CHINA RAILWAY (HONG KONG) HOLDINGS LTD also known as CHINA RAILWAY SERVICES (HONG KONG) LTD v. CHUNG KIN HOLDINGS CO LTD

HCA 434/2022

[2026] HKCFI 3809

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 434 OF 2022

_____________

BETWEEN

_____________

_____________

JUDGMENT

_____________

1.   Introduction

1.1  In these proceedings, the Plaintiff (“P”) seeks to recover an outstanding loan from the Defendant (“D”). Giving credit to various repayments made, the outstanding principal as at 10 November 2021 is HK$60,848,806.15.

1.2  At the trial, I was ably assisted by Mr Ian Yu for P and Mr Alexsander Wong for D.

1.3  The only issue for determination is the sole ground of defence raised by D, namely promissory estoppel. As confirmed by Mr Wong, should D fail to establish its estoppel defence, there is no further dispute on quantum and, as a result, P is entitled to the relief pleaded in the Statement of Claim.

1.4  Each party called one factual witness. P called Ms Liu Zhong Ying (“Ms Liu”), the head of P’s finance department since 2021. D called 李宏延先生 (“Mr Lee”) who is and was at all material times D’s managing director.

2.   Background

2.1  The parties have provided an Amended List of Undisputed Facts (“ALUF”). The matters set out in this section are in part taken from the ALUF, with my supplements gleaned from the documentary evidence. Unless otherwise stated, the matters set out in this section are undisputed or indisputable.

(i) The relevant entities

2.2  P and D are both companies incorporated in Hong Kong. In addition, there are the following relevant entities:

(1) 中國鐵路廣州局集團有限公司 (formerly known as 廣州鐵路集團公司) (“Guangzhou Railway”), a state-owned enterprise. At all material times, Guangzhou Railway and P were associated companies. In fact, Guangzhou Railway became the sole shareholder of P in 2003;

(2) Two companies by the names of 啟文貿易有限公司 (“Chi Wen”) and 啟融投資有限公司 (“Chi Rong”). Both Chi Wen and Chi Rong were at all material times companies associated with Guangzhou Railway and P. As shown in the 2023 Annual Returns: (a) Guangzhou Railway and P were the 2 shareholders of Chi Wen (b) Chi Wen was the overwhelming majority shareholder of Chi Rong, and (c) of the 4 directors of P, 3 were also the directors of Chi Wen. Guangzhou Railway, Chi Wen, Chi Rong and P are hereinafter referred to as the “Guangzhou Railway Group”.

(ii) D’s dealings with Chi Wen/Chi Rong

2.3  On 11 April 1995, D and Chi Wen entered into a cooperation agreement (“Chi Wen Agreement”), by which Chi Wen was to cooperate with D in the development of a real estate project in Guangzhou called “富宏花園” (“Guangzhou Project”). Under the Chi Wen Agreement, Chi Wen was to invest HK$110,000,000 into the Guangzhou Project. Although stated to be an investment, it appears from the terms of the Chi Wen Agreement that Chi Wen would not be responsible for any loss, but was entitled to a fixed annual return of 7% per annum on the investment sum. Under the Chi Wen Agreement, D provided a number of units and part of the shopping arcade of the Guangzhou Project to Chi Wen (valued at HK$183,333,333[1]) as security for the full sum of HK$110,000,000.

2.4  On the same day, Chi Wen advanced a sum of HK$60,000,000 (less agreed interest and charges) to D as the first phase of the investment sum under the Chi Wen Agreement. The net sum was paid to a company called Remax Technology Limited, as designated by D.

2.5  As to the second phase of the investment sum under the Chi Wen Agreement (namely HK$50,000,000), it is P’s evidence that the sum was advanced on 8 June 1995. According to P, this second phase of the investment sum, as directed by D, was paid to Rich Victory Investment Limited (“Rich Victory”). This is disputed by D. It is D’s case that Chi Wen never advanced the second phase of the investment sum.

2.6  It appears that, on 10 April 1996, Chi Wen and D entered into a supplemental agreement (“Chi Wen Supplemental Agreement”) to extend the expiry of the Chi Wen Agreement to 11 October 1996. In the meantime, on 11 August 1996, Chi Wen assigned its rights under the Chi Wen Agreement and the Chi Wen Supplemental Agreement to Chi Rong. On 10 October 1996, Chi Rong and D entered into a further supplemental agreement to the extend expiry date stated in the Chi Wen Supplemental Agreement from 11 October 1996 to 10 April 1997.

2.7  The agreements between D and Chi Wen/Chi Rong were signed by one 王偉先生 (“Mr Wang”) on behalf of Chi Wen/Chi Rong. It is D’s case that the second phase of the investment sum had been misappropriated by Mr Wang.

(iii) D’s dealings with P

2.8  On 30 June 1995, P and D entered into a Cooperation Agreement (“Cooperation Agreement”), by which P agreed to provide a loan of HK$40,000,000 to D for its construction of a 3-star hotel in Wanchai, Hong Kong (“Wanchai Project”) to be secured (“1995 Fuhong Mortgage”) by part of D’s real estate project in Shanghai also called “富宏花園” (“Shanghai Development”). Similar to the Chi Wen Agreement, P was entitled to a fixed annual return of 7% per annum on the sum advanced.

2.9  On 12 July 1995, D’s affiliate executed the 1995 Fuhong Mortgage.

2.10  On 14 July 1995, P advanced the HK$40,000,000 sum under the Cooperation Agreement to D after deducting the agreed fees and return. The net sum, as directed by D, was paid to Rich Victory.

2.11  On 16 October 1995, P and D entered into a Supplemental Agreement to the Cooperation Agreement (“Supplemental Agreement”), by which P agreed to advance a further loan of HK$10,000,000 for the Wanchai Project to be secured by further portions of the Shanghai Development not subject to the 1995 Fuhong Mortgage. In contrast to the Chi Wen Agreement and the Cooperation Agreement, the fixed return on the sum advanced was 8% per annum on the sum advanced.

2.12  It appears that the further mortgage contemplated under the Supplemental Agreement was not executed, but on 16 October 1995, D’s directors (including Mr Lee) executed a guarantee in favour of P in respect of the HK$10,000,000 sum and provided a cheque in the same amount in favour of P as security.

2.13  Also on 16 October 1995, P advanced the HK$10 million sum under the Supplemental Agreement to D. After deducting the agreed fees and charges, the net sum was paid directly to D.

2.14  Pursuant to 4 further supplement agreements executed between P and D on 30 June 1996, 16 October 1996, 30 June 1997 and 16 October 1997 (collectively “Another Supplemental Agreements”):

(1) The 1995 Fuhong Mortgage was eventually replaced by a mortgage over the Shanghai Development dated 2 September 1997 for the full sum of HK$50,000,000;

(2) The term of the Cooperation Agreement was extended to 29 April 1998;

(3) The term of the Supplement Agreement was extended to 15 October 1998.

2.15  P accepts that Mr Wang was one of P’s directors between May 1995 and May 1997. Mr Wang was one of the signatories who signed the Cooperation Agreement on P’s behalf.

2.16  Following the expiry of the Cooperation Agreement, on 21 May, 25 May and 13 August 1998, D gave 3 repayment proposals:

(1) The first (“21/5/98 Proposal”) involved a phased repayment plan to commenced on 31 July 1998 which involved 4 fixed monthly payments of HK$1,000,000 each and full payment of the remainder on 31 December 1998;

(2) The second gave two further option to P, namely to elect either (a) in specie repayment by utilizing the Guangzhou Project and the Shanghai Development or (b) further security secured by the Shanghai Development and D’s development in Wuhan to be monetized as and when D deemed suitable with repayment of interest in the meantime;

(3) The third (“13/8/98 Proposal” and together with the above proposals collectively “1998 Proposals”) stated that the 21/5/98 proposal was no longer feasible and D proposed only in specie repayment utilizing D’s projects in Beijing, Shanghai and Wuhan.

3.   P’s case

3.1  P’s case is based on a series of repayment agreements. It is common ground that the repayment agreements were executed.

3.2  Chronologically, a number of tripartite agreements were executed between P, D, and D’s subsidiary Wuhan Jinyin Lake International Golf Industrial Development Co Ltd (“Wuhan Company”) between 1999 and 2008. From 2009 onwards, the repayment agreements were only executed between P and D.

3.3  On 21 January 1999, P, D and Wuhan Company entered into a repayment agreement (“1999 Repayment Agreement”), by which:

(1) D acknowledged that under the Cooperation Agreement, the Supplemental Agreement and the Another Supplement Agreements, D owed P the sum of HK$63,799,517.44 as at 31 December 1998 (“Outstanding Sum”);

(2) D agreed to repay the Outstanding Sum by one or multiple installments before 30 June 1999;

(3) D was to provide a mortgage over certain properties owned by Wuhan Company, namely villas constructed or being constructed at 武漢金銀湖高爾夫俱樂部 (“Wuhan Golf Club”), as security in favour of P (“Wuhan Mortgage”);

(4) Provisions were made for contractual interest on the Outstanding Sum (Clause 3 thereof) and default interest (Clause 4 thereof).

3.4  On 19 May 1999, P, D and Wuhan Company executed an agreement whereby parties agreed that D could use a number of villas at the Wuhan Golf Club as repayment in specie (“In Specie Agreement”). Wuhan Company expressly promised that the properties to be used for that purpose would be transferred to D before 30 June 1999. Thereafter on 23 June 1999, P, D and Wuhan Company executed an annexure to the In Specie Agreement to specify the properties (stated to be 17,218 m²) to be used as repayment in specie (“Supplemental In Specie Agreement”). Under the Supplemental In Specie Agreement, Wuhan Company was to transfer the properties to P in 2 tranches, the first (at least 9,000 m²) to be transferred no later than 30 September 1999 and the remainder to be no later than 30 December 1999.

3.5  On 22 February 2001, P, D and Wuhan Company entered into another loan repayment agreement (“Feb 2001 Repayment Agreement”), by which it was agreed that:

(1) D and Wuhan Company were unable to comply with the terms of the 1999 Repayment Agreement, the In Specie Agreement and the Supplemental In Specie Agreement;

(2) D continued to acknowledge its debt due to P and confirmed the validity of all the agreements executed between the parties and P’s accrued right to pursue the Ourstanding Sum and interest from 1 January 1999;

(3) Within 2001, D and Wuhan Company would repay part of the Outstanding Sum in cash and to hand over part of the completed villas so as to satisfy D’s indebtedness to P;

(4) D and Wuhan Company would complete, by 31 December 1999, the registrations of the transfers of the 53 villas originally earmarked for satisfaction of D’s indebtedness to P and to provide replacement villas if registration of any of the 53 villas could not be effected.

3.6  On 26 November 2001, P, D and Wuhan Company entered into yet another repayment agreement (“November 2001 Repayment Agreement”), by which:

(1) It was acknowledged that D and Wuhan Company could not comply with the terms of the Feb 2001 Repayment Agreement;

(2) D continued to acknowledge the debt owed to P;

(3) D and Wuhan Company promised, inter alia, that they would (a) repay RMB500,000 before the end of November 2001, (b) no later than the following Chinese New Year, transfer 6 villas to P, (c) within 2002, effect in specie payment by effecting the transfer of villas valued at no less than HK$30,000,000.

3.7  In a letter dated 28 June 2002 from Wuhan Company to P, it is stated 3 villas had been transferred in December 2001, and it would endeavour to transfer the other 3 villas by the end of July 2002. Subsequently, in Wuhan Company’s letter to P dated 24 March 2003, it is said that the applications for the transfer of all 6 villas, valued at RMB6,583,408 (“In Specie Payment”), had been processed but the requisite certificates of only 3 villas were handed over to P[2].

3.8  On 20 October 2003, P, D and Wuhan Company entered into the “2003 Repayment Agreement”, by which D (1) referred to the 2 letters set out in the preceding paragraph and acknowledged D and Wu Han Company comply with the November 2021 Repayment Plan and the 1999 Repayment Plan and (2) acknowledged the indebtedness to P and (c) agreed to a repayment plan. Further agreements similar to the 2003 Repayment Agreement were entered into between P, D and Wuhan Company in December 2004, 2005, 2006 and 2007 (“2007 Repayment Agreement”), in each case containing a new and (deferred) repayment plan.

3.9  On 13 February 2008, P, D and Wuhan Company entered into the “2008 Repayment Agreement”, by which D and Wuhan Company undertook to procure to transfer a property known as “小白樓” (“Siu Pak Lau”) to P as repayment of the debt due to P.

3.10  On 30 October 2009, P and D entered into the “2009 Repayment Agreement”, whereby D apologized for its failure to perform the 2007 Repayment Agreement and the 2008 Repayment Agreement and continued to acknowledge the D’s indebtedness. Between 2010 and 2020, P and D entered into a series of repayment agreements on terms similar to the 2009 Repayment Agreement.

3.11  P commenced the present action on 20 April 2022. In the Schedule to the Statement of Claim, P provides the particulars of D’s indebtedness. Using the Outstanding Sum as the starting point, and taking into account (1) various repayments between October 2000 and January 2021 including the In Specie Payment and (2) exchange rate loss to be borne by D, the outstanding principal amount is HK$60,848,806.15 as at 10 November 2021. As noted above, quantum is not disputed by D.

3.12  P further claims contractual interest and default interest pursuant to the 1999 Repayment Agreement.

3.13  For completeness, on 20 May 2021, P issued a statutory demand against D. On 15 December 2021, D wrote to P (“15/12/21 Letter”). Chronologically, the 2021 Letter was the first occasion in which D objected to its indebtedness owed to P.

4.   D’s case

4.1  As noted above, D’s case is that Chi Wen/Chi Rong never advanced the second phase investment sum of HK$50,000,000 as the same was misappropriated by Mr Wang. In order to make up the shortfall, it is D’s case that Mr Wang procured P to enter into the Cooperation Agreement and the Supplemental Agreement with D.

4.2  Irrespective of whether D received HK$160,000,000 (on the basis that the second phase investment sum of HK$50,000,000 was received) or HK$110,000,000 (on the basis that it was not received), the case pursued by D in closing is that there was a very substantial over-repayment, at the latest by 20 August 1999 through the following transactions:

(1) On 19 April 1997, Chi Wen agreed to purchase a number of units of the Shanghai Development at the total value of US$2,650,354 (HK$20,541,712). It is P’s case that the foregoing represented a repayment made to Chi Wen, as Chi Wen did not in fact pay the purchase price (“Alleged 1997 Repayment”);

(2) A company related to or within the Guangzhou Railway Group 廣州鐵路集團廣深實業發展總公司purchased 12,945.75 m² in an existing development in Shenzhen called “漁景大廈” from the seller 深圳市旭來投資有限公司 (“SZ Yuk Loi”), a company associated with D, in the sum of RMB 135,061,500 (around HK$126,255,701). By a letter dated 24 April 1998 (“24/4/98 Letter”), SZ Yuk Loi directed the purchaser to pay the purchase price to Chi Wen for the purpose of repayment D’s indebtedness to Chi Wen (“Alleged 1998 Repayments”);

(3) In a letter dated 19 April 1999 (“19/4/99 Letter”) from D to 廣州保利房地產開發公司 (“Po Lee”), it is stated that (a) on 13 June 1998, D had agreed to purchase 606 units in 保利紅棉花園 (“Red Cotton Garden”) from Po Lee; (b) D and Guangzhou Railway agreed that D could use units in Red Cotton Garden as an in specie repayment of D’s indebtedness owed to Guangzhou Railway, (c) Guangzhou Railway had already assigned 210 units in Red Cotton Garden to its employees and (d) D suggested that a new agreement be executed in respect of 210 units. Eventually on 20 August 1999, a fresh sale and purchase agreement in respect of 210 units in Red Cotton Garden (“Po Lee Properties”) was signed between D and Po Lee at the purchase price of RMB62,099,676 (around HK$59,309,555) (“Po Lee S&P Agreement”). It is stated therein that RMB12,099,676 was to be paid by 25 August 1999 leaving a balance of RMB50,000,000 and the balance should be paid by 15 July 2000. Under the Po Lee S&P Agreement, the balance was secured by a mortgage over 80 villas at the Wuhan Golf Club owned by Wuhan Company (“Alleged 1999 Repayment” and together “Alleged Repayments”).

4.3  The Alleged Repayments, on D’s case, therefore total HK$205,076,968. According to Mr Wong’s calculation:

(1) If only HK$110,000,000 was received by D, the outstanding sum (including accrued fixed returns) would have been completely satisfied by the Alleged 1998 Payment, in fact resulting in an over-payment in excess of HK$88 million by the time the Alleged 1999 Repayment was made;

(2) If HK$160,000,000 was received by D, the outstanding sum (including accrued fixed returns) would have been completely satisfied by the time of the Alleged 1999 Repayment, resulting in an overpayment of almost HK$28 million.

4.4  Building from the above, it is D’s case that shortly before the execution of 2009 Repayment Agreement (ie 30 October 2009), in a meeting between Mr Lee and 程方石先生 (“Mr Ching”) representing the Guangzhou Railway Group, it was understood by all parties that (1) the indebtedness to both P and Guangzhou Railway should be dealt with together and D had already made sufficient repayments, (2) all parties understood that the actual amount advanced by Chi Wen was not as stipulated on the relevant agreements, (3) an actual reconciliation of the account would be done in due course and (4) P and Guangzhou Railway were not anxious to conduct a reconciliation of the accounts that were handled by their previous management (particularly when misappropriation of funds by the previous management was involved).

4.5  Importantly it is D’s pleaded case that the following representations were made by P to D (“Alleged Representations”):

(1) P considered that D had made sufficient repayments to P and Guangzhou Railway (particularly given that P/Guangzhou Railway were aware of the failure to provide the full sum under the Chi Wen Agreement because of Mr Wang’s misappropriation of the funds) and P and Guangzhou Railway would not sue D for the alleged indebtedness;

(2) D was however required to execute agreements from time to time for P’s internal accounting and other purposes and the terms therein were not intended to be enforced.

4.6  It is D’s pleaded case that D relied on the Alleged Representations and had acted to its detriment by (1) signing the 2009 Repayment Agreement and the repayment agreements subsequent to it without demanding a reconciliation of the accounts to be properly taken, (2) making repayments of various sums since the 2009 Repayment Agreement and (3) refraining from making further repayments and allowing interest to continue to accrue and/or not insisting on any overpayment to be repaid after a proper reconciliation of the accounts.

4.7  It therefore follows, D pleads, that it is unconscionable to allow P to resile from the Alleged Representations and P is estopped from (1) denying that sufficient repayment has been made by D and (2) suing D for any alleged outstanding indebtedness.

5.   Factual findings

5.1  The crucial (disputed) factual findings are (1) whether the second phase of investment sum under the Chi Wen Agreement was advanced, (2) whether the Alleged Repayments were used to repay the indebtedness owed by D to P and (c) whether the Alleged Representations were made. It must be highlighted at the outset that D’s case on each of the foregoing disputed factual matters is inconsistent with the contemporaneous documents and D’s case hinge on the credibility of Mr Lee. It is also to be noted that Ms Liu’s evidence adds little to the documentary evidence, as admittedly she has no personal knowledge of any matters which had transpired before she joined P in 2021.

(i) Applicable principles

5.2  It is trite that the credibility of a witness should be assessed by reference to contemporaneous documentation where it exists, as well as inherent probabilities having regard to all the facts that are known. It is also important to bear in mind the internal consistency of the evidence of a witness, which is often tested by a comparison between the oral testimony of the witness on the one hand and his witness statement and pleadings on the other.

5.3  In the particular circumstances of this case, the following additional principles are relevant.

5.4  First, as observed at Leung Chin Sing Rabo & Anor v Ko Chun Hay Kelvin [2021] HKCFI 2242 §§42-44, it is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been purely by word of mouth but of which there is no contemporaneous record of any kind. The burden of proof here rests of the party alleging the oral agreement to prove and establish the same, including the manner in which it was concluded and on the terms pleaded, on a balance of probabilities. Although the above observations were made in the context of an oral agreement, it seems to me that they are equally applicable to the present case where D has to prove the Alleged Representations.

5.5  Secondly, and related to the above, is the clarity required of the Alleged Representations. As regards the defence of promissory estoppel, Great Pacific Investments Ltd v 張華榮 [2024[ HKCA 1147 §§18 and 21 observe that the mearing of the promise conveyed by the promisor’s word or conduct must be clear and unequivocal and must make clear that the promisor is promising not to enforce the legal rights or powers and this message must be conveyed with a clarity similar to that needed to vary a contract.

5.6  Thirdly, the Alleged Representations are said to have been made in 2009. In a case which turn on evidence of events dating back many years, Gestmin SGPS SA v Credit Suisse [2013] EWHC 3560 is an authority for the proposition that the court should focus on inferences drawn from the documentary evidence and known or probable facts:

“[22] In light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

5.7  In a similar vein, Moorthy Selvaraj v Karupayee Ammal & Ors [2024] HKCFI 403 observes:

“[10] …determining what was said or agreed orally at a meeting, which occurred many years before trial is inherently problematic. Not only do memories fade, but even honest witnesses are prone to construct their memory of events to confirm their beliefs, prejudices, or interests …

…

[13] However, Leggatt J is going further than this. He is suggesting that we know that memories of what was or was not said or done are commonly inaccurate and that determining a disputed fact or matter by assessing, which of two or more conflicting recollections is likely to be correct will commonly result in an unreliable answer. Several points arise from this. First, although it is open to a party to pursue a claim based on an oral agreement, understanding or a recollection of an event, for which there is little, if any, corroborating documents the party should be informed that proving the claim may be very difficult because of the difficulties I have described in a court choosing between alternative narratives in the absence of contemporaneous records. The court does not have to choose who to believe; if it takes the view that the evidence is unreliable, it can decide the case on the burden of proof. Secondly, before assessing the oral evidence the court should determine what facts or matters cannot be disputed or are probable; what I shall refer to as the objective facts. Taking a view on the veracity of the oral evidence first and then considering what can be ascertained from the objective facts runs the risk of the objective facts being given less significance than they should be. …”

5.8  Finally, as Mr Wong accepted in closing, the effect of the promissory estoppel is to render all the repayment agreements (since the 2009 Repayment Agreement executed by P and D) a sham. As pointed out by Mr Yu, the court does not lightly find a transaction to be a sham given its implications. Chan Pui Sze & Mak Hau Yin v Wang Jue [2024] HKCFI 2419 observes as follows:

(1) The Court does not lightly find a transaction to be a sham. An allegation of sham is a serious matter. There is a “very strong presumption” that parties intend to be bound by the provisions of agreements into which they enter and even more, intend the agreements they enter into to take effect: §100;

(2) An allegation of sham carries with it a degree of dishonesty, and the Court should be slow (but not naively or unrealistically slow) to find dishonesty: §§100 and 103.

5.9  For the reasons set out below, I do not find Mr Lee to be a credible witness. Instead of setting out my general comments here, the reasons for coming to the foregoing conclusion will become apparent below.

5.10  What I intend to do is to set out my analysis under broad topics identified at §5.1 above. Although the analysis is organized in that way, I have assessed the evidence wholistically in reaching my factual findings.

(ii) The amount advanced under the Chi Wen Agreement

5.11  I am prepared to accept the something had gone awry with the affairs of Chi Wen. In fact, Ms Liu did not appear to dispute this. According to Ms Liu, Chi Wen became a dormant company since 1997 and was run by a manager who was appointed by the Mainland law enforcement division.

5.12  However, that does not necesarily mean that Chi Wen only advanced HK$60,000,000 to D pursuant to the Chi Wen Agreement. There is in fact no documentary evidence adduced by D to support the nature of the alleged wrongdoings identified.

5.13  Conversely, the documentary evidence in support of Chi Wen having advanced the second phase of the investment sum under the Chi Wen Agreement on or around 8 June 1995 is as follows:

(1) D's letter to Chi Wen (addressed to Mr Wang) dated 8 June 1995 (signed by Mr Lee) directing Chi Wen to deposit the net sum of the second phase of the investment sum to Rich Victory (“8/6/95 Letter”);

(2) Chi Wen’s letter to D dated 8 June 1995 (signed by Mr Wang) informing D that the second phase of the investment sum (in the net sum) of HK$44,207,080.55) would be “available into D’s designated account today”;

(3) An unprocessed transfer slip containing Chi Wen’s instruction to the bank transfer the net sum to Rich Victory’s account (“Transfer Slip”);

(4) Importantly, D’s letter acknowledging receipt of the second phase of the investment sum signed by Mr Lee (“8/6/95 Receipt”).

5.14  According to Mr Lee, he was asked by Mr Wang to presign the 8/6/95 Letter and the 8/6/95 Receipt before the actual transfer to the funds and he acceded to that request. The signed documents were then sent to Mr Wang. Despite executing the foregoing documents, the HK$50 million was never transferred to D.

5.15  Mr Wong points out the following matters:

(1) All the other provisions of funds to D (ie HK$60,000,000 under the Chi Wen Agreement, HK$40,000,000 under the Cooperation Agreement and HK$10,000,000 under the Supplemental Agreement) were all by way of cheques;

(2) However, the second phase of investment sum was purportedly done by direct transfer and the Transfer Slip had not been processed by the bank;

(3) That the sum under the Cooperation Agreement was intended to be a “replacement” of the second phase of investment sum is supported by the fact that D also designated the replacing fund to be paid to Rich Victory.

5.16  Whilst I acknowledge the apparent force of the forensic points raised by Mr Wong, having assessed the evidence as whole, I find that the second phase of investment sum was in fact advanced, for the following reasons:

(1) On Mr Lee’s own evidence, he had only met Mr Wang in 1995;

(2) According to Mr Lee, when D did not receive the second phase of investment sum, he did follow up with Mr Wang. He was then told by Mr Wang that Chi Wen was not in a position to advance the money at that time, but if and when funds were required, Mr Wang would arrange the funds to be provided by another company;

(3) Given Mr Lee’s evidence that he was not aware of any alleged wrongdoing at that time (in fact, on Mr Lee’s own evidence, he only learnt about Mr Wang’s alleged misappropriation in 1997), the obvious thing for D to do is to send a letter to Chi Wen to “nullify” the 8/6/95 Receipt. D did not do so;

(4) In addition, as pointed out at §2.3 above, D had already provided security to Chi Wen for the full HK$110,000,000 and there is no evidence to suggest that D had ever proposed to Mr Wang to release part of the security in the event that the HK$50,000,000 replacement sum was to come from another company;

(5) The tenor of Mr Lee’s evidence is that the purpose of the Cooperation Agreement was to fill the shortfall. However, as noted at §§2.8 and 2.9 above, D in fact provided separate and additional security for the Cooperation Agreement, and as noted at §2.12 above, Mr Lee further provided a personal guarantee for the Supplemental Agreement;

(6) I do not place weight on the fact that the sum paid under the Cooperation Agreement was designated by D to be paid to Rich Victory. The sum under the Supplemental Agreement, also purportedly part of the replacement sum, was as noted at §2.13, paid directly to D;

(7) Further, the fixed return under the Supplemental Agreement was in fact higher than that under the Chi Wen Agreement (§2.11 above);

(8) Importantly, and somewhat perversely, D’s overall factual case is even more unbelievable and makes even less commercial sense if it only received HK$60,000,000 under the Chi Wen Agreement, as this would mean, as noted at §4.3 above, D would have already full payment by the Alleged 1998 Repayment but continued to make further repayment, resulting in a massive over-repayment of HK$88 million by the time the Alleged 1999 Repayment was made.

5.17  For the above reasons, I find, on the balance of probabilities, that Chi Wen did advance the second phase investment sum under the Chi Wen Agreement to D.

(iii) Whether the Alleged Repayments amounted to an over-repayment

5.18  The premise underlying D’s case that there was a massive over-repayment is that the Chi Wen Agreement, the Cooperation Agreement and the Supplemental Agreement represent the only indebtedness due from D to the Guangzhou Railway Group.

5.19  Whilst it is true that only the above agreements have been adduced into evidence, they do not represent the entirety of the evidence of the dealings between D and Guangzhou Railway. On D’s own evidence, the dealings between D and the Guangzhou Railway Group also included a golf club, railway ticketing (中國直通車及廣深線的票務) and food and beverage businesses.

5.20  As noted at §3.13 above, the 15/12/21 Letter is the first occasion in which D objected to its indebtedness owed to P. In that letter, it is expressly stated that, between 1995 and 1997, the “facilities” granted by Guangzhou Railway to D was in the sum of HK$200,000,000 although it is asserted therein that D only received less than HK$100,000,000. I note that the sum of HK$200,000,000 mentioned in the 15/12/21 Letter is in fact quite close to the total sum repaid by the Alleged Repayments, ie slightly over HK$205,000,000 (§4.13 above).

5.21  I do not accept D’s evidence that the Alleged Repayments amounted to an overpayment for the following reasons:

(1) The reason given by D for the massive over-repayment is that D was willing to do so as a result of coercion involving the Mainland police, prosecution or the judiciary. This evidence is given for the first time in the witness box. I do not accept that evidence since, as will be seen below, it is entirely inconsistent with the evidence set out in Mr Lee’s witness statement;

(2) In any event, examining the underlying documents of the Alleged Repayments, there is no hint of any coercion. To the contrary, the underlying documents all show that D (or its related entities) were corresponding only with the entities within the Guangzhou Railway Group and not with any Mainland enforcement agencies;

(3) In respect of the Alleged 1997 Repayment, the contemporaneous documentary evidemce (ie a letter dated 19 April 1997 from Chi Wen to D) clearly states that the purchase of a number of units in the Shanghai Development was a suggestion made by D. Whilst I accept that there was no need for any alleged coercion at that time in time (as the Alleged 1997 Repayment did not result in any over-repayment), it already shows that D was having difficulties in making repayments in cash;

(4) Further D’s decision to make over-repayment plainly does not make any commercial sense given the manner in which the Alleged 1997 Repayment and the Alleged 1998 Repayment were structured;

(5) In respect of the Alleged 1998 Repayment, the 24/4/98 Letter expressly states that the purchase price was to be paid to Chi Wen for the purpose of repayment D’s indebtedness to Chi Wen. One needs to bear in mind that, according to Mr Wong’s calculation, it is D’s primary case that the Alleged 1998 Repayment already resulted in an overpayment of around HK$23 million since the second [ashe investment sum had not been received. Given that the 24/4/98 Letter contained an instruction to the purchaser to pay the purchase price to Chi Wen, there is no commercial justification for SZ Yuk Loi to direct that the entire purchase price to be paid to Chi Wen resulting in a substantial over-repayment;

(6) Similarly, the Alleged 1999 Repayment was clearly divisible, as it involved 210 units. There is no commercial reason for D to make an in specie repayment with all 210 units had there not been a true indebtedness. Further, in the 19/4/99 Letter, D stated to Po Lee that it could not repay its indebtedness to Guangzhou Railway because of its cashflow problems, which was entirely inconsistent with Mr Lee’s evidence that the Alleged 1999 Repayment was as a result of coercion. One needs to bear in mind that there was no reason for D to divulge its cash flow problems to Po Lee, and even more so were it factually not the case;

(7) Moreover, as is plain from the 1998 Proposals set out at §2.16 above, D’s financial position did not permit D to make repayment in cash such that it had to resort to in specie repayments. That D was in a financial predicament makes the suggestion that D was willing to make substantial over-repayments incredible.

5.22  The fact that D admitted that it was in financial difficulty is also prevalent in the series of tripartite repayment agreements and bipartite repayment agreements set out at Section 3 above:

(1) In the 1999 Repayment Agreement, D acknowledged that it needed time to raise funds (Clause 2);

(2) In the Nov 2001 Repayment Agreement, D and Wuhan Company stated that they were unable to comply with the Feb 2001 Repayment Agreement because they were unable resolve their financial problems (Clause 1);

(3) In the letter dated 28 June 2002 set out at §3.7 above Wuhan Company stated that it was in financial difficulty such that it was not in a position to honour its obligations;

(4) In the letter dated 24 March 2023 set out at §3.7 above, Wuhan Company repeated that it was in financial difficulty;

(5) In the 2003 Repayment Agreement, D and Wuhan Company again acknowledged their financial difficulties (Clause 1) which were repeated in the repayment agreements signed in December 2004, 2005, 2006 and the 2007 Repayment Agreement;

(6) In the 2008 Repayment, it is recorded that P was vehemently dissatisfied with D and Wuhan’s longstanding failure to honour their obligations (對甲方、丙方長時間不能履行償債協議的行為，乙方表達強烈的不滿) and D and Wuhan Company expressed apology (甲方、丙方對此深表歉意). It was on that basis that Siu Pak Lau was offered as a further in specie repayment. It is plain the terms of the 2008 Repayment Agreement is entirely inconsistent with Mr Lee’s evidence;

(7) In the 2009 Repayment Agreement, P’s vehement dissatisfaction and D’s expression of regret were again recorded, and repeated in the series of bipartite agreements executed thereafter from 2010 to 2020.

5.23  All of the above documented matters are entirely against D’s evidence that there was a clear case of over-repayment by D to the Guangzhou Railway Group. In my view, D has failed to show, on the balance of probabilities, that D had over-repaid Guangzhou Railway/P and that Guangzhou Railway/P had acknowledged the over-repayment (at any point in time).

(iv) Whether the Alleged Repayments referable to D’s indebtedness to P

5.24  In any event, not only is D’s case on over-repayment problematic, D also faces insurmountable difficulties to demonstrate that the Alleged Repayments were referable to D’s indebtedness to P.

5.25  In evidence is an internal note prepared by D (“D’s Note”). In D’s Note, there is no reference to the Alleged Repayments but instead it expressly recorded that, of the indebtedness due to P as at 30 June 1999 in the sum of HK$63,799,517.44, only RMB 7,059,968 (the bulk of which represented by the 6 villas transferred to P) had been repaid by 2001. As noted above, according to D’s primary case, D’s indebtedness would have been full repaid by the 1998 Alleged Repayment.

5.26  Mr Lee was cross-examined on D’s Note. He admitted that it was internal record. As such, there is no reason why the internal record would not state the true position as then known by D. D’s Note plainly shows that the Alleged Repayments were not related to D’s indebtedness owed to P.

5.27  Further, as has been pointed out by Mr Yu, in all of the underlying documents of the Alleged Repayments, no reference was made to P at all.

5.28  I find that the Alleged Repayments were not repayments referable to D’s indebtedness to P.

(v) Whether the Alleged Representations were made

5.29  It is first necessary to outline D’s evidence which paints a picture of protests on D’s part over an extended duration. According to the evidence set out in Mr Lee’s first witness statement:

(1) Between 1995 and May 1997, in addition to Mr Wang, Mr Lee also had dealings 廖制廣局長 of Guangzhou Railway (“Mr Ip”) and 翁世耀總經理 of P (“Mr Yung”);

(2) In late 1997, he learned about Mr Wang’s alleged misappropriation;

(3) He then told Mr Ip and Mr Yung about the shortfall of HK$50,000,000 and Mr Ip and Mr Yung expressed an understanding;

(4) On 21 January 1999 (ie the date of the 1999 Repayment Agreement), he met P’s representative 吳紅禮先生 (“Mr Ng”). Mr Ng said that he learned from Mr Yung about what transpired and expressed regret. However, Mr Ng said that D had to bear responsibility for the entire HK$160,000,000 said to have been advanced under the relevant agreements. Mr Lee protested, at which point Mr Ng suggested that the alleged misappropriation would be investigated into and a reconciliation of the accounts could be carried out later. It was on that basis that Mr Lee agreed to sign the 1999 Repayment Agreement. He also said that following the execution of the 1999 Repayment Agreement, he would carry out the Alleged 1998 Repayment and the Alleged 1999 Repayment and it was agreed that any over-repayment would be refunded;

(5) After the Alleged 1998 Repayment, he considered that all indebtedness due to the Guangzhou Railway Group had been repaid. He then asked for a reconciliation of the account in August 1999. He was told by the management of Guangzhou Railway that as the investigation into the misappropriation had not been completed, the reconciliation could not be conducted. However, since the management of Guangzhou Railway and P were already satisfied that full payment had been made, Wuhan Company therefore was no longer required to assume any responsibility for the indebtedness;

(6) P and Wuhan Company further executed a 委託售樓協定 (“Wuhan Agreement”) specifying a profit sharing in the events that the handed over unit was sold at above the In Specie Payment amount;

(7) Between 20 October 2003 and 20 December 2007 (ie the dates of the repayment agreements signed in 2003 to 2007), he met, inter alia, Mr Ng, and on each occasion, he expressed dissatisfaction about the state of affairs. Mr Ng said that he was grateful for D making substantial repayments which were already sufficient. He was told that (a) the reconciliation of accounts could not be carried out as Mr Wang could not be located, (b) the repayment agreements signed during this period was for formality and (c) Guangzhou Railway and P would not pursue D or Wuhan Company in court;

(8) D signed the 2008 Repayment Agreement and offered Siu Pak Lau as additional repayment only at the request of Mr Ng;

(9) Materially, in 2009, Mr Ching replaced the former management including Mr Ng. Prior to the signing of the 2009 Repayment Agreement, Mr Ching told Mr Lee that he had ascertained the state of affairs from Mr Ng. It was on this basis that Mr Ching made the Alleged Representations;

(10) Mr Ching stepped down in 2011 and the subsequent management confirmed the positions adopted by Mr Ng and Mr Ching.

5.30  I am unable to accept Mr Lee’s evidence for the following reasons.

5.31  First, there is not an iota of contemporaneous evidence to support Mr Lee’s evidence:

(1) The above narrative lasted an extended period and there is no documentary evidence to support Mr Lee’s evidence, whether in terms of D’s allegation that the Guangzhou Railway Group was satisfied of the repayments made or that D had asked for a reconciliation of accounts. This is particular inexplicable because there were a number of changes in the management of Guangzhou Railway;

(2) It bears emphasis that (a) it is D’s evidence that Mr Ng learned from Mr Yung about the alleged misappropriation of the second phase investment sum under the Chi Wen Agreement, (b) the Alleged Representations were in fact already in substance made in 1998 by the management of Guangzhou Railway (presumably by Mr Ng) and (c) the representations were repeated by Mr Ng between 2003 and 2007. There is simply no documentary evidence to support the foregoing, especially when Mr Ng’s position had allegedly been repeatedly communicated to Mr Lee. To the contrary, as set out at §§5.21 and 5.22 above, the contemporaneous documents generated during that period all show D’s admission of financial difficulties such that D was unable to repay the Outstanding Sum;

(3) Significantly, it must be D’s case that the person who had a firm understanding of the background leading to the Alleged Representation was Mr Ng. When Mr Ng was replaced by Mr Ching, one would have thought that the natural thing for D to do was to document the understanding reached between D and Mr Ng. That was not done;

(4) Similarly, D did not document its understanding allegedly reached with Mr Ching when Mr Ching stepped down in 2011. It is unbelievable that Mr Lee would be content to have the understanding between D and Mr Ng and Mr Ching undocumented through various changes of P’s management.

5.32  Secondly, D’s case that it made the over-repayment as a result of coercion in cross-examination is contradicted by the evidence set out in Mr Lee’s first witness statement. At §17 thereof, Mr Lee in fact stated that the Alleged 1998 Repayment and the Alleged 1999 Repayment was as a result of discussion with Mr Ng. Bearing in mind that it is D’s primary case that it did not receive the second phase investment sum under the Chi Wen Agreement, the offer by Mr Lee to make both the Alleged 1998 Repayment and the Alleged 1999 Repayment is inexplicable for the reasons already explored above. In any event, D’s case that Mr Ng had already acknowledged the sufficiency of repayment in 1998/1999 is contradicted by the subsequent transfer of the 6 villas in the Wuhan Golf Club and the agreement to transfer Siu Pak Lau.

5.33  Thirdly, it must be emphasized that, according to D’s pleaded case, the Alleged Representations were only made orally and not by conduct. The above two reasons are sufficient for me to reject Mr Lee’s evidence. Only for completeness, insofar as Mr Wong suggests that P’s inaction in actively pursuing D is only consistent with the Alleged Representations having been made, I do not accept his submissions. The parties’ conduct is at best equivocal. Whilst it is true that P only commenced proceedings in 2022 under the current management, P has plain preserved its rights and not allow the claim to be time-barred. P’s inaction may be explained by the evidence canvassed above which plainly shows that D was in a financial predicament and any litigation may not prove fruitful. I am also of the view that the “release” of Wuhan Company can be explained by the fact that the contemporaneous documents plain show that Wuhan Company was having financial difficulties on its own. On the other hand, it can equally be said that D has taken no active action to demand for a reconciliation of the accounts.

5.34  For all the above reasons, I find as a fact that the Alleged Representations were not made.

6.   Analysis

6.1  It is common ground that, to establish the defence of promissory estoppel, D bears the burden of showing:

(1) There is an unequivocal assurance by the promisor that he will not enforce or exercise some of his rights;

(2) The promisee relied on the unequivocal assurance;

(3) In reliance thereof, the promise acted to his detriment.

6.2  Given the above factual findings, D fails at the first hurdle. It follows therefore there could also be no reliance on D’s part.

6.3  Insofar as necessary, I also accept Mr Yu’s submission that D had not acted to his detriment, for the simple reason that Mr Lee had accepted in evidence that there is nothing to prevent D from asking for a reconciliation of the accounts even after D has repaid the sums pursued by P in these proceedings.

6.4  For all the above reasons, I reject D’s defence premised on promissory estoppel.

7.   Conclusion

7.1  I therefore enter judgment in favour of P, broadly in line with Relief (1) pleaded in the Statement of Claim. However, in order to finalize the order for the purpose of facilitating enforcement, the parties are to, within 7 days hereof, agree on the quantum of the pre-judgment interest accrued to the date of the judgment to be included in the final order. P is further entitled to post-judgment interest at the judgment rate until payment.

7.2  I also make a costs order nisi that P is entitled to the costs of the action, including any reserved costs, to be taxed if not agreed.