HO PIK SHAN v. LAU MAN YING AND ANOTHER

DCCJ 2957/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2957 OF 2015

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JUDGMENT

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1.  Sometimes, due to misunderstanding and mistrust, there would be tremendous difficulties in the performance of a simple and straightforward contract. This is such a case.

THE BACKGROUND

2.  I would first set out the background as shown in the undisputed documents.

3.  The plaintiff (“Alice”) has been working as an insurance agent since 1987.  The 2^nd defendant (“Sau Foon”) has been running a stall selling fruit and vegetables in Central for many years.  Alice and Sau Foon came to know each other in around 2000.  Alice became a regular customer of Sau Foon, and Sau Foon engaged Alice as her insurance agent.  As Sau Foon was extremely busy and would need to be at her stall for a long period of time each day, Alice would help Sau Foon to pay miscellaneous fees from time to time. Sau Foon had some properties, and Alice would also help Sau Foon to collect rentals from the tenants of these properties.  They were good friends for a long time.

4.  In early 2014, Alice and Sau Foon started to discuss of setting up a catering business in Central.  After some discussion, Alice, Sau Foon and Mr Li Kim Fung (“KF”) agreed to set up a catering business in Central selling salads and sandwiches.  They acquired a shelf company named Billion Joy (Hong Kong) Limited (“BJ”) as the vehicle to run the business.  BJ was beneficially owned by Alice, Sau Foon and KF, each of them had 1/3 beneficial interest in BJ.  The registered shareholders of BJ were Alice and Sau Foon, each of them had 1 share registered under her name.  Alice and Sau Foon were the directors of BJ.

5.  On or about 23 June 2014, BJ commenced business under the trade name of “Orchard” at Room 102, Cheungs Building, 1-3 Wing Lok Street, Hong Kong (“Room 102”), selling salads and sandwiches.

6.  All the paper works concerning BJ, including the accounting works of BJ, were done by Alice.  Alice’s son, Mr Wong Chun Pong (“CP”), also worked in BJ.

7.  On or about 5 September 2014, BJ changed its business and started to provide full dining services.  It rented a further unit in Cheungs Building, ie Room 202.  The business in Room 102 was run under the trade name of “Star Kitchen” while the business in Room 202 was run under the trade name of “Star Club”.

8.  In early October 2014, Alice told Sau Foon that Alice herself would like to withdraw from the business.  After some discussion, Sau Foon managed to find the 1^st defendant (“Mandy”), who was willing to buy Alice’s share in BJ at HK$180,000.

9.  Mandy is running a beauty shop in Central.  She has known Alice and Sau Foon for many years.  Alice previously was Mandy’s customer.  Sau Foon would patronize Mandy’s beauty shop from time to time.

10.  On 12 October 2014, Alice, Mandy and Sau Foon met in Room 102 and discussed the sale of Alice’s share in BJ to Mandy.  Alice’s husband, Mr Wong Man Yau (“MY”) was also there.  After some discussion, they went to Mandy’s beauty shop to have further discussion.  Finally, a written sale and purchase agreement (“SPA”) was prepared.  Alice and Mandy signed the SPA as seller and purchaser respectively, and MY signed on the SPA as a witness.

11.  The terms of the SPA are as follows:-

“[Alice]  甲方以港幣十八萬元將在Billion Joy (Hong Kong) Limited所持的全部股份（33.3%）轉讓予 [Mandy]。

[Alice]  同時辭去董事及所有在Billion Joy (Hong Kong) Limited的所有職位。

2014年10月13日前之所有帳目均與 [Mandy] 無關。

此文件由 [Alice and Mandy] 雙方各簽署，一式兩份，雙方各持一份，簽署同收錢後有權益及法律責任由 [Mandy]承擔。”

12.  On 13 October 2014, Mandy paid the HK$180,000 to Alice by cheque.  Alice and CP handed over the documents of BJ to Mandy and her son in Room 102.

13.  In early November 2014, Alice and Mandy agreed to engage Ka Win Services Limited (“Ka Win”) as the accounting firm taking care of the transfer of share from Alice to Mandy.

14.  On 5 November 2014, Alice resigned as a director of BJ with effect from 12 October 2014.

15.  It is Alice’s case that on 13 November 2014, Ka Win prepared the following documents relating to the transfer of the share (“the transfer documents”) and asked Alice to pass the same to Mandy and Sau Foon:-

(a)  a draft board resolution approving the transfer of the share to be signed by Sau Foon and Alice as directors (“the Board Resolution”);

(b)  a draft shareholders’ certification for the purpose of assessing stamp duty to be signed by Sau Foon and Alice as shareholders (“the Certification”);

(c)  a set of management accounts of BJ since its incorporation (“the Management Accounts”) to be signed by Sau Foon and Alice as directors;

(d)  an instrument of transfer (“the Instrument of Transfer”) to be signed by Mandy and Alice as transferee and transferor respectively;

(e)  a bought and sold note (“the Bought and Sold Note”) to be signed by Mandy and Alice as purchaser and seller respectively.

16.  Alice said on 13 November 2014, she and CP brought the said documents to Sau Foon’s stall.  She explained the contents of the documents to Sau Foon and asked her to sign the same.  Sau Foon signed the Board Resolution and the Certification, but did not sign the Management Accounts as she wanted to let Mandy have a look first.  Alice then asked Sau Foon to pass the Management Accounts, the Instrument of Transfer and the Bough and Sold Note to Mandy.

17.  Alice further said on 14 November 2014, she and CP went to Ka Win to collect the financial documents of BJ that were used to compile the Management Accounts.  They then went to Sau Foon’s stall to pass the same to Sau Foon. Sau Foon signed a receipt (“the Receipt”) which reads as follows:-

“何碧珊已將Billion Joy (Hong Kong) Limited從開業至2014年10月12日的所有單據及文件交給Billion Joy (Hong Kong) Limited的董事劉秀歡保存，而劉秀歡董事已清楚明白全部帳目及業務細則。日後任何有關於Billion Joy Hong Kong Limited的問題和責任均與何碧珊無關。”

18.  Sau Foon said Alice went to her stall on 14 November 2014 to pass some documents to her and asked her to sign the Receipt.  Although she signed the Receipt, she did not understand the contents of the same as she had only completed primary 1 in the Mainland.  The contents of the Receipt could not be taken as her words.

19.  Sau Foon also said on 14 November 2014, Alice and CP went to her stall and asked her to sign an English document, but she did not sign that document. She took that document to Mandy’s beauty shop that night.  After seeing the document, Mandy said the document was problematic.

20.  On 14 November 2014, Mandy told Alice that the shareholder’s loan due from BJ to Alice had to be dealt with.  In late November 2014, Alice and Mandy agreed that on the documents, HK$1 would be the consideration for the 1 share under Alice’s name and HK$179,999 would be the consideration for the shareholder’s loan due from BJ to Alice.  Alice then told Ka Win to revise the draft transfer documents accordingly.

21.  On 4 December 2014, save and except some minor wording, Alice and Mandy agreed on the contents of the revised transfer documents.

22.  On 31 December 2014, Mandy wrote a letter (“the Enquiry Letter”) to Alice, Sau Foon and KF, in which Mandy demanded explanations from them as to various items in BJ’s accounts.

23.  On 5 January 2015, Alice, Sau Foon and KF met in a fast food shop in Central to discuss the financial matters of BJ.  MY was also present in this meeting. 

24.  On 7 January 2015, there was a meeting in Room 102 for the purpose of discussing the issues relating to the share transfer.  Mandy, Sau Foon and KF were in this meeting.  However, Alice did not attend the meeting.

25.  On 16 January 2015, Mandy went to Ka Win and signed the documents relating to the share transfer.

26.  On 19 January 2015, Alice also signed the documents relating to the share transfer.

27.  On 21 January 2015, Alice urged Sau Foon to sign the documents relating to the share transfer.  Sau Foon said her accountant told her that there were some problems in the Management Accounts and asked her not to sign the documents.

28.  On 6 February 2015, Mandy’s solicitors wrote to Alice and said that Alice had breached the SPA by failing to obtain the approval from the board of BJ in relation to the share transfer.

29.  On 11 February 2015, Alice replied to Mandy’s solicitors and said the board had approved the transfer.  The Board Resolution was enclosed in the reply.

30.  On 5 March 2015, BJ ceased business.  At that time, BJ failed to pay a dish washing company and also failed to pay the rent of Room 102 for one month.

31.  On 14 April 2015, Sau Foon made a report to the police, complaining that Alice had forged Sau Foon’s signatures on the Board Resolution (“the forgery allegation”).

32.  On 6 May 2015, Alice made a statement to the police, in which she denied the forgery allegation.

33.  On 8 May 2015, Sau Foon resigned as the director of BJ.

34.  On 11 May 2015, Mandy’s solicitors wrote to Alice and said that the Board Resolution was a forged document.  The solicitors said that Alice had repudiated the SPA by failing to obtain the board’s approval in relation to the share transfer, and Mandy accepted the repudiation.  The solicitors demanded the return of the HK$180,000 paid under the SPA.

35.  Thereafter, Alice engaged solicitors to write back to Mandy’s solicitors.  The temperature continuously escalated and the disputes finally have to be resolved in court.  On 30 June 2015, Alice commenced these proceedings.

36.  On 11 September 2015, the Registrar of Companies published a notice in gazette pursuant to s 744(3) of the Companies Ordinance (Cap 622) notifying the public that, unless cause was shown to the contrary, the name of BJ would be struck off from the Companies Register after 3 months.  On 8 October 2015, the Registrar of Companies published another notice, in which the Registrar said as a result of an objection, the intended striking off has been discontinued. Accordingly, BJ is still in existence.

37.  On 8 May 2016, the police wrote to Sau Foon and informed her that the investigation concerning her complaint had been completed.  The police said that there was no sufficient evidence to support of laying any charge against anyone.  If further evidence was revealed at a later time, the police might review the case.

THE PARTIES’S RESPECTIVE CASE

Alice’s case

38.  Alice’s case can be divided into 3 parts.

39.  The first part concerns the SPA.  Alice’s case is that she has fully performed her obligations under the SPA.  The SPA is still subsisting and binding upon the parties thereto, ie Alice and Mandy.  Mandy is liable to pay HK$2,007.50 being half of the stamp duty concerning the SPA, and HK$900 being the contribution to Ka Win’ service fees, which has been agreed to be paid by Mandy.

40.  The second part concerns an oral agreement and/or an implied agreement with Sau Foon (“P’s Oral Agreement and/or Implied Agreement”), in respect of which Alice has pleaded the following in her Amended Statement of Claim:-

“8. In or about September 2014, the Plaintiff's family members started complaining to the Plaintiff that she had devoted too much time to Billion Joy and neglected her duties towards the family. As a result, the Plaintiff then in early October told the 2^nd Defendant that she would withdraw from Billion Joy. At that time, the Plaintiff even told the 2^nd Defendant that she was prepared to transfer her 1 share to the 2^nd Defendant free of consideration such that she could withdraw from management of Billion Joy immediately. However, since the 2^nd Defendant had no spare time to manage the business of Billion Joy, the 2^nd Defendant refused to accept the Plaintiff's share. The 2^nd Defendant offered that she would locate a third party that would be willing to manage the business to purchase the Share from the Plaintiff and that the Plaintiff should continue to manage Billion Joy until such a willing purchaser was located. The Plaintiff agreed.

9.  In the circumstances, there was an oral agreement (“the Oral Agreement”) between the Plaintiff and the 2^nd Defendant to the effect that the Plaintiff would continue to manage Billion Joy until the 2^nd Defendant could locate a willing purchaser to purchase the Plaintiff's share to take over management of Billion Joy. Alternatively, an agreement to the same effect could be implied (“the Implied Agreement”).

10.  It was also an implied term of the Oral Agreement and/or the Implied Agreement that the 2^nd Defendant would not without just cause hinder the transfer of the Plaintiff's share to the third party located by the 2^nd Defendant herself.  The implication of such a term is necessary for business efficacy, or is a term that goes without saying, or is in any event what a reasonable person would understand the Oral Agreement and/or the Implied Agreement to encompass.”

Alice claims damages for breach of the Oral Agreement and/or the Implied Agreement against Sau Foon.

41.  The third part is tortious claims against Mandy and Sau Foon.

(a)  Alice claims that Mandy and Sau Foon are liable for damages for the economic torts of unlawful means conspiracy and/or conspiracy to injure.  The common design and combination as pleaded in the Amended Statement of Claim is as follows:-

“43.  By reason of the matters pleaded above, the 1^st and 2^nd Defendants had since about February 2015 unlawfully combined together and/or conspired with each other to injure and/or cause damage to the Plaintiff pursuant to a common design.

44.  The common design referred to above is to achieve the purpose of obtaining for the 1^st Defendant the consideration paid under the SPA when the business had been unsuccessful under their management where no ground of recovery existed in the normal course of event.”

(b)  Alternatively, Alice claims that Sau Foon is liable for damages for the economic tort of causing loss by unlawful means.  In this regard, the unlawful means relied upon are the false representations (“the Representations”) pleaded in the Amended Statement of Claim:-

“54.  The 2^nd Defendant has wrongfully represented to the 1^st Defendant that:-

(1)  The 2^nd Defendant had not signed on the Board Resolution; and

(2)  The 2^nd Defendant had not approved of the transfer of the Share;

(collectively “the Representations”).

55.  The Representations are false and were made in circumstances that the 2^nd Defendant knew it was false and/or reckless as to whether they were true or false.

PARTICULARS OF FALSITY

(1)  The Board Resolution was signed by the 2^nd Defendant on 13^th November 2014 at the 2^nd Defendant’s fruit stall and was witnessed by the Plaintiff and the Plaintiff’s Son.

(2)  The 2^nd Defendant has approved of the transfer by reason of the following:-

(a)  It was the 2^nd Defendant who had caused the SPA to be entered into by the Plaintiff and the 1^st Defendant; the Plaintiff did never take any part in the course of the corresponding negotiation for reaching the SPA;

(b)  The 2^nd Defendant was present when the SPA was signed on 12^th October 2014 and a duplicate of the SPA was copied to her at the same time;

(c)  The 2^nd Defendant knew that the Plaintiff had resigned from all positions of Billion Joy and allowed the management of Billion Joy to be vested with the 1^st and 2^nd Defendants at the exclusion of the Plaintiff; and

(d)  The management of Billion Joy had in fact been carried on by the 1^st and 2^nd Defendants together with their respective family members in a high profile since the date of the SPA and such conduct was unequivocal in treating the 1^st Defendant as rightful shareholder of Billion Joy in accordance with the SPA for months until 11^th May 2015 when the 2^nd Defendant purported to disapprove the transfer of the Share (after the business had failed under their management).”

Mandy and Sau Foon’s case

42.  Mandy and Sau Foon avers that the SPA is subject to certain oral conditions (“Ds’ Oral Conditions”) and was signed under some express oral and/or implied terms (“Ds’ Express Oral and/or Implied Terms”).  The following is pleaded in the defence:-

“8.  Further to the above, the Defendants avers that during the meeting on 12^th October 2014, the SPA was signed under the expressed oral conditions between the Plaintiff, 1^st Defendant, 2^nd Defendant and KF Li that:-

(a)  The accounts of Billion Joy would be checked and corrected（對數）.

(b)  All the debts incurred by Billion Joy before 13 October 2014 would be paid off by its pre-existing shareholders, i.e. by the Plaintiff, the 2^nd Defendant and KF Li.

9.  Further to the above, since before 13^th October 2014, it was the Plaintiff who managed the business of Billion Joy, the SPA was signed under the expressed oral and/or implied terms that:-

(a)  The Plaintiff would be responsible for producing the accounting documents and receipts of Billion Joy.

(b)  The Plaintiff would be responsible for providing sufficient information to explain the accounting documents and receipts of Billion Joy.

(c)  The Plaintiff would assist in the checking and correcting of Billion Joy’s accounts with her best endeavours.

(d)  After the pre-existing debts being paid off, the assets of Billion Joy would be passed to the 1^st and 2^nd Defendant  for handling.”

43.  They say that Alice has breached these oral conditions and oral and/or implied terms.

44.  They also say that the SPA is subject to a condition as to debt, which is “2014年10月13日前之所有帳目均與劉文英無關”.  It is pleaded in the defence that:-

“Paragraph 25 is admitted. The Defendants avers that the original Management Accounts suggested that the Billion Joy would owe the Plaintiff a sum of HK$254,844. The Management Accounts was prepared under the instructions of the Plaintiff. It was prepared under the direct contravention to the Condition as to Debt. The fact that such an important and material irregularity appeared in the original Management Accounts suggests that the Plaintiff may not be a bona fide seller.”

45.  Mandy counterclaims for the return of the HK$180,000 paid under the SPA.

THE ISSUES

46.  The parties have signed a joint statement of issues, in which the parties invite the court to make rulings on the following issues:-

(1)  Whether the SPA contained express oral or implied terms as alleged by Mandy namely:-

(a)  Whether it was an expressed term of the SPA that Mandy would not be responsible for all the debts incurred before 13 October 2014;

(b)  Whether during the meeting on 12 October 2014, the SPA was signed under the expressed oral conditions between Alice, Mandy, Sau Foon and KF that:-

(i) The accounts of BJ would be checked and corrected;

(ii) All the debts incurred by BJ before 13 October 2014 would be paid off by its pre-existing shareholders, i.e. by Alice, Sau Foon and KF;

(c)  Whether the SPA was signed under the expressed oral and/or implied terms that: -

(i) Alice would be responsible for producing the accounting documents and receipts of BJ?

(ii) Alice would be responsible for providing sufficient information to explain the accounting documents and receipts of BJ?

(iii) Alice would assist in the checking and correcting of Billion Joy’s accounts with her best endeavours?

(iv) After the pre-existing debts being paid off, the assets of BJ would be passed to Mandy and Sau Foon for handling?

(2)  Whether Mandy or Alice was in breach of the SPA?

(3)  Whether Mandy is estopped from alleging that Alice had breached the SPA?

(4)  Whether Sau Foon was in breach of the Oral/Implied Agreement?

(5)  Whether, during the meeting between Alice and Sau Foon on 13 November 2014, Sau Foon signed on the Board Resolution and the Certificate?

(6)  Whether Mandy and Sau Foon are guilty of unlawful means conspiracy and/or conspiracy to injure?

(7)  Whether Sau Foon is guilty of the economic tort of causing loss to Alice by unlawful means?

(8)  Whether Alice is entitled to the relief claimed in the statement of claim?

(9)  Whether Mandy is entitled to the relief claimed in the counterclaim?

THE EVIDENCE

The witnesses

47.  Alice has called 3 witnesses, ie herself, CP and MY.  Mandy and Sau Foon have also called 3 witnesses, namely, themselves and KF.  With respect to the parties, in my judgment, save and except the evidence of MY, the evidence of all the other witnesses are not reliable.  While I do not doubt the evidence of MY, the evidence is not useful in shedding light on the issues in dispute in this action.

48.  In assessing the credibility of the witnesses, I bear the principles as said by DHCJ Eugene Fung SC in Hui Cheung Fai v Daiwa Development Ltd (unreported, HCA 1734/2009, 8 April 2014) in mind:-

“77.  Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) ...

78.  In deciding whether to accept a witness’s account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5th May 2011) §39 (Chu J).

79.  In determining a witness’s credibility, I have also attached importance to the consistency of the witness’s evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80.  I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36, 37 (Bokhary PJ).

81.  The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:-

“Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities.  It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.”

82.  Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’ credibility features prominently in the court’s determination...”

49.  As to the effect of lies by a witness on a central issue, Sir John Dyson in the Supreme Court of UK in MA (Somalia) v Secretary of State for the Home Department [2011] 2 All ER 65 said:-

“31.  ...... where a claimant tells lies on a central issue, his or her case will not be saved by general evidence unless that evidence is extremely strong. It is only evidence of that kind which will be sufficient to counteract the negative pull of the lie. But much depends on the bearing that the lie has on the case. ......

32.  Where the appellant has given a totally incredible account of the relevant facts, the tribunal must decide what weight to give to the lie, as well as to all the other evidence in the case, including the general evidence. ......

33.  ...... where the appellant tells lies on a central issue in the case, the [tribunal] may conclude that they are of great significance.  ...... It will be a matter for the [tribunal] to decide whether the general evidence is sufficiently strong to counteract what we have called the negative pull of the appellant’s lies.”

Alice

50.  Alice has given a detailed narrative of the matters concerning BJ and her dealings with Mandy and Sau Foon.  Having carefully considered her evidence, I am unable to accept her evidence on an important matter in this case, ie whether Sau Foon signed the Board Resolution and Certification on 13 November 2014 in the circumstances as said by Alice.

51.  The authenticity of the Board Resolution is the subject matter of the police’s investigation.  No doubt, Alice would be aware of the importance of the evidence relating to the execution of the Board Resolution and the Certification by Sau Foon.

52.  Alice’ evidence is that in her work as an insurance agent, from time to time she would have to explain various insurance plans or financial products to her customers.  She would explain to her customers in detail.  On 13 November 2014, she and CP took the transfer documents, including the Board Resolution and the Certification, from Ka Win.  A staff member of Ka Win had explained to them the contents of those documents.  She and CP then took the documents to Sau Foon’s stall.  Alice explained the contents of those documents (which are in English) to Sau Foon there.  After knowing the contents of the documents, Sau Foon signed the Board Resolution and the Certification.  Sau Foon did not sign the Management Accounts as she wanted to let Mandy have a look on the same first.

53.  Mr Edward Poon, counsel for Mandy and Sau Foon, drew Alice’s attention to the following contents of the Certification during cross-examination:-

“[Alice and Sau Foon] hereby certify that:-

2.  [BJ] has never commenced business since its incorporation.”

54.  Mr Poon asked Alice that paragraph 2 of the Certification was untrue, and why Alice would ask Sau Foon to sign a document containing an untrue declaration.  Alice answered that she just noticed paragraph 2 of the Certification when Mr Poon drew her attention to this.  I am puzzled by this answer.  The Certification is a very short document.  If she has really explained the contents of the same to Sau Foon before inviting Sau Foon to put her signature on the same, it would not be possible that Alice would have missed paragraph 2 of the Certification.

55.  Alice’s evidence on the execution of the Board Resolution and the Certification by Sau Foon is unsatisfactory and unreliable.

56.  As Alice’s evidence on this important matter is unreliable, it would not be safe for me to rely upon Alice’s evidence to make any finding.

CP

57.  CP’s evidence also touched upon the execution of the Board Resolution and the Certification by Sau Foon.  He tried to support Alice’s version on this matter.  His evidence is that “I heard my mother explained the contents and nature of the 5 documents to [Sau Foon]” at Sau Foon’s stall.  If that is the case, Alice would not only notice paragraph 2 of the Certification for the first time while she was giving evidence in the witness box.

58.  I refuse to accept CP’s evidence on the execution of the Board Resolution and Certification by Sau Foon.  As CP’s evidence on this important matter is unreliable, I would also refuse to rely upon CP’s evidence to make any finding.

MY

59.  MY and Alice are working in the same insurance company.  As Alice’s husband, he knows Alice’s involvement in BJ.  MY has also accompanied Alice in participating in some meetings concerning the share transfer.  I accept MY’s evidence, but his evidence is only on some background or peripheral issues. While the evidence is reliable, it is not useful for the purpose of resolving the controversies in this case.

Mandy

60.  Mandy is not a reliable witness.  I have no hesitation in rejecting her evidence.  She was an evasive witness, claiming of being unable to understand very simple questions that were put to her by Alice’s counsel, Mr Alexsander Wong.  She even claimed to be unable to understand very simple questions asked by the court.  In my judgment, Mandy was not unable to understand these questions, she was just unwilling to answer.

61.  Plainly she has not told the truth in the witness box.  She tried to distant herself from BJ and claimed that she has never been in the management of the BJ after 12 October 2014.  Mr Wong drew her attention to paragraph 12 of the defence, in which she has admitted that the management of BJ was taken up by herself and Sau Foon after 12 October 2014.  Clearly, Mandy’s evidence is contradicted by her own pleading.

62.  In fact, the evidence showing that Mandy was managing BJ after 12 October 2014 is overwhelming.  Yet Mandy repeatedly tried to make up various excuses to explain away.  When Mr Wong pointed out that she was in an advertisement of BJ, Mandy claimed that she was simply being asked to post for the picture because of her pretty face.  When Mr Wong asked why she had a name card with BJ’s name and her name printed thereon, Mandy claimed that she just put the card in her beauty shop and she had various other name cards from other companies.  When Mr Wong asked why she would know the daily income of BJ, she claimed that she learned it from her son working in BJ.  Mandy claimed that she was simply “looking after” BJ to see if it would cease business, but she had never managed BJ as the share transfer had not yet been effected.  All these excuses are unsustainable. 

63.  Mandy would say anything to put all the blames on Alice, no matter whether the accusation is true or untrue.  A noticeable example is the repayment of HK$1,000 (being the advertisement fees incurred by BJ prior to the SPA) by Alice to her.  When Mr Wong asked Mandy whether she could confirm this repayment, Mandy adamantly denied that Alice had repaid the sum to her.  Mr Wong then showed Mandy the transcript of the conversation between she and Alice on 7 November 2014 (which is evidence showing that Mandy clearly knew the repayment).  After being confronted with the relevant transcript, Mandy tried to retract from her previous answer.

64.  I would not rely upon Mandy’s evidence to make any finding.

Sau Foon

65.  Sau Foon is also not a reliable witness.  She tried to downplay the close relationship between herself and Alice.  At the beginning of the cross-examination, Mr Wong asked Sau Foon whether Alice would help her to collect rentals from the tenants of Sau Foon’s properties.  Sau Foon reluctantly admitted.  When Mr Wong asked the total amount of rentals passed by Alice to her each time, Sau Foon said she had forgotten the amount.  Mr Wong further asked that the rentals collected were from 5 properties, and hence the amount would be over HK$10,000.  Sau Foon just said she had forgotten the amount and refused to admit that the amount would be over HK$10,000.

66.  She also tried to cover for Mandy and said that Mandy had no role in the management of BJ after signing the SPA.  However, in paragraph 12 of the defence, Sau Foon together with Mandy have admitted that that the management of BJ was taken up by them after 12 October 2014.  Sau Foon’s evidence is contradicted by her own pleading.

67.  Like Mandy, Sau Foon would say anything to put the blames on Alice, regardless of the truthfulness of the accusation.  An example is the lease of Room 202.  Sau Foon said Alice had caused BJ to rent Room 202 without Sau Foon’s knowledge and consent, and Sau Foon only found out this in mid-September 2014.  However, there is documentary evidence showing that on 5 September 2014, Sau Foon signed an application for business registration of “Star Club”, in which Room 202 is clearly stated as the address of the business.  Obviously, Sau Foon’s evidence cannot be true.

68.  No reliance can be placed on Sau Foon’s evidence.

KF

69.  KF’s evidence is on peripheral matters.  His evidence, even if accepted, would be of little assistance in respect of resolving the issues in this case.

70.  I am sceptical about KF’s evidence in relation to the payment of salary of HK$45,000 by BJ to Alice.  KF, in his evidence, said that he had never agreed to this payment.

71.  It is common ground that when Alice, Sau Foon and KF started BJ, the 3 of them agreed that no one would get salary from BJ.  Alice’s case is that after starting the business, Sau Foon and KF did not devote much time in looking after BJ, and as a result Alice had spent much time in managing BJ. Alice therefore proposed to Sau Foon and KF, and Sau Foon and KF agreed that BJ might pay a salary of HK$45,000 to Alice.  Mandy and Sau Foon’s case is that no one has ever agreed the payment of salary of HK$45,000 by BJ to Alice. 

72.  The documentary evidence shows that Alice has prepared a list in which Alice has set out BJ’s expenses, including the payment of the salary of HK$45,000 to Alice.  Alice has sent a copy of that list to KF by mobile phone on 11 November 2014.  In the mobile phone message, Alice told KF that a copy of that list had been placed in BJ, and KF might went to BJ to see that list. Under cross-examination, KF agreed that he received the mobile phone message, and he also said that he had gone to BJ to see that list.  He noticed that the payment of salary of HK$45,000 was on the list.  However, KF did not raise any query with Alice on these HK$45,000 before the commencement of this action.  In fact, KF also did not mention these HK$45,000 in his first witness statement dated 20 February 2016.  He only mentioned this for the first time in his supplemental witness statement dated 30 March 2016.

73.  If the payment of HK$45,000 from BJ to Alice has never been authorized by Sau Foon and KF, this would certainly adversely affect the interests of Sau Foon and KF.  This payment is not a small sum.  If the payment is an unauthorized payment, there is no reason why KF would refrain from making any complaint to Alice.

Documentary evidence

74.  As there is no reliable or useful evidence given by any witness, I have to resort to the documentary evidence.  Save and except the Board Resolution and the Certification, there is no dispute as to authenticity of the documents in the trial bundles.

75.  Various meetings and conversations between the parties were recorded and transcripts of the same are produced.  In respect of some meetings and conversations, the parties have managed to produce a single set of agreed transcripts.  In relation to other meetings and conversations, each party has provided its own set of transcripts.  As to these transcripts, the parties have eventually agreed that Alice’s version should be treated as the accurate version.

76.  The parties have also produced some messages passing between the parties in mobile phones.  The accuracy of these messages are not disputed.  

ANALYSIS

77.  I will set out my findings and rulings on the relevant topics below.

SPA

78.  In my judgment, the meaning of the SPA is clear and plain:-

(a)  The subject matter of the SPA is the sale and purchase of the 1/3 beneficial shareholding owned by Alice in BJ.  Subject to the terms of the SPA, Alice would sell and Mandy would purchase this 1/3 beneficial shareholding at the price of HK$180,000.

(b)  Upon the signing of the SPA, Alice would resign from the directorship and all other positions in BJ.

(c)   Mandy would not be responsible for all the financial matters prior to 13 October 2014.

(d)  After the signing of the SPA and the payment of the HK$180,000, all the rights and liabilities would belong to Mandy.  The rights and liabilities here must be the rights and liabilities attached to the 1/3 beneficial shareholding.

79.  I accept Alice’s case that the SPA has an implied term, ie the stamp duty payable in relation to the SPA would be borne by Alice and Mandy in equal shares.  It is common knowledge in Hong Kong that stamp duty would be levied on a contract transferring shares in a private company.  The implied term suggested by Alice is what the SPA reading as a whole against the relevant background would reasonably be understood to mean.  See AG of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 at [21].

80.  In my judgment, apart from the above, Alice does not owe any further obligation to Mandy under the SPA.

81.  I do not accept that the SPA is subject to the condition as to debt contended by Mandy and Sau Foon (see paragraph 44 above).  Alice does not guarantee that BJ would not have any debt when the 1/3 beneficial shareholding is passed to Mandy. What is guaranteed by Alice is that Mandy would not be responsible for any liabilities incurred by BJ prior to 13 October 2014.  If Mandy is required to pay anything in relation to the liabilities incurred by BJ before 13^th October, Alice would have to indemnify Mandy.

82.  Alice also does not guarantee that Mandy would acquire the status of registered shareholder of BJ.  After the signing of the SPA, the interest in the 1/3 beneficial shareholding would be passed from Alice to Mandy, and Alice would hold the said beneficial interest on trust for Mandy.

83.  I refuse to accept Mandy and Sau Foon’s case that the SPA is subject to the Ds’ Oral Condition.  The pleaded case of Mandy and Sau Foon is that the oral conditions are express oral conditions among Alice, Mandy, Sau Foon and KF agreed on 12 October 2014.  This case must fail on the ground that KF was not present in any discussion held on 12 October 2014.  It has never been pleaded that Mandy and/or Sau Foon participated in those discussions on behalf of themselves and KF.  There is no evidence from KF that he has authorized anyone to represent him in those discussions.  Mandy and Sau Foon’s case on the Ds’ Oral Condition must fail.

84.  I also refuse to accept Mandy and Sau Foon’s case that the SPA contains the Ds’ Oral and/or Implied Terms:-

(a)  As to the production of accounting documents and receipt and information explaining these documents, Mandy’s right to have these documents and information is a right attached to the 1/3 beneficial shareholding, which is within the ambit of the express terms of the SPA.

(b)  To say that Alice has an obligation to “assist in the checking and correcting of BJ’s accounts with her best endeavours” is vague and uncertain. Apart from passing the financial documents and information to Mandy, provided that Alice would indemnify Mandy in respect of any liabilities incurred prior to 13 October 2014, Alice does not owe an obligation to Mandy under the SPA that Alice must ensure the accuracy of each and every entry in BJ’s accounts.

(c)  The transfer of the 1/3 beneficial shareholding in the SPA is not conditional upon the paying off of all the debts incurred by BJ prior to 13 October 2014.  What Alice has promised in the SPA is that Mandy would not be responsible of any liabilities incurred prior to 13 October 2014.  As said above, after the transfer of the 1/3 beneficial shareholding, if anyone requires Mandy to pay anything in respect of the liabilities incurred by BJ prior to 13 October 2014, Mandy can pursuant to the SPA require Alice to pay the same, and Alice has to do the same.

85.  I find that Alice has passed the BJ’s documents in her possession to Mandy after signing the SPA.  Mandy must have been in possession of those documents.  Otherwise, Mandy would not be able to ask the questions in the Enquiry Letter.  Alice has also passed the management right to Mandy after signing the SPA.  I find that BJ was managed by Mandy and Sau Foon after the SPA.  This is a fact admitted by Mandy and Sau Foon in their defence.

86.  In my judgment, Alice has not breached the SPA in any aspect.  On the contrary, by demanding the return of the HK$180,000 paid under the SPA on 11 May 2015, Mandy has breached the SPA.  Notwithstanding this breach, the SPA is still subsisting and binding upon the parties thereto, ie Alice and Mandy.

87.  Since BJ is still in existence, for the purpose of clarifying their respective rights and obligations in relation to the 1/3 beneficial shareholding mentioned in the SPA, I think it would be necessary and proper to make a declaration that the SPA is subsisting and binding upon Alice and Mandy.  I will make a declaration to that effect.

88.  Alice also claims an order for specific performance of the SPA in her Amended Statement of Claim.  In my judgment, since I am going to give the declaration mentioned above, it would not be necessary to give the order of specific performance sought by Alice.  In any event, Mr Wong does not pursue the application for an order of specific performance in his final submissions.

Stamp duty

89.  I have found that the SPA contains an implied term that the stamp duty payable in relation to the SPA would be borne by Alice and Mandy in equal shares.  Alice has produced documentary evidence to show that the transfer documents have been submitted to the Stamp Duty Office for stamping.  As the documents were not submitted in time, apart from the normal stamp duty, there is also a penalty.  Half of the total of the stamp duty and penalty is HK$2,007.50.  Alice claims this sum against Mandy.

90.  I find that both Alice and Mandy have a duty to submit the documents to the Stamp Duty Office in time.  The late submission should be a responsibility borne by both Alice and Mandy.  Accordingly, Mandy should be responsible for half of the penalty paid for late stamping.

91.  Strictly speaking, as the subject matter of the SPA is the transfer of the 1/3 beneficial shareholding in BJ owned by Alice, it would not be necessary to prepare the transfer documents.  However, the SPA itself would need to be stamped.  The stamp duty levied on the SPA and the penalty would be same as the one now charged on the transfer documents.

92.  With all these in mind, I am of the view that Alice should be entitled to the HK$2,007.50 claimed.

Service fees paid to Ka Win

93.  Alice pleaded that she and Mandy have agreed to engage Ka Win to do accounting works in relation to the BJ’s accounts, and Mandy has agreed to contribute HK$900 to the service fees paid to Ka Win.

94.  Alice has produced the messages exchanged between her and Mandy through mobile phones.  In my judgment, the messages clearly show that Alice and Mandy has reached an agreement in relation to Ka Win’s service fees as claimed by Alice in her pleading.

95.  Alice has also produced an invoice issued by Ka Win on 6 November 2014. In that invoice, apart from the disbursement, the total of the fees charged by Ka Win is HK$3,900.  Although there is no corresponding receipt, the documents in this case show that Ka Win in fact has done a lot of works in relation to the share transfer.  Naturally Ka Win would not provide services without charging any fee.  I accept that the service fees of HK$3,900 have been paid by Alice to Ka Win.  Pursuant to the agreement mentioned above, Mandy has to pay HK$900 to Alice as Mandy’s contribution.

P’s Oral/Implied agreement

96.  I find that Alice has failed to establish P’s Oral/Implied Agreement. As a result of no reliable or useful oral evidence before me, there is simply no sufficient evidence in support of this claim.

97.  Further, I have difficulties in accepting P’s Oral Agreement as a binding and enforceable agreement as a matter of law.  In order to have a binding and enforceable contract, the parties thereto must have reached a concluded agreement on all the essential terms.  See Kwan Siu Man v Yaacov Ozer [1997-98] 1 HKCFAR 343; and World Food Fair Ltd v Hong Kong Island Development Ltd [2006] 9 HKCFAR 735.

98.  The oral agreement suggested by Alice is this:- Sau Foon agreed to locate a third party that would be willing to manage the business to purchase Alice’s shareholding in BJ, and in return Alice agreed to continue to manage BJ until such a willing purchase was located.  There are at least 2 uncertainties in this agreement, ie (a) what is the meaning of “willing purchaser”?  Would a purchaser who is only prepared to pay HK$1 to Alice be classified as a willing purchaser?  Has Sau Foon discharged her contractual obligation if she has found a purchaser of such a kind?  (b) Sau Foon would have how much time to find the “willing purchaser”?  This would be an important term of the oral agreement (if the oral agreement has really been made between Alice and Sau Foon), as Alice was intending to leave BJ as soon as possible at that time.  In my judgment, if Alice and Sau Foon really intend to have the oral agreement as a binding contract, they would not leave this out.

99.  With these uncertainties on the essential terms, even if the oral agreement exists, I would not regard this as a binding contract.

100.  What have been said above also apply to P’s Implied Agreement.

The Board Resolution and the Certification

101.  It is Alice’s pleaded case that the Board Resolution and the Certification were signed by Sau Foon on 13 November 2014 at Sau Foon’s stall. Since I refuse to accept Alice’s evidence and CP’s evidence, this suggestion is not proved.  However, this only means that there is no evidence proving that the documents were signed by Sau Foon on 13 November 2014 in the circumstances described by Alice.  This cannot be treated as a finding that Sau Foon has never signed these documents.

102.  Sau Foon denied that she had ever signed the Board Resolution and the Certification.  Although I do not accept Sau Foon’s evidence, my non-acceptance of Sau Foon’s evidence cannot be treated as a finding that Sau Foon has signed these documents.

103.  There is simply no reliable evidence before me showing one way or the other.  As to whether the signatures on these documents are Sau Foon’s signatures, I make no finding on this question.

Unlawful means conspiracy and/or conspiracy to injure

104.  Mr Wong fairly accepts that cogent and compelling evidence is required in proving an allegation of conspiracy.  While all the evidence given by the witnesses called by Alice is either unreliable or not useful, I am reluctant to make a finding that Mandy and Sau Foon have conspired together in the way suggested by Alice in her pleading.

105.  There is no satisfactory evidence showing that Mandy has changed her stance before and after her signing of the transfer documents.  The documentary evidence shows that Mandy has concerns on BJ’s accounts at all times.  She wrote the Enquiry Letter to Alice, Sau Foon and KF on 31 December 2014.  Mandy signed the transfer documents on 16 January 2015.  However, on 6 February 2015, Mandy still queried Alice on the matters in BJ’s accounts over the phone. 

106.  There is also no reliable evidence showing that Sau Foon has signed the transfer documents on 13 November 2014, but disavowed the same since February 2015.

107.  In my judgment, Alice has failed to prove the common design suggested in her pleading.

108.  In the circumstances, Alice’s claim of unlawful means conspiracy and/or conspiracy to injure against Mandy and Sau Foon must be dismissed.

Causing loss by unlawful means

109.  In order to succeed on this claim against Sau Foon, Alice has to prove the falsity of the Representations as pleaded in her pleading.  Whether Sau Foon has signed the Board Resolution approving the transfer of share is a key issue in relation to the falsity of the Representations.  Since the evidence in relation to the events on 13 November 2014 adduced by Alice is not accepted by this court, the falsity of the Representations is not proved.

110.  Further, there is no reliable evidence before me showing that Sau Foon withheld the approval for the transfer of share with an intention to inflict harm on Alice.  For the success of this tortious claim, the proof of this intention is essential.  See Clerk & Lindsell on Torts (21^st Edition), para 24-73.

111.  As a result, Alice’s claim of causing loss by unlawful means against Sau Foon is dismissed.

Mandy’s counterclaim

112.  As a result of my finding that the one who is in breach of the SPA is Mandy and not Alice, Mandy’s counterclaim must be dismissed.

113.  There are other problems in the counterclaim.

114.  As a matter of law, Mandy may only get back the HK$180,000 by (a) an implied term in the SPA that the payment is conditional upon the completion of Alice’s obligations under the SPA; or (b) restitution.  See Polyset Ltd v Panhandat Ltd [2002] 5 HKCFAR 234, per Ribeiro PJ at [56] – [62].

115.  It has not been pleaded that Mandy is entitled to recover the HK$180,000 by an implied term in the SPA.  If that plea has been raised in the counterclaim, whether the implied term exists, whether the HK$180,000 can be classified as an advance payment, and whether the HK$180,000 is recoverable while Alice has at least performed some of her obligations (ie handing over the management of BJ to Mandy) would be explored in the trial.

116.  It has not been pleaded that Mandy is entitled to recover the HK$180,000 by restitution.  If that plea has been raised in the counterclaim, Alice may raise a defence in response to such a plea, for example, change of position. All these would have to be explored in the trial.

117.  Without pleading the legal basis in support of the counterclaim, Alice would have no opportunity to adduce evidence and to make submissions on the essential issues as set out above.  In the circumstances, even if Alice has breached the SPA as alleged by Mandy, I would still refuse the counterclaim.

118.  Apart from pleadings, since Mandy has already obtained benefits under the SPA, ie managing BJ, Mandy may not be able to get back the HK$180,000 in any event. 

(a)  If Mandy relies upon an implied term in the SPA that the payment of HK$180,000 is conditional upon the completion of Alice’s obligations, the claim may fail as the failure of consideration is not total.  See Polyset (supra) at [62].

(b)  If Mandy relies upon restitution, Mandy’s claim may still fail as the failure of consideration is not total.  See Carter’s Breach of Contract (Hart Edition, 2012), Article 13.9

“Where a contract is discharged by an election by the promisee to terminate the performance of the contract for breach or repudiation by the promisor, restitution may be ordered in favour of the promisee for the amount of any contractual payment in respect of which the agreed return failed totally.”

119.  I dismiss Mandy’s counterclaim.

CONCLUSION

120.  The answers to the issues set out in paragraph 46 above are apparent from the findings and rulings set out above.

121.  For the reasons above, I allow Alice’s claim to the extent that:-

(a)  there be a declaration that the SPA is subsisting and the parties thereto, ie Alice and Mandy, are bound by the terms thereof;

(b)  Mandy shall pay the following sums to Alice:-

(i) HK$2,007.50; and

(ii) HK$900;

(c)  there be interest on the aforesaid sums at 1% above the HSBC prime rate from the date of the writ until the date of this judgment

122.  Save the aforesaid, other claims made by Alice are dismissed.

123.  I dismiss Mandy’s counterclaim.

124.  As the parties in Alice’s claim (Alice, Mandy and Sau Foon) are different from the parties in Mandy’s counterclaim (Alice and Mandy), there should be a costs order in Alice’s claim and another costs order in Mandy’s counterclaim.  For the ease of taxation, I am minded to specify the time spent in each claim, and I have invited submissions on this.  Having heard the submissions, I am of the view that most of the time has been spent on issues concerning the SPA, which are common in both Alice’s claim and Mandy’s counterclaim.  The remaining time has been spent on P’s Oral Agreement/Implied Agreement and the tortious claims made by Alice.  In my judgment, the time spent in Alice’s claim and the time spent in Mandy’s counterclaim in these proceedings would be 60% and 40% respectively.

125.  As said above, Alice’s claim is divided into 3 parts.  Alice succeeds in the first part, but fails in the second and the third parts.  In my judgment, most of the time was spent on the first part.  In these proceedings, 60% of the time was occupied by Alice’s claim.  I would further specify that 40% of the time in these proceedings is spent on the first part of Alice’s claim, while 20% is spent on the second and the third parts.

126.  With the general rule of costs following the event in mind, I make the following costs order on a nisi basis:-

(1)  Costs in the Alice’s claim

(a) 2/3 of Alice’s costs (including all costs reserved, if any) are to be paid by Mandy;

(b) 1/3 of Mandy’s costs (including all costs reserved, if any) are to be paid by Alice;

(c) costs of Sau Foon (including all costs reserved, if any) are to be paid by Alice; and

(d) there be a certificate for counsel.

(2)  Costs in Mandy’s counterclaim

(e) costs incurred by Alice (including all costs reserved, if any) are to be paid by Mandy; and

(f) there be a certificate for counsel.

127.  Alice, Mandy and Sau Foon were friends at one time.  In particular, Alice and Sau Foon were good friends of each other for over a decade.  If they could have more understanding on the issues concerning the SPA, many problems might have been avoided.  Similarly, if they could try to place more trust on the others, any dispute might have been resolved through negotiation or mediation.  Due to misunderstanding and mistrust, the friends finally have to resolve this case in court.  This is most unfortunate.  I hope that this judgment can put an end to the saga, and from now on they can focus on other things in their lives.

128.  Lastly, it remains for me to thank Mr Wong and Mr Poon for the assistance rendered to this court.