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HCMP 894/2015
IN THE HIGH COURT OF THE

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HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO 894 OF 2015
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IN THE MATTER of ALL FAITH

CORPORATION LIMITED (
), a Hong Kong limited
liability company with registration
number 1770903

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and
IN THE MATTER of Section 42 of
the
Companies
Ordinance
(Chapter 622, Laws of Hong Kong)

and

IN THE MATTER of Order 102 of

the Rules of the High Court

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_____________

BETWEEN

1st Plantiff

CHEN MEI LAN ()

HUANG WEI CHENG ()

nd

2 Plaintiff
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and
THE REGISTRAR OF COMPANIES
()

1st Defendant

ALL FAITH CORPORATION LIMITED

()
2nd Defendant
WANG XUEHUA ()

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rd

3 Defendant
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4th Defendant

KORCHINA CULTURE INVESTMENT

LIMITED ()
5th Defendant

LIU HUI ()

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Before: Hon Au-Yeung J in Court
Dates of Hearing: 18-20 October 2016

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Date of Judgment: 30 December 2016

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JUDGMENT
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Introduction
1. Family members of the Plaintiffs transferred Shares in D2 (the
Company) to D5 (Korchina) allegedly under a Trust for stated
purposes. The transfer was secured by an undated instrument of transfer

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and undated bought and sold notes executed by Korchina (the Security
Documents). The purposes allegedly were not fulfilled. The Security
Documents were utilized to transfer the shares to the 1st Plaintiff.
2. Korchina denied the existence of the Trust and alleged that the
Security Documents were forged. Meanwhile, Korchina has changed the

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registered information as to the registered office and directorship of the

Company.

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3. The Plaintiffs sought orders pursuant to section 42 of the Companies

Ordinance, Cap 622 (the Ordinance) to rectify or remove the

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registered information. To decide the application, the court needs to

decide who the true beneficial owners of the Shares are.
4. D1 (the Companies Registrar) took a neutral stance.

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The

Company was joined for the judgment to bind it. The main protagonists

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at the trial were the Plaintiffs on one side, D3 (Wang"), D4 (Liu) and
Korchina on the other.

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5. There was another person called Gu Zhuoheng (Gu) who

featured prominently in the evidence. The Plaintiffs claimed that he was
the beneficial owner of Korchina.

Undisputed facts

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6. The 1st Plaintiff (the Mother) has 2 daughters, Huang Pin Ching (
) (HPC); and Huang Yi Chen ( ) (HYC) (collectively

the Sisters). She also has a son, the 2nd Plaintiff (the Brother).
They were from Taiwan.

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7. The Company has a Mainland subsidiary called

(the Subsidiary). The Subsidiary used to hold a piece of
land and the buildings thereon in Mainland China at

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with Land Parcel No. G11201-1739 and Registration Number

6000334782 (the Land).

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8. The Land is currently the subject of litigation in

(2015) 408 and (2015)
32 (collectively the Mainland Proceedings).

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9. As of 18 July 2013, the Sisters were the only shareholders of the

Company. The Brother was the only director.
10.On 5 December 2013, the Sisters transferred all of their 10,000 shares
of and in the Company (the Shares) to Korchina (the 2013

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Transfer). Since then, Wang has been the sole registered shareholder of
the Company until the Mother became a shareholder in January 2015 in
disputed circumstances.
11.Since 4 December 2013 Wang has been a registered director and from
19 June 2015, Liu became one of the directors.

The Plaintiffs case

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12.According to HPC, there was problem over sale of the Land, as part of
it was occupied by third parties/triads. In 2013, she came to know Wang

and Gu. As Gu suggested to HPC that it would be more convenient for

people based in the Mainland to handle the problem and the sale of the
Land, the Trust was therefore created for those purposes. The 2013

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Transfer was effected, but the Shares were to be returned to the Sisters or
their nominee upon fulfilment of the purposes or on demand.

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13.The Trust was reflected in a (the Declaration of

Trust) dated 5 December 2013. It was executed by Gu on behalf of
Korchina, in the presence of the Sisters and Wang. Gu claimed to be the

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beneficial owner of Korchina.

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14.At the same time, on the Sisters request and as security, Wang
executed the Security Documents, which were prepared by Ms Trista Yu

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of a secretarial company.
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15.HPC had taken a photo of the Declaration of Trust and Security

Documents using her mobile phone, after their execution. The Original
Declaration of Trust had been torn up by Gu in 2014 when HPC was
having a discussion with him.
16.Wang, Gu and Korchina refused to return the Shares to the Sisters
despite demand at the end of 2014. Realizing the fraudulent intent of

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Gu to take over the Land, the Brother, then as the sole director of the
Company, commenced the Mainland Proceedings on 22 January 2015

against the Subsidiary and (News

Media) (to whom the shares in the Subsidiary were transferred). News
Media was related to Gu.

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17.On 27 January 2015, the Sisters dated the Security Documents and
transferred the Shares to the Mother solely. The Companies Registrar has
not yet registered the change in shareholder because of this case.
18.A month later, on 27 February 2015, the subject forms (the 2
Forms), signed by Wang, were filed at the Companies Registry:
(a)

Form NR1 showing the registered address of the Company

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to be Unit A, 19/F, Tung Yip Commercial Building,

248 Des Voeux Road Central, Hong Kong;

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(b)

Form ND2A showing the director to have been changed

from the Brother to Liu.

19.The present case for rectifying the information in the 2 Forms was
commenced by originating summons (the OS) on 16 April 2015, which

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was later converted to a writ action.

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The Defendants case

20.The Defendants denied the existence of the Trust or that Gu had the

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authority to execute the Declaration of Trust on behalf of Korchina. They

claimed that the transfer of the Land was to repay a loan of
RMB95 million (the Debt) owed by the Subsidiary to

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(Shenzhen Hang Mei), a company of which Wang

was the legal representative. In any event, all the shares in the Subsidiary
had been validly transferred to News Media on 1 April 2014, at

a consideration of US$500,000.
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21.Wang also claimed that her purported signatures and the company

chop of Korchina on the Security Documents were forged.

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22.The Defendants counterclaimed for a declaration that the transfer to

the Mother was void and an injunction restraining the Mother and the
Brother from representing that they were shareholder or director of the
Company.

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The issues
23.The issues are:

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(1) Whether the Trust existed;

(2)

Whether Gu had authority to sign the Declaration of Trust on

behalf of Korchina;

(3)

(4)

Whether Wangs signatures and chop of Korchina on the

Security Documents were forged; and

Whether there was a resulting trust in favour of the

Plaintiffs.
24.There was a plea of fraud against Wang and Liu, without particulars.
The Plaintiffs did not pursue this plea.

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The Witnesses
25.As stated by Stock JA (as he then was) in Esquire (Electronics) Ltd v
Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439, at
135:
Comparison with contemporaneous documentation is always
an aid to reliability of oral testimony, unless there is reason to
believe that the documentation is contrived or materially
incomplete. the truth, in so far as one is able to reach it or,
can best be tested by reference to contemporaneous
documentation where it exists, or to its absence where one
would expect it to have been created, as well as to inherent
probabilities (though bearing in mind that there may be
occasions where the truth may run against that particular grain)
having regard to the all the facts that are known.

26.The Plaintiffs case was primarily based on a copy Declaration of Trust

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and original Security Documents. HPC was the only witness in the whole
case. Material evidence kept emerging whilst she testified. She was
wholly discredited under cross-examination. I find her to be untruthful
and unreliable.

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From the letter before action, to her affirmations in

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support of the OS, pleadings and documents (or the lack of them), the
Plaintiffs case

was

fraught

with

inherent

improbabilities

and

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inconsistencies.
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27.The Defendants had no witness at all since Wang was imprisoned in

Mainland China. They only adduced an expert report on handwriting.

This meant the defence could be disregarded except that part about
forgery of Wangs signature on the Security Documents.
28.None of the parties called Gu as a witness. The Plaintiffs regarded
him as a dishonest fraudster who was wanted by the Mainland police.

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Wang declined to plead to anything relating to him.

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Issue 1 Whether the Trust existed

29.It is trite law that beneficial interest follows the legal title. The burden

is on the party (in this case, the Plaintiffs) asserting that the beneficial
interest is different from the legal title to prove to the contrary: Stack v
Dowden [2007] 2 AC432, 4-5, Lord Hope; 68, Baroness Hale.
30.The letter before action dated 13 March 2015 from the Plaintiffs
solicitors to Wang and HPC-1st 1 filed on 27 April 2015 simply alleged

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that the 2 Forms were false. They did not assert the existence of a trust or
indeed any cause of action. It did not mention Gu or Wang. It did not
describe how the Mother came to be the shareholder.
31.That letter and HPC-1st was made at a time when the Mainland
Proceedings were already on foot, ie after the alleged fraud was
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This is to denote the deponent and the rank of her affirmation.

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discovered. The Mainland Proceedings only mentioned Gu but not Wang.

Again, there was also no mention of the Trust or any matter relating to

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shareholding of the Company.

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32.The Plaintiffs case on the Trust and Security Documents only

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emerged in HPC-2 dated 22 September 2015.

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33.The circumstances under which the Trust arose were peculiar. The

Land was worth about RMB26 million in 2015. See the statement of
claim in the Mainland Proceedings signed by the Brother. HPCs own
estimation (without valuation) was RMB1 billion. And yet the Trust was

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created at nil consideration from Gu or Korchina when the Sisters had

only known Gu and Wang for about 1-2 months by then.

34.In the witness box, HPC added that Gu represented that he had a
military background. Gu said that the military party would buy the Land
at RMB800 million and that she would be paid in 1-2 months. This was

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new evidence of an unpleaded contract. The only hint of it was clause 4

of the Declaration of Trust which the Plaintiffs never relied on.

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35.There were no lawyers involved in the preparation of the Declaration

of Trust, notwithstanding the huge amount at stake. No due diligence
was done on the background of Gu, Wang or Korchina.
36.HPC said that Gu would pocket the difference between the sale price
and the RMB800 million. Such new evidence was inconsistent with her
statement to the police on 30 March 2015 that Gu would receive a
commission instead.

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37.I am unable to accept that HPC, a university graduate in International

Trade, aged 35 in 2013 and having worked in her fathers company for 14

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years since the age of 21, would have been so nave in handling such
valuable assets. She wanted the court to believe that she reposed blind
trust in 2 strangers. Her story was inherently incredible.
38.Insofar as documentary proof was concerned, there was a paper
napkin (admittedly in existence and mentioned for the first time in HPCs

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oral evidence) handwritten by Gu in November 2013 which allegedly

contained the draft terms of the trust. HPC did not produce it.

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39.On its face, the Declaration of Trust was a suspicious document. Party
A was the Company instead of the Sisters. HPC said that it was a

mistake. However, HPC and Gu had been negotiating since November

2013. I find it odd that Party A had to be handwritten and not typed like
other parts of the Declaration of Trust.

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40.Further, there was no reason why the Declaration of Trust was signed
by Gu but the Security Documents (allegedly executed at the same time)
were signed by Wang.
41.What happened after creation of the Trust? The purchase price for
the Land was not forthcoming as Gu had promised. HPC also witnessed
Gu tear up the original Declaration of Trust in October 2014 (a date
which HPC remembered by reference to the Taiwan National Day). She
discovered Gu to be a fraudster at the end of October 2014.

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42.Gus conduct would not have left any doubt in HPCs mind that he
would not honour the Trust. And yet HPC did nothing to wrest back

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control of the Company. She blindly relied on the bare words of Gu that
money would arrive soon and that there were formalities to go through. It
took her another 3 months to make the Mother a shareholder.
43.Further still, the Brother filled up Form NR1 on 10 October 2014,
purporting to change the registered office to a place of Gus choice. Form

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NR1 was filed by the secretarial company on 24 October 2014. Even if

the Declaration of Trust was torn up in October 2014 (and not August as
pleaded), there was no reason why HPC or the Brother would not have

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revoked the change in the 2 weeks before Form NR1 was filed.
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44.On the other hand, there was no evidence from the Defendants side to
contradict HPC. There was no document to prove set off of the huge
Debt. Shenzhen Hang Mei was incorporated on 18 December 2013, after
the 2013 Transfer. The court was left with the unanswered questions as to

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why Korchina obtained the Shares in the first place and why HPC dared
to fabricate a claim of trust and security, and to forge documents.

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45.Mr Lam (counsel for the Plaintiffs) referred to one rhetorical question
asked by HPC in her evidence, He [Gu] did not give me a penny for the
Land. Why would I just gift the Land to him for free? With respect, that
was an over-simplification of the Plaintiffs case.
46.In Kao Lee & Yip v Koo Hoi Yan & Others [2003] 3 HKLRD 296 at
34, Ma J (as he then was) says,

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None of the defendants gave evidence.

In these
circumstances, adverse inferences may be more easily drawn
against them and correspondingly, any inferences favourable to
KLY can more confidently be drawn as well. This is of
course providing that the rest of the evidence allows such
inference to be drawn and that such evidence is credible in the
first place. (underline added)

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47.A judge is not bound always to make a finding one way or the other
with regard to the facts averred by the parties. It is open to him the 3 rd
alternative of saying that the party on whom the burden of proof lies has

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failed to discharge that burden. No judge likes to decide cases on the

burden of proof if he can legitimately avoid having to do so. There are
cases, however, in which, owing to the unsatisfactory state of the

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evidence or otherwise, deciding on the burden of proof is the only just

course for him to take. See Rhesa Shipping Co Supplemental Agreement

v Edmunds [1985] 1 WLR 948, 955H-956A, Lord Brandon of Oakbrook;

Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd & anor,
HCA 1957/2005, 28 July 2011, at 15-21, Poon J (as he then was)2.

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48.The case of there being a Trust simply begged belief in view of the
inherent improbabilities and inconsistencies in HPCs evidence. Her new
evidence in the box was but her recent invention. I am not satisfied that

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the Trust existed on a balance of probabilities.

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Issue 2 Whether Gu had authority to sign the Declaration of Trust on

behalf of Korchina

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49.Since I have doubts as to the existence of the Trust, I deal with this
issue only for the sake of completeness.

The Wu Yi case was decided on burden of proof and upheld on appeal on the same ground [2014] 2
HKLRD 1054, upheld on final appeal on the different ground that the defence case was proved on
balance of probabilities (2015) 18 HKCFAR 364.

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50.Under Section 36 of the Companies Ordinance (Cap 32) as it stood on

5th December 2013, a document requiring authentication by a company

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may be signed by a director, secretary or other authorized officer of the

company, and need not be under its common seal.

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51.Assuming I had accepted HPCs evidence, Wang was present at the

time of execution of the Declaration of Trust. Gu must have been an
authorized officer of Korchina in signing the Declaration of Trust and

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applying the chop.

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Issue 3 - Whether Wangs signatures and Korchinas chop on the Security

Documents were forged
52.The party alleging forgery bears the evidential burden of adducing

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evidence sufficiently cogent and probative to raise the issue of forgery.

The party relying on the disputed document bears the legal or persuasive
burden of proving its authenticity. The standard is still on balance of
probabilities but such standard is to be applied flexibly. The person
bearing the burden of proving the allegation is to prove it with evidence
of a commensurate cogency. The more serious the allegation, the less
likely it is that the event occurred, and hence, the stronger should be the
evidence needed to prove it. See Nina Kung v Wong Din Shin (2005) 8
HKCFAR 387, at 171-172, 180-184, Ribeiro PJ. The court prefers
direct evidence of a witness to expert evidence: Nina Kung, at 393,
Ribeiro PJ.
53.Given my finding on Issue (1), it follows that I am not satisfied that
there was a need for security or that the Security Documents were created

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as alleged.
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54.If that is not sufficient, I have considered other evidence pertaining to

the Security Documents. Each expert has given an opinion favourable to

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the party engaging him. The Plaintiffs direct evidence, however, was not
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satisfactory.

55.Firstly, there was no witness signing on the Security Documents. Ms

Trista Yu could have been asked to testify as to the preparation of the
Security Documents, her seeing Wangs signature and Korchinas chop

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appearing on them and how the amendment in paragraph 57 came by.

She was available but no subpoena was served on her. The Plaintiffs
never tried to ascertain from her if her email enclosing the draft Security

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Documents still existed. The inference was that Trista Yus evidence was
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not favourable to the Plaintiffs.

56.Secondly, contrary to the pleaded case, HPCs statement to the police
and HPC-2nd, it was firmly established in cross-examination that HPC had
already filled in the English (but not Chinese) name and address of the

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Mother as transferee even before Wang was asked to sign.

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57.Thirdly, allegedly Ms Trista Yu emailed the draft Security Documents

to HPC, who printed them out at Gus office for execution.

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Instrument of Transfer (which formed part of the Security Documents)

stated that 5,000 Ordinar (sic) shares were transferred from Wang to the
Mother. HPC claimed in the witness box that the mistake was discovered
there and then but the computer had been switched off. She called Ms
Trista Yu in the presence of Gu. Trista Yu told her to just amend it.
HPC admitted that she amended 5,000 to 10,000 (the amendment)
during those few days after the execution.

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58.Ms Lam fairly accepted that the number of Shares had been correctly
identified in the Instrument of Transfer as being nos. 1-10000. I was

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also unable to see why HPC had wanted only 5,000 Shares to be retransferred to her if there really was a trust. However, the amendment
was never shown to have been brought to Wangs attention.
59.Fourthly, HPCs oral evidence was that she took photos of the undated
Security Documents (and the Declaration of Trust) only after she had

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brought the originals home. Since she had the originals, there was no
reason for her to make copies. Even if she needed a copy, there was
a photocopying machine at Gus office but she never made copies there.
60.HPCs evidence was incredible. I am not satisfied that the Security

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Documents were genuinely created for the purpose or in the

circumstances described by HPC, or that Wangs signature was genuine.
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Issue 4 - Resulting trust

61.In his closing submission, Mr Lam submitted that the Plaintiffs were

not seeking to enforce the terms of the Declaration of Trust. They just
used that document to show that the transfer to Korchina must be subject
to a trust of some sort, and it did not matter what the exact terms of the

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trust were. If the Plaintiffs failed for any reason other than uncertainty,
but Korchina paid nothing for the Shares, and the Shares could not
possibly have been gifts, the legal consequence (by mere operation of

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law) would be a resulting trust in favour of the Sisters. They could

procure a transfer to the Mother as their nominee. These would apply
despite absence of a plea on resulting trust. Mr Lam relied on Ng Man

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Sun v Peckson Ltd & anor (unreported, ECSC CA, 22 May 2015) 7894, Kentish-Egan, QC, JA (Ag) in support of his propositions.
62.I am unable to agree with Mr Lam. A party should not be allowed to
depart from his pleading: Kwok Chin Wing v 21 Holdings Limited (2013)

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16 HKCFAR 663, at 21-27. The Plaintiffs case was one of express

trust. There was no hint of reliance on resulting trust in their opening
submission. The express trust and provision of security did not come up

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to proof. This was distinguishable from Ng Man Sun in that the court
there did not disbelieve the claimants evidence.

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63.Even if there was a trust, it was doubtful if the condition for utilizing
the Security Documents was met. The Brother had executed a Share

Transfer Agreement () dated 1 April 2014 on behalf of

the Company to transfer the shares in the Subsidiary (effectively
transferring the Land) to News Media. The purpose of the Trust was
purportedly fulfilled. The Plaintiffs case on this was inconsistent. In the

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Mainland Proceedings, they did not dispute the validity of the Share
Transfer Agreement but simply alleged that the consideration was not
paid. In the present case, the pleaded case was that Gu allegedly told
HPC that a re-transfer could be effected at nil consideration, again not
disputing validity. HPCs oral testimony, however, was that the Brother
had signed on the Share Transfer Agreement without intending it to take
effect.

She was somehow mistaken that Gu had taken away the

original from her house, only to discover it sometime later when she
moved. I do not consider it appropriate to find there to be a resulting trust
on the Plaintiffs inconsistent evidence.

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Conclusion

64.I am not satisfied as to the existence of the Trust, the circumstances

under which the Security Documents came into existence or that Wangs
signature on the Security Documents was genuine. Even if the Security
Documents were genuine documents signed by Wang, I am not satisfied

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that the condition for utilizing them was met, or that a resulting trust had
arisen. The claim against Wang and Korchina is not established.

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65.Liu could not have been liable in any way. Save for a brief mention of
him in the pre-action letter, Liu simply did not feature in HPCs evidence.

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66.I order as follows:

(1)

That the claim be dismissed.

(2)

That there be a declaration that the purported share transfer

by the 5th Defendant to the 1st Plaintiff on 27 January 2015
was null and void;

(3)

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That there be an injunction restraining the 1st and

2nd Plaintiffs, who by herself or himself, her or his servants,
agents, employees or otherwise, from representing to any

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one that she/he was the 2nd Defendants shareholder or

director;
(4)

On a nisi basis, costs of the claim and counterclaim be paid

by the Plaintiffs to the Defendants, to be taxed if not agreed,

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with certificate for Ms Rachel Lam alone;

(5)

On a nisi basis, costs of the summons to expunge the

Mainland Judgment from the evidence should be to the
Defendants to be taxed if not agreed.

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67.I thank counsel for their assistance.

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(Queeny Au-Yeung)
Judge of the Court of First Instance
High Court

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Mr Kenneth Lam and Ms Melinda Chiang, instructed by Tsang, Chan &

Woo, for the plaintiffs
Ms Rachel Lam and Mr Joseph Wong, instructed by Wong & Lawyers,
for the 3rd, 4th and 5th defendants

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