(合作辦學(xué)合同書)

/HCA1221/2006INTHEHIGHCOURTOFTHEHONGKONGSPECIALADMINISTRATIVEREGIONCOURTOFFIRSTINSTANCEACTIONNO.1221OF2006____________BETWEEN PINEENTERPRISESLIMITEDPlaintiffandCYBERSTRATEGYLIMITED1stDefendantLECTUREKITCOMPANYLIMITED2ndDefendantandWOOPAKHAYEDWARD1stThirdPartyLAWSHIUKAIANDREW2ndThirdParty____________HCCW593/2005INTHEHIGHCOURTOFTHEHONGKONGSPECIALADMINISTRATIVEREGIONCOURTOFFIRSTINSTANCECOMPANIESWINDING-UPPROCEEDINGSNO.593OF2005____________INTHEMATTERofUnionResources(EducationalDevelopment)LimitedANDINTHEMATTERofSections168Aand177(1)(f)oftheCompaniesOrdinance(Cap32)BETWEENPINEENTERPRISESLIMITEDPetitionerandLECTUREKITCOMPANYLIMITED1stRespondentUNIONRESOURCES2ndRespondent(EDUCATIONALDEVELOPMENT)LIMITED____________(HCA1221/2006andHCCW593/2005areheardandtriedtogetherpursuanttotheorderofHighCourtJudgePoondated31July2007)Before:DeputyHighCourtJudgeToinCourtDatesofHearing:17-21,24-25,27-28September2007,2-3October2007,5-6,8-9,12-14November2007,4,7-8,14,30-31January2008and1,4February2008DateofJudgment:14March2008_______________JUDGMENT_______________INTRODUCTIONThisisatrialoftwoactions,namelyHCCW593/2005andHCA1221/2006,orderedtobetriedtogetherpursuanttotheorderofPoonJ.ThedisputearoseoutoffouragreementsinconnectionwiththesalebyPineEnterprisesLimited(“Pine〞)ofitssharesinUnionResources(EducationalDevelopment)Limited(“URLimited〞)toLectureKitCompanyLimited(“LectureKit〞).ThesharesinURLimitedweredulytransferredtoLectureKiton13May2003.Pinecomplainedofbreachoftheagreements.On1August2005,PinepetitionedforthewindingupofURLimitedonjustandequitablegroundunderHCCW593/2005.On7June2006,PinealsocommencedactionHCA1221/2006againstLectureKitanditsparentcompanyCyberStrategyLimited(“CyberStrategy〞)forbreachofagreement.CyberStrategyandLectureKitcounterclaimedagainstthe1stand2ndThirdPartiesforfalserepresentation.IconsiderthemainactionisHCA1221/2006.ThePlaintiffandthe1stThirdPartyarerepresentedbyMrPoonSCandMsLindaChan.TheDefendantsarerepresentedbyMissAngelaGwiltandMrCYLiwhojoinedinasleadingcounselonthe12thdayoftrial.The2ndThirdParty,whoisapractisingsolicitor,appearedinpersonexceptforthelastdayofthetrialwhenheisrepresentedbyMsElsieYiu.Bytheseventhdayofthetrial,thepartieswerestillentangledinpre-trialmatters.Ratherthantohavebothactionsadjournedandre-fixed,Iconsidereditinthebestinterestofallpartiestocontinuehearingthemainactionandtoadjournthewindingupaction.Hence,onmyownmotion,IadjournedHCCW593/2005toadatetobefixedandcontinuedhearingHCA1221/2006.Iamgladtohavetakenthatcourse,becauseastheevidenceunfolds,itbecameobviousthattheevidenceinthewindingupactionwouldbehighlyprejudicialtotheDefendantsinthemainactionandtheevidenceinthemainactionwouldalsobeprejudicialtotheRespondentsinthewindingupaction.Inthisjudgment,IshallrefertosomeoftheevidenceinthewindingupactionforthepurposeofsettingoutthebackgroundinwhichthematerialissueswhichIhavetodecideinthemainactionarose.Idonotrelyonanyofthoseevidenceinmyassessmentofcredibilityofwitnessesorfindingoffactinthemainaction.Imakenofindingoffactinrespectofthewindingupactioneither,notevenaprovisionalview.Onthe13thdayoftrial,shortlyafteropeningthedefencecase,theDefendantsofferedtodiscontinuethethirdpartyproceedingsagainstthe2ndThirdParty,AndrewLaw,withcosts.Theofferwasnotacceptedbecauseofdisagreementonthescaleofcosts.AndrewLawcontinuedasathirdparty.Butforallpracticalpurposes,theDefendantshaveabandonedtheirclaimagainstAndrewLaw.TheissueasbetweentheDefendantsandAndrewLawiswhetherAndrewLawisentitledtohavehiscostsonindemnitybasis.Thedisputeisabouttwoofthefouragreements.On12April2003,Pine,CyberStrategyandLectureKitenteredintothreeagreementsinconnectionwiththesaleandpurchaseofsharesinURLimited.Onthesameday,theyalsoenteredintoafourthagreementwithURLimitedtoregulatetheirmanagementofURLimited.UndertheSaleandPurchaseAgreement,LectureKitpurchasedfromPine51%ofitssharesinURLimited(i.e.510,002shares)andPinepurchasedfromCyberStrategy20%ofitssharesinLectureKit(i.e.1,000shares).Inessence,thatwasashares.TheprincipalassetofURLimitedwas,andstillis,itswhollyownedsubsidiary,UnionResourcesLimitedEducationalDevelopment(Yanjiao)CompanyLimited(“UREDY〞)whichownsapieceofland(“theCampus〞)inthePeople’sRepublicofChina(“PRC〞).UndertheLectureKitShareholders’Agreement,CyberStrategyagreedtorepurchasePine’s1,000sharesinLectureKitatHK$12.5millionifLectureKitisnotlistedby12April2005andCyberStrategyagreedtodepositits510,002sharesinURLimitedwithMessrsAndrewLaw&FrankiHoascustodian.UndertheOptionAgreement,LectureKitgrantedanirrevocableoptiontoPinetocalluponLectureKittoissueaconvertiblenoteforHK$20millionwithinterest,inconsiderationofPine’sagreementtoprocureEdwardWootowaivehisdirector’sloantoURLimited.Pursuanttothisagreement,EdwardWoosignedaletterofreleaseconfirminghisagreementtoreleaseanddischarge“allloansandliabilitieshithertodueandowingby〞URLimitedtohim,whetherlistedornotlistedinthebooksofURLimited,andwhichwasnotlessthanHK$53,547,843.ThesaleandpurchaseofthesharesinURLimitedwascompletedon13May2003.PursuanttotheOptionAgreement,aconvertiblenoteintheadjustedamountofHK$20.65millionwasexecutedbyLectureKit,whichwassubsequentlydated1February2004withamaturitydateon1February2006.ThedisputebetweenthepartiesisrelatedtotheLectureKitShareholders’AgreementandtheconvertiblenoteissuedpursuanttotheOptionAgreement.On2July2003,GaryHo,forandonbehalfofUREDY,enteredintotheCooperationAgreement(合作辦學(xué)合同書)withChinaInstituteofDefence&ScienceTechnology(“CIDST〞)inprovidingeducationalservices.CIDSTtookpossessionoftheCampusandoperatedajointeducationalinstitutewithUREDYthere.On10November2003,UREDYdemandedCIDSTtovacatetheCampusforhavingfailedtoobtainabankloanwhichwasatermoftheCooperationAgreement.Aftersomenegotiations,on4February2004,UREDYandChinaDefenceTechnologyCentre(Beijing)(“CDTC〞)reachedanagreementforthesaleoftheCampustoCDTCforRMB50million(“CampusSaleAgreement〞).CDTCpaidUREDYRMB10millionon12February2004.On5March2004,UREDYpaidRMB9milliontoBeijingAIRStrategyandInformationTechnologyLimited(“BeijingAIR〞)purportedlytosettledebtsduefromURLimitedandUREDYtovariouscompanieswithintheAIRgroup.On29April2004,UREDYenteredintotwoconsultancyagreementswithAIRLogisticsInternationalLimited(“AIRLogistics〞)underwhichUREDYwouldpayAIRLogisticsRMB9.744millionayearforprofessionalrealtymanagementadviceandRMB35.01millionayearforrealestatedevelopmentadvice.CDTCdefaultedinpayingthebalancedueundertheCampusSaleAgreement.ThatwasfollowedbyarbitrationproceedingsinthePRCandthenanagreementtosellallthesharesinUREDYtoJeavonLimited,anomineeofCDTC(“JeavonAgreement〞)on3February2005.TheJeavonAgreementwasterminatedon30July2005.ThelistingofLectureKitdidnotmaterialiseby12April2005.CyberStrategyrefusedtorepurchasethe1,000sharesinLectureKitheldbyPineandrefusedtohonourtheconvertiblenote.On1August2005,PinepetitionedforthewindingupofURLimited.On13September2005,AsianInformationResources(Holdings)Limited(“AIRHoldings〞)enteredintoanagreementtosellElesonInctogetherwithitschainofsubsidiariesincludingCyberStrategyandLectureKittoBeijingOlympicsLimitedforHK$50,000.On7June2006,Pinecommencedthemainaction.TheissuesPineclaimsagainstCyberStrategydamagesforbreachoftheLectureKitShareholders’AgreementinthesumofHK$12.5millionforitsfailuretorepurchasethe1,000sharesinLectureKitandagainstLectureKitthesumofaboutHK$25.5millionundertheconvertiblenote.Inaddition,Pineseeksadeclarationthatthe510,002sharesofandinURLimitedhavebeenandarechargedinfavourofPineassecurityforpaymentofallsumsowedbyCyberStrategyandLectureKitundertheLectureKitShareholders’Agreementandtheconvertiblenote.Inessence,thedefenceofCyberStrategyandLectureKitisthattheyenteredintothefouragreementsasaresultofcertainfalserepresentationsmadebyPine,EdwardWooandAndrewLawandcertainnon-disclosuresinthecourseofnegotiationofthefouragreements.TheyalsoclaimthattheyweredischargedfromtheirliabilityundertheconvertiblenoteasEdwardWoohadfailedtocomplywiththeconditionprecedentbywaivinghisdirector’sloantoURLimitedoftherequisiteamount.Theyseekadeclarationthatthefouragreementsarerescindedandcounterclaimfordamagesforfalserepresentationandnon-disclosure.Inaddition,theyalsomakesimilarclaimsagainstEdwardWooandAndrewLawasthirdparties.ThereisnodisputethatthePlaintiffhadperformeditsobligationsundertheSaleandPurchaseAgreementandhasexerciseditsoptionundertheOptionAgreement.ThefactualdisputeiswhetherthePlaintiffhadprocuredEdwardWootowaivetherequisiteamountofloan.SubjecttothePlaintiffdischargingthatburden,theburdenwouldthenbeontheDefendantstoprovethefalserepresentationsandnon-disclosuresinordertohavethefouragreementsrescindedandrelievedoftheirliabilityunderthefouragreements.Theallegedfalserepresentationsandnon-disclosuresTheDefendants’pleadeddefenceisexcessive,confusingandoverlapping.Inbroadterms,thedefencesarefalserepresentation,non-disclosureandnon-fulfilmentofconditionprecedent.MrPoonSCandMrLiadoptdifferentapproachestotheinterpretationofthepleadeddefence.Toconsidertheirsubmissions,itisnecessaryformetoquotethepleadeddefenceinfull.Therelevantpleadingsareparagraphs5(f),5(g),5(h),6(c),6(d),6(e)and7oftheAmendedDefenceandCounterclaim(“AD&CC〞):“5(f) [EdwardWoo]warrantedandrepresentedtoGaryHothatthe[Campus]canbeusedtoestablishaninstitutionthereunderthename“TheEastWestCulturalExchangeVillage〞forthepurposeofpromotingeducationandculturalexchange.5(g)Asafurtherand/oralternativeproposal,[EdwardWoo]warrantedandrepresentedtoGaryHothatthe[Campus]canbeusedand/ordevelopedasahotel,spa,sportscentreorresidentialbuildings.5(h) InoraboutJanuary2003,GaryHo…wenttoinspectthe[Campus]uponthearrangementofthe1stand2ndThirdParties.Atthetimeoftheinspection,the[Campus]wasnotoccupiedandwasvacant.Asaresult,theDefendantswereledtobelievethat[EdwardWoo’s]intentionand/orproposalweregenuineandthatthe[Campus]wasinastateofvacantpossession.6(c)PriortosigningtheSaleandPurchaseAgreementandthe[LectureKit]Shareholders’Agreement,[EdwardWoo]failedtodisclosethefollowingmatterstotheDefendants:-Therearebuildingcertificatesnumbered013088and014809forthebuildingserectedonthe[Campus]whichwouldhaveshownthatthebuildingswereusedasteachingpremises,premisesforthestaffandpremisesforthestudents.AccordingtothelawsofChina,whenthatbeingthecase,the[Campus]togetherwiththebuildingscannotbemortgagedtothebanktoobtainfinance.Inthepremises,suchbuildingcertificatesconstituteanencumbranceorrestrictionsonthe[Campus],inbreachofClauses3.31(C)and(E)oftheSaleandPurchaseAgreementandsuchdefectshaverenderedthechanceof[URLimited]and2ndDefendantbeinglistednugatory.Pursuantto[theDecemberAgreement]on2ndDecember2002,CIDSThadacquiredcertainrightsincluding,interalia,therighttooccupyandtofurtherdevelopthe[Campus].InbreachofClauses3.17,3.18,3.31(B)and(F)oftheSalesandPurchaseAgreement,CIDSTanditsvariousdivisionswerestilloccupyingthe[Campus]atthedateofsigningoftheSaleandPurchaseAgreementandthe[LectureKit]Shareholders’Agreement.On13March2003,UREDYhadmadeanapplicationtotheEconomicPlanningBureauintheYanjiaoDevelopmentZoneAuthorityinthePRCandsubmittedaCampusExpansionPlan.6(d) [EdwardWoo]warrantedandrepresentedtotheDefendantsthatthe[Campus]canbeusedforvariouspurposesincludingbutnotlimitedtoestablishinganinstitutionand/orhotel,spasandotherbuildings.As[EdwardWoo]wellknewthattheirrepresentationswereuntrueandtheirproposalscouldneverbematerialisedduetotheoccupationofthe[Campus]byCIDST,theirrepresentationswerefalseandweremadefraudulentlyand/orrecklessly(“FalseRepresentations〞),withtheviewtoinducetheDefendantstoenterintotheSaleandPurchaseAgreementandthe[LectureKit]Shareholders’Agreement.6(e) TheDefendantshadreliedontheFalseRepresentationsandwereinducedbytheFalseRepresentationstoenterintotheSaleandPurchaseAgreementandthe[LectureKit]Shareholders’Agreement.7. …Byreasonofthematterspleadedinparagraph6(c)to(h)herein,theDefendantsaredischargedfromitsliabilitytotheSaleandPurchaseAgreementandthe[LectureKit]Shareholders’AgreementforreasonofFalseRepresentationsmadeby[EdwardWoo]totheDefendants.〞(Thewordsin[]aremysubstitutionsinplaceofthoseintheoriginalpleadingforconsistentreadingandtoreflecttheabandonmentofthethirdpartyproceedingsagainstAndrewLaw.)MrLisubmitsthattheDefendantshavepleadedfivefalserepresentationsandnon-disclosuresmadebyEdwardWooonnumerousoccasionsbetweenlate2002andJanuary2003.Thoserepresentationsare:thevillagerepresentation:theCampuscouldbeusedtoestablishaninstitutionthereunderthenameof“EastWestCulturalExchangeVillage(東西方文化交流村)〞forthepurposeofpromotingeducationalandculturalexchange(paragraph5(f)oftheAD&CC);theuserrepresentation:theCampuscouldbeusedand/ordevelopedasahotel,spa,sportscentreorresidentialbuildings(paragraphs5(g)and6(d)oftheAD&CC);thevacantpossessionrepresentation:theCampuswasnotoccupiedbyothers(paragraph5(h)oftheAD&CC;theloanrepresentation:theamountofloanowedbyURLimitedtoEdwardWoowasHK$53,547,843;andthemortgagerepresentation:theCampuscouldbemortgagedtoobtainfinance.Thefirstthreerepresentationsarebasedonparagraphs5(f),5(g),5(h)and6(d)oftheAD&CC.Thefourthrepresentationhadbeenpleadedasanon-disclosureinparagraph6(c)(iv)oftheDefenceandCounterclaim,butwasdeletedfromparagraph6(c)oftheAD&CC.Whetherthispleaisoneoffalserepresentationornon-disclosure,itisunnecessarybecausethePlaintiffbearstheburdenofprovingthatPinehadprocuredEdwardWootowaivetherequisiteamountofloan.IfEdwardWoohadonlywaivedaloanofalesseramount,whichiswhatMrLi’ssubmissionispremisedon,thePlaintiffwouldfailinanyevent.Ontheotherhand,ifthePlaintiffsucceedsindischargingthatburden,therecouldbenobasisonwhichtoraisethatdefence.Thatdefenceissuperfluousandhasbeenrightlydeletedfromthepleading.Thefifthrepresentationhasbeenpleadedasanon-disclosureinparagraph6(c)(i).However,MrLisubmitsthatitisarepresentationwhichnecessarilyarisesfromorunderpinstheuserrepresentationandthevacantpossessionrepresentation.Ontheotherhand,MrPoonSCdrawsadistinctionbetween“non-disclosures〞pleadedinparagraph6(c)and“falserepresentations〞definedinparagraph6(d).Hesubmits,firstly,thatunderparagraph6(d),“falserepresentations〞wasdefinedas“theCampuscanbeusedforvariouspurposesincludingbutnotlimitedtoestablishinganinstitutionand/orhotel,spasandotherbuildings〞whicharerepetitionsofthefalserepresentationspleadedinparagraphs5(f)and5(g)butnomore.Secondly,hesubmitsthatthe“non-disclosures〞pleadedinparagraph6(c)arebydefinitionexcludedfrombeing“falserepresentations〞byvirtueofparagraph6(d).Healsoreferstoparagraph6(e)asconclusivelysupportinghisargumentthat“falserepresentations〞reliedonbytheDefendantsdonotincludeanyofthe“non-disclosures〞.MrPoonSCthenreferstotheDefendants’answertothePlaintiff’srequestforfurtherandbetterparticularsofthefalsitypleadedinparagraph5(f)and5(g)oftheAD&CC.Intheiranswer,theDefendantsconfirmedthatbothrepresentationswerefalseinthat,contrarytotherepresentations,“infact,CIDSThadoccupiedandacquiredcertainrightstofurtherdevelopthe[Campus].Thebuildingcertificatesforthebuildingserectedonthe[Campus]furtherdisclosedthatthebuildingswereusedasteachingpremises,premisesforthestaffandpremisesforthestudentsandassuchcannotbemortgagedtothebanktoobtainfinanceandconstituteanencumbranceorrestrictionsonthe[Campus].〞(Wordsin[]aremysubstitutionsforconsistentreading.)Thesecondpartoftheanswerrelatestothemortgagerepresentation.MrPoonSCsubmitsthatinsofarasthefirstpartoftheanswerisconcerned,theDefendantsareallegingthatitwasCIDST’soccupationoftheCampuswhichrenderedthevillagerepresentationandtheuserrepresentationfalse.ThusthefalsitydoesnotlieinwhethertheCampuscouldbeusedtoestablishthe“EastWestCulturalExchangeVillage〞orcouldbeusedand/ordevelopedasahotel,spa,sportscentreorresidentialbuildings,butthattheCampuscouldnotbeusedforthosepurposesduetotheoccupationbyCIDST.EdwardWoodidnotdenythathehadmentionedaboutestablishingtheEastWestCulturalExchangeVillageandinthatconnectiontheusetowhichtheCampuscouldbeput.ThebuildingcertificateshowsthattheCampuswastobeusedasthe“EastWestCulturalExchangeVillage〞.Thebuildingplanshowsthetypeoffacilities,includinghotel,spaandsportscentrewhichwerepermittedtobebuilt.Therealfactualissuesinrelationtothefalserepresentationspleadedinparagraph5(f)and5(g)arethesame,i.e.whetherCIDSTwasinoccupationoftheCampusandthatsuchoccupationrenderitimpossiblefortheCampustobeusedforthepurposesrepresented.IcanwellunderstandMrPoonSC’singeniousargument.Itappearstobealittlestrainedandsemantic.ButIagreewithhim.Thepleadingsdrawadistinctionbetweennon-disclosuresandfalserepresentations.MrLialsoputsnon-disclosuresasanalternativebasisforrescindingthefouragreements.Thatishowthetwoshouldhavebeenpleadedanddealtwith.Thus,inviewoftheDefendants’answertotherequestforfurtherandbetterparticulars,thereisonlyonefalserepresentation,i.e.thevacantpossessionrepresentationwhichcoversthefirstthreeofthefiverepresentationssubmittedbyMrLi.ThefactualissueiswhetherCIDSTwasinpossessionoftheCampusbefore12April2003.Theaboveconclusiondoesnotmeanthenon-disclosureissuesarestruckofffromtheAD&CC.Theywillbedealtwithasnon-disclosures.MrPoonSCtakesyetafurtherpleadingpointonthenon-disclosureissue.HereferstoBullen&Leake&Jacob’sPrecedentsofPleadings,12thed,p449.Hesubmitsthataclaimtorecoverdamagesorforotherreliefformisrepresentationinducingacontractorotherconductcausingdamagewillliewherethemisrepresentationismadedishonestly,i.e.fraudulently,inacommonlawactionofdeceit.HethenreferstoViscountMaugham’sdictainBradfordThirdEquitableBenefitBuildingSocietyvBorders[1941]2AllER205at211andsubmitsthatinordertosustainthecommonlawactionofdeceit,thefollowingfactsmustbepleadedandproved,namely:theremustbearepresentationoffactmadebywordsorbyconduct,andmeresilenceisnotenough;therepresentationmustbemadewithknowledgethatitisfalse,i.e.itmustbewilfullyfalseoratleastmadeintheabsenceofanygenuinebeliefthatitistrue;therepresentationmustbemadewiththeintentionthatitshouldbeacteduponbytheplaintiff,orbyaclassofpersonswhichwillincludetheplaintiff,inthemannerwhichresultedindamagetohim;itmustbeprovedthattheplaintiffacteduponthefalsestatement;anditmustbeprovedthattheplaintiffhassustaineddamagebysodoing.Basedontheaboveprinciples,MrPoonSCarguesthatassumingforthepresentpurposesthatthe“non-disclosures〞wererepresentations,nowhereintheAD&CCdidtheDefendantspleadthatthePlaintifforEdwardWooknewtherepresentationswerefalseandintendedtheDefendantstoactonthem.MrLi’sargumentisthatwhiletheprimarybasisoftheDefendants’claimismisrepresentation,non-disclosureisneverthelessanalternativebasisreliedonbytheDefendants.ThisalternativebasisispredicatedonthebasisthatPineorEdwardWooowedtheDefendantsfiduciarydutiesincludingadutytoactingoodfaithandtomakeallmaterialdisclosure.HereferstoChittyonContracts,HongKongSpecificContracts,paragraphs19-20,10-45to10-52;Cartwright,MisrepresentationMistakeAndNon-Disclosure,2nded,paragraph17.19andSimmsvConlon[2006]EWCACiv1749atparagraphs87,127and128.Thepleadingshavedrawnacleardistinctionbetweennon-disclosureandfalserepresentation.Itismanifestlyclearthatnon-disclosureisreliedonasanalternativebasisforrescindingthefouragreements.Fraudisnotanecessaryelementfornon-disclosure.Inthecircumstances,itisnotnecessarytopleadthemattersreferredtobyMrPoonSC.Thewayinwhichthedefenceispleadedcannotbesaidtobecommendable.However,thenon-disclosureshavebeenfairlypleaded.Inparagraph7oftheAD&CC,theDefendantspleadedthat“byreasonofthematterspleadedinparagraph6(c)to(h)herein,theDefendantsaredischargedfromliabilityundertheSaleandPurchaseAgreementandtheLectureKitShareholders’Agreementforreasonoffalserepresentations.〞Thephrase“forreasonoffalserepresentations〞isinconsistentwiththephrase“byreasonofthematterspleadedinparagraph6(c)to(h)〞andonafairreadingshouldbetreatedasredundant.Thenon-disclosureshavebeenvalidlypleadedasanalternativebasisofthedefence.ThePlaintiffhasnotbeenmisledorprejudiced.MrLiisresponsibleforthemisunderstandingwhenhecallsthe“non-disclosures〞as“falserepresentations〞asaconvenientshorthand.Foravoidanceofdoubt,Iwouldbepreparedtoallowanamendmenttohavethepleadingsputrightifthedefenceofnon-disclosureismeritorious.Thefollowingtwonon-disclosuresarepleaded:theoccupationnon-disclosure:theCampushadbeenoccupiedbyCIDSTpriorto12April2003(paragraph6(c)(ii)oftheAD&CC);thenon-mortgageabilitynon-disclosure:theCampuscouldnotbemortgagedtoobtainfinance(paragraph6(c)(i)oftheAD&CC).Itisimmediatelyobviousthatthefactualissueraisedbytheoccupationnon-disclosureisthesameasthatraisedbythevacantpossessionrepresentation.Theonlynewissueraisedbythenon-disclosureiswhethertheCampuscouldbemortgagedtoobtainfinanceunderPRClaw.Thatisanissueofforeignlawandisafactualissue.Non-fulfilmentofconditionprecedentTheonlyotherdefenceisthatpleadedinparagraph11oftheAD&CC.ThatdefenceallegesthatEdwardWoohadnotwaivedaloanoftherequisiteamountandasaresultLectureKitisrelievedofitsliabilityundertheconvertiblenote.ThefactualissueraisedbythatdefenceiswhethertheloanwaivedbyEdwardWoowasinexcessoftherequisiteamount.TheissuesThusthefactualissuesraisedinthepleadingsare:whetherCIDSThadoccupiedtheCampuspriorto12April2003;whetherURLimitedowedEdwardWoodirector’sloaninexcessofHK$53,547,843;andwhethertheCampuswasmortgageableunderPRClaw;andthelegalissuesare:whetherthePlaintiffwasunderalegaldutytomakethenon-disclosurescomplainedof;andwhetheronatrueconstructionoftheOptionAgreement,the510,002sharesinURLimitedwerereleasedtotheCustodianassecurityforpaymentofallsumsowedbyCyberStrategyandLectureKittoPine.DramatisPersonaeHereunderarethemainentitiesandcharactersinvolvedinthemainaction.PineEnterprisesLimited(松茂企業(yè)有限公司)(“Pine〞)-ThisistheplaintiffinHCA1221/2006andthepetitionerinHCCW593/2005.ItisacompanyincorporatedinHongKong.ItsshareholdersareMrWooPakHayEdward(“EdwardWoo〞)andhiswifeMsHuenPuiLan.EdwardWooisthedirectorwhoisactivelyinvolvedinthemanagementofPine.UnionResources(EducationalDevelopment)Limited(聯(lián)合資源(教育發(fā)展)有限公司)(“URLimited〞)-ThiscompanywasincorporatedinHongKongon23December1986withEdwardWooholding1,000,002sharesandtheremainingshareheldbyhiswife.InNovember1994,thecompanychangedtoitspresentname.Sincethen,ithasbeenusedbyEdwardWooasthevehicletopursueeducationalservicesandbusiness.Theonlysubstantialassetofthecompanywas,andstillis,itswhollyownedsubsidiaryestablishedinthePRC,UREDY.Itisthe2ndRespondentinHCCW593/2005.UnionResourcesEducationalDevelopment(Yanjiao)CompanyLimited(聯(lián)合資源教育發(fā)展(燕郊)有限公司)(“UREDY〞)-Thisisawhollyforeign-ownedenterpriseestablishedinthePRCon30September1998witharegisteredcapitalofUS$4,819,000.ItisasubsidiaryofURLimited.Itsonlyassetistheland-useright(whichistheusualformoflandholdinginthePRC)overtheC