In AIM Global Holdings Ltd. & Ors. v Chien Kun Allen & Rising Dragon Global Ltd. [2023] HKCFI 1126 the Court of First Instance, in rejecting all of the Plaintiffs’ claims and giving judgment for the Defendants on all the substantive issues, inter alia (i) considered the issue of whether there was sufficient consideration in relation to purportedly overlapping contracts of employment with different entities (ii) in holding that a deed relied on by the Defendants had been validly executed under BVI law, examined and made findings as to the requirement that a deed be sealed in relation to the limits and purpose of s. 103 of the BVI Business Companies Act 2004 (as amended) (the “BCA”).
The case concerned a BVI holding company (“AIM”), its controller Madam Liu, and its PRC operating subsidiary (“Shanghai Weicon”) who had initially engaged by contract a consultant (“Rising Dragon”) to help AIM and Madam Liu sell their business of and/or shares in Shanghai Weicon.
Subsequently, and adopting a structure that will not be unfamiliar to both commercial and employment practitioners, both AIM and Shanghai Weicon entered into separate and further contracts of employment with Mr. Chien (an officer of Rising Dragon), appointing him as the CFO and Acting CEO of both entities (“the HK Employment Agreement” and “the PRC Employment Agreement” respectively). Another separate agreement (“the Deed of Share Award”) was also entered into at the same time, whereby Mr. Chien was to be entitled to be vested shares in AIM upon certain conditions, including if his services were terminated by AIM or Shanghai Weicon without cause.
In giving his judgment. K. Yeung J. held inter alia that all four contracts were (contrary to the Plaintiffs’ case) valid and binding on the parties. In addition to finding that none of them were void for uncertainty or had been procured by any misrepresentations, and that the parties had intended to create legal relations, the learned Judge rejected the Plaintiffs’ submission that there had been no consideration for the PRC Employment Agreement on the basis that the contractual duties under the PRC Employment Agreement overlapped entirely with the HK Employment Agreement. Amongst other things, the Court held that even if there had been complete overlap in duties between the two agreements, according to Pao On v Lau Yiu Long [1980] AC 614 (UKPC from Hong Kong), the actual performance of the HK Employment Agreement by Mr. Chien constituted valid consideration in support of the PRC Employment Agreement, as Shanghai Weicon thereby obtained the benefit of a direct obligation against Mr. Chien.
As for the Deed of Share Award, one of the main issues was whether the absence of AIM’s company seal thereon rendered the Deed of Share Award invalidly executed as a deed. His Lordship held that the Deed of Share Award was governed by BVI law, and found that it was enforceable as it had been validly executed as a deed thereunder. In doing so, he preferred the evidence of the Defendants’ BVI expert, Matthew Hardwick K.C. who had expressed the view that the only purpose of s. 103(3) BCA was to make it clear that the absence of the seal did not render the Deed of Share Award invalidly executed as a deed. In any event, the Court also held that there was valid consideration in support of the Deed of Share Award as, on the facts, it and the HK and PRC Employment Agreements were all inter-related and collateral contracts: see Asia Develop Ltd v Glory Mark Investment (Group) Ltd [2021] HKCFI 1572.
The judgment is a reminder to practitioners of the difficulty of arguing that there is no consideration in relation to potentially overlapping duties between related employment contracts, and (notwithstanding the favourable result for the Defendants) that it is of importance to ensure that deeds are properly executed in the applicable jurisdiction. The decision also contains a brief summary of the legal principles on intention to create legal relations.
Yang-Wahn Hew and Arthur Poon, both of Des Voeux Chambers, acted for the Defendants by Original Action and Plaintiffs by Counterclaim.
