1 HCMP 1987/2018 Day 01 Monday, 4 December 2023 (10.03 am) MS HO: Good morning, my Lord. I appear with Mr Arthur Poon for the petitioner, and Ms Frances Lok appears with Mr Ping Kan for the respondents. Before I proceed with my opening, I'll quickly inform my Lord where the agreed documents can be found. For the list of issues, that can be found in annex 1 to the petitioner's opening. That's the list of issues of the respective parties. For the agreed dramatis, chronology and agreed facts, they can be found in annexes B to D of the respondents' opening. As to the agreed hearing timetable, they have been handed up, submitted to this court, last week. COURT: I see. MS HO: Yes. COURT: And you still think that should be fairly accurate? MS HO: Yes. With that, I will start my opening. Opening submissions by MS HO MS HO: Lord, we come here before this court with sincerity. Harbour Front will show the court in this trial that we have reflected on our conduct and we have remedied the breaches of the shareholders agreement as found by the court. By doing so, we have repaired the trust and A Court Reporting Transcript by Epiq 2 HCMP 1987/2018 Day 01 10:05 confidence relationship between the parties, which we say is still there and can still be remedied. Your Lordship will recall that Harbour Front is in substance the majority shareholder of Fonfair, holding 66 per cent of Fonfair shares through Money Facts and itself. So, in other words, it is also the substantive, majority holder of the land, because Fonfair is holding the land. So having remedied the breach as the majority owner, Harbour Front should be entitled to return to the management seat. I understand that your Lordship might have a concern as to the practicality of Harbour Front going back to the management given there has been dispute between the brothers. Your Lordship will hear evidence in this trial that there is practicality and there is a future. Your Lordship will hear evidence from Gillian Leung, director of Harbour Front, that she and Jerry Leung are now the directors managing Harbour Front, and they are in the steering seat. COURT: Wasn't that the case at the last trial? MS HO: In the last trial, we understand that notwithstanding our case that Gillian was in the management seat, your Lordship had made an observation or finding Gillian -- COURT: No, I didn't believe her -- A Court Reporting Transcript by Epiq 3 HCMP 1987/2018 Day 01 10:06 MS HO: They don't believe that. COURT: I seem to recall something like that, that may be a less than accurate summary of way I put it, but -- yes. MS HO: You don't believe that fact then. COURT: Yes, the reality was that her father was telling her what to do even, if she did it. MS HO: Now it is and it will be in the future. The one piece of clear evidence that Gillian and Jerry are now in the steering seat is that Harbour Front, under the management of the brothers and sisters, have taken active steps to remedy the breach by accepting the reconciliation exercise and tendering the payment as an alternative. So this is the clear evidence that we have turned a new leaf, so we invite your Lordship to take that into account. Your Lordship will also note that both YT and YK are now in their retirement age. One turned 70, one in their early 70s. So the reality is that Gillian and Jerry, being the new management and the second generation, they are happy and prepared to follow the shareholders agreement and proceed and manage Fonfair and Money Facts in strict accordance with the SAK -- shareholders agreement with YK. If YK eventually really wants to exit, that's his choice, but he has follow the shareholders agreement A Court Reporting Transcript by Epiq 4 HCMP 1987/2018 Day 01 10:08 which has already provided a way for either party to exit. What he cannot do is that he cannot say we have committed further misconduct and rely on that to compel us to buy out his shares. Because one would see from the reaction of YK, is that he has been happily running the company in the past 20 years when he was in sole control. But after we have taken steps to remedy the breach and there is a chance, we say a good chance, that we have to return to the management, he turned around and said that, oh, the parties' mutual confidence has irrevocably broken down and there was no way for it to be resurrected. We will show, again, in this trial that his case is not credible on the facts and also he cannot rely on the unfair prejudice jurisdiction as a matter of law. In a nutshell, that is our case. We have remedied the breach at the time when the mutual trust and confidence relationship is still capable of being remedied. Having done that, we should be entitled to go back to our management. No further breach and no further breakdown of the shareholders agreement. With that introduction, I will just expand on two aspects of my written opening which I believe would be important for your Lordship's consideration of the evidence in the trial. A Court Reporting Transcript by Epiq 5 HCMP 1987/2018 Day 01 10:09 The first would be the proper approach in considering whether Harbour Front being excluded from management, is unfairly prejudicial. That's our case. The proper approach in assessing whether there is a mutual, irrevocable -- mutual break down, break down of mutual confidence, and that is YK's case, that's the first thing. The other thing I will take your Lordship to, the steps, the letters and the offers that we have made to remedy the breach and, and these are the two aspects which I'll deal with, and of course I will reply to YK's written opening where appropriate. Concerning the proper approach in considering whether Harbour Front's exclusion from management is unfairly prejudicial, I have set out my submission in section C of my written submission. That would be at page 11. COURT: I have that. MS HO: Your Lordship has repeatedly reminded us in various cases that for us to show unfair prejudicial conduct, there are two ways. First is to say that there is a breach of the terms where the parties have agreed to conduct their affairs, so it's a breach agreement scenario. The other one is relying on equitable consideration, saying that the parties running the company cannot rely A Court Reporting Transcript by Epiq 6 HCMP 1987/2018 Day 01 10:10 on their strict legal rights, so it's rely on the superimposition of equitable considerations. When we are talking about scenario 1, the terms of the parties' cooperation, those terms can be found in the articles, they can be found in the written shareholders agreement, they can also be found by implication. That is the position held by the law, and I'll just quickly take my Lord to that. Firstly, the Asia Television case of your Lordship, at tab 39 of the petitioner's supplemental list of authorities, paragraph 52. COURT: Yes, I have that. MS HO: Your Lordship cited Re Tobian Properties. If we can go to the bottom of that page, the last paragraph, fifth line starting with "The terms": "The terms of the association are contained in the articles of association and sometimes in collateral agreements between the shareholders. Thus the manner in which the affairs of the company may be conducted is closely regulated by rules to which the shareholders have agreed." Over the page -- COURT: You're reading. I understand what you're saying, but this is paragraph 53? MS HO: This is paragraph 52. A Court Reporting Transcript by Epiq 7 HCMP 1987/2018 Day 01 10:12 COURT: Oh, it's the bottom of the quote. MS HO: Yes. The last paragraph of the quote on that page, fifth line, starting with "The terms": "The terms of the association are contained in the articles of association and sometimes in collateral agreements between the shareholders. Thus the manner in which the affairs of the company may be conducted is closely regulated by rules to which the shareholders have agreed." Then over the page, still on the quote -- COURT: Just while I think about this point, I will take you very slightly out of order. "Secondly, company law has developed seamlessly from the law of partnership, which was treated by equity, like the Roman societas, as a contract of good faith." Later in your submissions, you refer to Lord Hoffmann referring to frustration as being an analogous way of thinking about what constitutes a breakdown in the relationship between the parties, so it's a slightly different point to the one you are on now. I didn't look at the authority, but my thought is I'm not sure that is the most helpful analogy. We don't need to debate it now, I just flag it. There's a A Court Reporting Transcript by Epiq 8 HCMP 1987/2018 Day 01 10:14 decision, a recent decision, the name of which I can't recall, in which Lord Briggs refers to, if I recall -- and maybe the context is different, but you might want to go away and have a look at it when you've got a minute -- in showing what is necessary in order to obtain unfair prejudice relief -- I can't remember whether it was specifically referring to the breakdown of relationships, but you can see why I think it might have been. Essentially, what you have to show is what you've have to demonstrate in order to dissolve a partnership. And that seems to me intuitively to me a better way of thinking about it, better way of beginning to think about the issue, than talking about frustration in law of contract. You don't need to comment on that; I just mention it because -- MS HO: I do agree with your Lordship that we are not talking about technical frustration of a contract, but what we emphasise here is that there is this bargain, or this agreement between the parties. Unless and until one can show this agreement has been completely broken down, or completely negatived as the other cases like Ng Yat Chi mentioned, then one cannot say that the mutual relationship is broken down. So we just want to emphasise it's something very A Court Reporting Transcript by Epiq 9 HCMP 1987/2018 Day 01 10:16 fundamental, serious. We don't need to go to the extent of saying, "Oh, it's contractual frustration, all the purposes have to be gone", et cetera. But what we are saying and what is important is that one has to show complete breakdown of the basis of the parties' association, not something fluid like what my learned friend is suggesting, especially in the written opening, that long-term dispute and some arguments, then, for that reason the mutual confidence relationship would be broken down. COURT: Well, this is a fairly unusual case, for fairly obvious reasons. MS HO: It is. COURT: And I don't want to see it again. MS HO: Yes. Hopefully you will not, but in a positive way. COURT: But perhaps because it's slightly unusual, thinking through, which I haven't done yet, quite how one should be approaching -- and it may be more relevant to Ms Lok's case than yours -- how one should be thinking about the circumstances in which the court accepts that things have changed fundamentally, and they justify, for example, a winding-up or buyout or -- as an alternative, would seem appropriate. As I say, when I was thinking about it, it just seemed to me, to be thinking about frustration of contract, that doesn't work very well, A Court Reporting Transcript by Epiq 10 HCMP 1987/2018 Day 01 10:17 conceptually I'm not particularly attracted by it as an approach in any case, but certainly in the context of a case like this, because it is messy, it is unusual, it does stretch over an extended period of time. MS HO: It is a unique case, unusual case, and that is why it is even more important that the legal approach is correct. Because apart from the facts about this present case, this will have an impact on the jurisprudence as to how we affect -- how we approach cases like this. As I will demonstrate and explain further, we're not saying that we need to go to technical frustration. This is just by analogy and a reference by Lord Hoffmann, but we do see cases finding that if we want to destroy the mutual confidence relationship or destroy the bargain of the parties, one has to show fundamental breach of the bargain. That is the point. COURT: Or, as I say, you can just pose the question that Lord Briggs seemed to be posing in this case, which, rather unhelpfully, I can't remember the name of the case -- MS HO: I'll look that up. COURT: -- but it is quite reasonable, which is in a comparable situation, would a partner be able to get dissolution of the partnership, presumably subject, of A Court Reporting Transcript by Epiq 11 HCMP 1987/2018 Day 01 10:18 course, to what the partnership deed said, but are these circumstances, and absent a comprehensive partnership deed, you would expect the court to say, "That's it, it's over"? MS HO: We'll bear that in mind and we'll look it up. Going back to Asia Television, page 627, the following page, still within the quote, your Lordship will see quote [22]. COURT: Yes. MS HO: "One of the most important matters to which the court will have regard is thus the terms on which the parties agree to do business together. These are commonly found in the company's articles. They also include any applicable rights conferred by statute. In addition, the terms on which the parties agreed to do business together include by implication an agreement that any party who is a director will perform his duties as a director." One example of such agreement by implication would be the directors' duties implication, implied duty, but this passage shows that agreement of the parties can be made by implication. Paragraph 53: "Whether or not a particular act is unfair has in the first instance" -- A Court Reporting Transcript by Epiq 12 HCMP 1987/2018 Day 01 10:20 COURT: Well, I'm not sure I get that out of that quote because it is referring specifically to "perform his formal duties as a director". I don't think -- I wouldn't be rushing to imply terms into a shareholders agreement, for example, purported to be comprehensive, other than obvious things, the obvious corollary, if you're entitled, you say, I would rather -- if you're entitled to appoint a director, if it doesn't say so in the shareholders agreement by implication the director must be expected to do what a director's responsible to do, he must have the right to the information required in order to do what is consistent with his obligation. MS HO: Yes, I will take my Lord To the shareholders agreement in a moment. We do say in one of the clauses there is an express provision, not in so many words saying, "You have equal management". We do see a provision saying that YK and YT are the two directors, not subject to rotation. So we say there is an "express term". And, in any event, there is an implied term to this effect, and that has been held in the 2004 judgment by Madam Justice Kwan. That is the basis. That is the case that I'd like to take my Lord to to show that the agreement can be implied, but, of course, I get your Lordship's point that it may not be as easy. We will tell your Lordship that in the shareholders A Court Reporting Transcript by Epiq 13 HCMP 1987/2018 Day 01 10:21 agreement, there is actually an express provision to that effect. Just for completeness, but this is only a textbook cited by YK in his list of authorities, tab 1 the Minority Shareholders textbook, page 334. COURT: Wait a minute; I thought I had opened that. Oh, here we are. I have that now. MS HO: The page is at the bottom, 334, paragraph 6.8. COURT: Yes. MS HO: 6.83. Here the learned author said that: "Therefore the first step in investigation into the question of unfairness is an examination of whether the petitioner's contractual rights, including those arising under the companies' articles of association, have been infringed. The rights in question may be express or implied." Then citing Luck Continent. So these are the parameters that we are working under, whether it's the scenario 1 situation or scenario 2 situation, and how the court should approach that. Our case, Harbour Front's case is that exclusion -- the exclusion from management is a scenario 1 situation, ie, there's a term of association which has been breached. If that is a scenario 1 situation, the court will be more ready to uphold this bargain subject to the clean hand issues A Court Reporting Transcript by Epiq 14 HCMP 1987/2018 Day 01 10:23 because the court will not rewrite a bargain of the parties. We say that this agreement of equal participation arises from the shareholders agreement, so the shareholders agreement and the destruction of it, whether frustration or fundamental destruction of it, is key, which YK has to show. I will just take your Lordship to three authorities, just the textbook, very quickly to show that the court will be ready to uphold the parties' bargain if we are in the scenario 1 situation. COURT: These are in your authorities? MS HO: In my supplemental authorities at tab 42. Your Lordship can go to page 480, the first page in the document. COURT: Yes. MS HO: Your Lordship will see 9-119, but I will start from reading the paragraph above it, six lines from the top, towards the end, starting with "If parties". COURT: Yes. MS HO: "If parties in a purely commercial relationship agree that the affairs of the company are to be governed by only the rules as laid out in its articles of association, then conduct in accordance with the constitution cannot, as a general rule, be 'unfair' in A Court Reporting Transcript by Epiq 15 HCMP 1987/2018 Day 01 10:25 the absence of breach of duties ..." Then citing the case. Moving on: "Where there is such a breach" -- the last sentence -- "there is generally no need to consider whether there are equitable considerations which render unfair the exercise of rights under the constitution. 9-119. 'Bargains' in articles of association may sometimes be supplemented by written commercial agreements or collateral agreements between the parties which are to be distinguished from equitable bargains in the sense first explained in Ebrahimi v Westbourne Galleries and later clarified in O'Neill v Phillips. Where 'bargains' contained in collateral agreements exist, the court will also not rewrite the terms of the collateral agreements." Similarly, if your Lordship -- COURT: What's an equitable bargain? MS HO: Equitable bargain -- COURT: I know you didn't write it, Dr Wong did, but what do you understand? MS HO: Equitable bargain would be scenario 2, equitable obligation. That is -- COURT: I'm not -- since neither of us actually wrote it, we don't need to worry about it. I'm not sure that -- I would have thought that the concept of a bargain falls A Court Reporting Transcript by Epiq 16 HCMP 1987/2018 Day 01 10:26 into the agreement category. So you agree something, it may be it's very casual, so a conventional partnership, two plumbers, incorporate a limited company, everybody knows that they were working together equally running the company. They didn't even bother to discuss it or write it down, but it's clear what the understanding was, to use that word, I would have thought that was a category 1 situation, not a kind of breakdown of trust and confidence situation. But, anyway, it doesn't matter. MS HO: I think the line is subtle in a sense, because if there are equitable understanding, mutual understanding -- usually, the court will say there's a mutual understanding or agreement, the conduct, then they will say which attract equitable consideration, and then it goes to scenario 2. But if it is clearer, there are shareholders agreement, there are implied agreement specifically seeing the parties positively agreeing to something, that will be a shared scenario 1 situation. COURT: It then actually uses the term "bargains" again in the next sentence. But then that seems to be relating to scenario 1. Okay, all right. MS HO: Yes. Move on to tab 43. COURT: That's Hollington, yes. A Court Reporting Transcript by Epiq 17 HCMP 1987/2018 Day 01 10:28 MS HO: The first page of the authorities, at the bottom. Paragraph 7-33, the last sentence, talking about breach of shareholders agreement and breach of articles of association: "Thus, any breach of the articles of association or of any collateral shareholders agreement is prima facie a ground for relief under section 994." The next paragraph: "A classic example of relief being granted on this basis albeit ...(Reading to the words)... the same principle applies in the context of section 994 is Re ABC Chewing Gum ..." Then the author recited the facts. Four lines from the bottom: "In order to achieve this position, the company adopted a new set of articles and on the same day the petitioner, the respondent and the company ...(Reading to the words)... made a winding-up order on a just and equitable basis." So the idea that we get from this textbook citing the authorities is that a shareholders agreement, be it express or implied, we say, are equally important as the articles. They cannot be brushed aside as what YK now seeks to do, especially in the written opening, saying that it's just a separate contract, can it be A Court Reporting Transcript by Epiq 18 HCMP 1987/2018 Day 01 10:30 ignored, and your Lordship does not need to pay regard to it. It is not. Lastly, if there is a breach of shareholders agreement, the consequence would be tab 44 in my list of authorities. 6.4, the last page of this authority. Your Lordship will see that for a shareholders agreement, if there was a breach, it can be terminated or affirmed. That is also a reason why we say if YK cannot show a fundamental breakdown of the shareholders agreement and the implied agreement of equal participation after we have cleaned our hands, we should be entitled to assert this right, a positive right. I will demonstrate to your Lordship why we say it is a scenario 1 situation by reference to the shareholders agreement, the articles of Money Facts and Mdm Justice Kwan's judgment. I take your Lordship to the shareholders agreement, in bundle D1, tab 4. COURT: I don't have a D1; I just have a D. MS HO: D, tab 4. COURT: What page is it? MS HO: Page 2098. COURT: No, the updated e-bundle? MS HO: Yes, that would be the D one. COURT: Bundle D -- oh, that's extra items, but what's A Court Reporting Transcript by Epiq 19 HCMP 1987/2018 Day 01 10:32 happened to -- has somebody deleted the original? Mystery solved. The problem with some of my bundle D -- anyway, which page do you want me to go to, and I'll tell you what the problem is. MS HO: This is the page which your Lordship -- COURT: You said tab 4. MS HO: Yes, tab 4, page 2098. COURT: Some of the pages have been copied sideways and I can't change the format or the PDF. This one, I can see. MS HO: This is the shareholders agreement between YK and YT and there is no dispute that after Harbour Front comes into the scene, this would be the shareholders agreement between Harbour Front and YK. We see from the second paragraph, ie "Now that it is hereby agreed", that is the first paragraph, and the second we see there is a provision that this agreement would be entered into between YK and YT for the setting up of a new company, and that new company would be Money Facts. Then if one goes to paragraph 5, starting with "YK and YT mutually undertake not to cause Newco to issue further shares ..." COURT: Yes. MS HO: And there should be mutual consent as above provided if they were to issue new shares." A Court Reporting Transcript by Epiq 20 HCMP 1987/2018 Day 01 10:34 Then one would see from paragraph 6 that Money Facts purposes, the three purposes that have been mentioned repeatedly. The first one is: "[Money Facts should] ensure as the majority shareholder in Fonfair ... that the rental and income received by Fonfair are properly administered and after reasonable provisions for expenses such incomes are distributed to the shareholders of Fonfair". That's the first purpose. The second is to: "ensure ... the majority shareholder, in Fonfair ... that Fonfair shall pursue and negotiate any future development plans and other business to safeguard and maximise the interest of Fonfair shareholders ..." Over the page, the last purpose: "[To] safeguard and maximise the interest of YK and YT in Fonfair ..." The second page, second paragraph, there is this provision which we say is an express provision: "YK and YT as sole shareholders in Newco shall cause the election of YK and YT as the only two directors in Newco. Both directors shall not be subject to rotation." So this is a provision which is clear, indicating that it was the parties' intention that there should A Court Reporting Transcript by Epiq 21 HCMP 1987/2018 Day 01 10:35 only be two directors, YK and YT, so now Harbour Front and YK, and both directors shall not be subject to rotation. They should stay. So we say this express provision is as good as the provision expressly saying that there should be equal management as long as the company is there. So this is not a case where we need to imply from any understanding, et cetera, which was not reduced in writing in the shareholders agreement. Moving on, paragraph 3, saying that the shares in Money Facts are not transferable to any other persons without the consent of the other shareholder. Paragraph 4: "In the event that one of the shareholders in [Money Facts] decides to sell his shares, he shall be allowed to do so after two years ..." And has to follow the provisions below, and that is the shoot-out provision. One will see the shoot-out provision provides that the shareholder who wants to sell the share should let the other shareholder know, and the other shareholder has three choices: either he agrees to the price and buys the shares, or he offers the shares to the proposing parties at the same price, and the proposing parties must buy that shares at that amount, or, he agrees for the proposing party to sell it A Court Reporting Transcript by Epiq 22 HCMP 1987/2018 Day 01 10:37 to the third party. So that is the exit mechanism agreed by the parties under the shareholders agreement. The last page of this shareholders agreement, second paragraph, we can see that: "This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective heirs administrative, executors and permitted assigns." Then I'll take your Lordship to the articles which the parties cannot dispute that the articles were being amended to bring it in line with the shareholders agreement. This is also YK's position, and I'll just quickly take your Lordship to YK's witness statement, one paragraph, bundle C1, tab 2, page 389, paragraph 12. YK says this: "In September 1991, Money Facts was acquired by YT and I off the shelf. The Share Sale Agreement was completed, and YT transferred [the] shares in Fonfair to Money Facts, which was owned ... in equal share. Upon the flotation of UDL in 1991, Fonfair was spun off ... The articles of Money Facts ... and Fonfair were amended to align them with the provisions of the Shareholders Agreement." So here, the shareholders agreement has a fundamental feature in the parties' basis of A Court Reporting Transcript by Epiq 23 HCMP 1987/2018 Day 01 10:39 association. It is as good as the articles. Then we can have a look at the articles of Money Facts and see how it has been amended to give effect to the shareholders agreement. That will be in bundle D1 again, tab 7. Page 2119. COURT: Yes. MS HO: Your Lordship will see that under "Special resolutions", the articles of association of the company is being amended, and the first amendment, paragraph (i)(a) is to produce the shoot-out provision. Then if we go to the next page, (ii)(a), that deals with the directors, and your Lordship will see the original articles 79 and 83 to 85 were being deleted. We can just quickly go to those articles being deleted first, at page 2139. On the right-hand side, article 79, under "Directors". The original 79 provided that: "The names of the first directors shall be determined by the [shareholders] ... Unless and until the Company in general meeting shall otherwise determine, the number of Directors shall not be less than two and there shall be no maximum number." Versus what was stated in the shareholders agreement, saying that YK and YT shall be the only directors. So this is deleted. Then article 81: A Court Reporting Transcript by Epiq 24 HCMP 1987/2018 Day 01 10:42 "The shareholding qualification for Directors may be fixed by the Company in general meeting, and unless and until [it is] so fixed no qualification shall be required." Deleted as well. Then move on to page 2140, paragraph 83: "The Directors shall have power ... from time to time, to appoint any person to be a Director, even to fill a casual vacancy or as an addition to the existing Director." So the directors can add directors. This is deleted to bring that in line with the shareholders agreement, because there should be only two directors, YK and YT. Artic 84: "The Company may by special resolution remove any Director before the expiration of his period of [offer] notwithstanding anything in these Articles or any agreement between the Company and such Director[s]. Such removal shall be without prejudice of any claim to [which the] Director may have ..." Again, taken out because that is not consistent with the express provision that two directors should stay. Similarly, article 85: "The Company may by ordinary resolution appoint another person in the place of [those directors being] A Court Reporting Transcript by Epiq 25 HCMP 1987/2018 Day 01 10:43 removed ..." All these deleted and being replaced by the provision in page 2120. Go back to page 2120. All these were being replaced by (II)(A). The new 81 says: "Unless and until otherwise determined by the Company the number of Directors shall be two." Article 82: "The first Directors of the Company shall be [YT and YK] as nominated by the subscribers to the Memorandum of Association." Article 83: "The First Directors shall not be subject to retirement by rotation." We say that the agreement by the parties that YT and YK shall be the only two directors have been incorporated in Money Facts' articles, and it is not the case, as YK's opening says at paragraph 13, if your Lordship will go to that, YK was saying that this clause is spent, the first director -- the appointment has spent, so we cannot say that this is an incorporation of the equal management arrangement in the articles. We do not agree with that because what the intention here is very clear, the first director would be these two people and these two people will stay until -- as long as the company will last. So that is A Court Reporting Transcript by Epiq 26 HCMP 1987/2018 Day 01 10:45 as good as saying that these two people will have equal management for as long as the company will last. So that deals with the articles. For Fonfair, there is no equivalent change in Fonfair. But we say that, clearly, the shareholders agreement concerns the management of Money Facts for the purpose of acting as the majority shareholder of Fonfair, and that is why, insofar as there is no express provision of equal management in Fonfair, that should be implied. I will move on to Mdm Justice Kwan's judgment, with which we say that she also found that there was an implicit agreement of equal management. Of course, it is not very clear there because she was also analysing the equitable considerations scenario, but we do say from her finding there is this finding of implied agreement. I take your Lordship to her judgment, in bundle D3, tab 107, page 3090, paragraph 33. If your Lordship goes back one page, you can see the header. Mdm Justice Kwan was analysing whether there was a quasi-partnership. If your Lordship goes back to paragraph 33: "The circumstances in which equitable consideration would arise would vary from case to case." First sentence. If your Lordship can go down to L, A Court Reporting Transcript by Epiq 27 HCMP 1987/2018 Day 01 10:47 her Ladyship said: "Further, it is not necessary that there should be an express assurance or understanding between the parties concerned of the rights or obligations that are not contained in the articles of association, as in an appropriate case, such rights or obligations can be implied or inferred from the conduct of the parties ... What I need to decide whether, on the facts viewed objectively as a whole, the basis of association was adequately and exhaustively laid down in the articles of association." Page 3093, paragraph 41: "Was there any agreement or understanding that both parties should participate in the conduct of the business of Money Facts and Fonfair? There was no express agreement or assurance to that effect but this may be implied or inferred from the conduct of the parties in an appropriate case." Paragraph 42: "I consider that there are further indications here for the right of equal participation in the business of Money Facts and Fonfair to be implied or inferred, although the further indications here are somewhat different from those considered in the [Tay case]. For one thing the rights and obligations in this instance A Court Reporting Transcript by Epiq 28 HCMP 1987/2018 Day 01 10:49 were not exhaustively laid down in the articles of association of Money Facts. These important provisions in the Shareholders Agreement had not been incorporated into the articles: that YK and YT had agreed not to cause Money Facts to issue further shares without ... mutual consent, and that they should cause themselves to be elected as the only two directors in Money Facts. These provisions must have been designed to ensure that there was to be equality of control in Money Facts of the two shareholders." Paragraph 43, line K: "The Shareholders Agreement set out the three objectives of Money Facts in its role as the majority shareholder of Fonfair, including the important objective of pursuing and negotiating any future development plan of the Yau Tong Property. In view of these objectives, it must have been intended that YK and YT should have a right to participate equally in the business of Money Facts and through Money Facts in the business of Fonfair." Paragraph 44: "I hold that there was an implicit agreement or understanding that both shareholders of Money Facts should participate in the conduct of its business and that through Money Facts, both should participate in the A Court Reporting Transcript by Epiq 29 HCMP 1987/2018 Day 01 10:50 business of Fonfair, and that neither was to be excluded from management and control unless for good reason ... change should become necessary." COURT: Can you help me with this small point. If we go back to Money Facts, where does it deal with the powers of directors. MS HO: Your Lordship means the articles or -- COURT: The articles. MS HO: Articles. It would be page 2140, starting from clause 87. COURT: This is his comment -- it says that the powers, the business of the company should be managed by the directors, so if you're a director, you necessarily have an express power and, indeed, as a matter of general law and obligation. I just wasn't quite clear why it was necessary, unless I misunderstood the judgment, to be considering anything more than the article, if you were considering whether the starting point was that YT and YK both had the right to be involved in the management. MS HO: The starting point is that because of the article or because of the amendment of the articles, YK and YT should be the only two directors, then it will be fine because we will be the only two directors and equal management power. But if there is any uncertainty as to A Court Reporting Transcript by Epiq 30 HCMP 1987/2018 Day 01 10:52 whether this "equal and only two director" agreement is being properly incorporated as part of the articles, because -- COURT: Sorry, maybe I'm just being simplistic, so -- this is a common article. MS HO: Yes. COURT: That's also why I asked to be reminded what it says in these articles: "The business of the Company shall be managed by the Directors ..." Et cetera, et cetera. So there we are, each director is entitled to be involved in the management of the company. Why do you need to look beyond that? MS HO: The issue here is that there is a dispute between the parties as to whether we have the right to be a director in Money Facts forever, or as long as the company lasts, so if your Lordship is with us that -- COURT: No, sorry, the bit of the judgment that was being read seemed to be dealing with the initial right, and at the beginning, if there were two directors, because both of them were entitled to be involved in the management of the company. MS HO: Yes, that would be fine, but we say that this right should be permanent, ie -- A Court Reporting Transcript by Epiq 31 HCMP 1987/2018 Day 01 10:53 COURT: All right, okay. MS HO: That is why we say the exclusion without showing any unclean hands now is unfairly prejudicial because there is disagreement between YT and YK, and now Harbour Front and YK, that they two should be the only two directors. If they are nominees, they should be equal, so two-two, one-one. And that should last forever. COURT: All right, it's the way it was expressed in the judgment that was causing me to ask the question. MS HO: Because as far as I can read from the judgment, her Ladyship, if one goes back to paragraph 41, she is proceeding on the basis that the articles of Money Facts or the shareholders agreement wasn't as clear, that there should be the only two directors, or only the two should be in the management equally. Then she proceeded and found all these different indications -- COURT: The question was not what was the power of the directors, the question was whether you were entitled to be a director. Or to have your interest represented by an equal number of directors as the other can -- MS HO: Yes, correct. COURT: -- not what the power of the director is. MS HO: No, we are talking about equal participation by way of being represented equally on the board, and that is A Court Reporting Transcript by Epiq 32 HCMP 1987/2018 Day 01 10:55 all along what we're complaining about because we are kicked out from the board. Then I've taken my Lord To paragraph 44, saying that there is the implicit agreement being found by her Ladyship about the equal participation in management by way of having equal representation on the board. We note that this finding of the implied agreement was made within the "equitable consideration" consideration, because her Ladyship was talking about quasi-partnership and talking about the three indications in the Ebrahimi case, but we say that this finding is clear, and even though there are further analyses about the scenario 2 situation, it does not detract from the fact that there's a finding of agreement of equal participation. And also, from the express term which we have taken your Lordship to in the shareholders agreement and the articles of Money Facts, it is clear that the parties expressly agreed, as a basis of their association, that each of them should be on the board. There is a complaint by the other side saying that in our petition, we are not relying on positive right but only relying on the equitable consideration, scenario 2. That is not the case, and I will take your Lordship to the pleadings to illustrate that point. A Court Reporting Transcript by Epiq 33 HCMP 1987/2018 Day 01 10:57 Bundle A, tab 1. This is our petition. 1987 and 1988 are largely similar, so I will just refer to the 1987 petition, at page 5. Here, your Lordship will see in paragraph 12 we recited the findings of Mdm Justice Kwan. Then if your Lordship can go to the bottom of page 7, paragraph (10), we are still in paragraph 12, so it is 12(10), still part of the judgment of Mdm Justice Kwan, we cited the implicit agreement found by her Ladyship. Over the page at paragraph 13: "Further, by reason of the Shareholders Agreement, in particular the Three Purposes and the understanding as set out in paragraphs 12(7), 12(10) and 12(11) above, Harbour Front and YK Leung should be entitled to equal participation in the disposal of the Yau Tong Property, being the only material asset of Fonfair and the family asset of the Leung family. In [other] words, it was agreed and anticipated in the Shareholders Agreement that any decision in relation to the dealings and disposal of the Yau Tong Property must be made with the joint consent of Harbour Front and YK ..." Page 17, paragraph 41: "As a result of the aforesaid conduct of YK ... who was in control of Fonfair, Harbour Front has been denied A Court Reporting Transcript by Epiq 34 HCMP 1987/2018 Day 01 10:59 of the fair opportunity to remedy the breaches of the Shareholders Agreement and continuously deprived of the right to equal participation in the management of the affairs of Money Facts and Fonfair under the Shareholders Agreement." Paragraph 42: ,Recently it has come to the attention of Harbour Front that YK is in breach of the Shareholders Agreement and implied agreement or understanding between the parties, seeking to dispose of the Yau Tong Property without Harbour Front's knowledge participation, approval or consent as a shareholder or director of Money Facts and Fonfair." Then page 21, paragraph 45, here we are talking about a proposed direction being proposed by Harbour Front to recognise the right of equal participation after we remedy the breach. We see: "With the aim of giving effect to the Shareholders Agreement and the understanding that Harbour Front and YK ... should have equal participation in the decisions relating to the Yau Tong Property [et cetera] ..." We proposed this resolution. Of course, this was rejected by YK. Then page 22, paragraph 47: "On 2 November ... the requested Fonfair EGM was A Court Reporting Transcript by Epiq 35 HCMP 1987/2018 Day 01 11:00 held. Harbour Front voted in favour of the Proposed [directions]. However, in plain neglect of the Shareholders Agreement and/or the implied agreement or understanding between the parties, YK procured Money Facts to vote against the proposed [Directions]." So we see that in our pleadings, we have relied on a positive right by equal participation by reason of being appointed as one of the only two directors on the board of Money Facts and Fonfair. Your Lordship actually can see from YK's defence he also acknowledged the finding of this implicit agreement. Your Lordship can turn to YK's defence, tab 2 of bundle A, page 30. Your Lordship will see under the header, the "Genesis of Money Facts and Harbour Front", paragraph 8, YK also cited the findings in the 2004 judgment. At page 34, it is still paragraph 8, paragraph 8 (10), the third paragraph, here we can see the implicit agreement being recited by YK. Then if your Lordship goes to the bottom of this page, paragraph 10, you will see YK denying paragraph 13 of our petition, and paragraph 13(2): "Paragraph 13 of the Petition is contradictory to paragraph 44 of the 2004 Judgment ... [the] implicit agreement [paragraph] ... namely that there was implicit agreement or understanding that both shareholders of A Court Reporting Transcript by Epiq 36 HCMP 1987/2018 Day 01 11:03 Money Facts should participate in the conduct of its business and that through Money Facts, both should participate in the business of Fonfair, and ... neither was to be excluded from management and control unless for good reason such change should become necessary." So we can see YK is also relying on paragraph 44 as a finding of an implicit agreement of association between the parties. Their case would be, there is good reason to exclude us. It is wrong for YK to say Harbour Front's case is a scenario 2 case, which was the submission in paragraphs 10 to 15 of YK's written opening. They are saying that we need to rely on superimposition of equitable consideration. We say that we do not. And since this is a positive right, positive obligation agreed to between the parties, so long as we can show that we come with clean hands, we have washed our hands, the court should be ready to uphold the bargain, subject, of course, to fundamental breakdown of the association, basis of the association, which we say didn't happen. Even if your Lordship says it is a scenario 2 situation, we say that the shareholders agreement is still of fundamental importance and it cannot be just shoved away. Because that is actually YK's pleaded case, they are relying on flagrant and repeated breach A Court Reporting Transcript by Epiq 37 HCMP 1987/2018 Day 01 11:04 of the shareholders agreement to show that as a breakdown of mutual trust and confidence, it is a situation 2 scenario. But, as we can see from the written opening, they are trying to move away from their pleaded case and we have to guard against that. I'll just quickly take your Lordship to their pleadings to show that their pleadings rely on a complete breakdown of the shareholders agreement. Fall back to the defence, tab 2, page 34. At the bottom of the page, your Lordship can see paragraph 9. YK was saying that: "... Money Facts was a quasi-partnership between Harbour Front and YK. The agreed terms of participation of the shareholders in the affairs of Money Facts were set out in the Shareholders Agreement, which is an agreement of mutual trust and confidence." If we go to page 40, at the bottom, paragraph 19: "The aforesaid misconducts by YT himself or through his associate or corporate alter ego (including Harbour Front) was flagrant, recurrent and persistent. Such breach of the Shareholders Agreement sabotaged the Purposes of Money Facts and already caused an irrevocable breakdown in the relationship of trust and confidence." If we go to paragraph (5), page 44, at the first A Court Reporting Transcript by Epiq 38 HCMP 1987/2018 Day 01 11:06 half of the page: "Further or alternatively, as pleaded in paragraph 19 above, Harbour Front's chronical breach of the Shareholders Agreement in the past decades sabotaged the Purposes of Money Facts and already caused an irrevocable breakdown in the relationship of trust and confidence. It is specifically denied that the purported offers made by Harbour Front could or did change that position." Similarly, page 46, paragraph 31, talking about flagrant breach of the shareholders agreement, persistently sabotaging, interfering with arm's length transaction of the land. Then page 57, paragraph 65: "... the wrongdoings by Harbour Front as pleaded above has caused a complete breakdown of trust and confidence between the members of Money Facts, and Harbour Front persistently and repeatedly breached the Shareholders Agreement (which breach will recur) [et cetera]." So that is the pleaded case of YK as well, and they have to be bound by it. For them to show irrevocable breakdown of trust and confidence, they must show a fundamental breakdown of this shareholder agreement and the association between the parties, nothing less. A Court Reporting Transcript by Epiq 39 HCMP 1987/2018 Day 01 11:08 One can also see the pleaded case of YK involves a high threshold of showing this fundamental breakdown. Your Lordship will have our point in O'Neill v Phillips and Ng Yat Chi and Pui Ying. O'Neill is the analogy with the frustration point which your Lordship said may not be a good analogy, but we also have Ng Yat Chi and Pui Ying. It's actually Ng Yat Chi which I can take your Lordship to, showing the fundamental breakdown that is required. Harbour Front's list of authorities, bundle 2, tab 10. Under the header of "Abuse of position in the company", two lines above F, starting with "However": "However in my view it is reading Lord Wilberforce's speech ...(Reading to the words)... personal relationship" -- COURT: Sorry, you are on which page? MS HO: Page 572. COURT: Yes. MS HO: Under the header "Abuse of position in the company", and line F, two lines above F, "However": "However in my view it is reading Lord Wilberforce's speech too literally simply because at the formation of the company ...(Reading to the words)... to rely on some prior arrangement based on mutual confidence to which he A Court Reporting Transcript by Epiq 40 HCMP 1987/2018 Day 01 11:11 had not adhered to found his claim." The last sentence: "While the dictum of Lord Cross ...(Reading to the words)... the petitioner in this case to say that the 2nd respondent was not aware of his misconduct." So what the vice-president was saying here is that the conduct has to be so serious that it negatived the original agreement of mutual trust and confidence, and we say here that the shareholders agreement would be one of the key hallmarks of their relationship, and that is also the understanding as illustrated in The Pui Ying Middle School case, which your Lordship can find in Harbour Front's tab 7 list of authorities. This is a judgment by Deputy High Court Judge Bernard Man SC, and your Lordship can turn to page 85 tab 7. Under "Clean Hands", page 3, paragraph 228, the Lordship talked about the clean hand principles, and then he also cited the Ng Yat Chi case. And the passages which I have referred your Lordship to, about the constant abuse, and so that you cannot rely on the consideration. Then paragraph 229: "One needs to be cautious because all this was said in the context of just and equitable winding up jurisdiction ...(Reading to the words)... vice-president A Court Reporting Transcript by Epiq 41 HCMP 1987/2018 Day 01 11:14 did not actually analyse what was indeed an application of the clean-hand method." So what YK has to show is an irrevocable breakdown, a complete breakdown, fundamental breakdown, that is why they say there is no longer any relationship for any us to rely on, so you don't talk about any clean hands. Because the relationship has gone. That is their case. COURT: So how does this work in practice? Somebody does a bad thing which falls into the category of conduct, which deprives them a right they would otherwise have had to relief for failure to comply with the original understanding between the parties. So somebody is a defendant -- a defendant/respondent is raising the conduct of the petitioner to defeat a complaint that probably they've been excluded from management, but that's not something which is necessarily different from the issue of whether or not that conduct has caused a breakdown in the relationship between the parties which entitles the respondent to relief. They may simply be different sides of the same coin. MS HO: There is a difference in the extent, and the extent that YK is now relying on is the extreme extent, the breakdown, complete breakdown, because -- COURT: You don't need to bottom this out now but it sounds a little bit artificial. The petitioner has behaved so A Court Reporting Transcript by Epiq 42 HCMP 1987/2018 Day 01 11:16 badly that the court says, "Oh, we're not going to give you any relief", but that conduct would assume is quite possibly -- because this is the way you're expressing it linguistically -- not such as to destroy the relationship between the petitioner and the respondent. But just as a matter of common sense, if you end up in court and the petitioner is saying, "I'm entitled to relief, I'm excluded from management", obviously the respondent takes the view that "You shouldn't be because you've behaved so badly, it's been right to exclude you from management", the court says, "Yes, I agree", you know, pretty likely that that will have done a lot of damage to any trust and confidence, particularly if it happens twice. So I'm not immediately attracted by the idea that they are somehow in a materially different category. I mean, at the moment it seems to me it's more a matter of whether you're considering the petitioner's conduct from the point of view of the petitioner's rights or whether you're considering the petitioner's conduct from the point of view of the respondent's right to relief, and the language that is used may be simply reflective of the question that is being asked, rather than indicative of a material difference between the possible outcome. A Court Reporting Transcript by Epiq 43 HCMP 1987/2018 Day 01 11:18 Once again, in very simplistic common sense terms, if you have come to court with hands which are so dirty that the court says, "You're not entitled to any relief", but then if you do it twice, it's quite likely that you've destroyed the trust and confidence. That's my point. MS HO: The outcome might be the same depending on the facts, but the legal route have to be correct, and that is what I'm emphasising here. Because there are two stages, as observed by your Lordship in the PTR as well, there are two stage. First stage is that we need to show, at the time when we remedy the breach, the trust and confidence relationship is still there for us to remedy. That is stage one. What they are saying is that the relationship is already gone; there's nothing for you to remedy, so forget it. Stage one. Then after we overcome this hurdle, quote/unquote "hurdle", the relationship is still there and we say we have remedied, then it will be stage two for your Lordship to exercise your discretion as to whether, given the past record, we should still be given the right to rely on this equal participation, and that will be the exercise of discretion stage which your Lordship was referring to, because in the exercise of discretion stage, your Lordship may well, at the end of the day, still A Court Reporting Transcript by Epiq 44 HCMP 1987/2018 Day 01 11:19 find that, "No, because they are the past record, I'm not prepared to give you this right, even though this right is still there and you can give it to me, but your hand is so dirty that I'm not going to give you". That is the exercise of discretion, and that is factual. And I will show to your Lordship that the past breaches are the past, and we have not committed any future breaches, and your Lordship should exercise the discretion to allow us to assert the right. That is the stage two. So it's stage one and stage two which I have to make clear, because what YK is trying to say now is, "Forget about stage two because there's nothing for you to remedy", and in the written opening they are pushing a timeline even back to 2004 and saying that back in 2004, everything is dead already, there is nothing for you to remedy, and that cannot be right. So the ultimate outcome may or may not be the same, depending on the facts, but the legal route should be according to what Harbour Front has submitted. That is the legal test and the legal approach which your Lordship should go through. If one looks at the stage two discretion, what YK is now relying on to say that your Lordship should not A Court Reporting Transcript by Epiq 45 HCMP 1987/2018 Day 01 11:21 exercise the discretion are all the allegations that YK is relying on to show breakdown of the relationship. So what they are saying is, oh, it involves serious allegation, they are saying that we are acting in bad faith even after 2018, and we are deliberately sabotaging all the allegations to the extent that there will be a breakdown. COURT: So let me just pose this question. You can think about it if you like, rather than answer it. Is it possible for me to conclude that in the way you're describing clean hands, if one comes to court with clean hands but on the other hand I'm satisfied that there has been a complete breakdown in trust and confidence, which is your client's responsibility? MS HO: Only if your Lordship finds that the relationship has broken down before the remedy. But we say it can't be because, as of 2018, as of your Lordship's last judgment, there was still this mutual relationship there, no complete breakdown, so we can remedy. COURT: I'll have to go back and read the judgment, sorry, but is that in fact clear from the judgment? MS HO: That it is remediable? COURT: No, that I wasn't satisfied that there was a complete breakdown, or is that simply a matter that I didn't address because it -- A Court Reporting Transcript by Epiq 46 HCMP 1987/2018 Day 01 11:22 MS HO: You didn't address directly -- COURT: Yes, because I didn't -- MS HO: -- because you only need to say, "We come with clean hands" and then just go away, yes. COURT: Yes. MS HO: Because our analysis of the judgment is that your Lordship was repeating the breach of the 2004 judgment of Mdm Justice Kwan, you're just saying that we haven't taken those breaches seriously and we didn't -- COURT: Yes, so the second issue, that wasn't one that I was concerned with. That, you would accept? MS HO: Yes, it's a stage two. So we say that all along, up until the point that we remedied the breach, the mutual relationship was still there, and after we remedied the breach, we have cleaned our hands and go to stage two, we convinced your Lordship that the unclean hands will not happen any more and the alleged misconduct after the cleaning hands cannot be established because there are serious allegations we didn't do that, and therefore give us the relief. That would be the road map. COURT: Shall we take a 15-minute break now? MS HO: Yes. MS LOK: Just to assist my Lord, we have located a case by Lord Briggs that my Lord Referred to, which is Lau v Chu -- A Court Reporting Transcript by Epiq 47 HCMP 1987/2018 Day 01 11:24 COURT: Oh, that's right. Yes -- MS LOK: -- a case of the Privy Council. So we will provide that over the break. COURT: Yes, those happy, happy litigants keep everybody busy at various jurisdictions. (11.24 am) (A short break) (11.42 am) MS HO: I will now proceed to look at YK's opening and respond to some of the paragraphs. At page 6 of YK's opening, still focusing on the proper authority. Page 6, paragraph 17, at the top, here YK is making the submission under scenario 2 and he is saying that: "Such mutual understanding agreements are not immutable and can change over time." And what may be a mutual trust and confidence relationship can change and cease as time passes. So they are trying to say this mutual trust and confidence relationship can be something very fluid, and can change and cease to exist for ad hoc reasons. But in the present case, there is the shareholders agreement, which is a clear benchmark of their relationship of mutual trust and confidence, and there are agreements between the parties of their association. So it is not the case where the mutual trust and A Court Reporting Transcript by Epiq 48 HCMP 1987/2018 Day 01 11:44 confidence relationship can cease to exist without showing the fundamental breakdown. Moving on to paragraph 18, again in the highlighted sentence, the fifth line from the bottom, talking about the substratum of the mutual trust and confidence. Again, going back, the substratum, yes, the shareholders agreement, and part of which have been already incorporated into the articles of Money Facts. Then, paragraphs 19 to 22, we can see the number of cases cited by YK seems to suggest that the events like conflict between the shareholders and irreconcilable differences between them can result in the cessation of the mutual trust and confidence relationship. In those cases it may be, but not in the present case. Because in those cases, their mutual trust and confidence relationship was not grounded in any shareholders agreement or the articles. For illustration purposes, I will quickly take your Lordship to two cases cited in those paragraphs. One would be the Nassar case, paragraph 21. Your Lordship would be able to find that case in YK's list of authorities, tab 7, page 362, paragraph 111. Here, it talks about Mr Nassar complaining that he got excluded from the day-to-day management in breach of an understanding that he would participate in that A Court Reporting Transcript by Epiq 49 HCMP 1987/2018 Day 01 11:46 management, there was no shareholders agreement, no amendment to the AA, just an understanding. Paragraph 112: "It maybe accepted that there was an expectation of such participation by Mr Nassar when the parties came together in 2000 and that it continued thereafter to the later part of 2007 ... The expectation that arose at inception was an incident of the parties' quasi-partnership. Paragraph 113: "But a fundamental and irreversible change in the nature and substance of the parties' relationship occurred abruptly on 9 November ... On that day, two of the three [participants] resorted to fisticuffs in the workplace. The situation was serious enough for the police to be called and to attend. Mr Nassar and Mr De Oliveira themselves recognised immediately that they could no longer work together. On the very day of the incident, Mr De Oliveira asked Mr Nassar when he would be leaving. Mr Nassar said that he would leave when he was paid out. It was thus acknowledged immediately that a parting of the ways was inevitable ..." Paragraph 115: "The pre-existing relationship -- which may already A Court Reporting Transcript by Epiq 50 HCMP 1987/2018 Day 01 11:47 have been under stress -- came to an abrupt end on or soon after 9 November ... [The two partners] acknowledged immediately that the relationship was at an end and that the termination would result in Mr Nassar leaving with a payout. This was not a product of exclusion by anyone of anyone. It was merely acceptance of a reality arising from fundamentally changed circumstances (in the form of inability to work together) not attributable to the fault of any individual. At that point, the pre-existing expectations about participation in day-to-day management was overtaken by mutual acceptance of the reality that Mr Nassar would no longer participate." There are two distinctions here from the present case. First, this case, there was mutual acceptance that their relationship has to end after the fight. This is not the case here. And, secondly, the mutual understanding was not grounded in the SHA or partly in the AA. The other authority which I would like to take your Lordship to is in the following tab, the case of Over & Over, tab 8. Again, here the mutual understanding between the parties ground their trust and confidence relationship was something very big, an understanding A Court Reporting Transcript by Epiq 51 HCMP 1987/2018 Day 01 11:49 and the working relationship between the parties. Your Lordship can see, in page 780, paragraph 6: "The discussions between HN and the Lauw family leading to the incorporation of Richvein were informal and plainly based on mutual trust. No documentary records of the various discussions between the parties were maintained. Further, despite the substantial investment made by both parties, the understanding was not embodied in any shareholders' agreement or in Richvein's memorandum and articles of association." Moving on to page 804, paragraph 89: "As in the case of Kokotovich, it is striking how much trust the Lauws and the Sianandars reposed, in the course of the negotiations over the joint venture, on mutual good faith. HN himself acknowledged that although there were a number of meetings between members of the two families to discuss the terms of the prosed joint venture, none of the terms agreed upon the discussion were reduced [into] writing." Then paragraph 90, four lines from the bottom: "The relationship is implicitly based on mutual trust and good faith with respect to the conduct of the affairs of Richvein in the future ..." Et cetera. So what we can see here again is a relatively fluid relationship based on their mutual A Court Reporting Transcript by Epiq 52 HCMP 1987/2018 Day 01 11:50 trust and cooperation. Therefore, in these kinds of cases, a long-term disagreement or a fight may have an effect of changing the fundamental basis of their cooperation. That is not the case here. Because here, we have clear agreement between the parties as to their relationship of mutual trust and confidence. So that would be the reference point, not any other standard, any lower standard. Then, if we go back to YK's opening, after citing the cases we go to paragraph 23, cited Ng Yat Chi. I have made my submission on Ng Yat Chi. Ng Yat Chi is actually a case that we will rely on as well, showing that there is a fundamental negativing of the original basis of the association. Therefore, if one goes to paragraph 26(b) of YK's opening, page 9, one cannot, as YK contended, just ignore the SHA. What YK is now saying is that: "The SHA simply [is a document of] ... contractual arrangement at the inception of the parties' association." It may be evidence of the relationship, it does not by itself generate equitable considerations. The continuation of the shareholders agreement -- so their case is that the shareholders agreement is still there, by which YK can enforce its strict A Court Reporting Transcript by Epiq 53 HCMP 1987/2018 Day 01 11:52 legal rights -- does not advance HF's case. So their case is the shareholders agreement is still there, but never mind about it, it has nothing to do with the relationship of mutual trust and confidence. It cannot be the case, because the shareholders agreement is the hallmark of their relationship of mutual trust and confidence, plus the AA. COURT: Well, aren't you talking about these two different things? I mean, the agreement records what they intended at the outset. Regardless of whether it's implicit, is mutual trust and confidence sufficient to support reaching this commercial arrangement in the first place? That doesn't mean that 10 years or however many years later it is longer than that the mutual trust and confidence couldn't be destroyed. MS HO: But we say that in order to show such destruction, we have to show a destruction of the shareholders agreement itself, first of all because that's their pleaded case, as I've taken your Lordship to, because they are relying on the recurrent and flagrant breach of the shareholders agreement and the sabotage of the purposes contained in the agreement. So in their pleaded case, that would be the benchmark. COURT: But I'm just trying to think through how this works. I mean, you've lost twice, so, on the face of it, you A Court Reporting Transcript by Epiq 54 HCMP 1987/2018 Day 01 11:54 didn't comply with the agreement. MS HO: Yes, correct. COURT: Now, of course, you can cure that, just as you can cure a breach of contract by payment of the sum that you should have paid. But it doesn't mean to say that people trust you or like you any more than they did before you paid them. MS HO: Yes. COURT: It doesn't seem to me that they're exactly -- that somehow they're mutually consistent or mutually inconsistent, I'm not quite sure which way around to think about this. If you behaved so badly that somebody would objectively, quite understandably, doesn't trust you any more, the fact that an agreement remains in place -- so it's not been terminated by an acceptance of the repudiation or some other way which you can terminate a contract, doesn't alter the fact that trust and confidence may no longer exist. MS HO: Yes. This will be a factual point, because, as I repeatedly emphasised, we are not saying about a technical frustration of the contract or breach of the contract, the shareholders agreement. But we do say that this shareholder agreement and its continual existence and continual reliance by YK himself shows that it will be a strong factor and a hallmark showing A Court Reporting Transcript by Epiq 55 HCMP 1987/2018 Day 01 11:56 that the mutual trust and confidence is still there. COURT: Well, I'm not sure that -- oh, as a matter of fact, you're not suggesting that YK likes YT, are you? That somehow he trusts -- MS HO: Well -- we will not be saying that -- COURT: Just as a matter of common sense presumably, he doesn't trust him. MS HO: But we do say that it cannot show that -- because it's not about trust or not trust here. YK has to show unfair prejudicial conduct or factors showing that notwithstanding the reparation of the breach, in your Lordship's exercise of discretion, we should still not go back to the management, and what they are relying on are these factors which goes to the breakdown. They're not suggesting anything less. They are suggesting a complete breakdown, and that is why they're asking for the buyout. Therefore, we say that if he has to show this kind of conduct, he has to meet the threshold of showing a fundamental breakdown. He cannot on the one hand rely on the shareholders agreement or say the mutual and trust and confidence is still there, and why don't you repair it, and then once you've repaired it, you go around saying, oh, actually, 10 years ago, it was broken down, so that is the logic and factual point. But we A Court Reporting Transcript by Epiq 56 HCMP 1987/2018 Day 01 11:57 say that in this point, the shareholders agreement is of key importance. When I'm talking about this factual point, we're under scenario 2. COURT: Surely in these rather unusual circumstances it must, as a matter of fact, be possible to conclude that there has been a breakdown in trust and confidence? MS HO: As a matter of fact -- it is a very easy conclusion for your Lordship to go to. That bit I cannot deny. But -- COURT: Yes, exactly. But my point is this, that -- do you remember the question I asked half an hour ago, which is -- are you suggesting that it is possible for me to reach that conclusion but at the same time reach the conclusion that your client is somehow entitled to the continued existence of the company and to be involved in its management? MS HO: We can because your Lordship will see the previous breach, the Lordship repeatedly mentioned the previous times, the repeated breach concerns the taking away of money from Fonfair, done by YT. And now the money has been paid, and any breakdown of mutual trust and confidence was due to taking away of the money, have been paid, and now we also have a change in the management, because Harbour Front is not a person. A Court Reporting Transcript by Epiq 57 HCMP 1987/2018 Day 01 11:59 Your Lordship can say, YK and YT have been in long disagreement, and how can YK trust YT even though the money is back? But Harbour Front is a company, and Harbour Front is now being managed by Gillian Leung and Jerry, the second generation. What we are saying is that after paying the money, there is no evidence that YK doesn't trust Gillian Leung or cannot work with, as your Lordship will see in evidence, in the -- COURT: All right, so this is important to the distinction, is it, that the petitioner's now under new management and the new management are nice, trustworthy. You're accepting the previous management weren't, but the new lot are, and therefore they should be given a chance to manage the company? Somehow I don't find that immediately convincing. Well, for reasons which I suppose are fairly obvious -- all right, we don't need to debate that any further than -- MS HO: I can understand I already -- of course, when I'm preparing the case, I thought about all these concerns of your Lordship -- COURT: Yes. MS HO: -- but I do urge your Lordship not to jump to the conclusion or a layman conclusion. It is very easy A Court Reporting Transcript by Epiq 58 HCMP 1987/2018 Day 01 12:00 to say, oh, two brothers have been -- COURT: Laymen can be right! MS HO: Of course I will try to persuade your Lordship that as a matter of legal principle and the factual evidence before your Lordship, there is actually a way for Harbour Front to go back to the management, and of course, Gillian will also explain to your Lordship why she has a process as to why she sees the synergy of herself and her uncle, YK, will be benefit for the parties to move on. Of course, she understands the dispute between his father and YK, but she has been involved, and she was there all along in the EGMs discussing with YK throughout that. So your Lordship should take this into account, and, after all, it is a family, and these are the brothers and the second generation of the Leung family. They do see the value of continuing in this company, and we should not, unless very necessary, go into the arena of judging whether it is practical from a third party or outsider's point of view for them to continue. But follow the benchmark which the parties have agreed, that is the shareholders agreement and the continuing reliance of YK on the agreement and the mutual and trust relationship to show that actually the relationship can be remedied, and it has been. A Court Reporting Transcript by Epiq 59 HCMP 1987/2018 Day 01 12:02 COURT: Well, obviously, presumably, I cannot find in your favour in 1987 and in Ms Lok's favour in 1471. MS HO: So there is no halfway house. So that is also important for your Lordship to bear in mind when assessing the evidence, is that the conduct which they are complaining us of, the new conduct after the past breach, are all very serious conduct which amounts to breakdown of the complete relationship. COURT: This is a bit basic, I know, but you accept that if I'm with Ms Lok on her petition, necessarily you lose? MS HO: Yes, correct. But of course I hope that you won't find that. COURT: Okay, all right. MS HO: I'll continue with dealing with the opening of YK. At paragraph 25, going back one page to page 8, at the fourth line, here, YK is saying that: "The previous mutual expectation of equal participation has been decimated in the light of [Harbour Front's] serious misconduct ..." And then quoting the judgment of Mdm Justice Kwan, paragraph 88: "... preventing equitable considerations from [beginning to generate] in Harbour Front's favour." We say this is a misinterpretation of Mdm Justice Kwan's judgment, and I will take A Court Reporting Transcript by Epiq 60 HCMP 1987/2018 Day 01 12:03 your Lordship back to Mdm Justice Kwan's judgment, at D3, tab 107, paragraph 88. COURT: This is page? MS HO: Page 3122. Here, her Ladyship said -- COURT: Sorry, which tab? MS HO: Tab 107, paragraph 88. This is the paragraph quoted: "I find that it was due to the misconduct of Harbour Front that there was a breakdown in the relationship of mutual trust and confidence. In the circumstances, Harbour Front cannot assert its right of equal participation in the management of Money Facts and Fonfair. So for this reason as well, whether simply or cumulatively with one or both of the other grounds that I have considered earlier, Harbour Front has failed to make out a case for wrongful exclusion ..." So they are saying, by this, her Ladyship has already said that there is an irrevocable breakdown. COURT: She certainly said there was a breakdown in the relationship of mutual trust and confidence. MS HO: Yes, there is a breakdown but it is not irrevocable. COURT: She doesn't use that language. MS HO: Yes, so we can see from the other parts of her judgment and her later judgment to confirm this point. So it can not be the case for YK to say, back in A Court Reporting Transcript by Epiq 61 HCMP 1987/2018 Day 01 12:06 2008, there was already an irrevocable breakdown. That's what they say want to say. Already gone. Because if your Lordship can go to page 3077, paragraph 9, she was dealing with the issues, she lists out all the issues. At page 3078, the sixth issue the judge dealt with was: "if the reliefs to wind up Money Facts and Fonfair" -- COURT: Hang on a second; it takes a little while to scroll through these PDFs. MS HO: So at the top, it was the sixth issue that her Ladyship has to deal with: "if the reliefs to wind up Money Facts and Fonfair on the just and equitable ground should be refused because Harbour Front has not come to court with clean hands ..." So she was dealing with the clean hands issue. At page 3103, paragraph 68. COURT: Yes. MS HO: "I have held earlier that the association between YK ... and Harbour Front ought to give rise to equitable considerations with an equal right of participation in the business of Money Facts and through Money Facts in the business of Fonfair, and that such equality of participation in business should not be altered without A Court Reporting Transcript by Epiq 62 HCMP 1987/2018 Day 01 12:08 good reason." Going down a few lines, next to line I, towards the end, starting with "This is": "This is another way of approaching the issue if Harbour Front has come to court with clean hands. In other words, if the breakdown of the relationship of mutual trust and confidence was attributable to the misconduct of Harbour Front, it cannot rely on the principle of justice and equity to assert its right of equal participation in the management and control of the companies." So one can see that her Lordship was dealing with the issue of clean hands. When the issue of clean hands can be dealt with, it means that the relationship is still there. It's a breakdown but it is not irrevocable. COURT: But what she goes on to say in the last two sentences is -- this another way of approaching the issue if Harbour Front came to court with clean hands. "In other words, if a breakdown of the relationship of mutual trust and confidence ..." So it seems implicit in those passages that Mdm Justice Kwan was assuming, as you might think as a matter of common sense people would, that if you come to A Court Reporting Transcript by Epiq 63 HCMP 1987/2018 Day 01 12:09 court and your petition is dismissed because your misconduct is sufficiently serious that the court thinks you don't have clean hands, it's almost axiomatic that there's been a breakdown in trust and confidence. I mean, clearly, you'd expect it to damage the trust and confidence. And then, if it happens a second time, as a matter of common sense it is not going to help, the trust and confidence is going to deteriorate further. MS HO: We are talking about the first time, and here there is no destruction. There may be damage but no destruction. Because what YK is now saying is that back in this judgment, there was already a complete destruction, but we say it's not. But at that point of time, there was still a repairable relationship. It's damaged but repairable. And it's also clear from -- COURT: Sorry, at this time, remind me, the petition that this judgment's given -- MS HO: Yes, 2004. COURT: -- this is 880 of 2004. MS HO: Yes. COURT: That was Money Facts. 246 is Fonfair. These are both petitions by Harbour Front. MS HO: Correct. COURT: And there was no cross-petition, is that -- no. So the judge didn't have to analyse it the other way round. A Court Reporting Transcript by Epiq 64 HCMP 1987/2018 Day 01 12:10 Remember I was saying an hour ago that one might say that clean hands, mutual trust and confidence are basically different sides of the same coin, and which side of the coin you're looking at depends on whether the petitioner is alleged by the respondent to have clean hands or whether the petitioner is saying there was a breakdown of mutual trust and confidence, and what's the company you have. MS HO: But here, we can see that there was no finding of any irrevocable breakdown, and it is very -- COURT: But there didn't have to be because -- MS HO: There didn't have to be, no. COURT: -- the way we frame it is if somebody is coming to court looking for relief and the respondent says you're not entitled to it, they tend to, for the kind of reasons we are addressing in this case, talk about clean hands, although it would appear Mdm Justice Kwan has used clean hands and breakdown of mutual trust and confidence as being essentially different ways of looking at the same thing, as you can see from that last paragraph on page 78. On the other hand, somebody may be coming to court and say, "Look, the behaviour is so bad that I want a winding-up order, I want a buyout order", then we talk in terms of breakdown of mutual trust and confidence. A Court Reporting Transcript by Epiq 65 HCMP 1987/2018 Day 01 12:12 MS HO: The point that I wish to make here is that YK cannot rely on paragraph 88 as they did in the opening and the other paragraphs to say that there was a finding by Mdm Justice Kwan that there was a complete or irrevocable breakdown. COURT: But they can rely on the judgment that says what it says and understanding what the judge thought in context. And then you go on and do the same exercise with my judgment. MS HO: Yes. But I will take your Lordship to another judgment of Mdm Justice Kwan, the recent Court of Appeal judgment, to understand the context and make it quite clear that in Mdm Justice Kwan's mind in the 2004 judgment, she didn't mean that there was an irrevocable breakdown. I will take your Lordship to that judgment. That will be bundle B, enclosing the judgment in the present proceedings. Bundle B, tab 3. This was the judgment by Mdm Justice Kwan and Mr Justice Cheung, upholding the interlocutory injunction which we obtained in these proceedings because they find that there is a serious issue to be tried as to whether we have remedied the previous breach. Your Lordship can see from paragraph 17 at page 271, at the bottom, Mdm Justice Kwan says: A Court Reporting Transcript by Epiq 66 HCMP 1987/2018 Day 01 12:14 "In previous petitions brought by Harbour Front to wind up Money Facts and Fonfair on just and equitable grounds, it was held that the two companies were intended to be quasi-partnerships between the two brothers, which gave rise to equitable considerations, such that each would have right to participate in the companies. In dismissing the petitions, the courts found that due to YT's misconduct, he and Harbour Front were excluded from the management and control of the companies for good reasons and unfair prejudice was not made out. Until Harbour Front has remedied the misconduct found by the courts and made reparation of the losses suffered by Fonfair as a result of the misconduct, it cannot re-assert the right of equal participation in the management of the companies." That footnote would be her judgment and your Lordship's judgment. COURT: Yes. MS HO: So we can see from Mdm Justice Kwan's own judgment recently summarising her 2004 judgment that she meant that the breakdown can be repaired and can be done by making good the misconduct so that he can reassert the right of equal participation. So we say it will be wrong for YK to say in paragraph 26 that there was an irrevocable breakdown as held by Mdm Justice Kwan, A Court Reporting Transcript by Epiq 67 HCMP 1987/2018 Day 01 12:15 also paragraph 26(a)(i) of YK's opening is also a misinterpretation, saying that there was a complete breakdown, because it was actually not. Of course, we will also now go to your Lordship's judgment. One thing that I emphasise is that your Lordship's judgment is to repeat the misconduct or the breach found by Mdm Justice Kwan, the same breach. Then your Lordship relied on the same breach not being remedied and then saying that we did not come with clean hands. That is the extent of your Lordship's judgment. That's at bundle D9, tab 343. COURT: Yes. MS HO: Page 6306. In paragraphs 20 and 21, your Lordship cited the judgment of Mdm Justice Kwan in the 1598 proceedings, and saying that Mdm Justice Kwan found that by that time there was still the breach of shareholders agreement, therefore, Harbour Front cannot assert its right and rely on the shareholders agreement because that was the case enforcing the shareholders agreement. Then your Lordship can go to the following page, paragraph 22. Your Lordship said "It should by September" -- COURT: I just note in passing, of course, that there is the additional Court of Appeal decision. MS HO: 1598. That was a separate of proceedings -- A Court Reporting Transcript by Epiq 68 HCMP 1987/2018 Day 01 12:18 COURT: But on the other hand, that's historical as well. So it's another chapter in the story of taking some time for your clients to wake up to the need, even on his own case. MS HO: Correct. It has taken some time, yes. But, of course, our case is that YK has waited for us to take some money, hasn't destroyed the relationship yet. When we have woken up we still have the chance. That's the storyline, if you want to put it that way. Go to paragraph 22, page 6307. Here, your Lordship pointed out that: "It should by September 2008 have been quite clear to Harbour Front and YT that if Harbour Front was to have any prospect of returning to a role in the management of Fonfair it would have to make good the losses it had caused to Fonfair and that if Harbour Front had continued with its belligerent refusal to respect the decision of the courts it was likely to find itself permanently excluded from a role in Fonfair's affairs." So, at this stage, there's still no permanent exclusion because your Lordship is still reminding Harbour Front to wake up. Then paragraph 41, page 6315, at the bottom: "As, in my view, it is clear from the history of A Court Reporting Transcript by Epiq 69 HCMP 1987/2018 Day 01 12:20 the disputes between YK and Harbour Front, which I do not think it can sensibly be suggested in practice is anything other than YT's corporate alter ego, YT has made no sensible effort to try to establish what needs to be done to remedy the breaches of the Shareholders Agreement. The opposite is the position." So this was your Lordship's observation at that time, Harbour Front was the practical alter ego of YT, and things have moved forward. Harbour Front is now managed by Gillian and Jerry, the second generation. Then continuing with this paragraph: "... meaningfully to agree what is owed despite being given the interim reports. Instead, Harbour Front tried to intimidate Lao & Au Yeung in to stopping compiling them. Harbour Front has made no effort to propose an alternative effort method for agreeing with what is owed and moving on. The guiding line behind Harbour Front, who as I have said I think it is reasonable to assume is YT, is motivated by an animosity towards YK ..." Et cetera. Paragraph 42: "I find that Harbour Front has fairly been excluded from management. In my view this will remain the case and still such time Harbour Front takes substantial and genuine steps to remedy its conduct. Mr Fung has cited A Court Reporting Transcript by Epiq 70 HCMP 1987/2018 Day 01 12:21 authority for the proposition that a finding that a shareholder has been fairly excluded from management becomes spent simply by effluxion of time even if the shareholder has made no substantive effort to remedy his wrong as I have found to be the position in the present case. This is entirely surprising as the proposition seems to me to be as meritless as it is unattractive. If a shareholder acts in such a way as to destroy the mutual trust which was central to any agreement that he would take part in management, it seems to me clear that until such time as he remedies the misconduct, if it is possible to do so and it might not, he loses the right to argue that his exclusion alone justifies the court making the winding up order on the just and equitable ground. The reason is simple: it would not be just and equitable to wind up in these circumstances and the exclusion from management is not unfair." So we say here, from your Lordship's judgment, that there is also no find of irrevocable breakdown. What your Lordship was saying was that at that time, you're still persisting with your breach which concerns misappropriation of money and return of money, and then you just simply cannot assert your right. So one cannot rely on your Lordship's judgment to say that by the time of 2018, there was already an irrevocable breakdown, A Court Reporting Transcript by Epiq 71 HCMP 1987/2018 Day 01 12:23 nothing you can do about it. That is the submission that we make. Then going on to paragraph 27(c) of YK's opening, here YK is saying that the mutual trust and confidence relationship somehow has gone since 2008, and the parties' basis of assertion becomes expressly stated in the 2008 reconciliation exercise. Firstly, this is not the pleaded case; secondly, it is wrong in concept and law. Because this reconciliation exercise was conducted pursuant to a board resolution of Money Facts, passed by YK and Marcon, a company which was in YK's control, Harbour Front was not even involved in passing this resolution; how can YK somehow say that this reconciliation exercise becomes the new benchmark or new parameters which the parties agree to associate with each other? This is simply wrong. This whole paragraph is wrong. So, to conclude, any attempt by YK to lower the threshold of showing irrevocable breakdown, to say, "Oh, I dispute, or reconciliation exercise", must be rejected because it is their pleaded case and it is the parties' terms of association that the mutual trust and confidence, yes, premised upon the shareholders agreement, the articles and the implied agreement, they should be given equal participation in the company. A Court Reporting Transcript by Epiq 72 HCMP 1987/2018 Day 01 12:25 When I say YK's case relies on a very high threshold, it's because they need to show this fundamental breakdown, therefore their pleaded case is, well, bad faith, sabotaging -- all these very serious conduct post the 2018 judgment, sabotaging the deals, et cetera, there is no evidence of misappropriation of money or any evidence of Gillian not conducting the financial affairs of the company in a reckless way, et cetera, no such complaint. But they are trying to find fault in another area, saying that we have sabotaged deals in bad faith. Just to have a flavour of how serious their allegations are, I will take your Lordship to YK's cross-petition. The allegations are the same in the defence but it's clearer from what they plead in the cross-petition. That's bundle A, tab 7, page 171, section C. There's a summary of the unfair prejudice. Paragraph 12, saying that: "Since ... 1996, YT [and then Harbour Front] ... conducted Money Facts' affairs in a manner unfairly prejudicial to the interests of [YK] causing an irrevocable breakdown of the relationship of trust and confidence ..." Paragraph 13: "YT and/or Harbour Front flagrantly breach A Court Reporting Transcript by Epiq 73 HCMP 1987/2018 Day 01 12:27 the Shareholders Agreement by ..." 1, the misappropriation of money, that's the past breach; second: "persistently sabotaging or otherwise interfering with arms length sale of the land by Fonfair ... (3) refusing to properly consider ... or accept an arm's length offer by a third party ..." So, again, concerning how we respond to these offers, and they say we are obstructing it and in bad faith. We can see from page 177, at the bottom, the misconduct were "flagrant, recurrent and persistent", and the breach of the shareholders agreement sabotaged the purposes of Money Facts and caused irrevocable breakdown. Page 180, at the top: "... could not resurrect the trust and confidence that Harbour Front had so thoroughly destroyed by its grave, persistent and recurrent misconduct over the past decades, particularly given the matters set out in section F below." Section F below would be the new breaches, the alleged sabotaging of the deal. Paragraph 41, page 183: "The above acts ... by Harbour Front were done in bad faith to sabotage any arm's length negotiation of A Court Reporting Transcript by Epiq 74 HCMP 1987/2018 Day 01 12:28 the sale of the Yau Tong property ... stifle any genuine offers made by third parties ... in breach of the 2nd and 3rd purposes of Money Facts ..." And then the particulars of bad faith, including sabotaging deals and hijacking the management. Lastly, page 189, paragraph 56, the second part: "By the misconducts set out in this section, Harbour Front again asserted de facto control over the management of Money Facts and Fonfair ... and hijacked the dealing regarding the Yau Tong property into a way that was prejudicial to the interests of the members." So their case is relying on very serious allegations of bad faith, sabotaging of each and every deal, and we will show that in the evidence they cannot meet the allegation. There is no such bad faith or sabotaging, or hijacking on the part of Harbour Front. And all Harbour Front was doing was to express its disagreement and that is within the parameters of the company. That deals with the first part, which is the major part for your Lordship's consideration when dealing with the evidence that has been approached in assessing whether there is unfair, prejudicial conduct, as we complained, or whether there was an irrevocable A Court Reporting Transcript by Epiq 75 HCMP 1987/2018 Day 01 12:30 breakdown, as YK alleged. As to the second part, I will be very brief. I just wish to take your Lordship to the letters to show the offer and the steps that we have taken to remedy the breach found by Mdm Justice Kwan and repeated by your Lordship in the 2018 judgment. We have done what we need to and those are the facts. Can I just take your Lordship to the reconciliation report, at bundle D5, tab 209, page 4337. Your Lordship will recall this reconciliation exercise which, back in 2018, we complained as an act of -- unfair, prejudicial, and it was rejected by your Lordship. And your Lordship has reminded us we should compensate the loss of Fonfair, and one of the ways that could be done is to accept the reconciliation report. The reconciliation report was commissioned by Fonfair, and it was the suggested way or the preferred way of YK to deal with the misappropriation. Your Lordship will see from this interim report, the first report, the first document at page 4337 up to 4351, is the 2016 interim report. It is common ground between the parties this is the last report which will supersede all the previous reports. So that is the report that we are looking at when we talk about the quantification of the amount. A Court Reporting Transcript by Epiq 76 HCMP 1987/2018 Day 01 12:32 Also, one point to note is that there is never any court finding as to the amount of the loss. So how to quantify the amount of the loss would be done by this reconciliation exercise, which we used to oppose, but now we are accepting. So now this reconciliation report, your Lordship would see from this report there are a few appendices starting from page 4346. Page 4346 is appendix 1, and that would be the drawing by YT found by the accountant. The amount which is drawn by YT would be the last -- seventh column from the right. This column, the bottom figure, 3 million plus, your Lordship doesn't need to go into the exact figure because there is no dispute between the parties as to what was the final figure, which is 15 million-odd, but I just wish to show you the report as a starting point. So it's the addition of appendix I, 3 mill odd. And then appendix II, omission of rental, 8 mill odd. Appendix III, loss of income, 93,000, and then appendix 4, legal costs. So all the figures under I, II, III, IV, add up to the figure which Fonfair says Harbour Front should compensate for the breach of the shareholders agreement. Appendix V is YK's own drawings because they adopted an accounting exercise so YK can draw as well. But what A Court Reporting Transcript by Epiq 77 HCMP 1987/2018 Day 01 12:34 is relevant would be I to IV, and they add up to 15 million-odd. Then, with that in mind, I will invite your Lordship to go to Harbour Front's opening, paragraph 35, where I have summarised the steps that Harbour Front has taken to remedy the breach. Your Lordship will see that there are a number of letters. I will just take your Lordship to a few of them, but your Lordship can see that since August 2018, we have been taking serious steps to remedy. So it's a few months after the 2018 judgment of your Lordship. Then we started to say, "Wake up" and then we took steps to remedy the breach. Your Lordship will see in the first letter, the 9 August letter, at paragraph (a) we offer -- COURT: Sorry, that is where? MS HO: That's page 13 of my submissions. COURT: Your submissions? MS HO: Yes. COURT: Yes. MS HO: Paragraph 35, I summarise the steps, the more important steps that we have taken to remedy the breach. Your Lordship will see that I say since 2017, Harbour Front has taken steps to make offers to compensate the loss, but we do note that in the judgment A Court Reporting Transcript by Epiq 78 HCMP 1987/2018 Day 01 12:36 of your Lordship in the 2018 judgment, your Lordship commented that some of the 2017 offers which were made during the trial were a little bit too late and too little. So the serious steps or the steps that we're relying on are the post-judgment steps. COURT: Can you just clarify this for me because I didn't go and look at the documents or the file -- you can do that now, of course. It says "offer to pay any" -- paying the adjudication of such claims by Fonfair. So if we go to -- so your client was offering to pay -- I haven't read this, as I say -- HK$12 million and to the extent that YK was saying, well, actually you owe more than that, the difference will be adjudicated. MS HO: Your Lordship is looking at the letter itself, right? COURT: Yes. MS HO: Here, the letter at page 6404, on the first page, paragraph 2, which your Lordship was referring to, HK$12 million-odd -- COURT: Yes. MS HO: -- it was a reference to the previous offer. The latest offer is in the following page, but in the previous offer we say, "We give you the HK$12 million, and if you do not accept this amount, we'll adjudicate the exact amount, and this A Court Reporting Transcript by Epiq 79 HCMP 1987/2018 Day 01 12:38 HK$12 million can be used as a security. Just put it there and then we adjudicate". So that was the offer prior to this letter. We're just recapping. COURT: But you weren't offering to pay at least a minimum sum which could be utilised? MS HO: That was previously. Previously. And by this letter we are offering the full sum of the 15 million-odd -- COURT: Well, as security. You're not saying, "We accept" -- we don't even say 16 million-odd, we're not sure that that is the right figure, and we think it might be lower, but we accept it was at least $10 million is payable, so we will today send you a cheque for $10 million, so you can have that and you can work out how to deal with the -- MS HO: Your Lordship is correct about the understanding of this letter. Because this letter is just the beginning. It's not yet the offer that we will be relying on. But I just to show your Lordship that since August, we are making serious effort. The starting point again is that there was no court judgment or finding as to the exact amount, so we were trying to find different ways to ascertain the exact amount. Of course we were preferring adjudication, and YK was not happy about it because he has been implementing this 2008 exercise for A Court Reporting Transcript by Epiq 80 HCMP 1987/2018 Day 01 12:40 so long, and he says you are just in it picking, as my learned friend said in the previous hearing, but the fact is that there is no finding so we are trying to find different ways to ascertain the amount. COURT: Well, you can just agree, of course. MS HO: Yes, later on we agree. COURT: "Here is a cheque." MS HO: Later on we agreed and we tender a cheque. And I'll take your Lordship to that letter, which is not very late, very soon after that letter appeared. Your Lordship will see in page 6440, at the bottom, the last paragraph he said: "We say that it would appear that the primary issue is that we cannot agree as to the amount." Over the page, second paragraph, the fact that there was not yet any finalised figure, and there needs to be a method to address this, it is also recognised in the judgment that your Lordship comment that the legal cost at appendix IV there might be some room to argue as to whether we need to be responsible for all of the legal costs. So the offer in this letter is that we will put up the HK$15 million odd, that is the total amount of appendix I to IV, as security, and then we go to adjudication. Then we also offer to put up another HK$1 million A Court Reporting Transcript by Epiq 81 HCMP 1987/2018 Day 01 12:41 for the costs in the event that the adjudication is not in our favour. So, back then, it was our proposed way of dealing with the amount. Then what we see is a rejection by Fonfair. Your Lordship can see in the following tab, tab 353, and we can see page 6404, the last three paragraphs saying that we're just trying to bully our way back to the management, and the offer is irrational and serves no useful purpose. Then we continued with our effort, and your Lordship will see the letter at tab 364. Here, Harbour Front has been advised by the new legal adviser in the new team, which is my current solicitors, then we made another offer. Paragraph 4: "... despite Harbour Front's repeated demands and requests, Fonfair has so far failed and/or refused to substantiate the quantum which Fonfair alleges ... to be liable for its breach of ... Shareholders Agreement. To resolve the disputes ... and notwithstanding to Harbour Front's disagreement with the Interim Report ... which was prepared exclusively upon the instruction of [YK], [the following page], it is observed that the figure in Annexes I to III is [11 million-odd]." So we took out the legal costs amount, took it out, A Court Reporting Transcript by Epiq 82 HCMP 1987/2018 Day 01 12:43 and in paragraph 5: "Without admission of the accuracy of the said sum of [11 million] ... to avoid further delay, Harbour Front hereby offers to tender a cheque issued to Fonfair in the sum of [11 million] ..." So we are willing to pay the 11 million to settle any outstanding liabilities. As to the legal costs, in the footnote we say because we are of the view that some of the amounts are disputed, we did not tender the cheque for that. Your Lordship will see that the loss, appendix I to III, by September 2009 we have already tendered the cheque and we are operating basing on the reconciliation report. Then your Lordship will see, from tab 368, a letter from Fonfair rejecting the cheque saying that it is an offhand offer of cash without admission basis, without acknowledging the reconciliation exercise, and that is not helpful. So they request that we have to acknowledge the reconciliation report. So your Lordship will see by the letter at tab 373, 13 October 2018, paragraph 7, page 6475, we say that: "If and to the extent that Fonfair's and [YK's] only 'preferred' way to fully and finally settle [the] breach of the Shareholders Agreement is for Harbour Front to A Court Reporting Transcript by Epiq 83 HCMP 1987/2018 Day 01 12:45 agree upon the execution of the ... [reconciliation exercise] based on the figures stated in the Interim Report ..." Our stance is as follows. "Without admission to the quantum ... and ... the propriety of the 'reconciliation exercise' and for the reasons stated above in previous correspondence, for the purpose of settlement, we have standing instruction to accept your Proposed Settlement. To avoid confusion and further delay, the said acceptance is upon the confirmation of [YK] and Fonfair that your Proposed Settlement will give effect to ..." Including us going back to the management." So by this letter, we have accepted the reconciliation exercise because that is what YK wants to fully settle the amount. Of course, YK in the reply letter says it is still subject to condition. COURT: But you go on to say there are conditions. MS HO: Yes. COURT: Now, let's just assume that, as it appears the court seems to have taken the view, your client had misappropriated some money, say it's 15 million, put it around there, his obligation to repay it was not subject to anybody else doing anything, was it? A Court Reporting Transcript by Epiq 84 HCMP 1987/2018 Day 01 12:46 MS HO: Correct. COURT: So he wasn't entitled to impose conditions. MS HO: That is why there is another letter, and this is the 22 October letter. COURT: But to start off with, he wasn't saying, "Mea culpa, I'm terribly sorry, here's a cheque for 10 million, I'm not sure what the balance is, but as an offer of good faith here is a substantial sum of money". That, my understanding is correct? MS HO: My submission to your Lordship is that as I've mentioned, there is no concrete quantum as to how much we need to -- COURT: But he is the guy who took the money. MS HO: Yes. COURT: So he must have some idea what he took. There must be a minimum figure which if he could be bothered to do the calculation he would have known was he was certainly going to have to pay, and he doesn't say, "You can argue about some but I accept that at least $10 million", whatever the figure is. MS HO: But he did say, I accept the full amount, as you would see from the previous letter, saying that "Full amount, I give it to you as security". COURT: But that's different, isn't it? He wasn't obliged to provide the security, he was obliged to repay the A Court Reporting Transcript by Epiq 85 HCMP 1987/2018 Day 01 12:47 money he misappropriated. But so far, he hasn't said "I'm doing it". MS HO: And the last letter that we want to look at -- COURT: So -- yes. MS HO: Because we need to go back to the previous letter which I showed you, is that -- to show that we have been doing, it is not just out of the blue the 22 October letter, but we have been doing it and we have ascertained it from the other side, whether it is good enough, and 22 October 2018 letter, at tab 377. COURT: Yes. MS HO: Here, we refer to the previous letters by Fonfair, Ho & Co(?) scolding us for not really purging the breach. Paragraph 2: "Purely for the purpose of settlement [and] without further delay, we hereby re-confirm on behalf of Harbour Front its acceptance of the execution of the one-off 'reconciliation exercise' based on the figures contained in the 2016 Interim Report ... which is Fonfair's ... own proposed and insisted form of settlement to fully and finally settle [the] ... past breaches." So, by this paragraph, we made it quite clear that we are accepting, not imposing any condition, but we are accepting. And we also referred back to the A Court Reporting Transcript by Epiq 86 HCMP 1987/2018 Day 01 12:48 13 October letter showing that we have this intention to accept the reconciliation exercise. Then we say, by accepting the reconciliation exercise, we have fully purged our past breaches and we ask Fonfair to put us back to the management. So -- COURT: Had you sent the money at this point? MS HO: Sorry? COURT: Have you sent the money? MS HO: Sent? COURT: You know, "Here's a cheque, and then cash it and then do what we would like you to do." MS HO: According to the reconciliation exercise arranged by YK, we do not need to pay any money. We actually needed to accept the reconciliation exercise because the accounting mechanism is that our misappropriation is being counted as drawings from the company, and throughout this year -- COURT: Oh, I see. So your understanding of the situation is that you weren't being asked to proffer a cheque although you were doing so earlier? MS HO: Yes, because we were not certain as to what is -- first of all, your Lordship will recall that we have been complaining about the reconciliation exercise -- COURT: Where do we get a letter from them saying, "You don't have to send the money, just agree the figure"? A Court Reporting Transcript by Epiq 87 HCMP 1987/2018 Day 01 12:50 MS HO: But I can let your Lordship know our acceptance of the reconciliation exercise has already been accepted by Fonfair, because that has now been booked in Fonfair's account. So this way is actually the way that YK wants us to do it, just that we have been doing other ways by tendering -- MS LOK: One of such letter can be found at page 6448. There are, in fact, more than one, and I will take you through the evidence later. COURT: So what tab number is that? It will be quicker. You have -- MS LOK: 368. COURT: So I should be reading this as YK saying, "I'm not asking for a cheque, I'm asking for you to agree a figure." Is that -- MS HO: Paragraphs 4 and 5. MS LOK: And paragraph 6. COURT: I'm not quite clear what that -- what I was concerned about was a narrow kind of common sense one, that you might say, "Well, I appreciate that you say I owe you $60 million, I'm not sure I do owe you $60 million, but I accept that I owe you at least $10 million, here's a cheque." But what I'm not quite clear on is whether I'm meant to be understanding that at this point in time, YK -- of course, it may be that A Court Reporting Transcript by Epiq 88 HCMP 1987/2018 Day 01 12:52 there is some confusion about what both parties were intending -- was actually saying, "I don't need you to write me a cheque, I just need you to confirm that the accounts can be finalised on the basis of the figures in the reconciliation." MS LOK: Maybe I'll find the better reference over lunch. COURT: Thank you. MS LOK: Something of that sort is stated in paragraph -- we are trying to find the paragraph in YK's evidence, but I don't quite recall whether the evidence is this proceedings or in previous proceedings, but he did explain the mechanics in a paragraph of his evidence, and the mechanics simply is that, according to YK, this reconciliation exercise is that the misappropriation sum will be counted as draw-outs by YT or Harbour Front from Fonfair. And because of this draw-out -- COURT: More will be left for him. Yes, that I can understand. It's not that I'm particularly concerned about. It's the extent to which your client was saying, "Okay, I have to be completely cooperative, I give in", or whether your client was constantly hedging his position and saying, "Well, I'll give you the money but you have to agree something in exchange." MS HO: By the stage of 22 October, we are not relying on any condition. So the step one is that we draw money A Court Reporting Transcript by Epiq 89 HCMP 1987/2018 Day 01 12:54 out -- COURT: It is not actually clear to me that that is the case at the moment. MS HO: Yes, acceptance of the reconciliation exercise is the way that YK said would be the way to cure -- COURT: But the letter before last was written -- MS HO: (Unclear) conditions. COURT: -- "Oh, and if we are going to agree this, you need to do A, B, C." MS HO: Yes, the last letter -- COURT: All right, let's deal with one thing first. "This is the amount of money that I owe you." We'll assume that that is the case, it can go to the accounts, all right? Now we'll move on to another subject, which is, "I'd like to be involved in the company again." The two of which seem to be, from the previous letter, treated as condition. MS HO: Correct, up until the 13 October letter. COURT: Do you want to go there or do you want to go there after lunch? MS HO: Very quickly. COURT: Where is that? MS HO: The 13 October letter was the one which I have taken your Lordship to. A Court Reporting Transcript by Epiq 90 HCMP 1987/2018 Day 01 12:55 COURT: Which is tab? MS HO: Which is tab 373. That was the letter which your Lordship has looked at and said, "Your acceptance of the reconciliation exercise was still subject to conditions." COURT: Yes, yes. MS HO: Then Fonfair came back also, amongst other things, saying that it's still conditional, so we have this 22nd letter. COURT: Where is that? MS HO: At tab 377. COURT: This is to be read, you're suggesting, as saying, "Okay, you can use the figure in the reconciliation report, that's unqualified." MS HO: Mm. And also accepting the way of handling the loss, because according to the reconciliation -- COURT: My next point was that paragraph 4 was to be read as, "Now we've dealt with reconciliation, the next point is I'd like to have representatives on the board." MS HO: Yes. COURT: That's how it's meant to be read? MS HO: Yes, and the reconciliation exercise, if we accept the mechanics, we do not need to pay anything. Accepting it, and then Fonfair will be declaring dividends, and that will be used to set off the amount A Court Reporting Transcript by Epiq 91 HCMP 1987/2018 Day 01 12:57 that we accept we owe Fonfair, and that would be how the reconciliation exercise operates. The last document which I'd like to take your Lordship to before we break for lunch would be the account of Fonfair showing that they also rely on this 22 October letter as the valid acceptance of the reconciliation exercise, and now the accounts -- COURT: Yes, so where is that? MS HO: Tab 423, D10. COURT: So this is the financial statement? MS HO: Mm. COURT: Where do we see the figure? MS HO: Tab 423. COURT: It's in a note, is it? MS HO: That will be the first page of the financial statement, if your Lordship can go to page 6761. COURT: We're now in the notes, presumably. We're now in the notes to the accounts -- MS HO: Yes. COURT: -- which I assume will be -- yes. MS HO: One can see this amount. Perhaps I can take your Lordship to page 6769, which will be easier. COURT: I'm on page 6761: "According to a letter from Harbour Front's solicitors dated 22 October 2018 ..." A Court Reporting Transcript by Epiq 92 HCMP 1987/2018 Day 01 12:58 That is the one we were looking at, I assume. MS HO: Yes. COURT: "... certain representation was made of Harbour Front Limited's acceptance of the aforesaid reconciliation exercise to bring the matter to a close." MS HO: Yes. COURT: "The directors ... resolved ... to approve the recognition of the amounts owed by Harbour Front ..." So what you're saying is that at the time of preparation of these financial statements, it would appear that YK accepted that YT had agreed that figure and it could be used in your financial statement. MS HO: Correct, and it's even clearer if your Lordship -- COURT: Well, that's pretty clear, unless you want to show me a figure. MS HO: From our reading, the figure would be the $9.9 million because we are not exactly clear as to how this $9.9 million came about, because it's subject to certain adjustment from the accountant. But from our understanding, it's this amount, which is the amount which -- COURT: Well, if Ms Lok thinks that's wrong, she will tell me in due course. MS HO: Yes, she will inform the court, because we are not A Court Reporting Transcript by Epiq 93 HCMP 1987/2018 Day 01 12:59 the one preparing it. But it's even clearer, if your Lordship can just go back a tab, just one last document before we break for lunch, at tab 421. That's the board resolution passed by Fonfair, which the auditors referred to, approving the booking of the amount. Your Lordship can see page 6729, paragraph 2: "Subsequent to the dismissal of the 2015 Petitions and their appeals ..." That's your Lordship's judgment and the appeal: "... Harbour Front commenced the present proceedings in [HCMP 1987] which Harbour Front apparently considered necessary ..." COURT: Well, it is resolved, isn't it, at page 6730? MS HO: Yes. COURT: So unless Ms Lok wants to argue it doesn't actually mean what you say it means -- it seems to say, we can see it on the basis that they treated the reconciliation figure as being the figure in the report. Quite how, as a matter of accounting that, they then adjusted the financial statement for that financial year, you don't know. MS HO: Correct. COURT: But on the face of it, that in itself isn't an issue, as far as you're aware. A Court Reporting Transcript by Epiq 94 HCMP 1987/2018 Day 01 13:01 MS HO: Yes, and we can see from the previous paragraphs that our 22 October letter was referred to, our 13th letter was referred to. So we say from this board resolution, it's very clear that from YK's perspective, he accepted it. COURT: All right. We are adjourned until 2.30 pm. (1.01 pm) (The luncheon adjournment) (2.34 pm) MS HO: My Lord, I'm coming towards the end of my opening, and the last thing that I wish to do is to go through the Chu v Lau case which your Lordship referred to, and also refer to another case which your Lordship has handed down the judgment, and quoting Chu v Lau. Maybe that was one of the reasons why this case was in the mind of your Lordship. Those are in our supplemental list of authorities. We have the hard copy and soft copy. I take your Lordship to the Lau v Chu case, tab 45 of the second supplemental list of authorities and your Lordship can go to page 4662. This is a case of just and equitable winding-up of a quasi-partnership. The court says a just and equitable winding up may be ordered in two scenarios. The first is winding up A Court Reporting Transcript by Epiq 95 HCMP 1987/2018 Day 01 14:35 may be ordered to what can be conveniently labelled as a functional deadlock. That's the first scenario. Over the page, paragraph 15: "Secondly, where the company is a corporate quasi-partnership, an irretrievable breakdown in trust and confidence between the participating members may justify a just and equitable winding up, essentially on the same grounds as would justify the dissolution of a true partnership." COURT: Yes, I know this one. MS HO: Yes. Here, we can see the analogy which your Lordship referred to, and that would be at line G, the analogy of the partnership. That is why your Lordship would think this may be a more appropriate analogy rather than frustration. COURT: Yes. MS HO: But we do draw the point here, apart from G, we go back to C. In this quote, there's an explanation as to what is the dissolution of partnership analogy. Here, the court says: "I do not base my decision upon any particular reported case, but upon the principle that the circumstances under which the parties entered into the partnership have, by matters over which they have no A Court Reporting Transcript by Epiq 96 HCMP 1987/2018 Day 01 14:36 control, materially altered, that these altered circumstances have, combined with the conduct of the parties themselves, produced a mistrust which the court cannot say is unreasonable; and that, taking all these things together, it is impossible that the partnership can be conducted upon the footing on which it was originally contemplated, without injury to all these persons concerned, and that taking all these matters together, [it would be a case for] ... dissolution of the partnership." Here we say that the factual circumstances as in the original agreement of the partnership or the trust and relationship is the shareholders agreement. COURT: I think the point that emerges, I thought, from these passages is that regardless of the basis upon which the parties may have entered into their venture, if the relationship between them deteriorates so as to destroy the trust and confidence that exists between them, if it is to be presumed to have existed at the time the company was formed, that may justify the court making a winding-up order on the just and equitable grounds. It doesn't -- I don't see why the fact that there was a shareholders agreement at the outset makes any difference to that analysis. MS HO: The analysis -- your Lordship's analysis is correct, A Court Reporting Transcript by Epiq 97 HCMP 1987/2018 Day 01 14:38 but in the present case we say one of the benchmarks which your Lordship would take into account to see if there is this dissolution of partnership is whether this shareholders agreement was still there and still being relied on by the parties. Of course, your Lordship will be assessing objectively whether this partnership can continue and whether objectively -- COURT: If you look at the quote from Sir John Romilly, it says: "... by matters over which they have no control over materially altered that these altered circumstances, combined with the conduct of the parties themselves, produced a mistrust which the court cannot say is unreasonable ..." One must say about this lot, may well say, well, you read that, remind yourself of the circumstances of this case. Surely the conclusion is that YK's done enough, it's actually not very complicated at all. In fact, I remember, when I read this, actually thinking it being -- thinking that as expressed as Lord Briggs is expressing it, it makes the threshold actually quite low, not high. MS HO: My Lord, my submission would be this, two points. First of all, as to the threshold, it is the same A Court Reporting Transcript by Epiq 98 HCMP 1987/2018 Day 01 14:40 threshold. It is the objective analysis as to whether the parties' relationship cannot go on, whether it is impossible for the parties to conduct their business, that mind -- it is impossible that the partnership can be conducted upon what was originally contemplated. COURT: That's not what it says. It says "produced a mistrust which the court cannot say is unreasonable". MS HO: And that taking all these things together, it is impossible that the partnership can be conducted upon the footing which it was originally contemplated without injuries to these persons concerned. So the test is whether it is impossible to continue the business on the basis of what the parties originally contemplating. COURT: Well, your reading of the use of "impossible" in that context as indicating a high threshold. But if this is what is telling us -- but if what this is telling us is that once the mistrust is there it becomes impossible, then it's -- MS HO: There are two ways, I understand. COURT: -- different. How can I -- since you were going to take me to Aitken, which obviously I wrote a little while ago. I think I have actually been -- referred to this more recently, I think there is another decision I handed down. Where do I -- ah, here we are, paragraph 37. A Court Reporting Transcript by Epiq 99 HCMP 1987/2018 Day 01 14:41 MS HO: Correct. Here, in this case, your Lordship was dealing with a just and equitable winding-up and there was no shareholders agreement. It was just an understanding between the parties. Your Lordship can see that in paragraph 43. So going back to Lau v Chu, and going back to your Lordship's question, is the standard high or low? The standard is one standard; that is objectively, your Lordship assesses whether this quasi-partnership, scenario 2, whether this quasi-partnership can perform. COURT: Well, no, can it be conducted as originally envisaged. And since the concept of mistrust is engaged, can you cure the mistrust? It's not just can you -- all right, so you steal all the money, you know, the burglar breaks into my house and he takes everything and then he thoughtfully brings it back on the next train. MS HO: Yes. COURT: I might just not trust him. So if that is the criteria, can you put parties back in the position in terms of their ability to work together, trust one another, then if it's impossible to put the trust back together, the test is satisfied. It's not, "Can you do something which, on the face of it, corrects the wrong?" That's my point. A Court Reporting Transcript by Epiq 100 HCMP 1987/2018 Day 01 14:43 We don't have to continue debating it; this is your opening. I'm just raising it for further consideration. MS HO: Yes. I certainly understand your Lordship's thinking and where you're coming from, and my response now is that when your Lordship is talking about mistrust, it is not a general or vague English term like mistrust or not, or whether or not I trust you or your Lordship trusts these brothers. There must be objective benchmark between these two brothers, as to how the outsiders can assess whether objectively that trust has broken down. We say that in this case, the SHA, the shareholders agreement, is the benchmark, and if one can see YK is still relying on the shareholders agreement, that is a strong indication that between these two partners, the trust is still there. COURT: Look, sure, I'm not sure I find that persuasive, but okay. I mean, that's your current argument. MS HO: The other point, of course, we go back to the pleaded case of YK saying that the irrevocable breakdown is based on the fundamental breach of the shareholders agreement. So they are also using the shareholders agreement as the benchmark in their pleadings. It's just when they are doing the opening, they are trying to go to the lower threshold of just A Court Reporting Transcript by Epiq 101 HCMP 1987/2018 Day 01 14:44 trust, "I don't trust you, you don't trust me, we have been arguing for so long, so we cannot continue to work." Of course, one last paragraph in Chu v Lau I would like to highlight is page 4664, letter D. If your Lordship can quickly go to paragraph 18, because that's part of paragraph 18. So if one looks at paragraph 18, at the top: "The well-known leading case on whether a company has quasi-partnership would be Ebrahimi ..." And then go to line D: "That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so where the company is large or small. The 'just and equitable' provision does not, as the respondent suggests, entitle to one party to disregard the obligation he assumes by entering a company nor the court to dispense him from it. It does, as equity always does, enable the court to subject the legal rights to equitable considerations ..." So one can see Chu v Lau, the dissolution of partnership analysis applies to scenario 2. So if your Lordship is with us on scenario 1, that our right A Court Reporting Transcript by Epiq 102 HCMP 1987/2018 Day 01 14:46 to equal participation will have us in the board having the equal management power, it is a positive right that your Lordship has to enforce and uphold, unless the agreement is totally gone. It is in the scenario 2 situation that the partnership law analogy comes in, and that will be the debate between myself and your Lordship as to what should be the test and the benchmark. So that is another point that I wish to highlight. Unless your Lordship has other questions, that would be my opening. Opening submissions by MS LOK MS LOK: May it please the court. I will deal with some quick points only, starting with the mutation in my learned friend's case in oral opening into a case of contractual implied term. What she says now is that having seen YK's opening and the analysis about imposition of equitable consideration, all these don't matter because in fact Harbour Front is not relying on equitable superimpositon of equal right of participation but a hard-core contractual term that YT, or his nominee, is entitled to equal participation in the company forever and ever. That is the synopsis of the first part of the submissions. Now, I will try to dissect it in several ways, but start by asking a few questions which my Lord No doubt A Court Reporting Transcript by Epiq 103 HCMP 1987/2018 Day 01 14:48 will take note of. First of all, one would ask, if you are talking about a contractual implied term in the Cairns(?) Land Realty style, so the traditional analysis, is it so obvious a bystander will say, "Yes, of course", is it a term capable of clear expression, is it a term required as necessary to maintain business efficacy, is it a term reasonable and fine, that sort of BP Refinery analysis, where is it pleaded? The answer is that, I'm sorry, it is not pleaded. I have looked at my learned friend's petition over and over again. It is true that she has shown to you that the word "implied" is used, but, in fact, if one looks into those wordings more carefully, they're not run into a case of contractual implied term at all, because all this necessary averment of what it is actually being alleged as to be in the implied contractual terms is absolutely missing. Second point, my Lord will find that ironically, this issue over whether or not there is such an implied term in the shareholders agreement is not even contained in my learned friend's list of issues. So it came as a great surprise to me because not only was it not in the list of issues, it was not in their opening at all. So all this analysis about how this is implied, and in which document, it all came this morning. A Court Reporting Transcript by Epiq 104 HCMP 1987/2018 Day 01 14:49 But, moving on to the more substantive point, one may ask, if it is said by Harbour Front that there is this implied contractual term, what exactly is the term? Now, my learned friend has only made reference and relies on paragraph 44 of Mdm Justice Kwan's judgment, but my first submission after the preliminaries in answer to that is that it is completely out of context. My first submission is that Mdm Justice Kwan did not make a finding at all about a contractual implied term in the sense that my learned friend now has reached to advance. Now may I take my Lord To that judgment itself and highlight a few important paragraphs. I'm afraid, my Lord, that when we progress in this trial, both this judgment and the judgment of my Lord In the last trial will assume some significance, because there are a lot of reading out of context from what you and Madam Justice Kwan meant. The judgment itself is at D3, tab 107. Does my Lord Have -- COURT: I will in just a moment. MS LOK: Every time I open the file, some strange boxes will come up. COURT: It's not too bad. That was -- MS LOK: Tab 107 of bundle D3. A Court Reporting Transcript by Epiq 105 HCMP 1987/2018 Day 01 14:51 COURT: So this is the original or the first instance -- MS LOK: What we call the round one, my Lord. COURT: Just reminding ourselves of the chronology, the hearing took place at the end of 2003, and obviously it relates to matters which took place prior to 2003. MS LOK: Exactly. My Lord, I need to take you down memory lane a little bit. To recall the whole genesis of this dispute, it actually started back in the 1990s, all this fight over the use of the land when, under the control of YK, Universal Dockyard was not paying rent and refusing to move out, and there were lots of lawsuits, et cetera. In fact, the first long judgment in that regard came from Mr Justice To, the 1992 judgment, and this round one trial was a first full-fledged trial of two winding-up petitions brought by Harbour Front in the Companies Court, that in fact before that, all these disputes had been spinning around in the court for a long, long time. So the context of this, as my Lord Rightly recognised, was that there was no cross-petition, so it was Harbour Front only being the petitioner asking for the companies to be wound up on just and equitable grounds, and the complaint is that they have been excluded, that despite they ought to have had a seat in the company, et cetera, so essentially the same kind of A Court Reporting Transcript by Epiq 106 HCMP 1987/2018 Day 01 14:53 company they're running now. The point I want to make is to start at paragraph 33 of that judgment to see what exactly was the analytical framework of Mdm Justice Kwan in that trial. In my respectful submission, the opening sentence of paragraph 33 speaks volumes. The question posted by her Ladyship was: whether or not there were circumstances in which equitable considerations would arise. Then she started the analysis and talked about whether or not there were expectations that YK ought to have had a seat in the companies. So this is the very obvious point to be made after one actually reads the judgment in its context carefully. Nobody ever argued, and it was never considered by Mdm Justice Kwan, whether or not the shareholders agreement contained an implied term in the Cairns Land sense as now alleged by my learned friend. It was a winding-up petition, and the exercise endorsed by my Ladyship was to vouch by the factual circumstances whether or not there ought to be superimposition of those equitable considerations, and if so, whether or not there are justified reasons for the exclusion. A very orthodox analysis of that sort of petition. So it is absolutely wrong for my learned friend to then take paragraph 44 out of context. That's what she A Court Reporting Transcript by Epiq 107 HCMP 1987/2018 Day 01 14:55 relies on. Because in paragraph 44, the word "implied" is being used, and saying that "Ah-ha the word 'implied' is used, it means an implied term in the Cairns Land sense, we are talking about a contractual term", that comes from nowhere and it is not what her Ladyship is saying. The same is reinforced by paragraph 88 of that judgment, where her Ladyship made her conclusion. So you start looking at her question and then you end up by looking at the conclusion, and paragraph 88 actually says this. This page number -- COURT: I have it, it's at page 3122, if you're using the PDF file. MS LOK: Yes, my Lord, that's right: "I find that it was due to the misconduct of Harbour Front that there was a breakdown in the relationship of mutual trust and confidence. In the circumstances, Harbour Front cannot assert its right of equal participation ..." So all the analysis was in the context of whether or not there was superimposition of equitable consideration, and then the whole cast, the breakdown of mutual trust and confidence and ergo, because it was YT's camp who caused the breakdown, therefore they cannot assert their right. So that, I think, speaks volumes, and this reliance on Mdm Justice Kwan's A Court Reporting Transcript by Epiq 108 HCMP 1987/2018 Day 01 14:56 judgment to say that there is a past finding of contractual implied term is wrong, and I want to make this at the outset. If we proceed on the analysis and assume that we're wrong and say, "All right, maybe there is room to argue", Mdm Justice Kwan made that finding about a contractual implied term, that does not stop there, because if you're going that route, then tell us, what exactly is the term you're implying? Now, of course, we run back to the same old problem that we pointed out in the beginning: nothing in the pleading which sets out with any degree of clarity whatsoever, what is the implied term. If I ask my learned friend now, probably there is no straightforward answer. But if we attempt that exercise, my learned friend may say, "All right, the implied term is that as long as YK and YT lives, both of them are to be the directors of Fonfair without exception and then they cannot fire each other from the role." That might be what she says, but that conclusion does not flow from that judgment, because if you go back to paragraph 44 of Mdm Justice Kwan's finding, which is my learned friend says the implied terms come from: "I hold that there was an implicit agreement or understanding ..." A Court Reporting Transcript by Epiq 109 HCMP 1987/2018 Day 01 14:58 Now, I pause here to note, in this actual finding, Mdm Justice Kwan did not use the word "implied term", but "implicit agreement or understanding", which is closer -- is the language under the equitable consideration. "... holding that both shareholders of Money Facts should participate in the conduct of its business and that through Money Facts, both should participate in the business of Fonfair, and that neither was to be excluded from management and control unless for good reason such change should become necessary." So if my learned friend is relying on this paragraph and saying that it gives rise to a finding of contractually implied terms, she cannot blue-pencil it, as it were, and delete the word starting "unless". Had there been a contractual implied term, the content of the terms must include those words after "unless", but if one takes a step back and thinks carefully of what is needed for my learned friend to succeed in her petition, this clause, even assuming it is an implied contractual term, does not help her client. Because what she needs to be implied would probably be: even though YT has done a lot of actions to harm the company and cause the loss of trust and confidence, he still is entitled to a board in the seat. A Court Reporting Transcript by Epiq 110 HCMP 1987/2018 Day 01 15:00 For my learned friend to succeed in this case and to support her position, she needs an implied term like that. In my respectful submission, if we are going down the Cairns Land route, it would be a nonsensical conclusion because obviously such an implied term will fail all limbs under the test. There will be no such implied term that exists which is fair and reasonable. A further point to be made is that one cannot escape from the analysis of the parties' nature of relationship, no matter one couches the language of the analysis in the traditional contractual implication terms, or the Ebrahimi equitable consideration term. That is because the facts of these kinds of cases are all stemmed from the personal relationship of trust and confidence among the shareholders. So even if one were to brush aside the equitable terminology and use the contractual terminology, one still has to go back to the question of, "Well, what was the basis of their relationship? If that was a relationship of trust and confidence, was that lost?" to justify the participation of the wrongdoer shareholder in the company. I hope I have made myself clear in this regard, my Lord, which is even if we are to assume that Mdm Justice Kwan made a finding, that that finding of A Court Reporting Transcript by Epiq 111 HCMP 1987/2018 Day 01 15:01 implied contractual term would not help my learned friend. My Lord, a necessary consequence of what follows from my last point was that once one recognises that even in the analysis of implied contractual terms, one needs to look at the relationship and the nature of the relationship. If we are going back to square one, all the submissions that I have made in the written opening about the imposition of equitable considerations applies mutatis mutandis, because then of course the court will ask what were the circumstances, was it reasonable, was it obvious, and those factors was the breach by one shareholder dishonest, or did he cause break down of trust and confidence, did he burn the bridge, et cetera. All this would apply even though you are talking about contractual interpretation. So I'm afraid that my learned friend's approach is futile because she was trying to escape from all these points about equitable imposition of considerations, and say that, well, we are talking contractual implication, so we don't care about these. That is wrong. Even if we go down that route, all these things, substantive analysis, will bite back, and there is no escaping from answering those questions. My Lord, my third point under this category is that if my learned friend has been going on and on forever A Court Reporting Transcript by Epiq 112 HCMP 1987/2018 Day 01 15:03 about implied terms, it seems to me pretty obvious that there is no express term that she can rely on. There is a fleeting reference to article 87 in the opening, written as well as oral, that because there is this provision that says both YT and YK would become directors, therefore they have to be directors permanently, in my respectful submission it simply does not hold up, and I have made that point in writing. It was at the time -- you are talking about -- more than 40 years ago, my Lord, at the inception of the companies, and that was the agreement then, and that was the provision of our first directors, but a lot has happened since then and you cannot say that there is any written provision in the shareholder agreement itself which gives rise to a permanent right of YT to become a director. I just add this other point just for the sake of argument and analysis. I don't know, and I'm not sure if I actually need it in the end, but I might just say it now, which is that if my learned friend is right and we are to argue this whole case based on contractual implied terms, it seems quite obvious, in the circumstances, that no matter what subsists, and for the past decade or so, YK has called it a day and wants to bring it in now. So if one sticks to the contractual A Court Reporting Transcript by Epiq 113 HCMP 1987/2018 Day 01 15:05 analysis by bringing the cross-petition and asking to be bought out, YK has made it clear that he does not want to continue this state of affairs any more. So that -- going round and round in circles, my learned friend is saying that well, because it is in the shareholders agreement, therefore you cannot get away from it -- for your whole life, permanently. This is an appalling submission, and in my submission it cannot be correct. Of course YK can get out, I mean, given all this wrongdoing on the other side, he can call it a day. So whatever was subsisting must be terminated. That is the short answer to this question if we need to go that far. Now, I move on to the second big point, which is, what is the required standard to dissolve, or quit, however you call it, to end the equitable expectation? My learned friend in her written submissions says that you have to prove frustration. And in my respectful submission, that is wrong and that has been retracted. Now, I do agree that in the cases that we have cited, you have seen some facts which say that a shareholder who hit the other one, and then they had an argument and then they could no longer work together in trust, it is probably good enough for that relationship to end. There are other cases which we A Court Reporting Transcript by Epiq 114 HCMP 1987/2018 Day 01 15:07 have cited to say that when you write a letter, a really hostile one, which the parties may not be able to work together any more -- again, this is probably enough to end the relationship -- but we do accept that there is no single clear statement of the applicable standard in the cases that we have cited so far. And we are very, very grateful for my Lord's indication about the Lau v Chu case, which I have read with great interest over lunch, and I think in fact it might be a great opportunity to clarify the law in this regard, namely, in this kind of situation where you have what in the old days called quasi-partnership, and then there is an end to it, what is the required standard for that to end? My Lord, the passages that are useful in Chu v Lau in fact have already been read by my Lord, they include in particular, at paragraph 15 of that decision, and the phrase being used was "whether or not there was mistrust which the court cannot say is unreasonable". Now, in my respectful submission, that must be a reasonable statement of the law because it ties back, in terms of jurisprudence, very nicely into the nature of the relationship. What gives rise to the equitable superimposition of considerations in the very first place was that these people, they must trust each other, have confidence in each other, and could work with each A Court Reporting Transcript by Epiq 115 HCMP 1987/2018 Day 01 15:09 other on that basis. So if there was mistrust which is not unreasonable, which means that they could no longer operate in that basis, then it would sufficient in the circumstances to end that relationship. Now, my Lord, of course, in the submissions, in the pleadings, et cetera, we have couched the parties' relationship in very clear language. We used the phrase "irretrievable breakdown". But it doesn't mean, and I think my learned friend is wrong insofar as she suggests it, by using such language, we accepted that that is the minimum threshold necessary to achieve a break down, proffer a breakdown. We do not say that. We are saying that, my Lord, after you hear the evidence -- of course, you can still make the finding at the end of the day about whether or not there were irretrievable breakdown, irrevocable breakdown, et cetera, however you phrase it -- but that doesn't mean that that is the minimum threshold. We will in fact in closing further develop that point of law by reference to partnership cases and doing some comparison, et cetera, in order to assist my Lord in that regard, to formulate a clear principle applicable in that sort of situation. We are saying that no matter what, even if we are wrong on the principle, it is as low as this or as high A Court Reporting Transcript by Epiq 116 HCMP 1987/2018 Day 01 15:10 as this, we are here because, on the fact of the case, one cannot possibly say, unless one is extremely naive, that these parties are able to continue their relationship. We have seen that happening, all these hostile letters, lawsuits, injunction applications, angry phone calls, for three decades, and this is enough for everybody to call it a day and end this. My learned friend will say that I'm adopting layman language again, but as your Lordship says, it is really as simple as that; when one takes one step back to think about, what is all this about, why are these two brothers, who obviously hate each other, have to hold on to that miserable relationship in the company? The answer is obvious, in my respectful submission. My Lord, the third big point that I wish to address is that my learned friend spent a lot of time mulling over the wording in the judgment to say that there was no finding made of a complete or irretrievable breakdown of trust and confidence. I think she is trying to draw a hairline distinction between "breakdown of relationship" and "complete breakdown of relationship", and she says that the distinction lies in the fact of whether or not the relationship is so completely destroyed that there is no going back. Again, here, I make that obvious factual point, A Court Reporting Transcript by Epiq 117 HCMP 1987/2018 Day 01 15:12 which is that no matter what argument over the legal test is, it is quite clear on the facts of this case that these two brothers, or the corporate vehicles of the children, cannot work together any more. So the breakdown is complete, irretrievable, irreparable, whatever -- no matter the choice of words, we are there. But in order to tackle my learned friend's objection, I would respectfully say that, A, one needs to consider the context of the first two rounds of petitions. Again, no cross-petition was made before my Lord last time. So you're also concerned with a petition of winding up and unfair prejudice brought by Harbour Front alone. So there was absolutely no need whatsoever for my Lord to make a finding in YK's favour of a complete breakdown of trust and confidence, but there is no stopping my Lord from making the finding now. That is a very straightforward approach to it. And, in so doing, my Lord looked at the totality of the evidence concerning the parties' relationship going back to the 1990s, from the 1990s, since the first altercation up until now, the third round of serious hostile litigation in the Companies Court, and arrive at the conclusion whether or not these two brothers or their companies or children are able to work together any more. A Court Reporting Transcript by Epiq 118 HCMP 1987/2018 Day 01 15:14 It's as simple as that, my Lord. The fourth big point that I wish to make in opening submissions is about the reconciliation exercise as well as the letters of so-called remedy of breach which my learned friend has attempted to take my Lord to in her opening submissions. My Lord, can I take some time to refresh your memory about what happened last time before my Lord when Mr Daniel Fung was appearing for YT's camp and I was appearing for YK. My Lord will remember that one argument that the parties spent a lot of time in at the last trial was whether or not the reconciliation exercise itself amounted to unfair prejudice. My Lord will remember that it was actually pleaded back in those petitions that the exclusion was wrongful, and the reconciliation was what Harbour Front named as self-help measure by YK, such that it amounted to unfair prejudice or wrongful conduct. To recap, my Lord, on what is actually the reconciliation exercise, it is an accounting set of exercise necessitated by Harbour Front's inaction over a decade over its wrong. My Lord, you will remember, after Mr Justice To's judgment, of course they did not pay anything to Fonfair for the lost rent, et cetera, and there were a series of A Court Reporting Transcript by Epiq 119 HCMP 1987/2018 Day 01 15:15 lawsuits arising from contempt of court, discovery, restructuring, et cetera, and they go on and on until they accumulated to the trial before Mdm Justice Kwan. After that judgment where Harbour Front's petitions were dismissed, still nothing was forthcoming from Harbour Front about, at the very least, paying Fonfair back for the money that it lost as a result of a wrongful conduct. At that time, no issue of set-off arises because the company was completely broke, to put in layman's terms. I remember the evidence was that it had only several hundred dollars in its account because of YT's misappropriation. But then, as years go on, YT put the land to rental, so they generated a lot of cash, and then YK said, "Well, we have this big pot of cash sitting in the company, of course we need to distribute it in normal circumstances, but cannot distribute to YT's side because they still owe the company so much money, and they are doing nothing to address their situation, so what I can do in the circumstances?" What YK put in place in 2018 was this reconciliation exercise, which essentially says that, well, every year you look at the cash position of the company, how much is distributable, and then you apply the ratio of their shareholding between YT's camp and YK's camp and then A Court Reporting Transcript by Epiq 120 HCMP 1987/2018 Day 01 15:17 declare dividends according to that ratio. But the declaration in favour of YT's side would not result in an actual cash withdrawal because it is then set-off from their cash drawing. My Lord will remember that there was a string of interim reports produced by the accountants in periodical manner showing what exactly was the items charged, for which action, on which date, and how much, et cetera. And one of the so-called points of the discussion in the trial last time was that Harbour Front was not very happy about some of the items in the interim reports, and there were even applications for amendment, and very last minute, on the first or second day of trial, about acting in particulars of what they're not happy about in the interim report. At the end of the day, my Lord's finding was, in gist, that there might be room for argument over how much is to be charged and for what item, but it doesn't affect the nature of Harbour Front's wrong because that is inaction over such a long period of time of not compensating the company that necessitated this exercise, and not withstanding that all these figures, et cetera, have been put in detail in the report, Harbour Front, over a decade, took no action to actually make any constructive proposal to it. A Court Reporting Transcript by Epiq 121 HCMP 1987/2018 Day 01 15:19 My Lord will remember the AGM evidence where people argued about -- they just argued, basically. There was no constructive discussion at all of, "If you say that you're unhappy about this item, then let's deduct it. How much are you talking about? 1,000? 10,000?" Something like that never occurred. So that was the long and short of the reconciliation exercise, and, therefore, my Lord, it is utterly surprising that to this date, even in Gillian Leung's witness statement in this action, she is still going on and on about the reconciliation exercise. That was already discussed and decided against Harbour Front in the last trial. But, my Lord, the more important point and why I spent so much time on the reconciliation exercise is that it forms the entire context of these so-called letters offering remedy. That happened in the end of the trial before my Lord, some 10 years ago. So when we were still doing all the cross-examination and closing submissions before my Lord in the daytime, we go back to the office and all of a sudden we have a letter from Harbour Front saying that, "Well, how about we pay you $3 million? But then we have to go back to the book, and I have my remedied my wrong, yeah?" Something like that. "Without admission of my wrong, I pay you A Court Reporting Transcript by Epiq 122 HCMP 1987/2018 Day 01 15:20 3 million", and then the next day you have a letter saying "I pay you 12 million, how about I pay you 50 million?" All this is just nonsense in the whole context when the reconciliation was already done, my Lord. All it required at that time, for that part of the reconciliation to close, was for Harbour Front to say, "Okay, I accept it", and then the accountant exercise of set-off would be ended. But instead of doing the sensible thing, which is either that you agree to the reconciliation or, at the very least, tell the company the exact items that they were disputing, all they did was to throw random cash offers at the company, with various types of conditions attached, in a not particularly nice manner. I won't do it now, my Lord, but when we go through the letters in evidence, then you will see that these are really angry, hostile letters, all premised on Harbour Front having attendance in the board. In my respectful submission, my Lord, even if my learned friend is right down to this level to say that, as a matter of approach, it was still open for Harbour Front to come back to management any time as they pleased, at the time they chose, on the fact of this case, and that is the bit which requires my Lord to A Court Reporting Transcript by Epiq 123 HCMP 1987/2018 Day 01 15:22 make some fact-finding in particular, of what was actually being done by Harbour Front in the course of the last two years, and was it good enough to restore the mistrust, assuming it could be mistrusting, was it or was it not. And that is a very factual analysis that requires my Lord's finding in the end of the day. My Lord, the last point -- and I'm doing really good in terms of time. I pride myself on being very brief. The last point that I want to make in opening is this. I know that in normal circumstances, and I hope I'm not counting my chickens, but only making this point now to avoid any argument later. In normal circumstances, it might be suitable to have a second stage of evaluation of the shares in a buyout order, as we have seen in some cases. But in my respectful submission, this is a reasonable case in that we have, before my Lord, a very clear third-party offer that is quite recent, and by that I am referring to the IDL offer of $910 million. I invite my Lord to pay special attention to that particular offer and the circumstances of how it went south again this time, due to Harbour Front's actions, in assessing whether or not this can be an easy way out when we come to the final analysis of what actually was the wrong done by Harbour Front and how does it impact on the valuation of A Court Reporting Transcript by Epiq 124 HCMP 1987/2018 Day 01 15:23 the shares in the possible buyout order. Can it be simple without any fanfare of valuation in the second stage? Can it be very simple? In my respectful submission, the jurisdiction of my Lord is definitely there, and I will cite some submissions and cases in my closing to support that proposition. The actual approach is pretty straightforward because notwithstanding all these papers, in fact deep down this case, the company structure is simple. You have a holding company, Money Facts, and then you have Fonfair, and then that's the land. That's about it; it's nothing complicated. It has been accepted many places in correspondence that the reality of this case is that you're only talking about the value of this piece of land where you've got a concrete offer in 2019, at $910 million, which, in fact, my Lord, the Fonfair board passed a resolution to accept it. It did, but it could not happen because of the injunction. Of course, it then just completely disappeared afterwards. My Lord, those are the big points I wish to make in opening. Is there anything else that my Lord wishes to kick me off? (Counsel confer) MS HO: I had a quick word with my learned friend; A Court Reporting Transcript by Epiq 125 HCMP 1987/2018 Day 01 15:25 Ms Gillian Leung is here and she is prepared to give evidence, but as suggested by my learned friend, we can start her evidence tomorrow. So we are subject to your Lordship's -- COURT: It's not yet half three. We might as well start, I think. It might be more sensible to get on and finish. MS HO: In that case, I'll call my witness. COURT: Why don't we just stop for five minutes so you can sort out whatever you need to do to go on. (3.26 pm) (A short break) (3.35 pm) MS HO: I'll call Harbour Front's witness, Ms Gillian Leung. MS LEUNG CHI YIN GILLIAN (sworn) Examination-in-chief by MS HO MS HO: Thank you, Ms Leung, you have made three witness statements for the two petitions. I will take you to them one by one to confirm the contents. A. Okay. Q. Can you go to bundle C1, tab 1. You will see that in the monitor in front of you. A. Yes. Q. Page 316 is the first page of your witness statement? A. Yes. Q. If you can go to page 383 -- A Court Reporting Transcript by Epiq 126 HCMP 1987/2018 Day 01 15:36 A. Yes. Q. -- we can see a signature there. Is that your signature? A. Yes. Q. Page 384, we can see a statement of truth and a signature. A. Yes. Q. Is that your signature? A. Yes. Q. I'll take you to the second witness statement. Tab 3, page 423 is the first page. A. Yes. Q. Page 433, is the signature there your signature? A. Yes. Q. Over the page, page 434, statement of truth, is that your signature? A. Yes. Q. The last witness statement is in bundle C7. COURT: C7? MS HO: C7, tab 6. COURT: C7? MS HO: Yes. COURT: Mine only goes up to C4. MS HO: It's page 2019. Does your Lordship have that? C4, sorry. It will be the last one. A Court Reporting Transcript by Epiq 127 HCMP 1987/2018 Day 01 15:38 COURT: So what tab? MS HO: Tab 6. COURT: Oh, here we are, yes. All right. It's not actually tab 6, but it is file C4. MS HO: Okay. COURT: All right. MS HO: Page 2019 is the first page. A. Yes. Q. Page 2027, is that your signature? A. Yes. Q. Page 2028 -- A. Yes. Q. -- statement of truth, is that your signature? A. Yes. Q. Do you confirm that the witness statement of yourself and the supplemental witness statement of yourself in HCMP 1987, which we have looked at, and the witness statement of yourself in HCMP 1471, the contents of that are true and accurate? A. Yes. Q. Would you like to adopt them as your evidence-in-chief? A. Yes. MS HO: Thank you, Ms Leung, I have no further questions. It will be Ms Lok cross-examining you. Cross-examination by MS LOK A Court Reporting Transcript by Epiq 128 HCMP 1987/2018 Day 01 15:39 MS LOK: Ms Leung, can you tell us a bit about your family and yourself? Can you remind my Lord when did you graduate university? A. I'm now 43 years old. I graduated in 2002 for my first degree, and -- sorry, what else did you say? Q. You mentioned first degree, so did you continue your study afterwards? A. Yeah, I did a year post-graduate. Q. So you graduated with that 2003? A. Yes. Q. And then did you continue your study afterwards? A. No. Q. I remember you told my Lord in the last trial that you are an accountant by training, is that right? A. No, I took accounting. I studied accounting at university. Q. You studied accounting but you did not become a professional accountant? A. No. Q. So what was your first job after you graduated? A. I worked in an accounting firm just for, like -- around two/three years. Q. That's a full-time job? A. Yes. But I was not doing accounting work, it's more like admin work. A Court Reporting Transcript by Epiq 129 HCMP 1987/2018 Day 01 15:40 Q. I see, and afterwards, did you continue full-time work? A. Yes, I've been working ever since. Q. Right, in companies but not -- in different companies, but the employer is not Harbour Front, is that right? A. Well, I worked in the family business side, so the family business, Harbour Front is the ultimate, our family company. The main business, we -- or I work in would be, first, the construction business, our main core business since my grandfather. That would also -- there is also the our Leung family investment side, investments including holding Fonfair's and other properties, all other investments, the non-construction side. Q. I see, so companies concerning construction and investment, but they are your full-time jobs? A. Basically, yeah, everything under the Harbour Front umbrella, but it's just the weight, the focus sometimes would be different, in terms of my time spent. Q. When did you start becoming a director of Harbour Front? A. Early 2000. Sorry, I can't remember the exact year. Q. Can you repeat? A. Sorry, I think 2000 and -- I don't remember the exact year. Early 2000, I think, 2001, I think. Q. So when you were 21 years old, right? A. Yes. A Court Reporting Transcript by Epiq 130 HCMP 1987/2018 Day 01 15:42 Q. Your brother Jerry, how old is he? A. I think he would be 19/20, around that. Q. In 2001? A. 2001, he would be 19. Q. Was Jerry made a director of Harbour Front in the same year as you? A. I think so, I think around that time. Q. When Jerry was 19, was he studying? A. Yes, he was doing his degree. Q. In? A. In university. Q. Where is he working now? A. He's also in the family business. Q. You mean the same company as you? A. Same group of business, let's put it that way. Because our -- on the construction side, there are different -- very different business units as well. There would be the civil engineering, as the main contractor work. We do have the marine divisions handling a portfolio or fleet of vessels. So that's just a gist of the construction bit. Q. So since 2001, Harbour Front has you and Jerry as its directors. Anybody else? A. That's -- 2001, I think that my mother's as well? Q. Does that continue? Or, if that changed, when did A Court Reporting Transcript by Epiq 131 HCMP 1987/2018 Day 01 15:44 the change happen? A. Yeah, we stayed as directors. Q. Do you mean that from 2001 to the present day, Harbour Front has three directors, being you, your brother and your mother? A. I can't remember the time, but I think my father joined some time later, again -- when we resumed with our construction business. Q. I see. So when did your father join as a director of Harbour Front? A. I can't remember the exact year. Q. Approximately? A. Few years ago, I think. Sorry, I can't remember. Q. Is your father still a director of Harbour Front now? A. I think so. Q. Apart from your father and your mother, you and your brother Jerry, are there any other directors of Harbour Front? A. No. Harbour Front is a -- sort of -- it's the family company that holds all our sort of wide range of businesses. So my father, for example, he would be -- still remain focussed on the construction, the sort of -- the engineering side. Q. What exactly is the business of Harbour Front? A. Harbour Front is a family -- it's like a family company. A Court Reporting Transcript by Epiq 132 HCMP 1987/2018 Day 01 15:45 Or now people say it's a family office, so it's a holding company that holds all the investments that our family owns. Q. May I refer you to your witness statement. Do you have before you bundle C1, please? A. Sorry -- Q. I'm afraid -- my Lord, I don't see any bundle prepared by the witness. Is she using the e-bundle? COURT: Well, she can if -- yes, yes. MS LOK: She is? COURT: But somebody of course has to make sure that the relevant pages are on the screen. Or is somebody doing it? MS HO: Your solicitor is doing it. MS LOK: All right, I'll try my best. The screen will be shown to you. My Lord, the page reference is C1, tab 1, page 316. This is your first payment made in the Fonfair petition. Do you remember that? A. Yes. Q. Please turn to page 317, paragraph 4(2), the very last sentence. A. Yes. Q. "Harbour Front is the trustee of the Harbour Front Unit Trust ..." A Court Reporting Transcript by Epiq 133 HCMP 1987/2018 Day 01 15:47 A. Yes. Q. "... our family trust set up by my father." A. Yes. Q. Well, I'm not sure I understand what does that mean exactly. This Harbour Front Unit Trust, is that a bundle of assets? Or what is it exactly? A. The Harbour Front Unit Trust is the family trust. Harbour Front is the entity that holds all the assets by the family trust, so under the one umbrella. Q. I see. So when you mentioned the family business, were there other companies or were they -- what is under this Harbour Front Unit Trust as stated in your statement? A. Well, Harbour Front is the -- as you say, it's the company that holds all the investments. When I say "investments", that includes the UDL group, a series of properties through different companies, Fonfair, Money Facts, and some other sort of liquid, like, stuff, everything, but they are, like, through a series of -- you know, like other companies. Q. I see, so a holding company. A. Yes, it's a holding company. If you trace all the way up, it would be Harbour Front. Q. Who exactly owns Harbour Front now? Who are the shareholders? A. It's part of the unit trust. I don't quite understand A Court Reporting Transcript by Epiq 134 HCMP 1987/2018 Day 01 15:48 your question. Q. Harbour Front is an offshore company, correct? A. Yes, yes. Q. And you told us that there are four directors -- A. Yes. Q. -- being you, your brother, your father and your mother. And my question now is: who exactly owns Harbour Front? A. The trust. Q. Who is behind the trust? A. The trustee. That's the Harbour Front Unit Trust, and it's a family trust set up by -- Q. Set up by your father? A. Yes. Q. Your brother Jerry, I think I forgot to ask about this, he joined as a director at the same time as you in 2001. A. Yes. Q. So if we focus back in those times, the only directors of Harbour Front would be you and your brother, is that correct? That was before your mother even joined. A. I think my mother joined around the same time. I can't remember the exact date. Q. I would assume that -- A. Oh, sorry. Sorry, I should put it this way -- I was not sure whether she was there first, but I remember in the very early time, there were, like, all three of us. A Court Reporting Transcript by Epiq 135 HCMP 1987/2018 Day 01 15:50 I don't remember the exact day who joined when. Q. In the early 2000s, that was already a time when your father and Harbour Front already had quite a number of lawsuits with your uncle, YK, or his company. Is that right? A. I think it came around that time or later. Q. So at that time, it must be the case that in conducting the affairs of Harbour Front, and you would consult your father. Is that correct? A. I would consult the -- there's a whole family that we discuss. My father may have influence. Q. Of course -- A. He's my father. Q. Your father is the head of the company, is he not? A. No. What do you mean by the head of the company? Q. You don't regard your father as the head of the family? A. Oh, as the head of the family? Q. Yes. A. Well, I guess in a Chinese traditional way, yes, my father -- but we're very equal. Q. Of course, we remember that before the shares, subject shares in this action, were transferred to Harbour Front, they were in fact owned fully by your father, is that correct? A. I think it was a bit legal, but they were under my A Court Reporting Transcript by Epiq 136 HCMP 1987/2018 Day 01 15:51 father's name. Q. Well, he was the shareholder. A. Yeah, he was the shareholder. Q. Correct? A. Registered shareholder, I think. Q. Now can you please go back to your witness statement and we turn the page. To make sure that both my Lord and I understand your case correctly, at page 318, (4), there you said, in the fourth line from the bottom: "It was agreed that any decision in relation to the dealings and disposal of the Yau Tong Property (being the only material asset of Fonfair and the family asset of the Leung family) must be made with the joint consent of YT ... and YK ..." A. Yes. Q. I want to focus on this sentence and ask you a few questions. A. Okay. Q. By using the word "family asset of the Leung family", do I understand that your father wants to keep the land within his family? A. Well, I guess it was all started with -- the land was from my grandfather, it passed to his six kids, so include my father and YK. So after -- you know, in early 1990s there was some restructuring, it was agreed A Court Reporting Transcript by Epiq 137 HCMP 1987/2018 Day 01 15:53 that it was to be in the Leung family. The Leung family, I mean as in the bigger circle Leung family. Q. Right. A. Yeah. Q. You said two things. "It was agreed". It was agreed by whom? A. It was an understanding, I was just -- at least it's an understanding. Q. Understanding by whom? A. By the brothers, or by the Leung family. That is what I was told when I grew up and, you know, knowing that this is -- the land is originally the shipyard of my grandfather. The land itself is a very well-known -- even if you Google today, you can see it's called the -- how to say, it's (Punti spoken). So -- Q. So this information came from your father, am I correct? A. It was came from -- no, no, it came from -- well, my father did mention the family, the members that -- members meaning uncle, aunties -- let me put it this way, it's known that this is a shipyard in the Leung family. Q. Ms Leung, I'm trying to understand the basis of your understanding because you used the word "agreed" in your answer. So I'm asking you: who agreed? You answered it A Court Reporting Transcript by Epiq 138 HCMP 1987/2018 Day 01 15:54 was an understanding, and I asked you whose understanding. Can you try again: was that an understanding told to you by your father? A. Yes, my father did -- did mention that. Q. Here, at the fourth line from the bottom at page 318, you said: "It was agreed that any decision ..." Now, can you clarify for my learned friend it was agreed by whom? A. Agreed by the -- by YK and YT. Q. By YK and YT? A. Yes, but I mean it's quite logical, I mean, the understanding. We were the two -- we hold two-thirds of interest in it, right, YK has one-third, and with the whole structure of -- we allow -- or both parties allow this equal -- sorry, this equal sort of say in dealing with the land. So when it comes to a major decision like that, it's very logical that it would be agreed by both parties. Q. Ms Leung, I'm not asking you for logic; I'm asking you for fact. You said at page 318 "it was agreed that" so on and so forth, and you told me it was agreed by YK and YT. A. This is what I understand, that when they came together, that's what was agreed. A Court Reporting Transcript by Epiq 139 HCMP 1987/2018 Day 01 15:56 Q. That's what you understood to be agreed by YK and YT, and again, is that understanding coming from your father? That was way before your time, wasn't it? A. Let's be -- let's put it this way, I understand to be this way and it has been so far like this when we conduct the meetings, when we -- when there are offers or whatever that needs to be done, YK would call meeting with the shareholders. So that sort of -- it's like sort of an accumulation of understanding, it has been like that. Does that answer your question? Q. No, it does not and please do not digress, Ms Leung. I'm asking for this specific agreement at this page 318, and in fact my next question to you is that this agreement you said you understood from your father, when it was it? A. I think I said it was agreed, rather than an agreement. Q. I'm sorry? You said it is agreed but it is in fact not an agreement? Is that your answer? A. No, it was agreed meaning within the -- there was a shareholders agreement. COURT: Are you saying that you were told by your father that he and YK, possibly other family members, had agreed that a decision in relation to the disposal of the Yau Tong property be made with the joint consent of the two of them? A Court Reporting Transcript by Epiq 140 HCMP 1987/2018 Day 01 15:57 A. Sorry, I need to clarify. There was a shareholders agreement. I've seen it, I have read the content, and from -- over the past years, that's how it's been -- how we respond and react according to the agreement. You know, when there's major decisions, meetings will be called for us to consider, vote or whatever. That's what I meant by as I understand agreement to be, rather than my father -- honestly, I don't recall one day my father sat down with me and say, "We agree to this", but it's what's been there and it's what's been sort of the practice. MS LOK: I'll try one last time, Ms Leung. When you said in page 318, "It was agreed that", that agreement comes from where? Is that an oral agreement, or is that what you have told us about "It's just the SHA"? A. I think it reached from the essence of the shareholders agreement between YK, YT and then, you know, so on and so forth, and it was a continuation of my previous lines. Q. So your answer is that the basis of this agreement is the shareholders agreement. A. Yes. Q. Can you please look at the screen, which we'll show to you bundle D1, tab 4, page 2098, which is the shareholders agreement dated 5 June 1990. A Court Reporting Transcript by Epiq 141 HCMP 1987/2018 Day 01 15:59 A. Yes. Q. How old were you at that time, Ms Leung? A. 10. Q. When was the first time you read that shareholders agreement? A. I think when I was 20, around. Maybe later, when I can read. Q. Can you point to my Lord which part of the shareholders agreement stated your agreement as stated at page 318 of your witness statement? It is a very short document. A. Well, I read through this before. I'm not very good at contracts and the wordings, but there was the understanding, you know, the parties come together, there were three purposes, you know, what we need to do -- is it -- sorry, is there a part -- what we need to do. Sorry, is that here? I mean, like -- can I -- sorry -- Q. You're referring to three purposes. A. Yeah. Q. So starting with the newco shell to operate as a company to -- MS HO: I think the correct page has to be shown. It's the page above it, it's page 209. A. So -- anyways -- COURT: I take it the practical problem is if the witness A Court Reporting Transcript by Epiq 142 HCMP 1987/2018 Day 01 16:01 wants to turn over pages, the witness can't turn over pages, literally can't turn them over. MS LOK: Yes, and in the process of cross-examination, it is very difficult to pinpoint the particular part -- COURT: Because you don't know what the witness wants to look at -- MS LOK: Yes, exactly. So a physical bundle has this advantage, at least for C1 or D1, if things like that might be provided to the witness. It's not about who controls the screen, it's the practical difficulty. MS HO: Yes. The physical bundle can be ready tomorrow. We actually asked the clerk when we learnt how to use the soft copy bundle we were given to understand that the soft copy would be preferred so that is why -- MS LOK: I'm not blaming my learned friend. MS HO: That's okay, it can be prepared tomorrow. For the time being -- COURT: Yes, all you can do is move the page on one page at a time so Ms Leung can read the first page, the second page. MS LOK: We are going to do, as my Lordship said, the screen is going to stop at page 2098, and when you finish reading what is on the screen, can you tell us and we'll move on. This is only a three-page document. A. If you could just do like two pages together, that will A Court Reporting Transcript by Epiq 143 HCMP 1987/2018 Day 01 16:02 be easier like a dual -- COURT: Why don't you just do it as Ms Lok has described, otherwise they will spend five minutes trying to work out if they can split the page. Although, actually, having said that, it is split on my other screen. MS LOK: Just to be fair to you and remind you of my question before all these logistical discussions, my question to you is: where in the shareholders agreement does it show the agreement that you allude to at page 318 of your witness statement? Are you done? A. Sorry, I need to take -- I don't always come back to these agreements when I read, so I need some time to sort of read through the agreements. Yes, I see the three purposes here at the bottom of, you know, the -- the page this side, and top of that page. We can't see the page number. Q. Have you finished reading this document? A. Now I'm at the three purposes which you asked me. Q. Have you finished reading this document? A. No, no; I'm still at the second page. Q. You have finished reading this document? A. Page 2. Okay. Q. Page 3 on 2100 -- A. This side, right? A Court Reporting Transcript by Epiq 144 HCMP 1987/2018 Day 01 16:07 Q. So can you answer my question now: where in this three-page document provides for the agreement you said in your statement? A. The agreed -- to be agreed to -- that would be part of the -- sorry, can you go back to -- yeah. Like the three purposes coming together and maximising value. Q. I don't understand your question[sic], Ms Leung, because the three purposes says nothing about what you said in your statement at all. A. Well, it -- okay, the three purposes, in short, is to maximise the value of the two shareholder -- like, the two shareholders, right? So in making major decisions, that would imply that -- if the disposal itself would be part of dealing with the land. Q. Well, the three purposes talk about the object of the company. It says nothing about who is to participate in the company. Do you agree? A. No, I do not agree. Q. All right. And at the very least, can you agree that on the shareholders agreement itself, there is no provision which actually provides for what you said in paragraph 4, page 318 of your witness statement? Can you at least agree to that? A. No, that's -- I don't agree. I think I said -- understand -- that's the understanding of what A Court Reporting Transcript by Epiq 145 HCMP 1987/2018 Day 01 16:08 the agreement is about. Q. You cannot even agree that it was not stated in the -- what you indicated? A. Not the exact word I used in my statement. Yes, it's not exact stated as I written -- sorry, the -- is it -- you know, my statements. Sorry, is it the -- it's not the exact wording, but it's my understanding of what the shareholders agreement is about. Q. What you stated in page 318 is your understanding of the agreement, but you cannot find those words in the shareholders agreement? A. I cannot find the exact words. Yes, I cannot find the exact words. Q. When we go back to your understanding of page 318, in fact, the joint decision that you refer to must be made by YT and YK. It doesn't say anything about them being directors, is that right? A. Sorry, your question is -- you mean I did not say in here, in my statement, or in the agreement? Q. I am referring to your own witness statement at page 318 of bundle C1. The point participation that you allude to there only says that YT and YK are to jointly make any decision in relation to the land. A. Yes. Q. They don't have to be directors, according to you, is A Court Reporting Transcript by Epiq 146 HCMP 1987/2018 Day 01 16:10 that right? A. If they're not, then who would be directors? Q. No, can you answer my question? From your understanding, for them to make the joint decision, they don't even have to be directors? A. No, they have to be directors. Q. They have to be? A. They have to be -- have, you know, the power to make the decision, right? Q. Then what to do now? Because apparently the other shareholder is not YT but Harbour Front. A. Then -- Q. So that means then you can't do it anyway, is that right, according to you? A. No. That -- Harbour Front becomes that person. Q. Harbour Front substitutes your father? A. Yes. Q. And on what basis did that happen? A. On the transfer when the -- YK agreed to the transfer. I think I did mention earlier in my -- the statements, if you can refer me back to what I said. Q. Thank you, I think I understand your evidence. Now, going back to the relationship between you, your uncle and your father, can you tell my Lord, do you meet other than in court? A Court Reporting Transcript by Epiq 147 HCMP 1987/2018 Day 01 16:11 A. No. We meet in all the Leung family's events. Q. Not even there? A. What do you mean? I said we meet. Q. In the family event? A. Yes. Q. When the other siblings are there? A. When the -- all the -- usually the big festival, you know, someone's wedding, like major Leung family events, yes. Q. But of course, they won't -- I mean, your father and YK, your uncle, will not have any social contact? A. No, they would say hi. I mean, as in, like photos, they will be in the same photo and things. I mean, they will not hug but men, they don't hug, right? Q. Apart from saying, "Hi", is that the extent of their social interaction? A. Yes, but I would say that's how men are. Q. Really? I respectfully disagree but it doesn't matter. Now, Ms Leung, how about this? You would agree that since the 1990s, your father and your father's company, Harbour Front, has been suing or being sued by your uncle or his company for some, well, how many years are there, 40 years until now? Is that correct? If my calculation is correct. From the 1990s until now. A. No, I think it was only 2000. Basically, I think it's A Court Reporting Transcript by Epiq 148 HCMP 1987/2018 Day 01 16:13 since the restruct -- you know, the UDL restructuring. Q. Okay, we can take 2000, but in fact it went before that. A. But it can't be because he has been working in the UDL group. Q. Do you accept that their relationship was bad, your father and your uncle? A. Well, what do you mean by "bad"? Like they -- like from what we see here? Q. Yes. A. Well, I guess it's not the best, buddy-buddy. Q. Well, not only that, but in fact they shared a bad relationship. Can you accept that? A. On papers, yes. Q. No, in real life, they shared a bad relationship. Do you accept that? A. With the litigations, it's not the best relationship. Q. It's a bad relationship. A. As I said, it's not the best, but I would not use "bad". Q. How about you? A. I'm okay. We -- at meetings, we -- we do have our meetings and, you know, during downtime, sometimes we have to wait for the paperwork, we will chat, you know, YK will update me how my cousins are. Because actually in fact, YK he is not always in Hong Kong anyways, because, as he understands, three of my cousins, one is A Court Reporting Transcript by Epiq 149 HCMP 1987/2018 Day 01 16:14 in Vancouver, one is in UK or in Europe. Q. What is the answer to my question? Do you consider yourself having a good relationship with your uncle YK? A. I would say we have -- okay. Like, we can chat. Q. Do you remember in the last litigation before my Lord, you filed an affirmation describing your uncle YK as being pompous and self-righteous? A. I don't remember it. Did I say it in here? Q. You said it in the affirmation filed before my Lord in the last trial. Do you remember that? A. No. Q. You don't. Well, do you want to be reminded? A. Sure. Q. Or do you take it from me that you said it? A. I can be reminded, but I don't think -- not sure what this "pompous" means. It's probably -- sometimes the lawyers help draft, so -- but anyways you can take me there. MS LOK: My Lord, I don't have the exact affirmation in the bundle but it was recapped in the closing submissions before my Lord. I will just take the witness there, but my learned friend can always check. It is a matter of record there. Ms Leung, the reference is bundle D9, tab 316, page 6073, paragraph 110. To be fair to you, Ms Leung, A Court Reporting Transcript by Epiq 150 HCMP 1987/2018 Day 01 16:16 this is a document drafted by me as part of the closing submissions before my Lord in the last trial. At paragraph 110, I was summarising the evidence before my Lord, so here it recorded that you said in an affirmation that you thought YK was "pompous and self-righteous". In footnote 154, you see the reference being made to A1, 193, paragraph 1, in the bundles before my Lord. So do you accept, having been refreshed, your memory, that this is what you said -- A. It would be helpful if I can see the whole thing in context. Because sometimes you will say something when you say -- for example, if he's, you know, some foul words on that person, but it has to be in the context of what happened, right? Q. All right, I won't press it any further. MS HO: Certainly this affirmation is not before the court in this case, and if my learned friend wants to rely on that, certainly, it's unfair because, again as my witness said, it is out of context and there might be other evidence. So I would say my learned friend cannot go on with this line of questioning. COURT: You have to get a copy of the affidavit as well. MS LOK: I will rephrase it and just wrap it up in this way, Ms Leung. Do you accept that because of the various A Court Reporting Transcript by Epiq 151 HCMP 1987/2018 Day 01 16:17 lawsuits that you, your uncle and your father have had over the many, many years, you have generated dislike towards him? A. No. Q. So your evidence to this court, seriously, is that you actually like your uncle YK? A. I would say neutral. It's just business, right? Q. Do you accept that in the many AGMs and EGMs held in respect of Fonfair and Money Facts, you very frequently have arguments with your uncle YK? A. There would be argument or disagreements. Q. And not only that, but in respect, at the very least, on how to deal with the land, do you agree that you and your uncle YK could not reach any agreement on whether to sell the land, sell the land to whom, at what price, et cetera? A. No, I would disagree to that. In a way, we have never really reached that point yet. I think sometimes the disagreements would be the sort of -- the full information that we asked for. So we are not -- we are never really haven't reached to the point of decide what to do, but sometimes if you look at the -- our meetings, the argument is still on the information. Q. Well, I suggest to you, Ms Leung, that given all the conflict over the years, you, your father and your A Court Reporting Transcript by Epiq 152 HCMP 1987/2018 Day 01 16:19 uncle YK can no longer work together in the company any more. Do you agree? A. Yeah, well my father has not worked in the company for five -- my father has not seen YK in the business company context for years, except there was this one -- one -- in 2018, I think the brothers, before the EGM, they were trying to sit together, to sit and talk things out. Q. So you are agreeing to me, is that right? A. That they are not working together -- well, as I said, I don't think they can work together because they haven't been working together for years. Q. That including you as well, Ms Leung, because -- A. No. Because I've been working with my uncle for the past years. We've been -- meetings and ... Q. To phrase it differently, well, at least by the early 2000, the trust and confidence in Harbour Front, be it controlled by you or your family or your father, and your uncle YK has been completely lost. Do you agree to that? A. No. Q. Are you sure? A. Yes, I'm-- well, in the context of if I trust -- you're saying trust the -- I don't know the legal context, right? You ask if I trust this person and can I work A Court Reporting Transcript by Epiq 153 HCMP 1987/2018 Day 01 16:20 with him, I say I can work with him. Q. I use the very normal terminology, I'm sure, having been fully engaged in litigation in the Companies Court twice, you understand the meaning, "trust and confidence". So my question to you is: by early 2000, you, your father and Harbour front Side, and your uncle, YK side, have completely lost all trust and confidence in each other. Do you agree? A. No, I don't agree to that. Q. Can you please look at the screen. My Lord, I need to refer to a letter in bundle D7, tab 283, starting at page 5145. This is a letter in Harbour Front's letterhead. Is that right? A. Yes. Q. This is a letter, in order to avoid all this trouble about flipping through the screen, I'm going to take you through the letter. This is a letter stating "Subject to contract", dated 27 April 2015, do you see that? A. Yes. Q. Addressed -- A. Sorry, can I pause for a bit? Can I have some more water, please? A Court Reporting Transcript by Epiq 154 HCMP 1987/2018 Day 01 16:22 Sorry. Q. This is a letter addressed to your uncle, YK Leung, is that correct? A. Yes. Q. Don't worry about the context, I'll show you later. If you can flip quickly to page 5149, you can see that it was issued under your name as a director of Harbour Front. A. Yes. Q. Can you confirm that is your signature? A. Yes. Q. So if we go back to page 5145, it started by referring to some previous letters which you handed to Harbour Front in an EGM. A. Yes. Q. Then you refer to article 25 of the articles of Money Facts, correct, which provided as follows: "Any member may transfer all or any of his shares subject to the restrictions of these Articles ..." So this is a reference to the provisions about sale of shares in the company, the shootout provision. Do you remember that? A. Yes. Q. Then you move on to the next page, page 5146. You were discussing whether or not the obligation of A Court Reporting Transcript by Epiq 155 HCMP 1987/2018 Day 01 16:24 Harbour Front under the shootout provision was triggered. A. Yes. Q. Then the contents do not trouble us, paragraph 1 to 7, et cetera. You can go to the next sub-heading at page 5147. You see: "Your offer to sell your Money Facts shares in Harbour Front". Then there was this argument raised by this letter, whether or not YK Leung's previous letter triggered the shootout provision instead. Then the next sub-section, at page 5148, you stated, and you can see the sub-heading: "Alternative in the event you fail to purchase Harbour Front's 3,950 Money Facts shares". Do you see that? A. Yes. Q. So there, you were discussing the operation of the shootout provision. You said: "In the event that you fail to confirm within 14 days that you agree to purchase Harbour Front's Money Facts shares for the [stated] total consideration ... Harbour Front reserves all its rights to take further action against you to enforce the Shareholders Agreement ... A Court Reporting Transcript by Epiq 156 HCMP 1987/2018 Day 01 16:25 However, wholly without prejudice to the above, pending resolution of the disputes between you and Harbour Front, in the event that you are unwilling or unable to purchase Harbour Front's 3,950 Money Facts shares as required above, then to bring a swift resolution to such disputes, Harbour Front proposes that you agree to the following steps being taken to dispose of yours and Harbour Front's respective interests in Money Facts as proposed in the attached Schedule ..." So you were talking about a sale of the shares, is that correct? A. Yes. Q. I'm jogging your memory now. A. Yes. Q. This is your letter. A. Yes, yes. Q. The next paragraph is important: "We have put forward the Proposals to try to bring a speedy resolution to the disputes since without dealing with the merits of any allegations made or to be made in the winding up proceedings against Harbour Front against you or vice versa ..." Of course, the context is that there is already on foot the proceedings before my Lord: "... we refer to the following matters relating to A Court Reporting Transcript by Epiq 157 HCMP 1987/2018 Day 01 16:26 Money Facts which are not in dispute". Paragraph 1, that's what you said: "There is a breakdown in the mutual trust and confidence between you on the one hand and Harbour Front on the other in relation to the management and operation of Money Facts ..." That is true, isn't it? A. The letter is written in the -- with the backdrop of the unfair prejudice and winding-up petitions at the time, 111 and 116. So I think this was draft in the context of that. At the time, we felt we were wrongfully excluded. Q. Do you mean that what you draft may be true or false depends on the context? A. I'm saying it was draft in the context of that. Like, the words used were draft in the context of that. Q. But what is stated in paragraph 1 is very clear whatever the context. This is a letter dated 27 April 2015. By that time, you stated in your letter: "There is a breakdown in mutual trust and confidence between [YK] and Harbour Front ... in the management or operation of Money Facts." Is that true or not? A. It aligns with our petitions of what we said, like, those two petitions. A Court Reporting Transcript by Epiq 158 HCMP 1987/2018 Day 01 16:28 Q. I'll ask you one last time: is that statement true or not? A. Same as our petition, so if my petition were true -- well, I -- like, it's a different -- it seems to be very legal here, but -- so I -- I don't -- it seems this was, like, copied from, you know, what was said in the petitions, in that context. Q. You signed the letter, Ms Leung. A. Yes, I did. I signed the -- also so it should be same as those affirmations or those petitions at the time. Q. Am I understanding you correctly, because they were copied from your petitions so it must be true? A. Yes, at the time. MS LOK: My Lord would that be a convenient moment. I'm moving on to the plan. COURT: We will adjourn until 10 am tomorrow, Ms Leung, so if you can come back at 10 am. Whilst you are giving evidence, you cannot discuss the case with anybody else. Anything else? (4.29 pm) (The hearing adjourned to 10.00 am the following day) A Court Reporting Transcript by Epiq 159 HCMP 1987/2018 Day 01 I N D E X P A G E Opening submissions by MS HO .........................1 Opening submissions by MS LOK ......................102 MS LEUNG CHI YIN GILLIAN (sworn) ...................125 Examination-in-chief by MS HO ..................125 Cross-examination by MS LOK ....................127 A Court Reporting Transcript by Epiq