KO NGA CHUN v. COMPANHIA DE DESENVOL VIMENTO WUI SAN LIMITADA AND ANOTHER

HCA 277/2012

[2018] HKCFI 1134

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 277 OF 2012

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(By Original Action)

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(By Counterclaim)

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JUDGMENT

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INTRODUCTION

Introduction

1.  This is an action founded on two causes of action: dishonoured cheques and breach of an intermediary contract.  In the original action, the plaintiff (the “Plaintiff”) claims the outstanding balance of intermediary fee under an oral agreement (the “Verbal Agreement”)[1] between herself and the 2^nd defendant (“Suen”) on his own behalf and on behalf of the 1^st defendant (“Wui San”) for her services in persuading the vendor (“Kong Cheong”) of certain landed property in Macau (the “Land”) to execute with Wui San a certificate of transfer of the Land.  The Verbal Agreement was evidenced in a written document dated 10 January 2009 and titled “Intermediary Agreement”.  The outstanding fee was in the amount of $85 million as represented by four post--dated cheques drawn by the 2^nd defendant.  As the defence to the action for dishonoured cheques is total lack of consideration, the underlying dispute is breach of the Verbal Agreement.  Resolution of this dispute will dispose of the entire action. 

Dramatis personae

2.  Macau, Empresa De Fomento E Investimento Kong Cheong (Macau) Limitada (“Kong Cheong”) is a property investment company incorporated in Macau on 1 September 1988.

3.  Companhia Desenvolvomento Platinum Limitada is a company incorporated in Macau (“Platinum”).

4.  Sociedale De Investimento E De Fomento Predial Wa Wai, Limitada (“Wa Wai”) and Companhia De Fomento E Investmoto Predial Pak Vai Limitada (“Pak Vai”) are Chinese state owned companies incorporated in Macau.  On 28 February 2008, Kuang’s father became a 30% shareholder of Wa Wai.

5.  Companhia De Desenvol Vimento Wui San Limitada (“Wui San”) is a company incorporated in Macau on 19 December 2006.  It is the 1^st defendant by original action and 1^st plaintiff by counterclaim.

6.  Ko Ngar Chun (the “Plaintiff”) is the plaintiff by original action and the 1^st and 2^nd defendants by counterclaim.  She is the daughter of Ko Kan (deceased) and the administratrix of his estate.

7.  Ko Kan is the father of the Plaintiff and was at all material times,except from 7 March 2008 to 31 October 2009, a director and owner of 70% of the shareholding in Kong Cheong.  He had actual and effective control of Kong Cheong.  He was diagnosed with lung cancer in May 2006 and died on 24 January 2016.

8.  Kuang Xhaosheng (“Kuang”) is the husband of the Plaintiff.  At the material time, he assisted Ko Kan in the management of Kong Cheong.  He had once held the shares in Platinum as nominee of Kong Cheong.

9.  Fong Lap (“Fong”) was a manager of Kong Cheong and was once a shareholder of Platinum representing the interest of Kong Cheong.

10.  Chan Wing Kin (“Chan”) was the accountant of Kong Cheong.

11.  Kwong Chik Yuen (“Kwong”) and Tam She Kin (“Tam”) were respectively the 70% and 30% shareholders of Kong Cheong from 7 March 2008 to 31 October 2009.  They acquired their shares respectively from Ko Kan and Sze Kin Man.  On 31 October 2009, they resold their shareholdings at the original purchase price respectively to Ko Kan and Leung Ying Lok through the arrangement of Ko Kan.

12.  Suen Wai Man (“Suen”) is the 2^nd defendant by original action and the 2^nd plaintiff by counterclaim.  He was a shareholder of Platinum representing his own interest.  He is the majority shareholder and administrator of Wui San.

13.  Lo Kin Shing (“Lo”) and Tsang Kam Pui (“Tsang”) were once shareholders of Platinum representing their own interest.  They transferred their shares in Platinum to Suen on 8 May 2006.

SOME EVIDENTIAL MATTERS

Admissibility of Ko Kan’s witness statement

14.  The Plaintiff sought to rely on the hearsay statements of Ko Kan in his affirmation dated 27 August 2012, witness statements dated 5 December 2014 and 9 November 2015 for the simple reason that Ko Kan had deceased on 24 January 2016 in China.

15.  Section 47(1) of the Evidence Ordinance provides that in civil proceedings evidence shall not be excluded on the ground that it is hearsay unless (a) a party against whom the evidence is to be adduced objects to the admission of the evidence; and (b) the court is satisfied, having regard to thecircumstances of the case, that the exclusion of the evidence is not prejudicial to the interest of justice  Section 49(2) sets out a list of factors which the court may have regard to in estimating the weight to be given to hearsay evidence.  In Cheung Wei Man Vivien v Centaline Property Agency Ltd [2], Lam J (as he then was) held it is relevant to go through the list of factors in section 49 to determine whether exclusion of the hearsay evidence would beprejudicial to the interest of justice.  Of relevance to the present application are: whether the original statement was made contemporaneously with the occurrence or existence of the matter stated; whether any person involved had any motive to conceal or misrepresent matters; whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose; whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight; and whether the evidence adduced by the party is consistent with any evidence previously adduced by the party.  Furthermore, in Amrol v Rivera [3], it was held that where there are very pertinent and legitimate questions which the party is entitled to ask the person who is making the hearsay evidence, it may be prejudicial if such party is deprived of the opportunity of cross-examination.

16.  Ko Kan’s hearsay statements were made between August 2012 and November 2015 relating to events which occurred during the period from 2005 to 2009.  They can hardly be described as having been made contemporaneously.  They were also obviously made for the purpose of the present action.

17.  Ko Kan is not an independent witness but a party to the present action and against whom there is a substantial counterclaim of $25 million.  He was the father of the Plaintiff.  Both the Plaintiff and Ko Kan had reasons to advance their interest at the expense of Suen.  As the evidence reveals, he was a person of suspicious character.  He had every reason to conceal or misrepresent the truth through the hearsay statements made for the purpose of the present proceedings.

18.  The circumstances in which Ko Kan’s hearsay statements were adduced are such as to suggest there was an attempt by the Plaintiff to prevent proper evaluation of its weight.  He did not die a sudden death but died ten years after he was diagnosed of lung cancer.  However, the information on his death was not disclosed until 4 August 2017, ie 17 months after his death and just three months before commencement of trial.  The delay to notify the court and the opponent was unexplained and this cast doubt on the Plaintiff’s motive of the delay.

19.  In the summons to substitute Ko Kan with the Plaintiff dated 4 August 2017 and the pre-trial review on 9 August 2017, no notice of the Plaintiff’s intention to adduce Ko Kan’s hearsay statements was given.  It was only until 19 September 2017, six weeks before trial, that the Plaintiff filed the hearsay notice indicating for the first time that she would adduce Ko Kan’s hearsay statements as evidence at trial.  Such conduct may be taken an attempt to ambush her opponent.

20.  Ko Kan is a party and key witness in this litigation.  His evidence about the power of attorney, the sale and purchase agreement of the Land between Kong Cheong and Wui San (ie S&P(1)), the Intermediary Agreement and the receipt of $8 million dated 8 July 2009 issued to Suen are crucial.  He gave a completely different account of events in his confession statement to the police in the Mainland on 15 November 2007.It is important that the evidence of such a crucial witness should be tested by cross-examination.  Should a witness of such critical importance be about to demise, the party seeking to rely on his evidence should have taken steps to secure his evidence by deposition under Order 39 rule 1 of the Rules of the High Court.  Ko Kan’s death was well anticipated.  Yet the Plaintiff failed to adopt this course andthereby deprive the defendants of the chance of cross-examination.  Without such cross-examination, the defendants are severely prejudiced.  This is an appropriate case which the Plaintiff should have secured the evidence of Ko Kan by Order 39 procedure and to avail her opponent the chance of cross-examination.

21.  Mr Cheung, counsel for the Plaintiff, submits that the defendants could have availed themselves of the safeguards under Order 38, rule 21 to call additional evidence to attack the reliability of the hearsay statements.  On the facts of the present case, all the evidence which the defendants could have availed themselves were presented.  There is no cure to the loss of opportunity for cross-examination.  Mr Cheung also referred to other cases in which hearsay statements were allowed.  Those were decisions on their own facts.  

22.  Having read the three statements, I am satisfied that, except as to his personal dealing with Suen, Ko Kan’s evidence is covered by the evidence of the Plaintiff and Kuang.  Mr Pun SC, counsel for the defendants, has indicated that Suen will not pursue the counterclaim against Ko Kan.  Hence, exclusion of Ko Kan’s hearsay statements will not cause any prejudice to the Plaintiff, but its inclusion will cause severe prejudice to the defendants.  Accordingly, I consider it appropriate to refuse to admit Ko Kan’s hearsay statements.

Admissibility of Fong’s evidence

23.  The defendants attempt to adduce a transcript of the evidence of Fong given in the course of the defendants’ proceedings in Macau under CV3-07-0077-CAO-A. It is not an official certified transcript obtained from the Macanese court. The maker of the transcript is unknown.  The Plaintiff is in no position to know how the transcript was made and obtained.  There is no assurance as to its accuracy.  It is essentially a witness statementof Fong.  The transcript was known to the defendants at least as early as July 2014.  There was ample opportunity for them to obtain a witness statement from Fong and to call him as a witness.  There is nothing to suggest that Fong is now unavailable like Ko Kan.  What the defendants are seeking to do is to adduce what purports to be a hearsay statement of an unknown transcriber of what he heard from Fong but without giving the Plaintiff the chance to cross-examine the transcriber or Fong. There is no way to assess the reliability of the transcription and Fong’s evidence.  Its admission is gravely prejudicial to the Plaintiff, but its exclusion is not prejudicial to the defendants.  The defendants’ application to adduce the transcript is refused.

Adverse influence to be drawn from the Plaintiff’s failure to call Tam

24.  The defendants relied on the maxim omnia praesumuntur contra spoliatorem which was summarized by Brooke LJ in Wisniewski v Central Manchester Health Authority [4] as follows:

(1)   In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.

(2)   If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

(3)   There must, however, have been some evidence, however weak,adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

(4)   If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn.  If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.

The question is whether in all the circumstances adverse inference is to be drawn against a party for his failure to produce document or witness when such production is reasonably expected.  All the circumstances, in particular the lack of explanation, must be taken into account before such adverse inference is to be drawn.

25.  The Plaintiff’s case is that it was due to her mediation that Kong Cheong, then under the control of Kwong and Tam, agreed to execute the certificate of transfer on 10 January 2009.  On the other hand, Suen’s case is that the settlement was because Ko Kan wished to settle the litigation and the fee of $105 million was a reward for Ko Kan clearing the encumbrances over the Land.  Thus, Tam’s and Kwong’s evidence as to their reason for agreeing to execute the certificate for transfer and their availability for cross-examination is most crucial to the parties’ case.  The Plaintiff has arranged for Tam to testify as her witness and obtained a witness statement from him as early as 4 December 2014. 

26.  On the Plaintiff’s case, the underlying reason for Kong Cheong’s dispute with the defendants is Suen’s using the power of attorney to execute the sale and purchase agreements of the Land (ie S&P(2) and S&P(3)) withoutKo Kan’s authority and Suen’s failure to pay the purchase price for the Land in the amount of $138.3 million.  Tam’s witness statement was very brief.  He supported the Plaintiff’s statement but did not explain why Kong Cheongwas willing to transfer its sole and valuable asset to Wui San without payment of any part of that purchase price.  That was a total defiance of logic and commercial sense.  Tam is the only person who could answer the question why Kong Cheong would have agreed to execute the certificate of transfer. 

27.  Furthermore, as submitted by Mr Pun SC, there are many other questions that are pertinent to the Plaintiff’s case which call for answers and only Tam could answer them, such as his and Kwong’s true relationship with Ko Kan as raised by his purchase of Ko Kan’s shares in Kong Cheong and resale back to Ko Kan at the same price when its only asset had been disposed of, his failure to register the share transfer for nine months, and his and Kwong’s use of Ko Kan’s address as their residential or correspondence address.  There are also questions relating to Suen’s case of the First and Second Verbal Agreements which the defendants would like to put to him.

28.  Despite that Tam had made a witness statement in 2014, the Plaintiff had to ask for an early adjournment in the morning of 13 November 2017 to arrange for Tam to testify on 14 November 2017.  However, when the hearing resumed on 14 November 2017, the Plaintiff informed the court that she would not call Tam to give evidence.  No explanation was given.  In the circumstances, I draw as the only logical inference that the Plaintiff feared that Tam would disclose something unfavourable to her case, particularly when cross-examined on the matters mentioned above. 

BACKGROUND

Introduction

29.  After two rounds of amendments in pleadings and three roundsof witness statements, it becomes obvious that the background to this dispute dates back to 2005.  The background leading up to the present dispute is important in resolving the parties’ dispute.  The background could be divided into six stages. 

Stage I—Pre-October 2005

30.  Kong Cheong used to own the Land known as Marginal Da Illha Verda in Macau.  In 1991, it entered into an agreement to sell the Land to Wa Wai for a consideration of $420 million (“1991 Agreement”).  In 1993, by a supplemental agreement Pak Vai was also made a party to sale and purchase agreement (“1993 Supplemental Agreement”).  Later that year, Wa Wai on behalf of Kong Cheong mortgaged the Land to Seng Heng Bank to guarantee a loan of MOP310 million with liability capped at MOP 493.52 million (the “Seng Heng Bank Loan”).

31.  In January 2005, Kong Cheong, Wa Wai and Pak Vai reached agreement to cancel the 1991 agreement and 1993 supplemental agreement (the “KC/WW Agreement”).  Under the terms of that agreement, Kong Cheong agreed to take over the Seng Heng Bank Loan and to pay Wa Wai and Pak Vai MOP 160 million from the proceeds of sale of the Land.  Obviously, Kong Cheong was in financial difficulties and the agreement was to avoid a forced sale of the Land by the bank.

Stage II—October 2005:  Kong Cheong/Lo Agreement

32.  On 29 October 2005, Lo entered into a sale and purchase agreement of the Land with Kong Cheong at the price of $188.3 million subject to encumbrances (“Kong Cheong/Lo Agreement”).  Lo paid $5 million as down payment.  No scheduled completion was specified.  If the agreement had been completed at that stage, Kong Cheong would have left the scene and made a profit of $28.3 million.

33.  Mr Cheung suggests that the price was stated for auspicious reason and stamp duty saving purpose and did not reflect the real value of the Land.  Auspicious reason might be one element, but the price was, in myview, very close to reality having regard to the Seng Heng Bank Loan and theprice at which the Land was acquired in 1991.  During the period from 1991 to 2005, Hong Kong property market experienced a severe crash in the financial tsunami in 1998 followed by a further crash during SARS attack in 2003.  The property market in Macau was affected in a similar manner.  Mr Cheung relies on the fact that the same price appeared in subsequent sale and purchase agreements of the Land as support for his auspicious proposition.  I respectfully disagree because the subsequent sale and purchase agreements were effectively assignments of the rights under the Kong Cheong/Lo Agreement.  The resale price must be the same.

Stage III—November 2005:  The Land Development Contract

34.  The Kong Cheong/Lo Agreement was short-lived.  Suen came into the scene a month later.  He together with Kong Cheong and Lo came up with a more aggressive plan to jointly develop the Land instead of selling it to Lo at a profit of $28.3 million.  On 14 November 2005, Kong Cheong, as party A, entered into a joint venture agreement with Suen, Lo and Tsang as party B to develop the Land using Platinum as the joint venture vehicle (the “Land Development Contract”) on, inter alia, the following terms:

(a)   Party A and Party B shall have equal shareholding in Platinum;

(b)   Party A shall inject the Land free from encumbrances into Platinum;

(c)   Lo did not have to make further payment under the Kong Cheong/Lo Agreement;

(d)   Party B shall be solely responsible for the capital required for developing the Land;

(e)   Party B shall pay Party A $15 million upon signing the Land Development Contract, $5 million within 60 days thereafter and $30 million within 10 days of approval of building plans (in total $50 million);

(f)   Party B shall repay the Seng Heng Bank Loan capped at MOP 493 million;

(g)   Party B shall pay all litigation costs; and

(h)   the sums paid by Party B under items (e) to (g) shall be repaid by Party A from future profit shared by them.

The Land Development Contract effectively superseded the Kong Cheong/Lo Agreement.  Five points should be noted.

35.  First, there was no sale or purchase of the Land at that stage.  Kong Cheong remained as its owner.  Kong Cheong shall inject the Land free from encumbrances into Platinum as its 50% joint venture capital. 

36.  Second, the liability for repaying the Seng Heng Bank Loan remained Party A’s ie Kong Cheong’s.  Party B was only responsible for financing Party A to repay.  Thus, Kong Cheong’s obligation was to inject the Land into Platinum free from encumbrances.

37.  Third, Party B was to pay a total of $50 million to Kong Cheong.  This payment must be equalisation payment to bring Party B’s contribution to joint venture capital on par with Party A’s contribution of the Land free from encumbrances.  It also represents part of the purchase price for the Land.   

38.  Fourth, the first two instalments under item (e) in paragraph 34 in the total amount of $20 million had been paid but not the last item as the building plans had not yet been approved.  That sum of $20 million was effectively part payment of the purchase price of the Land.

39.  Fifth, initially, Kuang and Fong respectively held 45% and 5% of the shares in Platinum, while Suen, Lo and Tsang held the remaining 50%.  Kuang and Fong had contributed nothing to the joint venture but became its 50% shareholder.  It is obvious that they were just nominees of Kong Cheong as Party A.  Thus, when Mr Cheung later argues that Kuang and Fong were personally entitled to compensation for their shares in Platinum, the argument was absolutely groundless.

40.  A month later, by a share transfer agreement dated 14 December2005, Party B agreed to acquire from Kuang 10.5% of his shares in Platinum for $160 million to be paid by four instalments (the “First Share Transfer Agreement”).  Under the terms of this agreement, the proceeds of this sale must be applied to discharge the debt owing to Pak Vai under the KC/WW Agreement.  It is obvious that Kong Cheong could not meet its obligation to pay Wa Wai and Pak Vai $160 million under the KC/WW Agreement and therefore had to sell 10.5% of its interest in the joint venture or Platinum held under Kuang’s name to Suen to finance that payment.  The nominee nature of Kuang’s shareholding can be seen from the fact that the payment for the shares was to be applied to discharge Kong Cheong’s liability. 

41.  By a supplemental agreement dated 12 January 2006, Suen replaced Party B as the purchaser of Kuang’s shares.  It was further agreed that upon full payment of the $160 million, the Land will be transferred to Platinum.  Three of the instalments totalling $80 million were paid as scheduled, but the last instalment of $80 million due on 7 September 2006 was not paid because of an intervening event as described in Stage IV.

42.  For some other reasons, on the same date, Kuang or Kong Cheong agreed to sell another 5.25% of the shares in Platinum to Suen (the “Second Share Transfer Agreement”).  The consideration was to be paid by four instalments from 12 January 2006 to 7 February 2007.

43.  On 7 March 2006, Party B signed an agreement with Ko Kan on behalf of Kong Cheong to repay the Seng Heng Bank Loan subject to a cap of MOP 493.52 million.  This was to perform Party B’s obligation to finance Kong Cheong’s repayment of the Seng Heng Bank Loan.

44.  On 8 May 2006, Suen acquired Tsang’s and Lo’s shares in Platinum.  Lo and Kong Cheong cancelled the Kong Cheong/Lo Agreement and Lo transferred all his rights and obligations in respect of the Land to Platinum.  As at this date, Suen had paid $110 million, being the sum of $20under the Land Development Contract and $90 million for the purchase ofKuang’s 15.75% interest in Platinum.  Kong Cheong/Ko Kan issued receipts to Lo stating that the payments were for purchasing the Land.  However, the Land had never been injected into Platinum.  Platinum remained as an empty shell with no asset.  By this stage, Suen had fully taken over Party B and held 65.75% interest in Platinum. 

Stage IV—17 November 2006:  The First Resolution

45.  All went well until May 2006 when two events occurred.  First, Ko Kan was diagnosed with lung cancer.  Second, Seng Heng Bank obtained judgment against Kong Cheong on 24 May 2006 for its loan of MOP 576.3 million and registered a pledge against the Land.  The deadline for repayment was 16 March 2007.  The Land would be subject to forced sale if the judgment debt was not paid.  This drastic turn of events shattered the original joint venture.  Ko Kan was not contactable.  Suen was upset about the pledge and Kong Cheong’s failure and inability to transfer the Land to Platinum free from encumbrances.  He was reluctant to finance the repayment of the Seng Heng Bank Loan and also ceased paying the last instalment under the First Share Transfer Agreement and the second to fourthinstalments under the Second Share Transfer Agreement.  As a result, Kong Cheong was unable to pay Wa Wai and Pak Vai the $160 million under the KC/WW Agreement.  But Kong Cheong’s obligation to transfer the Land did not arise until the last instalment of $80 million under the First Share Transfer Agreement was paid on 7 September 2006.  The parties’ position became interlocked.

46.  To find a way out of the impasse, Platinum held a shareholders meeting on 17 November 2006 and passed the following resolution (the “First Resolution”):

(1)   Suen would replace Platinum and take up all its rights and obligations under the various agreements entered into between Platinum and Kong Cheong, including the sale and purchase of the Land;

(2)   Suen would pay Kuang compensation of $240 million, of which$110 million had already been paid earlier; and $40 million for relocation compensation, legal expenses and debt owed to Nam Tung Company was to be paid by Suen separately, leaving $90 million payable on the day when the certificate of transfer in respect of the Land was executed;

(3)   Suen would pay Fong $20 million on the same date as above (in fact it was paid by three instalments between 21 December 2006 and 25 October 2007); and

(4)   Platinum agreed that if the litigation with Seng Heng Bank succeeded or partly succeeded, the resulting benefit would be shared among Suen, Kuang and Fong in the ratio of 50:25:25.

47.  The effect and intention of the First Resolution was to transfer all the rights and interests of Platinum in respect of the Land under the Land Development Contract to Suen and that Party A, ie Kuang and Fong, would quit Platinum and be paid compensation of $240 million and $20 million respectively.  Indeed, on the same day, Suen, Platinum and Kong Cheong entered into an agreement to transfer Platinum’s contractual rights relating to the Land to Suen.  Thus, Platinum’s right to purchase the Land from Kong Cheong at $188.3 million under the Kong Cheong/Lo Agreement and its interest in the part payment was transferred to Suen.  Platinum remained an empty shell with no value.

48.  On the same day, Suen and Kuang cancelled the First Share Transfer Agreement.  Probably, they had or should have similarly cancelled the Second Share Transfer Agreement as well because the $110 million referred to in the First Resolution included the first instalment of the purchaseprice for the shares in Platinum under the Second Share Transfer Agreement in the amount of $10 million.  If they had not so cancelled it, it was an oversight. 

49.  The effect and intention of the cancellation of the First and Second Share Transfer Agreements was to restore Party A and Party B in the same position as they were before, with Kuang and Fong holding 50% of the shares in Platinum and Suen holding the other 50%.  Upon cancellation of the First and Second Share Transfer Agreements, the $90 million paid to Kuang must be returned to Suen in cash or in some other form.  This became a hotly disputed issue between the parties.  The defendants’ case is that this sum was treated as part payment of the purchase price of the Land by Suen.  The Plaintiff’s case as argued by Kuang and advanced by Mr Cheung is that it is money belonging to Kuang for the part payment of his 15.75% shares in Platinum despite the sale had been cancelled.  That argument could be easily dismissed as unmeritorious for the simple reason that the sale of the shares must have been cancelled ab initio.  But I shall go through the parties’ arguments.

50.  Under the First Resolution, it was expressly agreed that in respect of the $240 million compensation to Kuang credit should be given to the $110 million paid previously, ie the $20 million paid by Platinum for the purchase of the Land and $90 million paid by Suen for the purchase of Kuang’s 15.75% shares in Platinum.  This is clear indication that the $90 million to be returned to Suen upon cancellation of the First and Second Share Transfer Agreements need not be returned but to be treated as part payment of the compensation to Kuang.

51.  As Kuang and Fong held the shares in Platinum as nominees of Kong Cheong and the shares in Platinum has no value without the Land or contractual rights in relation to the Land, the compensations were obviously not intended for Kuang and Fong personally for the loss of their shares in Platinum, but intended for Kong Cheong for its loss of the Land.  It must not be forgotten that Kuang and Fong were just nominees of Kong Cheong.  Kuang’s compensation, which included the $90 million refund from the cancellation of the First and Second Share Transfer Agreements, was in essence payment for the price of the Land.  That was why Suen said that this $110 million was part of the purchase price for the Land.  That was also why he said the purchase of the Land under the First Resolution and his purchase of 15.75% of the shares in Platinum (or to be more precise, its cancellation) were the same transaction. 

52.  However, Mr Cheung obstinately argues that Suen was double counting; the $90 million paid for the shares in Platinum to Kuang could not be treated as payment of the purchase price of the Land to Kong Cheong; and that the shares in Platinum has value represented by its contractual rights.  With the greatest respect, his argument is illogical and self-contradictory.  He deliberately turned a blind eye to the cancellation of the First and Second Share Transfer Agreements and the fact that Platinum was an empty shell without value if all its contractual rights in respect of the Land had been transferred to Suen.  How can Mr Cheung argue that on the one hand that the share purchase was cancelled and on the other hand that Kuang may keep the price paid and Suen has no right to recover the price?  He also turned a blind eye to the fact that Kuang held the shares in Platinum as a nominee of Kong Cheong as Party A.  How can Mr Cheung argue that Kuang is beneficially entitled to the compensation under the First Resolution?  Such arguments demonstrate a total lack of good faith in the Plaintiff’s conduct of the proceedings and lack of honesty on the part of the witness in instructing counsel to advance such arguments.  Counsel who deliver such argument should also share in the criticism.

53.  There is one apparent lacuna left by the First Resolution, which is who is to discharge the encumbrances over the Land.  Under the Land Development Contract, Kong Cheong was to inject, which was equivalent to “sell”, the Land to Platinum free from encumbrances. There was no more joint venture and Suen was to have the benefit of the Kong Cheong/Lo Agreement to have the Land sold to him for $188.3 million with encumbrances.  Thus, the parties’ intention under the Resolution was for Suen to purchase the Land subject to encumbrances.  That is why I say the lacuna was an apparent one.  Indeed this lacuna was filled by another resolution of Platinum two weeks later. 

54.  According to Kuang, Platinum was informed by its solicitors that after taking into account the interest and legal costs the total sum to be repaid to Seng Heng Bank for fully settling the mortgagee action would be about $70 to $80 million more than the maximum guaranteed by Kong Cheong.  Later with information from the Macanese court, the total sum was estimated to be $570 million.  Then a shareholders meeting was called.  At the shareholders meeting on 30 November 2006, it was resolved that Suen shall be responsible for repaying the Seng Heng Bank Loan up to the limit of $570 million (the “Second First Resolution”).  If upon litigation the liability exceeded that limit, Suen shall have the liberty not to perform the First and Second Resolution and the shareholders shall resolve among themselves as to how to resolve the situation. 

55.  Suen denied there was such a resolution.  The maintenance of the previous cap at MOP 493.52 million is an important part of Suen’s case that he had paid the balance of $90 million upon execution of the certificate of transfer.  The Second Resolution showed that Suen had acknowledged receipt of the original copy of the resolution.  In his witness statement he said that he did not have any recollection of the meeting.  But in court he went that far as to suggest for the first time that what purported to be his signature on the resolution was a forgery.  Fraud has never been pleaded or suggested in any correspondence between the parties’ solicitors.  In all the three different versions of the sale and purchase agreements, namely S&P(1), S&P(2) and S&P(3), no cap was set for the amount of encumbrances, suggesting that Suen accepted that Wui San was to purchase the Land subject to encumbrances without limit.  Given Suen’s equivocal assertion in his witness statement and his half-hearted allegation of fraud, the likelihood was that if Suen was not deliberately attempting to mislead the court, he had agreed to the resolution but forgotten about it. 

56.  Furthermore, Suen had no dispute about the First Resolution.  He knew the Land was subject to the Seng Heng Bank Loan which he had guaranteed up to a certain limit.  By accepting the right under the Kong Cheong/Lo Agreement to purchase the Land subject to encumbrance, he mustappreciate that the limit available to him as a guarantor may not be available to him as a purchaser of the Land.  That must be the reason why Kuang called for a shareholders meeting on 30 November 2006 when this issue was thoroughly discussed.  A new cap of $570 million was agreed.  If the encumbrances exceeded this new cap, both the First and Second Resolution shall be of no effect and the shareholders shall try to resolve the situation bysome other means. While the new cap was a matter for the shareholders and a matter of evidence, the approach was reasonable and sensible.  I accept Kuang’s evidence that the resolution had in fact been passed.

57.  In the meantime, Suen paid Ko Kan $6 million as part of the purchase price for the Land.  The Plaintiff argued that the payment was a personal transaction between Suen and Ko Kan, but there is no evidence to support that contention.

58.  In summary, the effect of the First and Second Resolutions and the related agreements was to put an end to the joint venture with Kong Cheong selling the Land to Suen, instead of to Platinum or Lo under the earlier agreements.  Suen shall purchase the Land at an increased price of $260 million, instead of $188.3 million subject to encumbrances as before and with the limit on liability for the Seng Heng Bank Loan increased to $570 million.  All funds put into the joint venture by Party B shall be treated as part payment of the purchase price for the Land.  But this increased price would not be reflected in the three sale and purchase agreements of the Land between Kong Cheong and Wui San (ie S&P(1), S&P(2) and S&P(3)) for the simple reason that Suen was to have the benefit of the Kong Cheong/Lo Agreement through the First Resolution.  The increase in the price of the Land of $71.7 million would be reflected and included in the $90 million to be paid to Kuang upon execution of the certificate of transfer of the Land to Wui San in due course.  The subsequent dispute of the parties leading to the legal actions between Suen and Kong Cheong in Macau as well as these proceedings have to be viewed against the above backdrop.

Stage V—January 2007:  The power of attorney and the three sale and purchase agreements

59.  In furtherance of the First Resolution, Ko Kan on behalf of Kong Cheong executed a general power of attorney in favour of Suen on 11 December 2006, authorizing him to deal with the Land, including selling it to himself.  On 3 January 2007, Ko Kan on behalf of Kong Cheong and Suen on behalf of Wui San executed a sale and purchase agreement selling the Land to Wui San (“S&P(1)”).  The terms of S&P(1) were based on the Kong Cheong/Lo Agreement, except that it acknowledged receipt of a down payment of $50 million. 

60.  The Plaintiff alleged that it was the agreement of Ko Kan and Suen that the purpose of executing the power of attorney and S&P(1) was for them to be shown to Suen’s mother to induce her into financing the building development on the Land and that they were not meant to have legal effect.  Ko Kan’s case which also forms part of the Plaintiff’s case, is that the parties deliberately planted errors in Suen’s name and his identitycard number on S&P(1) to ensure that it would have no legal effect and that it could only be used by Suen to show to his mother.  That was how Suen obtained funds to discharge the Seng Heng Bank Loan in March 2007.  Suen denied.  He said that the power of attorney was a security for he hadlost confidence in Ko Kan and that S&P(1) was entered into pursuant to the First Resolution and was meant to have legal effect.  With the execution of S&P(1), the purpose of the power of attorney was spent.

61.  For one simple reason I would dismiss Ko Kan’s argument aboutS&P(1).  S&P(1) was prepared by the parties’ solicitors.  While it would not be impossible for Suen and Ko Kan to put their heads together to generate a deliberate mistake, it would be stretching one’s imagination too far to suggest that their solicitors, as officers of the court, were a party to this fraud against Suen’s mother.  Furthermore, S&P(1) was a reproduction of Kong Cheong/Lo Agreement.  The mistake as to Suen’s name was a typo while themistake as to his identity card number was the result of the solicitors’ clerk’s failure to substitute Suen’s identity card number for Lo’s.  It is easier to accept the mistake as the result of the solicitors’ clerk’s negligence than the result of a conspiracy among Suen, Ko Kan and the solicitors’ clerk or the solicitor to defraud Suen’s mother.   I think the Plaintiff was trying to capitalise on an inadvertent mistake to boost her case.  Given the dire position of Ko Kan and Kong Cheong and the surrounding circumstances in May 2006, it was reasonable for Suen to be cautious against Ko Kan.  I reject the Plaintiff’s assertion and accept Suen’s evidence that the power of attorney was given by Ko Kan as an assurance of Kong Cheong’s performance of the First Resolution and S&P(1) as performance of the First Resolution and both documents were intended to have legal effect.

62.  A significant difference between the Kong Cheung/Lo Agreement and S&P(1) is that S&P(1) acknowledged receipt of an initial deposit of $50 million upon execution of the agreement.  There is no dispute that no money changed hands.  Suen’s case is that that sum was deemed to have been paid from part of the $110 million referred to in the First Resolution.  The agreement was executed before their common solicitors arranged by Fong. One would expect the solicitors would have verified with the partieswhether the payment had been received.  Had the payment not been receivedor not been accepted to have been paid, Ko Kan would certainly have raised it before executing S&P(1).  Accordingly, I accept Suen’s case that S&P(1) was executed pursuant to the First Resolution and I find that Ko Kan had accepted that the initial payment of $50 million had been received as part of the $110 million received by him or Kuang or Kong Cheong earlier.

63.  On 18 January 2007, Suen on the strength of the power of attorney executed a second agreement for the sale of the Land to Wui San on similar terms as S&P(1) (“S&P(2)”).  According to Suen, the purpose was to rectify the mistake as to Suen’s name and identity card number as stated in S&P(1).  He had tried to contact Ko Kan, but to no avail.  That is not disputed by the Plaintiff.  Hence, he conveniently used the power of attorney.  The terms of the two agreements were same.  Suen did not take advantage of his use of the power of attorney.  S&P(1) was then stamped “Cancelled” by the solicitor’s clerk.  However, another typo was created in Suen’s name.

64.  On 14 March 2007, Suen paid MOP 581 million into Macau Court of First Instance to discharge the Seng Heng Bank mortgage or assecurity.  The amount was within the new cap under the Second Resolution. 

65.  On 16 March 2007, using the power of attorney Suen executed a third sale and purchase agreement in respect of the Land (S&P(3)) at the solicitors’ office to rectify the typo in his name in S&P(2).  At the same time, Fong and Chan purportedly on behalf of Kong Cheong verified the various payments made by Suen and issued a receipt acknowledging receipt of $138.3 million as purchase price for the Land from Suen.  The Plaintiff disputed Fong’s and Chan’s authority to issue the receipt. 

66.  However, under the First Resolution, Suen shall pay Kuang a sum of $90 million upon execution of the certificate of transfer. As at the date of execution of S&P(3), this amount was not yet due and there is no dispute that this amount has never been paid.  Suen’s case is that by paying MOP 581 million to court in discharge of the Seng Heng Bank loan which was in excess of the cap of MOP 493.52 million by $84 million together withanother sum of $6 million paid to Ko Kan in the meantime, making a total of $90 million, he had already paid the said sum of $90 million before it was due to be paid.  On my finding, he had agreed to increase the cap to $570 million under the Second Resolution.  His discharge of the Seng Heng BankLoan was performance of his own obligation under S&P(3) and the First and Second Resolutions.  It had absolutely nothing to do with his obligation under the First Resolution to pay compensation of $90 million to Kuang at the time of execution of the certificate for transfer of the Land.  Thus, there is no basis to support Suen’s argument of set off or Chan’s receipt regardless whether Chan was authorized to issue the receipt.

Stage VI—Events from April 2007 to July 2008

67.  Between 26 April and 20 July 2007, various creditors, includingWa Wai, registered charges against the Land.  These are new encumbrances created after S&P(3).

68.  On 9 November 2007, Ko Kan revoked the power of attorney.  On the same day, he was held under administrative detention. According to the plaintiff, it was due to a complaint by another property investment company in Jiangmen, 江門市江順置業有限公司 (“Jiang Shun”).  Kuang sought Suen’s help.  Ko Kan was released on 29 November 2007.

69.  On 19 December 2007, Suen commenced legal proceedings against Kong Cheong in Macau.

70.  On 23 January 2008, Jiang Shun registered a charge of MOP 222,513,215.32 against the Land.

71.  On 22 February 2008, Kong Cheong and Wa Wai reached settlement to cancel the 1991 agreement by agreeing to pay Wa Wai $597,617,324 for failing to pay the sum of $160 million under the KC/WW Agreement.  On 3 March 2008, Wa Wai registered a charge against the Land in respect of the sum of $597,617,324.  Suen alleged that the settlement agreement was not genuine because the amount agreed was excessive having regard to the debt and because Kuang’s father became a 30% shareholder of Wa Wai six days later.  The Plaintiff says that the amount agreed was in accordance with Macanese law and Kuang’s father was only a nominee shareholder of the state owned corporation.  There is no need to resolve this dispute as it is irrelevant for the purpose of this action.  It is mentioned by way of background only.

72.  On 7 March 2008, Ko Kan sold his 70% shares in Kong Cheong to Kwong for $700,000, while Sze Man Kin sold his remaining 30% to Tam.  The share transfers were not registered until ten months later on 16 December 2008.

73.  On 19 May 2008, Wui San obtained interlocutory judgment against Kong Cheong prohibiting it from transferring the Land to any third party.

74.  In mid-2008, Suen lodged a criminal complaint with the Ministerio Publico of Macau for fraud against Ko Kan.  But no charge was laid against him.

75.  11 July 2008, at the direction of Kwong and Tam, Kong Cheong commenced legal proceedings against Wui San in Macau.

The position before the Verbal Agreement

76.  In summary, the parties’ position as at November 2008 was as follows.  Kong Cheong refused to perform S&P(3) on the ground that  Suen had no authority to use the power of attorney to execute S&P(2) and S&P(3) and that the full purchase price of $188.3 million had not been paid, not just as to $90 million.  For reasons as explained in the preceding subsections, Kong Cheong’s grievance about the non-payment of the $90 million was well justified.  But its claim for $188.3 million was grossly exaggerated for its refusing to acknowledge the price paid for the purchase of the 15.75% sharesin Platinum which ought to be returned in some form to Suen.  Suen and Wui Sancommenced proceedings against Kong Cheong on 19 December 2007 underS&P(3) to recover the Land and obtained interlocutory judgment against Kong Cheong on 19 May 2008 restraining it from transferring the Land to any third parties.  In the meantime, Ko Kan and Sze Kin Man sold their shares in Kong Cheong to Kwong and Tam respectively.  Then, two months later, Kong Cheong under Kwong’s and Tam’s control commenced proceedings against Wui San on 11 July 2008.  In the meantime, a lot of new encumbrances created after January 2008 were registered against the Land as a result of the litigations between Kong Cheong and other third parties.

77.  It was under these circumstances, according to the Plaintiff, that Suen requested her assistance in November 2008 to mediate with Kong Cheong for a settlement by executing the certificate of transfer; or according to Suen when he and Ko Kan entered into the First Oral Agreement to settle the legal proceedings and the Second Oral Agreement to procure delivery of vacant possession of the Land and to clear the encumbrances.

CREDIBILITY OF THE WITNESSES

Credibility of the Plaintiff

78.  Though the Plaintiff had experience operating a small business, she nevertheless impressed me as a simple woman.  She was asked to recall events which occurred ten years ago.  She had no knowledge about the dealings of Kong Cheong and Platinum.  It was fair that she could not give any meaningful answer when cross-examined on those matters.  I give her all the allowance I could give to a witness of such character.  I also reject most of the criticisms raised against her by counsel about her giving false or incomplete address. 

79.  On the Plaintiff’s pleaded case, she is the plaintiff and the contracting party to the Verbal Agreement, a $100 million agreement.  Not many people could have such an experience in their lifetime. She was to receive a very substantial financial benefit.  If there was indeed such an agreement, everything which happened during the course of making and performing that agreement must have left a deep impression on her mind.  After all, on her case, there were just four meetings and a telephone conversation to recall and to talk about.  However, in her Answers to Further and Better Particulars dated 20 June 2016 in answer to the defendants’ request for particulars of her mediation work, she said:

“ The Plaintiff with her husband and on occasions her husband on her behalf visited [Kwong] and [Tam], the new shareholders of Kong Cheong, who were sometimes in Macau and sometimes in Guangzhou. The exact number of occasions could no longer be recalled.”

That was her Answer two years ago, when her memory was probably better then than at trial.  Yet, she said she could no longer recall the exact number of occasions when she and Kuang met Kwong and Tam for mediation.  However, in her evidence under cross-examination, she gave a somewhat detailed account of her four meetings with Kwong and Tam.  She was able to recall not only the number of occasions but also details of each of the meetings.  But the details were inconsistent with those given in the Answerin that Kuang never appeared alone in those meetings on her behalf.  In hertestimony, she also volunteered details not contained in her witness statement such as spending $100,000 to $200,000 in treating Kwong and Tam on meals and gifts of wine and tea leaves.  But these were details invited by counsel in cross-examination.

80.  The Plaintiff tried to explain that at the time of giving her Answer she was reluctant to answer the defendants’ requests but when giving her testimony in court she was trying her best to recall details.  She should be more relaxed when giving her Answer before her solicitors than giving answers before counsel under cross-examination in the court environment.  She must also have been advised by her solicitors to give full and frank disclosure when giving her Answer.  I find her explanation incredulous.  Her testimony is outside the bounds of her witness statement.  This is a hallmark of recent fabrication.  Her vague Answer is evidence of untruthfulness.  I do not find her credible.

81.  The Plaintiff also gave inconsistent details on how Suen approached her.  In her witness statement, she painted the picture that for some reason Suen had been approaching her since March 2007 from time to time asking her to mediate between Kong Cheong and Wui San.  In terms of chronology, there was not much to mediate at that time.  Ko Kan executed S&P(1), followed by Suen executing S&P(2) and S&P(3) with Fong and Chan confirming receipt of the full purchase price for the Land.  There was nothing to suggest that the date given in her witness statement was a typo.  Then, under cross-examination, she said the request for mediation was made in June to July 2008, more than a year later.  Furthermore, her evidence was that Suen had been looking for Ko Kan instead of her; and on many occasions, she asked Kuang to talk to Suen, instead of dealing with the request herself.  This downplayed her alleged role as mediator and the contracting party to the Verbal Agreement. 

82.  Then, the Plaintiff’s case took a turn.  She gave evidence which is inconsistent with her pleaded case.  In paragraph 5(3) of her Re-Amended Statement of Claim, the Plaintiff pleaded:

“ [The Plaintiff] of one part and [Suen] for and on behalf of himself and [Wui San] of the other part orally agreed … that [the Plaintiff] shall assist [Wui San] so that it could successfully sign with Kong Cheong the certificate for the transfer of the Land to [Wui San] and in return [Suen] and [Wui San] would pay [the Plaintiff] a fee of HK$95,000,000.00.”

Under cross-examination, the Plaintiff asserted that the Verbal Agreement was reached on a triparte basis between herself, Kuang and Wui San.  She said that she and Kuang should be treated as one single entity.  In addition to making Kuang a party to the Verbal Agreement, Wui San substituted Suen as the contracting party.  She also introduced a new term that Suen should provide a sum of $15 million as legal fees and if the provision was not exhausted, it should form part of her remuneration in addition to the agreed fee of $95 million.  Although this term was mentioned in the Intermediary Agreement, it was not pleaded.  The Plaintiff said she would consider suing on this term later.  Then, she added three more unpleaded conditions, namely (1) that the litigations, eg with Wa Wai and Pak Vai should be cleared; (2) that all the debts should be cleared; and (3) that all legal fees should be borne by Wui San.  It is not entirely clear what were the litigations she was referring to, apart from those with Wa Wai and Pak Vai; and what were the debts.  These conditions are more consistent with the defendant’s case of the Second Oral Agreement than the Plaintiff’s original pleaded case of Verbal Agreement.

83.  The Plaintiff also departed from her original pleaded case and witness statement that on 10 January 2009, Ko Kan and Kuang were acting on her behalf in attending the execution of the certificate of transfer.  She said in evidence that she was only represented her husband Kuang.

84.  Apart from excessively topping up her evidence about her four meetings with Kwong and Tam, the Plaintiff departed from her pleaded case.  She was selective in pleading her case and changed her case when it suited her.  It appeared as if there were more which she was not prepared to plead and to tell the court.  I do not find her a credible witness.

Credibility of Kuang

85.  Kuang’s evidence about the formation of the Verbal Agreement and his mediation with Kwong and Tam was in line with the Plaintiff’s.  For the same reasons as I have given in my analysis of the Plaintiff’s credibility, I do not find that part of Kuang’s evidence credible.

86.  Kuang assisted Ko Kan in the management of Kong Cheong.  He was able to provide more information on the background leading to the present dispute.  As set out in the background, it is beyond dispute that he held the shares in Platinum as a nominee of Kong Cheong and he had no beneficial interest in those shares.  Yet, he insisted he had a personal interest in the purchase price for 15.75% of the shares in Platinum held by him or the compensation of $90 million under the First Resolution and refused to accept that upon the cancellation of the First and Second Share Transfer Agreements the part payment of the price paid for the purchase of those sharesshould be returned to Suen and applied towards payment of Suen’s purchase price of the Land.  On behalf of himself and Kong Cheong, he dishonestly made a double claim for the price of the 15.75% shares in Platinum, the sale of which had been cancelled and for part of the purchase price of the Land which had been set off.  He was an exaggerating and dishonest witness.  He attempted to mislead the court.  I do not believe his evidence.

Credibility of Suen

87.  Mr Cheung devoted twenty-two pages of his closing submission attacking Suen’s incredibility.  Essentially, it was an analysis of the evidence of the entire case with a focus on Suen’s incredibility.  As my finding on the background shows, I do not entirely agree with Mr Cheung’s analysis.  But I do agree with his conclusion that Suen was not a credible witness.  The following amply demonstrates his incredibility. 

88.  Despite what purports to be his signature on the Second Resolution, he denied he had agreed under the resolution to increase the limit of his liability for the guarantee on the Seng Heng Bank Loan to $570 million.  He even made a belated and half-hearted attempt to suggest that what purported to be his signature was a forgery.  For reasons as I have already explained, that was a concoction in the witness box.  If it were a forgery, his legal term would have properly pleaded forgery. 

89.  Then based on his dishonest denial about the Second Resolution,he made another dishonest assertion that the $90 million to be paid to Kuang upon execution of the certificate for transfer had been pre-paid by reason of his having paid in excess of his agreed cap under his guarantee for Seng Heng Bank Loan.

90.  For reasons as I shall give when analysing the Intermediary Agreement, Suen made another dishonest assertion that the name of Party B in the Intermediary Agreement was left blank when Ko Kan produced the document to him for signature.

91.  His dishonesty goes to the heart of the dispute in this action.  He has demonstrated propensity to distort the facts in this case.  I do not find him a credible witness.

THE FACT

Introduction

92.  The crucial issue in this case, as both counsel rightly agree, is whether the Plaintiff and Suen had entered into the Verbal Agreement which was subsequently recorded and evidenced in a written document titled “Intermediary Agreement”.  The Plaintiff bears the burden of proof.  If she fails to discharge the burden her cause of action based on breach of agreement fails and so does her cause of action based on dishonoured cheque due to total failure of consideration.

93.  Upon realising that Ko Kan is now deceased and that his estate is not worth the counterclaim, Suen made a practical decision not to pursue the counterclaim against Ko Kan.  He does not even have to bear the burden of proving the Second Oral Agreement.  If he does discharge that burden, it goes a long way to destroy the Plaintiff’s case.

94.  The dispute in this case is largely factual.  The most reliable testof credibility is inherent probability of the witness’ evidence, in other words,the commercial sense of the Verbal Agreement.  The court shall test the witness’ evidence against the contemporaneous documents and the surrounding circumstances, which include the entire course of transactions in the background since October 2005.  The Intermediary Agreement is only one document which is contemporaneous to the Verbal Agreement or the Second Oral Agreement alleged by Suen.  The major difficulties facing this court is that all the three witnesses were incredible.

95.  I refer to the background set out in paragraphs 29 to 77, particularly the summary at paragraphs 76 and 77 about the parties’ position immediately before the alleged Verbal Agreement and the First and Second Oral Agreements.

Ko Kan

96.  Ko Kan is the central figure in this litigation.  He was the majority shareholder of Kong Cheong and the person in charge, except for aquestionable period between 7 March 2008 and 30 October2009. He was the key figure in all the transactions in relation to the Land. According to the defendants’ case, he proposed to settle the legal actions between Kong Cheong and Wui San and he undertook to procure Kong Cheong to deliver vacant possession of the Land and to clear all its encumbrances.  It is remarkable that he offered to do that when he was no longer a shareholder or director of Kong Cheong.  He attended the execution of the certificate of transfer by Kong Cheong and produced or was given the Intermediary Agreement by Suen.  He collected payment of one of the instalments of intermediary fee from Suen.

97.  It is the Plaintiff’s case that Ko Kan wanted to take a break because of his illness and sold his 70% shareholding in Kong Cheong to Kwong on 7 March 2008 for a consideration of $700,000 while Sze Kin Man, for no obvious reasons, also sold his 30% shareholding to Tam.  That was just two months before Suen obtained the interlocutory judgment.  Sometime after the making of the Verbal Agreement, Ko Kan purchased back his shares from Kwong and arranged Leung Ying Lok to purchase Tam’s shares at the same price on 1 November 2009.  The Plaintiff suggested that during the interim period, ie the performance of the Verbal Agreement, Kong Cheong wasout of the control of Ko Kan.  She suggested that Kwong and Tam were distressed asset hunters and tried to explain Ko Kan’s purchase back at the same price and arranged for the purchase of Tam’s share by Leung Yin Lok was for friendship reason.  While that might explain Ko Kan’s purchase of Kwong’s shares, it could not explain the purchase of Tam’s share.  

98.  At the time of sale of Ko Kan’s and Sze Man Kin’s shares in Kong Cheong to Kwong and Tam, not only was the Land subject to litigation, Kong Cheong was heavily laden with post January 2007 liabilities of over MOP 900 million.  Unlike the position of Wui San, these post January 2007 encumbrances had been registered before the sale of the shares.  Those liabilities must have been boiling and known to any sensible distressed asset hunter.  There was absolutely no commercialreason for any distress asset hunters to buy them; and all the less reason for Ko Kan to buy them back at the same price as Kong Cheong was laden with more debts and had been ripped of all its assets as result of the Verbal Agreement.  Furthermore, the so called “friendship reason” cannot explain why a wholly unrelated third party and stranger, Leung Yin Lok, should purchase Tam’s shares.  One also wonders why the transfer to Kwong and Tam was not registered until 9 months later on 16 December 2008 and less than a month before their re-transfer back to Ko Kan and sale to Leung Ying Lok.  The Plaintiff’s argument that the sale and purchase back of the shares by Ko Kan was a genuine distressed asset sale lacks conviction.  There is much more that the Plaintiff or Kuang were not telling this court.  I accept Mr Pun SC’s submission that those share transfers were sham transactions to distance Ko Kan from Kong Cheong, but Ko Kan remained as the stealth controller of Kong Cheong with Kwong and Tam as his puppets.

99.  Another important piece of evidence is that it was Ko Kan’s undisputed practice to arrange for payments tobe made to him to be paid to his wife’s or the Plaintiff’s bank account.  Thepurpose was to keep the funds out of reach of his creditors as he was always in debt.  Payments made to Ko Kan or to him for Kong Cheong simply disappear through his wife’s or the Plaintiff’s bank account.  Payment, for example of the $80 million under the First Share Transfer Agreement which was supposed to be applied to pay half of the debt owing to Wa Wai and Pak Vai simply vanished.  Ko Kan was a questionable character.  Anything allegedly done by him has to be viewed with suspect.

The Intermediary Agreement

100.  The Intermediary Agreement, as I have said, is the only contemporaneous document in this action.  Suen’s case is that it was produced by Ko Kan after execution of the certificate of transfer with the description of Party B left blank.  The Plaintiff’s case is that it was produced by Suen when Suen asked for time to pay and offered fourpost-dated cheques as security.  When produced, it was in the same condition as it now appears with the name of the Plaintiff as Party B already printed on the document and with the copy of the four post-dated cheques printed on its back.  How this document came about is a crucial indicator of where the truth lies.

101.  The most striking feature of this document is the correct reference to the date of the four post-dated cheques in the body of the document and the image of the four post-dated cheques on the back of the document.  Suen explained that the dates were all on the last date of the months and were agreed during earlier negotiations with Ko Kan.  That explains why Ko Kan was able to put the correct dates of the post-dated cheques on the document.  However, while it is possible to print the four post-dated cheques on the back of the Intermediary Agreement, it is difficult to print the name of Party B as if it were an original run from the printer as it appears to the ordinary eye.  It is not Suen’s case that he did not notice what was written about Party B.  He made a positive assertion that Party B was left blank, which is unlikely to be true.  Thus, on the evidence as it stands, a first-hand impression of the Intermediary Agreement is that Ko Kan could not have been the maker of this document and that Suen’s case that Party B was left blank is not to be believed.  But that does not necessarily mean that I am driven to accept Ko Kan’s account en bloc as asserted by the Plaintiff in full.  If it were Suen’s evidence that Party B was already printed on the Intermediary Agreement, it would have been easy for me to accept his evidence and to infer that Ko Kan printed the cheques on the back of the Intermediary Agreement afterwards.  That is not the evidence and no one was telling the whole truth.  On the state of the evidence, I am bound to reject Suen’s evidence and accept the prima facie evidence as presented by the Intermediary Agreement.

The Plaintiff’s case of the Verbal Agreement

102.  The Plaintiff’s case is as follows.  Ko Kan had been receiving regular and intensive treatment for his cancer during 2007. Since March 2007, Suen had been approaching the Plaintiff seeking her help to contact Ko Kan or to mediate between him and Kong Cheong.  The Plaintiff only gave ambivalent answers as Ko Kan wasnot feeling well.  Suen commenced legal proceedings against Kong Cheong in December 2007.  Because of his health, Ko Kan wanted to take a break.  In March 2008, he sold his shares in Kong Cheong to Kwong while Sze Kin Man sold his to Tam. 

103.  Between June and July 2008, Suen for the first time explicitly asked the Plaintiff how to settle the dispute about the Land.  At around thattime, Kong Cheong commenced legal proceedings against Suen and Wui San.  A few days later, Kuang called up Suen and requested $100 million as remuneration for settling the legal proceedings.  In September 2008, Suen called back thePlaintiff.  In mid-October 2008, Suen called the Plaintiff again and the Plaintiff passed the telephone over to Kuang.  Suen and Kuang agreed to meet for a face-to-face discussion.  Eventually, the Plaintiff had a meeting with Suen in a teahouse in Shun Tak Centre when Suen was on his way back to Macau.  There they reached the Verbal Agreement for the Plaintiff to procure Kong Cheong to execute the certificate of transfer in respect of the Land for an intermediary fee of $95 million.  This is about the same amount which Suen was required to pay Kuang under the First Resolution.

104.  On the next day, the Plaintiff, Kuang, Kwong and Tam met in Tao Heung Restaurant in Guangzhou.  Kuang attempted to persuade Kwong and Tam to leave Kong Cheong at a tie, but they refused.

105.  Two or three days later, they met again in Wo Kee Restaurant in Macau to discuss the same matter.  Kwong did not give any direct reply.

106.  In mid-December 2008, the four of them met again in Wo Kee Restaurant.  Kwong’s attitude softened as Kuang had previously assisted him in arranging a bank loan of $10 million.

107.  After that meeting, Kwong told Kuang that he and Tam would agree to transfer the Land to Wui San on three conditions:

(1)   that the litigation with Wa Wai and Pak Vai should be cleared;

(2)   that the debts be cleared; and

(3)   all the legal costs be borne by Suen.

108.  Around Christmas in 2008, the four of them met in Guangzhou.  Kuang informed Kwong and Tam that Suen accepted their offer.

109.  In early January 2009, Suen and Kong Cheong discontinued their proceedings against each other by consent and Kong Cheong agreed to execute the certificate of transfer in respect of the Land.

110.  On 9 January 2009, Suen asked for the Plaintiff’s identity card number for the purpose of preparing an agreement for record.

111.  On 10 January 2009, Ko Kan, Kuang and Suen attended the solicitors’ office to executed the certificate of transfer, but the Plaintiff did not.  The sum of $95 million became due and payable.  But Suen asked for time to pay.  He produced a pre-typed document (ie the “Intermediary Agreement”) signed by himself and four post-dated cheques with the Plaintiff’s name as payee in the total sum of $95 million.  Kuang had no alternative but to accept.  In the evening, Kuang handed the post-dated cheques and Intermediary Agreement to the Plaintiff and she signed.

112.  When the first payment became due, Suen indicated to the Plaintiff that he would need more time to pay.  He eventually paid her $2 million and a post-dated cheque in the amount of $13 million.  The Plaintiff then returned the first post-dated cheque to Suen. 

113.  In about July 2009, Suen told the Plaintiff that he would pay $6 million.  As the Plaintiff was not free, Ko Kan went to collect the payment.  He prepared a receipt in the amount of $8 million, which included the $2 million received earlier and the $6 million to be received.  However, when he met Suen, Suen only paid him $5 million and said he would pay another $1 million in a few days.  Up to that stage, Suen had paid 7 million.  Ko Kan then gave Suen the receipt for $8 million without amending the amount received. 

114.  In October 2009, Suen paid a further sum of $3 million.  Suen said that he would send the Plaintiff a cheque of $5 million later to make up the sum of $15 million.  But Suen never did and became uncontactable.  Up to that stage, the total sum she received from Suen was $10 million.  Eventually, the Plaintiff presented the other three post-dated cheques, which were all dishonoured.  

Inherent probability of the Plaintiff’s case

115.  Apart from the fact that the Plaintiff was shown to be an incredible witness and her evidence about the four meetings with Kwong and Tam incredible, on the objective evidence, she had not performed her obligation under the Verbal Agreement fully and appeared to be a total stranger to the Verbal Agreement, even if there were such an agreement.

116.  On her un-pleaded case asserted in the witness box, two of the conditions imposed by Kwong and Tam for executing the certificate of transfer were that the litigations and debts of Kong Cheong were to be cleared.  There were ten encumbrances registered against the Land in the total value in excess of MOP 1,300 million.  This fortuitous evidence of hers blew up her case entirely.  There is no evidence that these two conditions had been fulfilled.  If what she said about her mediation with Kwong and Tam were true, there was no reason why Kwong and Tam would agree to executethe certificate of transfer.  When cross-examined on this matter, the Plaintifffailed to offer and plausible explanation but only said that she was not familiar with the litigations because she was not involved.  It appeared as though she was a total stranger to the mediation or if indeed there was any mediation.  Her evidence about these un-pleaded terms is more in line with Suen’s case of the Second Oral Agreement.

117.  The Plaintiff was absent in the most critical moment of the performance of her obligation under the Verbal Agreement.  The certificate oftransfer was executed on 10 January 2009 at the solicitors’ office upon which she was to be paid $95 million.  She was supposed to be present to ensure its execution and to see to it that all the conditions were fulfilled such as the clearance of all the debts and litigations against Kong Cheong.  She was not there.  She explained that she could not attend because she was suffering from Meniere’s disease and she told Kuang to attend.

118.  On the undisputed evidence, Ko Kan also attended the execution.  She explained that Kuang happened to see Ko Kan in the office and Kuang asked him to come along.  It should be recalled that in her Re-Amended Statement of Claim, she pleaded that Ko Kan and Kuang acted on her behalf.  But in her evidence she distanced Ko Kan’s involvement and said that Ko Kan did not represent her.  If Ko Kan’s presence on that occasion was a coincidence,Ko Kan’s representing her to collect the intermediary fee on 8 July 2009 andto sign a receipt was too much of a double coincidence.  Viewed objectively, Ko Kan’s position as a stealth director of Kong Cheong, his presence at the execution of the certificate of transfer and his collection of intermediary fee coupled with the Plaintiff’s absence on these two important occasions suggest that Ko Kan and not the Plaintiff was the person instrumental to these transactions and the real contracting party to some mediation agreement.  The Plaintiff simply had nothing to do with the execution of the certificate of transfer.

119.  Her absence apart, the Plaintiff was supposed to be paid $95 million on 10 January 2009.  However, on the Plaintiff’s case, instead of paying her, Suen produced the Intermediary Agreement and four post-dated cheques to Kuang, thereby deferring payment by 30 months.  Kuang accepted without even consulting the Plaintiff.  The Plaintiff’s explanation was that there was nothing Kuang could have done but to accept; that Suen had signed the Intermediary Agreement and had given her four post-dated cheques; and that she did not anticipate at the time that Suen would cheat her of the payment.  Then despite that she was only paid $10 million subsequently, she did not takelegal action to enforce the payment until three years later.  Such explanation is incredulous.  In my view, her absence, Ko Kan’s presence and Kuang’s acceptance of the post-dated cheques without consulting her suggest that she had no role at all in the transactions.

120.  The Plaintiff’s strongest evidence is the Intermediary Agreement.  By reason of Suen’s evidence, I am driven to the conclusion that it was Suen who prepared the Intermediary Agreement with the Plaintiff’s name as the other contracting party.  That does not mean I must accept the Plaintiff’s account fully as I have found her and Kuang incredible. By reason particularly of Ko Kan’s practice of arranging payment to him to be made to his wife or the Plaintiff, I have much misgiving about the Plaintiff’s case that she was the contracting party to the Verbal Agreement.  The facts strongly suggest that Kwong and Tam were Ko Kan’s puppets and Ko Kan, not the Plaintiff, was the real person orchestrating the Verbal Agreement or the First and Second Oral Agreements or some other agreement which they did not tell this court. Even accepting the Plaintiff’s case that Suen prepared the Intermediary Agreement naming her as Party B and making the post-dated cheques payable to her, the evidential value of the Intermediary Agreement and cheques is significantly reduced.

121.  More importantly, there are two underlying themes in the Plaintiff’s case of Verbal Agreement.  First, the Plaintiff was to be paid $95 million for procuring Kong Cheong to execute the certificate of transfer.  Second, Kong Cheong was to receive no benefit for doing what the Plaintiff procured it to do. 

122.  On the Plaintiff’s case, all that she had done to bring about the settlement or to earn $95 million was four visits and meals, wine and tea leaves of the value of about $200,000 plus Kuang’s assistance in arranging a loan of $10 million for Kwong.  It is inherently improbable that for these minor acts Kwong and Tam would have agreed to give up Kong Cheong’s claim of $278.3 million, ie $188.3 million ($50 million as initial deposit) purchase price for the Land underS&P(3) and another $90 million payable to Kuang upon execution of the certificate of transfer under the First Resolution.  Even if Kwong and Tam realised that Kong Cheong’s claim for the purchase price of the Land was grossly exaggerated, they ought to realise that Kong Cheong or Kuang had at least a good claim for the $90 million under the First Resolution.  The sum of $90 million was too much to give away for those relatively trivial acts of the Plaintiff and Kuang.  The Plaintiff’s case that she brought about the settlement by her mediation was just absurd.  On this count alone, the Plaintiff’s case is inherently improbable.  While it is often said that consideration need not be adequate, the inadequacy speaks for the lack of realism or the fictitious nature of the proposition as to make the proposition inherently improbable.

123.  From point of view of Suen, he thought rightly or wrongly that he has a good case against Kong Cheong as he had on the face S&P(3) executed pursuant a good and valid power of attorney and Kong Cheong’s receipt signed by Fong and Chan for the full purchase price of the Land.  In addition, he had also obtained an interlocutory judgment against Kong Cheong.  Why should he pay a third party $95 million to get what he thought he was entitled to get as of right?  If he was prepared to spend that amount of money, it would have been better spent offering it to Kong Cheong for a proper settlement inter partes by honouring his obligation under the Second Resolution than to give it away to an unrelated third party. It is illogical that the Plaintiff as a total stranger to Kong Cheong should be entitled to make a disproportionately big fortune of $95 million from the transfer of the Land by Kong Cheong whereas Kong Cheong itself got absolutely nothing.  The Plaintiff’s case is really absurd.

124.  Then, there is the adverse inference to be drawn from the unexplained failure of the Plaintiff to calling Tam to testify.  On the Plaintiff’s case, Tam represented Kong Cheong and accepted the Plaintiff’s mediation.  He signed the certificate of transfer.  He was the best witness to confirm that the Plaintiff did procure his and Kwong’s agreement to cause Kong Cheong to execute the certificate of transfer and to explain why they agreed.  He was the best person to explain the surreptitious transfer of the share in Kong Cheong to him and Kwong and their sale back to Ko Kan and Leung Yin Lok at the same price.  In the circumstances, the only logical inference from the Plaintiff’s unexplained failure to call Tam as witness is that the Plaintiff feared that Tam would disclose something unfavourable to her case, particularly when cross-examined on the above matters. 

125.  In conclusion, I find it inherently improbable that the Verbal Agreement existed and even if it did that the Plaintiff was a party to the agreement.  It is probable that she was trying to capitalize on some agreement entered into between Ko Kan and Suen in which she was made a payee.  She has failed to discharge the burden of proof.  This conclusion is sufficient to dispose of this action altogether as Mr Pun SC has indicated that the defendants are not pursuing against Ko Kan on the counterclaim.  Nevertheless, I shall deal with the counterclaim very briefly.

Suen’s case of the First and Second Oral Agreements

126.  Suen’s case is that under the pressure of civil litigations and criminal investigations, Ko Kan contacted Suen towards the end of 2008 to discuss settlement.  They agreed to mutually discontinue the legal proceedings on the basis that Ko Kan would procure Kong Cheong to execute the certificate of transfer (the “First Oral Agreement”). 

127.  The Land was occupied by a Wu Tak Nang possibly with the permissionof Kong Cheong or Ko Kan.  There were numerous judicial charges and encumbrances registered against the Land which were all created after the execution of S&P(3) in January 2007 as a result of Kong Cheong’s litigations with other third parties.  Hence, Suen asked Ko Kan to resolve those problems.

128.  In January 2009, he and Ko Kan reached another agreement (the “Second Oral Agreement”).  The terms of that agreement were:

(1)   Ko Kan shall procure delivery of vacant possession of the Land to Suen and to discharge all encumbrances registered against the Land after 18 January 2007;

(2)   Suen shall pay Ko Kan $105 million, of which $10 million shall be paid upon execution of the certificate of transfer and the balance of $95 million by four instalments on 30 April 2009, 31 August 2009, 30 November 2009 and 31 July 2011;

(3)   Suen shall issue four post-dated cheques as security for the payments which shall be honoured depending on Ko Kan’s performance of the above obligations; and

(4)   Ko Kan shall not bank the cheques without Suen’s consent.

129.  On 10 January 2009, Suen, Tam and Ko Kan attended the solicitors’ office where Tam executed the certificate of transfer.  He gave Ko Kan four post-dated cheques with payee left blank as Ko Kan had requested and cash of $10 million in accordance with the Second Oral Agreement, of which MOP 2,525,704.35 was to be paid into court for the purpose of clearing the encumbrances.  Then Ko Kan produced three copies of the Intermediary Agreement with Party B left blank and asked him to sign.  Ko Kan told him that the documents were to facilitate his negotiation with creditors of Kong Cheong in performing his obligation under the Second Oral Agreement.  Suen noticed that the Intermediary Agreement did not reflect the Second Oral Agreement, particularly in that there was no requirement for Ko Kan to assist in procuring the execution of the certificate of transfer, but as it had been executed, that did not matter.  Thus, Suen signed as he trusted Ko Kan.

130.  Thereafter, Ko Kan claimed that he was working on the Second Oral Agreement.  On 5 March 2009, Ko Kan issued a letter to Kong Cheong explaining that he had no lease agreement with Wu Tak Nang.  On 8 March 2009, Kong Cheong sent a letter to Wu Tak Nang demanding possession of the Land.  Then, Ko Kan asked for an advance payment.  As Suen considered Ko Kan was performing his obligation under the Second Oral Agreement, he paid Ko Kan $7 million in cash and cheques.  When the first instalment became due, he paid Ko Kan $8 million.  Then Ko Kan gave him a receipt for the said amount and returned him the first post-dated cheque.  As Ko Kan did not perform his outstanding obligations under the Second Oral Agreement, he did not make further payments and the other three cheques were dishonoured.

Inherent probability of Suen’s case

131.  On my analysis, Kong Cheong or Kuang has a good claim in the sum of $90 million as payment of the outstanding purchase price for the Land under First Resolution.  There was no reason why Kong Cheong would abandon its very substantial claim against Suen unconditionally, whether as pleaded in the Plaintiff’s Re-Amended Statement of Claim or as asserted by Suen under the First Oral Agreement. However, the amount of claim happened to be close to $105 million which was the sum agreed between Suen and Ko Kan for removing the encumbrances against the Land and procuring vacant possession under the Second Oral Agreement.  Thus, while the existence of the First Oral Agreement does not appear to be likely, the existence of the Second Oral Agreement is not unlikely.

132.  The Plaintiff’s strongest argument against the inherent probability of the Second Oral Agreement is that the fee of $105 million wasinsufficient to settle the outstanding encumbrances which then stood in excess of $900 million.  On the evidence, Suen had paid $581 million into court to discharge the Seng Heng Bank Loan and arrangements had been made to discharge the Nam Tung debt.  The encumbrances of $900 million were created after January 2008 when S&P(3) was executed.  Under common law, the applicable principle is first in time prevails.  Thus, these encumbrances have no priority against Wui San.  There is no evidence that Macanese law is any different.  If so, there was no need for Ko Kan to discharge those encumbrances.  The only encumbrance shown to be binding on Wui San was that the Land was occupied by Wu Tak Nang. There is no dispute thatKo Kan wrote to Kong Cheong on 5 March 2009 explaining that there was no tenancy arrangement between Kong Cheong and Wu Tak Ngan and wrote to the occupier Wu Tak Ngan on 8 March 2009 demanding immediate possession.  These acts are consistent with the existence of the Second Oral Agreement.  If procuring delivery of vacant position was the only encumbrance Ko Kan had to remove, the fee of $105 million may not be insufficient. 

133.  There is a lot of other evidence in support of the existence of an agreement between Suen and Ko Kan relating to the settlement of the dispute about the Land.  For example, Kwong and Tam were Ko Kan’s puppets and Ko Kan was the go-between and person orchestrating Kong Cheong’s settlement with Suen.  He attended the execution of the certificate of transfer and collected part of the payment under the Verbal Agreement or the Second Oral Agreement.

134.  The Plaintiff has relied on the Intermediary Agreement as evidence in support of the Verbal Agreement and therefore negates the existence of the First and Second Oral Agreements.  However, on my finding that because of Ko Kan’s practise of arranging for payments to him to be paid tohis wife and the Plaintiff, the Intermediate Agreement was equally consistent with the Verbal Agreement as with the Second Oral Agreement between Suen and Ko Kan.

135.  I have doubts in the existence of the First Oral Agreement with which the Second Oral Agreement was related.  Furthermore, another reason which prevented me from drawing the inference that the Second Oral Agreement is inherently probable is my reservation about Suen’s credibility.  I have mentioned about his dishonesty in:

(1)   denying he had agreed under Second Resolution to increase his limit of liability for the Seng Heng Bank Loan to $570 million;

(2)   asserting that the $90 million to be paid to Kuang upon execution of the certificate for transfer had been paid by reason of his having paid in excess of his limit under the guarantee for Seng Heng Bank Loan; and

(3)   dishonestly asserting that the Intermediary Agreement was prepared by Ko Kan with the name of Party B in blank.

His dishonesty goes to the heart of the dispute in his counterclaim.  He has demonstrated propensity to distort the facts in this case.  That made it impossible for me to come to any conclusive findings on which I can say with confidence that his account of the First and Second Oral Agreements are inherently probable.  I am therefore not satisfied that Suen has discharged his burden of proving the Second Oral Agreement.  This is of little consequence to Suen as he has indicated his abandonment of his counterclaim against Ko Kan.

CONCLUSION

136.  Kong Cheong, Ko Kan or Kuang, but not the Plaintiff, may havea good claim against Suen or Wui San for the balance of compensation in the sum of $90 million payable upon execution of the certificate of transfer of the Land.  However, that is not what this action is about.  This action is not about the rights or wrongs of those parties in the background transactions, but about the rights and obligations of the Plaintiff and Suen or of Suen and Ko Kan under their alleged agreements made to settle the disputes relating to those background transactions.  The core issue in the original action is whether the Plaintiff and Suen had entered into the Verbal Agreement to procureKong Cheong to execute the certificate of transfer for an intermediary fee of $95 million; or in the counterclaim whether Suen and Ko Kan had entered into the First and Second Oral Agreements to procure Kong Cheong to delivervacant possession of the Land and to clear all its encumbrances for a fee of $105 million.  The Plaintiff bears the burden of proof in the original action; while Suen and Wui San bear the burden of proof in the counterclaim. 

137.  In the ultimate analysis, I find that all the witnesses of the parties were incredible and not telling the whole truth.  I reluctantly come to the conclusion that the parties have failed to discharge their respective burden of proof.  Accordingly, the Plaintiff’s claim in the original action and the defendants’ claim in the counterclaim are dismissed.  I make a costs order nisi that there be no order as to costs in both the original action and the counterclaim.