CHAN WAI KUEN, GARY v. FINE MERIT LTD AND OTHERS

HCA 944/2019

[2020] HKCFI 1951

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 944 OF 2019

________________________

(By Original Action)

(By Counterclaim)
________________________

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D E C I S I O N

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1.  By a Notice of Appeal dated 10 October 2019, the Plaintiff (in the original action) appealed against the decision of Master KW Wong made on 27 September 2019 refusing his application pursuant to a summons dated 12 July 2019 (the “Summons”) for interim payment against the 1^st Defendant, Fine Merit Limited, with costs in the cause and certificate for one counsel.

2.  Mr Bernard Man SC (leading Mr Richard Yip) appeared on behalf of the Plaintiff and Ms Gekko Lan appeared on behalf of the 1^st Defendant. By way of a Respondent Notice dated 23 October 2019, the 1^st Defendant cross-appealed against the costs order made by the learned Master.

3.  In essence, the Plaintiff’s action herein against the 1^st Defendant is based on two cheques in the respective sums of HK$7,000,000 and HK$300,000 issued by the 1^st Defendant on or about 9 March 2019.  The cheques were post-dated to 30 April 2019 but dishonoured upon presentment since they had been countermanded by the 1^st Defendant. 

4.  The Plaintiff’s other causes of action against Chan Ngai Lik (“Chan”), the 2^nd Defendant, grounded on procurement of breach of contract, breach of trust and knowing receipt or dishonest assistance are not particularly relevant for present purposes save that the facts pertinent thereto, which are hotly contested, also form the background of the claim and the counterclaim.

5.  For the sake of completeness, the Plaintiff also appealed against the decision of the learned Master granting leave to the 1^st Defendant to rely on the 3^rd Affirmation of Chan Ngai Lik (dated 17 September 2019), which was first introduced by way of a summons dated 23 September 2019. In this respect, Mr Man advanced no substantive arguments and was contented to leave it to be considered in the round, in particular, when it came to costs.

THE PLAINTIFF’S CASE

6.  The 1^st Defendant was a company carrying on business as a trader of precious metals. Chan and his wife, Madam Lee Fei, were the shareholders and directors of the 1^st Defendant.

7.  Through another company by the name of Fame Brilliant Limited, Chan and his wife also operated a money exchange business under the name and style of “Chan & Lee Money Exchange” from a shop premises at Unit G22, G/F, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon (the “Money Exchange”).

8.  The shop premises of the Money Exchange was also the registered address of the 1^st Defendant. Apparently, the 1^st Defendant maintained another business address at the Peninsula Centre in Tsimshashui[1].

9.  The Plaintiff was the manager of a trading company and he learnt about the lucrative profit in gold trading in early 2018 from the social media. On his case, in about October 2018, he was introduced to Chan by Mr Lam Wai Jun (also known as “Jason”), the 2^nd Defendant in the counterclaim.

10.  Jason was then employed as a manager of the 1^st Defendant. In fact, the Plaintiff had come to know Jason in England some 20 years ago and they renewed acquittance in a chance meeting shortly before Jason introduced him to Chan. 

11.  As arranged by Jason, the Plaintiff first met Chan at the Peninsula Centre office when Chan told him that the 1^st Defendant held a licence to deal in precious metal in Singapore and maintained an account with Heraeus Singapore, said to be “a prestigious gold exchange”. Chan also mentioned that the 1^st Defendant had a daily trading quota[2] of 1,000 kg (see Paragraph 12.1 of Affirmation of the Plaintiff dated 28 May 2019).

12.  The Plaintiff was also told that the scheme involved the buying of gold bullions in cash at a small discount of around 2% to 3% of the prevailing market price from certain vendors in Singapore and then presenting the bullions for sale at Heraeus’ refineries at spot price of the day as determined by the London Bullion Market Association (the “Scheme”).

13.  Chan invited the Plaintiff to participate and invest in the Scheme since the daily quota of 1,000 kg was under-utilized due to the lack of capital. Chan said the profit margin would be about 0.8% to 1.3% of the amount invested in each trade. On the basis that 2 to 3 trades could be arranged per week, the return would be about 8% per month.

14.  On or about 11 November 2018, Chan took the Plaintiff along with Jason to Singapore for a trial run or demonstration as to how the Scheme worked.  He brought USD420,000 in cash to Singapore and deposited it into a bank account at the Development Bank of Singapore (DBS) as instructed by Chan. He was then told to wait in a café with Jason.

15.  After about two hours, Chan returned with a bag containing USD420,000 worth of gold bullions. They then attended Heraeus to sell the gold bullion at spot price. On or about 15 November 2018, he received remittance of HK$3,238,561[3]. A balance of about 5% of the amount was held by Heraeus which would be released in a few days. The Plaintiff said this experience instilled confidence in him and therefore he decided to participate in the Scheme.

16.  Thereafter, from about 21 November 2018[4] to 15 January 2019[5], the Plaintiff and/or his associate, one Mr Gan Xiao Cong, entered into a total of nine Co-Operation Agreements (the “Agreements”) with the 1^st Defendant which evidenced their investment in the Scheme. The Agreements were in a standard proforma bearing the name of the 1^st Defendant.

17.  The idea was that money put in by the Plaintiff and Mr Gan would be held in a running account with the 1^st Defendant. Subject to withdrawals that might be made from time to time, the balance of the fund standing in the account would continue to be invested in the Scheme to generate profit. This arrangement was described as a term under the heading “Suggestion” in the proforma agreement (at p.5). That said, it would appear that the withdrawals made by the Plaintiff were not limited to the profits but also included part of the principal.

18.  Pursuant to the Agreements, money invested by the Plaintiff was supposed to be paid in HK$/USD by telegraphic transfer into 1^st Defendant’s account maintained with the Bank of China in Hong Kong. However, in actual fact some payments were made by the Plaintiff to the 1^st Defendant by way of direct bank transfers. Some were paid in RMB through the bank accounts of various intermediaries (known as “exchange agents”) in the PRC.

19.  Agreements Nos. 1 to 9 can be categorized into two series. One series comprising of Agreement Nos. 1, 2, 3, 4, 5, 7 & 9 were signed by the Plaintiff[6] and the other comprising of Agreements Nos. 6 and 8 were signed by Mr Gan. In any event, the investment under each of Agreement Nos. 1 to 9 was attributed to the Plaintiff’s running account with the 1^st Defendant.

20.  Evidently, the Plaintiff and/or Mr Gan did not necessarily pay the full amount stated in each of the Agreements respectively signed by each of them. The total sums on Agreements No 1 to 9 came to HK$25,133,314. On the Plaintiff’s evidence, he and Mr Gan paid to the 1^st Defendant various sums totalling only HK$11,186,396.00 (between 21 November 2018 and 15 January 2019) pursuant to the nine Agreements. The total withdrawals or repayments made by the 1^st Defendant (from 27 December 2018 and 4 February 2019) came to HK$4,987,000.

21.  The Plaintiff said Chan had also arranged another trip to Singapore during 7 and 10 January 2109, which was designed to boost his confidence in the Scheme. It is however not clear whether the Plaintiff in fact made the trip (see Paragraph 31 of the Affirmation of the Plaintiff).

22.  By late January 2019, said the Plaintiff, he was informed that the capital put in by him and Mr Gan (together with the accrued profits) had accumulated to HK$7,000,000.  The Plaintiff said at a dinner on 20 January 2019, he asked Chan to basically liquidate the account and repay to him all moneys in the account by 27 January 2019. Chan promised but failed to do so. Thereafter, the Plaintiff continued to chase after Chan (through Jason) for the promised repayment but it was not forthcoming (see Paragraph 32 of the Affirmation of the Plaintiff).

23.  Meanwhile, the Plaintiff said he was embarrassed by the fact that Mr Gan, who had invested in the Scheme upon his introduction, was unable to recoup his investment. Therefore, he paid off Mr Gan out of his own pocket in the sum of HK$2,000,000 on 27 January 2019 (see Exhibit CWK-14 and Paragraph 35 of Affirmation of the Plaintiff).

24.  It is remarkable that in his affirmation, the Plaintiff described what happened thereafter as follows:

“33. Subsequently to reassure me, [the 1^st Defendant] signed a further agreement dated 15 February 2019 (Agreement No. 10) with me, which provides inter alia that :

(1) The HK$7,000,000 (which included the amount originally due to Mr Gan under Agreement No. 8 which is now due to me. . .) would be reinvested to trade in gold and [the 1^st Defendant] would pay 1.6% to [the Plaintiff] for each trading week;

(2) [The 1^st Defendant] would repay HK$7,000,000 by 28 February 2019 and in the event of any delay there would be a compound penalty of 2% per week.”

25.  One cannot help but notice that Agreement No. 10 (dated 15 February 2019) was signed by Jason on behalf of the 1^st Defendant (instead of Chan as appeared on Agreements Nos. 1 to 9). An example for the calculation of compound interest was given after Clause 12 which reads “(E.G. first week of delay $7,000,000 x (1+2%) = $7,140,000, second week of delay $7,000,000[7] x (1+2%) = $7,282,800 and so on)”. On any view, the interest rate of compound interest at 2% per week seemed exorbitant.

26.  Nonetheless, on the Plaintiff’ case, in early March 2019, he learned from Jason that instead of repaying him, Chan had siphoned off HK$5,220,000 for his other business in Japan. He therefore made a report to the police on 5 March 2019.

27.  The Plaintiff said he confronted Chan at the Peninsula Centre office on 9 March 2019 whereupon Chan promised to repay the capital and profit totalling about HK$7,300,000. To reassure him, Chan signed an agreement whereby the 1^st Defendant undertook to repay the money by 31 March 2019 (“Agreement No. 11”). Chan also signed two cheques of the 1^st Defendant in the respective sums of HK$7,000,000 and HK$300,000, which were post-dated to 30 April 2019.

28.  Unlike the other Agreements, which were in the nature of “Co-Operation Agreement” for investment in the Scheme, Agreement No. 11 was essentially an acknowledgement of debt.  It is however notable that the sum stated therein is HK$7,200,000 instead of HK$7,300,000 (i.e. the total amount of the two cheques) or HK$7,282,800 (i.e. HK$7,000,000 plus compound interest, as stated in Agreement No. 10). The Plaintiff attributes the discrepancy to a clerical mistake (see Paragraph 40 of the Affirmation of the Plaintiff and Exhibit CWK-11 and CWK-17).

29.  By 31 March 2019, no payment was made by the 1^st Defendant under Agreement No.11. The Plaintiff continued to chase after Chan which was evidenced in some WeChat messages between 24 and 27 April 2019. In one of the messages, the Plaintiff said he was honouring his promise to notify Chan before presenting the cheques for payment. Remarkably, Chan never suggested in reply that the two cheques were not meant be presented for payment at all (Paragraph 43 of the Affirmation of the Plaintiff).

30.  In passing, the printout of the WeChat messages were inadvertently omitted from the exhibits to the Affirmation of the Plaintiff and a copy of the same was only provided to the 1^st Defendant by a letter 19 September 2019. The same was before the learned Master and I also allowed the Plaintiff to rely on it.

31.  The Plaintiff duly presented the two cheques for payment but was notified by the bank that they had been countermanded by the 1^st Defendant (see Exhibit CWK-17).

32.  On 29 May 2019, upon an ex parte application, the Plaintiff succeeded in obtaining a mareva injunction against the 1^st Defendant and Chan. Immediately thereafter, the Writ of Summons was issued and the Statement of Claim was filed on 12 July 2019.

33.  The Plaintiff’s application for interim payment is solely based on the two dishonoured cheques (as opposed to the underlying transactions evidenced in the various Agreements).

34.  In so far as may be relevant, the Plaintiff emphasized that his claim arising from Agreement No. 11 was not merely for the difference between HK$11,186,396.00 and HK$4,987,000 (i.e. $6,199,396) since profits from trading under the Scheme had not yet been taken into account and the balance in the fund from time to time was supposed to be re-invested to generate more profit.

THE DEFENDANT’S CASE

35.  Ms Lan (for the Defendant) submitted the learned Master was correct in dismissing the Plaintiff’s application for interim payment but he ought to have awarded costs to the 1^st Defendant in light of the serious issues in disputes, which were or ought to have been known to the 1^st Defendant. In short, the application for interim payment ought not have been made in the first place.

36.  Notably, the Summons was issued on the day when the Statement of Claim was filed on 12 July 2019.  Ms Lan submitted that the Plaintiff shied away from making an application for summary judgment, which was indicative that he was well aware that such an application would not have succeeded.

37.  Further, Ms Lan sought to impress upon the Court the issues in dispute as discernible from the pleadings and evidence on affirmation.

(a)  Agreements Nos. 1 to 9 were forgery as evidenced from (1) the “cut-and-paste” job of the watermark; and (2) varying sizes of the company chop appearing on the various Agreements;

(b)  Agreement No. 10 allegedly showing a balance sum of HK$7,000,000 was a forgery and/or signed by Jason without authority of the 1^st Defendant, although Jason was employed by the 1^st Defendant to solicit customers/investors;

(c)  Law Ue Ming (“Ming”), who was employed by Fame Brilliant Limited since November 2018 to keep the books and accounts at the Money Exchange[8], conspired with the Plaintiff and Jason to perpetrate a fraud on the 1^st Defendant by hiding the relevant accounts of the Scheme from the 1^st Defendant.

(d)  Jason and Ming left the employment in about March or April 2019[9] and refused to give a full account of the sums paid by the Plaintiff and repaid by the 1^st Defendant to the Plaintiff under the Scheme.

(e)  The records showed that (1) between 21 November 2010 and 15 January 2019, the 1^st Defendant only received from the Plaintiff by way of 5 bank transfers a total sum of HK$6,112,110 (instead of HK$11,186,396 as alleged by the Plaintiff).

(f)  Although records produced by the Plaintiff only showed repayments in the total sum of HK$4,987,100, the 1^st Defendant believed that the total amount repaid to the Plaintiff was over HK$4,987,100 (Paragraph 18 of the 2^nd Affirmation of Chan).

(g)  The 1^st Defendant had already paid to the Plaintiff a sum of no less than HK$6,112,110 and/or any further sum which might be found to have been paid by the Plaintiff (see Paragraph 11 of the Defence);

(h)  Chan said that the two cheques were signed by Madam Lee at the request of the Plaintiff in early March 2019 when he was not in Hong Kong. The request was made by the Plaintiff through Ming since Jason had left for China and lost contact. The sole purpose of the cheques were for the Plaintiff to hold off his own creditors. They were not intended to be presented for payment (see Paragraph 23 of the 2^nd Affirmation of Chan and Paragraph 17(d) of the Defence).

(i)  Upon his return to Hong Kong two days afterwards, Chan signed Agreement No. 11, again at the request of the Plaintiff so that he could show it to his creditors. The purported acknowledgement of debt in the sum of HK$7,200,000 therein had not been verified (see Paragraph 24 of the 2^nd Affirmation of Chan).

(j)  If there were any over payments made by the 1^st Defendant and/or Mr Chan to the Plaintiff, such payments were caused to be made by the fraudulent and/or dishonest acts of the Plaintiff and/or Jason and/or Ming or induced to be made by the fraudulent representation made by them (see Paragraph 19(d) of the Defence);

(k)  The 1^st Defendant and Chan counterclaimed against the Plaintiff for any overpayment (see Paragraph 37 of the Counterclaim).

DISCUSSION

38.  It is trite that a cheque is an unconditional order in writing requiring a banker to whom it is addressed to pay on demand a sum certain in money to (or to the order of) a specified person, or its bearer (see SY Chan Ltd. V Choy Wai Bor [2001] 3 HKLRD 145 at Paragraph 9). Consideration is presumed to have been given for a cheque (s.30 of the Bills of Exchange Ordinance, Cap. 19).

39.  A cheque is a “separate and distinct contact” with the effect that the disputes relating to the underlying contract between the parties have no relevance to a claim based on a cheque.

40.  In Prosperity Lamp & Components Ltd v Rotegear Corp Ltd [2000] 2 HKC 63, Mr Justice Peter Cheung (as he then was) observed and explained (at 641B, 6432H- 643B) as follows:

“The parties in this case are business people engaged in a commercial venture. It is reasonable to assume that the parties will know the nature of a cheque. It is astounding that the defendant would simply issue cheques to the plaintiff in order to alleviate the pressure that Ms Chang might have from the plaintiff.

Oral agreement in defeasance of the undertaking

In the present case, the effect of the alleged oral agreement is to render the cheques to be meaningless. They are not to take effect until some third party had paid the defendant first. In other words, if the defendant was not paid by the third party, it did not need pay the plaintiff at all. This is not a condition suspending the operation of the cheques but in defeasance of the undertaking to pay. This clearly falls foul of the parol evidence rule. Oral evidence is not admissible because it contradicts the terms of the written instruments, namely the cheques. The situation is covered in Great Sincere Trading Co. Ltd. v Swee Hong & Co. [1968] HKLR 660, when Mills-Owens J at p.664 stated this :

“It is as if when the cheque was handed over the defendants said this is a cheque which is not a cheque unless we are put in funds.”

See also Chitty on Contracts 28th Ed. Vol 1, para. 12-099 and Neo-Concept Industrial Co. Ltd v Sportex Industrial Ltd [1992] 2 HKC 452.

The dispute relating to the underlying contract between the parties, in my view, has no relevance to the claim on the cheques which are separate and distinct contracts.” (emphasis added)

41.  This is precisely what the 1^st Defendant was seeking to argue, namely, Agreement No. 11 and the two cheques were only tendered to help the Plaintiff to ward off his creditors. The cheques were never meant to be presented for payment. For the reasons set out below, I am of the view that this defence is shadowy.

42.  Quite apart from the fact that Chan was a businessman, on his own evidence, he started to be suspicious of the accounts in February 2019 when Jason left the employment of the 1^st Defendant shortly after an argument with him during which he pressed Jason to give an account of the ins and outs of the Plaintiff’s account (see Paragraph 11 of the 2^nd Affirmation of Chan).

43.  Further, on Chan’s evidence, he was introduced to Ming and Jason in 2017 or 2018 upon the introduction by Mr Lee Yiu Tung (Jimmy) whom he only came to know in 2016. Chan knew that Jason and Ming were involved in bitcoins trading. All three of Jimmy, Jason and Ming had unstable income and had borrowed money from him (see Paragraph 5 of the 2^nd Affirmation of Chan). Jimmy was described by the Plaintiff as the accountant of the 1st Defendant, which was not denied by Chan (see Paragraph 11 of Affirmation of the Plaintiff).

44.  Still further, on Chan’s evidence, after the trial run or demonstration of 11 November 2018, Jason said the 2% profit would be split between the Plaintiff (1.3%) and the 1^st Defendant (0.7%). From the 0.7% allocated to the 1^st Defendant, 0.25% would be paid over to be shared by Jimmy, Jason and Ming (see Paragraph 8 of the 2^nd Affirmation of Chan). To put it bluntly, they all had an axe to grind.

45.  In the circumstances, it seems extraordinary that Chan entrusted Ming to maintain books and accounts of the Money Exchange apparently without supervision or verification.  Further, it seems to defy all logic and common sense for Chan to admittedly sign Agreement No. 11 and authorized the two cheques to be issued to the Plaintiff in March 2019, without verifying the amount owing to the Plaintiff, just to help him hold off his creditors.

46.  On the foregoing analysis, if the case had come before me on an application for summary judgment, I would at best have given the 1^st Defendant conditional leave to defend subject to a substantial payment into court as a term. I would adopt the same approach towards this application for interim payment. 

47.  In so deciding, I have not lost sight of the fact that the 1^st Defendant went so far as to allege forgery of Agreements Nos. 1 to 10 and took issues with the various sums referable to Agreements Nos. 2, 3, 4 & 9, which the Plaintiff allegedly paid through exchange agents. 

48.  Further, it struck me as a little odd that some of the Agreements (Nos. 2, 3, 4 & 10) were accompanied by a “Proforma Invoice” stating the same amount as in the corresponding agreement, but some are not (Exhibit CWK-3, CWK-4, CWK-5 and CWK-10).  

49.  As for Agreements Nos. 6 and 8, Mr Gan was supposed put in a sum of HK$2,000,000 under each of these two agreements. However, even on the Plaintiff’s own evidence, Mr Gan only put in HK$500,000 referable to Agreement No.6 and another HK$500,000 (HK$300,000 + HK$200,000) referable to Agreement No. 8 (see Appendix 1 to the Affirmation of the Plaintiff)

50.  Ms Lan was quite right in pointing out that Exhibit CWK-7 was supposed to contain “Agreement No. 6 and relevant 7 documents under Appendix 1 [to the Affirmation of the Plaintiff]”.  For one reason or another, in the hearing bundle [B/196-203], only Agreement No. 6 (dated 2 January 2019) could be found and there was no record of any payment. 

51.  That notwithstanding, the 1^st Defendant admitted that HK$500,000 was received by the 1^st Defendant on 3^rd January 2019, which was around the time of the Agreement No.6 (see Paragraph 10 of the Defence and Paragraph 13 of 2^nd Affirmation of Chan).

52.  Further, a payment slip for a bank transfer[10] of HK$500,000 issued by Bank of China (dated 3 January 2019) can be found in Exhibit CWK-8 in respect of Agreement No. 8.  It would therefore appear that the payment slip has been erroneously attributed to Agreement No. 8 whereas in fact it should be Agreement No.6.

53.  Besides, there were two other sums of RMB 312,746 and RMB 187,254 (totally RMB 500,000) evidenced by bank transferred to various exchange agents on 11 January 2019. This sum of RMB 500,000 was referable to payment under Agreement No. 8 (Exhibit CWK-8).  However, the 1^st Defendant only admitted having received HK$300,000 through an “exchange agent” (see Paragraph 10 of the Defence and Paragraph 13 of 2^nd Affirmation of Chan).

54.  Importantly, the admission on the part of the 1^st Defendant as to the receipt of HK$300,000 through “exchange agent” provides evidence that such was one of the accepted modes of payment under the Scheme and/or pursuant to the Agreements. Alternatively, the payment terms by telegraph transfer as provided in the proforma agreement had been dispensed with by conduct.

55.  That said, it seems inexplicable that Agreement No. 7 (for HK$4,000,000) and Agreement No. 8 (for HK$2,000,000) were accompanied by a Receipt, see Exhibit CWK-8) in the total sum of HK$6,000,000 (dated 11 January 2019) but the corresponding receipt could not be found in respect of other Agreements.

56.  As to the allegation of forgery, I observed that Agreement Nos. 1 and 2 only bore the company chop of (but were not signed by) the 1^st Defendant. On the face of them, Agreements Nos. 3 to 9 were signed by Chan on behalf of the 1^st Defendant (against the company chop of the 1^st Defendant).

57.  However, even with the coloured copies of some specimen agreement at Exhibit CNL-8 and Exhibit CNL-11 (attached to the Ms Lan’s submission), I am quite unable to discern how it can be demonstrated that the watermarks on Agreements Nos. 1 to 10 (Exhibit CWK-2-10) were forged.

58.  There is however some substance in Ms Lan’s submission that the company chop affixed to Agreements Nos. 3, 4, 5, 6, 7, 8 & 9 seems to be so tiny that they are out of proportion (as compared to the specimen exhibited to the 3^rd Affirmation of Chan). However, it is impossible to embark on such forensic exercise at this interlocutory stage.

59.  More fundamentally, the purport of the 1^st Defendant’s case is that although Jason was employed by the 1^st Defendant (and/or Chan) and Ming by Fame Brilliant Limited (and/or Chan), they were in fact agents of the Plaintiff in the operation of Scheme. This is a however a bare assertion which does not sit comfortably with the fact that (1) Jason was held out by the 1^st Defendant as its “Market Manger” (see letter from Heraeus Limited dated 12 September 2018 at Exhibit CWK-1); (2) Chan admittedly entrusted Ming to keep the books and accounts of the Money Exchange.

60.  In contrast, the Plaintiff’s version of fact was supported by a confirmatory, albeit terse, affirmation from each of Jason and Ming. In so far as Jason in fact had the authority to issue the Agreements on behalf of the 1^st Plaintiff, there seemed no point in resorting to forgery. No doubt, all these would have to be canvassed and resolved in a trial.

61.  Despite the able argument advanced by Ms Lan as to the various issues identified above, I am of the view that the defence to the claim founded on the two dishonoured cheques and Agreement No. 11, is shadowy. In the circumstances, on balance, I am of the view that an order for interim payment is justified.

62.  However, in setting the amount of interim payment, I am entitled to take into account the strength of the 1^st Defendant defence and counterclaim in the exercise of discretion (see Winsworld Properties v Chance Full International Development, HCA 4161/2002, unrep. 14 February 2003, DCHJ MH Lam (as Lam VP then was) at Paragraph 12).

63.  Ms Lan has helpfully provided a table setting out the alternative possible scenarios of the amounts of payments made by the Plaintiff and the amounts of repayments made the 1^st Defendant with reference to the records disclosed by the Plaintiff and such other records as might be accessible by the 1^st Defendant.

64.  Pausing there, Ms Lan sought to hold the Plaintiff to the two sums of HK$960,000 and HK$2,125,000 described as having been repaid by the 1^st Defendant respectively on 9 December 2018 and 14 December 2018 (see Appendix 2 to the Affirmation of Chan), which would have the effect of increasing the total amount of repayment to HK$8,097,100 (instead of HK$4,987,100 as asserted by the Plaintiff).

65.  Whilst I am not particularly impressed by the way in which the Plaintiff’s solicitors has put together the papers, which are plagued with errors and inaccuracies of one sort or another, upon hearing the explanation of Mr Man, I am satisfied that these two entries in Appendix 2 are likely to be inadvertent transposing errors. In short, these two figures were meant to be sums paid by the Plaintiff to the 1^st Defendant on the corresponding dates through “exchange agents”, which were reflected in the total sum of HK$11,186,396 (as set out in Appendix 1 to the Affirmation of the Plaintiff).

66.  This leaves only two plausible scenarios according to Ms Lan’s table. The only difference between the parties is that (1) the 1^st Defendant only admitted having received a total sum of HK$6,112,110 whereas the Plaintiff said the total amount paid was HK$11,186,396; (2) the Plaintiff  asserted (with documentary evidence) that only HK$4,987,100 had been repaid but the 1^st Defendant insisted (without any evidence) that whatever amount had been paid by the Plaintiff, it had been repaid in full. 

67.  Admittedly, on a straight line method, the profit of the investment would be about HK$404,133 as shown in Ms Lan’s table. Under the second scenario depicted therein, a sum of HK$1,529,143 (ie HK$6,112,110 + HK$404,133 – HK$4,987,100) would be due to the Plaintiff although no admission was made by the 1^st Defendant. 

68.  It cannot be emphasized enough that the Plaintiff’s application was not mounted on the basis of the underlying transactions but on the strength of Agreement No.11 and the two cheques in the sum of HK$7,300,000. However, looking at the evidence in the round, even if the estimated profit is excluded, I am of the view that if the matter proceeds further, it is highly likely that the Plaintiff would recover a substantial sum or damages not less than (HK$11,186,396 – HK$6,112,110)/2 – HK$4,987,100 = HK$3,662,153. On this approach, an interim payment in the region of HK$3,500,000 would be a reasonable starting point.

69.  However, it has to be borne in mind that there is no evidence of any notice in writing having been given to the 1^st Defendant as to the “assignment” of the debt due and owing from the 1^st Defendant to Mr. Gan (see paragraphs 23 & 24 above) as required by s.9 of Law Amendment and Reform (Consolidation) Ordinance (Cap. 23).

70.  On the Plaintiff’s own case, a sum of HK$2,000,000 was attributable to the investment made by Mr Gan. To err on the side of caution, the amount of interim payment would be adjusted to HK$1,500,000 (ie HK$3,500,000 – HK$2,000,000).

DISPOSAL 

71.  On the foregoing analysis, the order of the learned Master dismissing the application for interim payment is set aside and substituted by an order that the 1^st Defendant do within 28 days pay to the Plaintiff the sum of HK$1,500,000 by way of interim payment.

72.  The appeal against the Master’s decision to adduce the 3^rd Affirmation of Chan is dismissed since no prejudice has been shown by the Plaintiff.

73.  As to costs, although the Plaintiff is successful in the appeal in respect of the application for interim payment, it was not until the hearing of the appeal herein that the Plaintiff formulated its alternative case for an amount less than HK$7,300,000 notwithstanding that such alternative was open to the Plaintiff under the term of the Summons (as read with Paragraph (2) of the prayer in the Statement of Claim).

74.  In the circumstances, it is understandable that Ms Gan argued that it was an all-or-nothing case (i.e. the Plaintiff should get HK$7,300,000 or nothing). If the Plaintiff had properly formulated his alternative case, it seems likely that the 1^st Defendant would have formulated a proper offer of interim payment. I would therefore not disturb the costs order of the learned Master.

75.  The cross-appeal under the Respondent Notice is dismissed accordingly.

76.  As to the cost of the appeal, for the same reasons set out hereinabove, although the Plaintiff is successful to some extent, I make an overall order nisi that costs of the appeal be the Plaintiff’s costs in the cause (with certificate for one counsel).

77.  For the avoidance of doubt, none of the observations made herein shall hinder any finding of fact to be made by the learned judge at the trial of this matter.