TAI TONY CHAK LEUNG v. KE JUNXIANG

HCA 2651/2018

[2022] HKCFI 3420

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2651 OF 2018

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J U D G M E N T

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INTRODUCTION

1.  In the present trial, the Plaintiff, Mr Tai Tony Chak Leung’s (“Mr Tai”)  case is a simple and straightforward one.

2.  On 19 April 2018, he entered into an investment agreement with the Defendant, Mr. Ke Junxiang (“Mr Ke”)  as evidenced by, amongst others, a written declaration and undertaking (the “D&U”)  under which Mr Tai invested HK$30 million into the initial public offering (“IPO”)  of one Ping An Healthcare and Technology Company Limited (“Ping An Good Doctor”)  for a period of 30 days. Mr Tai was promised a return of HK13,000,000 by Mr Ke.

3.  Mr Ke further gave Mr Tai a post-dated cheque in the sum of HK$43,000,000 which was subsequently dishonoured. Mr Ke had made some partial payments to Mr Tai leaving an outstanding balance of HK$33,880,074.

4.  Mr Ke’s defence is that although the D&U states the HK$30 million as an investment, in fact, to the knowledge of both Mr Tai and himself, the D&U is a sham document and the HK$30 million is in fact a loan advanced by Mr Tai to Mr Ke at a monthly interest of about 42% and as such the outstanding loan is unenforceable pursuant to the provisions of the Money Lenders Ordinance, Cap 163 (the “MLO”).

5.  Hence, this case turns on the Court’s finding on an issue of fact, namely, whether the parties intended the advance of Mr Tai’s HK$30 million to Mr Ke to be an investment with a promised or guaranteed minimum profit of HK$13,000,000 or as a loan with HK$13,000,000 as interest. This will turn on the credibility of each parties’ case including what was discussed and agreed by the parties on 19 April 2018 at the Health Club of Island Shangri-La Hotel.

THE PLAINTIFF’S CASE

6.  Mr Tai’s case as set out in detail in his written closing submissions is that since late 2015, he has been visiting the Health Club on the 8^th floor of Island Shangri-La regularly after work to do physical exercise. From time to time, he ran into Mr Ke at the Health Club and they exchanged greetings with each other. They initiated conversations and exchanged WeChat contacts since around January 2016. Once or twice a week at the men’s locker room of the Health Club, they would briefly chat about the current news, economy, politics of Hong Kong and China. Gradually, they became acquaintances.

7.  In their exchange of conversations, Mr Ke told Mr Tai that he was the Chairman, CEO and majority shareholder of a Hong Kong listed company named CIL Holdings Limited (stock code 479). He also held himself out as a valued customer/VIP of JP Morgan Chase Bank (“JP Morgan”).

8.  In the year of 2017, Mr Tai was the Vice-President of the Chinese Manufacturers’ Association promoting the development of the Hong Kong industrial community. Mr Tai invited Mr Ke to procure his listed company, namely, CIL Holdings, to become a member of the Association. Mr Ke promised almost instantly for CIL Holdings to join as a member and further introduced two more of his affiliated companies, namely AVT International Limited and Hong Wei (Asia)  Holdings Company Limited to join as a member.

9.  In early 2018, Dr Lo Tai Chin, Mr Tai’s wife (“Mrs Tai”)  was in the course of forming the 39^th term board of directors of Yan Oi Tong, a charitable organisation in Hong Kong. Mr Ke indicated that he wished for his younger son, Jacky Or (柯兆堅), to join the new board of Yan Oi Tong as a vice-chairperson. With Mrs Tai’s help, Jacky Or became a vice-chairperson of Yan Oi Tong through donating a sum of HK$2 million.

10.  In the process, Mr Tai and Mr Ke grew closer. At that time, Mr Tai had high regard for Mr Ke, whom he considered to be a wealthy, resourceful, respectful and generous businessman.

11.  In or around early or mid-April 2018, at the men’s locker room of the Health Club, Mr Ke introduced to Mr Tai an investment project in relation to the IPO of Ping An Good Doctor.

12.  Mr Ke represented to Mr Tai that JP Morgan was the Joint Sponsor, Global Coordinator and Joint Bookrunner of the anticipated IPO, and was allocated a quota of US$50 million worth of shares to be purchased by three anchor investors including Mr Ke. Mr Ke further told Mr Tai that the investment was likely to result in a high return of 60% or more.

13.  On 17 April 2018, Mr Ke sent to Mr Tai several pieces of news regarding the anticipated IPO of Ping An Good Doctor. Mr Ke also forwarded to Mr Tai two WeChat messages from Bailey Xu of JP Morgan to Mr Ke, which suggested that, inter alia:

(1)  the expected profit would be at least 60% or even higher;

(2)  the investment was a sure win and could be completed within 2 weeks (within 3 days of the IPO)  「兩周內完成，百分之百賺錢…三日內走」; and

(3)  if there was difficulty in obtaining fund for the investment, Bailey Xu could ask Michael (i.e. Michael Choi of Sunwah Kingsway)  to help to raise fund and Michael would definitely be willing to do so.

14.  According to the information forwarded by Mr Ke to Mr Tai at the time, Mr Ke was one of the anchor investors for the anticipated IPO of Ping An Good Doctor. Wang Tao (王濤), the then Chairman and CEO of Ping An Good Doctor, could allocate to Mr Ke up to US$20 million worth of shares in Ping An Good Doctor. The IPO only had a small quota for public offering (6.5%)  and hence it was unlikely for a public investor to be offered a substantial amount of shares.

15.  At this point in time, Mr Ke was persuading Mr Tai to invest in this IPO of Ping An Good Doctor. During cross-examination, Mr Tai explained his understanding at the time was that Mr Ke wanted to persuade Mr Tai to join the investment because, on one hand, Mr Ke wanted Mr Tai to have a share of the benefit and, on the other hand, Mr Ke would like to pool-up funds so as to maximize the investment by taking up the entire US$20 million quota.

16.  In the morning of 19 April 2018, Mr Ke sent to Mr Tai via WeChat further information about Ping An Good Doctor indicating that 「預計利潤可高達60%或更高……利潤的中30%作分成之用……也就是說，最少1000萬可連本利收到不少於1420萬（收到股票後三天內沽清為限）」.

17.  In the afternoon of 19 April 2018, Mr Tai asked Mr Ke via WeChat for the stock code of Ping An Good Doctor, trying to get a better understanding of the anticipated IPO. Mr Tai and Mr Ke also discussed via WeChat about the possibility of meeting at the Health Club that evening.

18.  Up to this point in time (i.e. before the 19 April Meeting), there is no dispute that the discussion between Mr Tai and Mr Ke was in respect of a potential investment; neither party had said anything about a loan.

19.  At about 9:10 pm on 19 April 2018, Mr Tai and Mr Ke met inside the men’s changing room at the Health Club to further discuss the potential investment in Ping An Good Doctor (i.e. the 19 April Meeting). At the meeting:

(1)  Mr Tai asked Mr Ke whether or not there was a chance that the investment would go down. Mr Ke assured Mr Tai that based on his sources and experience, there was going to be a huge demand for the shares of Ping An Good Doctor, the share price would definitely go up quickly, and there was no way that Mr Tai would lose money.

(2)  To indicate his confidence in the investment, Mr Ke further offered to issue a one-month post-dated cheque in Mr Tai’s favour as the guaranteed return of capital and profit, that is, the amount of the capital plus the amount of the 42% minimum profit (i.e. 70% of the expected minimum profit of 60%). This is in fact the case put by Mr Wong for Mr Ke to Mr Tai during his cross-examination.

(3)  Mr Ke further said that, in the event that the stock price increased by more than 60%, the extra profit would be distributed in a pro-rata manner between Mr Tai and Mr Ke in the agreed ratio of 70:30. Alternatively, Mr Ke would transfer to Mr Tai equivalent value of shares of Ping An Good Doctor.

(4)  Mr Tai then asked Mr Ke whether he could accept the fund in Renminbi. This was because Mr Tai had reserved an amount of RMB equivalent to about HK$30 million in Shenzhen at the time, which was intended for payment in June 2018 to a minority shareholder of Mr Tai’s company for share buy-back. Mr Tai told Mr Ke it was important for Mr Tai to get back the money on time.

20.  In the course of such discussions, at 9:21pm that night, Mr Ke further forwarded to Mr Tai via WeChat a long message in relation to Ping An Good Doctor, which mentioned, amongst others, 7 cornerstone investors for the anticipated IPO and the big demand for the shares among the public investors. To Mr Tai, the content of the message was consistent with what Mr Ke had been telling him about the great potential of Ping An Good Doctor, and Mr Tai believed in what Mr Ke told him.

21.  Mr Tai did not confirm immediately at the 19 April Meeting that he would invest in the anticipated IPO. He did, however, give Mr Ke a promising indicative reply saying that he was interested but wanted to consider the matter over the night.

22.  On the morning of 20 April 2018, at around 9:19am, Mr Tai informed Mr Ke via WeChat that Mr Tai was prepared to transfer RMB 24 million (equivalent to HK$30 million)  into Mr Ke’s personal account in Shenzhen. Mr Tai also asked Mr Ke to call him.

23.  Mr Ke then called Mr Tai over the telephone that morning. During their conversation, Mr Tai told Mr Ke that Mrs Tai asked for a signed document from Mr Ke to record the investment agreement.

24.  Mr Ke agreed and, at 10:39am the same morning, sent to Mr Tai via WeChat a draft written declaration and undertaking in Chinese confirming the investment with him and his instruction that Mr Tai should transfer the investment fund to Mr Ke’s brother’s PRC bank account. This was the first draft of the D&U, drafted by Mr Ke.

25.  At 11:06am the same day, Mr Tai sent to Mr Ke via WeChat his comments on the draft D&U, asking Mr Ke to add to the draft: (1)  Mr Tai’s full name; (2)  a statement that the payment back to Mr Tai would be made to either his Hong Kong account or his PRC account; (3)  the date of D&U.

26.  At 12:31pm on 22 April 2018, before he was about to meet Mr Tai and his family for lunch, Mr Ke sent to Mr Tai via WeChat a revised draft of the D&U in the form of a word file. The three changes proposed by Mr Tai were reflected in this draft.

27.  At 12:40pm on 22 April 2018, Mr Ke sent to Mr Tai via WeChat a further revised draft of the D&U, also in word format. The only change in this version was that Mr Ke’s full name was added at the bottom next to the phrase「委託人」. This was the version that Mr Ke printed out and signed, which became the D&U.

28.  At around 1:00pm that day, Mr Ke met with Mr Tai, Mrs Tai and their daughter at the Summer Palace at Island Shangri-La for lunch. At the lunch, Mr Ke delivered to Mr Tai the signed D&U and the Post-Dated Cheque (in the sum of HK$43 million dated 21 May 2018).  Whilst 70% of an expected profit of 60% should give rise to a profit return of HK$12.6 million based on his capital of HK$30 million, Mr Tai said that the guaranteed minimum profit was rounded-up to HK$13 million, and Mr Ke agreed to the extra of HK$0.4 million with the view to convincing him to invest in Ping An Good Doctor.

29.  Mr Tai had a habit of self-reflection and writing down his feelings and observation before going to sleep. On the night of 22 April 2018, he recorded his gratefulness for having made a considerable fortune for his family and his daughter and having befriended Mr Ke. He shared his note with Mrs Tai via WhatsApp.

30.  The following day, i.e., 23 April 2018, at 9:02am, Mr Ke sent to Mr Tai via WeChat the Preliminary Offering Circular for Ping An Good Doctor’s anticipated IPO.

31.  At 10:16am the same day, Mr Tai replied to Mr Ke via WeChat: 「謝謝消息及資料。我們今天會給你投資款項。」(Emphasis added). There was no denial by Mr Ke that the relevant sum was for investment purpose.

32.  Shortly thereafter, Mr Tai arranged to be transferred RMB 24 million to Mr Ke’s brother’s bank account by 5 transfers. Mr Ke confirmed receipt of the funds via WeChat at around 10:42am.

33.  Meanwhile, Mr Tai’s daughter (“the Daughter”)  also expressed interest in the investment in the IPO of Ping An Good Doctor. Mr Ke offered to enter into a similar investment arrangement with the Daughter with a smaller investment capital of HK$4 million.  This investment was agreed to yield a profit return of HK$1.75 million for the Daughter, such that the capital together with the profit return would be in the total amount of HK$5.75 million.

34.  At 2:04pm on 20 April 2018, Mr Ke sent a message to Mr Tai via WeChat asking whether the HK$4 million for the Daughter could be transferred that day as Mr Ke had promised JP Morgan to have all the funds ready and in place by the coming Tuesday, i.e., 24 April 2018.

35.  At 2:25pm that day, Mr Tai informed Mr Ke via WeChat that the Daughter could not transfer the fund in time and hence would cancel the investment (「取銷投資認購400萬港幣」). (Emphasis added.)

36.  At 2:38pm that day, Mr Ke replied to Mr Tai via WeChat that he could help provide the fund first so as not to disappoint the Daughter (「那我墊出, 你下周方便轉回給我吧, 別讓女兒掃興」).

37.  At 2:49pm that day, Mr Tai replied to Mr Ke via WeChat saying that the Daughter would try to arrange HK$4 million to be transferred to Mr Ke early the following week, but if she could not get the fund ready, then she would not be able to make the investment (「我女兒說她盡力下週初抽到400[萬]元港幣給你。萬一不抽回不成便請見諒，就不能夠投資了」)  (Emphasis added).

38.  On 23 April 2018, the Daughter arranged to be transferred to Mr Ke’s Hong Kong bank account HK$4 million. Mr Ke also prepared and signed a similar declaration and undertaking and issued a post-dated cheque in favour of the Daughter on the same day.

39.  After the 19 April Meeting and in the days leading up to the listing of Ping An Good Doctor on 4 May 2018, Mr Ke continued to send information and news about Ping An Good Doctor to Mr Tai and Mr Tai continued to show keen interest in the prospect of the IPO:

(1)  At 9:02am on 23 April 2018, Mr Ke sent parts of the Preliminary Offering Circular about the anticipated IPO to Mr Tai via WeChat.

(2)  At 9:04am on 24 April 2018, Mr Ke sent to Mr Tai via  WeChat news about the anticipated IPO entitled 「平安好醫生將成為港股今年首個獨角獸，市值將超500億港元」.

(3)  At 10:57am on 24 April 2018, Mr Tai replied to Mr Ke’s aforesaid message via WeChat, commenting with excitement: 「還有10天才上市已經超額認購115倍！」

(4)  At 9:12am on 27 April 2018 (the day after the end of the subscription period), Mr Ke sent Mr Tai via WeChat further news about the anticipated IPO (entitled「【平安好醫生】孖展突破1400億 招股次日超購逾240倍」and「平安好醫生傳超購648倍 凍資約3760億 22萬人認購」respectively).

(5)  At 4:17pm on 27 April 2018, Mr Tai replied to Mr Ke’s aforesaid message saying: 「非常好」, and asking about the meaning of 「頂頭槌飛」, a term used in the two news articles about the IPO.

(6)  At 1:22pm on 3 May 2018 (the day before the listing), Mr Tai messaged Mr Ke via WeChat to ask about the subscription status of Ping An Good Doctor (「平安好醫生，認購情況熱烈？」).

40.  Unbeknownst to Mr Tai at the time and indeed Mr Ke agreed that he deliberately concealed from Mr Tai:

(1)  On 27 April 2018, Mr Ke (via his company Giant Master)  was allotted 1 million shares of Ping An Good Doctor at the issue price of HK$54.80 per share.

(2)  On 8 May 2018 (i.e. the 3^rd trading day)  and 9 May 2018 (i.e. the 4^th trading day), Mr Ke sold all the 1 million shares of Ping An Good Doctor at prices slightly lower than the issue price (HK$53.37, HK$53.78 and HK$54.36), and received sales proceeds totalling HK$53,774,138.42.

41.  On 4 May 2018, the shares of Ping An Good Doctor began trading on the Hong Kong Stock Exchange (stock code 1833). The stock price on the first trading day did not rocket as Mr Ke previously expected and suggested. Instead, it fluctuated around the issue price of HK$54.80, with the highest price being HK$58.70 and the closing price being the same as the issue price.

42.  Mr Tai and Mr Ke communicated frequently on 4 May 2018 in relation to the performance of Ping An Good Doctor:

(1)  At 10:36am, Mr Ke sent a message to Mr Tai via WeChat, telling Mr Tai not to worry and that the stock price would increase after the retail investors sold their shares.

(2)  At 1:23pm, Mr Tai asked to speak with Mr Ke on the phone. Mr Ke then sent Mr Tai further pacifying messages to reassure him that after the retail investors had sold their shares, the stock price would rocket.

(3)  At 5:34pm, Mr Tai sent a further message to Mr Ke via WeChat, pointing out that the closing price was similar to the opening price.

(4)  At 5:39pm, Mr Ke sent Mr Tai a short voice message via WeChat, to which Mr Tai replied at 7:40pm saying 「我放心」.

43.  Contrary to Mr Ke’s reassurances, however, the stock price of Ping An Good Doctor remained close to or below the issue price throughout May 2018. Naturally, Mr Tai was getting more concerned about the investment as time went by.

44.  Since around mid-May 2018, Mr Tai reminded Mr Ke from time to time when they met at the Health Club about the return of capital and profit by the end of the one-month period. He also requested Mr Ke to sell the shares immediately regardless of whether any profit had been made because the one-month period was due to expire soon.

45.  On 20 May 2018, the day before the payment was due, Mr Tai sent a message to Mr Ke via WeChat asking to discuss about the payment of the HK$30 million invested in Ping An Good Doctor (「談談我和太太投入平安好醫生的三千萬港元付款事」)(Emphasis added).

46.  When they met at the Health Club that night, Mr Tai told Mr Ke that Mr Tai was happy to make less money out of the investment, but it was important for him to get back the HK$30 million capital first because he needed the money pursuant to a contract. Mr Tai also prompted Mr Ke to sell the shares but Mr Ke insisted that they should remain confident and wait for the share price to go up (even though Mr Ke had already sold the shares at that stage).

47.  That night at 11:46pm, Mr Tai sent two messages to Mr Ke via WeChat to reiterate his urgent need for the HK$30 million capital and that he was willing to make less profit (「我們賺少量錢（看你最終情況）沒有問題」).

48.  On 21 May 2018, Mr Tai continued to chase Mr Ke for payment. Mr Ke indicated that he would make arrangement that day and would sell the shares of Ping An Good Doctor that day if necessary - 「… 我今天調配下 … 必要時我今天出平安股…」

49.  Mr Tai’s case is that the message that Mr Ke would sell the shares “today” (i.e. 21 May 2018)  “if necessary” (thereby conveying the message that he was still holding those shares)  was blatantly false as Mr Ke had already sold all the shares by 9 May 2018.  Mr Ke did not keep his promise to make any payment and avoided Mr Tai’s WeChat messages and calls for the rest of that day.

50.  By this stage, Mr Tai was still under the mistaken impression that Mr Ke was still holding the shares of Ping An Good Doctor by 21 May 2018.

51.  At trial, Mr Ke admitted that he deliberately concealed the fact that he had sold the shares from Mr Tai, because he wanted to buy more time from Mr Tai and did not want to alert Mr Tai. Mr Ke’s evidence is that 「我知道佢驚輸，我賣咗冇同佢講…諗住將D錢再做盤生意，賺咗錢再還畀佢」「我隱瞞咗，驚戴生驚我還唔到錢，所以隱瞞佢」；Mr Ke also agreed to the suggestion: 「雖然你畀咗戴生期票，5月21號到期，你希望唔好咁快要畀錢戴生，哩件事就一路都係隱瞞落去」.

52.  After 21 May 2018, Mr Tai kept repeatedly requesting Mr Ke for payment of money. Mr Ke kept reassuring Mr Tai that he would make available the fund for depositing into Mr Tai's bank account soon.

53.  Upon Mr Tai’s repeated demands, on about 31 May 2018, Mr Ke promised to pay Mr Tai a sum of HK$10 million, but claimed that he was still waiting for the proceeds from the sale of the shares of Ping An Good Doctor to be transmitted from his Samoa private company’s account with JP Morgan to his personal account with the Bank of Communications.

54.  On 1 June 2018, Mr Tai kept chasing Mr Ke for payment. Mr Ke promised to transfer HK$30 million to Mr Tai once the fund was available. However, despite Mr Tai’s repeated requests, Mr Ke only transferred to Mr Tai a total sum of HK$6,819,926 between 1 June 2018 and 5 June 2018.

55.  Thereafter, Mr Tai continued to chase Mr Ke but received no further payment in the rest of June 2018.

56.  On or around 20 June 2018, Mr Ke proposed to Mr Tai to treat the investment as a loan and that Mr Ke would compensate Mr Tai with interest at the rate of 10% to 30%+ per annum on the capital of HK$30 million. Mr Ke had made similar suggestions thereafter, proposing different interest rate on different occasions. He never came up with any firm proposal and the parties never actually agreed on any loan arrangement.

57.  Meanwhile, Mr Tai continued to chase Mr Ke for payment of the outstanding sums. Mr Ke kept stalling Mr Tai’s requests via various means including evading Mr Tai’s calls and making empty promises of payment (only to be broken shortly thereafter), occasionally making small payments when Mr Tai was clearly at the end of his patience:

(1)  On 3 July 2018, Mr Ke transferred to Mr Tai a sum of HK$1.7 million, after the threats by Mr Tai to cash the cheque and take legal action on 30 June 2018 and 2 July 2018.

(2)  On 12 August 2018, after having failed to make good his promises of payments on 10 August 2018 and 11 August 2018 and having made Mr Tai wait for him from 10:00am to 5:30pm on 11 August 2018, Mr Ke eventually delivered to Mr Tai three cheques in the respective sums of HK$500,000, HK$500,000 and HK$1 million. Save for one cheque in the sum of HK$500,000 dated 16 August 2018, the other two cheques were dishonoured.

58.  When Mr Tai confronted Mr Ke about the dishonoured cheques, Mr Ke instead blamed Mr Tai for presenting the cheques for payment without waiting for Mr Ke’s confirmation.

59.  Even at this stage, Mr Ke was still trying to give Mr Tai the wrong impression that Mr Ke was still holding the shares of Ping An Good Doctor, that he was suffering a loss of 10 odd dollars per share (which, as it transpired, was also false, as the extent of the loss was much less than “10 odd dollars per share”), and that he was in a passive position because he was unable to sell - 「…我平安好醫生每股虧十幾元，又出不了貨，所以造成被動…」

60.  In response, Mr Tai reiterated that he only agreed to invest in Ping An Good Doctor in reliance on Mr Ke’s Minimum Profit Guarantee: 「平安好醫生是你的保證會股價比認股時大升及保證會上市一個月內賺42%我們才投資的。股價升降內幕我們不知。背後利益分配我們也不清楚也不過問。投資是基於你的保證及承諾。」

61.  In the following days, Mr Tai continued to chase Mr Ke for payment. Mr Ke made yet another empty promise that, on 28 August 2018, he would transfer HK$2 million to Mr Tai. Even on the morning of 28 August 2018, Mr Ke still indicated to Mr Tai that the fund would be transferred to Mr Tai at 4:30pm. Again, Mr Ke broke his promise and avoided Mr Tai’s calls later that day.

62.  Having lost faith in Mr Ke, Mr Tai presented the Post-Dated Cheque for payment on 29 August 2018. As expected, it was dishonoured.

63.  Thereafter, Mr Tai instructed his former solicitors to issue a demand letter to D on 31 August 2018 demanding for payment of the outstanding sum of HK$33,980,074, followed up by a chaser letter on 3 October 2018.  There was no formal reply from Mr Ke to these demand letters.

64.  Meanwhile, Mr Tai continued to chase Mr Ke for payment. After relentless requests including threats to take legal action, Mr Ke eventually paid Mr Tai a sum of HK$100,000 on 6 November 2018.

65.  Thereafter, however, Mr Ke again broke further promises of payment and the promise to provide a concrete schedule of payment.

66.  By then, it was apparent that Mr Ke was simply stalling Mr Tai’s request and the matter could not be resolved amicably. Mr Tai therefore instructed his former solicitors to commence these proceedings on 12 November 2018.

67.  Based on the above narrative of facts as supported by contemporaneous WeChat messages and the D&U, Mr Ma SC for Mr Tai submitted that Mr Tai’s case is overwhelming. There was no denial of the investment agreement reached between the parties.

THE DEFENDANT’S CASE

68.  Mr Wong for the Defendant largely agreed with the above detailed narrative of facts, but stressed that the critical divergence of facts is that the Defendant, Mr Ke’s case that although he did meet Mr Tai at around 9:00 p.m. on 19 April 2018, to discuss the potential investment into the IPO of Ping An Good Doctor, at the 19 April Meeting:-

(1)  Mr Tai told Mr Ke that Mr Tai was not familiar with investment into stocks;

(2)  Mr Tai further told Mr Ke that if Mr Ke was in need of cash to participate in the IPO, Mr Tai was willing to lend HK$30 million to Mr Ke with interest to be paid back to him in 30 days;

(3)  Mr Tai and Mr Ke eventually agreed that the interest was to be HK$13 million;

(4)  Mr Tai told Mr Ke that this amount of interest might be excessive and suggested that the transaction be called an investment instead of a loan; and

(5)  Mr Ke would execute a document to Mr Tai accordingly. But at all material times, Mr Tai and Mr Ke understood the executed written document to be a sham document.

69.  Accordingly, the actual agreement between Mr Tai and Mr Ke was in substance a loan agreement made on 19 April 2018 (“the Loan Agreement”)  with the following terms:-

(1)  Mr Tai would lend to Mr Ke a sum of HK$30 million (“the Loan”);

(2)  Mr Ke would repay a sum of HK$43 million comprising of HK$30 million as principal and HK$13 million as interest;

(3)  Repayment was to be made within 30 days of the loan.

70.  On 22 April 2018, Mr Ke executed the D&U (聲明及承諾)  to Mr Tai as follows:-

聲明及承諾

尊敬的戴澤良先生:

現委託你將投資給我的3000萬港幣 (即兌換成人民幣2400萬元)  支付給我親弟弟的以下銀行帳號中…

以上帳號收到之人民幣2400萬元，本人將確定是閣下投給本人的款項，並按照我們的約定將該投資的本利在30天內還清給戴澤良先生指定的國內人民幣或香港港幣帳戶中。

特此委託承諾。

委託人: 柯俊翔

日期: 2018年4月20日

71.  But the above D&U is a sham document and bother parties understood it to be case.

72.  Mr Ke said that Between June to November 2018, he had on various occasions repaid a total sum of HK$9,119,926 to Mr Tai pursuant to the Loan Agreement:-

(1)  HK$1,114,963 on 1 June 2018;

(2)  HK$282,419 on 1 June 2018;

(3)  HK$392,544 on 1 June 2018;

(4)  HK$5,000,000 on 5 June 2018;

(5)  HK$1,700,000 on 3 July 2018;

(6)  HK$500,000 on 16 August 2018; and

(7)  HK$100,000 on 6 November 2018.

73.  Mr Ke admits that he had also issued 2 cheques which were all dishonored. But the dishonoured cheques were issued for the repayment under the Loan Agreement.

74.  In the circumstances, the Loan and the Loan Agreement has an effective interest rate of over 520% per annum (i.e. HK$13 million / HK$30 million x 365/30).  As the interest rate exceeds 60% per annum, the Loan Agreement is illegal and unenforceable by virtue of section 24 of the MLO.

75.  Any contravention of section 24 of MLO renders a loan outright unenforceable and the Court does not retain any discretion to re-open the matter:  Wong Ming Wai v Tsui Kam Ming(unrep., CACV 179/1999, 14 October 1999), p.3; Yifung Properties Ltd v Manchester Securities Corp. (unrep., HCA 1341/2014, 17 November 2014)  at §§26, 27.

76.  Similarly, any cheques issue for repayment pursuant to an illegal loan contract is likewise unenforceable: Wong Wai Yin v Sung Siu Wai[2010] 4 HKLRD 556, at §8; Chan Ping Che v Gao Gunter (unrep., CACV 253/2014, 5 June 2017), at §6.

77.  Mr Wong for Mr Ke also relied on certain WeChat messages, in particular, from Mrs Tai, to support Mr Ke’s case that the real nature of the HK$30 million advancement by Mr Tai is a loan.

78.  Mr Wong also relies heavily on the failure of Mr Tai to call Mrs Tai as a factual witness and invites this Court to draw the necessary adverse inference.

APPROACH TO EVALUATION OF EVIDENCE 

79.  Lord Bingham in his book The Business of Judging at pp 5 – 6 insightfully said:

“Let me then turn to the central questions. Faced with a conflict of evidence on an issue substantially effecting the outcome of an action, often knowing that a decision this way or that will have momentous consequences on the parties’ lives or fortune, how can and should the judge set about his task of resolving it? How is he to resolve which witness is honest and which dishonest, which reliable and which unreliable? How, as between competing experts in a field not his own, is a judge to determine where the truth lies? Is our existing way of resolving expert conflicts the best way? I shall begin by considering the resolution of issues of primary fact, the choice between first-hand eye-witnesses. Then I shall turn to expert evidence.

The normal first step in resolving issues of primary fact is, I feel sure, to add to what is common ground between the parties (which the pleadings in the action should have identified, but often do not)  such facts as shown to be incontrovertible. In many cases, letter or minutes written well before there was any breath of dispute between the parties may throw a very clear light on their knowledge and intentions at a particular time ….

The most compendious statement known to me of the judicial process involved in assessing the credibility of an oral witness is to be found in the dissenting speech of Lord Pearce in the House of Lords in Onassis v Vergottis. In this he touches on so many of the matters which I wish to mention that I may perhaps be forgiven for citing the relevant passage in full:

‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection even subsequently altered by unconscious bias or wishful thinking or by over-much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.

Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue. There are, no doubt, witnesses who follow the guidance of the Good Soldier Sveyk that ‘The main thing is always to say in court what isn’t true,’ as a matter of principle, but more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely from case to case:

(1)  the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred;

(2)  the internal consistency of the witness’s evidence;

(3)  consistency with what the witness has said or deposed on other occasions;

(4)  the credit of the witness in relation to matters not germane to the litigation;

(5)  the demeanour of the witness.

The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness’s evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility.” (Emphasis added).

80.  In Lee Fu Wing v Yan Paul Po Ting [2009] 5 HKLRD 513, Deputy High Court Judge Au (as he then was)  at 524 helpfully set out the well-established approach as to assessment of witnesses:

(1)  whether the party’s case is inherently plausible or implausible;

(2)  whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise)  which is undisputed or indisputable;

(3)  where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests.  This is relevant to the assessment of his overall credibility; and

(4)  the demeanour of the witnesses.

81.  I find the above guidelines helpful and will apply the same in assessing the credibility of the parties’ diametrically different versions of events.

EVALUATION OF EVIDENCE

82.  This Court has considered all the evidence including the oral testimony of Mr Tai and Mr Ke carefully. I have no hesitation to come to the view that Mr Ke is not a credible and reliable witness. He changed his evidence as he went along. He also came up with new and important allegations which were not even communicated to his legal team.

83.  Mr Wong for the Defendant, Mr Ke, fairly submitted that the demeanor of Mr Ke as witness leaves much to be desired. That I agree but it is an understatement to say that Mr Ke’s demeanor leaves much to be desired. His evidence, on any analysis, is far from credible. I am willing to accept Mr Wong’s submissions that demeanor itself is not a reliable indicator in assessing witness evidence (as opposed to inherent probabilities and consistency with contemporaneous documents).   This Court takes into account the totality of the evidence adduced by the parties in coming to a view as to what evidence should be accepted.

84.  This Court also bears in mind that some part of the evidence is unsatisfactory does not necessarily mean that all of the evidence given by a witness should automatically be considered unreliable, particularly when the unsatisfactory part does not affect the overall case of that party.

MR KE’S EVIDENCE

85.  Overall, Mr Ke’s oral testimony at trial is not credible at all. He made things up as he went along.

86.  First, when confronted with the multiple references to investment in his WeChat messages with Mr Tai, Mr Ke for the first time gave evidence in court that there was an agreement between him and Mr Tai that in their private WeChat messages, any expression of the loan should be referred to as an investment. I found this startling because not only was this not mentioned in his witness statement, his evidence is that he did not even tell his solicitors about this agreement on expression. I have no hesitation to come to the view that Mr Ke made up this story to explain the multiple references to investment in his WeChat messages with Mr Tai. Had there been such an agreement on expression, it would not be mentioned for the first time in trial.

87.  In fact, as both legal teams relied heavily on the WeChat messages, it defies belief that if there were indeed this agreement on expression, Mr Ke would not have told his solicitors. I also find it inherently unbelievable that Mr Tai and Mr Ke would have reached such an agreement on expression in their own private WeChat messages. It simply serves no useful purpose.

88.  Further, Mr Ke also testified subsequently that both Mr Tai and him breached the agreement on expression by making reference to the sum of HK$30 million as a loan in their WeChat messages anyway. There is no credible explanation for this sudden breach except it sits well with Mr Tai’s case that there was a subsequent discussion to turn the investment agreement into a loan agreement which in the end did not materialize. This evidence of Mr Ke bears the hallmarks of an invented story to deal with the multiple references to investment in their WeChat messages.

89.  Mr Wong’s reference to paragraph 2(5)  of Mr Ke’s witness statement that generally “the transaction be called as an investment instead of a loan”; and it was stated in Mr Ke’s witness statement at §6 that “以利息表述一個月收1,300萬港元的利息可能過高，所以戴先生提出將有關借款稱為 ‘投資’ 而非 ‘借款’” were dealing with the D&U and in my view, bears no relation with the newly alleged agreement on expressions.

90.  Secondly, when asked about his WeChat message to Mr Tai at 09:48am on 19 April 2018, he gave evidence that it was a record of a 50:50 distribution of profit between Mr Tai and himself. This is in direct contrast with the clear wording of the message that for each investment of HK$10 million, there would be a return of capital and profit of at least HK$14.2 million (「最少1000萬可連本利收到不少於1420萬」), which was clearly calculated based on a 70:30 split of an expected profit of at least 60%.

91.  This 50:50 split agreement was again mentioned for the first time in Mr Ke’s oral testimony. What is surprisingly is not only that this 50:50 split was not mentioned in his witness statement and not how his counsel put his case to Mr Tai in cross-examination, his evidence is that he has never informed his legal team about this 50:50 split agreement. I find this simply unbelievable. This very issue directly relates to the 42% interest. It is inconceivable that if such a 50:50 split was agreed, he would not have informed his legal team.

92.  When the Court asked Mr Ke how he came up with the figure of HK$4.2 million, which would have entailed an increase of stock price by 84% on his case of 50:50 distribution, he gave no coherent answer and simply stated that it was above 70%. This is flatly contradicted by his answer to the Court later that morning that he would not promise a profit of more than 70% to Mr Tai.

93.  This new case of a 50:50 distribution also does not sit well with Mr Ke’s contention that it was Mr Tai who came up with the interest rate of 42%. Mr Ke cannot coherently explain how Mr Tai came up with the 42% if that was not his own proposal.

94.  This is also contradictory to Mr Ke’s witness statement which claimed that the 42% rate was based on his own promise that for each investment of HK$10 million, the expected return would be at least HK$4.2 million.

95.  Mr Wong for the Defendant, Mr Ke submitted that there is no reason for Mr Ke to deliberately lie about the sharing percentage that was initially offered by him. That may be correct. But the fact is that he did lie to this Court.

96.  Thirdly, when asked whether he gave the signed D&U to Mr Tai on 22 April 2018, he claimed that the D&U was provided to him by Mr Tai and he simply signed on it without saving a copy. This is untrue. It was only after he was taken to the contemporaneous records that he accepted that he actually drafted the D&U and Mr Tai only proposed some minor amendments to the draft.

97.  Fourthly, Ke’s oral testimony in relation to the 19 April Meeting is that after he and Mr Tai discussed about the investment, Mr Tai left the men’s changing room and met with his wife outside to discuss, and then he came back into the changing room to inform Mr Ke that he would not participate in the investment but would be prepared to advance a loan with extortionate interest instead.

98.  When confronted with a different version which is set out in his witness statement, he changed his evidence to say that his oral evidence in court was in fact a wrong recollection.

99.  Fifthly, Mr Ke at first denied having received funds from anyone other than Mr Tai for the investment in the IPO of Ping An Good Doctor. Mr Ma SC for Mr Tai is correct that this was untrue as he admitted later, he did receive HK$4 million from Mr Tai’s daughter.

100.  Sixthly, Mr Ke admitted in cross-examination that he deliberately concealed the sale of the shares of Ping An Good Doctor from Mr Tai and gave Mr Tai the false impression that he was still holding the shares at the time, so as not to alert Mr Tai and to buy more time from Mr Tai. He claimed that he intended to use the sales proceeds to do another business and make money (presumably within a short period of time)  to pay back Mr Tai. It is clear to this Court that to achieve his own purpose, Mr Ke had no problem at all in lying to Mr Tai.

101.  Although Mr Ma SC for Mr Tai also relied on Mr Ke’s confusing and conflicting evidence about the message from Bailey Xu which he forwarded to Mr Tai on 17 April 2018. I am happy to accept that Mr Ke was only confused about this aspect of the evidence. He eventually corrected himself.

102.  Overall and also taking into account of some other instances which will be addressed below, I find the evidence given by Mr Ke unbelievable and Mr Ke is not a credible witness.

MR TAI’s EVIDENCE

103.  In contrast, I find Mr Tai a very reliable and credible witness. He is straightforward and honest. Although there are minor discrepancies between his oral testimony and his witness statement, I do not think they are material. For example, Mr Wong for Mr Ke submitted that while in oral testimony, Mr Tai referred JP Morgan as an underwriter, but in his witness statement, he referred JP Morgan as the “Joint Sponsor, Global Coordinator, and Joint Bookrunner”. Mr Tai gave a very candid answer that when preparing his witness statement, he was more careful and did his research on the role of JP Morgan before putting it down in his witness statement. This sits well with his prudent and careful character as a former university professor.

104.  Secondly, as a matter of fact, Mr Tai did in WeChat messages request Mr Ke to sell the subject shares in order to repay him.

105.  Thirdly, the fact that Mr Tai did not initially plead his entitlement to a profit sharing if the share price were to increase over 60% is perfectly understandable. As Mr Ma SC rightly pointed out, Mr Tai’s Statement of Claim contains a very straightforward claim. It was only when Mr Ke put forward the illegal loan as a defence that Mr Tai condescended upon the particulars of the investment agreement. In any event, the share price never increased by more than 60%, so it was not considered necessary at the initial pleading stage to mention this. I find this understandable. This does not affect the credibility of Mr Tai at all.

106.  Fourthly, in relation to the subsequent references to a loan, Mr Ke gave a credible explanation which sits well with paragraph 51 of his witness statement that on or around 20 June 2018, Mr Ke proposed to him that he would compensate Mr and Mrs Tai with interest at the rate of say 10% to 30%+ per annum on the capital amount of HK$30 million. He never agreed to the proposal.

107.  Overall, I am of the view that other minor discrepancies do not affect the overall credibility of Mr Tai. I accept Mr Tai’s evidence as reliable and credible.

CONTEMPORANEOUS DOCUMENTS AND INHERENT PROBABILITES

108.  First and foremost, in view of the contemporaneous documents, I am of the view that it is inherently unlikely that the Loan Agreement has been entered into. It is Mr Ke’s evidence that he offered a guaranteed profit, namely, 60%, and in the round up figure of HK$13 million to Mr Tai. Further, he also offered to Mr Tai that if the share price increased by more than 60%, Mr Tai would be entitled to a further distribution. On the other hand, with a loan agreement, Mr Tai would only be entitled to a straight 60% interest. Commonsense dictates that no sensible commercial man would have opted for the Loan Agreement.

109.  Secondly, both Mr Tai and Mr Ke are mature and seasoned businessmen. Mr Ke ran a money lending business. Mr Tai was also aware of the prohibitions under the MLO. Against the benefit of an investment agreement, it is, in my view, unthinkable and inherently improbable that both gentlemen, in particular, Mr Ke a chairman and CEO of a listed company could have knowingly entered into a loan agreement which both parties knew full well would be unenforceable as matter of law with potential criminal consequences. There is no conceivable reason that, from Mr Tai’s perspective, he would have opted to enter into such a loan agreement. There was no need for him to do so. The guaranteed profit is as good as if not even better than the return of the alleged Loan Agreement.

110.  Thirdly and importantly, the D&U dated 20 April 2018 executed by Mr Ke and given to Mr Tai on 22 April 2018 used wording similar to Mr Ke’s WeChat message at 10:39 and confirmed unequivocally that it was an investment:

「現委託你將投資給我的3000萬元港幣（即將兌換成人民幣2400萬元）支付給我親弟弟的以下銀行賬號中：

……

以上賬號收到之人民幣2400萬元，本人將確定是閣下投給本人的款項，並按照我們的約定將該投資的本利在30天內還清給戴澤良先生指定的國內人民幣或香港港幣賬戶中。

特此委託承諾。」(Emphasis added)

111.  Mr Wong for the Defendant, Mr Ke, very fairly agrees that the Defendant carries a very high burden to prove that the D&U is a sham document. There is no legitimate reason as to why the two gentlemen had to execute a sham document. The D&U only binds Mr Tai and Mr Ke. It is not as if the D&U had to be submitted to a third party for approval and/or registration. Mr Ma SC reminded this Court that Mr Ke carries a higher burden of proof to satisfy this Court that the D&U is a sham document. I agree. On the evidence before this Court, I do not find any cogent evidence to rule that the D&U is a sham document. Indeed, it correctly reflects the parties’ agreement.

112.  Fourthly, I agree with Mr Ma SC’s submission that Mr Tai’s case sits well and is supported by and consistent with contemporaneous documents and WeChat messages. The WeChat messages between the parties at the material time were only consistent with it being an investment (投資). Mr Ma SC relied on the following WeChat messages:

(1)  Mr Ke’s WeChat message to Mr Tai at 9:48am on 19 April 2018: 「早晨帶總，平安好醫生股預計利潤可高達60%或更高，佔用資金約30天之內，利潤中的30%作分成之用……也就是說，最少1000萬可連本利收到不少於1420萬，（收到股票後三天內沽清為限），請根據你自己的實際情況，今天覆實我……」This message clearly shows the parties contemplated an investment rather than a loan.

(2)  Mr Ke’s WeChat message to Mr Tai at 9:21pm on 19 April 2018: Mr Ke continued to market Ping An Good Doctor as a good investment to Mr Tai in the course of their discussions at the 19 April 4 Meeting.

(3)  Mr Ke’s WeChat message to Mr Tai at 10:39am on 20 April 2018: 「尊敬的帶總！請你將投資給我的3000萬港幣，（兌成人民幣計算得2400萬元），現委託並指定你將該款轉給如下我親弟弟的中國廣州賬號……該款本人確定是投給本人的款項，並按我們的約定將該投資的本利在三十天內還清給閣下賬號，特此委託承諾，柯俊翔」(Emphasis added).

(4)  Mr Ke’s only explanation about the references to investment (投資)  in the WeChat messages at the time is that there was an alleged “oral expression agreement” (表述協議)  between Mr Tai and him to cover up the nature of the transaction, namely, even though it was a loan, they would refer to it as an investment in the private WeChat messages between the two of them. For the reasons stated above, I do not find this oral expression agreement believable at all.

(5)  Mr Ma SC for Mr Tai submitted that the first and only time (before the filing of his Defence in this action)  that Mr Ke ever referred to the HK$13m as an “interest” (利息)  was on 9 October 2018, after receiving the demand letters issued by Mr Tai’s then solicitors. I accept Mr Tai’s evidence that this was Mr Ke’s「一面之詞」. The demand letters never mentioned anything about interest.

113.  Mr Tai also consistently referred to the HK$30 million (RMB 24 million)  as an “investment” in his WeChat messages at the material time:

(1)  Mr Tai’s WeChat messages to Mr Ke in relation to the Daughter’s HK$4 million, describing the same as investment – at 2:25pm on 20 April 2018: 「我的女兒的現金今天來不及給你. 所以她取銷投資認購400 萬港幣 」(Emphasis added); at 2:49pm on 20 April 2018: 「萬一不抽回不成便請見諒, 就不能夠投資了」(Emphasis added); at 1:24pm on 21 April : 「我女兒的投資…」(Emphasis added).

(2)  Mr Tai’s WeChat message to Mr Ke at 10:34 on 22 April 2018:「……如果方便請到時給我太太投資聲明（及期票）」Consistent with the content of the D&U, Mr Tai described the D&U as a 「投資聲明」. (Emphasis added)

(3)  Mr Tai’s WeChat message to Mr Ke at 16:10 on 23 April 2018, right before advancing the RMB 24 million to D’s designated account: 「謝謝消息及資料。我們今天會給你投資款項。」(Emphasis added)

114.  Mr Ma SC for Mr Tai also submitted that Mr Tai’s own “diary” record of his reflection by way of a WhatsApp message, appreciating the opportunity to make money and the good personality of Mr Ke with the “right way” of making profit (「…更重要的是結交了柯先生, 他為人豪爽及有義氣, 更有比較正派生財之道的人. 這是又一次是上天給我的命和時運, 我真的要好好的感恩…」)  (Emphasis added). I agree that such a “diary” entry would be incomprehensible if Mr Tai were at the time knowingly committing the crime of advancing a loan with extortionate interest as Mr Ke now alleges.

115.  Overall, I agree with Mr Ma SC, for Mr Tai that the parties’ contemporaneous WeChat messages point strongly in favour of an investment rather than a loan.

116.  Fifthly, I also agree with Mr Ma SC that the parties’ conduct after the conclusion of the agreement on 19 April 2018 sits well with an investment agreement rather than a loan. Mr Ma SC submitted that the Court should find the following conduct by the parties material in assessing whether the advancement of the sum of HK$30 million was an investment or a loan:  

(1)  As from 19 April 2018 and even after the listing of Ping An Good Doctor, Mr Ke continued to send good news about Ping An Good Doctor to Mr Tai. Mr Ke continued to send reassuring messages to Mr Tai about the performance of Ping An Good Doctor on the day of the listing. Mr Tai continued to show interest/concern in the performance of Ping An Good Doctor.

(2)  I agree with Mr Ma SC that if Mr Tai had only made a loan to Mr Ke, Mr Tai would not have shown such interest and concern in the performance of the shares and Mr Ke would not need to keep sending good news to Mr Tai. The exchanges between Mr Ke and Mr Tai on the first day of the listing (4 May 2018)  is particularly telling. If it had truly been a loan, there would be no need for Mr Ke to repeatedly send the pacifying messages to Mr Tai and for Mr Tai to follow the stock price so closely.

(3)  In particular, there would be no need for Mr Tai to tell Mr Ke that he was at peace (「我放心」)  at 7:40pm if he had not been worried or concerned about the stock price performance of Ping An Good Doctor in the first place.

(4)  I do not find Mr Ke’s evidence that Mr Tai was merely expressing a concern as a personal friend believable. Mr Tai was genuinely and deeply concerned because he had a personal stake on the investment. I also do not accept that Mr Tai was concerned because he was worried about Mr Ke’s inability to repay him had the share price did not go up. There is no evidence and Mr Ke did not adduce any evidence that at the material time, as the chairman and majority shareholder of a listed company, he had no other source of income to repay Mr Tai.

(5)  In any event, I accept Mr Tai’s evidence that the ability of Mr Tai to repay him was one of the many reasons that he was concerned about the price move of the subject shares, but he was absolutely clear that the most important reason was that he had an interest in the investment and in particular, if the share price increased by more than 60%, Mr Tai would be entitled to extra profit distribution.

(6)  On the other hand, when asked about this, Mr Ke struggled to give coherent evidence.  At first, he claimed that he sent the information so that Mr Tai would not worry. He then changed his evidence to say that he was just sharing information with Mr Tai for no particular purpose, that Mr Tai was just being curious and that the messages had nothing to do with the alleged loan. Shortly afterwards, he changed his evidence again to say that Mr Tai was showing his concern for him and his investment. Mr Ke’s changing evidence on this issue adversely affects his credibility.

117.  Sixthly, to supplement the first reason, it makes common and commercial sense for the parties to agree on an investment rather than an illegal and unenforceable loan. Mr Ma, SC for Mr Ke submitted that:

(1)  Mr Ke has confirmed in cross-examination that it was his belief at the time, in April 2018, that the stock price of Ping An Good Doctor would rocket, with at least 60% increase within a short period of time. Insofar as the HK$30m is concerned, Mr Ke was in effect investing with Mr Tai’s monies (not Mr Ke’s own monies), with 30% of profit from Mr Tai’s monies for “distribution”.  Under cross-examination, Mr Ke said that Wang Tao (王濤)  had agreed with him that Mr Ke would only “distribute” 10%+ of the profits to Wang (and/or some others)  if the stock price increased by 70% or more.  In other words, with an increase of 60% in stock price, Mr Ke could keep 30% of such profit all to himself (without distributing to anyone else), making a windfall gain without the need to put up his own monies (無本生利).

(2)  Given Mr Ke’s firm belief that the stock price would rise by at least 60%, it is natural for him to believe that he would make a profit even if he were to guarantee a minimum of 42% return to Mr Tai.

(3)  Even if the stock price increased by less than 60%, say, by only 40%, according to Mr Ke’s arrangement with Wang Tao (王濤)  of Ping An Good Doctor, Mr Ke would not need to share his profit with Wang in the event the stock price did not increase by more than 70%. It followed that, in between Mr Tai and Mr Ke, 30% of the profit (i.e. 30% x 40% x HK$30m = HK$3.6m)  for “distribution” would all go into Mr Ke’s own pocket. In other words, Mr Ke would pocket the profit of HK$3.6m.

(4)  70% thereof (i.e. 70% x 40% x HK$30 million = HK$8.4 million)  should belong to Mr Tai. With the profit guarantee (i.e. HK$13 million), Mr Ke would need to cover the shortfall of HK$4.6m (HK$13 million – HK$8.4 million). However, Mr Ke would not only have benefited firstly from the 30% distribution, but would also have made a profit of 40% over the remaining Ping An Good Doctor shares purchased with his own monies (HK$20 million). As mentioned, he did not need to share this profit with Wang because it was less than 70%. This meant he could pocket the profit of HK$8 million (i.e. 40% x HK$20 million = HK$8 million).

(5)  Hence, the overall position is that Mr Ke would still be making a substantial profit of HK$7 million (i.e. HK$8 million – HK$4.6 million + HK$3.6 million), having invested with only HK$20 million of his own funds.

(6)  Without Mr Tai’s funds (HK$30m), Mr Ke might have to invest all with his own funds, or might not have been able to take up the maximum quota of US$20 million worth of shares (with the credit line granted by JP Morgan)  to the fullest extent. This explains the commercial incentive for Mr Ke to agree to the profit guarantee.

(7)  With the profit guarantee, whilst Mr Ke ran a risk (if the stock price did not rise up enough, or even dropped), given Mr Ke’s firm belief in Ping An Good Doctor’s positive performance, and the prospects of making substantial profit in the round, it was a risk worth-taking.

(8)  From Mr Tai’s perspective, he trusted Mr Ke as a friend. He explained that although he did take into account the information forwarded by Mr Ke to him and considered such information to be consistent with what Mr Ke was telling him, the most important factor for Mr Tai was his trust in Mr Ke and his confidence in the investment which was backed by Mr Ke’s promise to give Mr Tai the post-dated cheque. In fact, Mr Tai made it clear that but for Mr Ke’s profit guarantee and the post-dated cheque, Mr Tai would not have made the investment or would have only made very little investment.

(9)  Importantly, Mr Ke has confirmed several times in cross-examination that he did give Mr Tai the profit guarantee, such that the investment was effectively risk-free for Mr Tai. It is therefore understandable why Mr Tai was attracted by Mr Ke’s promises and assurance and agreed to invest HK$30 million with Mr Ke.

118.  I agree with Mr Ma SC’s analysis.

119.  Seventhly, I agree that the investment agreement was consistent with Mr Ke’s motives to benefit Mr Tai (and his family). On the contrary, to enter into an illegal and unenforceable loan would not serve the said purpose.

(1)  Mr Ke mentioned repeatedly in his oral evidence that he honestly believed that the stock price would rocket and he wanted to benefit Mr Tai (and his family including Mr Tai’s daughter)  so as to build a good relationship with Mr Tai and to cooperate with Mr Tai in future investments. This is only consistent with the transaction being an investment. It could be hardly be described as a cooperation if it was merely a loan with an extortionate interest involving criminality and illegality particularly on the part of the alleged lender i.e. Mr Tai.

(2)  When being questioned on why he and Mr Tai would have agreed to an unlawful loan, Mr Ke’s answer is unconvincing and hard to believe. He said :  「當時冇考慮咁多，諗住可以做成功生意，冇考慮過後果，冇考慮過要還錢，冇考慮要打官司。我諗住投資，7成以上回報，可以做多D生意，同埋交戴生哩個朋友。」He did not mention a loan in his answer.

120.  Eighthly, I agree with Mr Ma SC that the fact that Mr Ke offered to pay up for Mr Tai’s daughter’s investment first negates the possibility of a loan. This does not sit well with the notion of a loan. A borrower does not pay for the principal and interest at the same time.

121.  The incontrovertible contemporaneous evidence is that the Daughter also put in HK$4 million investment with Mr Ke on Ping An Good Doctor, with a slightly higher expected minimum profit return of HK$1.75 million or 43.75% within 1 month. I agree that it could not have been a loan.

122.  When the Daughter could not advance the monies on time and proposed to cancel the investment, Mr Ke offered to “put it up first” for her so that she could transfer the monies to Mr Ke later.  I agree that this shows that Mr Ke had his own funds and did not need to borrow it from the Daughter at all.  As such, it makes no sense at all for this to be a loan from the Daughter.

123.  When being asked by the Court as to why would Mr Tai describe it as an investment in his message at 14:49 on 20 April 2018, Mr Ke’s evidence is that: 「佢意思話，佢想幫個女賺錢，如果畀唔到，等於放棄。所以我話，唔緊要，嗰400萬我畀住先…買股票…畀佢個女，畀佢投資。」(Emphasis added). I agree that this tends to show that it is an investment, not a loan.

124.  Mr Ke similarly prepared a Declaration & Undertaking (D&U)  for the Daughter. On 18 May 2018, Mr Tai asked Mr Ke for payment of the profit return of HK$1.75 million for the Daughter, and Mr Ke made payment. I agree that this shows that it could not have been a loan from the Daughter.  It was an investment. This also affects the credibility of Mr Ke.

125.  I also agree with Mr Ma SC that it is unthinkable that Mr Tai would procure his daughter to enter into the same arrangement with Mr Ke, knowing that it was unlawful and unenforceable.

126.  Ninthly, I agree that if Mr Ke was looking for a loan, he could have obtained it elsewhere, at reasonable interest rate. Mr Ke said that he had the credit line from JP Morgan which could cover the entire US$20 million quota (subject to him putting up his own funds in the ratio of 1:5, i.e. he could get credit for 5 times of the funds he put in). The interest rate for the credit line was only less than 2% per annum.  In other words, he could use up the US$20 million quota in full if he put in 1/6^th thereof, i.e. US$3.33m, or approximately HK$26 million.  In fact, Mr Ke had injected a total of about HK$68 million (i.e. HK$60 million and US$0.5 million)  into Giant Master’s account with JP Morgan on 24 and 25 April 2018. Even if one were to deduct therefrom HK$30 million representing Mr Tai’s funds and another HK$4 million representing the Daughter’s funds, Mr Ke was able to and did inject HK$34 million from his own monies, which would (according to his testimony under cross-examination)  have been sufficient for him to utilize the credit line granted by JP Morgan to the fullest extent at the rate of less than 2% p.a..

127.  Bailey Xu of JP Morgan also suggested that he could ask Michael Choi of Sunwah Kingsway to help Mr Ke raise funds. Bailey Xu was very confident that Michael Choi would be willing to do so because Michael Choi would not be able to get a quota without going through Mr Ke. When asked about this, Mr Ke denied that he could have obtained funding from Michael Choi and gave an answer that he had come to the view that Michael Choi would not be interested in giving him funds for this IPO as Michael Choi was interested in subscribing to the shares as well. I find Mr Ke’s evidence on this aspect unbelievable. It directly contradicted Bailey Xu’s message which he forwarded to Mr Tai without any amendments or qualification.

128.  Tenthly, I agree that the promise of further return if stock price exceeded the expected profit of 60% points towards an investment. During cross-examination, Mr Ke gave unprompted evidence that he had offered to pay more “interest” to Mr Tai in the event that the stock price increased by more than 60%, as a gesture of goodwill (心意).

129.  Finally, for the subsequent references to loan, I accept Mr Tai’s evidence as set out in paragraph 51 of his witness statement.

130.  By reason of the matters as set out above, I reject Mr Ke’s case of an oral illegal and unenforceable loan agreement.

ADVERSE INFERENCE

131.  For the sake of completeness, I should also deal with the issue of adverse inference on the basis that Mr Tai did not call Mrs Tai to give evidence and explain the references to “loans” in her WeChat messages. Mr Wong for Mr Ke relied heavily on this point. It should be mentioned that even if I accept Mr Wong’s submissions on this point, it is but one of the factors that this Court have to take into consideration. Given this Court’s acceptance of Mr Tai’s evidence, I do not find this to be a weighty factor.

132.  In any event, as a matter of law, I accept Mr Ma SC’s submissions that the relevant principles have been set out by Lord Justice Brooke in Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340:

“(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 the 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.” (Emphasis added)

133.  In Tjang Siu Thu v Profield Construction Engineering Ltd [2015] 5 HKC 22, the Court of Appeal set out the following principles that can be derived from the case law (at §33):-

“(i)  the Wisniewski principles do not constitute a presumption; consequently, the mere failure of a party to call a witness does not automatically confer an evidential benefit on the opposing party;

(ii)  the Wisniewski principles concern the drawing of inferences and whether any inference is drawn will depend upon the quality of the primary facts on which the inference is based; this is necessarily a fact sensitive matter and will vary from case to case;

(iii)  the primary facts must allow of the inference to be drawn in the sense that the inference logically flows from those facts;

(iv)  in the circumstances of the case the judge must be persuaded that it is appropriate to draw the inference; and

(v)  one circumstance where it will not be appropriate to draw the inference is where there is an explanation for the party's failure to call the witness.” (Emphasis added)

134.  I agree that in the present case, there is no basis to draw adverse inference from Mrs Tai’s absence and not being called as a witness. First, Mr Ke has not made out a case to answer at all. Mr Wong for Mr Ke fairly accepted that Mrs Tai does not feature in the Defendant’s pleaded case. There is only one cursory reference to the WeChat messages between Mrs Tai and Mr Ke in his witness statement.

135.  The Wisniewski principles cannot be used to transform an unbelievable witness making an unbelievable claim into a proven claim. Those principles were never intended to be used this way: see Tjang Siu Thu (supra), at §§34-36.

136.  Further, I accept that Mr Tai has given credible explanation for his decision not to call Mrs Tai as a witness. In fact, given the pleaded case and the cursory reference to Mrs Tai, it is perfectly understandable that Mr Tai decided not to call his wife to testify.

137.  I also bear in mind that Mrs Tai was not present at the 19 April Meeting, where Mr Tai and Mr Ke agreed on the substantial terms of the Agreement. Nor was she involved in the negotiation between Mr Tai and Mr Ke in relation to the Ping An Good Doctor project from early April 2018 to 20 April 2018.

138.  In the circumstance, it would not be appropriate to draw any adverse inference against Mr Tai for not calling Mrs Tai to testify.

DISPOSITION

139.  For all the reasons stated above, I find that the agreement was one for investment with a profit guarantee, which Mr Ke breached by failing to make the promised payment on 21 May 2018.

140.  Accordingly, I make an order that judgment be entered in Mr Tai’s favour, on the following terms:

(1)  The sum of HK$33,880,074;

(2)  Pre-judgment interest at the rate of prime (HSBC)  plus 1% from 21 May 2018(being the date of accrual of the cause of action);

(3)  Interest at judgment rate from the date of judgment;

(4)  A costs order nisi that costs of and incurred by the present trial to be paid by the Defendant, Mr Ke to the Plaintiff, Mr Tai, on a party to party basis, to be taxed if not agreed with a certificate for two Counsel. The said costs order nisi will be made absolute within 14 days unless an application is made to vary the same within the 14-day period.

141.  Finally, it remains for this Court to thank Mr Ma SC, Miss Xu for the Plaintiff and Mr Wong for the Defendant for their very helpful assistance including their very detailed and comprehensive closing submissions to this Court.