Ngan Pui Chi v Bao Quan [2019] 4 HKLRD 135

Michael Chai (and Gekko Lan) appeared for the plaintiffs in the Court of Appeal in Ngan Pui Chi v Bao Quan [2019] 4 HKLRD 135.

D advanced loans to Ps on the security of P1’s shares in a company, C. Undated bought and sold notes in respect of the shares were executed by P1 for the purpose of the security. Ps defaulted on instalment repayments and the shares were transferred to D, a director in C. However, P1 claimed that her signature one the instruments of transfer was forged. At first instance, Ps succeeded on the basis that D had not discharged the onus of proving the authenticity of the impugned documents. D appealed.

Held, allowing the appeal, that:

(1) the onus was on Ps to prove the forgery, Ps had not discharged that burden. Inferences of fraud or forgery could not be reached by conjecture. Without a reasonable foundation for an inference to be drawn, one could not elevate the rejection of the defence’s evidence or the defence’s case or failure to dispel suspicious circumstances as proof of such serious allegations (Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387, Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334, To Pui Kui v Ng Kwok Pui (CACV 281/2012, [2014] HKEC 1410), Choi Lisa Mei Yin v Yau Pak Kin [2019] HKCA 812, [2019] HKEC 2380 applied; Pacific Electric Wire & Cable Co Ltd v Taxan Management Ltd (CACV 90/2012, [2013] HKEC 1475) distinguished). (See paras.47-85.)

(2) Even if forgery had been established, the prayer for relief in the form of a “return” or “delivery up” was not properly formulated. Shares were choses in action. A shareholder had a bundle of rights in the company and the company only recognised his status by reference to the share register. Upon a transfer, the company issued a new share certificate in favour of the new shareholder. Thus, the proper remedy for a forged transfer was to seek a rectification of the share register. The company was a necessary party to the claim. At the same person who presented a forged transfer was bound to indemnify the company for the loss incurred (Barton v London & North Western Railway Co (1888) 38 Ch D followed). (See paras.43-44.)

(3) The equity of redemption would not be destroyed just because the legal title of the shares had been transferred to the mortgagee. It was rather surprising that Ps took the position that the issues could not be resolved by a redemption action but the Court would not impose one. The appeal having been allowed, it would be left to the parties to decide the future course of action (See paras.28-34.)


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