YEUNG WING WAH v. CHUI TSAN KIT

HCA 2118/2016

[2026] HKCFI 139

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2118 OF 2016

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BETWEEN

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JUDGMENT

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A. Introduction

1.  On 19 June 2015, the plaintiff (“P”, “Mr Yeung” or “Yeung”) and defendant (“D”) entered into a Chinese agreement entitled資產管理顧問服務協議書 (translated as Asset Management Consultancy Service Agreement, the “Service Agreement”). P signed as the investor. He provided the assets to be managed (which parties refer to as the “Asset Under Management”, or “AUM”). D signed as a “資深金融從業員” to provide asset management consultancy. P subsequently suffered investment losses, and on 3 August 2016 terminated the Service Agreement. P says that the loss was the result of D’s breach of contract and/or duties (contractual, tortuous, and fiduciary). P says further that D had under the Service Agreement agreed to provide to him (P) guaranteed profit on the AUM at 12% per annum (the “Profit Guarantee”, or “Guaranteed Profit” as appropriate). P now sues D for those losses and the Guaranteed Profit, or alternatively damages and/or equitable compensation. He also asks for return of the service fees which he had paid D. The total amount of the claim on the basis most favourable to P is in the region of HK$85,000,000. D disputes liability. His position is that he carried out his duties with the degree of reasonable skill and care required of him. He disputes P’s interpretation of the Service Agreement in relation to the Profit Guarantee. He says that that 12% was only P’s investment target (the “Target Return Rate”), which also worked as the “hurdle rate” for him (D) to get his performance bonus (“Hurdle Rate”). He says that P’s termination of the Service Agreement, which D says was a wrongful repudiation on P’s part, had deprived him (D) of the opportunity to “chase back” the loss. He says that P had contributed to the loss. He further says that P had failed to mitigate. He also counterclaims for unpaid consultancy fees in the sum of HK$800,000, and further damages to be assessed.

2.  This is the trial of their disputes. Mr Rimsky Yuen SC leading Mr Peter Dong appeared for P. Mr Kenneth CL Chan with Mr Joshua Choy appeared for D.

B. The parties

3.  P was born in 1953. He received education in Hong Kong up to early secondary school level. He started working in 1968. At the material times, P was a businessman. He was involved in charitable work, which included the setting up and operation of the Wing Wah Charity Foundation in 2011, of which P was, and remains the Chairman.

4.  P has 2 sons and 1 daughter. One of his sons is called Terry Yeung (“Terry”). He is one of the witnesses in this trial. The daughter is called Eunice Yeung. Her name is mentioned in some of the documents before this Court.

5.  Terry was born in 1990. He received secondary education in the UK. He then attended University of Sussex and University of Surrey there. He was awarded Bachelor of Science (Business and Management Studies) in 2013, and Master of Science (International Marketing) in 2015. After graduation, in around April 2015, he returned to Hong Kong.

6.  P had a trading account with Bright Smart Securities International (HK) Limited (“Bright Smart”, and the “Bright Smart Account” (or the “Trading Account” as sometimes referred to by the parties)). It was through that account which the investments under the Service Agreement were made.

7.  In respect of D:

(a) He was an honourable assistant professor (榮譽助理教授) in e-finance and corporate finance at the University of Hong Kong, and an adjunct associate professor (兼任副教授) in marketing at the Chinese University of Hong Kong.

(b) He had worked as a Chief Executive Officer at a wealth management company called China Galaxy International Wealth Management Limited. He subsequently joined Qilu International Securities Limited (“Qilu”) as a Chief Strategy Officer. He also at different times provided consultancy or training services to various institutions;

(c) The professional qualifications D claimed to have included: (i) Chartered Wealth Manager; (ii) Certificated Financial Consultant; (iii) Certificated E-Commerce Consultants; and (iv) 中國高級商業電子商務師;

(d) He had hosted or participated in numerous media programmes, and had published articles from time to time in different newspapers and magazines on investment, financial products and/or wealth management. He further from time to time delivered talks and lectures through various institutions or bodies on those topics;

(e) He had published around 25 books on topics including investment and/or financial products and/or wealth management;

(f) He was also known as “Professor Chui” or “Professor J”.

C Some agreed and undisputed facts

8.  Parties have reached some agreed facts. They are contained in the Agreed Chronology, Agreed Dramatis Personae, and Statement of Agreed Facts. Some further facts are admitted on the face of pleadings, or otherwise not in dispute. It is convenient to set them out at this stage, so as to put the Service Agreement and parties’ respective pleaded cases in context.

9.  In 2014, P was having a dispute with Coutts & Co. Limited (“Coutts”). Coutts was an investment bank in Hong Kong. P and D first met during that time, when D shared his views with P on certain financial investment matters.

10.  From around the 4^th quarter of 2014, P and D entered into discussions and negotiations in relation to an investment consultancy service agreement. During those discussions and negotiations, D submitted to P, among others, written proposals for the consultancy services. They included proposals dated 24 November 2014 (“Proposal v.1.0”), 5 December 2014 (with 2 versions) (“Proposal v.2.0”) and 5 January 2015 and (“Proposal v.3.0”, and the “Proposals” collectively).

11.  I pause here to set out certain features about the Proposals which parties have highlighted:

(a) All the Proposals were prepared in printed form, but have on them some handwritten changes or remarks;

(b) In relation to Proposal v.1.0:

(i) Under the heading “模式”, there were 8 bullet points, 4 of them read as follows[1]:

➣ [D]以自己的專業知識，行內經驗，市場及產品分析為楊先生設計及選擇投資產品/項目。

➣ [D]將總結投資產品/項目向楊先生匯報。

➣ [D]妥善處理相關文件及為楊先生存檔以作查閱

➣ 從機會成本層面，楊先生要求每年的指標回報為12%，即每月1%的回報!!

I will for ease of presentation call the last bullet point the “12% Bullet Point”;

(ii) There was no handwritten change to the 12% Bullet Point;

(iii) Under the heading “數理分析”, there were 3 bullet points, the 3^rd of which read, after 2 handwritten changes, as follows[2]:

楊先生有權年結後提取利潤，但注入資金，需要得到 [D] 的允許才可!!一切以先保本，穩中求勝，適度風險帶來的回報為投資核心基礎。

(iv) Under the heading “組合建議”, there were 3 bullet points, as follows[3]:

20%： 投入海外地產銀行項目

50%： 投入結構性產品以股票為主

30%： 用作股本市場 例如購買可換股債劵，過橋財務安排，配售…..等等

(c) In relation to Proposal v.2.0:

(i) Proposal v.2.0 contained the same 12% Bullet Point in printed form[4]. But between the words “回報” and “為”, 2 words “保証” in manuscript were inserted, and that at the front of that bullet point, a “star” had also been added by hand;

(ii) In court, P said that the words “保証” were written by him in front of D, and that the “star” was added also by him (P) to denote the importance of that requirement. D under cross-examination also accepted that the words “保証” were written by P, though he claimed he could not recall who put down the “star”;

(iii) Proposal v.2.0 also addressed the question of D’s performance fee[5]. The printed words originally proposed that upon 12% profit being achieved, D would be entitled to 15%-20% of the net profit as performance fee. Those percentages had been struck through by hand, and replaced in manuscript by “50%-50%”, suggesting that those net profit would be split 50/50 between P and D. D confirmed during cross-examination that that increase was requested by P;

(iv) There were similar references to “楊先生有權年結後提取利潤” and “一切以先保本, 穩中求勝”[6];

(v) There was the same “組合建議”;

(d) In relation to Proposal v.3.0:

(i) It contained in printed form the same 12% Bullet Point as appeared in Proposal v.1.0 (except that “楊先生” had become “甲方”)[7]. The words “保証” added in manuscript to Proposal v.2.0 were not incorporated;

(ii) There were also similar references to “甲方有權年結後提取利潤” and “一切以先保本, 穩中求勝”[8];

(iii) There was “甲方二億組合初步建議” of [9]:

30%：買入美股

70%：投入私人銀行並以結構性產品及度身訂造產品為主

投資選擇：一切以市場實時變化作相應調較，及向投資會呈示及作出相關決策及協調!!

12.  The parties signed the Service Agreement on 19 June 2015. Whilst that was the date of the execution, and as we shall see, the operation date of the Service Agreement was specified to be 1 April 2015, and according to P’s evidence, access to the Bright Smart Account was given to D even before that (in March 2015, when D started to buy shares on P’s behalf via that account).

13.  It is agreed between the parties that D was obliged to exercise reasonable skill and care in the discharge of his roles and responsibilities under the Service Agreement. I add however that while this is agreed, the precise scope of D’s duties is not. I will discuss this further below.

14.  Pursuant to the Service Agreement, D made investments on P’s behalf through the Bright Smart Account (the “Portfolio” and “Portfolio Shares” as appropriate). Despite D’s pleaded stance on the face of pleadings, details of the Portfolio are now agreed and set out in Annex A and Annex B attached to P’s Re-Re-Amended Statement of Claim (“RRASoC”, “Annex A” and “Annex B”)[10]. I will explain more about those 2 Annexes later.

15.  By 30 June 2015, the Portfolio had incurred a loss of more than HK$17 million.

16.  On 8 July 2015, D submitted to P a “Self-Evaluation Report” in relation to his management of the Portfolio[11].

17.  On 25 July 2015, D submitted to P a report[12] which advised P that he should maintain his position in the Portfolio Shares in the medium to long run except for certain shares which should be sold within the short term (e.g. 1 or 2 weeks).

18.  P had previously (on 1 April 2015 and 1 July 2015) paid to D under the Service Agreement 2 instalments of HK$400,000 each as consultancy fees. On 28 July 2015, P through his solicitors Messrs. Katherine YW Or & Co (“KYWO”) issued to D a letter[13] (the “KYWO 28/7/2015 Letter”). Therein, P claimed that D had acted in breach of the Service Agreement, and gave D notice terminating D’s entitlement to consultancy fees under the Service Agreement.

19.  Between August and November 2015, D maintained his advice to P (i) to sell the shares listed in his report submitted on 25 July 2015, and (ii) to maintain all other shares in the Portfolio in the medium to long run. In another report dated 29 December 2015[14], D advised P to continue to hold the shares then remaining in the Portfolio.

20.  On or around 1 February 2016, P asked D to liquidate shares with low market prices within the Portfolio (the “Small Price Shares”). Save some (as shown in Annex B/Sales, as defined below), D did not sell other shares remaining in the Portfolio.

21.  Since around February 2016, P had also requested D to submit written proposals in relation to the losses incurred by the Portfolio. Thereafter, D submitted (inter alia) the following reports:

(a) On 31 March 2016, D submitted an “Annual Report”[15] to P which stated that the floating losses (浮動損失) for the Portfolio was tentatively HK$60 million; and

(b) On 19 May 2016, D submitted a report to P titled “為楊先生追回投資損失的建議報告”[16].

22.  On 31 May 2016, D’s right to access the Bright Smart Account was terminated.

23.  On 6 June 2016, D provided P with a hand-written breakdown[17] stating that the floating loss (浮動損失) as at 31 May 2016 was HK$50,600,719.24, and the total net loss was HK$57,472,805;

24.  In around July 2016, a draft supplemental agreement (補充協議書)[18] was made. The parties ultimately did not sign it[19].

25.  On 28 July 2016, D wrote to P’s solicitors a letter. It was in both English and Chinese[20]. D stated therein, inter alia, that “This letter relates to my reply on ‘Supplemental Agreement’ earlier on this week. I hereby declare that I have no intention of refusing my liability based on client’s expectation, thereof the relevant reply should NOT be deemed as a rejection to the reasonable settlement request form [sic.] client.” (“就較早前本人對補充協議書的回覆，本人在此聲明，本人並無拒絕承擔責任的立場，有關回覆不應視作拒絕客戶合理的和解要求。”)

26.  On 3 August 2016, by letter on his behalf from KYWO[21] (the “Termination Letter”), P formally terminated the Service Agreement.

27.  On 15 August 2016, P commenced the present action.

D. The Service Agreement

28.  The Service Agreement[22] comprises 20 pages. I have considered the totality of its contents. I set out some of its terms for ease of reference and presentation:

(a) P entered into the Service Agreement as “甲方”, and D as “乙方”;

(b) §§1 to 3 of the Recital provided inter alia as follows:

l、甲方是一獨立投資者。

2、乙方是一個資深金融從業員，在金融市場及產品上、擁有豐富經驗。

3、基於上述第二條，甲方有意聘請乙方，就甲方指定的專戶資產（其初始資產為【港幣貳億元正】港元(HK$200,000,000.00)）在香港證券及海外市場上協助甲方投資包括股票、債券、基金、黃金、石油、貴金屬及提供資產管理顧問服務以實現該等資產的長期及穩健增值。乙方願意接受甲方的聘請，當中也包括楊榮華家族全部成員，在該貳億港元資金以外，投放的資金全部無償地全力協助提供專業意見。

…

(c) Clause 1 defined the terms used, that, inter alia:

“初始專戶資產”：港幣貳億元正 (HK$200,000,000.00)

“證券市場”：包括但不限於股票市場、債券市場、基金市場、黃金市場，貴金屬市場，石油市場，結構性房品市場，控股債券、新股認購等等。

“保證每年回報”：12%

“專戶資產”：本協議中甲方指定交由乙方提供資產管理顧問服務的總資產或可供投資金額合共港幣貳億元正(HK$200,000,000.00) …

“生效日”：二零一五年四月一日

“結算日”：指每個完整順延年的最後一日。如果該日為非工作日，則向後順延至下一個工作日。如果本協議發生解散或終止，則以解散或終止生效日為結算日。

“順延年”：指特定日期加上365日。第一個完整的順延年為生效日加上365日，以後每個完整的順延年為上一個順延年最後一日加上365日。

“資產淨值”：指每個結算日專戶資產的公允價值的總額

“承諾的年化收益率”：指乙方為獲得支付業績獎勵（即表現費），承諾甲方之資產應達到的最低收益比例為每年百份之十二(12%)。實際收益未達到該比例的，甲方不需支付任何業績獎勵。其中甲方指定年化收益率為不少於12%。如收益不足年12%之回報，乙方有責任無償順延至合理年之每年保証回報為不少於12%之合理保障。

甲方有權在不足年12%之下，可即時停止或減少乙方每季港幣四拾萬之資產管理服務費。

(d) Clause 2 provided for the engagement of D, that:

甲方邀請乙方為前述專戶資產提供資產管理顧問服務，且乙方同意接受該等邀約出任其顧問，雙方合作形式及詳細條件如下。

(e) Clause 3 specified the contents of the consultancy services (顧問服務內容), that, inter alia:

在本協定有效期內，乙方要全心全意忠於楊榮華先生及其意願，此合作作為乙方一切工作中最重要首選及重視的一項，比一切其他工作為重要及需以其專業知識，行內經驗，市場及產品分析為甲方設計及選擇投資產品/項目，乙方應根據甲方指定的專戶資產的行業特點和具體監管要求，以實現該等資產的長期、穩健增值為目的，全面運作以低成本高效益為主，(除非經甲方書面同意)，為甲方購買、持有、出售、配置或以其他方式處置該等專戶資產（以下簡稱“資產配置”）相關事宜提供資產管理顧問服務，包括但不限於：

1、深入研究宏觀經濟形勢、宏觀經濟資料、宏觀調控政策資訊、宏觀熱點問題、重大政策及事件、重點行業等宏觀層面課題深層硏究，現今互聯網I.T.藥業、環保、水利、軍工業或其它行業之各行業其最優質投資其最優勢部份 …

2、及時向甲方通報香港及海外證券市場訊息，深入研究香港及海外證券市場，並按照甲方要求提供相關書面報告和相應投資策略；

3、在專戶資產的總體投資目標、投資策略及資產配置等方面透過有系統及分析進行研究並及時提出操作方案，並按照甲方要求提供相關書面報告；

4、在專戶資產的戰略配置、交易配置等方面進行研究並及時提出方案，並按照甲方要求提供相關書面報告；

5、就專戶資產配置相關具體操作事宜（包括但不止於盡職調查、談判等）透過有系統及分析進行研究並及時提出方案，並按照甲方要求提供相關書面報告；

6、甲方及乙方同意使用之交易平台方案為：

6.1 齊魯國際：參予國際配售，投資大額項目：可換股債券，貸款給上市公司等等；

6.2 耀才：買賣港股及美股，及其他地方股票甲方商議及得到同意下由乙方代表甲方在網上進行交易

6.3 瑞士銀行：外匯和結構性產品。

6.4 或楊榮華家族成員的專戶口進行交易。

(f) Clause 4 specified the manner of service (服務方式), that, inter alia:

甲方應在每月或每星期的合理時間內向乙方作出具書面或口頭的投資指引，以書面為主，確實指示，闡明投資風險承受能力、投資偏好、投資範圍、投資限制等。

甲方有權不時對投資指引進行修正，修正內容包括但不限於：對禁止購買投資品種的變動；對投資品種的數量限制；對交易對手方的限制等。甲方擁有最終決定權。

該等投資指引及其修正為即時生效。

乙方應按照現時有效的投資指引為甲方提供資產管理顧問服務，包括市場分析，研究報告及相關有利於甲方作為投資時議會的資訊。

若甲方不向乙方出具書面的投資指引，乙方則需按照忠心、忠實、勤勉、謹慎、專業經驗及負責任的原則及根據市場慣例為甲方提供資產管理顧問服務。乙方須一心一意運用其專業知識及資源履行此協定及除經甲方同意外，不能從事及/或受僱於其他機構及/或個人之任何投資活動。一切要甲方書面批準才可進行，不得私自處理完成後才向甲方匯報。

儘管前文所述，甲乙雙方同意乙方需提供資產淨值申報表有關於初始專戶資產內之淨值，如該投資有任何變動，包括但不限於原有的，已改變的，與第三者合作進行之投資，如配股、集資或借貸抵押等等，或有任何投資上之改變，一切需以書面通知甲方及需經甲方書面同意及/或簽字確實該申報表及批準後方可進行。乙方亦同意如有其他在外新事項或新工作亦需預先表白及預先取得甲方之書面同意方可接受新工作，免致其顧問服務工作受到影響。

…

(g) Clause 5 provided for parties’ rights and obligations (雙方的權利和義務), that, inter alia:

(i) In respect of P’s, that, inter alia:

（一）甲方的權利和義務

…

2、若甲方有確鑿證據發現乙方在履行本協議過程中存在違法違規行為或不誠實，甲方有權採取旨在保護甲方指定的專戶資產安全的措施包括但不限於向乙方提出質詢、提前終止協議等及／或追討乙方的賠償責任。

…

6、甲方有權年結後提取利潤，如注入資金超過港幣貳億元正需要得到乙方的同意因乙方需就保證每年回報中負責甲方總投資額100% 之12%回報責任。

(ii) In respect of D’s, that, inter alia:

（二）乙方的權利和義務

l、乙方應當以一名忠實、勤勉、謹慎、專業、負責任履行其職責的標準，履行其協議項下義務。

2、乙方要以其專業投資知識、行內經驗、市場及產品分析為甲方提供意見及選擇投資項目。甲方擁有此資產管理顧問服務協議書合同最終決定權。

3、乙方應向甲方提供合理的協助（包括但不限於及時提供甲方認為有必要在其他報告或備案文件中包含的任何有關資產管理服務的資料）。

4、乙方應妥善保存關於與履行本協定有關的檔案，以備甲方可即時查閱及甲乙雙方各保存有關的檔案，正本由甲方保存。

5、在履行職責時，乙方應確保其擁有一個能夠依照本協議的條款提供該等服務的專業團隊，該團隊應由在資產管理及特定行業投資領域擁有豐富顧問經驗的人士組成，並保持穩定，該等人事之顧用費用全由乙方支付。

5a、如乙方有意邀請其團隊參與，須預先向甲方申報費用。而乙方則需負責其團隊之一切費用。

5b、人力資源方面，乙方可按季向甲方申請聘請員工1位，但需視乎情況而定，（費用由乙方支付），但甲方有權在每季的表現會議認為工作效益不理想，可隨時切除該員工及交由乙方處理。如遣散費用由乙方支付全部費用。

…

7、乙方需將總結投資產品/項目提前或盡早向甲方匯報。項目決定後，確保投資產品或項目能順利執行。

8、乙方需定期向甲方及投資決策會匯報各產品及相關市場走勢（每星期兩次，如市場波動需召開緊急會議）。

9、全面運作以低成本、高效益為本，除非甲方書面同意。

10、一切以先保本金、以穩中求勝，高度風險帶來的回報為投資核心基礎。

(h) Clause 6 addressed representations, warranties, and promises (陳述、保證及承諾);

(i) Clause 7 related to the asset management consultancy service fees (資產管理顧問服務費), that, inter alia:

（一）甲方對乙方在本協定下提供的服務向乙方支付資產管理顧問服務費。

資產管理顧問服務費按照以下方式計算：

1、顧問服務費：年收港幣HK$1,600,000.00以季付形式支付（即由每季以三個月為一個季度）開始甲方給予乙方HK$400,000.00以履行一切以上責任的費用）。

註：如乙方表現不理想，甲方有權停止支付每季HK$400,000.00 直至乙方表現合格或理想再行重新支付或補回停止季度差價，由甲方審批是否追收及/或補回該數全由甲方作最終決定。

如甲方專戶資產每個順延年的年化收益少於專戶初始資產金額的12%（即未達保證回報），乙方須負責補回或追回保證每年回報之差額，甲乙雙方同意每年三個月對保證回報檢討一次。(This unnumbered sub-paragraph of Clause 7(一)1、will be referred to as the “補回或追回Provisions”.)

2、表現費：表現費收取方式如下：

2.1 乙方承諾甲方專戶資產每個順延年的年化收益為專戶初始資產金額的12%。若專戶資產實際年化收益率低於該承諾的年化收益率，專戶資產的全部收益歸屬甲方，乙方不可收取表現費；若超出該承諾的年化收益率的部分，但需扣除一切費用後（即甲方的權利和義務中第(一)款第5項涉及的費用），甲方應向乙方支付（扣除該12%及一切該費用後）超出承諾的年化收益率的投資收益部分（即淨利潤）的50%作為乙方的業績獎勵（即表現費）；甲乙雙方同意作為風險管理的原則前提下，乙方同意在表現費上甲方可從100%中扣起30%作為風險基金，（即50% - 15%後之35%。乙方方可收取）風險基金存放於甲方，由甲方保管作為以後不足12%補償每三年循環。第四年分回第一年之30%。[23]

2.2 乙方的投資顧問服務費按季計算（即三個月為一個季度），逐季計算收取。每季為港幣HK$400,000.00元正。

註：如乙方表現不理想，甲方有權停止支付每季HK$400,000.00直至乙方表現合格或理想再行重新支付或補回停止季度差價，由甲方審批是否追收及/或補回該數全由甲方作最終決定。

(j) Clause 8 dealt with the distribution of profits from the account (專戶收益的分配), that, inter alia:

2、淨值報告經甲乙雙方確認後，如收益超過初始資產金額的12%及扣除一切費用及稅項後，在每個結算日後，按照以下順序進行分配：

(1) 乙方應收的表現費；

(2) 甲方的剩餘收益。

(k) Clause 10 provided that the effective period of the Service Agreement would be 10 years (有效期為十年);

(l) Clause 11 addressed the issue of termination (協議的解除), that, inter alia:

（一）甲方有權以下列方式單方解除本協定：

1、 乙方出現重大違約，且自甲方向乙方發出要求其採取即時補救措施仍未作出補救的，甲方有權向乙方發出解除本協議的書面通知；本協議自乙方收到該等書面通知之日起即行解除。並有權追討乙方失誤引致甲方的損失賠償。乙方應在收到書面通知時，7天內回覆並於一個月內賠償甲方全部損失，每逾期一日乙方應按逾期每日百份之三向甲方支付違約金額。

乙方違反甲方出具並不時修正的投資指引（若有）中的相關規定，視為重大違約。

E. The current set of pleadings

29.  The Writ was taken out on 15 August 2016.

30.  The current set of pleadings comprises:

(a) P’s RRASoC (“SoC”, “ASoC” and “RASoC” for the earlier versions as appropriate);

(b) D’s Re-Amended Defence and Counterclaim (“RAD&CC”, and “D&CC” and “AD&CC” for the earlier versions as appropriate);

(c) D’s Further and Better Particulars of the Defence and Counterclaim; and

(d) P’s Amended Reply and Defence to Counterclaim (“AR&DCC”, and “R&DCC” for the original version as appropriate).

F. Annex A and Annex B

31.  The RRASoC has 2 Annexes, namely Annex A and Annex B (collectively the “2 Annexes”). I have mentioned them above.

32.  Annex A comprises a number of tables, each particularizing those listed shares in the Bright Smart Account which D handled under the Service Agreement (i.e. the Portfolio Shares) at month-ends between 31 March 2015 and 31 May 2016.

33.  In respect of Annex B:

(a) Annex B gives a more global picture of the Portfolio;

(b) It comprises 3 tables, particularizing in each:

(i) the “Shares Purchased”[24] (“Annex B/Purchases”), which sets out inter alia the purchase prices of the Portfolio Shares;

(ii) the “Shares Sold”[25] (i.e. Annex B/Sales), which sets out inter alia the prices at which the Portfolio Shares were subsequently sold; and

(iii) the “Dividends Received”[26] (“Annex B/Dividends”), which sets out the dividends that had been received from the Portfolio Shares;

(c) P’s case is therefore that Annex B, with appropriate calculations, particularizes his case on the following matters:

(i) the amount of the AUM which P had provided under the Service Agreement (the total on Annex B/Purchases), in the total sum of HK$206,750,119.33[27] (“AUM Total”);

(ii) the amount of the annual Guaranteed Profit, in the sum of HK$24,810,014.32 (HK$206,750,119.33 x 12%);

(iii) the total amount of the Guaranteed Profit due, in the sum of HK$28,945,016.71 (AUM Total x 0.12 ÷ 12 x 14 months)[28]; and

(iv) the total amount of losses (the total on Annex B/Purchases less the total on Annex B/Sales less the total on Annex B/Dividends), in the total sum of HK$55,371,911.65[29] (the “Total Loss”).

34.  The 2 Annexes were not admitted on the face of pleadings. Subsequently however, and as recorded above, parties state at §8 of the Statement of Agreed Facts that “Details of the investments made by D are agreed by the parties and set out in Annex A and B”.

35.  During the course of oral openings:

(a) This Court had the following exchange with Mr Yuen in relation to the effects of Annex B:

COURT: Annex B itself comprises three tables: the shares purchased, the shares sold and the dividend.

MR YUEN: Yes.

COURT: So that, by looking at, according to your case, as I understand it, so that merely by looking at the “Shares Purchased” part of annex B, and by looking at the grand total at the bottom, we know the amount of the injected asset under management.

MR YUEN: Yes.

COURT: That is where you got the figure.

MR YUEN: Yes. Basically, we look at it -- annex B --

COURT: It’s A minus B -- B purchase minus B sales minus B dividends, that becomes your loss.

MR YUEN: Yes.

COURT: We forget for the time being the guaranteed profit.

MR YUEN: Yes.

COURT: So that is the way you get the figure.

MR YUEN: Yes. We submit that although annex B is not done in exactly, say, the monthly way of annex A --

COURT: No.

MR YUEN: -- but this is what we can do.

(b) No dispute was raised by Mr Chan.

36.  I will come back to the 2 Annexes when I come to consider Agreed Issue #2 (which I will define below).

G. Parties’ pleaded cases

37.  I have introduced parties’ respective cases at §1 above. I provide some more details here.

38.  P’s pleaded case goes as follows:

(a) D had consistently held himself out as a professional expert in the field of investments, as being an experienced investment adviser and/or wealth management consultant, and as having extensive experience and expertise in trading, advising and consultancy services in the financial market and products;

(b) P and D had prior to the execution of the Service Agreement engaged in some 9 months of negotiations (the “Nine Months Negotiation”). During the process, D had consistently told and reassured P that he (D) was confident that he could achieve the 12% Profit Guarantee, and that he would be responsible for any shortfall in the event he failed to achieve the agreed rate;

(c) Upon execution of the Service Agreement and upon D’s engagement thereby, D owed P contractual (express and implied), tortuous and fiduciary duties to “exercise reasonable skill and care when discharging his roles and responsibilities under the Service Agreement (i.e. the degree of skill and care which was at the material time ordinarily exercised by reasonably competent members of the same profession or trade, who have the same level of experience and expertise as held out by [D]”[30];

(d) P further relies, “insofar as it is necessary”, on the provisions in the Fund Manager Code of Conduct (Second Edition) (“Fund Manager Code”) published by the Securities and Futures Commission in assessing the standards of reasonable skill and care expected of D[31];

(e) The duties which D owed P included the duty to exercise reasonable skill and care in the areas pleaded at §19E of the RRASoC, as follows:

(1) obtaining and implementing instructions from [P] (including, but not limited to, implementing [P’s] instructions within reasonable time or in any event as efficiently as might be possible in the circumstances);

(2) advising and/or recommending appropriate investments or financial products for the AUM, and in constructing the overall investment [Portfolio] for the AUM …, bearing in mind the terms and investment objectives as stated in the Service Agreement (especially clause 5(2) thereof) and the investment aims, risk appetite, expectations and understanding of financial and investment concepts of [P];

(3) diversifying appropriately the investments for the AUM including investment or financial products available in both Hong Kong and overseas markets as set out in clause 3 of the Service Agreement;[32]

(4) devising and/or putting in place appropriate investment strategies including, among others, the stop-loss measures to be implemented as and when the prices or values of the investments dropped or as and when the situation of the market required.

(f) D had acted in breach of the Service Agreement and failed to achieve the Profit Guarantee as undertaken by D under the Service Agreement[33];

(g) D had acted in breach of the Service Agreement, and/or its implied terms, and/or his tortuous duties, and/or his fiduciary duties, in that he had failed to, in particular[34]:

(i) engage and maintain a team of staff with the requisite experience and expertise (the “Alleged §23(1) Breach”);

(ii) advise and seek written authorization from P before acquiring shares in the Portfolio (the “Alleged §23(2) Breach”);

(iii) provide appropriate and timely updates and/or written reports in relation to the investment strategy (the “Alleged §23(3) Breach”);

(iv) conduct appropriate analysis and/or provide any or any adequate or appropriate advice to P before acquisition and/or so as to devise an appropriately diversified Portfolio (the “Alleged §23(4) Breach”);

(v) properly consult with P to determine his investment aims, risk appetite, expectations and understanding (the “Alleged §23(4A) Breach”);

(vi) invest in both local and overseas financial products, and/or arrange or advise P to arrange sufficient diversification of the investment (the “Alleged §23(5) Breach”);

(vii) actively and effectively monitor the market and the performance of the Portfolio so as to make appropriate changes (the “Alleged §23(6) Breach”);

(viii) implement P’s instructions, in that D failed to liquidate the Small Price Shares (the “Alleged §23(7) Breach”);

(ix) devise and/or put in place effective stop-loss measures (the “Alleged §23(8) Breach”);

(x) liquidate loss-making positions and invest the proceeds in alternative investments (the “Alleged §23(9) Breach”, and collectively the “Alleged §23 Breaches”);

(h) Because of the breaches, P by the Termination Letter terminated the Service Agreement on 3 August 2016;

(i) Although the termination took place on 3 August 2016, parties agreed that 31 May 2016 (the date when D’s authorization to trade through the Bright Smart Account was terminated) shall be adopted for the calculation of any loss and damages;

(j) P is entitled to, calculated with reference to the 2 Annexes and as particularized in the RRASoC:

(i) Under §33 of the RRASoC, Guaranteed Profit for 14 months (from 1 April 2015 to 31 May 2016), in the sum of HK$28,945,016.71 (AUM Total x 0.12 x 14/12); and

(ii) “Further”, under §33A of the RRASoC, the Total Loss, in the sum of HK$55,371,911.65;

(k) P then at §§33AB and 33B, with reference to P/Exp Report (as defined below), pleads as follows:

33AB. Further and/or alternatively:

(1) … [D] ought to have arranged for, and/or advised [P] to arrange for investments of the Portfolio in at least Hong Kong/China and US equities, and US AAA Corporate Bonds. Had [D] done so, the net loss for the AUM would have been reduced, or alternatively reduced to HK$9,310,295.

(2) … Had [D] implemented [P’s] instructions to liquidate the Small Price Shares with due reasonable skill and care and within reasonable time, the net loss for the AUM would have been reduced, or alternatively reduced by HK$1,423,583.

(3) … Had [D] implemented appropriate stop-loss measures, the net loss for the AMU would have been reduced. In particular, the net loss would have been reduced to HK$38,410,257 (if a 10% stop-loss percentage is adopted); or still alternatively reduced to HK$34,762,631 (if a 15% stop-loss percentage is adopted).

33B. By reason of the matters pleaded herein, [P] was entitled to recover the aforesaid losses (or such other amount as this Court may think fit) by way of: (1) damages for breach of the Service Agreement … and/or breach of the Tortious Duty of Care; or (2) as equitable compensation for the aforesaid breach of Fiduciary Duty of Care.

(l) The following prayer is then pleaded:

(1) Loss on Investment of HK$55,371,911.65 or alternatively, such other sum as this Court may think fit;

(2) Loss of the guaranteed Profits (for the period from 1st April 2015 to 31st May 2016 @12% p.a.) for HK$28,945,016.71;

(3) Service Fees Paid to [D] (for the period from 1st April 2015 to 30th September 2015 for HK$800,000.00);

(4) Alternatively, damages and/or equitable compensation as pleaded above;

…

39.  In respect of P’s case, I note and record the following:

(a) P’s claim based on alleged breach of fiduciary duties:

(i) P has pleaded breach of fiduciary duties on D’s part and seeks on that basis equitable compensation;

(ii) Whilst that is part of P’s pleaded case, Mr Yuen in his written closing[35] informs this Court that P, while not formally abandoning the same, will not trouble this Court with his case on fiduciary duty, and will not invite this Court to rule on any issues or disputes concerning his pleas of fiduciary duty and incidental matters;

(iii) Mr Yuen confirmed P’s stance in the course of his oral closing. Specifically, he informed this Court that:

For the purpose of the eventual determination by this court, what we would submit is I think this court can simply note in the judgment that in the pleadings the plaintiff had made references to or relied on fiduciary duty but there is this indication in paragraph 115 and therefore no ruling or observations will be made insofar as any claim or any act or conduct was referred to or relied on by the plaintiff on the basis of fiduciary duty.

(iv) I note P’s stance, and hence will not make any ruling or observations on P’s claim on the basis of fiduciary duty;

(b) In respect of his claim for the Guaranteed Profit and Total Loss on the one hand, and damages for breach of duties on the other:

(i) As noted above, §33A of the RRASoC (for the Total Loss) is pleaded as being “further” to §33 (for the Guaranteed Profit);

(ii) §33AB is pleaded on a “Further and/or alternatively” basis;

(iii) The loss and damage pleaded at §33AB are in the nature of the loss that would have been reduced or avoided had D not been in breach. If P is to be successful in his claim for Guaranteed Profit and loss to the AUM, there would no longer be any basis for him to seek relief in relation to the loss which would have been avoided or reduced;

(iv) Indeed, as opened by Mr Yuen[36]:

In the event that this Court accepts P’s case on the Profit Guarantee, it would not be necessary to consider expert evidence on quantum. P would be entitled to claim the net loss of the AUM and the loss of the Profit Guarantee for a total amount of HK$ 84,316,928.36.

(v) In the course of oral closing, I invited Mr Yuen to clarify further in writing what, depending on the Court’s ruling on the different limbs of P’s claim, corresponding judgments P would be seeking. Mr Yuen subsequently lodged his “Explanatory Memorandum” (the “P/Explanatory Memo”) dated 31 July 2025. At §§1 to 3 thereof, Mr Yuen clarifies and confirms that:

1. This Explanatory Memorandum is filed pursuant to the directions of this Court made in the course of the parties’ oral closing submissions on 25 July 2025. Attached herewith are the following drafts:

(1) Annex A: draft Judgment on the basis of the Profit Guarantee.

(2) Annexes B, C and D: respective versions of draft Judgment on the basis of damages (3 alternative scenarios)

2. P’s claims comprise of the Profit Guarantee claim and the breach of duty claim. If the Court upholds the Profit Guarantee claim, Annex A will be applicable (and the other drafts become irrelevant). If the Court only upholds the breach of duty claim, the relevance of Annexes B, C and D depends on this Court’s on damages.

A. Claim for Profit Guarantee (Annex A)

3. The amount of HK$84,316,928.36 is the amount (apart from interests) that should be awarded if this Court accepts P’s interpretation of the relevant provisions in the Service Agreement and upholds the claim for Profit Guarantee. This consists of (i) the losses incurred by the AUM; and (ii) the shortfall on the Profit Guarantee. See: P’s Closing §174.

40.  In respect of D’s case:

(a) D does not dispute the execution of the Service Agreement;

(b) D admits that he was obliged to exercise reasonable skill and care when discharging his roles and responsibilities under the Service Agreement[37], but he

(i) denies any breach on his part;

(ii) denies the existence of any fiduciary relationship between him and P[38];

(iii) denies that he had acted as a fund manager, so that the Fund Manager Code is irrelevant[39];

(iv) denies the particular duties pleaded by P at §19E of the RRASoC, and specifically denies that he was under any duty to diversify the investments for the AUM;

(c) In respect of the Profit Guarantee:

(i) He denies the existence of any Profit Guarantee;

(ii) He denies having assured P that he (D) would be responsible for any shortfall;

(iii) He disputes P’s interpretation of the Service Agreement. He avers that[40]:

… pursuant to Clause 7(1)(1) of the Service Agreement, if the Portfolio was not making a profit of 12% per year, [D] was entitled to make up for the difference (追回) by making further investments within the term of the Service Agreement. As such, it was not a term under the Service Agreement that [D] had to achieve an annual return at the rate of 12% nor was it a breach on [D’s] part if the annual return was lower than the rate of 12%. Further and/or alternatively, it is averred that the rate of 12% only represented the Target Return Rate, which was used as a hurdle to determine whether [D] would be entitled to an extra performance fee under Clause 7(1)(2.1) under the Service Agreement …, as opposed to being a rate of which any shortfall would be indemnified by [D].

(d) He avers that the termination by P on 3 August 2016 via the Termination Letter was a wrongful one, such that he was deprived of the “entitlement to continue to invest pursuant to the Service Agreement”, and that “[P] had not allowed time for [D] to prove the quality of the investment advice given”[41]. He pleads[42] that in the circumstances:

(1) [P] repudiatorily breached the Service Agreement;

(2) The alleged loss of [P] (if any, which is not admitted) was not caused by any breach (which is denied) on the part of [D], whether contractual, tortuously, or in a fiduciary relationship (existence of which is not admitted) …

(3) Without prejudice to the aforesaid, further and/or alternatively, [P’s] breach of the Services Agreement, breach of duty and/or negligence contributed to the alleged loss (if any, which is not admitted), and [D] is entitled to diminish his liability accordingly; and

(4) Without prejudice to the aforesaid, further and/or alternatively, [P] failed to mitigate his alleged loss (if any, which is not admitted).

(e) He avers further[43] that the alleged losses suffered by [P] “matched with the fall of the general market since June 2015”, and that “[as] pleaded, the investment of [P] was meant to be a long term investment, and that is the reason why the term of the Service Agreement is 10 years. When the general market fell, [P] did not give any chance to [D] to recover the losses when the market comes up again.”

(f) D further pleads[44] that he and P on 6 June 2016 reached an oral agreement (the “Oral Agreement”), that:

… during the meeting on 6^th June 2016, the parties orally agreed (“the Oral Agreement”) and [P] represented to [D] that [D] would be allowed to make further investments for 2 more years in order to mitigate the floating losses and/or to make up for the difference with the Target Return Rate. In other words, the original term of the Service Agreement was reduced to only 2 years after 6^th June 2016, and [D’s] entitlement to the original longer period of time to make up for the difference in further investments was also reduced accordingly. It is averred that there was an implied term of the Oral Agreement that [P] forbore his rights to sue against [D] for 2 years thereafter for any alleged breach … on the part of [D] up to the date of the Oral Agreement …

He says hence that the Writ of Summons (which was as mentioned above issued on 15 August 2016) was issued prematurely, and/or that P was estopped from claiming against D for any of the alleged breach;

(g) D makes a Counterclaim for HK$800,000 of unpaid management fee, and for further damages to be assessed;

(h) Pursuant to the invitations I gave in the course of oral closing, Mr Chan also on 31 July 2025 lodged his explanatory notes (“D/Explanatory Memo”) on the judgments which D would invite this Court to make if his Counterclaim is to be successful.

41.  P joins issue with D:

(a) He denies the existence of the Oral Agreement. He refers to a meeting on 6 June 2016 between him and D. He pleads that D during that meeting “asked for 3 years’ time to compensate the losses suffered by the Portfolio. [P] refused and told [D] that he would only accept a timetable of two years”, and that the “parties agreed that a further supplemental agreement (“Supplemental Agreement”) would be signed to record [D’s] liability to [P]”. After some further communication, the Supplemental Agreement was drafted. The draft provided inter alia that D would by 31 May 2019 repay in 3 instalments the losses together with 12% annual profits. The draft was provided to D on about 15 July 2016. On about 18 July 2016, P by WeChat informed D that unless a reply in relation to the Supplemental Agreement was received within 7 days, P would take legal action. The Supplemental Agreement was not signed;

(b) P pleads[45] further or alternatively that even if he had represented to D that D would be allowed to make investments for 2 more years as alleged:

(i) The representation was not clear and unequivocal, not intended to be relied upon, and hence incapable of giving rise to any forbearance or estoppel;

(ii) Detrimental reliance is denied;

(iii) Reasonable notice had in any event been given by P so that he was entitled to resile from the forbearance; and/or that

(iv) No legally binding agreement had been reached;

(c) P denies that his termination of the Service Agreement was wrongful;

(d) P denies D’s Counterclaim.

H. The witnesses

H.1. Factual witnesses

42.  As factual witnesses:

(a) P has called:

(i) himself, who has given 2 witness statements (“P/WS#1” and “P/WS#2”)[46];

(ii) Ms Chan Ngar Chi (“NC Chan”). She was P’s personal assistant. She has given 2 witness statements (“NC Chan/WS#1” and “NC Chan/WS#2”)[47]; and

(iii) Terry, who has given 1 witness statement (“Terry/WS”)[48];

(b) D has called only himself. He has given 2 witness statements (“D/WS#1” and “D/WS#2”)[49].

H.2. Expert witnesses

43.  In relation to expert evidence:

(a) Leave has been granted to parties to adduce expert evidence on the following 8 issues (“Expert Issues #1” to “Expert Issues #8” respectively, and collectively the “Expert Issues”)[50]:

Liability

(1) As a matter of general practice and with reference to the [Service Agreement] pleaded in paragraph 8 and the alleged duties as pleaded in paragraph 19E of the [ASoC], what would be:

(a) the relevant factors and/or considerations that should be taken into account; and

(b) the appropriate steps that should be taken, by a reasonably competent asset management consultant[51] with the expertise as held out by [D] (i.e. as particularized in paragraph 2 of the ASoC) for the purpose of constructing as well as managing an investment portfolio for a client in the position of [P], and in discharging his duties under the Service Agreement from March 2015 to 31 May 2016 (“Relevant Period”).

(2) With reference to the Service Agreement, whether a [RCAMC] with the experience as held out by [D],

(a) is under a duty to diversify the Portfolio (as stated in Annex A of the ASoC); and

(b) if so, whether a [RCAMC] would deal with or arrange (or advise [P] to deal with or arrange) investments in shares listed in the Hong Kong Stock Exchange during the Relevant Period.

(3) Whether a [RCAMC] with the experience as held out by [D] would, during the Relevant Period, would [sic.] advise [P] in the manner as stated in §20J of the ASoC; considered in conjunction with §13J of the [AD&CC].

(4) What considerations a [RCAMC] with the experience as held out by [D] in selling or liquidating (or advising [P] to sell or liquidate) a particular share during the Relevant Period, would take into account; and whether he should take into consideration the liquidity, the then market prices of the relevant share, and whether the target price, if any, could be reached.

(5) Whether a [RCAMC] with the experience as held out by [D], after taking into account the considerations stated in (4), would act as [D] allegedly did in relation to the liquidation of the “Small Price Shares” as stated in paragraph 20K of the ASoC during the Relevant Period.

(6) Whether a [RCAMC] with the experience as held out by [D] is under a duty to implement stop-loss measures. If so, what are the relevant factors and/or considerations that should be taken into account by such reasonable asset management consultant in [D’s] position in designing, implementing and executing the stop-loss measures.

(7) Based on the experts’ opinion in (6), whether a [RCAMC] would necessarily implement stop-loss measures different from those acts of [D] in discharging his duties under the Service Agreement during the Relevant Period.

Causation and Quantum

(8) By reference to the opinion expressed in respect of issues (2)-(7) above, what were [P’s] loss and damage had [D] exercised reasonable skill and care in discharging his duties under the Service Agreement during the Relevant Period.

(b) As is obvious from the Expert Issues, they are relevant to both liability and quantum;

(c) Parties have each called one expert;

(d) P’s expert is Mr Alan Wong Ngai Lun (“P/Expert” or “Alan Wong”). He is a managing director of Deloitte Advisory (Hong Kong) Limited. He has prepared a report dated 5 July 2021 (“P/Exp Report”);

(e) D’s expert is Mr Michael Wong Chak Sham (“D/Expert” or “Michael Wong”). He is an Associate Professor of the College of Business of City University of Hong Kong. He has prepared a report dated 30 June 2021 (“D/Exp Report”);

(f) P/Expert and D/Expert have together prepared a Joint Expert Statement dated 23 September 2021 (“Joint Statement”).

I. Credibility of the witnesses

44.  The majority of the issues do not turn on the issue of credibility. I have nonetheless considered the same, as follows.

45.  On the considerations when assessing credibility and reliability, I have been cited a number of cases, which include Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513, §53, Macau First Universal International Ltd v Ding Xiao Hong (HCA 992/2010, 20 August 2014) at §§48-49, Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (HCA 1957/2005, 28 July 2011) at §§12-21, and Lam Rogerio Sou Fung v Tan Soon Gin George (HCA 2576/2005, 5 May 2011) at §§34-35 and 39-41. I have considered them. They are not controversial.

I.1. Factual witnesses

46.  In respect of P:

(a) I have considered P’s evidence holistically:

(b) He was cross-examined extensively on various matters. The topics included his business, his investment experience, whether he had invested in any licensed money-lender[52], whether he had heard of the English name of Joint Faith Finance Limited [53](“Joint Faith”), the negotiation of the Service Agreement, the terms of the Proposals, the terms of the Service Agreement and in particular the effects of the Profit Guarantee, his reaction to D’s purchase of the Small Price Shares, whether they were purchased with his consent (in the context of Mr Chan’s suggestions that they were, that P fabricated the alleged related complaints to D, and that P used D as the scapegoat ), whether P had refused D’s request to hire a team to assist in the performance of the Service Agreement, NC Chan’s role in the preparation of reports, the various reports (WeChat in particular) that D had prepared and made available to P, and the Oral Agreement;

(c) To the various lines of cross-examination, P consistently maintained as follows (in gist and summary). He stressed that without the Profit Guarantee, he would not have entered into the Service Agreement, that D purchased inter alia[54] the Small Price Shares without his prior notice or consent, that D failed to sell the Small Price Shares despite requests, that D just kept giving empty advices without executing them, and that whilst P himself had the requisite access to the Bright Smart Account to sell them, he did not have the expertise to do so, and that he in any event should not be held responsible for cleaning up D’s mess for him. P said that under the Service Agreement, D had a substantial remuneration. P should not be the one doing all the work, even though he had the final say on the investments. He said that at the early stage, he still trusted D given the explanations he gave him and given his most impressive CV. But soon in about July 2015, he became disappointed and asked Terry to follow up on D’s performance of the Service Agreement;

(d) I have considered Mr Chan’s criticisms against P’s credibility[55]. I do not accept Mr Chan’s submissions that P gave bizarre answers on issues of general credibility. I bear in mind that he was asked to recount events that took place some 10 years ago. I bear in mind also his lack of English ability, which would bear upon his answers in respect of the name Joint Faith;

(e) In all, I find P’s evidence to be overall inherently probable, does not have any material inconsistency, whether internal or external, and is in general materially consistent with contemporaneous documents and conduct. He also gave his evidence in a spontaneous manner;

(f) Overall, I find P to be an honest and reliable witness.

47.  In respect of NC Chan and Terry:

(a) Whilst Mr Chan did cross-examine them, he did not seriously challenge their credibility and reliability;

(b) I have considered the totality of their evidence. Their evidence is inherently probable. There is no inconsistency, internal or external. They gave evidence in a spontaneous and straightforward manner;

(c) I find both of them to be honest and reliable witnesses.

48.  In respect of D:

(a) D’s evidence on a number of the main issues are inherently improbable and conflicting. Below are the prime examples;

(b) On the question of Guaranteed Profit:

(i) At §12 of D/WS#1, D claims that:

After I had presented my idea for several times, I realised that Mr. Yeung was trying to test and review my investment strategy and advice. It seemed that he was quite impressed with my proposal. In the beginning of 2015, he even proposed to set the investment amount to be HK$200 million and the target return rate to be 12% (the “Target Return Rate”).

(ii) That is clearly incorrect. The 12% Bullet Point first appeared in printed form on Proposal v.1.0. That shows clearly that the question of Guaranteed Profit had been discussed even before D’s preparation of Proposal v.1.0;

(c) D’s oral evidence otherwise in relation to their discussion on the Guaranteed Profit is in any event inherently improbable. He said under cross-examination that during their discussion of Proposal v.1.0, P requested guaranteed return of 12%. He said that he did not answer right away, and went away to consider whether that could be done. He said that he then considered a certain property project in Brazil. He thought that that could be done. But none of those, nor his consideration of the Brazilian project, is in his witness statements. In any event, the Brazilian project was only a one-off project for 3 years, and according to the Proposals, only 20% of the Portfolio would be overseas properties and bank projects;

(d) As to the discussion in relation to P’s request and insertion of the words “保証” in Proposal v.2.0, and the circumstances in which the Service Agreement ultimately came to be signed, D’s evidence was evasive, inherently most improbable, and inconsistent with contemporaneous correspondence:

(i) He claimed during cross-examination that the meaning of “保証” was not clear, and there was no consensus between P and him. He claimed during cross-examination that:

我諗百分之十二本身其實仲有好多細節喺度，當中點解喺後邊你見到有「保證」，跟住來來回回有好多唔同嘅version，因為就係大家就住呢個“12%”呢個字眼確立咗，但係12%背後做到咩嘢程度，其實當中大家都未定。所以有咗三個唔同嘅建議書，其實我哋原先係諗住再傾落去嘅，但係楊先生話唔好再嘥時間嘞，傾落去都係咁嘞，就不如等合約出嚟之後，就住合約呢個嘅終極版本就再作相關嘅磋商。

…

袁大狀，我都係想--我明白，其實我喺簽呢份--喺預備呢份建議書嘅時候，去保證呢個條款，係真係未有雙方攞到個共識嘅。跟住我哋係期待住第三份建議書係繼續去傾，再溝通落去，但係冇再傾，因為呢份建議書楊先生話唔好傾住，等佢再整咗個合約時候，係以番個合約，然後根據合約，坦白講我真係冇太多時間去睇，而我因為要因應住楊先生話簽番先，追番上去先喇，就簽咗呢個協議書，所以最終我就以番合約本身嘅協議書嗰個保證嗰定義去執行番我以後嘅事務。

…

我諗個顧問協議--我明你嘅意思，個顧問協議確有傾過，但係喺建議書之後嘅話，其實我哋準備係再傾番嗰個建議書嗰啲相關嘅細節。但係如果我唔記錯嘅話，去到呢個嘅建議書嘅時候嘅話，楊先生就話不如定咗先，等睇晒相關嘅嘢之後再出一個稿件再傾，我嘅意思理解就係咁樣。

(ii) To start with, none of the above is in his witness statements;

(iii) What he claimed in any event raise the obvious question as to why he was nonetheless willing to sign the Service Agreement with terms and clauses like “保證每年回報”, “承諾的年化收益率”, Clause 7(一)1 and the 補回或追回Provisions;

(iv) No doubt with the view of attempting to explain why he nonetheless signed the Service Agreement, he claimed repeatedly during cross-examination that he was busy at the time, that he was flying around, and he was hence reading slowly. He further claims in D/WS#1 at §15 that:

Shortly after I started providing consultancy service, Mr. Yeung proposed that we should sign a formal consultancy agreement for our cooperation. He told me that he would ask his lawyers to draft the agreement and, eventually, in around June 2015 Mr. Yeung’s lawyers emailed me a draft copy of a consultancy service agreement. I only had chance to make a few amendments to the draft during a discussion with Mr. Yeung. Thereafter, his lawyers sent me an execution copy, but I did not have a chance to read through the final version before signing on it.

(v) To start with, what he claims at §15 of D/WS#1 that he only “eventually” received the draft Service Agreement in around June 2015 is inconsistent with contemporaneous correspondence. According to an email dated 26 March 2015[56], a draft of the Service Agreement was actually sent to him on that day. The Service Agreement was signed on 19 June 2015[57]. He had had close to 3 months to study it, to seek clarifications had he wanted to, and to engage in further discussion had he thought it necessary. He did not do any of those. He signed the Service Agreement;

(vi) Further, it is in my view inherently most unlikely that D would have signed the Service Agreement without having studied it carefully:

(1) The Service Agreement was important to him financially. The remuneration which he would receive under it was higher than his remuneration from Qilu. The Service Agreement was also intended to run for 10 years;

(2) As a professional of his experience, it is inherently most unlikely that he would have signed the Service Agreement when there were terms in it which meaning he thought and claimed were unclear and undefined. That was particularly so given the presence of terms and clauses like “保證每年回報”, “承諾的年化收益率”, Clause 7(一)1 and the 補回或追回Provisions;

(e) On the question of choice of investment and diversification:

(i) He says at §§17 and 18 of D/WS#1 that:

17. I would also like to draw this Honourable Court’s attention to the fact that, although Recital 3 of the Service Agreement states that Mr. Yeung intended to engage me to assist him to make investment in stocks bonds, funds, gold, cruel oil and precious metals, the only item which Mr. Yeung had sought my assistance on, and therefore I was responsible for in the course of the Service Agreement, was the Hong Kong stocks.

18. In fact, it was the only investment vehicle that we had been discussed all along. Also, Mr. Yeung only gave me the Trading Account to make investment on his behalf, which only allowed me to trade in the Hong Kong stock market, and he injected all such sum of HK$200m into the Trading Account. Mr. Yeung had never asked me to assist him to make investment in other fields. Instead, Mr. Yeung had only sought to ask for my assistance in relation to his investment in the Hong Kong stock market. Nevertheless, I have also advised Mr. Yeung to invest in Pre-IPO opportunities, but it was Mr. Yeung who decided not to do so.

(ii) To start with, there were certainly references to investment products other than Hong Kong stocks in the Proposals. The Trading Account also allowed the trading of Hong Kong and US stocks;

(iii) His explanations therein for purchasing only Hong Kong stocks were also inconsistent with the explanations he gave in Court, as summarised by the following question and answer:

Q. 係，而係因為頭先你嘅解釋，即係頭先啱啱响庭上你畀我哋嘅解釋，包括時間好緊急呀呢啲，或者係3月、4月、5月已經大部分嘅資金都買晒落港股嘞，因此因為呢個原因就冇再向呢個美股或者其他海外嘅投資產品係作投資，咁樣講啱唔啱呀？

A. 係嘅。

(f) As to why he did not explain to P his investment strategy when building up the Portfolio, D claimed under cross-examination that he was required to create the portfolio within a short time, as P called him in about May 2015 and said that he (D) was doing it too slowly, that P wanted him to do it faster, “所以我就喺5月嘅時候做得比較快，去將呢個組合好快咁完成”. That alleged request by P is, in the context of P’s claim, obviously an important one. But D has never mentioned it in his witness statements. Nor is its existence reflected in any contemporaneous documents;

(g) His evidence on the Oral Agreement is also inconsistent and inherently improbable. I will deal with that further when I consider Agreed Issues #7 and #8;

(h) There are also divers matters which I will discuss below when I come to the Agreed Issues;

(i) I warn myself that mistakes or lies by a witness in specific areas do not necessarily mean that the entirety of that witness’s evidence is to be rejected. However, having considered the entirety of D’s evidence, I am of the view that the extent of all the matters highlighted above reflects adversely on D’s overall credibility and reliability as a witness.

49.  For the above reasons, I find that D is neither an honest nor reliable witness. Unless supported by contemporaneous documents or established facts, I do not accept D’s evidence, and prefer the testimonies of P, Terry and NC Chan to his.

I.2. Expert’s evidence and reliability

50.  In respect of P/Expert:

(a) Alan Wong had by the time of his evidence some twenty years’ experience in advising clients on the financial aspects of investments, including the management of private equity investments. He is, amongst other, a fellow member of the Hong Kong Institute of Certified Public Accountants, a fellow of the Hong Kong Securities Institute and a Certified Deal Maker in Mainland China. I have also considered his curriculum vitae. I find him to be highly experienced in the matters which he is engaged to testify on;

(b) He has no conflict of interest. This issue of conflict has some special relevance in this case, which I will return to when I consider the position of D/Expert;

(c) His analysis on various issues is reasoned, and is supported by what appear to be relevant materials and appropriate methodologies;

(d) I find him to be an honest and reliable expert witness who has endeavoured to assist the Court in an impartial manner.

51.  D/Expert:

(a) I am prepared to accept that D/Expert is an honest witness. However, there are areas of his approach and evidence that cause this Court significant concern, as follows;

(b) This is the first case in which he appeared as an expert in court. That by itself should not necessarily affect the weight of his opinions. There are however matters which suggest that he may not be totally conversant with his duties as an expert:

(i) He first knew D some 20 years ago when D was engaged to give some talks at City University. Later, D was engaged to teach an undergraduate course. He and D had in fact jointly wrote a paper in about 2004 or 2005. D is now an adjunct professor of the EMBA Programme of which D/Expert is the director;

(ii) I am inclined to accept D/Expert’s evidence that the acquaintance has not affected the opinions he has given. But such acquaintance in my view ought to have been revealed in his report;

(iii) In both D/Exp Report and the Joint Statement, D/Expert offered and volunteered his views on the interpretation of the Service Agreement in relation to the Profit Guarantee, and did so despite knowledge that P/Expert was of the view that it is a matter for the Court, and that it is inappropriate for experts to express their views on the issue[58];

(iv) D/Expert felt able to draw factual inferences, when such matters are for the Court. I will say something more about this latter;

(c) On Expert Issues #1:

(i) In the Joint Statement, the Experts express their agreement[59] that:

… when advising [P], a RCAMC such as [D] should consider the investment’s objectives and expectations, the sophistication and the risk appetite of [D] against the suitability of various assets (including their type, their inherent risk, their degree of diversification).

(ii) That however is to be contrasted with what D/Expert has said at §17 of D/Exp Report, that:

If YEUNG approaches a professional wealth advisor, the professional wealth advisor should consider YEUNG's investment experiences and objectives in providing suitable advice. As mentioned in [P/WS#1 §§3 & 4], YEUNG started working in 1968, running his own business in 1991 and trading stocks in 2004. His business experiences mainly concentrated in the Mainland China region and the Hong Kong region. These imply that YEUNG should be aware of stock investment risk and general business risk of listed companies. YEUNG does not have any investment experience in bonds, structured financial products, and complex derivatives. It is prudent for the professional wealth advisor, as a kind of RCAMC, to recommend stocks to YEUNG. In addition, YEUNG says in his witness statement (Paragraph 2) that he is able to read and write Chinese and is not proficient in English. This suggests that YEUNG tends to be more suitable with stocks which have Chinese information written on them. Many foreign stocks do not have relevant Chinese information.

(iii) As accepted by D/Expert in the course of cross-examination, he is there seeking to make an inference of facts. That is not for him;

(iv) In any event, his approach is flawed. The primary facts in my view do not support the inference (or implication) which D/Expert has drawn. Further, an investor’s knowledge about investment products may be limited. His language ability may also be limited. But that may be the very reason why he seeks consultancy from professionals. It would defeat the very purpose of the investor seeking professional consultancy if the professional is to say that because of the investor’s limitations, it is more appropriate to recommend to him only products which he is familiar with and the documentation of which more in the language he knows;

(v) D/Expert’s views on Expert Issues #1 are indeed affected by the above flaws. At §18 that immediately follows, he says:

The above background information about YEUNG should be the basis for the professional wealth advisor as a RCAMC to identify assets suitable for YEUNG. Stocks listed on Hong Kong exchange, which are mostly related to Hong Kong and China Mainland business and have their company information written in Chinese, should be suitable for YEUNG.

(vi) There is no evidence that D had done any know-your-client exercise with P, nor any evidence that D had ascertained P’s “objectives and expectations, the sophistication and the risk appetite”. Despite that, D/Expert finds it appropriate to express the opinion that the “above background information”, which he has purportedly gathered as a matter of inference, “should be the basis … to identify assets suitable for” P[60];

(vii) I find D/Expert’s opinion in this regard illogical and self-contradictory;

(viii) D/Expert says at §3.1 of the Joint Statement that:

In his opinion, low risk assets, such as high-quality bonds and bank deposits, would provide stable returns but would be unable to achieve a target return of 12% per year. Stocks with high growth prospect would have higher chance to achieve 12% return per year.

Therefore, the stock portfolio which the Defendant recommended to the Plaintiff matched the Plaintiff's experiences and expectations.

(ix) There is however no basis to suggest that the Small Price Shares were necessarily stocks with high growth prospect;

(d) In relation to the Profit Guarantee:

(i) I have touched on this above;

(ii) At §24 of D/Exp Report, D/Expert says:

In the Services Agreement, there was a term “Guaranteed Return of 12%”. This “guaranteed return of 12%” is in fact a target return used to calculate [D’s] performance bonus. This target return is also YEUNG's investment objective that a RCAMC should consider in selecting assets for YEUNG. The RCAMC should not consider assets or investment strategies with less probability to achieve this target return.

(iii) What D/Expert has done is that he considers “guaranteed funds”, certain publications of the Investor and Financial Education Council under the Securities and Futures Commission, and certain regulatory standards in Hong Kong. He opines that “[t]hese standards are industry standards. Whether these standards should be applied to [D] is arguable because [D] was not a regulated person under the Services Agreement.”[61] In doing so, D/Expert misses the point that the scope of the Profit Guarantee is not so much industry standards, but a question of interpretation of the Service Agreement, which is a matter for this Court;

(iv) Because of his views, he finds himself able to in effect conclude at §81 of D/Exp Report that:

The Services agreement did mention “guarantee return”. However, its context in the agreement was like as a TARGET RETUN to determine bonus YEUNG gave [D]. The agreement did not require [D] to compensate YEUNG if this target was not achieved.

(v) Further, because of (at least partly because of) those views of his, he feels appropriate not to give opinion on the question of quantum (Expert Issues #8) because he “considers that [D] cannot be held liable for the loss claimed by [P]”, such that he “therefore does not provide any estimate of the losses suffered by [P] as a result of [D’s] behavior”[62];

(vi) I find D/Expert’s opinion in this regard outwith his engagement and expertise, and is in any event far from convincing;

(e) On the Duty to diversify:

(i) On the question of diversification, the experts are able to agree that “a reasonable asset management consultant should consider is diversification, in that it helps reduce the investment risk associated with a portfolio, and that a RCAMC such as [D] should recommend a diversified portfolio to [P] to mitigate his risk and achieve his return target”[63];

(ii) Whilst accepting that, D/Expert is of the view that diversification may be achieved by the quantity of the invested shares, and the sectors in which they are in, such that the Portfolio “should be considered diversified”[64];

(iii) However, in the course of cross-examination, D/Expert accepts that in D/Exp Report, he has not dealt with the value of the shares in the Portfolio, and that in fact, and as pointed out by P/Expert, 73.10% of the total purchase costs of the Portfolio were spent on shares in the industry classification of “financials”, and that 74.15% of the total purchase costs of the Portfolio were spent on 3 shares;

(iv) In the light of the provisions in the Service Agreement, the capability of conducting US stock trades via the Trading Account, and the restricted analysis carried out by D/Expert, I find his opinion that the Portfolio “should be considered diversified” neither substantiated nor justified, which I do not accept;

(f) In additional to the matters highlighted above, there are other areas of D/Expert’s evidence which have caused me concern. I will deal with them as appropriate later.

52.  Overall, I find the evidence of P/Expert to be much more professional, convincing and reliable. In cases of conflict, unless there are specific reasons to the contrary, I prefer the evidence and opinions of P/Expert.

J. Agreed Issue #1

53.  The parties have agreed upon a list of issues (“Agreed Issue #1” to “Agreed Issue #8”). I will consider them below.

54.  Agreed Issue #1 concerns the terms of the Service Agreement. It is in the following terms:

1. What is the proper interpretation of the relevant provisions contained in the Service Agreement concerning the 12% Profit Guarantee (including, but not limited to, the definitions of “guaranteed annual return” and “promised annual return percentage” under Clause 1 as well as the provisions in Clauses 5(1)(6[65]), 7 and 8)? Specifically:

(1) did D undertake to achieve no less than 12% profits on a yearly basis, and that he would make up the shortfall between the amount of 12% profit and the actual amount of profit?

or

(2) whether pursuant to Clause 7(1)(1) of the Service Agreement, if the Portfolio was making less than 12% profit per year, was D entitled to make up the difference (追回) by making further investments within the term of the Service Agreement?

or

(3) did the rate of 12% only represent the Target Return Rate, which was used to determine whether D would be entitled to an extra performance fee under Clause 7(1)(2.1) of the Service Agreement (as opposed to being a rate of which any shortfall would be indemnified by D)?

J.1. Parties’ respective cases

55.  At §§1(2) to (4) of his written closing, Mr Yuen summarises this aspect of P’s case as follows:

(2) On its proper interpretation (by taking into account its context and its language), the Service Agreement imposed a strict obligation on D to achieve an annual return of 12% (每年保證回報) (“Profit Guarantee”) on the AUM so as to protect P’s opportunity costs (機會成本).

(3) D’s contention that the Profit Guarantee was merely for D to “make up” (追回) any shortfall for the AUM without any obligation to compensate P flies in the face of the clear language of the Service Agreement and is also contrary to common and/or commercial sense.

(4) In any event, D’s “make up” contention is a red-herring. D’s alleged right (if any) to “make up” for the shortfall must be subject to P’s right to terminate the Service Agreement, and D does not appear to dispute this. Accordingly, upon the lawful termination of the Service Agreement by P on 3 August 2016, D’s alleged right (if any) to “make up” for the shortfall became wholly irrelevant and D is plainly liable to compensate P as provided for under the Service Agreement.

56.  On what Mr Yuen calls “D’s “make up’ contention”, Mr Yuen in the course of oral closing developed his case further. He submitted that upon D’s failure to meet the Profit Guarantee, what the Service Agreement imposed upon him was at best an obligation or duty to “make up”. It was not, as contended by Mr Chan on his behalf, an entitlement. He submitted that it was a quantum leap to try to elevate that obligation or duty to an entitlement so as to override P’s rights under the Service Agreement, including the right to terminate the same.

57.  In his written closing, Mr Chan summarises this aspect of D’s case as follows:

11. D avers that the term under the Service Agreement was not that D guaranteed a 12% profit on the AUM and he would indemnify the Plaintiff of the shortfall. Instead, 12% was a Target Return Rate, which was used to determine whether D would be entitled to an extra performance fee under the Service Agreement …

12. Further, the term of the Service Agreement was 10 years, meaning that the investments were meant to be long-term instead of short-term … Under the terms of the Service Agreement, D was entitled to make up the difference in profit return in a particular year by making/advising to make further investments within the term of the Service Agreement.

58.  In respect of Mr Chan’s written closing, I note and record the following:

(a) At §§68 and 69, Mr Chan submits as follows:

68. Therefore, on the one hand, it is true that the Portfolio did not achieve a 12% profit on a yearly basis from 1 April 2015 to 31 May 2016, on the other hand, it was not a guaranteed result. It could not have been a breach of D’s duties simply for failing to achieve a 12% rate of profit.

69. Further, the failure to achieve 12% profit was not caused by any breach of D’s duties. But for any alleged breach of D’s duties, due to the general 2015 Market Crash which happened in June and July 2015 …, August 2015 and January 2016 …, the Portfolio would not be able to attain 12% annual profit rate.

(b) During oral closing, I clarified with Mr Chan as to why, if this Court is against him on the interpretation issue, such that the Profit Guarantee was a contractual obligation, the issue of causation would come into play. Having reflected on the issue, Mr Chan informed this Court that he would no longer pursue §69.

J.2. General legal principles on interpretation

59.  Agreed Issue #1 is primarily one of contractual interpretation.

60.  I have been cited a number of authorities. They include Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279, p. 296, Arnold v Britton [2015] AC 1619, §15, Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, p. 771A-C; Norwich Union Life & Pensions v Linpac Mouldings Ltd [2010] 1 P&CR 218, §44, Napier Park European Credit Opportunities Fund Ltd v HarbourMaster Pro-Rata CLO 2 BV [2014] EWCA Civ 984, §33, Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487, §§42-46; Greens Nursery & Tree Planting Design Ltd v Secretary for Justice [2018] HKCFI 2558, §§65-70. They are not in dispute. I have considered and summarised them in Greens Nursery. I do not repeat them.

61.  I see however the need to remind myself of one matter which is of particular relevance to the existence (or otherwise) and scope of the Profit Guarantee, and which Mr Yuen has highlighted. In Platform Funding Ltd v Bank of Scotland plc [2009] QB 426 at §30, Moore-Bick LJ observed as follows:

… although there is a presumption that those who provide professional services normally do no more than undertake to exercise the degree of care and skill to be expected of a competent professional in the relevant field, there is nothing to prevent them from assuming an unqualified obligation in relation to particular aspects of their work. Whether a professional person has undertaken an unqualified obligation of any kind in any given case will depend on the terms of the contract under which he has agreed to provide his services.

The relevant principles and considerations are summarised in McMeel & Virgo on Financial Advice and Financial Products (3^rd edn.) at p. 296 as follows:

11.07 The traditional starting-point for a consideration of the standard of care at common law is the famous direction to the jury in Bolam v Friern Hospital Management Committee (a case of clinical negligence). McNair J provided the following guidance:

The test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill; it is well established law that it is sufficient he exercises the ordinary skill of an ordinary competent man exercising that particular art.

11.08 In Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners (a case concerning engineers), Lord Denning MR suggested:

Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case.

11.09 In exceptional cases, a warranty may be the consequence of the adviser’s words and conduct. Whether an adviser has made a warranty is a question for the interpretation of his acts and statements, from an objective perspective.

J.3. Pre-contractual negotiations

62.  There is, in the light of parties’ stances, one area of the law which in my view requires some discussion. It relates to the admissibility of the evidence on pre-contractual negotiations.

63.  Admissibility cannot be considered divorced from the purpose for which the evidence is adduced. Pre-contractual negotiations are admissible for the purpose of considering credibility. Counsel agreed on this.

64.  But if pre-contractual negotiations are adduced for the purpose of interpreting the agreement which the negotiations subsequently led to, caution has to be exercised:

(a) As Lord Hoffmann explained in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, at 912H – 913C:

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(b) As further explained by Lord Hoffmann NPJ in Jumbo King at 296H:

The court is not privy to the negotiation of the agreement – evidence of such negotiations is inadmissible – and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined.

(c) Both Mr Yuen and Mr Chan refer and rely in their different ways on the Nine Months Negotiation and the Proposals. In fact, in the course of oral opening, I specifically raised with Mr Chan the issue of admissibility of the Proposals for the purpose of interpreting the Service Agreement. He at that stage informed this Court that he had no objection to the same. Counsel also cross-examined extensively on the Nine Months Negotiation and the Proposals;

(d) In his written closing, Mr Chan on the issue makes the following submissions (the emphasis being Mr Chan’s):

33. In this regard, P firstly refers to a “Nine Months Negotiation” between around September 2014 and June 2015 prior to the execution of the Service Agreement and referred to 4 versions of Powerpoint proposals dated 24 November 2014 …, 5 December 2014 (2 versions) …, and 5 January 2015 … (“the 4 Proposals”).

34. In The Interpretation of Contracts, 8th Edn., by Sir Kim Lewison, at §§3.43-3.65 …, the learned author observes that:-

(1) Evidence of pre-contractual negotiations is not generally admissible to interpret the concluded written agreement.

(2) But evidence of pre-contractual negotiations is admissible to establish that a fact was known to both parties; to decide (in a consumer contract) whether a term has been individually negotiated; to determine which party put forward a particular term; and to elucidate the general object of the contract.

35. It is therefore for the limited purposes at the above (2), the 4 Proposals and other pre-contractual negotiations could be admitted and considered by the Court.

(e) In the course of oral closing, upon this Court’s invitation for clarifications, and after with respect some wavering, Mr Chan ultimately confirmed that he was inviting this Court to take into account the Nine Months Negotiation and the Proposals as part of the factual matrix for the purpose of construing the Service Agreement;

(f) Mr Yuen’s position had become more subtle. In the course of oral closing, he submitted that the interpretation he was contending for is supported by the clear wording of the Service Agreement. The background facts, including the Nine Months Negotiation and the Proposals could be used to test the conclusion, which he submitted support the same interpretation;

(g) In Investors Compensation, Lord Hoffmann noted the unclear boundary of the matters, but felt that that was not the occasion on which to explore them. Given counsel’s stances in the present case, and in the absence of submissions, I also do not feel that this is the appropriate case to canvass those boundaries. But when considering the Nine Months Negotiation and the Proposals, I will bear in mind the law as discussed above, and the limits to their use. In particular, I will confine their consideration to the purposes as counsel refer them for.

J.4. Application of the law to the facts and the terms of the service agreement

65.  In interpreting a contract, it does not matter whether the court starts off with the factual background, or with an examination of the language, so long as this Court balances the indications given by each – Eminent Investments at §45(a).

66.  I start off with the text of the Service Agreement.

67.  I recite the context. P’s case is that D had agreed to the Profit Guarantee. D’s case is that the 12% was only the Hurdle Rate to determine D’s entitlement to the performance bonus.

68.  I have considered the totality of the terms of the Service Agreement. I have set out the more relevant terms above.

69.  I am of the view that the text of the Service Agreement clearly does not support the contention that the 12% was only the Hurdle Rate, but clearly supports P’s case that D had agreed to the Profit Guarantee:

(a) There are 3 terms which are of particular importance in the context of the present discussion, being:

(i) “年化收益”,

(ii) “保證每年回報”, and

(iii) “承諾的年化收益率”;

(b) Parties’ choice of words is important. Words and terms like “保證” and “承諾” are chosen and used. They are ordinary terms which convey clear meanings;

(c) Parties’ decision to use the 2 different terms of “保證每年回報 ” and “承諾的年化收益率 ” is also highly relevant. Whilst the minimum “年化收益” of the “保證每年回報” and “承諾的年化收益率” are both contractually set at 12%, “保證每年回報” and “承諾的年化收益率 ” are differently defined, carry different meanings, connote different concepts, and are in the Service Agreement for different purposes;

(d) The term “保證每年回報” is employed in Clause 7(一)1. Failure to meet the same triggers the contractual obligations on D’s part as specified therein, i.e. “乙方須負責補回或追回保證每年回報之差額” under the 補回或追回Provisions;

(e) The different term “承諾的年化收益率 ” is specifically defined in Clause 1. As the definition makes clear, it “指乙方為獲得支付業績獎勵（即表現費），承諾甲方之資產應達到的最低收益比例”. Consistent with the definition, it is employed in Clause 7(一)2.1 for the purpose of determining D’s entitlement of the performance bonus;

(f) The above conveys to a reasonable person the clear and objective implications that (1) the parties deliberately chose to have and use 2 different terms for 2 different purposes and concepts, (2) “保證每年回報 ” was intended to be used to govern D’s contractual obligations under the 補回或追回Provisions if the threshold is not met, (3) while the “承諾的年化收益率” was intended to be the Hurdle Rate to determine D’s entitlement to the performance bonus;

(g) D’s contention that the Profit Guarantee was only the Hurdle Rate in my view erroneously conflates “保證每年回報” with “承諾的年化收益率”;

(h) D’s contention that the Profit Guarantee was only the Hurdle Rate is also:

(i) clearly inconsistent with Clause 5(一)6, that “乙方需就保證每年回報中負責甲方總投資額100%之12%回報責任 ” (emphasis added);

(ii) clearly inconsistent with Clause 7(一)2.1, that “乙方承諾甲方專戶資產每個順延年的年化收益為專戶初始資產金額的12%”;

(iii) not supported by the existence of the Retention Mechanism under Clause 7(一)2.1;

(i) In the following paragraphs, I address certain of Mr Chan’s specific submissions;

(j) The overall structure of the Service Agreement:

(i) Mr Chan submits[66] that “What P contends must have emerged from a literal interpretation of the words ‘保證每年回報’ or ‘承諾的年化收益率’ ”;

(ii) I do not agree. As I have discussed above, P’s case on the interpretation of the Service Agreement is not only supported by a literal interpretation of the words, but also how parties used them and the overall structure of the Service Agreement;

(iii) Mr Chan submits that “every instance where [those] phrases appeared, the sentences were describing how D’s management fee or performance fee shall be determined or why the AUM had to be limited”[67];

(iv) That submission however ignores the fact that Clause 5(一)6 is under the heading of “甲方的權利和義務 ”. I also accept Mr Yuen’s submissions[68] that Mr Chan’s contention in this regard is inconsistent with the clear language of the Service Agreement, and renders the term “保證每年回報 ” completely otiose;

(k) “Why not say it?”:

(i) Mr Chan submits[69] that if the terms are to be interpreted as P contends, “there is no reason why they are not spelt [sic.] clearly as such”, and that “there is a clear section setting out D’s duties at Clause [5(二)] (乙方的權利和義務) …, but it was completely silent on the alleged guarantee 12% profit”;

(ii) Those submissions do not take D far;

(iii) As I have discussed above, the Profit Guarantee has been clearly provided for in various parts of the Service Agreement, and D’s duties under Clause 5(二)1 clearly cover the Profit Guarantee;

(iv) Further, as commented upon in Lewison, The Interpretation of Contracts (8^th edn.) at §2.113:

13. WHY NOT SAY IT?

Since almost any dispute about the interpretation of a contract involves rival meanings, it is seldom helpful to ask why the parties did not adopt one of those rival meanings in their contract.

One question which is frequently posed for forensic effect is to ask: “if the parties meant that, why did they not say it?” It is, however, inherent in most disputes about the interpretation of a contract that the words in question are susceptible of more than one meaning. As Asplin LJ said in European Film Bonds AS v Lotus Holdings LLC:

“The question for the Court is what the contract entered into by the parties means, not whether it could have been better or differently expressed.”

Mance LJ explained in Dodson v Peter H Dodson Insurance Services:

“It is almost always possible to say after the event that the point could have been put beyond doubt, either way, by express words.”

If the words were clear, there would be no room for dispute.

In Charrington & Co v Wooder, Lord Dunedin said:

“I do not think it rests with either party to say to the other ‘If the meaning is as you contend, why did you not express it otherwise?’ Both contentions as to the true meaning can be expressed by a gloss. … If either of these glosses had been expressed there would be no possibility of dispute. It therefore comes back to the question, What is the true interpretation of the expression in the contract?”

(v) Those comments are exactly on point;

(l) Alleged absurdity:

(i) Mr Chan submits that[70]:

… the literal interpretation that D guaranteed for the 12% profit and undertook to compensate P for the shortfall would be absurd, because:-

(1) In that case, there is no further need for Clause 7 … to mention about D’s further investment in future years to “chase” back the shortfall. P’s interpretation contradicts with the terms of the Service Agreement.

(2) Under Clause 4 … or Clause [5(二)2] … of the Service Agreement, P has the final say (最終決定權) in investment decisions.

Mr Chan then postulates the scenarios of either P terminating the Service Agreement right from the beginning and forbidding D to make an investment, or declining every advice given by D and letting the cash sit there. He then submits:

It does not make any commercial common sense at all. As opposed to honouring freedom of contract, the absurdity created by P’s interpretation demonstrates that it was improbable the parties intended to create a term this way.

D submits that a guaranteed profit in an investment consultancy agreement will never be consistent with an absolute control or veto power of the investing party.

(ii) In the present regard, it is important to bear in mind §45(e) of Eminent Investments, wherein Ribeiro PJ and Lord Collins NPJ explained:

commercial common sense and surrounding circumstances should not be used to undervalue the importance of the language of the provision which is to be construed, and the mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one of the parties, is not a reason for departing from the natural language.

(iii) There is no absurdity. D had experience in asset management. There is no suggestion that achievement of the Guaranteed Profit was an impossibility. D was free to give the Profit Guarantee. He did sign the Service Agreement which contained clear terms which I have discussed above. He subsequently did not achieve the Guaranteed Profit. That might be so. But that is not a reason for departing from the clear and natural language of the Service Agreement;

(iv) If anything, the existence of the 補回或追回Provisions actually supports P’s case. As Mr Yuen has pointed out which I agree, “[t]o begin with, why would D have to chase back the shortfall if the 12% rate of return was not guaranteed in the first place”[71];

(v) That P had the final say under the Service Agreement is objectively perfectly reasonable, given the fact that he was the owner of the AUM. The scenarios Mr Chan has put forward are highly contrived, which objectively would not have been intended by the parties. They are, with respect, and borrowing Lord Hoffmann NPJ’s words in Jumbo King at 296H-I, more like the words or postulations of pedantic lawyers;

(vi) In any event, as Mr Yuen submits[72] which I accept, in approving or rejecting D’s proposals, P would be expected to exercise his discretion in good faith and not arbitrarily or capriciously[73], and D could be entitled to rely on the “prevention principle” to contend that any failure to achieve the Guaranteed Profit was prevented by P[74];

(m) D’s alternative case on contractual interpretation:

(i) I have set out above §12 of Mr Chan’s closing. He further puts forward D’s alternative case as follows[75]:

… alternatively, even if any of the said clauses is found to be creating a duty on D, the terms did not provide that D had to compensate P of the shortfall. Correctly interpreted, the terms provided a scenario in which D was entitled to make up the difference in profit return in a particular year by making/advising to make further investments in the coming years within the term of the Service Agreement.

(ii) D’s alternative case is based principally on the 10-year term of the Service Agreement, and the 補回或追回Provisions in Clause 7(一)1. It focuses upon the meaning and interpretation of those provisions. He also relies on his arguments on absurdity;

(iii) I have set out above §§1(3) and 1(4) of Mr Yuen’s written closing submissions. I have also summarised his oral elaborations made in the course of closing. The thrust of Mr Yuen’s submissions against this facet of D’s case is that it focuses solely on the term “追回”, and completely ignores the remaining provisions of the Service Agreement. He highlights the entire sentence “乙方須負責補回或追回保證每年回報之差額”, P’s entitlement to take profit each year under Clause 5(一), and P’s right to terminate under Clause 11. He submitted that upon D’s failure to meet the Profit Guarantee, what the Service Agreement imposed upon him was at best an obligation or duty to “make up”. It was not, as contended for by Mr Chan on his behalf, an entitlement. Mr Yuen further submitted that if D was entitled to make up for the shortfall by making further investments within a term of 10 years, this would mean that D would somehow be allowed to continue to invest on P’s behalf regardless of the performance of the Portfolio, and regardless of whether D was able to provide the Profit Guarantee each year. Mr Yuen further submits[76] that if D were right, he would be entitled to provide in aggregate a sum of profits equivalent to 10 years of 12% annual return by the end of the 10-year term, which would be contradictory to D’s promise to provide the “保證每年回報”;

(iv) Given the clear wording and structure of the Service Agreement as discussed above, I accept Mr Yuen’s submissions summarised above. D’s alternative case is inconsistent with the wording of the Service Agreement and the profit taking mechanism provided therein. Upon D’s failure to meet the Profit Guarantee, what the Service Agreement imposed upon him was at best an obligation or duty to “make up”. It was not a contractual right or entitlement. It could not have the effect of overriding any contractual right which P had under the Service Agreement. In particular, it could not have the effect of overriding P’s contractual right to terminate the Service Agreement in accordance with its terms. It would be absurd to suggest that irrespective of D’s performance, he could have 10 years to make up for the shortfall, and P could not dismiss him in the meantime. Objectively, on the wordings and structure of the Service Agreement, that could not have been the intention of the parties;

(n) Contra proferentem:

(i) Mr Chan submits[77] that as the Service Agreement was drafted by P’s side, and now P wishes to rely on the terms to establish a duty on D, the principle of contra proferentem operates against P, in the sense that where there is a doubt about the meaning of a contract, the words will be construed against the person who put them forward;

(ii) Mr Yuen has cited to me BNY Mellon Corporate Trustee Services Ltd v LBG Capital [2016] Bus LR 725, wherein Lord Neuberger observed at §53 that:

… the contra proferentem rule is very much a last refuge, almost an admission of defeat, when it comes to construing a document …

(iii) Mr Yuen has also cited Wai Lung Yee Shirley v Ng Cheuk Nam [2024] HKCFI 457 wherein Recorder Manzoni SC noted at §68 that:

In Triple Point Technology v PTT [2021] AC 1148 at [111] Lord Leggatt JSC referred to the contra proferentem rule as one of a number of “old and outmoded formulas” which “are steadily losing their last vestiges of independent authority”, and, in Haberdashers Aske’s Federation Trust v Lakehouse Contracts [2018] Lloyd’s Rep IR 382 at [85] Fraser J (as Fraser LJ then was) said that there is “precious little, if anything, left of this [contra proferentem] doctrine remaining in commercial cases…”

(iv) I respectfully share those sentiments. On the facts of the present case, and for reasons which I have given above, I do not believe it is necessary, or indeed appropriate, to resort to that rule.

70.  The factual context of the case in my view reinforces the objective and textual interpretations discussed above:

(a) It is part of the agreed facts that P first met D when he was having a dispute with Coutts, and D shared with P his views on certain financial matters. It is also part of the agreed facts that D had a very impressive CV;

(b) As I have observed above, the Service Agreement was important to D financially. The remuneration which he would receive under it was higher than his remuneration from Qilu. The Service Agreement also had a term of 10 years;

(c) In relation to P, and viewed objectively, it is inherently probable that having experienced problems with an investment bank, and being impressed with D’s CV, P would seek some sort of profit guarantee from D. In relation to D, given his experience and the importance of the Service Agreement to him, it is objectively and inherently probable that he would be prepared to give some sort of profit guarantee. These are important background facts which, in Lord Hoffmann’s words in Investors Compensation, “would have affected the way in which the language of the document would have been understood by a reasonable man”. In any event, those facts are relevant to the genesis and object of the Service Agreement;

(d) Mr Chan relies heavily on one aspect of the Proposals. I have given above a summary of their contents. To recapitulate, and relevant to the points Mr Chan takes:

(i) Proposal v.1.0 at page 5 contained the following printed words:

從機會成本層面，楊先生要求每年的指標回報為12% …[78];

(ii) Proposal v.2.0 contained those same printed words, but between the words “回報” and “為”, 2 words “保証” in manuscript were added, and at the front of that sentence, a “star” had also been added by hand[79];

(iii) In court, P confirmed that the words “保証” were written by him in front of D, and that the “star” was added also by him (P) to denote the importance of that requirement;

(e) On those facts, Mr Chan submits[80] that there was no pre-contractual consensus between the parties on those terms;

(f) However, whilst the words “保証” did not appear in Proposal v.3.0, they appeared in the Service Agreement. I have set out the relevant terms above;

(g) And importantly, D did sign the Service Agreement. As I have observed above, D had had ample time to study the wordings of the Service Agreement. Given the importance of the document, and given further his experience in asset management, he would not have signed it unless he had carefully read it and agreed to the contents;

(h) The absence of the words “保証” from Proposal v.3.0 in my view does not assist D.

71.  In my view, whether construed textually and contextually, the Service Agreement in my view indeed contained the Profit Guarantee as P contends. I reject D’s case in this regard.

J.5. Conclusion on Agreed Issue #1

72.  For the above reasons:

(a) In respect of Agreed Issue #1(1), I answer it in the affirmative;

(b) In respect of Agreed Issue #1(2), framed as such, I answer it in the negative. For the reasons set out above, the 補回或追回Provisions did not confer an entitlement upon D, but at best imposed upon an obligation to 補回或追回;

(c) In respect of Agreed Issue #1(3), the Target Return Rate and the Guaranteed Profit are different concepts, and were governed by different terms and paragraphs. For the reasons set out above, the 12% did not just represent the Target Return Rate, but also, as discussed above, related to the minimum rate of the Guaranteed Profit.

K. Agreed Issue #2

73.  Agreed Issue #2 concerns the AUM. It asks:

2. What was the amount of the “Asset Under Management” (AUM) (as defined under Clause 1 of the Service Agreement) paid by P and received by D under the Service Agreement:

(1) HK$207,150,329.48[81] (as pleaded by P); or

(2) HK$200,000,000.00, being the only total amount of AUM agreed by D under the Service Agreement (as pleaded by D)?

K.1. The procedural history

74.  I have summarised above the contents of the 2 Annexes. I highlight for the purpose of the present discussion the following matters:

(a) At §20A of the RRASoC, P pleads that:

Whilst the initial amount of funds to be provided by [P] under the Service Agreement was stated to be HK$200 million (i.e. the “Initial Asset under Management”), [P] had in fact provided (and [D] accepted) a total of HK$206,750,119.33 (which constituted the total Asset Under Management (“AUM”) (專戶資產) within the meaning of the Service Agreement) …

(b) That pleaded sum is the same as the AUM Total set out in Annex B/Purchases;

(c) At §33 of the RRASoC, the pleaded amount of the Guaranteed Profit is calculated with reference to that AUM Total.

75.  I have recorded above that whilst Annex A and Annex B were not admitted on the face of pleadings, parties state at §8 of the Statement of Agreed Facts that “Details of the investments made by D are agreed by the parties and set out in Annex A and B”.

76.  The genesis of that agreement can be traced back to the Pre-trial Review. During that hearing, I expressed concern over the non-admission of Annex A and Annex B. They contain only historical data. I saw no reason why they could not be agreed. If there were any special reasons for the non-admission, those reasons should be spelt out. For those reasons, and having heard counsel, I during the Pre-trial Review gave the following direction:

The parties do reach agreement on Annex A and Annex B … by 20 December 2024. Any disagreement by that day be fully particularized by [D], who shall by that date notify [P] of the same.

77.  In his written opening at §52, Mr Yuen opened his case on Agreed Issue #2 as follows:

Issue 2, which concerns the “Asset Under Management” (AUM), should no longer be in dispute given the parties’ agreement on Annex A and B of the RASOC. As pleaded (and now accepted by D) in Annex B of the RASOC, the total AUM used by D to purchase the stocks in the Portfolio amounted to HK$ 206,750,119.33.

78.  In his written opening at §4(6), Mr Chan opened his case on the following basis:

The following material facts are not disputed:-

…

(6) Pursuant to the Service Agreement …, D made investments for P through an account maintained under P’s name at Bright Smart Securities International (HK) Limited, particulars of which are set out in Annex A and B of the RRASOC.

Despite the way Mr Yuen opened his case on Agreed Issue #2, no comment or objection was raised.

79.  I have set out above the exchange between this Court and Mr Yuen in the course of his oral opening in relation to P’s case on the AUM. I have further mentioned above that no dispute even at that stage was raised or flagged up by Mr Chan.

K.2. D’s challenge, and P’s opposition

80.  Mr Chan in his closing seeks to dispute the amount of the AUM:

(a) As mentioned above, P’s case is that the AUM Total was HK$206,750,119.33;

(b) Mr Chan in his written closing disputes that. In effect, he is raising an objection on the basis of double-counting. He submits, relevantly, as follows:

49. P’s calculation of the sum HK$206,750,119.33 could be found at Annex B ... The figure is derived by simply arithmetically adding up the price of all purchases of shares for the Portfolio between 5 March 2015 (starting with #1803, Share No. 31) and 5 May 2016 (ending with #1515, Share No. 26).

50. This is clearly a misconception in the mathematics involved, as P’s calculation had completely not considered that, in fact, since as early as 15 May 2015, there were shares in the Portfolio being sold ... It means that the cash in the AUM used to purchase these shares was converted back into cash when they were sold. The cash used to fund newer purchases after these dates could be those obtained from the sale of older shares.[82]

…

56. It is undisputed that the Bright Smart Account was mixed with the funds and shares (1) owned by P himself which are unrelated to the AUM; (2) owned by Terry; and (3) under the AUM. It could not be said that the funds and shares in the Bright Smart Account fall within the AUM, except for those which were actually managed by D. As mentioned, the assets actually managed by D never exceeded HK$200,000,000.00.

57. As such, D submits that AUM could only be at most HK$200,000,000.00.

81.  Mr Yuen objects, primarily on the basis of the agreed facts and the absence of evidence from D in support. Mr Yuen further submitted in the course of his oral closing that had D given evidence in this regard, he would have cross-examined him. P had been deprived of the opportunity to do so.

K.3. My finding

82.  For the following reasons, I find that the amount of the AUM was HK$206,750,119.33, i.e. the AUM Total as particularized in Annex B/Purchases and as pleaded in the RRASoC:

(a) Given the pleadings, including the 2 Annexes, the direction I gave during the Pre-trial Review, §8 of the Statement of Agreed Facts, and the ways counsel opened their respective case, it is in my view clear that the amount of the AUM is within the scope of parties’ agreement. In my view, there is no room for that issue to be re-opened;

(b) Even if there were any ambiguity as to the scope of the parties’ agreement, so that the issue could still be canvassed (which I do not accept), there would have to be evidence in support of the Re-Investment Theory. There is none. As pointed out by Mr Yuen[83] which I accept:

… it has never been D’s case that any of the investments made for the Portfolio were made with proceeds from selling any of the stocks in the Portfolio (and therefore does not count towards the AUM), instead of funds provided by P in the Bright Smart Account. Plainly, it is now far too late to re-open this in closing.

(c) The above further open up a procedural point. Had D given any prior indication of his intended reliance upon the Re-Investment Theory and given evidence in support, he could have been cross-examined on that. P has now been deprived of the chance to do so. Allowing D to rely on the Re-Investment Theory now would work grave injustice against P.

K.4. Conclusion on Agreed Issue #2

83.  I find that the amount of the AUM was HK$206,750,119.33, i.e. the AUM Total as particularized in Annex B/Purchases and as pleaded in the RRASoC.

L. Agreed Issue #3

84.  Agreed Issue #3 asks:

3. In addition to his contractual or tortious duty to exercise reasonable skill and care (which D admits), was D a fiduciary agent who owed to P a fiduciary duty of care to discharge his roles and responsibilities under the Service Agreement with reasonable skill and care?

85.  I have recorded above Mr Yuen’s position that whilst not formally abandoning the point, P will not trouble this Court with his case on fiduciary duty, and will not invite this Court to rule on any issues or disputes concerning his pleas of fiduciary duty and incidental matters.

86.  Agreed Issue #3 is hence no longer engaged. I make no ruling on it.

M. Agreed Issues #7 and #8

87.  Agreed Issues #7 and #8 relate to the Oral Agreement and the Supplemental Agreement. Mr Chan in his written closing[84] submits that “[the Oral Agreement] gives rise to a complete defence to P’s claim if factually found”. Further, the facts relevant to the 2 issues are intertwined. In the circumstances, I find it appropriate and logical to next consider Agreed Issues #7 and #8, and to consider them together.

88.  Agreed Issues #7 and #8 ask:

7. (1) Did the parties enter into the Oral Agreement alleged in [RAD&CC] §24A?

(2) If answer to (1) is in the affirmative:

(a) was the Oral Agreement a legally binding agreement?

(b) did the Oral Agreement contain the implied term as D alleges?

(c) did P forbear or agree to forbear to sue until after 6 June 2018, and thus this action was commenced pre-maturely?

(d) further or in the alternative, is P estopped from claiming against D for his breaches (if any)?

(e) further or in the further alternative, did P act in breach of the Oral Agreement by issuing the Writ in this action?

8. (1) Did the parties enter into the Supplemental Agreement as alleged by P in [AR&DCC] §20A(2)(b)?

(2) If answer to (1) is in the affirmative:

(a) was the Supplemental Agreement legally binding; and

(b) what was the impact of this Supplemental Agreement on the parties’ legal relationship?

89.  I have set out or summarised above the relevant pleadings, and in particular §24A of D’s RAD&CC, and §20A of P’s AR&DCC.

90.  For the following reasons, I find that there was no Oral Agreement as D alleges:

(a) I have found that D is neither an honest nor reliable witness;

(b) His evidence specifically in relation to the Oral Agreement is also inconsistent and inherently improbable;

(c) The existence of the Oral Agreement is specifically pleaded at §24A of D’s RAD&CC. An implied term has also been specifically pleaded;

(d) D’s evidence in D/WS#1 is scanty, and is inconsistent with he and P having agreed on the Oral Agreement. He says in D/WS#1 as follows:

34. … on 6 June 2016, a meeting was held between me and Mr. Yeung at his residence. During the meeting, Mr. Yeung evaluated my performance and we discussed on how to improve our cooperation and mitigate the chances of miscommunication. At the end, I presented a refined proposal on how to recover the “floating loss” of the Portfolio by future/further investments.

35. Contrary to what Mr. Yeung was trying to say in his Statement of Claim, although I did present a hand-written breakdown of the “floating loss” of the Portfolio (the “Breakdown”) which was meant to facilitate my presentation of the said proposal of recovering the “floating loss” during the meeting on 6 June 2016, I had never made any admission as alleged or at all. I had always insisted that the investment of the Portfolio under the Service Agreement should be of a long-term nature. Since the “floating loss” had not yet been crystalised, Mr. Yeung should allow me to in recover/reduce the difference between the actual performance of the Portfolio and the Target Return Rate by making further investment in the rest of the 10-year time.

…

37. Initially, Mr. Yeung agreed to give me 2 years to recover the “floating loss”. However, Mr. Yeung later went back on his words and asked me to sign a supplemental agreement (the “Proposed Sup Agreement”) under which I would be admitting liability in breaching the Service Agreement and agreeing to compensate (“賠償”) Mr. Yeung. This was fundamentally different from our agreement in which I was only responsible for making further investment to recover (「追回／追討」) the floating loss. Therefore, I refused to sign the Proposed Sup Agreement.

(e) As seen from the above, D claims that he had always insisted upon the long-term nature of the Service Agreement. This is directly contrary to his pleaded case that “In other words, the original term of the Service Agreement was reduced to only 2 years after 6^th June 2016, and [D’s] entitlement to the original longer period of time to make up for the difference in further investments was also reduced accordingly”;

(f) When under cross-examination, D gave yet another version (emphasis added for ease of presentation):

Q. …你當其時嘅理解係根據合約，你有十年餘下嘅時間嚟到去追回嗰啲投資嘅回報，你根本冇需要同楊先生達成你所指嘅口頭協議，呢個係我嘅問題。

A. 我諗當其時喺呢個嘅氣氛嘅時候，我係冇同楊先生就住十年去講嘅。但係我點解有信心以番呢個三年、兩年，因為我本身其實喺後段嘅時候，係希望透過啲企業融資嘅項目去追番呢個嘅浮動損失嘅五千幾萬。而我覺得我自己有信心嘅時候，咁我就用呢個嘅基礎同楊先生去達成呢個協議。

Q. 你覺唔覺得如果係你嘅講法係啱，即係話將呢個合約由十變咗做兩年，呢一個係一個好重大嘅改變？

A. 呢個係嘅。

Q. 咁重大嘅改變，對你影響亦都咁大，你亦都知道楊先生當時對你嘅表現不滿，點解你會可以容許佢作為一個口頭嘅合約，而唔係作為一個書面嘅補充協議或者係一個修改嘅協議？

A. 佢當其時講完之後嘅話係有後邊走咗一個補充嘅協議書出嚟嘅。

Q. 但係點解你唔將頭先嗰啲嘅就話「呢個係我哋嘅補充協議」？好簡單咋嘛，如果你所講嘅事實係真嘅，當然，我哋接受。你所講嘅事情好簡單嘅啫，就咁一個補充協議就話「2016年，2015年6月19號簽訂嘅協議書，年期由十年變為兩年，其他條款不變」，咁就可以處理，點解你唔做？

A. 呢個本身其實係因為當其時6月6號之後嘅話，佢係會話有一份補充協議書會跟住去做番，根據住當其時我哋所講去做呢件事嘅，所以我就倚賴番嗰份嘅協議書。

(g) None of those appears in his witness statement. No particular of any of the “企業融資嘅項目” has been provided. His “confidence” was only his bare assertion;

(h) If the Oral Agreement in fact existed, given its importance, it is inherently most improbable that there is no reference to it in any contemporaneous document. There was indeed none (at lease none is referred to at section G(E) of Mr Chan’s written closing where he deals with the Oral Agreement);

(i) In this regard, P’s evidence is inherently more probable, and is supported by contemporaneous documents, which I accept, that[85] (emphasis added for ease of presentation):

我於2016年6月6日，就以上提及的報告與被告人會面。在該會面中，他不但承認違反該協議書，還要求我給予他3年時間補償所有損失，但當時我只答應給他兩年時間。雙方並於會面結束前同意簽署一份補充協議書（“補充協議書”）…，記錄他對我的責任。

However, as agreed between the parties, while the Supplemental Agreement was drafted, it was ultimately not signed;

(j) The bolded words should be noted. P never said that he agreed to give D 2 years to carry out further investment to chase back the loss. Indeed, when cross-examined on §49 of P/WS#1, P drew a distinction between D paying back the loss and D’s request for time to carry out further investments[86];

(k) Mr Chan criticises P’s oral evidence in this regard. He submits that “when D’s case (that P agreed to give D 2 years’ time to chase back the shortfall) was put to P during cross-examination, and it was asked whether P promised the above, P said ‘I cannot remember.’ ”[87]

(l) That answer should not be viewed in isolation. Before that answer, P had more than once disagreed to the suggestion that on 6 June 2016, he and D had agreed upon the Oral Agreement[88]. The lapse of time between the events and the time when P was cross-examined should also be borne in mind;

(m) I have considered parties’ contemporaneous conduct Mr Chan points to at §§151(1) to (3) of his written closing. They are at best equivocal;

(n) From the totality of the evidence, it is clear that parties were on 6 June 2016 only at the stage of discussion and negotiation. It was clearly understood that a further agreement in variation of the Service Agreement would be signed. But ultimately none had been;

(o) On the evidence, I find that the existence of the Oral Agreement has not been established. I further find that P did not otherwise make any representation to D as pleaded at §24A of the RAD&CC.

91.  For the above reasons, I answer Agreed Issue #7(1) in the negative.

92.  In the light of my findings above and my answer to Agreed Issue #7(1), Agreed Issue #7(2) and the 5 sub-issues under it are not engaged. Even if they somehow still do, I answer them all in the negative. On the facts, neither forbearance nor estoppel is made out.

93.  For the same reasons, and bearing in mind also parties’ agreed fact that the draft Supplemental Agreement was ultimately not signed[89], I answer Agreed Issue #8 also in the negative.

N. Agreed Issue #4

94.  I next consider Agreed Issue #4.

95.  Agreed Issue #4 asks:

4. (1) Was the scope of D’s duty to exercise reasonable skill and care (whether owed contractually, tortiously or as a fiduciary agent) as pleaded in [RRASoC] §19E?

(2) If answer to (1) above is in the negative, what precisely was the scope of D’s duty to exercise reasonable skill and care? In particular, was D under a duty to diversify the investments for the AUM as P contends?

96.  I make the following 2 preliminary comments:

(a) I have set out §§1-3 of Mr Yuen’s P/Explanatory Memo. Given my finding and conclusion on Agreed Issues #1, #2, #7 and #8, P’s breach of duty claim, in Mr Yuen’s words, “become irrelevant”. I continue to consider this and other issues on P’s breach of duty claim in deference to submissions made, and lest I err on Agreed Issues #1 and #2. They also bear to some degree upon Agreed Issue #9 on repudiation. I will not however be as detailed as I otherwise may be;

(b) Agreed Issue #4 partly touches on P’s claim on fiduciary duty. In this regard, I repeat my observations on Agreed Issue #3. My discussions below exclude any reference to fiduciary duty.

97.  I have set out parties’ respective pleaded case. I have in particular set out above §19E of P’s RRASoC. D admits, both on the face of pleadings and as part of the agreed facts, that he was obliged to exercise reasonable skill and care when discharging his roles and responsibilities under the Service Agreement. As explained in Jackson & Powell on Professional Liability (9^th edn.) §§15-022 and 15-036:

In common with other providers of relevant services acting in the course of business, a provider of financial services will be under an implied if not express contractual duty to exercise reasonable care and skill in carrying out the services required of him. The standard of care and skill will be, at least in most respects, that to be expected of a like provider engaged to provide the relevant services: that is by application of the “Bolam test”. Evaluating that standard generally will involve consideration of applicable regulatory requirements. It may also involve considering expert evidence from like practitioners to the defendant as to relevant practices, procedures and safeguards, perhaps in relation to highly specialised investments or markets ...

A financial practitioner generally will owe a duty of care in tort to his client quite apart from any contract that exists between them. As with most professions, that duty usually will be not only concurrent to, but also consistent with, the contractual duty to exercise reasonable care and skill…

98.  In relation to D’s expertise, and in so far as necessary, I express agreement to P/Expert’s opinions and views as follows[90]:

Based on the matters set out above, I would expect [D] to have an in-depth understanding of the services that he was going to provide in the role of an asset management consultant that he undertook in the Service Agreement. He presented himself as a senior academic in the field of finance, with professional qualifications that would enable him to construct and manage a global investment portfolio. He promoted his investment acumen through frequent media appearances professing to be an expert on the subject of investments. He would be aware of the relevant risks and should be able to communicate clearly with the investor and keep detailed financial records of his investment actions.

99.  Mr Chan addresses the issue at section G(C) of his written closing:

(a) The first point he addresses concerns P’s claim on fiduciary duty. We are no longer concerned with that;

(b) The only other point relates to the applicability of the Fund Manager Code:

(i) I do not believe there is any dispute of any significance between the parties;

(ii) P’s reliance on the Fund Manager Code is pleaded to be “insofar as it is necessary”;

(iii) Mr Yuen has made clear that it is not P’s case that the Fund Manager Code directly applies to D, but only serves as a reference on the standard to be expected of D in the present case;

(iv) Along similar lines, Mr Chan submits that “The issue of whether D breached his duties should be considered by the Court not by strict reference to the Fund Manager Code, but by a global assessment of D’s decision in the context of a person in a consultancy position”;[91]

(v) The experts are also largely agreed on the relevance of the Fund Manager Code, that:

Both expert note that the applicability of the … [Fund Manager Code] and other relevant guidelines published by the SFC (see Michael Wong Report, para. 14-16) as guidelines that [D] could have been expected to act by is a matter for the Court. In this regard, they note that it is common ground between the experts that [D] was not a person with a SFC license for Asset Management (i.e. a “Type 9” licence) at the material times, and that he was not bound to act by it.

Subject to the aforesaid, Alan Wong notes that guidance provided by the code is very limited when it comes to portfolio management. In any event, it is Alan Wong’s view that the FM Code of Conduct (as defined in Michael Wong Report at para. 14) as relied upon by Michael Wong is entirely consistent with the Alan Wong’s views, including issue (1)(a)-(b) in his report, in particular sections 3.7-3.8 therein.

(vi) I note also that in most cases where Mr Yuen refers to the Fund Manager Code in his written closing, he refers to it in the context of P’s claim on fiduciary duty, which is no longer pursued;

(vii) I accept parties’ stance that D is not strictly governed by the Fund Manager Code, and its use in the present case is limited.

100.  On the Duty to diversify, I have recorded the experts’ agreement to the same. What they do not agree upon is whether D had breached that duty. I will come back to this when I come to consider Agreed Issues #5 and #6.

101.  In my view, the scope of D’s duty to exercise reasonable skill and care (whether owed contractually or tortuously) is that as pleaded in RRASoC §19E. They are part and partial of D’s agreed duties under the Bolam test.

O. Agreed Issue #5

102.  Agreed Issue #5 concerns D’s breach of the Service Agreement. It asks:

5. (1) Subject to the court’s ruling in respect of Issue 1 above, did D fail to achieve the 12% profit as guaranteed under the Service Agreement as pleaded by P?

(2) If answer to (1) above is in the affirmative, is D liable to pay to P an amount representing 12% profit (or balance thereof) as pleaded in [RRASoC] §33 (or in such other amount)?

103.  I repeat my discussions and conclusions on Agreed Issues #1, #2, #7 and #8.

104.  D has clearly failed to achieve the Guaranteed Profit.

105.  With reference to the Annexes, P has suffered the Total Loss.

106.  Subject to the Agreed Issue #9 on repudiation, which I will consider towards the end, I answer Agreed Issue #5(1) in the affirmative.

107.  In relation to Agreed Issue #5(2), I am of the view that D is liable to P for the Total Loss (HK$55,371,911.65) plus the Guaranteed Profit (HK$28,945,016.71), in the total sum of HK$84,316,928.36.

P. Agreed Issue #6

108.  Agreed Issue #6:

6. (1) Without prejudice to Issue 5 above, did D act in breach of his duties (whether contractual, tortious or as a fiduciary agent) as pleaded in [RRASoC] §23?

(2) If answer to (1) above is in the affirmative:

(a) what are the loss and damage caused by D’s breach(es)?

(b) is D liable to pay to P damages as claimed in [RRASoC] §§33A and 33B (or in such other amount)?

(c) (i) Whether any loss of P was a floating loss instead of a crystallized loss; and (ii) if answer to (i) is in the affirmative, whether any floating loss could not be included under D’s liability as the term of the Service Agreement was meant to be 10 years (as pleaded in [RAD&CC] paragraphs 13E and 15)?

(d) Without prejudice to Issue 9 below, whether P’s breach of the Service Agreement and/or breach of duty and/or negligence (as alleged by D and if upheld at the trial) in any way contributed to the loss; and whether P failed to mitigate the loss (as pleaded in [RAD&CC] paragraph 15A(3)&(4))?

109.  I have summarised §23 of the RRASoC above.

110.  For the purpose of considering this issue, I have also considered the divers reports and analyses prepared by D, and in particular those tabulated at §75(6) of Mr Chan’s written closing, and those included in the Core Bundle.

111.  Before considering the pleaded breaches in turn, I make the following preliminary but overarching observations. Despite and in the face of P’s pleading of specific breaches against D, D’s pleaded defence in response lacks particulars and specificity. D’s witness statements are no better. In particular, no analysis has been attempted on the contemporaneous documents. In this regard, Mr Yuen submits that “D has not pleaded any particulars, or adduced sufficient evidence to justify the investment decisions made for the Portfolio”[92], and that “It is insufficient for D (as a purported expert in asset management consultancy services) to merely provide generalized pleas in response to P’s complaints on his construction and management of the Portfolio.”[93] There is clear force in those submissions. I will elaborate on this in the following discussions.

P.1. The Alleged §23(1) Breach

112.  This concerns P’s complaint that D failed to maintain a team of staff with the requisite experience.

113.  I have set out Clause 5(二)5 of the Service Agreement above.

114.  When performing the Service Agreement, D was only assisted by one assistant. She was called Cindy Man. She was an employee of Qilu. Her duties related to customer support. Her work did not involve her analysing investment products. D accepted during cross-examination that she should not be assisting D in carrying out analysis for performing the Service Agreement. On the evidence, Cindy Man did not qualify to be included and regarded as any member of the team contemplated and required by Clause 5(二)5 of the Service Agreement.

115.  On pleadings, D denies the Alleged §23(1) Breach. He then pleads:

It is averred that, in around July 2015, [D] sought approval from [P] to hire staffs for assistance. However, [P] rejected [D’s] proposal and requested [D] to put the matter on hold until further notice. In reliance on [P’s] request, [D] did not hire staffs.

116.  No contemporaneous record of P’s alleged rejection has been produced. D’s witness statements do not mention that alleged rejection by P. In the KYWO 28/7/2015 Letter, one of P’s complaints was D’s non-compliance with Clause 5(二)5 of the Service Agreement. There was no written response from D. It is inherently most improbable that, had it been P who had rejected D’s request to hire further staff, D would not have immediately put that rejection on record. One should further note the context. By that letter, P was giving D notice to terminate D’s entitlement to consultancy fees. It was a letter that carried significant consequences.

117.  Under cross-examination, D claimed that at the time of that letter, P telephoned him and told him that P “純粹想提你嘅，冇任何嘅意思”, and that “楊先生出呢封信嘅基礎係想真係當一個formality提醒我，我亦都冇當咗呢個係一個好認真嘅文件去對待，所以最終我係冇reply番呢件事”.

118.  I reject D’s aforesaid evidence. It is not mentioned in his witness statements. The alleged telephone conversation, if in fact taken place, would have been an important one. D would not have missed it out from his witness statements.

119.  On the evidence, I find that the Alleged §23(1) Breach has been made out.

P.2. The Alleged §23(2) Breach

120.  P complains thereby that D failed to advise him and seek written authorization from him before acquiring shares in the Portfolio.

P.2.a. The facts

121.  The following facts are relevant, which I find.

122.  There is no dispute that whilst the operation date of the Service Agreement was specified to be 1 April 2015, P had before that given D access to the Bright Smart Account, and D started to buy shares on P’s behalf via that account in March 2015[94].

123.  The vast majority of the stocks in the Portfolio were purchased between March and early June 2015[95]. By 21 May 2015, D had spent some HK$193.8 million of the AUM on divers Hong Kong stocks[96]. Mr Chan himself acknowledges[97] that most of the purchases had already been completed prior to 19 June 2015.

124.  As can be seen from Annex B/Purchases, the Portfolio comprises 43 Hong Kong Shares. There was no other type of investment products.

125.  In respect of the composition of the Portfolio:

(a) According to P/Exp Report[98], “although the Portfolio was spread across 11 out of 12 industry classifications, it was heavily focused on the “Financials” industry in terms of the percentage of total purchase cost of the Portfolio (73.1%)”;

(b) Also according to P/Exp Report[99], “the Portfolio, besides being focused on the Financials industry, was also heavily focused in a few stocks.” The top 3 stocks by total purchase were GF Securities, HKEx and CK Hutchison Holdings. Together, the total purchase costs were HK$153,306,513.31, representing 74.15% of the total purchase costs of the Portfolio;

(c) There were further the 14 Small Price Shares set out at §20K(2) of the RRASoC.

P.2.b. Whether breach

126.  The gist of D’s pleaded defence can be seen from §13D of the RAD&CC, that:

… It is averred that, whenever [D] acquired the shares in the Portfolio for [P], it was duly authorized by [P]. [D] further avers that he was not contractually obliged to explain proactively to [P] the detailed reasons and analysis for investment in each of those shares acquired by [D] on [P’s] behalf. Further and/or alternatively, [D] had duly answered [P’s] enquiry, if any. In any event, [D] avers that it was the common understanding between the parties that [D] acquired those shares because he genuinely believed that those shares would be profitable for the Portfolio.

127.  It is hence not D’s pleaded case that he did give P advice or sought authorizations from him before specific acquisitions. His case in effect is that he was not obliged to do so. Indeed, in D/WS#1, he said that, in the beginning, “I could make the investment decision whenever I saw fit. I only needed to update Mr. Yeung on the transactions after the trading hours”[100], and that that only changed in October 2015, when “I was no longer authorised to deal with the Trading Account without prior approval.”[101]

128.  D’s stance is at odds with his duties under Clause 4 of the Service Agreement on the manner of service. I have set that clause out above. It is also at odds with the experts’ agreed opinion set out at §2.6 of the Joint Statement, wherein the experts say:

Alan Wong and Michael Wong agree that a RCAMC such as the Defendant should initiate and sustain a dialog with his client, and communicate about market trends, the portfolio’s performance and the client’s objectives.

129.  In respect of that duty to “initiate and sustain a dialog”, I accept Mr Yuen’s submissions that it “clearly includes” (both as a matter of D’s general law duty and under Clauses 3 and 4 of the Service Agreement) a duty for D to explain his overall investment strategy for the AUM and seek P’s agreement on the same before commencing investments.

130.  D did not do that. D in fact says that there was no need for him to do that.

131.  I have considered Mr Chan’s submissions[102] in this regard.

(a) At §74 of his written closing, he frames the issue as being this, that “P alleges that, with the exception of [2 shares], the shares in the Portfolio were acquired by D without P’s prior consent”;

(b) Mr Chan then proceeds to discuss the evidence, including various reports that D had prepared and meetings D had had with P. He submits then that “P would have knowledge to the purchase of shares by D, at least by the time he received the reports compiled by either D or Ms. Chan”[103]. He concludes by submitting that “Therefore, the allegation that P had given no consent to the purchase of shares is inherently improbable, not credible, and not supported by P’s oral evidence.”;

(c) But the complaint at §20D of the RRASoC is not confined to what Mr Chan has framed and dealt with. That paragraph reads as follows (emphasis added for ease of presentation):

With the exception of [the 2 shares] …, the shares in the Portfolio were acquired by [D] without [P’s] prior consent (whether written or otherwise). Nor did [D] explain to [P] the reasons for investing in or acquiring those shares.

(d) §23(2) of the RRASoC further complains that “In particular, [D] had failed to: … (2) advise and seek written authorization from [P] before acquiring shares in the Portfolio”;

(e) Prior consent is different from prior authority. And much more importantly, D had indeed failed to advise P as was his duty to do so.

P.2.c. Conclusion

132.  On the evidence, I find that the Alleged §23(2) Breach has been made out.

P.3. The Alleged §23(3), §23(4) and §23(4A) Breaches

133.  I can deal with these 3 alleged breaches together.

134.  P complains thereby that D failed to (1) provide appropriate and timely updates and/or written reports in relation to the investment strategy, (2) conduct appropriate analysis and/or provide any or any adequate or appropriate advice before acquisition and/or so as to devise an appropriately diversified Portfolio, and (3) properly consult with him to determine his investment aims, risk appetite, expectations and understanding.

135.  P has in P/WS#1 provided detailed evidence on the matter. His evidence is supported by the contemporaneous evidence he refers to. In particular, he says, which I accept:

25. 首先，被告人於耀才戶口為專戶資產投資的股票（除了鳳凰醫療及我以基石投資者身分得到的部分廣發證券股票外）都是未經我同意購買的。被告人亦沒有在作出該些投資之前向我解釋購買的原因。尤其是，被告人為專戶資產投資了很多市價很低的股票（“細價股”）（例如天譽置業（代號59），中國數碼信息（代號250），新宇國際（代號8068）等）。我不明白被告人為何要投資該些細價股…

…

31. 簡言之，被告人根本沒有對於耀才戶口購買的股票作出恰當監控，當股價大幅下跌時，亦沒有採取任何相應減低虧損的措施（例如預先設定一個最低價位（即止蝕價），當股價跌穿該價位時及時將持有股票沽出等）…

…

36. 根據協議書，被告人有責任每星期兩次匯報各產品及相關市場走勢，並且為專戶資產的投資策略及資產配置等方面進行分析，研究和及時提出操作方案，並向我提供相關書面報告。

37. 我會在下一部分進一步講述被告人在協議書仍然有效期間（由2015年4月至2016年5月31日）未有充足提交報告的行為。在此部分，我會集中講述被告人有提供的所謂投資報告的相關情況。如下文所述，被告人為我提供的投資意見顯然都是未如理想。

38. 於2015年7月至12月期間，被告人向我提交關於專戶資產的建議中明顯反映被告人的疏忽：

(1) 被告人在2015年7月25日向我提交的報告中…，有以下的建議：

(a) 以下的股票應該於“1星期之內”或“1-2星期之內”沽出…

(b) 其他的股票都應該繼續“中長線持有”（即持有3-6個月）或“中線持有”（即持有1-3個月）；

(2) 後來，被告人於一份名為“楊生證券組合研究分析報告（2015年8月11日–11月1日）”的文件中繼續維持以上的“意見”。

(3) 從被告人自己準備的11月11日報高中看出...，被告人雖然於7月25日開始已經表示應該於“1星期之內”或“1-2星期內”沽出上述的股票。然而，被告人直至11月才有所行動。再者，被告人實際上沽出的股票與上述報告中提及的股票又是有出入的。

…

40. 被告人於5月4日向我推薦鳳凰醫療。（見同日錄音（09:06））經被告人分析後，我後來於5月5日同意被告人購入總值不多於港幣500萬元的鳳凰醫療股票。（12:04）於同日（交收日期為5月9日），被告人代我以大概港幣340萬購入了284,000股。從被告人5月9日的“一周報告”中寫明，當時被告人對該股票的目標價為每股港幣15元，止蝕價為每股港幣11元。…然而，被告人一如既往，無論股價升跌，都拒絕沽出。於5月18日，我通知被告人鳳凰醫療的股價已經跌穿了每股港幣11元。被告人依然無任何的行動，並只是表示“下次我會小心啲”。（見錄音15:02-15:13）

…

D3. 報告不足

42. 由上文可見，被告人根本沒有對專戶資產管理作出應有的專業研究和分析，導致協議書生效短時間內，我的專戶資產已經蒙受重大損失。這其實與被告人太差的工作行為，強差人意的工作態度亦有直接關係。

43. 基於被告人處理該投資組合的表現，被告人早於2015年7月已經意識到自己的不足：

(1) 於2015年7月8日，被告人向我提供了一個自我檢討報告…。當中，被告人承認自己在處理廣發證券的投資上的不當，而且在過往數月於處理協議書投資的事宜上“存在了很多不妥善的地方”。

(2) 被告人隨後於2015年7月19日與我會面…，討論被告人的表現：

(a) 被告人承認跌市下沒有和我好好溝通，股票組合不佳；

(b) 我向被告人投訴為何股票低位不止蝕，當時又沒有任何行動，我同時表明會保留追究責任的權利；

(c) 被告人同時承諾會“去追數：以先前12%為基本目標”。

44. 奈何，被告人隨後的表現依然沒有改善，故我正式委託柯玉華律師事務所，代表我向被告人發出了日期為2015年7月28日的信件…，除列出他違反該協議書的情況外，更知會他我正式行使終止支付顧問費的權力。

45. 從2016年初，我與被告人已經開始討論被告人如何追回因他而對專戶資產所造成的虧損。於2016年1月27日，被告人向我提供了一份非常簡陋的報告（名為“2016年楊榮華組合攻略”）…。在該報告中，被告人承諾會“和[我]在一個特定時間來量化浮動虧損的終值”。

46. 隨後，如上文所述，於2016年2月左右，我向被告人要求他先將當時該投資組合持有的一些細價股先沽出，並與我的兒子Terry 討論沽出股票的細節。我繼續向被告人要求他向我提交追回虧損的時間表，但被告人卻一直推搪。

47. 這能從我與被告人的錄音中可見…。在不列出所有有關短訊的前提下：

(1) 2016年2月4日：我再追問被告人向我交出初步的計畫書。我再提醒被告人他曾經承諾過2月中能夠給予我答覆。（14:11）

(2) 2016年2月5日：我向被告人要求他給予我對追回虧損的一個時間表。（16:22）2月15日，我提醒被告人需要於同一期間執行合同的責任（21:42）。被告人承諾會向我提交投資項目的資料（21:44）。

(3) 直至2016年2月25日，被告人才把一些投資項目的建議交給我，當中是關於被告人推薦三間正在準備於香港交易所上市的投資項目。然而，被告人依然未向我提交任何追會虧損的時間表（12:08)。

(4) 我在2016年3月期間繼續向被告人追問關於建議書的事宜。被告人一直只是聲稱他仍然在與Terry討論的過程中（見2016年3月9日（17:18）的錄音）。直至2016年3月25日，被告人終於向我表示會於3月31日親自到我家向我交出建議書（見同日12:39錄音）。

(5) 被告人終於在3月31日交出一份名為“年度報告”的文件給我…。當中除了一些宏觀的市場概要外，只是提到“暫定[專戶資產]價錢浮動損失為港幣60,000,000，會透過認購新股，上市公司的前期投資及投資於大市至股票從而追回組合上的損失”。

(6) 報告中建議我再分別用2千萬元投資一隻名為中海物業（代號︰2669）的股票，以及用4千至5千萬作準備上市的公司作前期投資，並表示整個過程需要一至兩年才會有實際的回報。然而，被告人建議投資的公司於報告上根本沒有寫明資料。

(7) 期後，我繼續向被告人追問他所謂的兩年時見表，並要求他向我表示如果他未能為我於兩年內追會損失，會否負上任何的責任（見錄音，5月3日（09:17-09:22））。被告人當時只是回覆“一定要追番五千萬，喺一個合理嘅時間裏面，至於嗰盤現金呢，一樣係當好似借錢…”

(8) 直至5月12日，被告人承諾會與Terry 訂下專戶資產實際的虧損，並於同年6月6日或6月7日向我提相關報告（見08:50-08:56）。

(9) 被告人於2016年5月19日再向我提交報告，表示暫定要為我追回港幣1億元。為追回這一億元，被告人建議為我買入“優質股票”例如鳳凰醫療等，並表示會“精選”30隻上市公司股票。被告人同時建議我投資一家“興倫科技股份有限公司”的股票。後來，由於被告人未能向我提交充分的解釋，我最後拒絕了被告人的建議。我會在以下部分對這建議在作詳細解釋。…

(10) 我於5月31日通知被告人，要求被告人為有關耀才戶口及專戶資產“截數”（06:22）。

136.  Despite P’s detailed evidence with reference to the contemporaneous documents, D has, apart from general assertions, failed to put forward any positive case in response.

137.  I accept P’s evidence in the above regard not only upon his say-so. I have considered the contemporaneous evidence he has referred to. I have also considered the relevant opinions of P/Expert, and in particular those he summarises at §§3.1 and 3.3 of the Joint Statement, which I accept, and which support P’s evidence. I remind myself that the burden of proving breaches remains on P. But on the totality of the evidence before me, I accept P’s evidence.

138.  I refer also to my discussion on the Alleged §23(5) Breach below.

139.  In my view, the Alleged §§23(3), 23(4) and 23(4A) Breaches are made out.

P.4. The Alleged §23(5) Breach

140.  P complains thereby that D failed to invest in both local and overseas financial products, and/or to arrange or to advise P to arrange sufficient diversification.

141.  I have touched on this matter when considering the reliability of the experts’ evidence. For those reasons, I do not accept D/Expert’s views that the Portfolio “should be considered diversified.”

142.  In the Joint Statement, P/Expert summarises his views at §3.2 as follows:

Contractual terms

The Service Agreement provides that [P] engaged [D] to assist in investing in stocks, bonds, funds, gold, oil, precious metals in Hong Kong securities and overseas markets, and providing asset management consulting service to achieve long-term and steady appreciation of such assets.

Diversification

Alan Wong notes that the Experts are in agreement that one of the key factors a RCAMC should consider is risk diversification.

Risk diversification can be achieved through careful selection of geographical markets, industries and financial products, because they have different levels of risks and will react differently to the same events.

When it comes to building a well-diversified portfolio, one should not only consider the number of stocks in the portfolio, but more importantly how the specific chosen stocks would react (either together or in opposition) to various scenarios and whether there is a risk of the portfolio being over concentrated in one stock, one sector, or one geography (therefore being vulnerable to the risk inherent to them).

Overconcentration of the portfolio

The Portfolio was not properly diversified.

There is no evidence that [D] has performed any proper analysis on diversification before proceeding with the initial investments (or even while liquidating and rebalancing the portfolio).

Furthermore, as shown in the Section 4.2 of the [P/Exp Report], specifically in paragraphs 4.2.9 and 4.2.10:

(a) The entire portfolio was invested in HK stocks;

(b) The financial sector represented 73.10% of the investment amount (9 stocks);

(c) 83.57% of the total portfolio investment amount was invested in 10 stocks;

(d) the top three stocks (being GF Securities, HKEx and CK Hutchison) made up of about 74.15% of the total amount invested in the Portfolio; including about 36.11% being attributed to one single stock, GF Securities (1776).

(e) In [D’s] self-evaluation report dated 8 July 2015, he admitted that he over-relied on his personal relationships for the investment in the initial public offering of GF Securities.

143.  I have considered those opinions of P/Expert. They are supported by his analysis, are well-reasoned, and make good sense. They are also consistent with the evidence that he has considered and which is before the Court. As further submitted by Mr Yuen[104], which I accept, D has not put forward any explanation or evidence as to why the Portfolio was constructed in the manner as it was.

144.  Mr Chan suggests that P/Expert in opining on the need to diversify has forsaken “D’s duties to attempt a 12% profit under the Service Agreement.”[105] I do not accept that. There is no evidence that D constructed the Portfolio as he did because of the Profit Guarantee. Any opinion in this regard by D/Expert is speculative. Further, as Mr Yuen submits[106], which I accept, neither expert has suggested that diversification could be ignored in favour of the Profit Guarantee, and that if anything, risk management would be even more important if high return was the goal.

145.  I accept P/Expert’s views and opinions on this issue. I find the Alleged §23(5) Breach, and the related limb of the Alleged §23(4) Breach established.

P.5. The Alleged §23(6) Breach

146.  P complains thereby that D failed actively and effectively to monitor the market and the performance of the Portfolio so as to make appropriate changes.

147.  As I have pointed out above, the Portfolio suffered heavy losses soon after its construction. By the end of June 2015, the Portfolio had incurred a loss of more than HK$17 million. With reference to Annex A, the floating losses in the subsequent month-ends were as follows:

Date	HK$
June 2015	17,506,580.99
July 2015	55,351,081.85
August 2015	74,024,202.42
September 2015	71,778,003.35
October 2015	57,333,079.35
November 2015	44,797,193.58
December 2015	43,514,178.58
January 2016	67,431,702.98
February 2016	71,625,808.64
March 2016	49,250,234.41
April 2016	51,960,668.41
May 2016	54,182,872.04

148.  There is evidence before this Court that the Hong Kong stock market crashed round about June and July 2015.

149.  I have considered D’s duties under the Service Agreement, and in particular under Clause 3 thereof.

150.  I have also considered P/Expert’s opinion, and in particular those at §3.7.8 of P/Exp Report which I accept:

… I would stress that while the considerations to be taken into account may evolve and not have their place in a long-term agreement for investment management, all the relevant factors are expected to be part of a constant dialogue between the asset management consultant and his client, in order to ascertain his/her risk appetite, investment objectives and any other relevant personal characteristics (e.g. age), etc. The factors above should therefore be considered and re-assessed on an ongoing basis while managing the portfolio over its lifecycle in order to respond to changes in circumstances and/or changes in the investor's aims for the portfolio.

151.  In the course of cross-examination, D/Expert also accepted that an investment consultant in D’s position should bear in mind the need to rebalance the Portfolio from time to time.

152.  In my view, it must be part of D’s duties to actively and effectively monitor the market and the performance of the Portfolio so as to appropriately respond. This must also be part of the duties pleaded at §19E(4) of the RRASoC.

153.  D himself in his report of 19 July 2015[107] acknowledged as follows:

在過去四個月的股票市場不斷的衝擊和考驗，對楊生的組合後續將有以下操作：

1. 將股票組合進行換馬，將獲利的股票先套回本金，留下利潤滾轉！以備更多資金作對應市場之用！

2． 減少組合持股數目！

3. 在留意及預備相關造淡工具！

154.  Despite that, D had done little. As can be seen from Annex B/Sales, with the exception of several sales of relatively small quantities (notably Items 15, 18, 27 and 41 which took place in May/June 2015), there had been no sale until early November 2015, round about the time when P specifically requested D to stop loss[108].

155.  D has put forward no explanation or strategy to explain his investment decisions and inaction.

156.  Mr Yuen further submits that D had failed to provide a “coherent investment strategy on how (and when) losses of the Portfolio could be recovered ”[109]. In my view, and on the evidence, that submission is justified.

157.  In my view, and on the evidence, the Alleged §23(6) Breach has been made out.

P.6. The Alleged §23(7) Breach

158.  P complains thereby that D failed to implement his instructions within reasonable time, in that D failed to liquidate the Small Price Shares in accordance with his instructions.

159.  The following specific evidence in P/WS#1 is relevant, which I accept (some already cited above, but grouped together again here for better understanding of the issue):

25. 首先，被告人於耀才戶口為專戶資產投資的股票（除了鳳凰醫療及我以基石投資者身分得到的部分廣發證券股票外）都是未經我同意購買的。被告人亦沒有在作出該些投資之前向我解釋購買的原因。尤其是，被告人為專戶資產投資了很多市價很低的股票（“細價股”）（例如天譽置業（代號59），中國數碼信息（代號250），新宇國際（代號8068）等）。我不明白被告人為何要投資該些細價股，亦不認為該些細價股適合納入該投資組合，更不認為應該買這麼多細價股。如下文所述，我後來要求被告人把該些細價股沽出，但被告人沒有充分依照我的指示。

…

32. 除了以上的該三隻股票以外，我於大約2016年2月開始便指示被告人把耀才戶口中持有的細價股沽出。被告人在2016年3月7日的“一周報告”中亦有反映該指示，並列出需要沽出的股票…。在同一報告中，被告人表示沽出的過程正“每日進行中”。

33. 然而，被告人並沒有充分依從我的指示行事。從陳小姐供詞的附件二中顯示，被告人除了於2016年2月及3月沽出少量股票外，被告人沒有沽出其他我要求沽出的細價股。更甚的是，被告人當時基本上沒有為該投資組合採取任何其他行動。

…

38. (5) 此外，從陳小姐供詞的附件一中看到，該投資組合於2015年7月至12月期間持續出現嚴重的帳面虧損。期間該虧損於2015年9月更超過港幣7千2百萬。再者，由2016年1月開始至到2016年5月，除了上述我指示被告人沽出的細價股外，縱使該投資組合繼續出現嚴重帳面虧損，該投資組合持有的股票基本上沒有改變。

…

46. 隨後，如上文所述，於2016年2月左右，我向被告人要求他先將當時該投資組合持有的一些細價股先沽出，並與我的兒子Terry討論沽出股票的細節。我繼續向被告人要求他向我提交追回虧損的時間表，但被告人卻一直推搪。

160.  As can be seen from Annex B/Sales, the vast majority of the Small Price Shares were not liquidated until much later. In this regard, “The Experts both understand that [P] instructed [D] to sell 14 so called Small Price Shares on or around 1 February 2016, but that most of these stocks were not sold until [P] liquidated the portfolio at the end of 2016.”[110]

161.  On this issue, P/Expert summarised his views as follows[111]:

Alan Wong considers that if the purpose of the liquidation is to avoid further losses, a reasonable asset management consultant would want to sell the stock as soon as possible when the share price drops significantly and/or its trend remains downward, as further losses may be incurred if the stock is not sold. 11 out of the 14 Small Price Shares had lost between 32.61% and 74.15% of their value (before transactional fees) as of 29 January 2016.

On the Defendant anticipating a recovery

Alan Wong has not seen evidence of relevant analysis supporting that the Defendant could reasonably anticipate a bounce back of prices of these particular stocks.

On liquidity

He is of the view that the Defendant should have been able to liquidate most, if not all, of the shares of the Small Price Shares between 1 Feb 2016 and 31 May 2016 based on the average trading volumes at the time.

On the market news

Alan Wong has not seen any evidence as to what (if any) market news the Defendant had considered and, even if he did consider such market news, what analysis he conducted on the same and whether he had communicated such analysis to the Plaintiff.

In any case, a single news article cannot be the only basis for a proper market analysis. In Alan Wong’s experience, a RCAMC would consider different sources, including but not limited to newspapers, equity research and macroeconomic reports to form an opinion on the prospects of potential investments.

162.  On this issue, in the Joint Statement, D/Expert says that “[D] was not a stockbroker of [P] and had no obligation to execute the trades that [P] instructed”. I do not accept that. He also stresses the importance of investment horizon, liquidity and market news. I do not find such general assertions helpful.

163.  In his written closing, and in gist, Mr Chan submits that it was not clear what the Small Price Shares were, that there were no clear instructions from P (in particular on the target sale prices), and “P’s instructions, information available to D at the material time, the then market prices, and market news that the prices may rebound, are all factors that had to be considered. P failed to show that a RCAMC would not have behaved in the way D did, in the sale of these shares.”[112] I do not accept those submissions. I do not find those submissions justified by the evidence. I also find that they are contradicted by P/Expert’s views and analysis.

164.  I find the Alleged §23(7) Breach proved.

P.7. The Alleged §23(8) Breach

165.  P complains thereby that D failed to devise and/or put in place effective stop-loss measures.

166.  P/Expert summarises his views on this issue as follows[113]:

Alan Wong considers that a reasonably competent asset management consultant would consider the need for mapping out stop-loss strategies, taking into account:

(a) Investment objectives, expected return and risk appetite of the investor; and

(b) Macroeconomic factors, outlook of the industry in which the stock is in and performance of the stock.

Based on the information available, he has seen no evidence that the Defendant did so.

Alan Wong considers that a reasonably competent asset management consultant should have, amongst other things:

(a) proposed stop-loss prices for each stock, explain the underlying rationale and document the prices agreed with the investor in writing;

(b) monitor the share prices, and alert the investor;

(c) reassess stop-loss prices to reflect external factors or changes, or the performance of the stock;

(d) when applicable, executed stop-loss orders and liquidate the shares (if necessary, in batches).

Based on the information available, Alan Wong has seen no evidence that the Defendant followed these steps, set stop-loss prices for the 42 stocks in the Portfolio or enacted stop-loss measures during the Relevant Period to preserve the value of the Portfolio. There was also no evidence that a predetermined timeframe was set to reassess the performance of the portfolio and consider the need to rebalance the portfolio to ensure the investment objective is met.

167.  P/Expert’s views at §3.8.7 of P/Exp Report are also relevant, that:

From the bottom-up perspective, the asset management consultant would perform in-depth, targeted analysis of financial information and fundamentals for individual investments. He (or she) would identify company-specific risks and mitigating factors, and determine entry and exit prices, including target prices and stop-loss prices for each investment. These would be used to inform investment decisions throughout the period the portfolio was under management, and act as triggers to buy or sell individual stocks, as part of portfolio risk management measures.

168.  D/Expert is of the view that in the context of the Portfolio, stop-loss strategies were optional. He summarises his views at §§3.6 and 3.7 of the Joint Statement as follows:

Michael Wong considers stop-loss strategies are common among professional investors dealing with futures/derivatives trading and leveraged stock trading. They pre-set some prices to stop further loss. However, many long-term investors, especially those with no leverage (i.e. no margin trading), do not consider this kind of stop-loss strategies. These long term investors tend to periodically review fundamental factors on buying, holding and selling stocks.

The Plaintiff's stock portfolio at that time did not have any leveraging and his investment objectives were mentioned in the Services Agreement to be “long term”. Therefore, stop-loss strategies were optional and for the Defendant to consider.

In Michael Wong’s opinion, considering stop-loss measures and strategies are optional and the Defendant did not have to recommend them. He therefore has no additional comment on the implementation of such measures.

169.  I do not accept D/Expert’s views. Whilst futures/derivatives and leveraged stock trading involve higher risks, it does not mean that trading in stocks requires no stop-loss measures. At the very least, as P/Expert has pointed out, the pre-setting of target and stop-loss prices “would be used to inform investment decisions throughout the period the portfolio was under management.”

170.  When under cross-examination, D accepted that in respect of stocks, stop-loss measures are common measures which the investment industry adopts. While he accepted that he did not set any stop-loss price when he constructed the Portfolio, he said he had his own views in terms of portfolio management. He said that:

Q. 其實响你幫楊先生透過耀才戶口，响2015年3月、4月、5月所購買嘅股票嘅時候，其實你本身並沒有設定一個止蝕位，你同唔同意？

A. 因為嗰陣時啱啱開始，再加上市場嘅氣氛係向好，所以我係冇設定到止蝕位嘅。

…

Q. 係，你想解釋，你解釋吖。

A. 因為覺得成個市場嘅氣氛係繼續向上，而同期時因為我設立呢個組合嘅時候亦都係剛剛開始，亦都因為我喺設立呢個組合嘅時候，我本身都因應住呢個組合本身嘅現金狀況，或者買嘅投資產品，所以風險管理呢個諗法我係有，但係我就冇擺咗喺呢個嘅止蝕嘅行動裏面。

171.  I do not accept his views. Market trends can change. The fact that the Portfolio was just being constructed has little relevance. And even though the Portfolio was purchased with cash, risk was still involved. Further, D himself during the meeting he had with P on 19 July 2015 said, as part of the “跟進建議”, that “做嘢不能滿足楊生的基本要求，也忘記了風險管理的意識，要好好改善！！”[114]. During cross-examination, he accepted that the setting of stop-loss prices is part of risk management.

172.  Mr Chan criticises P/Expert’s suggested mechanism as being “highly inflexible and mechanical”, and that “setting up an exit price would mean that it has to be blindly executed”[115]. Those criticisms ignore the operation of the mechanism as explained and summarised by P/Expert. I do not find those criticisms justified.

173.  On the evidence, I accept P/Expert’s views. D admittedly did not set up any stop-loss mechanism. I find the Alleged §23(8) Breach established.

P.8. The Alleged §23(9) Breach

174.  P complains thereby that D failed to liquidate loss-making positions and to invest the proceeds in alternative investments.

175.  I repeat my discussions above, and in particular those on the Alleged §23(6) Breach above. For those same reasons, I am of the view that the Alleged §23(9) Breach has also been made out.

P.9. Conclusion on Agreed Issue #6(1)

176.  For the reasons set out above, I answer Agreed Issue #6(1) in the affirmative. From now on, I will remove the word “Alleged” when describing those Breaches.

P.10. Agreed Issue #6(2)

P.10.a The quantum

177.  I have concluded that all the §23 Breaches are made out.

178.  As I have mentioned above, D/Expert declines to offer assistance on the issue of quantum.

179.  P/Expert has addressed the issue. He summarises his conclusions at §3.8 of the Joint Statement, as follows:

To form his opinion, Alan Wong considered three scenarios reflecting the amount of profits (or losses) that the Plaintiff would have made (suffered), had the Defendant exercised reasonable skill and care in discharging his duties under the Service Agreement during the Relevant Period.

(a) Scenario 1 - Diversified Portfolio

in which the Defendant built a diversified portfolio in March 2015, carrying out his duty to diversify the portfolio;

Estimated loss: -HK$9,310,295 or -4.5%

(b) Scenario 2 - Small Price Shares

in which the Defendant liquidated 14 Small Price Shares on or shortly after 1 February 2016, to reflect the fact that the Defendant should have executed the selling of the Small Price Shares as he was instructed to do so by the Plaintiff;

Estimated loss: a maximum reduction of HK$1,423,583 from the actual loss in investment as at 31 May 2016.

(c) Scenario 3 - Stop loss measures

in which the Defendant set stop-loss prices for the 42 stocks in the Portfolio or took stop-loss measures during the Relevant Period to preserve the value of the Portfolio, carrying his duty to do so.

Estimated loss: -HK$38,410,257 or -18.6% with a trailing stop-loss mechanism set at a 10% loss and -HK$34,762,631 or -16.8% with a trailing stop-loss mechanism set at a 15% loss.

All scenarios were prepared with information that would have been available to the Defendant at the time of his preparing his advice. Alan Wong considers that looking at the evolution of stocks in hindsight is not helpful, as a RCAMC would not have been able to base his/her decision on data that was not available to him/her.

180.  There is no contrary expert evidence before this Court. I also myself do not see any problem with the methodology which P/Expert has adopted. I accept his views and opinions.

P.10.b. Whether cumulative

181.  Though I have found that all the §23 Breaches are made out, on the evidence before me (namely P/Exp Report), only §§23(5), 23(7) and 23(8) of the RRASoC sound in damages. I have set out §33AB of the RRASoC above.

182.  The question arises as to whether those damages should be cumulative.

183.  In P/Explanatory Memo, Mr Yuen argues that they should be.

184.  I am not satisfied that they should be. They represent alternative counterfactuals. In particular, if D had properly diversified the Portfolio, the composition of the Portfolio would have been different. There might not have been any Small Price Shares to sell, and the significance of setting up stop-loss measures (and the consequence of not setting them up) would have been very different.

185.  The alternative nature of the 3 scenarios is also apparent on the face of P/Exp Report, where P/Expert says at §5.1.4 as follows:

5.1.4 To avoid any unnecessary misunderstanding, I wish to stress the following:

(a) as previously explained, I am of the view that the Defendant should have diversified the portfolio in the first place;

(b) however, I appreciate that this is one of the aspects that the Court may have to consider at the trial, and I do not want to prejudge the outcome of this Court’s ruling;

(c) hence, as a matter of prudence and for the sake of completeness, I proceed to deal with Scenarios 2 and 3, which are included in this report as alternatives (but without prejudice) to my views expressed in respect of Scenario 1.

186.  Hence, if necessary:

(a) I would assess damages for breach of duty on the basis of the §23(5) Breach only in relation to D’s failure to diversify;

(b) The amount of HK$9,310,295 concluded by P/Expert is the amount of loss that would have been reduced to. Hence, the amount of loss which could have been avoided would be HK$46,061,616 (Total Loss less HK$9,310,295);

(c) That would be the amount of damages I would assess at.

P.10.c. §33A vs §33B of the RRASOC – Agreed issue #6(2)(b)

187.  I have mentioned above that if P is to be successful in his claim for Guaranteed Profit and loss to the AUM, there would no longer be any basis for him to seek relief in relation to the loss which would have been avoided or reduced.

188.  In relation to breach of fiduciary duty, P is no longer pursuing the same.

P.10.d. The market crash

189.  Mr Chan asserts in his written closing[116] that “but for any alleged breach, the Portfolio would still be making a loss (even in P’s expert’s hypothetical scenarios), given the 2015 Market Crash.”

190.  I have considered the following cases which Mr Yuen cites: Rubenstein v HSBC Bank plc [2012] 2 CLC 747 at §103, Richly Bright International Ltd v De Monsa Investments Ltd (2015) 18 HKCFAR 232, §§28-41, David Rocker v Full Circle Asset Management [2017] EWHC 2999, §295 and廈門新景地集團有限公司 v Eton Properties Ltd [2024] HKCFI 1291, §§79-82. I note that the amount of avoidable loss is worked out with reference to the analysis and opinion of P/Expert. D/Expert has declined to assist. There is no contrary and countervailing expert view. Mr Chan’s assertion on causation is not supported by any analysis or expert opinion. I accept P/Expert’s opinion in this regard.

P.10.e. Whether floating loss – Agreed issue #6(c)

191.  I repeat my discussion above on D’s alternative case on contractual interpretation. For those same reasons, I answer Agreed Issue #6(c)(i) and (ii) both in the negative.

P.10.f. P’s breach or failure to mitigate?

192.  Agreed Issue #6(2)(d) makes reference to §§15A(3) and (4) of the RAD&CC, which reads as follows:

(3) Without prejudice to the aforesaid, further and/or alternatively, [P’s] breach of the Service Agreement, breach of duty and/or negligence contributed to the alleged loss (if any, which is not admitted), and [D] is entitled to diminish his liability accordingly; and

(4) Without prejudice to the aforesaid, further and/or alternatively, [P] failed to mitigate his alleged loss (if any, which is not admitted).

193.  I repeat my discussions above, and in particular those on Agreed Issue #1. I find no breach by P.

194.  The pleading of mitigation is grossly inadequate, lacks particulars, and is nothing but a bare assertion. D has failed to discharge the onus on him to establish failure to mitigate on P’s part.

195.  I answer Agreed Issue #6(2)(d) in the negative.

Q. Agreed Issue #9

196.  I next consider Agreed Issue #9. It asks:

9. (1) Did P repudiate the Service Agreement on 3 August 2016 as alleged by D?

(2) If answer to (1) above is in the affirmative:

(a) what was the loss and damage caused by P; and

(b) is D entitled to damages as pleaded in his [RAD&CC] §§31-33?

197.  I repeat my discussions above, and in particular those on Agreed Issues #1 and #6.

198.  Given D’s breaches and their nature, I find that P was clearly entitled to terminate the Service Agreement as he did. I accept Mr Yuen’s submissions in this regard[117].

199.  I answer Agreed Issue #9(1) in the negative. Agreed Issue #9(2) is not engaged.

R. P’s claim for Service Fees

200.  Whilst P at §(3) of the Prayer claims “Service Fees Paid to [D] (for the period from 1st April 2015 to 30th September 2015 for HK$800,000.00)”, the legal basis of the claim has not been pleaded. In his written opening, written closing, the P/Explanatory Memo and Annex A attached thereto, Mr Yuen does not address this claim.

201.  I find this part of the claim not established.

S. D’s Counterclaim

202.  For those same reasons set out above, I find D’s Counterclaim not made out, which I dismiss.

T. Conclusion and disposition

203.  For the reasons set out above, I find P’s case on Profit Guarantee and Total Loss proved. I have also expressed my views on P’s claim on breach of duties. Whilst I am of the view that the §23 Breaches are made out, they do not bear upon the terms of this Judgment on P’s Profit Guarantee and Total Loss claims, and do not sound in any further damages.

204.  I enter Judgment in favour of P in the following terms, that D do pay P the sum of HK$84,316,928.36 on the claim with interest.

205.  I dismiss D’s Counterclaim.

206.  I make the following orders nisi, absolute within 14 days:

(a) The judgment sum of HK$84,316,928.36 carries interest at 1% over prime rate (being the prime rate issued by the Hongkong and Shanghai Banking Corporation as at the date of this Judgment) from 15 August 2016, until the date hereof and thereafter at judgment rate until payment; and

(b) The costs of the action (including all costs reserved) on the High Court scale be paid by D to P, with certificates for two counsel, to be taxed if not agreed.