed to, among other things, grant a mortgage over 4 residential properties and a hotel in favour of the HK Branch.

44.  The guarantor in the HK Authorisation Letter indeed is defined to be Yucheng and specific references are made to those 4 agreements and the mortgages created thereunder. The Share Charge does not feature at all.

45.  Ms Ho does not shy away from this. She advances four grounds to support her submissions that Mr Meng had the authority to execute the Deed of Appointment.

46.  First, Ms Ho asks this court to construct the authority of Mr Meng given by the HK Authorisation Letter liberally bearing in mind that the document is not a deed under seal. So long as Mr Meng has acted reasonably in good faith and his act can be justified by any one of the permissible constructions of the HK Authorisation Letter, he should be deemed to have been duly authorised. Ms Lau refers to Bowstead & Reynolds on Agency (22^nd ed.) at §§3-017 to 3-021 and Munday: Agency – Law and Principles (4^th ed.) at §3.12.

47.  Second, Ms Ho submits that, being the Chief Risk Officer of the HK Branch, Mr Meng had the usual authority to execute the Deed of Appointment. It must be part of his duty to manage the risk exposure of the HK Branch and to take necessary enforcement actions against debtors or third-party security providers in case of default.

48.  Third, Ms Ho refers to the 3^rd Affirmation of Lu Tianyi in which the HK Branch confirmed the position of Mr Meng as an authorised officer under Clause 10.1 of the Share Charge and his authority to sign the Deed of Appointment and apply the rubber chop of the HK Branch.

49.  Fourth, Ms Ho draws my attention to the fact that the appointees under the Deed of Appointment (i.e. the Receivers) have never raised any objection to the authority of Mr Meng. Indeed, in the 4^th Affirmation of Ms Yeung, she confirms that to the best of the understanding of the Receivers, Mr Meng was the Chief Risk Officer of the HK Branch and they verily believe that he had actual, usual or apparent authority to sign the Deed of Appointment.

50.  Ms Ho submits that the HK Branch must be bound by the act of Mr Meng as the Receivers are entitled to rely on the apparent authority of Mr Meng. In this regard, she relies on Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No 2) (2010) 13 HKCFAR 479 at §§42-45 per Lord Neuberger.

51.  On this issue as to whether Mr Meng had the authority to execute the Deed of Appointment, there is a heated debate as to what should the applicable law be.

52.  Mr Lau submits that Mr Meng’s authority to bind the HK Branch should be governed by the lex incorporationis i.e. PRC law. This is particularly the case when it is expressly provided in the Mainland Authorisation Letter that PRC law is the governing law. Mr Lau further submits that it makes commercial sense for the entire related chain of authorisation should be governed by the same law: Johnston & Harris, Conflicts of Law in Hong Kong (3^rd Ed) at §5.009(j).

53.  Mr Lau refers to Integral Petroleum S.A. v SCU-Finanz AG [2015] 1 Lloyd’s Rep 545. There, the parties were Swiss companies and they entered into a supply contract expressly governed by English law. The defendant claimed that the contract was not binding on it because it only bore one of its two authorised signatures required by Swiss law. Floyd LJ held that the issue was one of the authority of a single signatory (under Swiss law, prokurist) to bind the company was a matter for the company’s constitution as broadly interpreted and was governed by Swiss law, the place of the defendant’s incorporation.

54.  Then Mr Lau contends that the common law principles relied on Ms Lau cannot assist the HK Branch and Mr Meng. PRC law should be applicable to the issue of authority of Mr Meng.

55.  Neither party adduces PRC law on the issue of authority. Ms Ho submits that in the absence of such evidence, foreign law was presumed to be the same as Hong Kong law: Li Yuen Ling v Tang Kwong Wai Thomas [2010] 1 HKLRD 522 per DHCJ Horace Wong SC at §26.

56.  The application of this well-settled default rule is grossly unfair in Mr Lau’s submission and is inappropriate in the present case. He relies on Caspian Resources Development Pte Ltd v Fortune Oil Plc [2015] 5 HKLRD 836 in which DHCJ Le Pichon refused to apply the default rule because of such gross unfairness that might be caused to the defendants.

57.  There, the learned deputy judge considered Part 15 of the Companies Ordinance, Cap.622 and observed that it was merely a domestic rule of Hong Kong statutory law and not a generally applicable rule of company law. The learned deputy declined to invoke the default rule and apply those statutory provisions to the plaintiff which was not incorporated in Hong Kong and did not even qualify to be registered as a non-Hong Kong company. The learned deputy judge was of the view that the result would be grossly unfair if the default rule was to be applied.

58.  Whether the application of the default rule will lead to unfairness must be facts sensitive. Mr Lau does not start to explain what the potential unfairness would be caused to Ds.

59.  Furthermore, as pointed out by Ms Ho, an agency relationship is, in effect, regarded as contractual irrespective of its characterisation under any relevant applicable law. The question should be determined simply by applying the closest and most real connection principle in the ordinary way: Johnston & Harris, supra, at §5.015. I fail to see how the application of common law would be prejudicial or erroneous.

60.  Accordingly, I shall determine whether the purported lack of authority on the part of Mr Meng is a triable issue in light of Hong Kong law.

61.  First, I turn to the HK Authorisation Letter, I agree with Mr Lau that however liberal the construction of the document this court is prepared to adopt, it was incapable of authorising Mr Meng to enforce the Share Charge and appoint the Receivers by executing the Deed of Appointment.

62.  I agree with Mr Lau that the HK Authorisation Letter must be considered as a whole. By the HK Authorisation Letter, Mr Meng was authorised to handle the disputes between the HK Branch on the one part Skyfame and Yucheng on the other part. The subject matter of the same were clearly the securities provided by Yucheng for the purpose of the Facility Agreement. This is the clear reason why the Share Charge and/or Fortunate Start were not mentioned at all.

63.  Thus, the scope of the authority conferred to Mr Meng by the HK Authorisation Letter must be confined to the enforcement actions against Skyfame and Yucheng in respect of the securities provided by the latter and cannot be extended to the Share Charge even adopting a liberal construction of the document.

64.  Nor can I accept that in the absence of any objections raised by the Receivers, there can be no issue about Mr Meng’s alleged lack of authority. The Deed of Appointment affects not only the immediate parties to the same. The interest of Fortunate Start is prejudiced and the authority of Mr Meng to execute the Deed of Appointment must be subject to challenge.

65.  I also accept Mr Lau’s submission that the doctrine of apparent authority is not applicable to the present case. Mr Lau validly points out that Ds did not deal with Mr Meng as an agent of the HK Branch. At least, it is arguable that there could be no apparent authority.

66.  I accept Ms Ho’s submission that Mr Meng had the usual authority to execute the Deed of Appointment. As the Chief Risk Officer, Mr Meng was part of the senior management team of the HK Branch reporting directly to the Chief Executive and the board. He was also responsible for taking prompt action in relation to any material risk of exposure of the HK Branch: see the Supervisory Policy Manual Risk Management Framework issued by the Hong Kong Monetary Authority.

67.  Securing the appointment of the Receivers over the Charged Property should be regarded as an action to control the risk of exposure of the HK Branch by enforcing indebtedness against third-party security providers including Fortunate Start and hence falls within the duties of the Chief Risk Officer.

68.  As explained in Bowstead, supra, at §3-005, usual authority comes into being where an agent is put in a position which normally carries with it certain authority. The agent impliedly has such authority unless it is withdrawn by the principal.

69.  Here, it is clear that the HK Branch has throughout insisted on the authority of Mr Meng: see the 3^rd Affirmation of Lu Tianyi (Head of the Special Assets Division of the HK Branch) at §59. It acts on the Deed of Appointment and commenced these proceedings against Ds. In the premises, I accept that Mr Meng did have the usual authority to execute the Deed of Appointment in his position of the Chief Risk Officer.

70.  Even if Mr Meng did not have any authority at the time of his execution of the Deed of Appointment, I accept the submission of Ms Ho that the HK Branch ratified the Deed of Appointment in any event by reason of the matters stated above. This is perfectly permissible: Palmer’s Company Law (Volume 1) at §3.303.

71.  In Gimex Development Ltd v Cua Wai Tai & Another [2000] 1 HKLRD 14, Cheung J (as he then was) said this about ratification,

“Although a ratification must be clear and must bear distinct reference to the facts of the particular case, it need not necessarily be proved by positive acts of adoption. In certain cases it is sufficient evidence of ratification that the intended principal, having all material facts brought to his knowledge and knowing that he is being regarded as having accepted the position of principal, takes no steps to disown that character within a reasonable time, or adopts no means of asserting his rights at the earliest time possible: Halsbury’s Laws of England (4^th ed., Reissue) Vol.1(2), para.83.”

72.  It should be noted that ratification could be implied from words or conduct though such words and conduct must be unequivocal. Ratification can also be implied from a position taken in litigation: Bowstead, supra, at §2-077.

73.  There can be no question that the HK Branch has all along relied on the Deed of Appointment and acted on the same ever since it was executed by Mr Meng. The present claim is based on the valid appointment of the Receivers by virtue of the Deed of Appointment. The HK Branch caused affirmations to be filed in support of the interlocutory applications in these proceedings. Mr Lu confirmed the authority of Mr Meng. The HK Branch has never raised any issues about the authority of Mr Meng.

74.  Mr Lau submits that Mr Lu in his affirmation did not say that he was making an ex post facto ratification. This is not necessary at all. The position of the HK Branch adopted in the present action with the supporting affirmations of Mr Lu already gives rise to an implied ratification.

75.  I can come to the conclusion that, ratification, if necessary at all, could plainly be implied on the evidence.

76.  I believe that the issue of the purported lack of authority of Mr Meng is an utter non-starter and cannot afford Ds any arguable defence or raise any triable issue.

Validity of the execution of the Deed of Appointment under Hong Kong law?

77.  On the issue of the validity of the execution of the Deed of Appointment, both parties have filed PRC law opinions. On the part of the Company, Opinion of Shu Man dated 3 July 2023 and Opinion of Li Jianhui and Hou Lei dated 28 June 2024 were filed. Ds filed Opinion of Chen Jianbin dated 8 May 2024.

78.  The experts of both parties agree that the governing law in relation to the validity of the execution of the Deed of Appointment should be Hong Kong law.

79.  Ms Ho and Mr Lau also agree that insofar as Hong Kong law is concerned, section 20(2) of the CPO is the governing provision. It provides,

“Where a person is empowered to execute a deed by a corporation, he may execute the deed as agent by signing the name of the corporation or his own name and by affixing his own seal.”

80.  Mr Lau complains about the lack of any seal, much less Mr Meng’s own seal, in the Deed of Appointment. Thus, under Hong Kong law, the execution falls foul of section 20(2) of the CPO and hence is invalid.

81.  The answer of Ms Ho to this is that there is a pre-printed circle marked “L.S.” (“the LS Mark”) in the execution page of the Deed of Appointment. Ms Ho submits that the LS Mark was intended to serve the purpose of a seal: First National Securities Ltd v Jones [1978] Ch 109 at 118C-D per Buckley LJ and 121C per Sir David Cairns, Chitty on Contracts (35^th ed.) at §1-106 and Formation and Variation of Contracts (4^th ed.) at §4-15.

82.  Mr Lau submits that the LS Mark does not suffice and fails to meet the two additional requirements in First National Securities. First, there is no attestation clause in due form and, secondly, Mr Meng did not sign his own name across the circle. He submits that as a result, the Deed of Assignment was not sealed at all and does not comply with section 20(2) of the CPO.

83.  I cannot accept Mr Lau’s submission. In First National Securities, Buckley LJ first observed that there was no evidence to indicate in any other way whether the defendant did or did not intend to deliver the legal charge as his act and deed. He then said this (at p.118C-D),

“But it is a very familiar feature nowadays of documents which are intended to be executed as deeds that they do not have any wax, or even wafer, seal attached to them, but have printed at the spot where formerly the seal would probably have been placed, a printed circle, which is sometimes hatched and sometimes has the letters “L.S.” within it, which is intended to serve the purpose of a seal if the document is delivered as the deed of the party executing it.”

84.  Buckley LJ went on to observe that apart from the LS mark, the defendant placed his signature across that mark and there was an attestation clause. He then concluded that these features and the attestation, in the absence of any contrary evidence, were sufficient evidence to establish that the document was executed by the defendant as his deed.

85.  In my view, Buckley LJ did not really make it an essential requirement that there should be an attestation clause in due form and that the signature should be placed across a LS mark. He merely looked for supportive evidence that the executor did mean to execute the document as his deed.

86.  What Sir David Cairns said about the LS mark is also noteworthy. It was said,

“Moreover, while in 1888 the printed indication of a locus sigilli was regarded as being merely the place where a seal was to be affixed, I have no doubt that it is now regarded by most business people and ordinary members of the public as constituting the seal itself. I am sure that many documents intended by all parties to be deeds are now executed without any further formality than the signature opposite the words “Signed, sealed and delivered” usually in the presence of a witness, and I think it would be lamentable if the validity of documents so executed could be successfully challenged.”

87.  It can be seen that back in the 1970s, LS marks were already commonly used to denote sealing in documents.

88.  In Chitty on Contracts (35^th ed.) at §1-106, the learned editors note that the requirement of sealing has been interpreted by the courts very liberally and a LS mark or even a document bearing no indication of a seal at all will suffice if there is evidence (e.g. attestation) that the document was intended to be executed as a deed.

89.  In the Deed of Appointment, immediately above Mr Meng’s signature and the LS Mark it is written as follows,

“THIS DEED has been executed and delivered as a deed on the date stated at the beginning of this Deed.”

90.  In my view, this is clear evidence that Mr Meng intended to execute the Deed of Appointment as his deed by appending his signature beside the LS Mark. I can conclude that on balance of probabilities, Mr Meng validly executed the Deed of Appointment in compliance with section 20(2) of the CPO.

91.  I also accept the alternative position of the Company that the Deed of Appointment was in any event validly executed under hand by the HK Branch.

92.  To start with, Clause 10.1.1 of the Share Charge allows appointment of receivers by any other means other than by deed.

93.  The Memorandum of Association of the HK Branch does not require the common seal or chop of the HK Branch to be affixed.

94.  I accept Ms Ho’s submission that the method of appointment of a receiver is governed exclusively by the terms of the debenture: Kerr & Hunter on Receivers and Administrators (21^st ed.) at §16-9 and in common law, appointment of a receiver can be done in writing under hand without sealing: Lightman & Moss on the Law of Administrators and Receivers of Companies (6^th ed.) at §§7-042 to 7-043.

95.  I then come to the conclusion that the HK Branch acting through Mr Meng by the Deed of Appointment in any event executed under hand validly appointed the Receivers under Hong Kong Law.

Validity of the execution of the Deed of Appointment under PRC law?

96.  Strictly speaking, in light of my foregoing conclusions, I need not continue to determine the validity of the execution of the Deed of Appointment under PRC law.

97.  I accept Mr Lau’s submission that I actually should not do so. PRC law refers the substantive analysis back to Hong Kong law. Thus my conclusion above is applicable even if PRC law applies.

Conclusion and orders

98.  For the reasons given, I do not find any merit in the core issues raised by Ds regarding the authority of Mr Meng and the validity of the execution of the Deed of Appointment.

99.  Clearly Mr Meng had the authority and the Deed of Appointment was properly executed by Mr Meng on behalf of the HK Branch as a deed or, alternatively, as a simple contract.

100.  Ds are unable to raise any triable issues. Nor can they show any arguable defence on the evidence. The Company must be entitled to judgment and the reliefs set out in paragraphs 1(1) to (9) of the Summons.

101.  There is no reason why costs should not follow the events. I make a costs order nisi that Ds do pay the Company the costs of this action including costs of and occasioned by the Summons and all costs reserved to be taxed if not agreed. In the absence of any application for variation within 14 days by summons, this order nisi would become absolute without further order.

102.  Lastly, I thank Ms Ho, Mr Poon and Mr Lau for their assistance in this matter.