Hu Lan v Sundale International Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Wallbank, J. |
| Judgment Date | 22 February 2021 |
| Neutral Citation | VG 2021 HC 071 |
| Docket Number | BVIHCM 2019/0167 |
| Court | High Court (British Virgin Islands) |
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
BVIHCM 2019/0167
Mr. Richard Millett, QC with him Ms. Tameka Davis, Ms. Jane Fedotova and Dr. Alicia Johns for the Claimant/Respondent
Mr. John McCarroll, SC, with him Mr. Stuart Rau for the Fourth Defendant/Applicant
Wallbank, J. (Ag.) On 20 th October 2020, the Fourth Defendant as Applicant, Mr. Golden, filed an application seeking to set aside an injunction order of this Court entered on 11 th August 2020 (the ‘Application’). That order discharged an earlier injunction order made on an ex parte basis on 25 th February 2020, continued on 18 th March 2020 and varied on 11 th May 2020. The Applicant thus refers to the order dated 11 th August 2020 as ‘the New Injunction’. The grounds relied upon by the Applicant are that following the New Injunction, evidence has come to light that two key documents the Claimant, Ms. Hu, relies upon to support her claim were forged by her and her husband Mr. Gao. These two documents are a Declaration of Trust (‘DoT’) and a share purchase agreement (‘SPA’) dated 10 th January 2013. The Applicant says this evidence is corroborated by transcripts of conversation recordings, photographs and other documents and records. The Applicant contends that the Claimant therefore cannot rely upon the forged documents and her case is bound to fail, but for present purposes, had the evidence of fraud been known to the Court when the New Injunction was being considered, the New Injunction would not have been made. The Claimant, as Respondent, contends that the evidence the Applicant relies upon is not admissible because it is subject to litigation privilege and, further, it had been obtained by wrongful means. This is the Court's judgment on the issue of the admissibility of that evidence. I shall refer to this jurisdiction as the ‘BVI’ and the Peoples’ Republic of China as the ‘PRC’.
The context by way of the subject matter of the proceedings can be briefly stated. I do this by way of summary of the respective main allegations only, without making any findings of fact.
The Claimant, Ms. Hu, is the current wife of Mr. Gao. Mr. Gao is now quite elderly and not in the best of health. Ms. Hu and Mr. Gao have young children together. Mr. Gao is the father of Mr. Golden, by a previous marriage. Mr. Golden is himself married with children.
Mr. Gao has been an enterprising businessman, making a considerable fortune from a variety of businesses. Mr. Gao has an interest in art and culture and has a company called Great National Culture and Arts Products Group Co, also known as ‘Guojia’. Guojia employed an artist as art director, one Ms. Han, since around the end of May 2018. Ms. Han was admitted into Ms. Hu's and Mr. Gao's inner circle and appears to have helped them with their private and domestic affairs, including looking after their children — and, so it would appear, as Mr. Golden alleges, with the forgery and falsification of documents. It is Ms. Han who secretly recorded conversations involving Ms. Hu and Mr. Gao which are the subject of this Judgment.
The value in this dispute concerns a high-end luxury residential villa development near Shanghai, called Sunville, comprising of around 268 villas, in various stages of readiness for sale and occupancy. This is ultimately held through Sundale and Best Land. Earnings for the business are generated through sales of villas (through a company called Jiacheng) and management fees that are charged to residents (through a company called Bange).
Ms. Hu communicates the following narrative in her Points of Claim filed on 3 rd February 2020. For sake of clarity, I set out below what Ms. Hu alleges. These are not findings of fact.
In or around late 2012, Mr. Gao became very ill with heart disease. He needed to seek treatment in the United States of America. Assuming a good outcome, convalescence would take several years. Ms. Hu had to be with Mr. Gao and care for him.
So, she thought it advisable to have Mr. Gao's son, in whom she reposed confidence and trust, registered as the owner of the issued share capital of Sundale in case any documents needed to be signed by a registered shareholder. But, says Ms. Hu, Sundale would be held by Mr. David Golden on trust for her as part of this arrangement. She would remain the beneficial owner of the company.
A suite of documents dated 10 th January 2013 was then executed to record this arrangement. These comprised:
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(1) an agreement for the sale and purchase of the share at the nominal amount of US$1.00 as the sale price and with Ms. Hu as the vendor and Mr. Golden as the purchaser (‘the SPA’);
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(2) an instrument of transfer of the share;
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(3) an irrevocable declaration of trust, with Mr. Golden as trustee or nominee in favour of Ms. Hu as the beneficial owner (‘DoT’); and
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(4) an authorization letter authorizing Ms. Hu to be Mr. Golden's sole representative for all matters relating to Sundale (‘Authorization Letter’).
The Claimant refers to these as the ‘Trust Documents’. The Fourth Defendant does not accept this characterization. He says there was and is no Trust.
Initially the issued share capital that was transferred to Mr. Golden consisted of one share. 999 further shares were subsequently issued to Mr. Golden. The precise circumstances of that issuance are in dispute, but for present purposes the only material detail is that Ms. Hu claims that Mr. Golden also holds those shares on trust or as nominee for her.
Mr. Gao underwent medical treatment and he recovered gradually. By mid-2019 he was able to resume work and travel.
Ms. Hu and/or Mr. Gao (on behalf of Ms. Hu) instructed Mr. Golden to transfer Sundale back to Ms. Hu. He refused. Instead, he took various steps to consolidate his control and oust Ms. Hu. He:
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(1) Changed the registered agent on 16 th October 2019: previously it had been Vistra, who, I am told, treated Ms. Hu as its client of record. Now it is Harneys Corporate Services, who treat Mr. Golden as their client of record, with ‘Harneys’ the law firm acting for Mr. Golden himself;
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(2) Caused the companies to revoke a power of attorney in favour of Ms. Hu;
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(3) Took personal custody of the records and company documentation;
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(4) Caused Best Land to adopt a resolution removing Ms. Hu as director of the underlying operating company that held the real estate;
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(5) Vandalized and destroyed the Sunville estate's sales office on 4 th November 2019 and removed the steel to be sold for money; and
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(6) Terminated staff and senior management and created an environment of fear and intimidation such that Ms. Hu, Mr. Gao and their two very young daughters were forced to flee for their safety.
Ms. Hu says that she attempted to take various corporate administrative steps to reverse some of these steps and to establish herself as sole director of Best Land, but Mr. Golden and Harneys Corporate Services refused to update the company's registers. The reason given was that Mr. Golden is the registered shareholder and director of Sundale and he disputes the authenticity of the DoT.
Ms. Hu brought these proceedings, seeking relief that would see her regain directorship control over Sundale and Best Land and have her beneficial ownership of all shares in Sundale formally recognised. She also seeks damages and/or equitable compensation for breach of trust by Mr. Golden.
For his part, Mr. Golden contends that Ms. Hu transferred that first share to him as a gift. If there was any consideration for the transfer, it was purely nominal. Mr. Golden says this transfer was pursuant to a share transfer agreement executed in or around June 2012 and/or an oral agreement entered into around that time. Mr. Golden contends that although he does not know what documents he signed, because he does not read English, he says he did not knowingly execute the DoT relied upon by Ms. Hu, nor the Authorization Letter. Thus, he does not know if he signed a version of a share purchase agreement. Mr. Golden contends that the share had been previously owned beneficially by his father, with the Claimant acting as his nominee, and that his father had repeatedly expressed an intention to make an inter vivos gift to him as his only son. Mr. Golden claims that he owns beneficially all the shares that were either transferred or issued to him.
Mr. Golden now accuses Ms. Hu and Mr. Gao of having forged corporate documents, including the DoT and the SPA. In relation to the DoT, Mr. Golden accuses them of having taken a document which bore his signature, and then replaced the first page with paper of a matching weight and type, creating a new first page entitled ‘Declaration of Trust’. This, Mr. Golden alleges they did in around November 2019, aided by other persons. This new first page, alleges Mr. Golden, was then artificially aged by Ms. Hu and Mr. Gao, or at their or her behest, by exposing it to the sun for a period of time. Mr. Golden's side sought to inspect the DOT and SPA and they were permitted to inspect it on 28 th July 2020. These are central documents upon which Ms. Hu and Mr. Gao seek to rely in these proceedings.
Mr. Golden asserts that the DoT and SPA had been fraudulently created and are thus void.
The evidential basis for Mr. Golden's allegations of fraud comes from Ms. Han. Ms. Han has made a First Affirmation in these proceedings, in which she said that since mid-October 2019 she had been increasingly focused on assisting Mr. Gao and Ms. Hu in the preparation of materials for these proceedings.
She there narrated that Ms. Hu and Mr. Gao had embarked from around 3 rd November 2019 upon a...
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