NG TING KWOK v. NG ON KWOK AND ANOTHER

HCA 1587/2017

[2018] HKCFI 2438

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1587 OF 2017

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JUDGMENT

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I. INTRODUCTION

1.  The plaintiff Ng Ting Kwok Andrew (“P”) is the younger brother of the 1^st defendant Ng On Kwok Raymond (“D1”). The 2^nd defendant is D1’s wife Dan Yan Ping Bella (“D2”). By the present action, P sought to enforce payment obligations by D1/D2 (collectively, “Ds”) under a master agreement dated 29 May 2014 between P and Ds (“MA”) as subsequently varied by a supplemental deed dated 29 April 2016 between the same parties (“SD”) (collectively, “Revised MA”).

2.  Pursuant to the MA, P agreed to sell and Ds agreed to purchase certain shares (“Shares”) in 5 companies (ie Steps Consulting Limited (“Steps Consulting”),[1] S&W Holding Limited (“S&W Holding”),[2] Rabeanco Singapore Pte Ltd, Rabeanco Europe BV and Brighteam Holdings Limited (“Brighteam”) (collectively, “Companies”)) within the Rabeanco Group[3] (“S&P”) for the Consideration (see paragraph 102 below) payable jointly and severally by Ds to P. Completion of the S&P took place on 29 May 2014. By the SD, P and Ds agreed to vary certain provisions of the MA.

3.  Pursuant to the Revised MA, Ds were to jointly and severally pay P the balance of the Consideration ($58,135,000) by 75 monthly instalments (“Instalments”), the respective amounts of which were set out in the schedule attached to the SD (“Payment Schedule”), and each Instalment was due and payable on the last day of the respective instalment period (“Instalment Period”) ascertained in accordance with clause 5.6 of the Revised MA (“Instalment Payment Date”) and set out in the Payment Schedule. Interest (“Interest”) shall accrue on the outstanding amount of the Consideration (“Outstanding Consideration”)[4] on the basis of actual days elapsed and a 365 days’ year at the rate of HIBOR[5] plus 2% and shall be payable by Ds on each Instalment Payment Date. If Ds failed to pay any sum payable under the Revised MA when due, they shall pay interest (“Default Interest”) on each such overdue sum from and including the due date to the date of actual payment at 5.5%pa (as well after as before judgment) and be calculated on the basis of the actual number of days elapsed and a 365 days’ year.

4.  Ds paid the Instalments up to 27 March 2017 pursuant to the Payment Schedule, but thereafter did not pay (a) the following 3 Instalments ($1,740,000),[6] (b) Interest on the Outstanding Consideration[7] ($347,707.22),[8] (c) Default Interest on the overdue Instalments ($6,817.73)[9] and/or (d) further Default Interest on the overdue Instalments.

5.  On 5 July 2017, P commenced the present action against Ds to recover the aforesaid outstanding sums and further Default Interest. On 24 July 2017, Ds gave notice of intention to defend. On 28 July 2017, P issued a summons for summary judgment (“O14 Summons”) pursuant to Order 14 of the Rules of the High Court (“RHC”). On 28 July and 13 November 2017, P filed his 1^st and 2^nd affidavits in support of the O14 Summons (“P 1^st and 2^nd Affs”). On 9 August, 11 September and 14 December 2017, Ds filed D1’s 1^st, 2^nd and 3^rd affirmations (“D1 1^st, 2^nd and 3^rd Affs” or collectively “D1 Affs”) in opposition.

6.  The O14 Summons was heard on 13 December 2017 (“Master Hearing”) before Master Benny Lo (“Master”), which meant the D1 3^rd Aff was filed a day after the Master Hearing. This was because of the following:

(a)	on 16 August 2017, the argument hearing for the O14 Summons was fixed/scheduled to be heard at the Master Hearing on 13 December 2017;
(b)	on 13 November 2017, P filed the P 2nd Aff in reply to the D1 1st/2nd Affs in opposition;
(c)	on 29 November 2017, Ds filed a summons (returnable at the Master Hearing) for leave to file/serve the D1 3rd Aff dated 28 November 2017;
(d)	at the Master Hearing, the Master granted leave for Ds to file/serve the D1 3rd Aff.

7.  At the Master Hearing, the Master granted judgment in favour of P against Ds (“Master Order”) for:

(a)	the sums of $1,740,000, $347,707.22 and $6,817.73;
(b)	Default Interest on the sum of $2,087,707.22 at 5.5%pa (or at the daily rate of $314.59) from 30 June 2017 until payment;
(c)	costs of the action (including costs of and occasioned by the O14 Summons) to be paid by Ds to Ps with certificate for one senior counsel to be taxed if not agreed.

The Master reduced his reasons for decision in writing, which written reasons were handed down to the parties on 3 January 2018 (“Decision”).

8.  On 27 December 2017, Ds filed Notice of Appeal against the Master Order (“Appeal”) for the following reliefs:

(a)	the Master Order be set aside;
(b)	the O14 Summons be dismissed, or alternatively Ds be given unconditional leave to defend, or further alternatively Ds be given conditional leave to defend upon such condition(s) to be made as the court saw fit;
(c)	costs of and incidental to the O14 Summons (including all costs reserved and costs of the Master Hearing) be to Ds to be taxed if not agreed with certificate for counsel;
(d)	consequential directions to be given for filing/serving Ds’ Defence and Counterclaim (if any), and P’s Reply and Defence to Counterclaim (if any);
(e)	costs of the Appeal to be paid by P to Ds.

On 4 January 2018, the hearing of the Appeal was scheduled to be heard before this court on 24 July 2018 (“Appeal Hearing”).

9.  Also on 27 December 2017, Ds filed (a) a summons for stay of execution of the Master Order pending final determination of the Appeal (“Stay Summons”) and (b) D1’s 4^th affirmation in support thereof. On 9 January 2018, Master Hui granted an order by consent for P and Ds to respectively file affirmations in opposition and in reply, and for the Stay Summons to be adjourned for argument before a judge with 1 hour reserved. By that time, both P and Ds were well aware the Appeal Hearing was scheduled to be heard on 24 July 2017, but neither P nor Ds asked for the Stay Summons to be made returnable for argument at the Appeal Hearing. Time extensions were granted for P to file affirmation in opposition, and he eventually filed his 3^rd affidavit on 21 March 2018. Time extension was granted for Ds to file affirmation in reply, and they eventually filed D1’s 5^th affirmation (“D1 5^th Aff”) on 30 April 2018.

10.  In the meantime, P issued bankruptcy petitions against D2 in HCB1310/2018 and HCB2098/2018 on 8 March and 17 April 2018 respectively. The hearing of such bankruptcy petitions was adjourned to 1 August 2018, and further adjourned to 31 October 2018.

11.  Unlike the Appeal in respect of which Ds took the initiative in January 2018 to fix/schedule the Appeal Hearing (see paragraph 8 above), Ds did not arrange to fix/schedule the argument hearing of the Stay Summons until 5 July 2018 when Ds’ solicitors proposed to P’s solicitors to attend before the listing clerk on 10 July 2018 to have such argument heard at the Appeal Hearing. On 6 July 2018, Ps’ solicitors disagreed because:

(a)	there would be insufficient time at the Appeal Hearing to deal with the Stay Summons;
(b)	Ds chose not to restore the Stay Summons until after P’s solicitors declined to include affirmation evidence for the Stay Summons in the hearing bundle for the Appeal;
(c)	Ds could apply to stay execution if the Appeal was dismissed.

On 9 July 2018, Ds insisted the Stay Summons should be heard at the Appeal Hearing but Ps continued to disagree, so Ds’ solicitors wrote to this court for leave to have the Stay Summons heard together with the Appeal[10] otherwise the latter might be rendered nugatory. On 10 July 2018, the parties attended before the listing clerk who refused to fix/schedule the argument hearing for the Stay Summons at the same time as the Appeal Hearing, but offered an earlier hearing for the Stay Summons on 17 July 2018 (which Ds declined to take up). On 11 July 2018, P’s solicitors wrote to this court to express P’s concern that Ds’ request for the Stay Summons to be heard together with the Appeal was a veiled attempt to slip in the D1 5^th Aff as evidence before this court at the Appeal Hearing. On 12 July 2018, Ds’ solicitors wrote to this court to deny such suggestion, and reiterated it would be undesirable for the Stay Summons to be heard by another judge.

12.  On 12 July 2018, I refused to allow the Stay Summons hijack the Appeal Hearing:

(a)	3 hours’ hearing time was reserved for the Appeal Hearing which was needed as the Appeal was by way of re-hearing, and it was inappropriate to allow such necessary time to be taken up by another application;
(b)	the alleged concern about unknown outcome of the Appeal could be made before any judge, and there was always the possibility this court upon hearing the Appeal might reserve judgment.

With hindsight, it appeared such directions were quite perceptive since the Appeal Hearing itself took full 3 hours, so decision had to be reserved.

13.  Notwithstanding Ds’ denial of any intention to slip in the D1 5^th Aff as evidence at the Appeal Hearing, 5 days later and a week before the Appeal Hearing (ie on 17 July 2018), Ds filed a summons returnable at the Appeal Hearing for leave to adduce the D1 5^th Aff into evidence for the Appeal (“Leave Summons”). On the same day (ie 17 July 2017), Ds filed D2’s affirmation in support (“D2 Aff”). At the Appeal Hearing, Mr Hariman, counsel for Ds, confirmed that for the Leave Summons Ds would only seek to adduce paragraphs 5-15 of the D1 5^th Aff for the Appeal, so for convenience references to the D1 5^th Aff below are references to paragraphs 5-15 thereof unless otherwise stated. Upon agreement by Mr Chang (and Ms Wong with him), counsel for P, and Mr Hariman at the Appeal Hearing, counsel addressed on the D1 5^th Aff on de bene esse basis pending determination of the Leave Summons.

II.  DS’ AFFIRMATION EVIDENCE

14.  D1 1^st Aff filed on 9 August 2017  D1 claimed that at the time of the D1 1^st Aff, Ds were still gathering evidence, compiling information and providing documents for Ds’ solicitors, and they would file a further detailed affirmation to set out how P/Ds carried on leather handbags business under the Rabeanco brand name and how they entered into several ventures in various companies that eventually led to the MA by which P substantially disposed of his interests in those companies to Ds. D1 claimed the matter was not as simple as P depicted for there was a long history of business relationship between P and Ds that led to the present dispute, and voluminous documents[11] would be exhibited to the further detailed affirmation to be filed.

15.  The D1 1^st Aff claimed the further detailed affirmation would set out P’s misrepresentations and “what were the actual pictures of the various entities in particularly the entities in the USA which costed [Ds] a fortune, rather than the rosy picture that [P] described”:

“…… However, we would like to highlight that there were many misrepresentations made by [P] before entering into the [MA]. Such misrepresentations made by [P] were very material to the price we were willing to pay for acquiring [P’s] interest in various entities but [Ds] subsequently found out that in fact the value of the various entities were inflated and [Ds] purchased at much higher price if not for [P’s] misrepresentations. This part mainly related to a related company set up in the USA, ie Rabeanco USA,[12] a company which was set up and managed by [P] before the execution of the [MA] as well as the rosy picture of the business in the coming years. Upon taking over after the [MA], the situation was indeed very worst and [Ds] incurred a huge loss and spent a fortune to cut it off. ……”

On such basis, it was said P failed to act in good faith, and failed to show honesty and/or observance of reasonable commercial standards of fair dealing.

16.  D1 2^nd Aff filed on 13 November 2017  D claimed S&W Handbags Limited (“S&W Handbags”)[13] was principally engaged in retail/wholesale of handbags, and in the early years it was the joint effort of Ds through Gala Prosper Investment Limited (“Gala Prosper”) and P and Ms Sian Ping (“SP”) through Steps Consulting. Steps Consulting and Gala Prosper as “equal shareholders held the operating arms of the handbag business in Rabeanco Limited[14] and [S&W Handbags]”. In/about 2007/2008 dispute arose between SP and Ds/P that led to a sale and purchase agreement dated 18 June 2009 whereby SP sold her shares/interests in Steps Consulting (and S&W Holding) to P/Ds for $8,000,000. From then until the MA dated 29 May 2014 whereby P disposed of his Shares/interests in the Companies to Ds, P/Ds operated the handbags business with the Rabeanco brand name under S&W Handbags with P in charge of finance/operation, D1 in charge of manufacturing, and D2 in charge of design and product development.

17.  In/about 2013/2014, there were disputes between P and Ds over the expansion plan / future direction of the Rabeanco Group. Ds wanted to focus more on the Asian markets, but P “in the last few years or so endeavoured in very aggressive expansion plan into the markets of the USA which [Ds] felt very risky”. Even though Ds were the indirect majority shareholders of S&W Handbags, P caused his majority shareholding in Steps Consulting[15] to frustrate S&W Handbags’ normal operations (which practically came to a standstill for several months) by hindering business decisions/actions that Ds wanted to make, and to force Ds to buy out his Shares in the Companies at a high price. D1 further claimed P as joint signatory of S&W Handbags’ bank accounts also intentionally refused to sign cheques to pay staff wages. Nevertheless, Ds refrained from winding up Steps Consulting as P was D1’s brother, and Ds negotiated with P on his terms for disposal of his interests in the Rabeanco Group to them. P and Ds eventually signed the MA.

18.  During negotiations for the MA, D1 suffered from illness and had surgery with slow recovery. D1 claimed P made various misrepresentations “without which [Ds] would not have acquired his shareholding at such high price”:

(a)	During negotiations for the MA, Ds trusted and relied on P on all finances and accounting matters as P had always been the person in charge of finance/operation. Ds claimed they did not understand the impact of the audited accounts of S&W Handbags being qualified since such accounts were not prepared on consolidated basis, and P explained there was no problem and such accounts were accurate. It appeared from S&W Handbags’ audited accounts for years ended 31 March 2013 and 31 March 2014[16] that S&W Handbags had net assets of $149,000,000 and pre-tax profits of $28,000,000 as at 31 March 2014, but Ds claimed the accounting picture was far from accurate or close to reality.
(b)	Ds wanted to conduct due diligence to check “the veracity of the accounts especially the overseas entities but such request was not agreed by [P]. He just told [Ds] that the accounts were OK and they were accurate” (my emphasis). As Ds wished to resolve the matter amicably with P who was D1’s brother, they eventually agreed to buy P’s Shares at a high price. But if not for P’s “misrepresentation that the accounts were OK and that consolidation was not necessary …… [Ds] would have insisted on a due diligence exercise and asked for valuation before [Ds] finalised the price for acquiring P’s shareholding” (my emphasis), which eventually cost them a fortune.
(c)	After signing the MA, Ds took control of all entities of the Rabeanco Group including the overseas operations, and began to realise the many problems that they were unaware of before. Various overseas entities held unsaleable obsolete stock, and made huge losses “on a hidden basis to boost the profitability of S&W Handbags in the past years during 2013 and 2014. Many inter-company loans owed by the overseas entities turned out to be bad debt and non-recoverable”.
(d)	On advice of Ds’ new auditor, the accounts of S&W Handbags (main operating arm of the handbags business) for the year ended 31 March 2015 were prepared on consolidated basis, and the figures therein for total net assets and profitability were significantly adjusted downwards from (ie far lower than) corresponding figures in the non-consolidated audited accounts for the year ended 31 March 2014. The new auditor also advised that the 2015 accounts be adjusted for huge non-recoverable receivables so as to give a true picture of S&W Handbags’ financial status. Upon additional write-offs upon closing down loss-making overseas entities, S&W Handbags only achieved a small profit that year.
(e)	There were problems when Ds closed down the US entities because they discovered P signed various long-term (eg for 7-10 years) leases/contracts with landlords/suppliers, so Ds had to pay huge compensation before they could close down the US operations.
(f)	D1 claimed the Consideration in the MA for acquiring P’s shareholding was overpriced, and had Ds been “made aware of the pictures then, [Ds] would only have agreed to purchase [P’s] shareholding in a much more reasonable price”, so “[Ds] do ask for damages, a reduction of the price of a sum of about HK$28M to 38M or to be assessed as a result of the misrepresentation of [P] to [them] before the execution of the [MA]”.

19.  D1 3^rd Aff filed on 14 December 2017  D1 claimed most if not all operating entities/companies in the Rabeanco Group required unanimous vote for decision-making, so P could easily force a deadlock to frustrate decision-making and operation of such companies, and P was 1 of 2 joint signatories to all company accounts. D1 claimed the Companies’ true financial picture was not fully revealed to Ds until after settlement of HCA1772/2015 (see paragraph 32 below) as the previous auditor did not present consolidated accounts and the new auditor needed time to review the previous accounts and to prepare appropriate financial statements according to applicable accounting standards. “…… [The] audited accounts of [S&W Handbags], the main operating company, was only available to [Ds] on or about 13 October 2015. [Ds] were not given the full picture of the financial situation of Companies until then. However, the matter in HCA1772/2015 was already settled by way of Consent order dated 8 October 2015”.

20.  D1 considered HCA566/2017 (see paragraph 37 below) irrelevant to the present action, and would not address the same.

21.  Summary  It appeared the D1 Affs alleged Ds did not understand the impact of the non-consolidated audited accounts of S&W Handbags, so they trusted and relied on P’s representations “…… that there was no problem and the accounts were accurate” (paragraph 19 of the D1 2^nd Aff and paragraph 18(a) above), and when Ds wanted to carry out due diligence to check the accounts “especially the overseas entities” P disagreed and “…… told [Ds] that the accounts were OK and they were accurate” (paragraph 24 of the D1 2^nd Aff and paragraph 18(b) above).[17]

22.  It also appeared from the D1 Affs that subsequently Ds (who took over control of the Rabeanco Group after execution of the MA and who was not given “the full picture of the financial situation of the Companies” until the 2015 consolidated accounts of S&W Handbags were available on 13 October 2015) realised such representations were false and inaccurate:

(a)	various overseas entities held unsaleable obsolete stock, made huge losses “on a hidden basis to boost the profitability of S&W Handbags” in 2013/2014, and owed many inter-company loans that turned out to be non-recoverable bad debts (see paragraph 18(c) above);
(b)	due to adjustment for huge non-recoverable receivables and write-offs made when closing down the overseas operations, the figures for S&W Holding’s net assets and profitability in the 2015 consolidated audited accounts were significantly lower than and/or adjusted downwards from the corresponding figures in the 2013/2014 non-consolidated audited accounts leaving a small profit for 2015 (see paragraph 18(d) above);
(c)	Ds noted huge compensation had to be paid for closing down the US entities because P committed such entities to long-term leases/contracts with landlords/suppliers (see paragraph 18(e) above).

The above plainly showed the D1 2^nd/3^rd Affs set out Ds’ case as to their misrepresentation defence, including the alleged representations, alleged inducement/reliance and alleged falsity with nothing on their face (bearing in mind the D1 3^rd Aff was adduced into evidence only at the Master Hearing) to suggest Ds’ inquiries/investigations were still ongoing/ incomplete at the time of the Master Hearing.

III.  P’S AFFIRMATION EVIDENCE

23.  P claimed the bare allegations of misrepresentation raised in the D1 Affs were false, incapable of belief and contradicted by contemporaneous records, and further claimed Ds made up such purported defence at a late stage to delay payment of substantial sums owed to P when Ds always had cashflow problems and struggled to meet their payment obligations under the MA and Revised MA.

24.  P said that since SP left Steps Consulting in June 2009, Ds/P worked on expanding the Rabeanco Group into Singapore, Europe and (in/about late 2012) USA with a view to eventual listing on the Hong Kong Stock Exchange. P/Ds were all actively involved in the operations of the Rabeanco Group, and made all major decisions collectively. Before execution of the MA, P was a minority shareholder whereas Ds together held majority shareholdings in the operating entities within the Rabeanco Group, so P claimed it was absurd and misleading for Ds to allege:

(a)	P was solely responsible for or in charge of finances and accounting matters in each of the Companies and also in S&W Handbags;
(b)	Ds as majority shareholders/directors of the Companies did not understand the true financial status or implication of the audited accounts of each of the Companies and also S&W Handbags;
(c)	Ds were prevented from carrying out due diligence on any of the Companies before executing the MA and/or acquiring P’s interests in the Companies, and so had not checked and/or had not been satisfied with the veracity of the audited accounts;
(d)	Ds did not know about the problems with Rabeanco USA Inc (“Rabeanco US”) until after the MA was signed.

25.  P also claimed the decision to expand the Rabeanco Group into USA was made collectively by P/Ds, who were aware of the risks/ uncertainties involved, but who also saw the potential benefits such expansion could bring. So the 3 of them decided to expand into the US market, and in/about mid-2012 decided to acquire Brighteam (with P and Ds as equal shareholders) as holding company of Rabeanco US and to become directors of Rabeanco US. P claimed:

(a)	Ds and P were both heavily involved in setting up the US business, including recruiting the executive team for the US operations and leasing premises in USA;
(b)	since about late 2013 D1 replaced P as executive chairman of Rabeanco US, and Ds and P also started negotiations for the S&P as shown in P’s email to Ds dated 12 September 2013 in which P proposed some major terms on the intended S&P;
(c)	since about February 2014, in anticipation of the S&P, P started to take a passive role in the management of the Rabeanco Group whereas Ds started to make all major management decisions including those in relation to Rabeanco US, and even though P would still express his thoughts/opinions, he would defer to Ds’ decision in case of disagreement;
(d)	the main reasons for the S&P were (i) the unresolved commercial conflict between S&W Handbags and Worldbe International Limited (“Worldbe”), a company solely owned/controlled by Ds that was virtually the sole supplier of products to the Rabeanco Group at the material time,[18] and (ii) differences in opinion between P and Ds on the future direction of the Rabeanco Group (but not difference in views as to whether to expand into the US market as D1 alleged).

26.  Accordingly, P claimed:

(a)	it was incorrect and contradicted by contemporaneous evidence that Rabeanco US was set up and managed by P before execution of the MA;
(b)	given Ds’ willingness to become directors of Rabeanco US, their heavy involvement in setting up the US business, and their awareness that a reason for expansion into the US market was to facilitate eventual listing of the Rabeanco Group, Ds’ assertion of being unwilling to expand to USA was unbelievable;
(c)	the reasons that triggered P’s decision to sell and Ds’ decision to acquire the Shares were not as alleged in the D1 2nd Aff, and P denied that as a joint signatory to S&W Handbags’ bank accounts he had ever intentionally refused to sign any cheque for payment of staff wages.

27.  P claimed Ds falsely alleged they did not know the financial problems with Rabeanco US before they signed the MA; rather, Ds were at all material times fully aware of the difficulties/risks they would have to face after acquiring P’s interests in the Companies, and P had never painted any “rosy picture” relating to Rabeanco US or any of the Companies.

28.  First, D1’s email to P dated 30 January 2014 (ie sent during negotiations on the initial draft of the sale and purchase agreement prepared by Ds’ solicitors) explained D1’s observations on P’s proposed amendments to the draft agreement as follows:

“As you said, there are deadlocks in the existing operations. The expansion plans in the States and Europe are disastrous and cause the companies to bleed a lot and are still bleeding in the magnitude of millions of dollar.

……

First, we agree to buy your 25% for HK$60M to facilitate quick settlement, notwithstanding we certainly (and you can look at the accounts yourself) do not agree that the value of the entire group is worthy of HK$240M. We will face a lot of risks and uncertainties in the years to come and we will have to handle them ourselves.

……

…… we hope that this is a clean buy and sale situation and do not want to complicate the matters further by allowing future participation, or involvement of managements or restrictions in our management rights (as no doubt you know that we need to take very prompt actions in relation to Europe and the States to stop further bleedings).

……

Lastly, I have just gone through a big surgery. I do need time to recover. Likewise the companies need time to recover after the disastrous expansion plans in Europe and the States as well as our ensuing conflicts for months ……” (my emphasis)

P claimed such email unequivocally evidenced Ds’ knowledge and appreciation of the “disastrous” and “bleeding” situation of the US operations.

29.  Secondly, Eva Yiu (“Eva”) of S&W Handbags circulated an email dated 28 May 2014 (ie before the MA was signed) that enclosed a copy “Bankruptcy Action Plan” as approved by Ds that set out inter alia what had to be done to close down the US operations, including termination of long-term leases. P claimed this showed Ds plainly knew Rabeanco US had to be closed down with bankruptcy action pending even before the MA was signed. P further claimed Ds obtained legal advice on Rabeanco US in early May 2014 in light of its then dire financial situation, so P believed Ds were advised and fully understood the extent/nature of Rabeanco US’ debts.

30.  Thirdly, by 12 June 2014 P had sold his Shares/interests in the Companies, but P (who remained as consultant to the Rabeanco Group for about a year after signing the MA) prepared a “story” to be sent to creditors of the US operations (primarily landlords of Rabeanco US’ shops) to explain to them the decision to close down the US operations (see correspondence between P and D1 on 12 June 2014):

“This is a very sad decision to shut down Rabeanco USA operations. This is an unavoidable decision as the business unit is already in big financial problem. While further funding is not available, this is a much more responsible decision to do it earlier rather than later. …….”

D1 approved such “story” by stating in his email dated 12 June 2014 “[the] story is fine for me. Please proceed”, which (according to P) unequivocally demonstrated D1’s knowledge of the troubled financial situation in USA.

31.  After the MA was signed on 29 May 2014, Ds took complete control over the management/finances of S&W Handbags, and its audited financial statements showed Ds became its only directors on 1 August 2014. From June 2014 to about March 2015, Ds made regular payments by post-dated cheques under the MA. Since about April 2015, some of Ds’ post-dated cheques were dishonoured even though they still paid the Interest, and Ds indicated they had cashflow problems and requested deferred payment on a number of occasions. P’s solicitors sent a demand letter dated 15 July 2015 to Ds’ solicitors, and by a reply letter dated 21 July 2015 Ds claimed to have personally told P many times they had cashflow problems and would like to re-schedule payment of the outstanding balance of the Consideration. By letter dated 28 July 2015, Ds’ solicitors stated inter alia that:

“Our clients admit that since 27 April 2015, our clients have not [paid] the stipulated instalments …… Our clients stress that this is due to temporary cash flow problem in the business and they will contact your client directly for arrangement of settlement to the said outstanding.” (my emphasis)

32.  P claimed that due to Ds’ breach of their payment obligations under the MA, he commenced HCA1772/2015 against them on 5 August 2015 to claim inter alia for outstanding Instalments of the Consideration payable from April to July 2015. Quite soon thereafter Ds fully settled P’s claim (with interest) in HCA1772/2015 without raising any of the allegations in the D1 Affs, and by a consent order dated 8 October 2015 HCA1772/2015 was discontinued with costs of such action to P. By a further consent order dated 6 January 2016, Ds were ordered to pay such costs agreed at $181,356.10 by 4 instalments, the last of which was due on/before 15 May 2016 and had since been duly paid. P claimed that if Ds’ present allegations of misrepresentation had any modicum of truth, it was inconceivable for them to have (a) sought indulgence to re-schedule payment of the outstanding balance of the Consideration, (b) agreed to settle P’s claims (with interest) in HCA1772/2015 based on Ds’ failure to pay, and/or (c) agreed to pay P’s legal costs of $181,356.10.

33.  P claimed Ds continued to struggle to meet their payment obligations under the MA, so at Ds’ request P agreed to enter into the SD on 29 April 2016 to give them more time to pay but on condition Ds would pay the then outstanding Interest of $248,491.02. Recital (B) of the SD expressly acknowledged (a) Ds had “failed to pay the Consideration in accordance with the terms of the [MA]” and (b) the Outstanding Consideration was $58,135,000 with outstanding Interest at $248,491.02 (which Interest sum was paid by Ds to P upon execution of the SD without any reservation).

34.  A month after signing the SD, P and Ds completed P’s sale to Ds another 1,000 shares of $1 each in Steps Consulting without any complaint/reservation by Ds pursuant to an agreement for sale and purchase dated 29 May 2014 (“2^nd SC SPA”), and pursuant thereto Ds agreed to pay P a further sum of $5,800,000 according to a payment schedule with payment to be made in 2021.

35.  After signing the SD, Ds paid P 11 Instalments with Interest even though they were occasionally late with payment,[19] but P did not receive any further payment thereafter from Ds who again blamed their ongoing cashflow problem. P claimed that from February to May 2017, Ds through Worldbe’s accountant Iris Chan (“Iris”) repeatedly sought P’s indulgence for more time to make payment as shown in email/WhatsApp messages by P and Iris between 24 February and 26 May 2017:

(a)	Iris by email dated 24 February 2017 (and copied to D1) asked P (i) whether the post-dated cheque in the sum of $150,000 for the 10th Instalment due on 27 February 2017 could be cashed on 13 March 2017 due to Ds’ “insufficient funds”, and (ii) whether payment of interest could be made on 17 March 2017;
(b)	a month later, by email dated 24 March 2017, Iris again asked if the Interest sum for the 11th Instalment ($107,765.67) payable on 27 March 2017 could be paid on 12 April 2017, and P replied by email (copied to D1) agreeing to deposit the “interest cheque” on 7 April 2017 on condition that such cheque would be dated 27 March 2017 and given to him before 29 March 2017 to which Iris replied on 25 March 2017 agreeing to P’s conditions and saying “Thank you so much”;
(c)	on 27 April 2017 (ie due date for payment of the 12th Instalment under the Revised MA), Iris sent Whatsapp message to ask P if such Instalment could be paid on 4 May 2017, and P replied the interest portion could be so paid but payment of the principal sum could not be postponed;
(d)	Ds did not pay P either principal sum or interest for the 12th Instalment on 4 May 2017;
(e)	on 17 May 2017, Iris messaged P again stating “4月的本金及利息要遲一些才能付款, 請知悉”;
(f)	on 23 May 2017, Iris asked P for further time by asking “Andrew, 可否再通融一下, 延些再入票”, but when P explained to her why further delay was not acceptable, Iris told him on 25 May 2017 “要遲一些才能付款”.

36.  When P commenced the present action on 5 July 2017, Ds had defaulted payment of the 3 Instalments due on 27 April, 29 May and 29 June 2017. In the months leading up to commencement of the present action, neither Iris nor Ds alleged any misrepresentation by P, so P believed the purported misrepresentation defence raised in the D1 Affs were just desperate attempts to delay recovery of the outstanding sums due to him.

37.  P recently discovered that on 10 March 2017 the landlord of a property that was leased to DBE (HK) Limited commenced HCA566/2017 against inter alia Ds as guarantors for inter alia outstanding rent of $4,970,000 from July 2016 to March 2017, and such landlord applied for summary judgment with argument hearing scheduled to be heard on 7 November 2017.

38.  By reason of the foregoing matters (especially in light of contemporaneous documents), P claimed Ds’ allegations as to P’s misrepresentations were incapable of belief:

(a)	there was clear documentary evidence to show Ds had always known about Rabeanco US’ financial problems, and were never induced by any “rosy picture” of business prospects alleged to have been painted by P or otherwise;
(b)	the allegations in the D1 Affs were incoherent and inherently implausible:
	(i)	according to the D1 2nd Aff, in/about 2013/2014 (ie when the parties started to negotiate the S&P), (1) the parties disputed over the US expansion plan and future direction of the Rabeanco Group, (2) P caused his majority shareholding in Steps Consulting to frustrate the normal operations of S&W Handbags, (3) P forced Ds to buy the Shares at a high price, and (4) P refused to sign cheques for wages of staff at S&W Handbags;
	(ii)	if any of the above allegations were true, it was inconceivable Ds would still (1) repose great trust in P on all finances and accounting matters or (2) accept P’s alleged assurance that the financial accounts were accurate without performing any independent due diligence;
(c)	further, if as Ds alleged P made any misrepresentation to them before the MA was signed, it was inconceivable Ds would have (i) repeatedly sought P’s indulgence for time to make repayment from July 2015 to May 2017, (ii) agreed to settle HCA1772/2015, (iii) agreed to pay P’s legal costs for HCA1772/2015, (iv) proceeded to sign the SD in April 2016, (v) proceeded to complete the 2nd SC SPA in May 2016 and/or (vi) paid P various Instalments (HK$1,350,000) together with Interest whilst experiencing cashflow problem;
(d)	Ds’ allegations of misrepresentation had never been made in solicitors’ correspondence or in communications between P and Ds/Iris until after P commenced the present action.

IV.  D1 5^TH AFF AND D2 AFF

39.  D1 5^th Aff  D1 made the following “averments and clarifications” in reply to the P 2^nd Aff in relation to Ds’ misrepresentation defence:

(a)	although there were selective emails that predated the MA suggesting knowledge of some problems with overseas entities including Rabeanco US, this did not mean Ds had complete knowledge and knew then the true extent and nature of the Companies’ problems;
(b)	prior to the MA, P was in charge of Rabeanco US’ team and the Companies’ finances, and represented to Ds “the losses in the US amounted to around HK$20 million in the previous 1-2 years. Notwithstanding [Ds] considering closing down the US business (hence the formulation of the Bankruptcy Action Plan and the draft story), [P] reassured [Ds] the US business need not be closed down as (1) the losses there can be offset against gains from elsewhere such as Singapore and (2) it was normal for the recently established US business to make losses initially. [P] played up the prospects of the Companies and also contended that there were further opportunities in the US and elsewhere to explore, especially with there being business for the Companies in Europe and Asia”;
(c)	Ds had no reason to suspect any wrongdoing/impropriety on P’s part at the time, and despite their disagreements on business decisions (which was the reason behind the sale/transfer of P’s Shares to Ds), Ds trusted P (who was D1’s brother) to have acted in the interest of the Companies (including S&W Handbags) as he was in charge of finance/operation, and Ds placed trust/reliance on P’s representations/reassurances pursuant to which Ds formed their views as to the Companies’ outlook/prospects and made decision to purchase P’s Shares;
(d)	Ds trusted and relied on P to come up with a fair/reasonable price for his Shares, which price Ds accepted without (i) insisting on carrying out due diligence exercise even though it did cross their minds, and (ii) asking for a concise breakdown/set of calculations when P presented his valuation of the Shares to Ds;
(e)	P’s role meant the 2013/2014 non-consolidated audited accounts of S&W Handbags and other companies were prepared under his watch, and he simply asked Ds to approve and sign the relevant pages, which they did without examining/scrutinising the contents because at that time they had no reason to suspect any wrongdoing or impropriety, but this did not mean Ds had a complete picture of what had gone on; further, Ds did not have S&W Handbags’ 2014 audited accounts during discussions with P who took away the 2013/2014 audited accounts after they were signed, but Ds did not demand P to produce the same as they trusted and relied on P;
(f)	Ds only started to find out about the situation with the Companies after they signed the MA and took control of such entities, but even though the financial picture became clearer with S&W Handbags’ 2015 consolidated accounts, Ds did not delve into the causes/reasons of the Companies’ problems or go about finger-pointing as these matters were not a priority for them at the time;
(g)	Ds were more concerned with the future, so they were preoccupied with and focused on improving and turning around the Companies, which explained the way they acted in relation to HCA1772/2015, SD and 2nd SC SPA, ie asking P to be more accommodating over payment timeframe/terms and instructing Ds’ legal advisors to liaise with P on such matters accordingly;
(h)	the early involvement of Ds’ legal advisors did not necessarily mean complaints of misrepresentation could have been raised earlier since they did/do not oversee, supervise or scrutinise Ds’ business/ operations, and it did not cross Ds’ mind to take legal action against P at the time of HCA1772/2015, SD and 2nd SC SPA and to seek legal advice on this;
(i)	Ds did not know the contents of communications between Iris and P (which Ds did not admit to have been said by Iris and/or to be binding on Ds), but Ds did instruct Iris to deal with P to seek greater flexibility on payment timeframe;
(j)	it was after P commenced the present action and filed the O14 Summons that Ds sat down to discuss with their legal advisors in full detail the financial situation of the Companies, so it was then that Ds “analysed why things were much worse than initially thought”, and by responding to inquiries by their legal advisors Ds realised the causes/reasons of the problems were attributable to P’s misrepresentations:
	(i)	P downplayed non-recoverable loss in the US business which were closer to about $50,000,000 – $60,000,000 instead of $20,000,000 odd, and did not tell Ds about the comparatively low purchasing power of US customers vis-à-vis those in Asia, and Ds found out P had caused the US business to incur vast unjustified expenses in design, promotion campaigns and purchasing, and had committed Rabeanco US to rental agreements and salary packages at level and rates that were unaffordable and unsustainable;
	(ii)	since S&W Handbags made loans to and was supplier/seller of goods to Rabeanco US, the losses substantially affected the financial position and prospect of S&W Handbags which in turn had impact on the value of its shares, and Ds came to realise they had overpaid for P’s Shares as S&W Handbags was in fact worth much less;
	(iii)	P’s depiction of the Companies’ outlook/prospects as accepted and relied on by Ds was false, misleading and/or inaccurate for P did not raise/mention losses in the European market of about HK$20,000,000 – HK$30,000,000, depreciation in value of stock in Hong Kong and lack of resale value thereof, and the effect/consequences of inter-party loans, which omission, Ds claimed, must have been for inflating the price/value of his Shares that Ds were caused to pay;
	so it transpired that as a result of P’s misrepresentations, Ds suffered loss and damage by paying a heavily inflated price for P’s Shares in the Companies through entering into the MA and SD;
(k)	Ds admitted their case on misrepresentation could have been better presented but there were time constraints due to O14 Summons, and the above matters showed P’s case of misrepresentation was not incapable of belief.

40.  D1 claimed that had Ds found out about the causes/reasons behind the problems earlier such that there was a viable cause of action against P for misrepresentation, they would not have signed further documents/agreements such as the SD, but would most likely have proceeded to take legal action against P for being induced by and having relied on P’s misrepresentations to pay the highly inflated price for the Shares in the Companies.

41.  Ds alleged that since P did not make positive responses to Ds’ assertions about obsolete stock with no resale value, huge hidden losses in the overseas entities and inter-company loans that turned out to be non-recoverable bad debts without plausible reason offered for not doing so, this would lend weight and be material to Ds’ case on misrepresentation.

42.  D1 claimed Ds were informed after the Master Hearing that the Inland Revenue Department (“IRD”) had commenced investigation into the accounts of S&W Handbags and Worldbe since 2011, and he was prepared to render assistance. D1 claimed (a) the relevant accounts from 2011-2014 were prepared under and supervised by P, (b) the IRD investigation by Investigation Team 4 was not a routine matter, (c) the “investigations might reveal the relevant accounts prepared under and supervised by [P] to have been falsified, misleading and/or riddled with inaccurate information and/or misrepresentations by P” (my emphasis), and (d) “the results of the investigations may be of assistance to [Ds’] case of misrepresentation” (my emphasis).

43.  Given the respective differing case of the parties on misrepresentation, D1 believed there was a triable issue that would go to the heart of such dispute. D1 claimed that to properly determine Ds’ case of misrepresentation, their knowledge, the circumstances faced, the dealings between the parties at the material times, and the IRD investigation and results thereof were all relevant matters to be examined and would likely constitute/trigger factual disputes that should only be determined by the trial process. It was said Ds’ case at present was not incapable of belief.

44.  Observations on the D1 5^th Aff  It appeared the D1 5^th Aff alleged P made misrepresentations that “the losses in the US amounted to around HK$20 million in the previous 1-2 years” (ie P downplayed the non-recoverable loss in the US business), and “the US business need not be closed down as (1) the losses there can be offset against gains from elsewhere such as Singapore and (2) it was normal for the recently established US business to make losses initially. [P] played up the prospects of the Companies and also contended that there were further opportunities in the US and elsewhere to explore, especially with there being business for the Companies in Europe and Asia” (see paragraph 39(b) and (j)(i) above).

45.  The D1 Affs showed Ds realised the falsity/inaccuracy of P’s alleged representations when (a) they had to face up to and deal with the matters in paragraph 22(a)-(c) above after execution of the MA and taking over sole control of the Rabeanco Group, and (b) they were given “the full picture of the financial situation of the Companies” by mid-October 2015 when the 2015 consolidated accounts of S&W Holding were available[20] (see paragraph 19 above). It was therefore apparent from the D1 Affs that Ds knew the constituent elements of the misrepresentation defence and the problems with P’s alleged representations (ie their alleged falsity/ inaccuracy) well before commencement of the present action (see paragraphs 63-65 below), but the D1 5^th Aff tried to put a gloss on this by alleging Ds only found out later the causes/reasons behind the problems (see paragraphs 70(a)-(b) below). In my view, such assertion as well as the metamorphosis of the alleged representations by P in the D1 2^nd Aff to those in the D1 5^th Aff (which matters must necessarily be a matter of Ds’ recollection) did not sit well with Ds’ appreciation of the constituent elements of the misrepresentation defence (see paragraphs 67-68 below). In any event, even though the D1 5^th Aff stated D1 wished to respond to the P 2^nd Aff, it did not say Ds had not completed their inquiries/ investigations by the time of the Master Hearing.

46.  D2 Aff  By the D2 Aff, D2 claimed the information/evidence set out in the D1 5^th Aff were not available or could not have been obtained before the Master Hearing. After entering into the MA and SD, Ds focused their energies on turning around the Companies and their subsidiaries/ businesses, and there was no reason for them to delve and look back into what had gone wrong previously. After P commenced the present action on 5 July 2017 and filed the O14 Summons on 28 July 2018, Ds immediately sought advice from their legal advisors and came to realise there was “…… pressing need to look into the financial situation of the various companies, the problems faced and the causes and reasons thereto” (my emphasis).

47.  D2 claimed large-scale and extensive inquiries/investigations that concerned the Companies and their subsidiaries (which covered many years before 2015 when P was in charge of finances) were only started in August 2017. “We had to dig up and trough through documents and recall information dating back to two years or more before”, which was time-consuming and costly with multiple correspondence exchanged among Ds, their legal advisors and relevant employees/professionals “who did the groundwork”. It was said such inquiries/investigations were still at an early stage by September 2017, but Ds managed to come up with piecemeal information/evidence for the D1 2^nd Aff even though “…… many things were still in the air and not known to [Ds] at the time given the ongoing inquiries and investigations”. Ds claimed their difficulty was reflected by the need for belated leave to file the D1 3^rd Aff returnable at the Master Hearing. On such basis, D2 claimed Ds’ misrepresentation defence was handicapped by time pressure and by piecemeal, scattered and incomplete picture at the time, so Ds could only put forward the evidence in the D1 Affs in summary form and scattered manner. D2 claimed the ongoing inquiries/investigations meant the ramifications of exchanges with P were not entirely known, and Ds were not in a position to proffer the same at the Master Hearing. D2 went on to say “[the] inquiries and investigations undertaken were only completed after the [Master Hearing]. The findings and results of the inquiries and investigations were therefore only available after 13 December 2017 and have been summarised and put forward in the [D1 5^th Aff], notably paragraph 7 and the subparagraphs therein.”

48.  D2 said a key reason given by the Master in finding for Ps was that Ds’ complaints were not put forward earlier, particularly given the involvement of D’s present legal team. It was said the Master did not pose this point at the Master Hearing, so Ds had no opportunity to address the same let alone appreciate its significance as well as the need adduce information/evidence and make submissions on the same. It was said this explained why information/evidence in this regard was not put forward/argued at the Master Hearing, so fairness required that Ds be allowed to address such matter by the D1 5^th Aff given the serious implications of the summary judgment application. D2 added that matters in paragraph 10 of the D1 5^th Aff onwards concerned developments/events after the Master Hearing and could not have been raised before the Master.

49.  D2 further claimed the information/evidence in the D1 5^th Aff (particularly paragraph 7 and its sub-paragraphs therein that were most relevant to the misrepresentation defence) would probably have an important influence on the result of the O14 Summons and would presumably be believed as it demonstrated a more complete/ comprehensive case on the misrepresentation defence that was not incapable of belief. D2 claimed the same could also be said for the IRD investigation raised in the D1 5^th Aff for they “suggested wrongdoing on the part of [P] and give credence to [Ds’] case of having relied upon and being induced into the transaction by way of misrepresentations (fraudulent or otherwise) by [P] as to the financial situation of the Companies”. D2 believed there was no reason why the matters in the D1 5^th Aff were not to be believed or at least incapable of being believed.

50.  D2 suggested whilst P might take issue over the timing of the Leave Summons made a week before the Appeal Hearing, she claimed to have been advised that the timing of the application had no bearing on whether it would be granted or not.

V.  LEGAL PRINCIPLES

51.  Appeal against master’s decision  It is trite that an appeal from the master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the master; but he is in no way bound by it.^[21]

52.  Summary judgment A plaintiff may invoke the procedure under Order 14 of the RHC where there is no valid defence to his claim or otherwise a triable issue. The rationale is set out in Hong Kong Civil Procedure 2019:[22]

“ ...... The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in case in which the defendant clearly has no defence to the plaintiff's claim: Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225.

‘Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defence, equally, there is injustice to the plaintiff’ (Manciple Ltd v Chan On Man [1995] 3 H.K.C. 459 at 466, per Mortimer JA).

The machinery of O.14 works on the basis that if the plaintiff's application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed. ......”

53.  In Ng Shou Chun v Hung Chun San,[23] Godfrey J noted it was not appropriate to embark on a mini‑trial of the action on affidavit evidence.[24] The court should ask itself the question whether what the defendant says is credible or believable. If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment. Hong Kong Civil Procedure 2019 goes on to say that:[25]

“...... ‘In considering whether there are triable issues the Court will, of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. But what the Court should not do is to conduct a mini‑trial on complicated factual issues’: Paul Y Management Ltd v. Eternal Unity Development Ltd (unrep., CACV16/2008, [2008] H.K.E.C. 1359 at [19] per Cheung J.A. ……”

“...... The defence set up need only show that there is a triable issue or question or that for other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law such as could have been raised on the former demurrer to the plea and no possibility of a real defence on the question of fact (Jacobs v. Booth’s Distillery Co. (1901) 85 L T 262; Runnacles v. Mesquita (1876) 1 Q.B.D. 416). 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, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good and bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend: Billion Silver Development Ltd v. All Wide Investments Ltd [2000] 2 H.K.C. 262, applying Extraktionstechnik Gesellschaft für Anlagenbau Gmbh v. Oskar (1984) 128 S.J. 417 ......”

54.  But to raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim that as a result of his own parsimony in details there is an obscurity which must await trial for illumination.^[26] Further, “‘[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism’ (per Megarry V.-C. in Lady Anne Tennant v. Associated Newspapers Group Ltd [1979] F.S.R. 298)”.^[27]

55.  Adduce further evidence on appeal  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”.

56.  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[28] to be satisfied.[29] 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.

57.  In the case of an application for summary judgment, the conditions in (b)-(c) above will 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 there is no injustice in requiring a defendant to use diligence as is reasonable in the circumstances to put before the tribunal 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”.[30]

58.  This is emphasised by Poon JA in Bank of New York Mellon v Sun Jiangrong[31] 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”.

59.  The observations in paragraph 57 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 Marshallcould 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:[32]

“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.”

60.  In my view, the above guidance applied mutatis mutandis with equal force to applications to adduce fresh evidence for appeal from master’s decision. This was echoed by DHCJ Au-Yeung (as she then was) in Bank of China (Hong Kong) Limited v Certain Aim Limited[33] as follows:[34]

“… Order 58, rule 1(5) was introduced to curb the undesirable practice before the Civil Justice Reform when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a Master. Rule 1(5) aims at effecting a change of culture so that parties should prepare their application properly at the earliest possible opportunity and lay all cards on the table prior to the hearing before a Master. The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice. …”

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).

VI.  LEAVE SUMMONS

61.  The Leave Summons was undoubtedly very late. There are 2 aspects to the matter of lateness: (a) whether Ds satisfied the 1^st limb of the Ladd v Marshall conditions, ie whether the evidence could not have been obtained with reasonable due diligence for use at the Master Hearing, and (b) whether leave should not be granted given the lateness of the application even if Ds satisfied the 1^st limb of the Ladd v Marshall conditions.

62.  Ds claimed that prior to commencement of the present action they focused on turning the Companies and their subsidiaries/businesses around, so there was no reason for them to look back to the time when P was in charge of finance/operation, hence the relevant inquiries/ investigations only started in August 2017 after Ps commenced the present action and filed the O14 Summons, and as the inquiries/investigations took time, the evidence in the D1 5^th Aff could not have been obtained with reasonable due diligence for use at the Master Hearing. But in my view, the D1 Affs and D1 5^th Aff gave a different picture.

63.  According to the D1 1^st Aff filed on 9 August 2017 (ie about the time when Ds allegedly started their inquiries/investigations), Ds already anticipated filing further detailed affirmation to set out P’s misrepresentations as to “various entities” (but specifically referring to Rabeanco US) and to exhibit voluminous documents in support. Clearly, by the time of the D1 1^st Aff, Ds already knew the key constituent elements of their misrepresentation defence, ie P painted a “rosy picture” and made “many misrepresentations” prior to the MA (ie the alleged representations) that were “very material to the price” Ds paid for acquiring the Shares (ie the alleged inducement/reliance) but which was subsequently discovered to be inflated/overpriced (ie the alleged falsity), and they further knew P’s alleged misrepresentations concerned Rabeanco US and “various entities” which suffered huge losses and required a fortune to close down (see paragraph 15 above). Clearly Ds had Rabeanco US and “various entities” on their minds at that time, and they well knew the scope/focus of their misrepresentation defence, which meant they must already have recollection and information to hand. In my view, Ds could not have started their inquiries/investigations from scratch only after commencement of the present action and/or after filing of the O14 Summons as alleged in the D2 Aff (see paragraphs 46-50 above).

64.  In the D1 2^nd Aff filed on 13 November 2017, D1 was able to set out Ds’ case on (a) the history of business relationship between the parties, (b) P’s alleged misrepresentations (see paragraphs 18(a)-(b) above and summarised in paragraph 21 above) “without which [Ds] would not have acquired his shareholding at such high price” (and indeed D1 was even able to assert $28 to $38 million should be shaved off the Consideration as a result of P’s misrepresentations – see paragraph 18(f) above), (c) the alleged inaccurate picture presented by 2013/2014 non-consolidated accounts of S&W Handbags, and (d) the revelation of such alleged inaccurate picture to Ds after they took control of the Rabeanco Group when they had to deal with write-offs (for unsaleable obsolete stock and non-recoverable receivables), to pay compensation for closing down the US/overseas operations, and to learn the “true picture of S&W Handbag’s financial status” presented in the 2015 consolidated accounts of S&W Handbags, which would also reflect the financial status of the US/overseas operations due to unsaleable obsolete stock (supplied by S&W Handbags) held by such entities, and non-recoverable inter-company loans owed (to S&W Handbags) by such entities (see paragraphs 18(c)-(e) above, footnote 20 above and summary in paragraph 22 above). Plainly, these matters were known to Ds well before the commencement of the present action let alone the Master Hearing, and Ds were able to exhibit documents to the D1 2^nd Aff as alluded to in the D1 1^st Aff.

65.  The D1 3^rd Aff that was adduced into evidence at the Master Hearing was significant on 4 matters:

(a)	the D1 3rd Aff did not elaborate on the alleged representations by P despite Ds having sighted and considered the P 2nd Aff;
(b)	the D1 3rd Aff confirmed that the new auditor had conducted an accounting review before he prepared the 2015 consolidated audited accounts of S&W Handbags according to applicable accounting standards (see paragraph 19 above), which reinforced the view that Ds’ inquiries/investigations could not have started only after commencement of the present action;
(c)	S&W Handbags was said to be main operating entity in the Rabeanco Group and had to write off non-recoverable inter-company loans (presumably lent to support other loss-making companies/entities within the group) that had deteriorated into bad debts, and the 2015 consolidated accounts had been adjusted to take into account non-recoverable receivables to give a true picture of S&W Handbags’ financial status (see paragraph 18(d) above) and “full picture of the financial situation of the Companies” (see paragraph 19 above), which echoed the observations in paragraph 64 above;
(d)	Ds came to know the “full picture of the financial situation of Companies” by 13 October 2015, ie more than 2 years before the Master Hearing (see footnote 20 above).

66.  More importantly, there was nothing in the D1 2^nd and 3^rd Affs to suggest Ds’ inquiries/investigations were in any way incomplete (indeed the analysis in paragraphs 64-65 above suggested otherwise), and Ds were able to set out the alleged representations by P in the D1 2^nd Aff (summarised in paragraph 21 above), their alleged reliance on such representations, and the alleged falsity/inaccuracy of such alleged representations (summarised in paragraph 22 above). By the D1 3^rd Aff, D1 merely claimed Ds wished to respond to certain matters raised in the P 2^nd Aff.

67.  Thus, irrespective of the question of whether or not the misrepresentation defence had any arguable merits which I will deal with in Part VII(a) below, Ds squarely raised and addressed the issue of misrepresentation in the D1 Affs. They were also well aware of the pressing need to put forward an arguable defence to oppose the O14 Summons (see paragraph 46 above), and had 5 months until the Master Hearing to place full affirmation evidence in opposition (with leave if necessary as in the case of the D1 3^rd Aff). Despite D1’s assertions in the D1 5^th Aff that Ds did not have full/complete knowledge at the time of negotiations for the MA and shortly thereafter (see paragraph 39(a) and (e) above), the D1 5^th Aff confirmed Ds’ case on misrepresentation was elicited when they sat down to discuss full details of the financial situation of the Companies with their legal advisors after P commenced the present action and filed the O14 Summons, and upon analysis and response to inquiries from their legal advisors (see paragraphs 39(j) and 45 above). As alluded to above, there was no suggestion in the D1 5^th Aff itself that Ds’ inquiries/investigations were incomplete at the time of the Master Hearing, and/or part/all of its contents were derived from results of inquiries/ investigations carried out only after the Master Hearing.

68.  It must also be remembered at the time the D1 5^th Aff was made it was for the Stay Summons and not the Appeal, and it raised “averments and clarifications” in reply to the P 2^nd Aff for the Stay Summons without indication it was “new” evidence acquired after the Master Hearing (save for the IRD investigation) to be placed before the court for the Appeal. Further, such “averments and clarifications” also raised concerns (which concerns were also pertinent to the 2^nd and 3^rd limbs of the Ladd v Marshall conditions):

(a)	D1 did not explain why, when the “huge loss” of Rabeanco US was raised as early as in the D1 1st/2nd Affs as a material element of the misrepresentation defence (see paragraphs 15 and 18(c) above), it was only disclosed for the 1st time in the D1 5th Aff that P orally represented to Ds (which therefore must have been a matter of recollection) that “the losses in the US amounted to around HK$20 million in the previous 1-2 years”. This also raised question why it was only belatedly asserted in the D1 5th Aff that the loss suffered by the US business was close to $50 to $60 million rather than $20 million, which assertion wore thin in the absence of any documentary support despite alleged completion of extensive inquiries/ investigations and document review before the D1 5th Aff.
(b)	D1 did not explain why, when the P 2nd Aff already referred the emails in paragraphs 29-30 above issued before and shortly after the execution of the MA that alluded to contemplated bankruptcy action and the parties agreed to a “story” to be put to creditors for closing down the US operations, P would have orally represented to Ds that the US business need not be closed down (which was mentioned for the 1st time in the D1 5th Aff) (see paragraph 39(b) above). This was plainly a matter of recollection, and yet there was no mention of this in the D1 3rd Aff which was made in reply to the P 2nd Aff. Even in the D1 5th Aff, there was no sensible explanation why, within 2 weeks of signing the MA, P offered the “story” for creditors’ consumption which D1 immediately approved for implementation if P had orally represented to Ds there was no need to close down the US operations.
(c)	The alleged oral representation that losses in the US operations could be offset from gains in, say, Singapore was first raised in the D1 5th Aff, which again must be a matter of recollection. But there was no explanation for such belated recollection when the alleged “huge loss” of the US operations were in Ds’ minds even at the time of D1 Affs. Further, the alleged oral representation that it was normal for the US business to suffer loss initially was again first raised in the D1 5th Aff, but such alleged representation did not sit well with Ds’ understanding even before execution of the MA that the US operations were “bleeding” disastrously and had to be closed down (see paragraphs 28-29 above), and Ds offered no credible explanation.
(d)	In asserting that Ds trusted and relied on P to come up with a reasonable price for the Shares such that they did not ask for due diligence or breakdown of valuation of the Shares (see paragraph 39(d) above), there was no reason why this could not have been raised before the Master Hearing in light of their understanding of the constituent elements of their misrepresentation defence.
(e)	It was raised for the first time in the D1 5th Aff that Ds signed the 2013/2014 audited accounts of S&W Handbags and other companies without examining the contents (see paragraph 39(e) above). This, of course, did not sit well with the statement as to directors’ responsibility in the auditor’s report in the 2013/2014 audited accounts of S&W Handbags (see paragraph 87 below). Further, I note the 2014 accounts were dated 31 July 2014, ie 2 months after the execution of the MA and completion of the S&P, when Ds took over control of the Rabeanco Group, so I am quite unable to see how P could be blamed for Ds have allegedly blindly signed such audited accounts. Ds did not disclose the audited account of other companies of the Rabeanco Group or assert they were unavailable or explain how they were inaccurate.
(f)	The allegation in paragraph 39(e) above that P took away the 2013/2014 audited accounts of S&W Handbags after they were signed but Ds did not demand their production was also first elicited in the D1 5th Aff, but such allegation was (i) unconvincing as the 2014 accounts dated 31 July 2014 was made after Ds had taken over control of the Rabeanco Group, and (ii) pointless as Ds via Gala Prosper being a corporate director of S&W Handbags could have required access to such accounts any time. In any event, the alleged inaccuracy of the 2013/2014 audited accounts of S&W Handbags was a key feature of the misrepresentation defence and the D1 1st/2nd Affs, so I am unable to see how Ds’ recollection of how they signed such accounts and what P did with such accounts only came about after the Master Hearing.
(g)	The allegations in paragraph 39(h)-(i) above were argumentative responses to the P 2nd Aff that referred to Ds having the benefit of legal advice and also referred to communications between P and Iris. Those matters plainly could have been raised in reply in the D1 3rd Aff, and I see no justifiable basis for saying they could only be elicited after the Master Hearing.
(h)	I also note Ds raised a number of matters in paragraph 39(j) above (eg non-recoverable loss in the US business was close to $50 to $60 million, US customers had comparatively low purchasing power, loss suffered by European entities were about $20 to $30 million), which were nothing more than bare assertions even though they allegedly spent months in inquiries/investigations and went through voluminous documents. The unfairness to P at being called upon to meet such bare assertions without opportunity to reply was instantly obvious, especially when there was no specificity as to the source of such information and no explanation as to why such particular source was not available before the Master Hearing. This also undermined the believability of such bare assertions.

69.  It was only in the D2 Aff made a week before the Appeal Hearing and against the procedural background that I have explained in Part I above that Ds asserted the D1 Affs placed before the Master were piecemeal and scattered, and their large-scale inquiries/investigations involving many companies/entities had not been completed by the time of the Master Hearing (even though Ds admitted their case on misrepresentation could have been better presented). It was also the D2 Aff rather than the D1 5^th Aff that suggested the latter summarised the findings/results of inquiries/investigations that continued after the Master Hearing.

70.  To support such contention, D2 claimed Ds had to dig up and go through documents going back 2 years or more with extensive liaison among Ds, legal advisors and employees/professionals. I am unimpressed by such bare assertions, and even on the basis of Ds’ case I find such contentions unpersuasive:

(a)	Ds’ misrepresentation defence was based on alleged oral representations by P, which obviously turned on Ds’ recollection/memory. As explained in paragraph 63 above, as early as the D1 1st Aff, Ds who were in sole control of the Rabeanco Group after completion of the S&P were well aware of the key constituent elements of their misrepresentation defence. Further, much investigative groundwork appeared to have been done by 2015 when Ds (i) liaised with and were advised by their new auditor on preparation of proper accounts that would reflect the “true” or “full” picture, (ii) provided financial information for the new auditor to review, (iii) reviewed the 2015 consolidated accounts of S&W Handbags that revealed alleged problems with the financial picture previously presented by P to Ds, and (iv) learned about and dealt with huge losses, non-recoverable receivables, unsaleable obsolete stock, unfavourable long-term commitments in closing down the overseas/US operations. So even on Ds’ case, they clearly knew the problems (ie the falsity/inaccuracy of the alleged representations by P) that allegedly misled them into signing the MA.
(b)	Indeed, D2 in the D2 Aff emphasised failure to fully appreciate the causes/reasons behind the misrepresentation problems and ramifications of exchanges with P. But I am unimpressed by such claim when the D1 Affs clearly showed even on Ds’ case they were aware of the constituent elements of their misrepresentation defence (see discussion in paragraphs 63-68 and 70(a) above).
(c)	Indeed, other than the matters raised in paragraph 42 above concerning the IRD investigation to which I will return to below, the matters canvassed in the D1 5th Aff concerned matters/events that occurred before the MA was signed and/or before P commenced the present action let alone the Master Hearing. Paragraph 7(a) of the D1 5th Aff responded to emails referred to in the P 2nd Aff (see paragraphs 28-30 above), and paragraph 7(g)-(h) thereof set out Ds’ explanations for settling HCA1772/2015, entering into the SD and completing the 2nd SC SPA, which matters had already been raised in the P 2nd Aff filed on 13 November 2017, so they were matters Ds already knew but did not respond to in the D1 3rd Aff dated 28 November 2017. Indeed, other than the bare assertions discussed in (d) below, Ds gave no particularity as to the nature of any specific inquiry/investigation that was still outstanding at the time of the Master Hearing that prevented them from addressing any/all of the matters in paragraph 7(a)-(h) of the D1 5th Aff, nor gave any specificity as to precisely when after the Master Hearing the relevant inquiries/investigations were completed.
(d)	The assertions in paragraph 62 above were bare assertions since Ds failed to condescend upon particulars as to (i) the nature of the alleged inquiries/investigations, (ii) what was outstanding as at the Master Hearing, and (iii) why the alleged outstanding inquiries/investigations could not have been dealt with prior to the Master Hearing when Ds had been in sole control of the Rabeanco Group for years and had 5 months at their disposal after the commencement of the present action. Neither the D2 Aff nor D1 5th Aff asserted Ds had to wait for any particular document/report (and the 2015 consolidated accounts of S&W Handbags were available since mid-October 2015) from any auditing professional or employee, or for any specific information to be provided by any employee or third party. Since the Leave Summons was Ds’ application on “special grounds” and the 1st limb of the Ladd v Marshall conditions pertained to matters wholly within Ds’ knowledge, it behoved Ds to be forthcoming with particulars of what they had done before the court would begin to consider exercising its discretion to admit new evidence.
(e)	As early as in August 2017, Ds by the D1 1st Aff already asserted documents would be exhibited to the further detailed affirmation. In the D2 Aff it was said Ds had to dig up and go through documents going back 2 years or more, but the D1 3rd Aff only exhibited 1 email in 2015, and the D1 5th Aff and D2 Aff had no exhibits at all. What and where were the documents alluded to the D1 1st Aff and D2 Aff other than those already exhibited to the D1 2nd Aff? When did Ds dig up those documents going back 2 years? Why were Ds unable to dig up such documents (if any) in the 5 months before the Master Hearing? What documents (if any) prompted Ds to recollect what matters after the Master Hearing? Ds failed to offer any answers. The paucity of Ds’ documents was underlined by the fact that even though the D1 5th Aff alleged the P 2nd Aff referred to “selective emails predating the [MA] ……” (see paragraph 39(a) above), no full/complete email chain was referred to or exhibited in the D1 5th Aff, which did not sit well with alleged efforts made over half a year to dig out and review documents, and which also undermined the veracity of Ds’ assertion of ongoing inquiries/investigations that continued after the Master Hearing.
(f)	The D2 Aff suggested Ds had to recall information dating back 2 years or more, and further suggested ramifications of Ds’ exchanges with P were not entirely known until completion of inquiries/investigations after the Master Hearing. As these were matters of recollection by Ds, 5 months appeared to be more than adequate time for them to put down their recollection in affirmation evidence when all along they were well aware of the scope/focus and constituent elements of the misrepresentation defence. I am unable to discern any reference in the D1 5th Aff and D2 Aff as to what document Ds sighted or which person Ds spoke to after the Master Hearing that prompted what aspect of their recollection. I reiterate what I have said in paragraphs 65-68 above.
(g)	Other than the matter of IRD investigation in paragraph 42 above which I will turn to below, I find Ds failed to show the evidence in the D1 5th Aff (including the matters in paragraph 7(i)-(j) thereof) could not have been obtained with reasonable due diligence for use at the Master Hearing.

71.  In my view, the D2 Aff had the odour of belated effort to slip in affirmation evidence to bolster the Appeal in face of the adverse Master Order, and I am not satisfied the 1^st limb of the Ladd v Marshall conditions was satisfied.

72.  Mr Hariman next argued that even if the 1^st limb of the Ladd v Marshall conditions was not fulfilled, Ds had not replied to certain matters raised in the P 2^nd Aff and they should be afforded the opportunity to do so. Such argument is not understood. To adduce new evidence for the Appeal on “special grounds”, Ds had to establish all 3 limbs of the Ladd v Marshall conditions. Having failed to establish the 1^st limb and having had the opportunity to respond to matters raised in the P 2^nd Aff by way of the D1 3^rd Aff, I see no “special grounds” to give Ds a further bite of the cherry when they did not seize the opportunity afforded by the D1 3^rd Aff to respond to such matters.

73.  In the D1 5^th Aff, D1 made the bare assertion that Ds were informed “in the past month” of an investigation by the IRD into the accounts of S&W Handbags (see paragraph 42 above). There was no document to evidence such IRD investigation or explain the focus/scope of such investigation (save for D1’s bare assertion that it was not a routine matter). Whilst it seemed the discovery of such IRD investigation was made after the Master Hearing, it is pertinent to note Ds had to satisfy the 2^nd and 3^rd limbs of the Ladd v Marshall conditions, ie the evidence would probably have an important influence on the result of the Appeal (though it need not be decisive) and the evidence must be such as is presumably to be believed.

74.  In my view, given the sad lack of particulars as to the nature, focus and scope of the IRD investigation, it was a speculative leap of faith for D1 to assert the IRD investigation might reveal the relevant accounts “prepared under and supervised by [P] to have been falsified, misleading and/or riddled with inaccurate information and/or misrepresentations by P”, especially in view of the seriousness of such allegations. I am not persuaded Ds even began to show any arguable basis to suggest the IRD investigation would aid their case of misrepresentation against P and/or would have an important influence on the result of the Appeal.

75.  As for the 3^rd limb of the Ladd v Marshall conditions, the fact IRD commenced investigation of the accounts of S&W Handbags and Worldbe as from 2011 was neither here nor there since Ds did not provide any believable basis for the speculative suggestion that such investigation might “have been falsified, misleading and/or riddled with inaccurate information and/or misrepresentations by P”. It was of particular concern that the IRD investigation was said to concern the accounts of both S&W Handbags and Worldbe (the P 2^nd Aff explained that the latter was a company solely owned and controlled by Ds), and Ds must have known the P 2^nd Aff had already alluded to commercial conflict between S&W Handbags and Worldbe, ie the latter was at the material times virtually the sole supplier of products to the Rabeanco Group (as reflected in the relevant accounts of S&W Handbags – see footnote 18 above), which was said to be one of the reasons for the S&P (see paragraph 25(d)(i) above). Ds had no response on this, and by being silent on the nature/scope of the IRD investigation Ds failed to allay concern that such investigation might possibly be related to such matter. I am unable to see how the D1 5^th Aff on the IRD investigation would lend credence to Ds’ case of misrepresentation.

76.  This nicely brings me to the 2^nd and 3^rd limbs of the Ladd v Marshall conditions as to other aspects of the D1 5^th Aff. I repeat my views in paragraph 70 above, and propose to further deal with those matters on de bene esse basis in the discussion in Part VII(a) below in relation to the Appeal. But suffice to state here I find Ds have failed to show the “new” evidence could have material impact on Ds’ Appeal and/or was presumably to be believed.

77.  Mr Hariman submitted the “new” evidence in the D1 5^th Aff “along with [the D2 Aff]” would help explain the difficulties Ds faced in particularising the precise contents of P’s misrepresentations, which was important as the Master found against Ds’ case of misrepresentation on the premise that Ds knew about the financial situation when entering into the MA and/or SD given (a) contemporaneous emails predating the MA showed Ds were well aware of the problems associated with the Rabeanco Group’s overseas operations, (b) Ds signed the 2013/2014 audited accounts of S&W Handbags, (c) the misrepresentation complaints were not raised earlier, and (d) Ds received the 2015 consolidated accounts of S&W Handbags on 13 October 2015, but still proceeded to sign the SD and make payments under the Revised MA without reservation. It was said the Master oversimplified the matter, and the D1 5^th Aff would help to clear things up by explaining that although the financial situation “may have been made clearer by the receipt of the consolidated accounts”, it did not mean that Ds knew the complete financial situation and all causes/reasons behind the problems they faced at the time, and that their ignorance of the entire picture played a part in their decisions in (a)-(d) above and in not raising their misrepresentation allegations earlier.

78.  I am unconvinced by these arguments:

(a)	Ds only relied on the D2 Aff to support the Leave Summons, and did not seek to adduce the D2 Aff into evidence for the purpose of the Appeal, hence the contents of the D2 Aff were immaterial to the 2nd and 3rd limbs of the Ladd v Marshall conditions.
(b)	The purpose of granting leave for a party to adduce “new” evidence on appeal is to secure justice by enabling a party to adduce materially relevant evidence that comes to light only after the hearing despite reasonable diligence. It is not an avenue for a litigant when faced with an adverse judicial decision to challenge the court’s findings and/or to shore up his case for the appeal by way of greater factual elaboration. It must be remembered that (i) Ds carried the burden to establish an arguable case of misrepresentation, (ii) they could not say they were unaware of the relevant matters/issues expressly raised in the P 2nd Aff (see eg paragraph 77(a)-(d) above), (iii) the D1 5th Aff was, as stated in such affirmation itself, a “[reply] to [P’s] remarks about the defences raised”, and (iv) I am not satisfied the matters raised in the D1 5th Aff (save for the IRD investigation) were new matters that came to light after the Master Hearing notwithstanding D2’s assertion otherwise in the D2 Aff. To allow Ds to adduce further affirmation evidence to “rebut” the Master’s findings/conclusions without satisfying all the Ladd v Marshall conditions would unfairly move litigation goalposts against P who could not be faulted on the matter of the Leave Summons.
(c)	I note in paragraph 16 of the Decision that counsel for Ds at the Master Hearing “conceded that whatever might have happened prior to the signing of the [MA] would not affect or taint the validity or enforceability of the [SD], which was executed after [Ds] received the consolidated accounts of S&W Handbags on 13 October 2015”.[35] At the Appeal Hearing, Mr Hariman did not seek to resile from such concession. That being the case, it begged the question why the so-called “new” evidence would be relevant.
(d)	I reiterate the discussions in paragraphs 61-71 above and Part VII(a) below when I come to consider the Appeal in light of the D1 5th Aff on de bene esse basis.

79.  In any event, the extreme lateness of the Leave Summons justified exercising of my discretion to dismiss such application even if the Ladd v Marshall conditions were satisfied (which I disagree). First, the Appeal was lodged on 27 December 2017 and the Appeal Hearing was fixed on 4 January 2018, so when Ds filed the D1 5^th Aff on 30 April 2018 they were well aware their Appeal was due to be heard on 24 July 2018. If, as Ds claimed, their enquiries/investigations to unearth information/evidence in response to the O14 Summons and P 2^nd Aff were completed before they filed the D1 5^th Aff on 30 April 2018, Ds could not have forgotten or omitted to seek leave to adduce such further evidence for the Appeal. But Ds did not do anything about this until June/July 2018 when they tried to restore the Stay Summons to be heard at the Appeal Hearing and to include the D1 5^th Aff in the hearing bundle. Still there was no attempt to adduce the D1 5^th Aff for the Appeal in contra-distinction to the Stay Summons. But when Ds’ efforts to restore the Stay Summons to be heard at the Appeal Hearing met with resistance and were foiled by this court, Ds then took out the Leave Summons just a week before the Appeal Hearing. Given such chronology of events, there was force in P’s concern that it was a tactical/forensic exercise to slip in the D1 5^th Aff by the backdoor, but when Ds found the backdoor was bolted they had to knock on the front door with the Leave Summons. This view was reinforced by the fact, as Mr Hariman was constrained to acknowledge, there was no or no acceptable explanation for Ds’ inaction for over 2 months from 1 May to 17 July 2018.

80.  Further, P might be forgiven for preparing for the Appeal on the assumption that Ds would not adduce any “new” evidence (and hence they did not react to the D1 5^th Aff for the purpose of the Appeal), especially when there was no application at all since 30 April 2018 to adduce the D1 5^th Aff as evidence for the Appeal. In this respect, it would be pertinent to note 2 matters. First, this was not the first time Ds tried to adduce late affirmation evidence prior to court hearing. Indeed, Ds applied to adduce the D1 3^rd Aff as evidence shortly before the Master Hearing, and was granted leave at the Master Hearing. Ds (who were all along legally represented) must have known this was procedurally undesirable, and hence should have applied with due diligence to adduce the D1 5^th Aff into evidence much earlier than they did. Secondly, by reason of Ds’ conduct of adducing the D1 3^rd Aff as evidence at the Master Hearing and their attempt (if successful which I disagree) in adducing the D1 5^th Aff as evidence at the Appeal Hearing, Ds would have 2 chances to put in the last word for the O14 Summons when P as applicant should normally have an opportunity to reply to affirmation evidence in opposition. I cannot agree with Mr Hariman’s submissions that P would not suffer any forensic prejudice. Ds’ delay (for which they had no good reason at all at least for the period since 1 May 2018) left P with no opportunity to respond to Ds’ affirmation evidence not once but twice. The fact P wished to proceed with the Master/Appeal Hearings without seeking adjournment (and P was understandably loath to adjourn such hearings as it would further delay him from the judgment seat) would mean he had to forego rightful opportunity to respond to the D1 3^rd/5^th Affs, which at least must be forensic/procedural prejudice, especially when the D1 5^th Aff attempted to raise substantive matters pertaining the misrepresentation defence.

81.  In all the circumstances, I decline to grant leave for Ds to adduce the D1 5^th Aff for the purpose of the Appeal, and dismiss the Leave Summons. I will deal with the question of costs in Part VIII below.

VII.  APPEAL

(a)  Misrepresentation defence

82.  In this Part, I proceed to consider the Appeal by referring to the D1 5^th Aff on de bene esse basis. The starting point in considering any misrepresentation defence is to ascertain what precisely is/are the representation(s) that the defendant relies upon. In his oral submissions at the Appeal Hearing, Mr Hariman confirmed Ds relied on P’s alleged misrepresentations in the D1 2^nd Aff summarised in paragraph 21 above and in the D1 5^th Aff summarised in paragraph 44 above.

83.  In the D1 1^st Aff, Ds referred to “many misrepresentations” by P in relation to “various entities”, so US/overseas operations under the aegis of Rabeanco US and “various entities” must have been on Ds’ minds, and it begged the question why Ds had to wait until the D1 5^th Aff to expand on the alleged representations. Even on Ds’ case, the D1 1^st/2^nd Affs clearly suggested Ds knew from available information before the signing of the MA (see paragraphs 63-64 above) that the Consideration was allegedly overpriced, which would have alerted Ds to the significance of P’s alleged oral representations to them, and it begged the question why D1 would have recollected such alleged oral representations by P (in the D1 5^th Aff as summarised in paragraph 44 above) only after the Master Hearing with no mention of any particular document/dialogue that would have triggered such belated recollection. Indeed, for reasons in Part VI above, I was not satisfied with Ds’ contention that they had to continue their inquiries/investigations after the Master Hearing.

84.  Mr Hariman tried to answer such concerns by submitting that notwithstanding criticisms levelled at Ds for failing to properly particularise their case on misrepresentation at the Master Hearing, the difficulties Ds faced had to be understood in the relevant factual matrix, ie the time constraints Ds faced, the inquiries/investigations into the financial situation of the Companies and on the causes/reasons of the problems that started only after commencement of the present action, and the time/effort needed for such inquiries/investigations to ascertain the Companies’ true financial situation and to establish association with misrepresentations made by P. Mr Hariman submitted that even though P/Ds were in control of the Companies prior to entering into the MA, P (upon whom Ds reposed trust and reliance) was in charge of finance/operation, and Ds would not have agreed to substantially buy out P’s Shares in the Companies by entering into the MA and SD for the inflated Consideration but for P’s representations set out in the D1 2^nd Aff, which representations caused Ds not to insist on due diligence verification (see D1 2^nd/5^th Affs) or on concise breakdown calculation for P’s valuation of the Shares (see D1 5^th Aff).

85.  I have carefully considered such contentions in the analysis above, and repeat the discussions in paragraphs 63-70 above. Suffice to say here I am not persuaded such contentions amounted to credible explanation for metamorphosis of Ds’ case on P’s alleged representations (which I have found was not justifiably explained), and this gave pause for concern as to whether there was truly a credible defence. In light of the above, I agree with the observations by the Master in paragraph 12 of the Decision as follows:

“The first point I note is that the [Ds] have failed to properly particularize the precise contents of the alleged misrepresentation, In the [D1 2^nd Aff], [D1] gave different formulations of the same representation alleged made by [P]. In my view, this is unsatisfactory, particularly where the [Ds] are advancing a complaint as serious as fraudulent misrepresentation.”

This was further compounded by the D1 5^th Aff that gave even more formulations of P’s alleged oral representations.

86.  Mr Hariman acknowledged Ds’ case on misrepresentation would turn on Ds’ knowledge of the financial situation of the Companies. He suggested it was over-simplistic and ignored commercial realities at the time for P to contend Ds must have known about the true financial situation when agreeing to purchase the Shares at the agreed Consideration such that they could not have been misled as to the accuracy of the 2013/2014 accounts, could not have failed to fully understand the financial status of S&W Handbags and/or its subsidiary, and in turn could not have made any misrepresentation.

87.  I disagree, and repeat paragraphs 63-70 above in which I have addressed with this point. Further, when the 2013/2014 audited accounts of S&W Handbags were published on 18 October 2013 and 31 July 2014 respectively, Steps Consulting (owned by P, D1 and D2 until execution of the MA on 29 May 2014 with P and D2 as its directors) and Gala Prosper (solely owned/controlled by Ds) were the 2 corporate directors of S&W Handbags. As stated in the Auditor’s Reports for 2013/2014:

“The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with the Hong Kong Financial Reporting Standard for Private Entities issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.” (my emphasis)

Plainly, the 2013/2014 financial statements were “approved and authorised for issue by the Board of Directors”and signed by P (on behalf of Steps Consulting) and D1 (on behalf of Gala Prosper) on 18 October 2013, and by D1 (on behalf of Steps Consulting) and D2 (on behalf of Gala Prosper) on 31 July 2014. This did not sit well with Ds’ assertion that they signed as P requested without examining/scrutinising the contents thereof because of their trust in P. More importantly, by the time Ds signed the 2014 audited accounts of S&W Handbags on 31 July 2004, P had already sold the Shares to Ds who had taken up sole control of the Rabeanco Group (including S&W Handbags) for 2 months. In any event, on D’s case, their allegation of reposing trust and reliance on P did not sit well with their criticisms against P for frustrating normal operations of S&W Handbags to force purchase of his Shares at a high price, and for refusing to sign cheques to pay for staff wages (see paragraph 38(b) above). As Mr Chang submitted, Ds’ allegation that they were ignorant of the true financial status of the Companies on/before May 2014 (or on/before August 2017) was rather unbelievable.

88.  Next, as regards Ds’ claim that they only discovered the “many problems” with the overseas entities/business after executing MA on 29 May 2014, there was in fact contemporaneous evidence to show Ds had known about the financial problems faced by the overseas entities, including Rabeanco US’ “disastrous” “bleeding”.

89.  As a starting point, I note (a) Rabeanco US was wholly owned by Brighteam which in turn was equally owned by P, D1 and D2 who were also the 3 directors of Rabeanco US, (b) D1 was the executive chairman of Rabeanco US, and (c) the other overseas entities were also directly or indirectly owned by P, D1 and D2 in equal shares, and either D1, D2 or both were directors.

90.  In my view, the emails disclosed in the P 2^nd Aff provided cogent and contemporaneous evidence that Ds knew the existence/extent of financial problems faced by Rabeanco US and other overseas operations before execution of the MA:

(a)	D1 sent email to P on 30 January 2014 (ie 4 months before the MA was signed) to comment on and enclose Ds’ revised draft sale and purchase agreement that was under negotiation at that time, and such email demonstrated Ds knew and understood the “disastrous”situation in USA (see paragraph 28 above).
(b)	On 26 May 2014 (ie 3 days before execution of the MA), Kenneth Keung of P’s solicitors emailed Eva of S&W Handbags with copy to inter alia P, D1 and D2 that: “As discussed earlier today, I have cleared conflicts with another US team for advising on matters relating to the proposed winding up of Rabeanco USA and discussed with them over the weekend in this connection …… I have briefly summarised the background, the assets and liabilities position of Rabeanco USA and the intention of not funding the business anymore which would lead to the default by Rabeanco USA ……” (my emphasis)
(c)	Eva emailed her reply to Kenneth Keung on 28 May 2014 (ie 1 day before execution of the MA) with copy to inter alia P, D1 and D2 attaching a “Bankruptcy Action Plan” for Rabeanco US (see paragraph 29 above).
(d)	On 12 June 2014 (ie 2 weeks after execution of the MA), P sent D1 an email titled “The story – a decision to shut down Rabeanco US” with a “story” that explained their decision to shut down US operations (item 6 of the “Bankruptcy Action Plan”) for US creditors/landlord, explaining that shutting down Rabeanco US was an “unavoidable decision as the business unit is already in big financial problem”, and the business parameters had been wrong with performance in the first 6 months “totally out of track”, so the “top management” of Rabeanco US had no choice but to shut down operations. D1 approved such draft “story” by his email on the same day copied to D2 and Eva.

91.  Ds had no real answer to the 4 emails save to say (a) they were selective (see D1 5^th Aff), and (b) whilst indicative Ds knew there were certain problems with the financial situation of Rabeanco US they did “not necessarily mean [Ds] had complete knowledge and knew about the true extent and nature of the problems of the Companies”. But despite the complaint in (a) above and Ds’ claim that their inquiries/investigations were completed before the D1 5^th Aff, Ds failed to provide complete email chain to demonstrate how the 4 emails were selective or at the very least to indicate what material emails had been omitted. In respect of (b) above, the contents of the 4 emails speak for themselves without need for further elaboration, and I agree with Mr Chang it was quite unbelievable for Ds to say they were ignorant of the finances/problems of the overseas entities (especially Rabeanco US) until after the MA was signed.

92.  Next, Mr Chang submitted that if Ds’ allegations of misrepresentation had any modicum of truth, it was inconceivable that Ds would have:

(a)	admitted their failure to pay under the MA;
(b)	sought P’s indulgence for more time to make payment by emphasising their temporary cashflow problems;
(c)	failed to raise any complaint of misrepresentation after Ds had fully taken control of S&W Handbags and in face of HCA1772/2015 against them;
(d)	been willing to settle HCA1772/2015[36] by fully paying the amounts P claimed with costs as agreed pursuant to such settlement;
(e)	execute the SD without taking any issue some 6 months after the 2015 consolidated accounts of S&W Handbags were made available to them on 13 October 2015 which revealed “the full picture of the financial situation of the Companies”;[37]
(f)	completed the 2nd SC SPA without reservation;[38]
(g)	paid the 1st to 11th Instalments under the Payment Schedule in the Revised MA from 30 May 2016 to 27 March 2017 ($1,350,000) without reservation/complaint albeit being occasionally late in their payments;
(h)	through Iris sought time indulgence to make payment to P between February and May 2017.

93.  Mr Chang submitted Ds’ allegations of misrepresentation were inconsistent with and contradicted by their own contemporaneous/ subsequent conduct as outlined above. The Master regarded such matters as “telling” (paragraph 14 of the Decision), and considered it “wholly unthinkable”that Ds’ complaint of misrepresentation had not been raised earlier when their legal team had been involved since negotiations for the MA, settlement of HCA1772/2015 and even now (paragraph 18 of the Decision).

94.  Mr Hariman submitted the suggestion that by virtue of these matters Ds must have known about the true/actual financial situation of the Companies (particularly the US operations) such that there was no misrepresentation was flawed as it presupposed Ds to have and must have started a chain of inquiry after obtaining the 2015 consolidated accounts, gone on to investigate the causes/problems associated with the finances of the Companies and thereby discovered the falsity of P’s alleged representations, but there was no reason for Ds to do so when their focus at the time was very much on trying to turn the Companies and their businesses around, which was a perfectly reasonable explanation as to why Ds acted as they did in paragraph 92(a)-(h) above, and just because they did not raise the issue of misrepresentation there and then did not mean Ds did/could not have a case.

95.  Mr Hariman further submitted that to suggest otherwise as P did would be to engage in exactly the kind of minute forensic exercise which the Court advocated against for Order 14 applications, and P’s contention that Ds had an opportunity to find out the truth before the SD or 2^nd SC SPA but failed to do so and/or to take issue was tantamount to an argument that failure to avail oneself of the opportunity to discover the falsity of misrepresentation was a bar to relief, which argument had been rejected by the courts.[39]

96.  I do not believe that was the focus of P’s contentions in paragraphs 92-93 above. Ps were not saying Ds could have investigated the matter earlier to discover the falsity of P’s representation; rather Mr Chang submitted Ds’ inaction and complacency demonstrated their allegations were inherently implausible and contrary to common/commercial sense, especially when it was for Ds to show an arguable case and when Ds failed to adduce documentary corroboration of the alleged misrepresentations in contrast to the contemporaneous documents P produced to evidence Ds’ knowledge. Indeed, Ds were unable to explain the messages in February to May 2017 by Iris, who (as Ds agreed) was tasked to deal with P to seek greater flexibility on payment timeframe, which was what she had done. Iris had no personal interest in the matter, and Ds’ suggestion that they had no idea of the contents of communications between Iris and P (belatedly raised in the D1 5^th Aff) was unconvincing.

97.  In essence, P claimed that even if, as Ds alleged, they were busy trying to turn around the Rabeanco Group and did not initially delve into its historynotwithstanding, say, P’s alleged robust assurance the accounts were accurate and/or okay and Ds’ later discovery that the US/overseas entities suffered “huge loss” (which the D1 5^th Aff said was about $50 to $60 million instead of $20 million for the previous 1-2 years as P allegedly represented), it was incredible/ unconvincing that Ds would not have raised any issue on any of the matters in paragraph 92 above in face of (a) litigation against them (when they were legally represented), (b) re-scheduling of payment obligations in the SD (when they had cashflow problems) and (c) completion of the 2^nd SC SPA (when the price of the Shares was inflated), when they had already learned of the matters in paragraph 22(a)-(c) above after taking over the Rabeanco Group, having written off losses, irrecoverable receivables and unsaleable obsolete stock, and having received the 2015 consolidated accounts of S&W Handbags that revealed inter-company loans had turned into bad debts (which in short, according to Ds, showed the Consideration was overpriced). It was of particular concern that (a)-(c) above were not normal business operations, but events that as a matter of commercial reality and logic Ds would have been concerned to ascertain whether legal claim against them was defensible and what were their potential liabilities/obligations when entering into completion or further agreement. In my view, the explanations Ds put forward for their complacency had an aura of unreality.

98.  Mr Hariman next suggested the small number or even lack of contemporaneous documents in support of Ds’ case would not automatically render it to be incapable of belief. After all, there had been instances where summary judgment application was dismissed and the case be allowed to be taken to trial even for such scenario.[40] In my view, each case turns on own facts, and little assistance could be drawn from the factual matrix in other cases. But here, it was Ds who said there were voluminous documents (D1 1^st Aff), and they had to dig up and go through documents going back 2 years or more (D2 Aff).

99.  Further, Mr Harmian submitted P’s representations were false/untrue and were misrepresentations since the value of the Companies was inflated (since it transpired there were financial and other problems[41] with the business of the Companies, their subsidiaries and/or Rabeanco Group) and the Consideration was overpriced (since the Shares were worth much less than what P represented). But interestingly, there was no affirmation evidence from Ds as to how much the value of the Shares was inflated or false. Mr Hariman could only refer me to an email by P to D1 on 12 September 2013 during the early stage of negotiations for the MA (signed on 29 May 2014) which stated:

“As per our discussion, please find below terms and conditions which I brought up during the last meeting with Margaux –

- the final value of my share will not be less than 50 millions (NOT LESS THAN 55M and NOT MORE THAN 75M)” (my emphasis)

Such email set out various “terms and conditions” for the S&P put forward by P to D1 during the negotiation process, which process took 8 months before the MA (with the Consideration agreed at $68 million) was signed. In my view, such email set out P’s stance on the “terms and conditions” for the S&P for the purpose of negotiations, and I am unable to see how this could be elevated to representation as to the value of the Shares. More importantly, there was no evidence before this court as to the what was the true value of the Shares apart from the bare assertion in the D1 2^nd Aff that the Consideration was overpriced and should be reduced “for a sum of about HK$28M to 38M or to be assessed as a result of the misrepresentation made by [P] to [Ds] before the execution of the [MA]”. Mr Hariman sought to answer this by saying P failed to deny the Consideration was overpriced and/or failed to adduce evidence to show the price was not inflated, and such silence was suspicious and required investigation. But the burden was on Ds to establish an arguable misrepresentation defence, including falsity of the alleged representation, and also to condescend upon the particulars of such defence.

100.  I am not persuaded by the submission that despite P’s criticisms Ds’ case on misrepresentation was arguably made out and not incapable of belief, and that there were triable issues could only be properly resolved at trial (such that if successful Ds would not have to pay the sums P claimed and would be entitled to rescind the MA/SD that was voidable or void ab initio).[42] Rather, I find there was no arguable defence or triable issue, and I am not persuaded the misrepresentation defence was believable or has any prospect of success.

(b)  Construction of the MA

101.  Ds submitted there were issues of construction/interpretation in respect of certain terms/clauses in the MA which formed the basis of P’s claim. Mr Hariman submitted the construction/interpretation of the term “Outstanding Consideration” was not an academic issue, but one with important/serious ramifications as it would impact on Interest calculation, how much Interest P would receive, and how Default Interest was to be computed (see clause 5.7 of the MA). But Mr Hariman acknowledged this point only went to the matter of Interest and Default Interest, and had no impact on the 3 outstanding Instalments being the subject matter of the Master Order.

102.  The Revised MA contained the following definitions:

“Outstanding Consideration”	“the outstanding amount of the Consideration payable by Raymond [D1] and Bella [D2] jointly and severally to Andrew [P] from time to time”;
“Consideration”	“the aggregate of the Raymond Consideration and the Bella Consideration”;
“Bella Consideration”	“the total consideration of HK$34,000,000 payable by Bella to Andrew for purchasing certain shares of each of the Companies set out in Schedule 2 pursuant to the terms of this Agreement and the Transaction Documents”;
“Raymond Consideration”	“the total consideration of HK$34,000,000 payable by Raymond to Andrew for purchasing certain shares of each of the Companies set out in Schedule 2 pursuant to the terms of this Agreement and the Transaction Documents”.

103.  As evident from P’s pleadings, P interpreted “Outstanding Consideration” to mean “the Consideration less the aggregate of whatever amount in Instalment already paid at a particular time”. But Ds said such term meant the outstanding Instalment at the relevant date. Thus, “Outstanding Consideration” as at 27 April 2017 amounted to $56,635,000 according to P’s interpretation, and $150,000 under the Payment Schedule according to Ds’ interpretation. This was a fresh point taken by Ds at the Appeal. Mr Chang did not take any procedural issue, but submitted Ds’ argument was hopeless, which might explain why such argument was not raised in the past 4 years since execution of the MA, and why Ds had always made payments on the basis that the Outstanding Consideration represented the total amount outstanding in respect of the purchase price.

104.  Mr Hariman submitted that construction/interpretation of a written agreement involved looking at the agreement as a whole, the factual/legal background against which it was concluded, and the practical objects which it was intended to achieve.[43] He argued that a textual analysis alone would be insufficient to determine the construction/ interpretation issue as there was need to consider the relevant factual matrix, especially in the case of complex formal contracts such as the MA and SD.

105.  But Lord Hodge in Wood v Capita Insurance Services Limited at paragraph 13 remarked as follows:[44]

“Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court on its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. ……” (my emphasis)

106.  Mr Hariman suggested P’s construction/interpretation was not the only meaning that could be ascribed to the term “Outstanding Consideration”. I deal with the various points he raised as follows:

(a)	Mr Hariman asked why, if the meaning of “Outstanding Consideration” was as P contended, it was not defined in the MA in words similar or akin to what was set out in P’s pleadings. But the issue here was not whether the definition could be phrased differently, but whether the definition adopted in the MA was clear in its meaning.
(b)	Mr Hariman questioned why, if P’s interpretation were correct, the word “payable” (which in essence meant “to be paid”) and not “already paid” or similar words were adopted in the definition. The answer is simple. The definition in the MA adopted a prospective approach by identifying what was outstanding, so the total “outstanding” amount of the Consideration was necessarily payable and not already paid. But the description in P’s pleadings adopted a retrospective approach by identifying the “already paid” Instalments that should be carved out of the Consideration to result in the Outstanding Consideration, which was essentially the other side of the same coin.
(c)	Mr Hariman submitted that inclusion of the words “from time to time” and not words “at a particular time” or similar words to such effect in the definition supported Ds’ interpretation because specific amounts in the form of Instalments have to be paid from time to time, eg HK$150,000 by 27 April 2017 and $795,000 by 29 May 2017, but nowhere was it stipulated $56,785,000 or $56,635,000 have to be paid by specific date(s). I cannot understand such argument. The “Outstanding Consideration” could not have been a fixed sum. When Ds pay more and more Instalments pursuant to the Payment Schedule, the outstanding amount of the Consideration would be reduced by these Instalment payments, so the outstanding amount would not be static but would vary “from time to time”.
(d)	Mr Hariman submitted the email from P to Ds dated 12 September 2013 by proposing the following “terms and conditions” for the S&P supported Ds’ interpretation/construction: “- as 80% of the amount will be paid by instalment, interest will be calculated assuming HIBO + 2.5% or based on current market value such as bank reference (HIBO + 2%)”. I cannot see how this would aid Ds’ interpretation/construction, especially in light of the entire agreement clause in clause 16 of the MA.

107.  Mr Hariman next questioned why the “Outstanding Consideration” could not be construed to mean the amount of the Instalment to be paid by Ds to P in accordance with the Payment Schedule when the MA and SD both had payment schedules that prescribed outstanding amount of the Consideration in the form of Instalments to be paid by Ds on the Instalment Payment Dates. Mr Hariman submitted that since the parties put forward rival meanings, I should lean towards a construction more consistent with business common sense.[45] He argued it would not accord with business common sense for the parties (particularly Ds) to agree to use the exorbitant figure of $56,635,000 (at 27 April 2017) to calculate Interest, and instead Interest calculation based on the more reasonable figure of $150,000 (at 27 April 2017) could not be said to be incapable of belief at this juncture.

108.  In my view, the answer is clear and straightforward. Clause 5.5 of the MA provided that “Interest shall accrued on the Outstanding Consideration on the basis of actual day elapsed and a 365 days’ year at the Agreed Interest Rate and shall be due and payable by [Ds] on each Instalment Payment Date”. The starting point was completion of the S&P took place on 29 May 2014, and thereafter Ds took over control of the Companies and their subsidiaries. Whilst Ds already enjoyed the benefit of their bargain, they had not paid the full Consideration. In fact, they needed time to pay off the total Consideration by Instalments over an extended period. Clearly, the commercial purpose for charging Interest at the agreed rate (HIBOR + 2%) on the Outstanding Consideration (ie the entire unpaid part of the Consideration that had yet to be paid by Ds by way of Instalments) was the price Ds had to pay to compensate P (creditor) for keeping him out of money that was due to him (outstanding balance of the purchase price). I agree with Mr Chang it made no commercial sense to charge Interest on the very sum of money that P (creditor) was to receive for a particular Instalment Period. This harked back to paragraph 106(c) above in which I explained that as Ds paid more and more Instalments under the Payment Schedule to P, the Outstanding Consideration would be progressively reduced and Ds would have to pay less and less Interest on the progressively decreased Outstanding Consideration.

109.  Mr Hariman submitted clause 6(b) of the MA, which catered for Ds making early payment and/or prepayment of an amount in advance of the relevant Instalment Payment Date and requisite Instalment amount due, gave credence to Ds’ construction/interpretation:

“6. [Ds] may prepay all or part of the Instalments provided that:-

……

(b) interest shall remain due and payable on the Outstanding Consideration on each of the Instalment Payment Dates following the prepayment notwithstanding that no or only part of an Instalment is payable on such Instalment Payment Dates as a result of the prepayment.”

Mr Hariman submitted that under such provision how much Interest stood to be paid depended on the amount of and construction/interpretation of “Outstanding Consideration”. It was said the intent of such provision seemed to be for ensuring P would still receive Interest payment notwithstanding early prepayment of Instalment(s) rendering no Instalment payment(s) payable come the relevant Instalment Payment Date(s), and such arrangement would run all the way through to 29 July 2022 being the last relevant Instalment Payment Date. Mr Hariman agreed that if the entire Consideration ($68,000,000) was paid before 29 July 2022, then on P’s interpretation/construction of “Outstanding Consideration” and the provision for P’s continued entitlement to receive Interest from Ds under clause 6(b) of the MA, it would be impossible to calculate any Interest payable beyond the date on which the Consideration was fully paid off, for there would be simply nothing left of the Consideration that remained to be paid. But on the basis of Ds’ interpretation of “Outstanding Consideration”, calculation of Interest was still possible given the stipulated Instalment amount on each Instalment Payment Date in the Payment Schedule despite prepayment of the entire Consideration, eg Interest due to be paid on 27 April 2017 would be calculated on the basis of $150,000 that had been prepaid.

110.  I am not persuaded by such argument. Unlike financial institutions, P was not in the business of earning interest by granting loan facilities. Rather, P received Interest for being kept out of the Consideration which he should have received upon completion of the S&P. When he received the entire Consideration, there would simply be no basis to receive further Interest. This fundamental understanding underlined the provisions for pre-payment under Clause 6(b) of the MA. If Ds made early prepayment of any Instalment or part thereof to P before the relevant Instalment Payment Date, there would no longer be any commercial reason to charge Ds Interest on that sum. Likewise, if Ds fully paid the entire Consideration of $68,000,000 before 2022, then P should no longer charge Interest as there was no longer any “Outstanding Consideration”. It would be wrong to say, as Ds suggested, that even after Ds fully prepaid the entire purchase price, they should still have to pay Interest on each notional Instalment (which had been prepaid) until 2022, which construction (as Mr Chang pointed out) would totally defeat any incentive for Ds to make early payment to P. In my view, clause 6 of the MA made clear Ds could prepay all or part of the Instalments, but clause 6(b) of the MA clarified that if Ds prepaid part but not the entirety of the Outstanding Consideration (eg prepaid 2 Instalments not yet due and payable), then Interest was still payable on the Outstanding Consideration (ie unpaid part of the entire Consideration) on the Instalment Payment Dates for the 2 Instalments that had been prepaid and consequently no longer payable on the Instalment Payment Dates. This turned on the rationale that Interest was payable on the unpaid portion of the entire Consideration and not on any Instalment.

111.  Further, as Mr Chang pointed out, Ds’ construction was also contradicted by the clear commercial purpose of clauses 10.1(a) and 10.2 of the MA, which provided that in the event Ds failed to pay 6 consecutive Instalments in accordance with the Payment Schedule, P shall have the right to declare the Outstanding Consideration, accrued interest and all other sums payable under the MA to be immediately due and payable. In my view, the purpose of such acceleration clause was to render whatever amount that was outstanding in respect of the entire purchase price immediately due and payable if Ds failed to pay the Instalments as and when they fell due so P would not have to commence separate legal actions to enforce payment for each subsequent Instalment. It flied against commercial sense if, in such event of default for 6 Instalments, only the next Instalment would become due and payable to P.

112.  Mr Hariman submitted the factual background set out in the affirmation evidence was by no means complete, and the court had yet to make findings as to the factual matrix in relation to the MA/SD that would affect the proper construction/interpretation of the “Outstanding Consideration”, which would inform the correct/applicable method of calculating Interest and Default Interest, so the interpretation/consideration point should not be resolved at the summary judgment stage.[46] But in light of the above analysis, interpretation/construction of the term “Outstanding Consideration” was clear and unambiguous from the perspectives of textualism, contextualism and business purpose, and they all point irrevocably towards P’s meaning as the plain and ordinary meaning that made commercial sense.

113.  In the circumstances, Ds failed to raise any triable issue or arguable defence, and I discern no other reason for trial. The Master Order was correct, and the Appeal is dismissed.

VIII.  CONCLUSION

114.  The Leave Summons and Appeal are dismissed. There is no reason why costs should not follow event. I therefore grant a costs order nisi that Ds shall pay P costs of and occasioned by the Leave Summons and Appeal (including all costs reserved, if any) to be taxed if not agreed. Mr Chang asked for certificate for 2 counsel. Whilst I have no doubt Ms Wong rendered helpful assistance to Mr Chang in presenting P’s case to this court, on the basis of party and party taxation, I am not persuaded the Leave Summons and Appeal justified two counsel, especially when P had the benefit of helpful submissions and other groundwork done by his legal team (including senior counsel) before the Master.