POON KAI MING AND ANOTHER v. LI TUNG CHEUNG MARTIN

HCA 188/2018

[2020] HKCFI 3139

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 188 OF 2018

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JUDGMENT

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1.  The subject matter in these proceedings is the beneficial ownership of 60% of the issued shares of Kai Cheung International Pharmaceutical Limited (啟璋(國際)藥業有限公司) (“Kai Cheung”). At all material times, the defendant (“D”) was and is the registered owner of all the issued shares of Kai Cheung. The plaintiffs (“Ps”) are claiming that at all material times, D was and is holding 30% of the shares on trust for the 1^st plaintiff (“P1”), and another 30% on trust for the 2^nd plaintiff (“P2”). These are denied by D.

2.  From about mid-2006 to about mid-2020, Kai Cheung was the vehicle operating a pharmacy known as Richland Pharmacy (啟豐中西藥房) (“Richland”) at Shop No.59C, G/F, Richland Garden, No.138 Wu Chui Road, Tuen Mun, New Territories (“the Shop”).  Unless otherwise specified, the terms “Richland” and “Kai Cheung” are used interchangeably in this judgment.

3.  P2 is the younger brother of P1.

THE PARTIES’ RESPECTIVE CASES

4.  Ps’ pleaded case is as follows:

(1)  At all the material times

(a)  P1 was and is a businessman in Hong Kong having business dealings in operation of pharmacies, and the proprietor of a wholesale business for supplying products to pharmacies in Hong Kong through his company Poon’s Pharm (USA) Medicine Limited (“Poon’s Pharm”);

(b)  P2 was an employee at various pharmacies until he became a partner in the business of Richland;

(c)  D was an employee at various pharmacies, including having worked as a subordinate of P2, until D became a partner in the business of Richland.

(2)  In around early 2006, P2 (who was then working in a pharmacy in Tuen Mun) wished to start up a pharmacy business of his own. In around April 2006, P2 was informed that a pharmacy was up for sale in the Tuen Mun area.  P2 immediately sought advice from P1 on whether P2 should purchase that business, since P1 was experience in operating pharmacies.  P1 advised P2 that P2 should locate another partner who could assist in the management of the proposed business, as P1 was busy with his own businesses.

(3)  In around April 2006, P2 approached D and inquired as to whether D was interested in starting a pharmacy business together with P1 and P2.  D expressed an interest in the proposal.  Subsequently, P1, P2 and D met and discussed the details of their proposed business and they agreed that (“the 2006 Agreement”):

(a)  P1 would coordinate the setting up of the business as both P2 and D had no previous experience in setting up a pharmacy;

(b)  the anticipated total investment would be around HK$600,000; and

(c)  P1, P2 and D would each contribute a sum of HK$200,000 to the proposed business in return for a 1/3 interest in the business.

(4)  In about June 2006, P1, P2 and D agreed with the previous operator of the pharmacy business at the Shop (ie Ng Shing Lin (“NSL”)) to purchase the same in the sum of HK$192,000.  After acquiring the pharmacy business, they renamed the pharmacy as Richland.

(5)  Kai Cheung was incorporated on 31 July 2006 as the vehicle to run Richland.

(6)  Of the total investment of HK$600,000:

(a)  HK$200,000 was provided by D in making payment of HK$80,000 towards the purchase price of the pharmacy business and by incurring other costs in relation to the setting up of Richland;

(b)  HK$200,000 was provided by P2 in making payment of HK$112,000 towards the purchase price of the pharmacy and by incurring other costs in relation to the setting up of Richland; and

(c)  HK$200,000 was provided by P1 by (i) making a cash contribution of HK$100,000 on 20 September 2006, (ii) paying HK$6,000 as the incorporation fee to the accounting firm incorporating Kai Cheung, and (iii) supplying goods from Poon’s Pharm to Richland with the value of HK$93,400 without demanding any payment.

(7)  P1, P2 and D agreed that D would be the only registered shareholder and director of Kai Cheung, but each of them would be a 1/3 beneficial owner of the company.  The reason for registering all the shares under D’s name was that D was supposed to be the one holding the pharmacy licence of Richland and a main manager of the business.

(8)  From about September 2006 (when Richland commenced trading) up to about June 2011, both P2 and D had been in charge of the daily management and finance of Richland.  Since June 2011, D was solely responsible for the management of Richland.

(9)  From time to time, D would report to Ps the operation of Richland and distribute profits in accordance with the beneficial shareholdings of 1/3 to each party.  P1, P2 and D would also jointly make major decisions affecting Richland.

(10)  In about June 2011, P2 invited Tsang Yung Ping (“Tsang”), who was then an employee of Richland, to join the business as a beneficial shareholder and it was expressly agreed by P1, P2, and D that Tsang would hold 10% interest in Kai Cheung in consideration of a payment of HK$150,000 from Tsang to the business.  D would continue to be the sole registered shareholder.  As a result, P1, P2, D and each has 30% beneficial interest, and Tsang has 10% beneficial interest in Kai Cheung after June 2011.

(11)  Since June 2011, D continued to be entrusted with the daily management and finance of Richland.

(12)  Since about May 2015, P1 and P2 were informed of the amount of sales from Richland on a daily basis through a computer system known as POS.

(13)  Despite repeated demands from Ps since August 2017, D has failed and refused to recognize Ps’ interest in Kai Cheung and has failed and refuse to transfer the respective shareholdings in Kai Cheung to Ps.

5.  Ps have called the following witnesses to give evidence at the trial in support of Ps’ case:

(1)  麥得永 (“Mak”)

(2)  林立志 (“Lam”)

(3)  張偉強 (“Cheung”)

(4)  Loo Yat Wa (“Loo”)

(5)  蔡敏聰 (“Choi”)

(6)  陳家樂 (“CKL”)

(7)  廖國權 (“Liu”)

(8)  蘇燕婷 (“So”)

(9)  潘啟國 (“KK Poon”)

(10)  吳柏麟 (“NPL”)

(11)  陳嘉茵 (“CKY”)

(12)  鄧淦中 (“Tang”)

(13)  P2

(14)  P1

6.  D’s pleaded case is as follows:

(1)  D had been working in the pharmacy market for some time prior to opening Richland.  D through a friend found the opportunity to procure the ownership of a pharmacy.  In order to raise the funds to buy this pharmacy, apart from using his own money, D remortgaged his own flat and obtained a loan from his mother-in-law.  No money in the amount paid to the previous operator of the relevant pharmacy was obtained from Ps.

(2)  D was and is the sole beneficial shareholder of Kai Cheung.  It is denied that P1 and/or P2 has any beneficial interest in Kai Cheung.

(3)  D has been at all material times wholly in charge of the daily management and finance of the business of Richland as it is his solely owned business.

(4)  POS was set up in about May 2015 in Richland and it was D who introduced the setting up of POS to P1 as an aid to speedily monitor the supply and replenishment of pharmaceutical products by Poon’s Pharm to Richland.

(5)  The HK$150,000 from Tsang, an employee of Richland, was a personal loan from Tsang to D.  The agreement alleged in Ps’ case in relation to the acquisition of 10% beneficial interest in Kai Cheung by Tsang by this sum is denied. 

7.  D has called the following witnesses to give evidence at the trial:

(1)  D

(2)  Tsang

(3)  NSL

(4)  Kwok Wan Kin (“Kwok”)

(5)  Yam Kit Ying (“Yam”)

8.  As revealed in the pleadings, the core issue in these proceedings is whether the 2006 Agreement pleaded in Ps’ case is true or not true.  P’s pleaded case is that at the time of the establishment of Richland, “the parties expressly agreed that [D] would become the sole registered shareholder and director Kai Cheung, but each of [P1], [P2], and [D] would have 1/3 beneficial interest in Kai Cheung”[1]^.  Mr Kay KW Chan, counsel for D, has agreed that if the case pleaded by Ps is proved, Ps would succeed in these proceedings.

THE AGREED FACTS

9.  Mr Alexsander Wong, counsel for Ps and Mr Chan for D have helpfully provided me an agreed statement of facts (“the Agreed Statement of Facts”), in which the parties have agreed, inter alia, the following:

(1)  P2 was an account signatory of Kai Cheung’s HSBC Bank Account from 2006 to 2011.

(2)  Before Richland stopped using POS on 19 July 2017, Richland had sourced their goods from suppliers including Kam On Group[2].

(3)  Since Richland stopped using POS on 19 July 2017, Richland did not source further goods supplied from Ps and Kam On Group.

(4)  Kai Cheung was set up as a corporate vehicle to operate Richland.

(5)  The setup costs of Richland are about HK$600,000.

(6)  During the initial stage of Richland’s business, P2 had provided funds of about HK$200,000.

(7)  On 7 August 2017 at about 2:21 pm, at the Shop, the following took place:

(a)  One of 5 unidentified men, who arrived with Ps (but see subparagraph (8) below), said “呢次警車，下次可能白車，遲啲可能黑箱車……”

(b)  D responded “黑箱車即係你恐嚇㗎啦喎而家” and “唔緊要㗎，我呢10年裡面有咩嘢風吹草動呢，我第一個搵你”.

(8)  The events at subparagraph 7(a) and (b) above occurred in the absence of Ps.

(9)  P1 had paid Kai Cheung a sum of HK$100,000 on 20 September 2006.

10.  Ps have filed witness statements made by 21 witnesses.  At the beginning of the trial, I asked Mr Wong whether it would be really necessary for Ps to call all these witnesses to give evidence at the trial.  I told Mr Wong that some witness statements might merely touch upon peripheral matters.  After taking instructions, Mr Wong told me that he decided to reduce the number of Ps’ witnesses to 14.  Further, Ps would not rely upon some paragraphs in the witness statements of these 14 witnesses (“the paragraphs not relied upon by Ps”) in support of Ps’ case.

11.  The parties have agreed that no weight should be given to the witness statements of the 7 witnesses on Ps’ side who have not attended the trial to give any oral evidence.  The parties have also agreed that no weight should be given to the paragraphs not relied upon by Ps.  All these have been set out in the Agreed Statement of Facts.  As agreed by the parties, I give no weight to all these in my deliberation.

THE PRINCIPLES

12.  Ps’ case is a case of express trust.  In considering whether the express trust pleaded by Ps is true, the court is entitled to take into account the events occurred prior to the establishment of the alleged trust, as well as conducts after the establishment of the alleged trust.  In Leung Wing Yi Asther v Kwok Yu Wah[3], Stock NPJ said:

“55. A question canvassed in the course of argument before this Court was whether those earlier and later events were admissible as evidence of intention at the time of transfers. It seems to me that they were and that the issue was one of weight. In the context of a question whether evidence of conduct subsequent to the registration of shares in the names of the children was admissible to rebut the presumption of advancement, it was held in Shephard v Cartwight that whereas acts and declarations of the parties before or at the time of the transaction or so immediately after it as to render it a part of that transaction are admissible ‘either for or against the party who did the act or made the declaration … subsequent declarations are admissible as evidence only against the party who made them, not in his favour.’ The modern approach is less rigid in relation to evidence of subsequent conduct:

… it does not follow that subsequent conduct is necessarily irrelevant.  Where the existence of an equitable interest depends upon a rebuttable presumption or inference of the transferor’s intention, evidence may be given of the subsequent conduct in order to rebut the presumption or inference which would otherwise be drawn. [Tribe v Tribe [1996] Ch 107, 129 (Millett LJ), as he then was.  See also Lavelle v Lavelle]”

“56. As a matter of common experience, contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event, especially in the case of ‘self-serving statements or conduct of the transferor, who may long after the transaction be regretting earlier generosity.’ That rationale is not restricted to evidence in rebuttal of presumptions but embraces any evidence from which an inference of the transferor’s intention may properly be drawn.” (Emphasis added)

13.  In respect of evaluating the evidence given by witnesses, a valuable summary of the relevant principles can be found in Hui Cheung Fai and another v Daiwa Development Limited^[4], in which DHCJ Eugene Fung SC said:-

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

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

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

80.I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).”

14.  Similar guidance can also be found in Lee Fu Wing v Yau Po Ting Paul[5], in which DHCJ Au (as he then was) said:-

“53. In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations the following:-

(1) Whether the party’s case is inherently plausible or implausible.

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

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

(4) The demeanour of the witnesses.”

15.  The rule in Browne v Dunn has been referred to in counsel’s submissions.

(1)  The rule in Browne v Dunn is a rule of practice or procedures designated to achieve fairness to witness and a fair trial between the parties^[6].

(2)  The applicability of the rule has been explained by DHCJ Reyes (as he then was) in Kaifull Investments Ltd v. The Commissioner of Inland Revenue,^[7]:

“(1) The general principle is that, where an attack on a witness' evidence is to be made, notice should normally be given to the witness in cross-examination of the nature of the attack if such is not otherwise obvious.

(2) There is no breach of the principle if the witness knew or ought to have known that his version of events was being challenged or that adverse inferences might be drawn against him.

(3) Even if the procedural rule is transgressed, it does not inexorably follow that matters which have not been put to a witness in cross-examination cannot be relied on. It may be a question of the weight to be given to a witness' testimony taking into account all the available evidence. Thus, for example, a witness' evidence may be so incredible as to be incapable of belief or his evidence may be unsupported or contradicted by known facts and contemporaneous documents.

(4) The principle does not inflexibly require every point which might be used against the witness to be put to him. There can no hard-and-fast rule. The paramount consideration is fairness to the witness. In essence, the principle is breached if in all the circumstances an omission to cross-examine on a specific point is unfair to a witness.” (Emphasis added)

16.  With all these principles in mind, I turn to analyse the evidence in this case.

EVIDENCE OF THE MAJOR WITNESSES

17.  No doubt the major witnesses in these proceedings are P1, P2 and D.  Having considered their evidence and the other evidence in this case, I am of the view that P1 and P2 are honest and reliable witnesses.  At the same time, I consider D as an untruthful and unreliable witness.  I accept Ps’ evidence and refuse to accept D’s evidence.

18.  There is no dispute that in about 1997, P2 began working at a pharmacy called 龍華藥行.  P2 met D since about 1999 when D also joined 龍華藥行and worked as a subordinate of P2 until 2006.

19.  Ps and D touched upon the following areas in their respective evidence:

(1)  Events leading to the setting up of Richland;

(2)  Whether Ps have ever made contributions to the setting up fees of Richland;

(3)  Whether Tsang has ever become a 10% beneficial shareholder of Kai Cheung;

(4)  Other matters relevant to the dispute concerning the beneficial ownership of Kai Cheung;

(5)  Events leading to the fall out; and

(6)  Aborted transfer of Johnson Pharmacy (莊臣藥房) (“Johnson”, operated by a vehicle called Johnson Pharmaceutical Limited) by D to Ps.

Setting up of Richland

20.  In his evidence, P2 said in about April 2006, P2 was informed by Choi, a salesperson of pharmaceutical products whom he had frequent contact with, that a pharmacy in Tuen Mun was up for sale, which P2 was interested in acquiring.  After knowing that investment opportunity, P2 first approached P1 for advice.  While P1 was interested, he advised P2 to locate another business partner to assist in the management of the new pharmacy to be acquired.  Thereafter, P2 informed D of this and invited D to join in.

21.  As to the source of knowledge of this investment opportunity, D is evasive and is unwilling to reveal the truth.

(1)  In [6] of his Amended Defence, it is pleaded that that D came to know the sale of the pharmacy through a “friend”.  In D’s witness statement, it is stated that this information came about from a “colleague”. In his oral evidence, D attempted to define the term “colleague” in his witness statement as “someone in the same profession” rather than the usual meaning “someone in the same company”.

(2)  Under cross-examination, D said that Choi was only one of the persons who informed him of this.  He claimed that he could not remember the name of the friend mentioned in his Amended Defence and the name of the colleague stated in his witness statement.  Subsequently, D said that the colleague’s surname was Lau.  However, at a later time, D claimed that Lau in fact heard the news from Choi.  Ultimately, D said that “a friend” in the Amended Defence in fact was referring to Choi.  However, this allegation is contradicted by the evidence given by Choi.  In his evidence (which is accepted by this court), Choi said that he was not too close to D at that time and did not reveal the news to D.

22.  Obviously, P2’s evidence on this point is clear and straightforward, while D’s evidence on the point is convoluted and evasive.  In my judgment, D tried to allege that he learned the investment opportunity from an independent source and not from P2, for D wanted to paint a picture that the setting up of Richland was something unrelated to Ps.  I am of the view that the truth is the version mentioned by P2, and D’s evidence on the point is untrue.

23.  Ps’ evidence is that in early May 2006, P1, P2, and D met to discuss the proposed business.  After discussion, all of them agreed that:

(1)  P1 would coordinate the setting up of the business as both P2 and D had no previous experience in setting up a pharmacy; and

(2)  The total investment of the business would be HK$600,000, and each of them would contribute HK$200,000 to the business in return for a one-third interest in the business.

24.  Both P1 and P2 said in their evidence that at the time of the incorporation, the Chinese name of Kai Cheung was “啟章(國際)藥業有限公司”.  On 17 August 2006, the Chinese name was changed to “啟璋(國際)藥業有限公司”.  The name “啟璋” was intended to reflect the names of both Ps and D (ie “啟” for “啟民” and “啟明”; and “璋” for “李同璋”).  Ps’ evidence on this point has not been challenged under cross-examination.  The evidence on this point therefore is undisputed.  In my view, this evidence has provided a strong support to Ps’ case that Richland is not solely owned by D, but is a joint venture in which both Ps and D have interests.

25.  That Richland is a joint venture started by Ps and D is also supported by a WhatsApp message from P1 to D on 5 November 2016, in which P1 said “啟豐集團是我們三人建立…”.

26.  The pharmacy business on sale as well as the Shop were owned by a NSL.  There is no dispute that Ps and D were involved in the negotiations with NSL.  Ps’ case is that since the new business would be owned by Ps and D, all the 3 of them participated in the negotiations with NSL. D’s case is that Ps only participated in the negotiations with NSL as D’s friends and advisors. In my view, Ps’ case is the truth, and D’s case is untrue.

(1)  Ps’ case is supported by P1’s WhatsApp message on 24 January 2017 in the group “啟豐藥房(集團)股東會” where P1 wrote “… 三兄弟和業主一齊商討租金的一晚都歷歷在目…”.  On the other hand, apart from D’s bare allegations, D’s case is not supported by any other evidence.

(2)  D admitted that P1 did assist in the negotiations, but at the same time D said that he had never revealed his interest in acquiring NSL’s pharmacy business to P1.  D’s evidence is inherently improbable.  Even on D’s own case, P1 was helping D in the negotiation process with NSL.  Had D never revealed his intention of acquiring NSL’s pharmacy business, P1 would not have had offered any help to D in the negotiations with NSL.

(3)  In [6] of the Amended Statement of Claim, it is pleaded “[i]n about June 2016, [P1], [P2], and [D] agreed with the previous operator of a pharmacy to purchase the same for the sum of HK$192,000.” This plea is partially admitted by D in [7] of his Amended Defence, in which D said “[s]ave that HK$192,000 was paid by [D] to the previous operator of a pharmacy in acquiring the pharmacy which D operated under the name of [Richland], paragraph 6 is denied.”  However, in his evidence, D sought to resile from the admission that the agreed acquisition fee paid to NSL was HK$192,000 and said that the sum paid to NSL was more than HK$192,000.  The inconsistency between his own pleading and his evidence shows that D’s evidence concerning the negotiation process is unreliable.

Ps’ contributions

27.  It is an agreed fact that during the initial stage of Richland’s business, P2 provided funds of about HK$200,000.  However, in [4] of his witness statement, D in fact has admitted that the amount provided by P2 to him is exactly HK$200,000.

28.  It is also an agreed fact that P1 paid Kai Cheung a sum of HK$100,000 on 20 September 2006.

29.  Ps’ case is that these are the contributions made by them pursuant to the 2006 Agreement.  D is saying that these are loans provided by Ps to him to assist him to set up Richland, and these sums are not Ps’ investments in Richland.  D also claims that he has repaid the same to Ps.

30.  These alleged loans have not been mentioned in the Amended Defence.  On the contrary, it is emphasized in the Amended Defence that all the funds used in setting up Richland are D’s own money.  In the Amended Defence, it is pleaded:

“6. … No money in the amount paid to the previous operator of the relevant pharmacy was obtained from the Plaintiffs.

……

9. Save that the total investment of HK$600,000 in setting up Richland Pharmacy was wholly incurred and paid by the Defendant, paragraph 8 is not admitted.” (Emphasis added)

31.  After the pleadings stage, Ps disclosed documents relevant to the issues in these proceedings, among which there is a handwritten document showing that P2 did pay some money for the setting up of Richland[8], and a deposit slip showing that P1 deposited HK$100,000 into Kai Cheung’s account on 20 September 2006[9]. Mr Wong submits that after seeing these documents, D came to realize that it would not be possible for him to deny that Ps did make contributions in the setting up of Richland, and hence D tried to describe these contributions as loans in his witness statement.  After considering all the evidence, I agree with Mr Wong and accept his submission.

32.  In my judgment, D’s evidence on the alleged loans is inherently improbable and must be rejected.

(1)  D could not remember when P2 offered to lend him money.  D’s evidence is that he hired P2 to work in Richland.  According to D, it was after he had agreed to hire P2 that P2 agreed to lend him money. 

(2)  D also could not remember whether it was P2 who first offered to lend him money or whether it was he who requested P2 to lend him money.  In my view, setting up Richland is the start of his own business in D’s lifetime.  It is inherently improbable that D would forget whether it was him who requested P2 to lend him money to help him to start his own business.

(3)  D said that he had told P2 that he did not have enough money.  However, it was also D’s evidence that he had already paid all the acquisition money to NSL before hiring P2.  If that is the case, D should not be in urgent need of funds.

(4)  D said that he had never told P2 how much more money he needed.  It is inexplicable why the amount of the loan would be HK$200,000, no more and no less.  The figure HK$200,000, according to D’s evidence under cross-examination, was P2’s idea. This is inherently improbable.  Without any clue from D, P2 would not be able to know how much more money D would need in order to set up Richland.  P2 would not just plug a figure in the air.

(5)  D further alleged that P2 had offered to ask his brother P1 to lend D money if D was still in need of further funds.  Under cross-examination, D said that the figure HK$100,000 was not mentioned by P2.  D was not certain whether he told P2 that P2’s loan was not enough.  After further questioning, D said he told P2 that he wanted more liquid cash for the business.  However, eventually D has not explained why the alleged loan from P1 would be in the sum of HK$100,000.

(6)  D claimed that Ps agreed to lend him money without discussing any repayment terms or interest with him.  The sum HK$300,000 was not a small amount in 2006.  According to D, his own residential property was worth just over a million dollars at that time.  In my view, it is inherently improbable that a substantial loan of HK$300,000 was left without any repayment term.  It is worth to note that according to D, he and P1 did not have a close relationship at that time.  In this context, the allegation that P1 was willing to lend HK$100,000 to D without any repayment term is inherently improbable.

(7)  When being asked why he did not mention the alleged loans from Ps in the Amended Defence, D said that because he had returned the money to Ps.  This explanation is contrived and cannot be accepted.  At [6] of the Amended Defence, D pleaded that in order to raise funds to buy the pharmacy business, he remortgaged his own flat and obtained a loan from his mother in law.  Naturally, if the HK$200,000 from P2 and the HK$100,000 from P1 were also loans provided to D to enable D to set up Richland, these loans should also be mentioned in [6] of the Amended Defence.

33.  D’s case is that he had repaid the alleged loans to Ps in June 2011 by a cheque dated 22 June 2011 in the sum of HK$330,000 payable to P1 and drawn by Kai Cheung.  Ps’ case is that the sum of HK$330,000 was Kai Cheung’s investment in the Kam On Group.  Ps’ evidence is that P1 invited P2 to invest in Kam On Group for a 20% interest by injecting HK$880,000 into Kam On Group.  Eventually, P2 decided to take up the 20% interest in the Kam On Group jointly with D and P1.  The investment of HK$880,000 in the Kam On Group consisted of HK$330,000 from P2, HK$220,000 from D, and HK$330,000 from Kai Cheung. Having considered the evidence, I agree with Ps and refuse to accept D’s case.

(1)  Ps’ case is supported by P1’s WhatsApp message in the “啟豐藥房(集團)股東會” on 24 January 2017, in which P1 stated:

“金安藥房股東提出退股事項: 潘啟民出資$330,000萬 亞同出資$220,000萬 啟豐藥房33萬……”

(2)  According to D, he had sufficient cash in 2009 because he successfully sold his property in that year.  He said that in June 2011, he used the sale proceeds to make a repayment of HK$330,000 to Ps (apart from the principal of HK$300,000, D1 out of his own motion voluntarily paid an interest of HK$30,000) and to make another payment of HK$220,000.  If that is the case, there is no reason why D did not repay the loans to Ps in 2009 but had to wait until 2011.  Further, there is also no reason why D have to place the money into Kai Cheung’s bank account before issuing a cheque to repay the loans, as the loans were made to him personally.

(3)  There is no dispute that D paid HK$220,000 to P1 by D’s personal cheque dated 3 June 2011.  In his oral evidence, D refused to accept that this payment was his investment in Kam On Group.  D claimed that this payment was a loan to Ps.  When pointed out to D that this was the first time he mentioned this, D claimed that he did raise this matter in his witness statement.  However, what has been mentioned in his witness statement is this:

“7. In or about 2011, Kai Ming told me that the Kam On Pharmacy has 2 shops to sell for about $4 million but they did not have sufficient money and they needed to raise money. They persuaded me to invest. As they have helped me before, I wanted to repay their favours to me and I gave them 2 cheques, one is my company’s cheque no. 421471 for $330,000.00 dated 28 June 2011 being the repayment of the loan of $300,000 to them and the other is my personal cheque no. 562656 for $220,000.00 dated 3 June 2011 for investment in Kam On, making a total of $550,000.00.” (Emphasis added)

(4)  When being shown what he had stated in his witness statement, D simply said that his witness statement was wrong.  D claimed that he never accepted that he had invested in Kam On Group.

(5)  D’s oral evidence is not only contradicted by D’s own witness statement, but also by the witness statement of his wife, Yam. In her witness statement, Yam said:

“6. …… In 2011, my husband told me that he wanted to use the profits from the sale in 2009 of our joint property to pay off his loans and to invest in a pharmacy called the Kam On Pharmacy. ……” (Emphasis added)

(6)  D’s denial as to the nature of the HK$220,000 is incapable of being believed.  In my view, D tried to deny that the HK$220,000 was his investment in Kam On Group, for he realized that this point would be in line with P1’s WhatsApp message as set out in subparagraph (1) in the above, and that message would damage his case.

34.  In my judgment, the HK$200,000 from P2 and the HK$100,000 from P1 are not loans as alleged by D, but are Ps’ contributions to Richland in accordance with the 2006 Agreement.

35.  Ps’ case is that apart from the HK$100,000 set out in the Agreed Statement of Facts, P1 has also contributed another HK$100,000 to the Richland’s business by the following means:

(1)  paying HK$6,600 as the incorporation fee of Kai Cheung;

(2)  paying HK$800 as the accounting expenses of filing the annual return of Kai Cheung in 2007;

(3)  supplying goods from Poon’s Pharm to Richland between September 2006 to June 2007 without demanding any payment, and the total of the value of the goods provided to Richland without requiring any payment is HK$92,600.

All these are denied by D.

36.  As to the HK$6,600, Ps’ case is that this is the incorporation fee of Kai Cheung levied by the accountant Tommy Tam (“Tam”).  P1 instructed Tam to incorporate Kai Cheung and P1 had handled all of the communication with Tam.  P1 also paid the incorporation fee.  The documentary evidence produced by Ps in support of their case is a handwritten record kept by P2[10], on which P2 wrote “商業登記$6600  哥哥已付”.

37.  No evidence, let alone convincing evidence, has been adduced by D to cast any doubt on Ps’ case concerning the HK$6,600.  D did not say it was him who liaised with Tam in respect of the incorporation of Kai Cheung.  Further and importantly, D did not say that the incorporation fee was paid by him.  In fact, it seems that D did not have much knowledge of the incorporation fee.  D claimed that he knew that the incorporation fee was HK$6,600, for there was a payment advice with that figure thereon.  However, in fact no such payment advice has been produced by the parties in these proceedings.  The only documentary evidence on the HK$6,600 is the handwritten record made by P2 as said in the above.

38.  As to the HK$800, it cannot be disputed that the sum was paid by P1.  Ps have produced the email exchanges between P1 and Tam in 2007.  The original payment advice concerning this HK$800 was kept P1.  Mr Chan has fairly accepted that in the normal course of events, the original payment advice would be with the person who paid it.

39.  As to the HK$92,600, Ps have produced the accounting records of Poon’s Pharm showing provision of goods to Richland (“the Account Records”)[11] in support of their case.  The authenticity of the Accounting Records is not challenged by D.  In fact, D did not deny that Poon’s Pharm did provide the goods to Richland between September 2006 and June 2007 as set out in the Accounting Records.  D claimed that Richland had made full payments for these goods.

40.  P1 explained the Accounting Records in his evidence.  According to P1, the remarks on the records were entered on his instructions.  It was stated in the remarks that the total value of the goods provided to Richland was HK$96,539.60, and there was a payment of HK$3,939.60 by a cheque with the number 123149.  The balance (ie HK$92,600) was the investment in Richland.

41.  Mr Chan submits that there is doubt in Ps’ evidence concerning the HK$92,600.  Mr Chan says that the figure in Ps’ witness statements and in Ps’ Amended Reply is HK$93,400, not HK$92,600.  Further, Ps have not produced a copy of the cheque with the number 123149.  With respect, I am of the view that there is no merit in these criticisms.

(1)  P1 explained in his evidence that at the early stage of these proceedings, he could only remember that he paid the incorporation fee of HK$6,600.  At that time, he was under the impression that apart from the HK$100,000 deposited into Kai Cheung’s account, the remaining HK$100,000 were provided by him by paying the incorporation fee of HK$6,600 and providing goods to Richland with the value of (HK$100,000 – HK$6,600) = HK$93,400.

(2)  He could only start to remember that he also paid the accounting expenses of HK$800 after discovering the relevant payment slip in about August 2018.  Further, he only reprinted the Accounting Records in December 2018.

(3)  For these reasons, the figure HK$93,400 stated in Ps’ witness statement and in Ps’ Amended Reply is incorrect, and the correct figure should be HK$92,600.

(4)  It has to be borne in mind that there is no challenge against the authenticity of the Accounting Records by D.  That being the case, whether a copy of the cheque with the number 123149 has been produced is not material.  The criticisms made by Mr Chan in his submissions are in fact neither here nor there.

42.  In his evidence, D claimed that he had made full payments in respect of all the goods provided to Richland by Poon’s Pharmacy. However, no documentary evidence has been produced by D in support of this claim.  If the HK$92,600 have been paid, there would certainly been documentary evidence showing the same, for example, the cheque(s) issued by Kai Cheung for the purpose of effecting the payment(s), the receipt(s) issued by Poon’s Pharmacy.  In the absence of any documentary evidence proving the full payment alleged by D, I refuse to accept D’s evidence.

Tsang as a 10% beneficial shareholder

43.  Ps’ case is that Tsang became a 10% beneficial shareholder of Richland by making a contribution of HK$150,000 in about June 2011. D’s case is that the HK$150,000 was a personal loan from Tsang to D. Interesting, although D has pleaded a positive case on the HK$150,000 in the Amended Defence, D has not filed any witness statement on this point.  Even in the witness statement of Tsang filed by D, the alleged loan of HK$150,000 has not been mentioned.

44.  It is common ground that both Ps and D would call Tsang as “越南”.

45.  In my view, there is clear evidence in support of Ps’ case on this point.

(1)  In the WhatsApp message from P1 to D on 5 November 2016, P1 specifically mentioned that Tsang had a 10% interest in Richland.  In D’s reply message on 6 November 2016, D confirmed that the adding of Tsang as a 10% beneficial shareholder to Richland was at the request of P2.

(2)  On 23 January 2017, P1 established the WhatsApp group “啟豐藥房(集團)股東會” and included Tsang in the group.  P2 and D were also included in the group.  D said that he was not surprised when seeing Tsang was included in this group, for Tsang would be present every time at all the meal gatherings.  D’s explanation is unconvincing.  In my view, the fact that Tsang was included in this group and D was not surprised by this shows that Tsang is a 10% beneficial shareholder of Richland as suggested by Ps, and D has knowledge of this.

(3)  On 10 April 2017, P1 sent an intended public announcement to the “啟豐藥房(集團)股東會” group inviting comments from shareholders of Richland, including Tsang.

(4)  In late April 2017, P2 had in the WhatsApp group “啟豐藥房(集團)股東會” asked Tsang and D to attend a shareholders’ meeting of Richland.  Tsang gave a reply and indicated that he would attend.

46.  The only evidence from D on this point is that under cross-examination, D attempted to say that Tsang had in fact lend him HK$150,000 as a personal loan, not in June 2011 but at a time in 2010 or 2011.  This has not been mentioned in D’s witness statement at all.  In any event, D’s allegation is inherently improbable.  According to D, he was cash-rich after selling his property in 2009.  That being the case, it would not be necessary for him to borrow HK$150,000 from Tsang in 2010 or 2011.  D tried to explain that the sale proceeds were kept by his wife to purchase a new flat and would not be used unless necessary.  However, D was able to use the reserved fund to repay the loans from Ps and to invest in Kam On Group in June 2011.  It is inherently improbable that D was not willing to use the reserved fund to assist the existing business of Richland in 2010 or 2011, but was willing to use the reserved fund to invest in a new business in 2011. 

47.  In my judgment, Ps’ case is true and Tsang is a 10% beneficial shareholder of Richland since June 2011.

Other relevant matters

48.  It is an agreed fact that P2 was made a bank signatory of Richland before June 2011.  It is also not in dispute that in June 2011, P2 left Richland and worked in Kam On group.  Since June 2011, Richland was solely managed by D.  Both the fact that P2 was a bank signatory of Richland before June 2011, and the fact that Richland was solely managed by D since June 2011, cannot be said as determinative in relation to the beneficial ownership of Richland.

49.  Ps’ case is that while Richland was in operation, profits were shared by the beneficial shareholders each year.  This was done before and after June 2011.  Ps’ case on this point is supported by the evidence of Tang, who said that in late October 2016, he saw that D obtained HK$100,000 from Richland and was also informed by D that the money was to be distributed to the shareholders of Richland.

50.  D claimed that Richland was operating at a loss at all times while it was in operation, and it would not be possible for Richland to have any profit.  D said that the location of Richland was not good and hence Richland could not have much business.  I am of the view that D’s allegation that Richland was operating at a loss for 14 years is inherently improbable.

(1)  D’s case is the Richland is solely owned by him.  That being the case, all the losses of Richard would in turn be D’s losses.  It is inherently improbable that D would continue a failing business for such a long time, ie 14 years.

(2)  Despite D claiming that Richland was a failure, after running Richland for 9 years, in 2015 D was willing to set up yet another pharmacy (ie Johnson) and invested a HK$1.5 million as the set up costs. This was not done as a relocation, but as an expansion of D’s business since Richland was not closed down even after Johnson was set up.

(3)  In September 2020, Richland was closed down and a new pharmacy named 森美藥房(“Sum May”) continued to conduct business at the Shop.  Sum May was set up by Kwok.  D and Kwok are good friends.  D knew that Kwok would set up Sum May at the Shop after the close down of Richland, but did not tell Kwok the unsatisfactory location of the Shop. Given the friendship between D and Kwok, it is inherently improbable that D would not give a warning to Kwok, if the location of the Shop is really so unsatisfactory as claimed by D. 

51.  I am of the view that Ps’ case on the sharing of the profits of Richland is true.  The sharing of profits is another factor in support of Ps’ case.

52.  There is also evidence showing that Ps have rendered assistance to Richland from time to time.  All these show that Ps have interests in Richland.

(1)  In 2006, P1 has provided a personal guarantee to 健安西藥房(“Kin On”) to enable Richland to open an account with Kin On.  With this account, Richland would be able to have supplies from Kin On.

(2)  Also in 2006, P2 successfully persuaded Cheung to join Richland.

(3)  In September 2013, P2 hired NPL to work in Richland as a salesman.

(4)  In May 2015, P1 and P2 asked NPL to be the licence holder of Johnson[12].  It was P1 who had trained NPL to prepare him to obtain the relevant licence.

(5)  In 2016, P2 hired CKL to work in Richland.

(6)  It was P2 who instructed D to teach Tang how to operate POS to enable Tang to perform the accounting works.

53.  Another episode in this case is the setting up of Johnson.

54.  Ps’ case is that in about March 2015, P1, P2 and D decided to expand the business of Richland by setting up another pharmacy, later known as Johnson, as a wholly owned business of Richland.  This incident in fact is supported by the WhatsApp message from P1 to D on 5 November 2016, in which P1 said:

“至於莊臣[開]店，當時我太忙，只是輕輕一句話，你說可以，我以為你用啟鋒名義向銀行先融資，再找時間大家傾下，但一直沒有 我更沒有想過不夠[錢]還要你們自己借出來，點解你不和我和民仔講呢，或只是溝通上的誤會啦，如是[錢]的問題，只要你們出聲找我，不論任何我都支持，因為只是兄弟一句再加時間上的安排就一定可以”

55.  It is Ps’ case that since Ps have interest in Johnson, Ps have given assistance in the process of renovating and setting up Johnson. The assistance rendered by Ps in relation to the setting up of Johnson is as follows:

(1)  P1 asked his brother KK Poon to renovate the shop premises of Johnson.  D claimed that it was him who instructed KK Poon to renovate Johnson.  However, D’s evidence is contradicted by KK Poon’s evidence, which is accepted by this court.  According to KK Poon, the instruction to renovate Johnson came from P1 and P2, not from D.

(2)  P1 instructed Stephen Lau (劉志文) (“Lau”) of Poon’s Pharmacy’s design department to come up with the interior design for Johnson.  D admitted that certain design was done by Lau.

(3)  P1 instructed CKY of Poon’s Pharmacy to assist in various matters in respect of Johnson.   CKY confirmed this in her evidence.  CKY had provided assistance in coordinating the renovation works, hiring staff, managing the rosters, promotion the sale of the goods in Johnson, and stock taking.  CKY’s evidence on this point is not challenged.

(4)  P1 sent a letter to the landlord of Johnson to discuss the rental matters.  The letter was issued under D’s name.  D claimed that the letter was only a draft provided by P1 to him as a reference. However, the documentary evidence shows that P1 had sent out the letter first, and then provided a copy to D.

(5)  Ps appointed NPL as a director and licence holder of Johnson.  P1 has taken time to train NPL so that he could pass the relevant examination and become a licence holder.  D claimed that it was him who had trained NPL.  However, D’s allegation is contradicted by NPL’s evidence, which is accepted by this court.

(6)  In 2015, P1 introduced POS to Richland and Johnson.  POS was used by Kam On Group.  With the installation of POS, P1 would have an easy access to the business records of both Richland and Johnson.  D claimed that he was the person making the decision to set up POS in Richland and Johnson. However, this is contradicted by evidence of Loo (owner of the company installing POS in Richland and Johnson), who confirmed that instruction came from P1, and P1 had entrusted the installation logistics to D.  D also claimed that he did not know that P1 could view his companies’ confidential information through POS and that was why he terminated the system when he discovered this in early 2017.  However, it is an admitted fact that the POS system in Richland was only terminated in July 2017.  Under re-examination, D said that he gave instruction to the software company to terminate the POS system in early 2017 and he was unaware why the POS system was only terminated in July 2017. In my view, D’s evidence is inherently improbable.  It is inherently improbable that the software company would do nothing after receiving D’s order to terminate the system and would only take action at a time about 6 months later. It is even more improbable that D would not chase the software company in the 6-month interim period, bearing in mind that D should have an urgent need to terminate the system to prevent P1 from accessing D’s confidential business information.

(7)  There is no dispute that P1 has procured Richland and Johnson to be offered membership by the Hong Kong General Chambers of Pharmacy Ltd (港九藥房總商會有限公司). 

56.  All the matters set out above support Ps’ case that Ps in fact have beneficial interests in Richland.

Events leading to the fall out

57.  Ps’ case is that the relationship between Ps and D started to deteriorate in a meeting on 28 October 2016.

(1)  There was a meeting between Ps and D on 28 October 2016.  In that meeting, P2 inquired into D’s salary in Richland and was told by D that D was drawing a monthly salary of HK$48,000. P1 also asked D about the setup costs of Johnson and was told for the first time that Richland contributed HK$260,000 and has about a 15% interest in Johnson.

(2)  On the next day (ie 29 October 2016), P1 asked P2 to talk to D about his salary and asking D only to draw an official salary of HK$40,000 each month, and the remaining HK$8,000 could be treated as allowances.

(3)  In early November 2016, P1 further asked P2 to ask D to do the following:

(a)  to provide all the financial documents of Richland and Johnson to Ps;

(b)  to register Ps as the shareholders of Richland; and

(c)  to implement some changes in the operation of the pharmacy shops.

(4)  D was upset by the message conveyed to him and told P2 that he would not provide the financial information.

(5)  Thereafter, on 5 November 2016, P1 wrote a WhatsApp message to D.  On 6 November 2016, D gave a WhatsApp reply to P1.

58.  In respect of the events leading up to the WhatsApp exchanges on 5 and 6 November 2016, there are various inconsistencies between D’s witness statement and D’s oral evidence given in the trial.  In my view, these inconsistencies show that D’s evidence cannot be reliable.

(1)  In D’s witness statement, D claimed that there was a meeting between Ps and him in August or September 2016.  However, under cross-examination, D said that he made a mistake and the time of the meeting should be in late October 2016.  In D’s witness statement, D claimed that in that meeting, P2 asked him to raise HK$5 or 6 million to assist Ps to invest in 2 new pharmacy shops.  In the same meeting, P1 also asked him to raise HK$6 million to assist P1 to acquire a company.  However, under cross-examination, D said that there were 2 occasions where P1 and P2 asked D to raise funds for them.  The first occasion was to raise HK$5 or 6 million to assist them to acquire 2 pharmacy shops, and the second occasion was to raise HK$6 million to assist them to acquire a pharmaceutical factory.  In his witness statement, D said that P1 asked him to raise funds personally, and if he was unable to do so, he might use his company to raise funds.  However, under cross-examination, D conceded that he in fact did not have a clear memory of this.

(2)  In his witness statement, D claimed that a few days after the meeting, he and Tsang were called to P2’s office where P2 showed them a form.  P2 said that he wanted to take back Richland and asked D to transfer 60% interest to P2 because Ps had lent D $300,000 in the past.  However, under cross-examination, D said that it was P1 asked him to add Ps as the registered shareholders of Richland.  D was then asked that according to his witness statement, the person making this request was P2.  D said that he could not remember clearly.

(3)  In his oral evidence, D said that the form shown to him was a one-page document, on which it wrote that P1 was the Chairman of the Board (董事長), P2 was the Chief Operation Officer (營運總監) and D was the shop manager (店長).  D also said that the request to add Ps as the registered shareholders was made orally and was not in the form.  D claimed that he was told that the reason for adding Ps as the registered shareholders of Richland was to enable P1 being named as the Chairman of the Board and P2 being named as the Chief Operation Officer.  D was then asked to explain why this was not stated in his witness statement.  In fact, as per his witness statement, Ps wanted to be the registered shareholders of Richland because D had failed to repay the HK$300,000 lent to D by Ps.  D could not explain the inconsistencies between his witness statement and his oral evidence.

59.  I have carefully considered the WhatsApp exchanges between P1 and D on 5 and 6 November 2016.  It would not be necessary for me to set out the contents of those exchanges in full here.  Suffice for me to say that, in my judgment, these exchanges have provided a solid support to Ps’ case and have directly contradicted D’s case.  The important episodes in these WhatsApp exchanges include the following:

(1)  In D’s reply given on 6 November 2016, in the last paragraph, D said: “最後我絕不會讓啟鋒股東蝕一分一毫，即使將我所得的不要。心意已決，我已冇能力再玩下去”.  I am of the view that this a clear admission by D that Richland is not solely owned by him and there are other shareholders in Richland.  In his oral evidence, D tried to explain that “啟鋒股東” in fact should mean “金安股東”.  This is contrived and cannot be true.

(a)  The meaning of the term “啟鋒股東”is plain and unambiguous. Clearly, D was referring to the shareholders of Richland in this sentence.

(b)  The matters raised by P1 in his message dated 5 November 2016 are clearly matters concerning Richland.  In that message, P1 said if D remained unsatisfied after hearing P1’s explanation, P1 could even give up his shareholding in Richland.  D’s reply dated 6 November 2016 is a reply to P1’s message dated 5 November 2016.  Reading in context, the true meaning of the term “啟鋒股東” in the last paragraph of D1’s reply must be its plain and natural meaning.

(c)  P1 gave a reply to D on 6 November 2016, in which P1 said: “今天應該是我退出啟鋒集團，而不是你…”.  It is clear that there is no misunderstanding between P1 and D that all the matters discussed in these WhatsApp exchanges are matters concerning Richland.

Aborted transfer of Johnson

60.  According to Ps, at one time D was willing to transfer Johnson to Ps at a token sum in exchange for Ps giving up their 60% beneficial ownership in Richland.  Ps’ case is that:

(1)  By March 2017, Ps and D had agreed that they would separate with each other and dissociate their business cooperation.  They agreed that Ps would take Johnson, and D would get Richland.  The movement of various personnel (NPL, CKL, and Tsang) between Johnson and Richland in March 2017 was done in preparation of their separation.

(2)  A stock taking exercise was done on 31 March 2017 to prepare for the separation.

(3)  In preparation for the separation, D also provided handwritten notes (“D’s Notes”)[13] to Ps on 9 April 2017 explaining the financial situations of Richland and Johnson.

(4)  In May 2017, the parties had agreed to finalize their separation with actual draft agreements being exchanged.  On 27 May 2017, D sent to Ps a draft transfer agreement, whereby D was willing to transfer Johnson to P and D for the token sum of HK$10,000.

(5)  Ps did not accept the draft proposed by D, for that draft did not reflect the truth that Ps had 60% interest in Richland.   Ps counter-proposed their own draft to D.  As can be seen in Ps’ draft, Ps were saying to sell their beneficial shareholdings in Richland to D.

(6)  On 31 May 2020, stock taking was also done in preparation for the transfer of Johnson to Ps on 1 June 2020.

(7)  However, on 1 June 2020, D refused to transfer Johnson to Ps.

61.  D’s case is that in December 2016, he told P2 that he saw a shop at the Citi Store in Tsuen Wan and planned to open a new pharmacy shop there.  D also told P2 that Kwok would come to help D in the new shop.  After hearing this, P2 was very angry.  Thereafter, D was repeatedly threatened by Ps and was forced to transfer Johnson to Ps at a nominal sum.  In his witness statement, D claimed that he was being threatened repeatedly since late 2016.   He alleged that P2 had threatened to beat up Kwok and Tsang.  D further claimed that there was a meeting in February 2017 attended by Ps, D and Tsang.  In that meeting, Ps were attempting to extract a “Separation Fee” from D by asking D to transfer either Richland or Johnson to Ps.

62.  In respect of the aborted transfer of Johnson to Ps, I accept Ps’ case and reject D’s case.

63.  As to D’s Notes, D denied that those notes were prepared for the separation as claimed by Ps.  According to D, those notes were prepared for the intended listing of Kam On Group as proposed by P1.  In my judgment, D’s evidence concerning these notes is untrue.

(1)  There is nothing about D’s Notes mentioned in D’s witness statement.  These notes were first referred to in the Affirmation of Poon Kai Ming dated 23 February 2018.  In that affirmation, P1 already said that these handwritten notes were compiled by D to explain to Ps the financial positions of Richland and Johnson.  There is no denial of this in D’s witness statement dated 4 October 2018.

(2)  As shown in those notes, it is clear that Richland has injected HK$260,000 into Johnson and in return Richland has a 18% interest in Johnson[14].  Facing these documents, D was forced to acknowledge that Richland had paid HK$260,000 to set up Johnson.  D claimed that notwithstanding this, he considered that Richland had not made any contribution in the setting up of Johnson, because Richland owed him money.  D’s explanation cannot be believed. His evidence cannot be true in the light of the documents.  In those notes, after “$260000”, it was expressly stated that “莊臣股份”.  These notes were prepared by D.  Plainly, D’s evidence given in the witness box is untrue.

64.  As to the alleged threats mentioned by D, in my judgment, the allegation is not supported by the evidence.

(1)  In respect of the meeting in February 2017, D said in his witness statement that in that meeting, Ps told him that the only way out for him was to “give” them one of his shops[15]. However, in his oral evidence given at the trial, D said that Ps only asked him to “sell” one of his shops to them.

(2)  In both D’s and Tsang’s witness statements, it was mentioned that in that meeting, Ps asked D to make a calculation for them to see which shop was suitable for them to have.  However, D and Tsang gave different versions in their oral evidence as to what Ps demanded in the meeting. D’s evidence is that Ps requested to have the pharmacy shop with a higher turnover but not necessary the one with a higher value, whereas Tsang stated that Ps asked for the one with a higher value.

(3)  Importantly, D said that he was afraid in the meeting and that is why he decided to compromise and agreed to transfer Johnson to Ps.  However, D could not offer any reasonable explanation as to why he was afraid in the meeting.

(4)  D’s allegation that he was repeatedly threatened by Ps since December 2016 is contradicted by indisputable evidence and is incapable of being believed.

(a)  On 23 January 2017, P1 set up the WhatsApp group “啟豐藥房(集團)股東會” and included D in the group. There were still courteous exchanges between P1 and D in that group until D left the group on 30 April 2017.

(b)  On 10 April 2017, P1 sent out a draft public announcement in the group and sought the view of Richland’s shareholders on the same.  P1 was seeking views from everyone in the group (including D), without any threatening words and without imposing his view on the others.

(c)  In late April 2017, P2 proposed in the group that they should meet and have a shareholders’ meeting.  Tsang quickly responded to the proposal and agreed to attend the meeting.  In the light of these exchanges, it is inherently improbable that Tsang had been threatened by Ps in the February 2017 meeting.

(5)  In respect of the incident on 7 August 2017 as recorded in the Agreed Statement of Facts, there is no dispute that police were called on that day.  However, D confirmed that he did not tell the police that he was threatened since December 2016 or in a meeting in February 2017.

(6)  Two days after the incident, on 9 August 2017, D’s solicitors wrote to Ps’ then solicitors complaining of the incident on 7 August 2017. However, there is no allegation in that letter that D was repeatedly threatened by Ps since December 2016 or in a meeting in February 2017.

(7)  In the light of all the above, I am of the view that D’s allegation of being threatened by Ps since December 2016 and in a meeting in February 2017 cannot be true.

65.  In his witness statement, D said that after the meeting in February 2017, he “related what had transpired to my solicitor and had a discussion with them.  Their advice was that the only proper and legal way was for me to sell Johnson to them at a reasonable price incorporating a discount for their past help to me.”[16] Surprisingly, under cross-examination, D said that in fact his solicitor did not give that advice to him. This is a glaring example showing the unreliability of D’s evidence.

66.  In his evidence, D said that he asked his solicitors to prepare the transfer agreement with the consideration being left blank.  D was referred to the transfer agreement prepared by his solicitors[17], in which the consideration in fact was stated as HK$10,000[18].  D was unable to explain the difference between his oral evidence and the documents.

67.  Even according to D, assets of Johnson was substantial, and various assets would be transferred to Ps in the contemplated transaction.  According to D, the following would be transferred to Ps in the transaction:

(1)  a sum of HK$794,29.14 in Johnson’s bank account;

(2)  rental deposits paid by Johnson, the value of which would be HK$196,365.90; and

(3)  stocks with the value of about HK$2 million.

68.  In other words, the purchase price of HK$10,000 as stated in the draft transfer agreement prepared by D’s solicitors must be a token sum.

69.  On 30 May 2017, Ps sent their draft transfer agreement to D.  As per that draft, the transaction between Ps and D in fact was a sale of Ps’ beneficial interest in Richland to D, in exchange for a sale of Johnson to Ps.   D claimed that although he received Ps’ draft, he did not read it in detail.  He said that there was already stock taking and he did not read Ps’ draft.  In my view, in late May 2017, the transfer of Johnson was about to complete.  It is inherently improbable that while Ps did not sign the transfer agreement prepared by D and counter-proposed their version to D, D would just ignore Ps’ counter-proposal and did not spend any time to read Ps’ draft at all.

Criticisms against Ps

70.  Mr Chan has made two criticisms against Ps, ie the incomplete WhatsApp message, and the sequence of Ps’ witnesses.  With respect, I am not convinced that there is any merit in these criticisms.

71.  The incomplete WhatsApp message is the message from P1 to D dated 5 November 2016.  While D was giving evidence, D suddenly out of his own motion mentioned that the copy of the message produced by Ps was not complete.  I adjourned the hearing and gave some time to the parties to sort out the matter.  After the adjournment, with no object from Mr Wong, a new page was added to the trial bundles[19].  As shown on that new page, there is no dispute that the entire WhatsApp message in fact should contain two more paragraphs.

(1)  Mr Chan submits that the two new paragraphs contradict P1’s evidence that he had never asked D for loan(s).  It is telling that the paragraphs missing in the copy produced by Ps are the crucial paragraphs contradicting P1’s evidence.

(2)  With respect, as submitted by Mr Wong, Mr Chan’s submission is based upon a misreading of the WhatsApp message.  The two new paragraphs in the WhatsApp message only shows that P1 asked for an investment from Richland (not from D personally) and that any such investment must be agreed upon by everyone concerned.  The two new paragraphs are not inconsistent with P1’s evidence.  On the contrary, P1 emphasized that any investment by Richland had to be agreed by everyone. That in fact is suggesting that Richland is not solely owned by D.

(3)  The WhatsApp message was disclosed by Ps as early as in their pre-action letter on 14 December 2017, and subsequently in P1’s Affirmation dated 23 February 2018.  The copy disclosed by Ps is in the same form at all times.  Mr Wong rightly submits that when Ps disclosed their copy in the pre-action letter in December 2017, Ps could not have possibly known what D’s case would be.  There is no reason to say that Ps have been trying to hide the two paragraphs deliberately.  As said in the above, the two paragraphs in fact support Ps’ case. 

(4)  D in fact is in possession of the entire WhatsApp message at all times. D did not offer any explanation as to why he did not disclose his copy and only mentioned this out of his own motion while he was giving evidence in the witness box.

72.  In Ps’ case, all the other witnesses gave evidence first.  Thereafter P2 gave evidence.  After that, P1 gave evidence. In other words, Ps are the last witnesses giving evidence in Ps’ case.  Mr Chan submits that this sequence has given Ps an unfair advantage.  Mr Chan further submits that P1 was in the courtroom observing the trial at all times.  Since P1 is the last witness giving evidence in Ps’ case, before he started to give evidence, he had heard the evidence of all the other Ps’ witnesses.  Further, under cross-examination, P1 admitted that he had discussed the case with Ps’ other witnesses after they had finished their evidence.  In Mr Chan’s submission, all these hit the core of the integrity of the trial, and Ps’ evidence should be rejected entirely.

73.  With respect, I am unable to accept these submissions.  Both P1 and P2 are parties in these proceedings.  They are entitled to be present in the courtroom at all times to observe the trial.  P1 frankly admitted that he had discussed the case with other Ps’ witnesses after they had finished their evidence.  On the face on this answer, I do not see any impropriety.  It has not been suggested to P1 and P2 that by the sequence of witnesses in Ps’ case, they intended to gain an unfair advantage as submitted by Mr Chan.  It has not been suggested to P1 and P2 that they had coached any of Ps’ witnesses to give evidence.  Further, it has not been suggested to P1 and P2 that their evidence had been tainted because they had discussed the case with others before they gave evidence.  Without putting all these to P1 and P2 to offer them an opportunity to respond to these, it would not be fair to take these points against them at the final submissions stage.

Ps v D

74.  For all the reasons above, in my judgment, Ps’ evidence is reliable and true.  D’s evidence is untrue and unreliable, and must be rejected.

EVIDENCE OF Ps’ OTHER WITNESSES

75.  In respect of Ps’ other witnesses, Mr Chan has reminded me that some of the evidence given by them is hearsay evidence. Mr Wong has made it clear that he would not rely upon the hearsay evidence given by these witnesses.  In my view, matters which are not within the personal knowledge of a witness but are information conveyed by someone to that witness would be hearsay evidence.  However, the fact that someone has told something to a witness is a matter within the personal knowledge of that witness, and that fact is not hearsay.

Mak

76.  Mak is the proprietor of Kin On and a member of the management committee of the Hong Kong General Chamber of Pharmacy.  In his evidence, Mak said that P1 had provided a personal guarantee to Kin On to enable Richland to open an account with Kin On, and hence Richland could have supplies of goods from Kin On.  Mak also said that it was P1 who asked Mak to act as a referee to introduce Richland and Johnson to become members of the Hong Kong General Chamber of Pharmacy.  All these are matters within the personal knowledge of Mak and are not challenged under cross-examination.  I accept Mak’s evidence.

Lam

77.  Lam is a registered pharmacist working at Richland from 2009 to 2011.   Lam said the following in his evidence:

(1)  Both P2 and D were jointly in charge of management of Richland.

(2)  D told Lam that P1 was the proprietor of Poon’s Pharma and a beneficial shareholder of Richland.

(3)  Both P2 and D told Lam that since P1 was a beneficial shareholder of Richland, he should report matters such as changes in the relevant legislation to P1.

78.  As to whether P1 is a beneficial shareholder of Richland, this would not be a matter within the personal knowledge of Lam. However, the fact that he heard the messages from D as set out in [77(2)] and [77(3)] above is a matter within the personal knowledge of Lam.  I accept Lam’s evidence.  The fact that D has related the messages as set out in [77(2)] and [77(3)] to Lam is a factor which the court may take into account in assessing the evidence.

Cheung

79.  Cheung is a registered pharmacist working in Richland from about 2006 to 2008.  Cheung said the following in his evidence:

(1)  He was asked by both P2 and D to join Richland.

(2)  P2 was the ultimate decision maker of Richland and was responsible for managing the operations of Richland, whereas D was responsible for the accounts.

(3)  P2 and D would take turn to look after Richland for daily businesses, and P1 would attend Richland for business purposes occasionally.

80.  I see no reason to doubt Cheung’s evidence, and I accept his evidence.

Loo

81.  Loo is the proprietor of the software company that provided POS for the use of Kam On Group as well as Richland and Johnson. Loo said that it was P1 who asked Loo to install POS at Richland and Johnson in 2015.

82.  There is nothing casting any doubt on Loo’s evidence.  I accept his evidence.

Choi

83.  Choi was a sale representative of 強生(香港)有限公司in 2006.   He said that in 2006, he informed P2 about the sale of the pharmacy business at the Shop, which was operated by NSL at that time.  He related the information to P2 and he did not reveal the same to D.  After the setting up of Richland, it was P2 liaising with him as to ordering of products for Richland.

84.  There is no reason to doubt Choi’s evidence, and I accept his evidence.

CKL

85.  CKL was an employee at Richland since about April 2016.  He said the following in his evidence:

(1)  He was hired by P2 to become an employee of Richland.

(2)  In about early March 2017, he was informed by P1 and P2 that they would dissociate their business relationship and separate from D.  The fact that Ps conveyed this message to Chan in about early March 2017 is something within Chan’s personal knowledge.

(3)  At about the same time, he together with NPL left Richland and went to work at Johnson, and Tsang left Johnson to work at Richland.

(4)  Since CKL joined Johnson, he was responsible for the daily management of Johnson and he had to report the operation of Johnson to P1 and P2 daily.

(5)  Johnson had undergone stock taking twice, once in March 2017 and also in May 2017.

(6)  On 3 June 2016, CKL was told by D to follow his orders and to disregard Ps’ instructions.  CKL was also told by D that if CKL disagreed, CKL might choose to leave.  CKL replied that he would need time to consider.  Eventually, CKL was asked by D to sign a document to terminate CKL’s employment contract.

86.  There is nothing casting any doubt on CKL’s evidence.  I accept his evidence.

Liu

87.  Liu is a 20% beneficial shareholder in Kam On Group and the person in charge of one of the pharmacies in the Kam On Group, namely 榮健藥房 (“Wing Kin”) in Tsuen Wan.  Liu said the following in his evidence:

(1)  In 2011, Kam On Group was established. Liu was one of the founding shareholders of Kam On Group.  At that time, P1 asked P2 to come to help Kam On Group, and Richland’s operation was left to D.

(2)  In Kam On Group, there were regular management meetings attended by all persons in charge of the various pharmacies in the group.  They would report the businesses of their pharmacies to P1 in those meetings.  These meetings were attended by D.

(3)  In mid-2016, Liu and Kwok (who was the licence holder and a director of Wing Kin) was asked by P1 to locate a suitable premise in Tsuen Wan to expand the business of Kam On Group.  In December 2016, Kwok told Liu that D, Tsang, and himself would set up a new pharmacy in Tsuen Wan at the Citi Store.  Liu asked Kwok whether Ps were informed of this.  Kwok said that he would report the matter to Ps.

88.  Liu also mentioned that there was a green box with the name “Kai Cheung” on it in P1’s office.  Mr Chan submits that Liu did not raise this in his witness statement and I should place no weight on this evidence.  I would attach no weight to this part of Liu’s evidence, but for a different reason.  Liu has not said what was/were in that green box.  Without knowing the contents of that box, it would not be prudent to say that the presence of this green box in P1’s office would have any significance in these proceedings.

89.  Subject to what I have said in [88] above, I accept Liu’s evidence.

So

90.  So is an accounting clerk in Poon’s Pharm and Kam On Group since August 2011.  In her evidence, she said that her job would include checking the transactions among the pharmacies in Kam On Group each month.  Richland was within Kam On Group.  She was instructed by P1 that in respect of the goods supplied to the pharmacies in Kam On Group, the price would be the price at costs without any profit margin, for these were provision of goods to the pharmacies in the same group. In May 2012, a WhatsApp group “金安貨倉收貨報告” was set up, in which Ps, D, and other persons in charge of various pharmacies, employees working in the warehouse as well as accounting staff members were included.  In about July 2015, a WhatsApp group “啟鋒莊臣開新code” was set up, for the purpose of coordinating product codes and other matters.  So also assisted in stock taking for pharmacies including Richland and Johnson.

91.  I have no reason to doubt So’s evidence, and I accept her evidence.

KK Poon

92.  KK Poon is the younger brother of P1 and the elder brother of P2.  In his evidence, he said that in 2006, it was P1 and P2 asking him to renovate Richland.  In 2015, it was P1 and P2 asking him to renovate both Richland and Johnson, and they asked D and a designer in Poon’s Pharm to liaise with KK Poon in respect of the renovation.

93.  There is no reliable evidence casting any doubt on KK Poon’s evidence.  I accept KK Poon’s evidence.

NPL

94.  NPL is the holder of the pharmacy shop licence in Johnson.  NPL said the following in his evidence:

(1)  In September 2013, NPL was hired by P2 to work in Richland.

(2)  In May 2015, P2 asked him to be the licence holder of Johnson.  It was P1 who trained NPL to prepare him for the licence examination.

(3)  In about March 2017, NPL was informed by Ps that he would have to work in Johnson.  NPL was required to report the operation of Johnson to Ps on a daily basis.

(4)  Johnson underwent stock taking on 31 March 2017 as well as 31 May 2017.

(5)  On 1 June 2017, D visited Johnson and told NPL that D would not hand Johnson over to Ps.  Eventually, he was asked by D to leave Johnson.

95.  There is no reliable evidence casting any doubt on NPL’s evidence.  I accept his evidence.

CKY

96.  Chan is the head of the accounting department in Poon’s Pharm since 2013.  Chan said the following in her evidence:

(1)  In respect of human resources affairs and matters in relation to stocks, CKY would report and seek instructions from P2. When she received reports from various pharmacies in Kam On Group, she would also report and seek instructions from P1.

(2)  In relation to transfer of goods supplied to the pharmacies in Kam On Group, the value of those stocks were calculated at costs without any profit.

(3)  The purpose of having the WhatsApp group “金安貨倉收貨報告” (which included Ps, D, other persons in charge of various pharmacies, employees of the warehouse as well as accounting staff members) was to coordinate various matters among the pharmacies.

(4)  There would be a stock taking exercise each year in all the pharmacies, including Richland and Johnson, and the accounting department of Poon’s Pharmacy, including CKY herself, would assist in those stock taking exercises.

97.  There is no reason to doubt CKY’s evidence, and I accept her evidence.

Tang

98.  Tang was an employee of Richland since October 2015 until 31 March 2018.  In his evidence, Tang said that P2 would visit Richland about 2 to 3 times each month.  Under P2’s instruction, D trained Tang as to how to operate POS to perform accounting work.  In late October 2016, Tang saw D placed some cash in Richland.  D told Tang that the value of the cash was HK$100,000, and he and Tsang was about to bring the money to meet Ps to share the profits.  In about February 2017, D told Tang that he would dissociate the business relationship with Ps. Tang also mentioned that there were 2 stock taking exercises in Richland and in Johnson, which were conducted on 31 March 2017 and 31 May 2017 respectively.

99.  Mr Chan submits that I should reject Tang’s evidence, because Tang’s evidence concerning the incident on 7 August 2017 contradicts [7] of the Agreed Statement of Facts.  With respect, I am unable to accept this submission.  Tang mentioned the incident in August 2017 in [18] of his witness statement.  On the face of the documents, it is not apparent that [18] of Tang’s witness statement is inconsistent with [7] of the Agreed Statement of Facts.  Further, Mr Chan has not put the alleged inconsistencies to Tang.  In my view, the inconsistency point is not open to D at the final submissions stage.

100.  I accept Tang’s evidence.

EVIDENCE OF D’s OTHER WITNESSES

101.  D’s other witnesses are Tsang, NSL, Kwok and Yam.

Tsang

102.  Tsang has been working in Richland since October 2006.  D’s case is that the HK$150,000 from Tsang was a loan from Tsang to D in about June 2011.  However, there is no such evidence in Tsang’s witness statement on this point.  Tsang’s evidence as per his witness statement concerns the meeting mentioned in the above at [58(1)] (“the 1^st Meeting”), at [58(2)] (“the 2^nd Meeting) and at [61] and [64] (“the Meeting”).  The contents of Tsang’s witness statements concerning these meetings in fact are reproduction of the contents of D1’s witness statement on the same topics.  It is doubtful whether Tsang himself has a clear and independent memory of these meetings.  I am further of the view that Tsang’s evidence in relation to these meetings is unreliable for the following reasons:

(1)  As to the 1^st Meeting, Tsang claimed that he could remember this meeting was held in August or September 2016.  He said that he had a clear memory of this because at that time, it was near the end of the summer holiday and students were about to go back to schools.  That was an important business time for pharmacies and hence he could remember the time of the 1^st Meeting.  However, under cross-examination, after seeing the WhatsApp exchanges on 5 and 6 November 2016, Tsang conceded that the 1^st Meeting was not held in August or September 2016 but was in late October 2016.  Tsang also claimed that in the same meeting, P1 asked D to raise HK$5 or 6 million to assist P1 to acquire 2 new pharmacy shops and HK$6 million to assist P1 to purchase a company.  However, this is contradicted by D1’s oral evidence given at the trial.  In his oral evidence, D1 said that P1 made these 2 requests on 2 separate occasions.  All these show that Tsang in fact does not have a clear memory of the 1^st Meeting.

(2)  As to the 2^nd Meeting, Tsang claimed that P2 showed D and him a form in this meeting.  According to Tsang, it was stated in the form that Ps had 60% interest in Richland, D had 30% interest and Tsang had 10% interest.  D1 in his evidence did not say that the form contained these matters.  Tsang said that he was surprised when he saw all these on the form.  However, he said nothing.  In my view, it is inherently improbable that Tsang would be indifferent after seeing the form, in which he was described as a 10% shareholder in Richland.  This would be something concerning Tsang’s interest, and naturally he should ask P2 why he (Tsang) was described as a 10% shareholder in Richland.  Tsang’s evidence concerning the 2^nd Meeting cannot be true.

(3)  As to the 3^rd Meeting (held in February 2017), Tsang’s evidence is unreliable.

(a)  In his oral evidence, Tsang claimed that the purpose of the meeting was to discuss the matters arising from the setting up of Johnson by D.  This cannot be right.  According to D, the meeting should be related to the setting up of a new pharmacy shop by D in Citi Store in Tsuen Wan in December 2016 and hiring Kwok to work in that new shop.

(b)  Tsang was asked why he said that D was afraid in the meeting.  The only explanation given by Tsang was that D wanted to leave. However, there is no evidence showing that D was prevented from leaving the meeting by anyone or by any means.  Tsang could not offer a satisfactory explanation as to why he would say that D was afraid in the meeting.

NSL

103.  NSL is the landlord owning the Shop and the owner of the pharmacy business at the Shop before the setting up of Richland. It was NSL who sold the pharmacy business to Richland.  NSL mentioned the following in his evidence:

(1)  P1 and P2 were present at least once in the negotiations concerning the transfer the pharmacy business in 2006.  There was also one time where P2 and D discussed the matter with him.  On both occasions, the details of the deal were discussed.  As to why Ps would participate in these negotiations, NSL did not know the real reason.

(2)  NSL was asked whether P2 has signed the transfer documents. NSL at first said that he could not remember.  Subsequently, NSL said that P2 did not sign the transfer documents.

104.  In my view, D may not derive any assistance from NSL’s evidence.

(1)  As to the matter in [103(1)] in the above, this matter is in fact in line of Ps’ case.

(2)  As to the matter in [103(2)], P2 has said in his evidence that he, D and NSL had signed the transfer documents.  No party in these proceedings has produced the transfer documents.  In the absence of any document, bearing in mind the execution of these documents was done in 2006, ie 14 years ago, it would not be safe to say P2’s memory or NSL’s memory on this point is more correct. In any event, even if NSL’s memory is correct, that would not provide any support to D’s case. At the time of setting up of Richland, D was the sole registered shareholder and the sole registered director of Kai Cheung. In these circumstances, it would not be a surprise that the transfer documents were signed by D alone. 

Kwok

105.  Kwok was the licence holder of Wing Kin since 2011.  Wing Kin is one of the pharmacy shops in Kam On Group.  Under cross-examination, Kwok confirmed that he started to operate Sum May at the Shop in September 2020, after the cessation of business of Richland there.  He said that he had discussed the idea of running a pharmacy business at the Shop with D and D supported his idea.  D did not tell him the location of the Shop was undesirable and it would be difficult to run a pharmacy business there.  In my view, Kwok’s evidence does not assist D in these proceedings.

Yam

106.  Yam is D’s wife.  She has no participation in the setting up of Richland in 2006 and has never directly discussed the matters concerning Richland with Ps.  Yam mentioned the following in her evidence:

(1)  According to her witness statement, in 2011 D told her that he wanted to use the profits gained in the sale of their joint property to pay off his loans and to invest in a pharmacy called Kam On Pharmacy related to P1.  She was so worried because she did not trust P1.  She knew that P1 was a person who would evade his liabilities by every means.  Yam was asked why she would not trust P1 in 2011, when P1 in fact had lent HK$100,000 to D to open Richland in 2006 and had never urged D to repay the sum.  Yam at first answered that she was under the impression that all the HK$300,000 was advanced by P2 in 2006.  However, after a few questions, Yam conceded that in 2011, she already knew that HK$100,000 was provided by P1 in 2006.  These show that Yam changed her evidence from time to time and her evidence cannot be relied upon.

(2)  In her witness statement, Yam said that after discussion, eventually she did not object to D’s decision to invest in Kam On Pharmacy in 2011.  At about the end of 2016, D wanted to withdraw from Kam On, because D was not able to accept the management methods of Ps.  However, in her oral evidence, Yam claimed that the HK$220,000 provided by D to Kam On Group in 2011 was not an investment but a loan.  Yam’s oral evidence directly contradicts the contents of her witness statement.  This is another example showing the unreliability of Yam’s evidence.

107.  I am of the view that Yam is an unreliable witness.  In any event, her evidence is of limited assistance in these proceedings

Overview on the evidence of D’s other witnesses

108.  For the reasons set out below, in respect of D’s other witnesses. I am of the view that:

(1)  Tsang and Yam are unreliable witnesses and I refuse to accept their evidence.

(2)  NSL’s evidence and Kwok’s evidence do not assist D’s case.

109.  Mr Chan submits that there has been “lack of puttage” by Mr Wong in respect of the following:

(1)  It has not been put to Tsang that the HK$150,000 provided by him in about June 2011 was an investment and thereby Tsang acquired 10% interest in Richland.

(2)  It has not been put to NSL that in respect of the HK$192,000 paid to him for acquiring his pharmacy business in 2006, HK$112,000 was paid by P2 and the remaining HK$80,000 was paid by D.

110.  In Mr Chan’s submissions, the court should bear the “lack of puttage” in mind in assessing the evidence.

111.  In reply to these, Mr Wong submits:

(1)  The rule in Browne v Dunn is intended to give the witness a chance to respond before his version of events is being attacked or discredited.  The salient point here is that the witness must have in the first place given evidence on a particular point, without which there is no need to discredit the witness’ evidence on that particular point. There is no need to put to a witness a point on which the witness’ evidence does not relate at all.  Obviously, there would be no challenge if there is nothing to be challenged.

(2)  Tsang’s evidence did not touch upon his shareholdings nor his alleged payment of HK$150,000 in about June 2011.  Similarly, NSL’s evidence did not touch upon who had paid him the HK$192,000 or any part thereof.  It is D’s deliberate choice not to deal with these points in Tsang’s and in NSL’s witness statements.  There is nothing on these points in Tsang’s evidence and in NSL’s evidence which have to be challenged or discredited.  There cannot be a reverse burden on Ps to elicit evidence from Tsang and from NSL on these matters by putting the points to them.

112.  I respectfully agree with Mr Wong.  There is no merit in the “lack of puttage” point taken by D.

MY RULING

113.  Based upon the evidence accepted by this court, I am of the view that the evidence in support of Ps’ case is in fact overwhelming.  In my judgment, the 2006 Agreement as pleaded by Ps is true. Ps’ case is proved and D’s case must be rejected.

DISPOSITION

114.  I allow Ps’ claim and grant the following reliefs to Ps:

(1)  There be a declaration that D held and holds:

(a)  30% of the shareholdings (being 3,000 ordinary shares) of Kai Cheung registered in D’s name on behalf and for the benefit of P1; and

(b)  30% of the shareholdings (being 3,000 ordinary shares) of Kai Cheung registered in D’s name on behalf and for the benefit of P2;

(2)  An order that D do take all necessary steps to transfer the shareholdings of Kai Cheung referred to above to P1 and P2 respectively within 28 days; and

(3)  Liberty to apply.

115.  There is no dispute that costs should follow the event.  I order that costs of these proceedings, including all costs reserved (if any), be paid by D to Ps, to be taxed if not agreed.

116.  Lastly, it remains for me to thank Mr Wong and Mr Chan for the helpful assistance rendered to the court.