FAMV Nos.

5, 6, 7 & 8 of 2014

FAMV Nos. 5, 6, 7 of 2014

IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NOS 5, 6 AND 7 OF 2014 (CIVIL)
(ON APPLICATIONS FOR LEAVE TO APPEAL FROM
CACV NOS. 94, 95 & 96 of 2012)


BETWEEN CACV 94/2012
PACIFIC ELECTRIC WIRE & CABLE
COMPANY LIMITED

Plaintiff
(Respondent)
and
TEXAN MANAGEMENT LIMITED 1
st
Defendant
CLIPPER INVESTMENT LIMITED
(formerly known as PACIFIC CAPITAL
(INVESTMENT) LIMITED)

2
nd
Defendant
PACIFIC CAPITAL (ASIA) LIMITED 3
rd
Defendant
ALL DRAGON INTERNATIONAL LIMITED 4
th
Defendant
PCL HOLDINGS LIMITED
(formerly known as PACIFIC CAPITAL
(HOLDINGS) LIMITED

5
th
Defendant
LAIDLAW PACIFIC FINANCIAL SERVICES
(HOLDINGS) LIMITED
(formerly known as PACIFIC CAPITAL FINANCIAL
SERVICES (HOLDINGS) LIMITED)

6
th
Defendant
SUPER WISH LIMITED 7
th
Defendant
HU HUNG CHIU
8
th
Defendant
(Applicant)
-2-

WONG KUN TO
9
th
Defendant
(discontinued)

CHEUNG KWAN HUNG, ANTHONY
10
th
Defendant
(discontinued)

MA KAM FOOK, ROBERT
11
th
Defendant
CHENG SHU WING
12
th
Defendant
(discontinued)

TUNG HSIU CHUN (), the person entitled
to manage and administer the estate of Tung Yu Jeh
() (deceased) (By Order to carry on)

13
th
Defendant
SUN TAO TSUN
14
th
Defendant
PANG HONG
15
th
Defendant
(discontinued)


BETWEEN CACV 95/2012
PACIFIC ELECTRIC WIRE & CABLE
COMPANY LIMITED

Plaintiff
(Respondent)
and
GOLD GLOBAL LIMITED 1
st
Defendant
PCL NOMINEES LIMITED 2
nd
Defendant
GREATEAM LIMITED 3
rd
Defendant
HU HUNG CHIU
4
th
Defendant
(Applicant)
CHUNG CHE LING
5
th
Defendant
YIP CHI HUNG
6
th
Defendant
TAM PUI NA, RAFIA
7
th
Defendant
(discontinued)

HARMUTTY LIMITED 8
th
Defendant


-3-

BETWEEN CACV 96/2012
PACIFIC ELECTRIC WIRE & CABLE
COMPANY LIMITED

Plaintiff
(Respondent)
and
HARMUTTY LIMITED 1
st
Defendant
HADDOWE LIMITED 2
nd
Defendant
CASPARSON PROPERTIES LIMITED 3
rd
Defendant
HU HUNG CHIU
4
th
Defendant
(Applicant)
YIP CHI HUNG
5
th
Defendant
CHUNG CHE LING
6
th
Defendant
TUNG HSIU CHUN (), the person entitle
to manage and administer the estate of Tung Yu Jeh
() (deceased) (By Order to carry on)

7
th
Defendant
SUN TAO TSUN
8
th
Defendant
TAM PUI NA, RAFIA
9
th
Defendant
(discontinued)

WONG KUN TO
10
th
Defendant
(discontinued)

CHEUNG KWAN HUNG, ANTHONY
11
th
Defendant
(discontinued)

AFTERVILLE LIMITED 12
th
Defendant
NEE SOON LIMITED 13
th
Defendant
SHOWGROUND LIMITED 14
th
Defendant
BERRIDALE DEVELOPMENTS LIMITED 15
th
Defendant
J UTECH INVESTMENTS LIMITED 16
th
Defendant
ALL DRAGON INTERNATIONAL LIMITED 17
th
Defendant
BLINCO ENTERPRISES LIMITED 18
th
Defendant
PATAGONIA LIMITED 19
th
Defendant
-4-

MA KAM FOOK, ROBERT
20
th
Defendant
HU SUN MAR LI
21
st
Defendant
(discontinued)

TOP SELECTION COMPANY LIMITED 22
nd
Defendant


FAMV No. 8 of 2014

IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 8 OF 2014 (CIVIL)
(ON APPLICATION FOR LEAVE TO APPEAL FROM
CACV NO. 93 of 2012)

BETWEEN
PACIFIC ELECTRIC WIRE & CABLE
COMPANY LIMITED

Plaintiff
(Respondent)
and
HARMUTTY LIMITED 1
st
Defendant
HADDOWE LIMITED 2
nd
Defendant
CASPARSON PROPERTIES LIMITED 3
rd
Defendant
HU HUNG CHIU
4
th
Defendant
YIP CHI HUNG
5
th
Defendant
CHUNG CHE LING
6
th
Defendant
TUNG HSIU CHUN (), the person entitle
to manage and administer the estate of Tung Yu Jeh
() (deceased) (By Order to carry on)

7
th
Defendant
SUN TAO TSUN
8
th
Defendant
-5-

TAM PUI NA, RAFIA
9
th
Defendant
(discontinued)

WONG KUN TO
10
th
Defendant
(discontinued)

CHEUNG KWAN HUNG, ANTHONY
11
th
Defendant
(discontinued)

AFTERVILLE LIMITED 12
th
Defendant
NEE SOON LIMITED 13
th
Defendant
SHOWGROUND LIMITED 14
th
Defendant
BERRIDALE DEVELOPMENTS LIMITED 15
th
Defendant
J UTECH INVESTMENTS LIMITED 16
th
Defendant
ALL DRAGON INTERNATIONAL LIMITED 17
th
Defendant
BLINCO ENTERPRISES LIMITED 18
th
Defendant
PATAGONIA LIMITED 19
th
Defendant
MA KAM FOOK, ROBERT
20
th
Defendant
HU SUN MAR LI
21
st
Defendant
(discontinued)

TOP SELECTION COMPANY LIMITED 22
nd
Defendant
(Applicant)


Heard together
Appeal Committee: Chief J ustice Ma, Mr J ustice Ribeiro PJ and
Mr J ustice Tang PJ

Date of Hearing:

3 October 2014
Date of Determination: 14 October 2014



DETERMINATION


-6-




Chief Justice Ma:
1. After hearing submissions on 3 October 2014, the Appeal
Committee reserved its Determination on this leave application. The
Determination in respect of Top Selections as of right claim is dealt with by
Mr J ustice Ribeiro PJ and the applications of Top Selection and Hu Hung Chiu
for leave on the discretionary basis are dealt with by Mr J ustice Tang PJ .
Mr Justice Ribeiro PJ:
2. This is an application for leave to appeal to this Court brought by
two defendants, namely Hu Hung Chiu (Hu) and Top Selection Co Ltd (Top
Selection) against whom claims were successfully brought by the respondent
company, Pacific Electric Wire & Cable Company Limited (PEWC), which
was at the relevant time a listed Taiwanese corporation.
A. The nature of the actions and decisions below
3. Three actions of great factual complexity were involved. In their
bare essentials presently relevant, they were actions brought against Hu, then a
director, an executive vice-president and the Chief Financial Officer of PEWC
for breach of fiduciary duty, it being alleged that he made secret acquisitions of
assets in Hong Kong using funds belonging to PEWC and funds raised by
pledging PEWCs credit as a note-issuer and guarantor, all without PEWCs
authority. The assets acquired include a substantial parcel of shares in a
company called PacMOS Technologies Holdings Ltd listed on the Hong Kong
Stock Exchange (the PacMOS shares); and properties referred to as the
South Horizons Properties and the Shouson Hill Property respectively. Top
Selection was sued as the vehicle which held the shares in two companies
-7-

(Blinco Enterprises Ltd (Blinco BVI) and Patagonia Ltd (Patagonia) which
sat at the apex of a network of companies (the corporate network) through
which the aforesaid shares and properties were held.
4. Hu denied that the acquisitions were secret and averred that those
assets had been acquired and held by the corporate network for PEWC
beneficially with its full authority until, in February 1999, again with PEWCs
full authority, he had caused the shares in Blinco BVI and Patagonia to be
lawfully transferred to Top Selection. This was done, he alleged, pursuant to
a Takeover Arrangement entered into between himself and Robin Willi (Willi)
in consideration of financial injections made by Willi to relieve financial
pressures which PEWC and its subsidiary PCL Holdings Ltd (PCHL) were
facing. It was thus Hus case that while the network of companies had initially
been beneficially owned by PEWC, they had been lawfully transferred to Top
Selection, a company owned by Willi, for the benefit of PEWC pursuant to the
Takeover Arrangement. Top Selections own defence was accordingly that it
was not a vehicle for receiving the proceeds of any breach of fiduciary duty by
Hu, but an independent company beneficially owned by Willi, holding the
shares of companies in the corporate network and the underlying assets,
acquired by virtue of the Takeover Arrangement.
5. As the trial J udge, Reyes J , pointed out,
1
the validity of the Takeover
Arrangement was therefore the crux of the case. After an 18 day trial, in
a 138 page judgment in which his Lordship closely and comprehensively
analysed and weighed up the evidence and the arguments, Reyes J concluded
that while the allegation that the assets had been secretly acquired had not been
made out:

1
HCCL16, 17 and 18/2009 (12 April 2012), 223.
-8-

There never was a Takeover Arrangement between Hu and Willi. The alleged
Takeover Arrangement was belatedly fabricated to cover Hus ownership and control
through Top Selection of the companies and assets held through Blinco BVI and
Patagonia.
2

And that:
The evidence irresistibly points to Willi, Top Selection, Blinco BVI, Patagonia and
the Corporate Defendants being nominees of Hu. Through the web of the latter
companies, Hu to this day controls the South Horizons and Shouson Hill Properties
and Texans 43% PacMOS shareholding.
3

In other words:
There was no Takeover Arrangement. Instead, in breach of his duties as director of
PEWC, Hu in effect handed the assets of the PCHL network of companies to himself.
4

6. On the basis of those findings, Reyes J granted PEWC proprietary
remedies in the following terms:
First, Top Selection must be a nominee for Hu. It therefore holds its shares in Blinco
BVI and Patagonia on trust for PEWC from whom Hu (in breach of his fiduiciary
obligations owed to PEWC) diverted such shares.
5

Second, Willi is not a bona fide purchaser for value without notice. He did not
provide valuable consideration in the manner alleged. He had knowledge of Hus
beneficial ownership of the relevant companies and their underlying assets.
6

Willi is himself merely a nominee for Hu. The fact that he is now registered as Top
Selections sole shareholder would not affect the position that Top Selection holds
Blinco BVI and Patagonia for PEWC. Hu having acted fraudulently, the Court is
entitled to pierce the corporate veil and treat Top Selection as Hus alter ego.
7

Third, the shares of the subsidiary companies under Patagonia and Blinco BVI
(namely, the Corporate Defendants) must also be held on constructive trust for PEWC.
The layers and layers of Corporate Defendants are in effect all merely nominees of Hu.
The Court is entitled to pierce the corporate veil and treat them as mere alter egos
(albeit a chain of alter egos) for Hu.
8


2
Judgment 526.
3
Judgment 533.
4
Judgment 534.
5
Judgment 538.
6
Judgment 539.
7
Judgment 540.
8
Judgment 541.
-9-

In my view, the Court is entitled to impose a constructive trust on underlying assets
(including the South Horizons and Shouson Hill Properties and the PacMOS shares)
in the hands of the Corporate Defendants.
9

Since the Corporate Defendants are mere nominees for Hu and since the Court can
pierce the veil of incorporation where there is fraud, the present situation is analogous
to Hu himself holding the relevant assets. If the underlying assets were in his own
name, Hu would undoubtedly hold the same on constructive trust for PEWC. It
should make no difference that Hu now holds the same assets through a string of
nominee companies.
10

7. His Lordship also granted personal remedies requiring specified
companies forming part of the corporate network to account for all monies, etc,
received as a result of holding or having held the underlying assets.
11

8. The Court of Appeal,
12
dealt in detail with six grounds of appeal
advanced by Hu and Top Selection
13
challenging the findings made and
inferences drawn by the J udge on key issues in the case, the burden of proof
applied and findings of fraud made in the absence of supporting pleadings.
Those challenges were all rejected so that concurrent findings have been made
on the central issues of the case, in particular on the fact that the Takeover
Arrangement was bogus, being a concoction of Hu and Willi to cover up Hus
ownership and control through Top Selection of the companies and assets held
through Blinco BVI and Patagonia.

9
Judgment 544.
10
Judgment 545.
11
Judgment 549-550. A finding of liability and remedies granted against another
defendant, Robert Ma Kam Fook were reversed in the Court of Appeal and do not
concern us.
12
Lam VP, Kwan and Fok JJ A, CACV 90, 91, 93, 94, 95 and 96/2012 (17 September
2013); Kwan J A delivering the principal judgment.
13
Summarised at Court of Appeal 34.
-10-

B. Top Selections application for leave to appeal on the as of right basis
9. Top Selection relies for this ground on the second limb of section
22(1)(a) of the Courts statute
14
which states:
(1) An appeal shall lie to the Court in any civil cause or matter
(a) as of right, from any final judgment of the Court of Appeal, ... where
the appeal involves, directly or indirectly, some claim or question to or
respecting property or some civil right amounting to or of the value of
$1,000,000 or more...
10. It submits that the proposed appeal comes within that provision since
PEWCs actions were brought to recover assets, namely the shares in Blinco
BVI and Patagonia, which are companies which, through the corporate network,
hold the PacMOS shares, the Shouson Hill Property and the South Horizons
Properties, so that they are actions involving claims or questions to or
respecting property or some civil right amounting to or of the value of
$1,000,000 or more.
11. Top Selection adduced evidence to demonstrate that such assets are
of the requisite value. The evidence was substantial. It relied on a short
affirmation and a much longer affidavit (being expert accounting evidence
comprising 22 pages with several exhibits). In reply, PEWC filed three
affirmations (one comprising 18 pages with over 180 pages of exhibits, another
to answer the expert evidence comprising 24 pages, and a third short
affirmation). The bundle of documents used at the hearing contained 324 pages.


14
Cap 484.
-11-

B.1 The principles for grant of leave
12. Propositions derived from the established case-law bearing on this
ground of application were summarised in Chinachem Charitable Foundation
Ltd v Chan Chun Chuen
15
as follows:
(i) A further appeal to the Court is in principle oppressive to the party who has
won in the Court of Appeal where the appeal is without substance. Unless it
involves a point of law of public importance or unless grievous injustice would
be done if the final court does not intervene, a successful litigant should not be
dragged before a third tier of court. Appeals as of right deprive the Court of
this beneficial discretion and are exceptional in courts of final appeal.
(ii) Section 22(1)(a) should therefore receive a narrow construction. It is well-
established that the first limb must be narrowly construed, limiting it to
liquidated claims which exceed the threshold amount. The second limb should
be consistently interpreted and must not undermine the established
construction of the first limb.

(iv) To come within the words some claim or question to or respecting property or
some civil right, the claim must be a claim to some particular property or to a
proprietary right of the requisite value.
(v) In considering the threshold amount, the Court focuses on the value of the
claim which is the subject-matter of the appeal and not on the value of any
property or proprietary right which merely has some connection with the claim.
(vi) The value of the claim must be clearly quantifiable in the sum of $1 million or
more.
(vii) The order which the Court would make in disposing of the proposed appeal
must have the immediate effect of conferring or imposing on the relevant
parties a financial benefit or detriment in the quantified amount. It is not
enough to show that such a financial impact is a likely eventual result of the
appeal.
(viii) The words directly or indirectly describe the nature of the claim asserted and
do not affect the requirement for immediacy of the economic consequences of
the Courts order.
And at 31:
the immediacy requirement means that the order sought in the proposed
appeal, if granted, would have the effect of conferring the quantified financial
benefit without need for any further adjudicatory process to determine any
question of fact or law, including any process of assessment, quantification or
apportionment.

15
(2011) 14 HKCFAR 798 at 811 to 812, 20.
-12-

13. So the first question is: what is the property or proprietary right
claimed which is the subject-matter of Top Selections proposed appeal? The
answer is: two shares in Blinco BVI and one share in Patagonia, as both parties
agree.
14. This is therefore not a straightforward case of a claim to recover, say,
a flat or a house, whose value is readily ascertainable and which will be the
same whether viewed from the perspective of appellant or respondent. Top
Selections shares in Blinco BVI and Patagonia each have a par value of US$1
so that it is necessary to inquire into their real value which in turn depends on
assessing the value of the group of companies whose shares were held by them.
That also is not straightforward since the capital of those companies was
generally also nominal, so that any valuable properties held by them must have
been acquired against some countervailing liability. Moreover, assessment of
the assets and liabilities involved has been seriously hampered by the loss or
destruction of financial records relating to the relevant companies. This is
obviously important where the evidence indicates that there were numerous
inter-company transfers, set-offs and so on, within the group.
15. It is against that background that Top Selection relies on expert
evidence from Catherine J ean Williams (Ms Williams) who had given
evidence on behalf of the other corporate defendants at the trial. PEWC call
into question the impartiality of Ms Williams and rely on the evidence of their
expert, Mr Yuen Tsz Chun (Mr Yuen) to challenge the soundness and
correctness of the opinion advanced by Ms Williams.
16. The object of Ms Williamss evidence is to show that the value of
the shares in Blinco BVI and Patagonia plainly exceeds $1,000,000 for the
purposes of section 22(1)(a). She states that her approach is to ascertain the
liquidation value of the group of companies which ultimately holds the
-13-

PacMOS shares, the Shouson Hill Property and the South Horizons Properties.
Her methodology is explained as follows:
The liquidation value of a company is the value that would be realised by the
shareholders if the company was wound up, ie, if all assets were sold and all liabilities
discharged. ... The starting position for calculating liquidation value of a company is
its net assets or book value. ... In considering the parent company of a group, the
value received by shareholders of the parent company in an orderly winding-up of the
group is the (realisable) value, in the form of distributions, of the net assets of each
subsidiary distributed upwards through the group of companies to their parent.
17. She provides as her exhibit CJ W-3, a corporate chart showing the
companies forming part of this group (the Williams Group), to which I shall
return. Taking the current market value of the PacMOS shares and the
abovementioned properties as totalling HK$2.32 billion as at April 2012,
Ms Williams concludes that taking all relevant liabilities of the Williams Group
into account, the liquidation value of the Blinco BVI and Patagonia shares is at
least HK$1.685 billion, subject to the addition of assets and deduction of
liabilities of those companies and of All Dragon, another holding company in
the group. She acknowledges that there are potential liabilities of Blinco and
Patagonia totalling HK$296.3 million which would reduce the liquidation value
of the shares to $1.385 million (subject to the adjustments mentioned), but
suggests that her report establishes that the value of the assets claimed vastly
exceeds the HK$1,000,000 threshold requirement under section 22(1)(a).
18. In our view, Mr Yuens report compellingly exposes what may be
serious flaws in Ms Williamss approach. It is striking how Ms Williams has
performed her analysis of the groups liquidation value defining for her own
purposes, the companies comprised in that group, narrowing it down to
companies with a direct or indirect interest in the three underlying assets
mentioned. Thus, she excludes PCHL from the Group even though PCHL has
throughout featured as an important company in the corporate network. Perhaps
more fundamentally, she excludes PEWC as a member of the group even
-14-

though the evidence shows that PEWC was the source of massive financing for
almost all the acquisitions in the corporate network.
19. Mr Anthony Neoh SC
16
attacks this as a fundamental flaw
in Ms Williamss methodology. Since we are concerned with ascertaining the
value of the assets which are the subject-matter of the claim, namely, the Blinco
and Patagonia shares at the apex of a corporate network, he submits that the
assets and liabilities of all the companies in the corporate network must be taken
into account. This is especially so since (i) they are in turn companies with only
nominal amounts of capital and therefore had to have financed any assets held
by incurring corresponding liabilities; and (ii) since the evidence disclosed
complex inter-company transfers, set-offs and other financial dealings among
members of the entire group. The evidence moreover shows that PEWC was an
essential member of the group, being a beneficial shareholder in Blinco BVI
and Patagonia and a lender to the many asset-acquiring companies in the
corporate network.
20. There is plainly force in Mr Neohs criticism. Adopting a
liquidation valuation from a shareholders perspective, vertically linking Blinco
BVI and Patagonia to particular assets while ignoring horizontal and diagonal
cross-liabilities in the group and ignoring what the position would be in the
groups consolidated accounts, must (Mr Neoh submits) produce a suspect
valuation of the shares of the holding companies at the apex of the corporate
network. This is especially so since the shareholder is not regarded as PEWC
but, contrary to the concurrent findings of the J udge and the Court of Appeal,
Willi.
21. As already mentioned, the attempt to establish the value of the
holding companies shares is made particularly difficult by the denuded state of

16
Appearing with Mr Eugene Fung SC, Ms Barbara Wong and Mr Jonathan Chang.
-15-

the financial records of certain companies in the group, in particular CPE, the
group treasury company. Nevertheless, on the available materials, Reyes J
made a number of findings that PEWC was the source of finance for substantial
acquisitions by companies in the group. For instance, his Lordship found that
despite having been booked by PCHL as loans from Blinco HK, in all
likelihood the internal funding used for the South Horizons Properties
ultimately came from PEWC.
17
He also pointed to evidence that the
acquisition of the PacMOS shares was ultimately funded by PEWC redeeming
fixed rate notes which it had guaranteed.
18
He pointed to the evidence of Larry
Horner that :
... all money for the acquisition of the shares of Win Win
19
came from PEWC. The
funding could be direct from PEWC or through the subsidiary(ies) of PEWC or raised
from financial institutions using PEWCs credit. ...
20

22. Again, in the context of Hus allegation that Willi had provided cash
injections as part of the Takeover Arrangement, Reyes J found that in relation to
an alleged injection of HK$80 million into PCHL, at least $55 million
ultimately came from PEWC, which was also the more probable source of the
remaining $25 million.
21
These findings illustrate the complex nature of the
liability picture for the group as a whole and the importance of the role played
by PEWC.
23. Indeed, the evidence at trial suggested that senior officers of PEWC
had raised approximately HK$5.2 billion between 1990 and 1998 by means of
bank borrowings and the issue of fixed and floating rate notes. Mr Yuen

17
Judgment 105.
18
Judgment 143-147.
19
PacMOSs former name.
20
Judgment 147.
21
Judgment 444 and 445.
-16-

suggests that the HK$5.2 billion so raised had most probably [been] advanced
to the Blinco and Patagonia Group. If so, they would have incurred liabilities
to PEWC of a very substantial magnitude which would have to be taken into
account in considering the groups liquidation value.
24. At the hearing, Mr Yu SC disputed the existence of potentially huge
liabilities not taken into account. He pointed to the absence of debt enforcement
actions by external creditors against members of the corporate network as
suggesting that the liability position has adequately been taken into account,
justifying Ms Williamss conclusion as to the minimum value of the shares.
However, Mr Neoh countered that the absence of external creditor enforcement
proceedings was entirely explained by the fact that PEWC had paid off the
external debts incurred by companies in the corporate network, with PEWC
taking their place as creditor.
25. Mr Yu endeavoured to argue that whatever doubts there might be
around the edges, there was at the core, sufficient evidence to satisfy the Court
that the Blinco and Patagonia shares must be worth at least $1 million. Mr Yu,
however, expresses the view that the Blinco and Patagonia Group could well
have a deficiency in assets once the HK$5.2 billion of PEWCs funding is taken
into account and there would potentially be no residual value to the shares of
Blinco BVI and Patagonia. He emphasises that without the full set of financial
records of the relevant companies showing how the funds were channelled to
pay for acquisitions and what countervailing liabilities were incurred, the
valuation opinion of Ms Williams lacks any sound foundation.
B.2 Conclusion regarding as of right
26. It is of course neither possible nor necessary for this Appeal
Committee presently to make any findings or reach firm conclusions as to the
actual valuation of the shares in Blinco BVI and Patagonia which are the subject
-17-

of PEWCs claim against Top Selection. I do not doubt that cogent arguments
can be made on both sides. But what the controversy between the parties
plainly shows is that it cannot by any means be asserted that the value of the
claim is clearly quantifiable in the sum of $1 million or more. Nor is it the case
that the Courts order for Top Selection to transfer those shares to PEWC had
the immediate effect of conferring or imposing on PEWC and Top Selection a
financial benefit or detriment in an ascertained or readily ascertainable
quantified amount. To translate the value of the shares from their US$3 par
value to a real value, there is clearly a need for further adjudicatory processes
requiring the resolution of contentious questions as to the proper methodology
and as to what conclusions can properly be drawn, given the seriously depleted
state of the groups financial records. Such processes of assessment,
quantification or apportionment are likely to be extremely difficult and may, in
some cases, be virtually impossible. Even with the extensive evidence before us,
it could not be shown that the requisite value of $1 million or more was reached.
In truth, the evidence only served to underline the sheer difficulty or
impossibility of the exercise. This is not the type of case the as of right
procedure was meant to cover.
27. In the light of the established construction of section 22(1)(a) as
summarised in Chinachem Charitable Foundation Ltd, I would hold that Top
Selections case for leave as of right has not been made out. I have read in draft
and respectfully agree with the Determination of Mr J ustice Tang PJ .
Mr Justice Tang PJ:
28. I agree with Ribeiro PJ that Top Selection, is not entitled to appeal
as of right. I am further of the view that neither Top Selection nor Hu should be
granted leave to appeal on any other basis. I gratefully adopt his lordships
-18-

summary of the nature of the actions and decisions below in paras 3 to 8
above.
29. Essentially, these proceedings were concerned with the beneficial
ownership of the shares in Blinco BVI and Patagonia (the shares). PEWCs
case was that as a result of the breach of fiduciary duties by Hu, the shares
became vested in Top Selection, which was controlled by Hu. The defence of
Hu and Top Selection was that Willi was a bona fide purchaser for value of
these shares from PEWC by virtue of a Takeover Arrangement
22
which was
evidenced by three letters

,

exchanged between Hu purporting to act on behalf of
PEWC and Willi, whereby PEWC divested its interests in the shares in favour
of Willi for valuable considerations.
30. The trial took place before Reyes J . PEWCs case at trial was that
the Takeover Arrangement was a concoction.

After a careful examination of the
evidence the learned judge concluded:
526. There never was a Takeover Arrangement between Hu and Willi. The alleged
Takeover Arrangement was belatedly fabricated to cover Hus ownership and control
through Top Selection of the companies and assets held through Blinco BVI and
Patagonia.
31. The Court of Appeal dismissed Hu and Top selections appeals.
Thus, there were concurrent findings of fact.
32. It is against such background that I consider the questions which
are said to be of great general or public importance, namely, (1) Whether it is
open to a court to give judgment in favour of a party who has failed in its
pleaded case, but on an alternative case which has not been pleaded; (2) whether

22
In Hus pleadings he used the expression Takeover Arrangement, Top Selection used the
expression Takeover Agreement to denote the same transaction or series of
transactions.
-19-

the rejection of a positive case by the defendant can supplant the lack of a
positive finding in favour of the plaintiff.
33. These questions can be dealt with together. They are fact sensitive,
moreover, they are based on the false premise that PEWC succeeded on an
alternative case which it had not pleaded. The reference to PEWCs pleaded
case was a reference to PEWCs denial of the existence of the Takeover
Arrangement and PEWCs allegation that if it existed it was a fraudulent
scheme to secretly divest PEWCs interests in the shares with no consideration
or at gross undervalue, as well as PEWCs allegation that it was unaware that
its resources had been used without its knowledge or authority to acquire the
assets represented by the shares. The learned judge rejected PEWCs case that
it was unaware of the acquisitions, but found that the Takeover Arrangement
was a fabrication. This finding was open to the learned judge. At trial, the
common case of Hu
23
and Top Selection
24
was that the plaintiff was originally
the beneficial owner of the shares but that the plaintiff no longer owned the
shares because of the Takeover Arrangement. Upon the finding that the
Takeover Arrangement was a fabrication, it followed that the beneficial interest
in the shares remained with PEWC.

There was no other relevant basis to deny
PEWC judgment.
25
Had PEWCs denial of the knowledge of acquisitions been
accepted by Reyes J , other remedies might have been open to PEWC. But the
rejection of this part of PEWCs case would not per se affect its beneficial

23
19.2, of Hus Re-Amended Defence in HCCL18/2009, where Hu pleaded it is averred
that, before PEWC entered into the Takeover Arrangement the worldwide subsidiaries
of PEWC included Blinco, Patagonia and PCHL and their subsidiaries.
24
3(3)(c) and (d) of its Re-Re-Re-Amended Defence in HCCL18/2009, in particular at (d)
where Top Selection averred that Willi acquired the shares as a bona fide purchaser by
virtue of the Takeover Arrangement.
25
Other arguments such as, that it was unconscionable for PEWC to sue Hu (para 586),
illegality under Taiwanese law (593), were rejected by Reyes J.
-20-

interest in the shares, which were, ex hypothesi, acquired with its knowledge
and authority, and for its benefit.
34. The applicants also relied on the or otherwise ground. They said
there was a miscarriage of justice. This complaint is also tied up with their
claim that PEWC had succeeded on an unpleaded case which should have
pleaded in the alternative.

The alternative case being that, if the assets were
acquired with its knowledge or authority, their disposal was unauthorized. But,
PEWCs case was that there was no disposal at all and that they were
beneficially entitled to the shares, and the alleged disposal, namely, the
Takeover Arrangement, was a concoction. That was so found by the learned
judge and confirmed by the Court of Appeal.
35. The applicants repeated before us arguments before the Court of
Appeal that the learned judge had reversed the burden of proof and that the
evidential burden was on PEWC to prove that the three letters were forgeries or
that the Takeover Arrangement was a fabrication. But as the Court of Appeal
rightly pointed out Chan Chun Chung & Another v PBM (HK) Ltd (2004) 7
HKCFAR 178 is authority for holding that the burden was on Top Selection to
show that it was a bona fide purchaser without notice. The burden was not on
PEWC to disprove the alleged disposal. Moreover, it did not matter because
64 since the judge had found the evidence was overwhelming and pointed
to a clear conclusion there was no Takeover Arrangement.
36. I will take note of two other arguments. First, it was said that PEWC
had not pleaded fraud but Reyes J found that Hu was fraudulent. The plaintiffs
case, as the learned judge pointed out, was that the Takeover Arrangement was
a concoction. In its Amended Reply to the Re-Amended Defence of Hu
26


26
In HCCL18/2009, para 43-45, para 41-43 in PEWCs Amended Reply to Top Selections
Re-Re-Amended Defence made the same points.
-21-

PEWC denied the existence of the Takeover Arrangement. PEWC also denied
that the three letters said to evidence it, were produced contemporaneously with
the dates shown. It also pleaded that if the Takeover Arrangement existed it
was a fraudulent scheme to secretly divest the plaintiff of its interest in the
shares, and that there was no consideration. A clear allegation of fraudulent
conduct had been pleaded although the word fraud was not used. The Court
of Appeal said: There is no need to plead the logical and natural result which
followed from the finding that there was no Takeover Arrangement. With
respect, I agree.
37. Another complaint was that Reyes J had failed to have proper regard
to his rejection of PEWCs case that it was unaware of the acquisitions. It was
said the whole case should have taken on a completely different complexion.
There is nothing in this point, with respect, the learned trial judge dealt with the
Takeover Arrangement in detail and with great care. He found that it was a
belated fabrication to hide Hus control and ownership of Top Selection. His
findings were subjected to vigorous attack in the Court of Appeal. The Court of
Appeal confirmed Reyes J s findings. The evidence was overwhelming that the
Takeover Arrangement was a fabrication.
38. For these reason, I would dismiss Hu and Top Selections
applications for leave to appeal and make a cost order nisi against them in
favour of PEWC, such costs to be taxed unless agreed.
Chief Justice Ma:
39. I agree with both Determinations and accordingly, the application is
for leave is dismissed. We make an order nisi that the applicants pay the costs
of and occasioned by this application. Any submissions as to costs should be
made in writing and lodged with the Registrar within seven days of the date of
-22-

this Determination. In default of such submissions, the order as to costs is to
stand as an order absolute without further direction.









(Geoffrey Ma)





(R.A.V. Ribeiro)





(Robert Tang)
Chief J ustice Permanent J udge Permanent J udge

Mr Robert Whitehead SC, Mr Steven Kwan and Mr Vincent Chen, instructed by
Haldanes, for the applicant in FAMV Nos 5-7/2014

Mr Benjamin Yu SC, and Ms Rachel Lam, instructed by Munros, for the
applicant in FAMV 8/2014

Mr Anthony Neoh SC, Mr Eugene Fung SC, Ms Barbara Wong
and Mr J onathan Chang, instructed by Lo & Lo, for the respondent
in FAMV Nos 5-8/2014