CHAN CHOR KI v. CHUNG GAVIN SAI LUN

DCCJ 3072/2021

[2026] HKDC 1357

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3072 OF 2021

---------------------------------------

BETWEEN

---------------------------------------

------------------------

JUDGMENT

------------------------

INTRODUCTION

1.  This is the trial of the Plaintiff’s claim for repayment of four alleged personal loans advanced to the Defendant during the period from 2014 to 2019.

2.  The Defendant does not dispute that the Plaintiff made the four payments to him. The Defendant’s case, however, is that these payments were not loans but were made for other purposes, as will be addressed below.

3.  A notable feature of this case is the paucity of documentary evidence supporting either party’s account. The trial bundle contains fewer than 50 pages of documentary evidence. Accordingly, the determination of the issues rests largely on the quality of the witnesses’ oral evidence, their credibility, and the inherent probability of their respective accounts.

4.  The Plaintiff called three factual witnesses, including himself. The Defendant gave evidence on his own behalf. Both Ms Sakinah Sat, counsel for the Plaintiff, and Mr Cyrus Lau, counsel for the Defendant, made persuasive submissions for their respective clients. While there are considerations pointing in either direction, as well as matters that are ultimately neutral, my task is to weigh all relevant considerations, take an overall view of the evidence, and determine on the balance of probabilities whether the Plaintiff’s version of events is more likely than not to be true.

5.  The discussion below addresses the principal matters raised by the parties at trial, as well as those which the Court considers material to its determination. To the extent that not every point advanced by the parties is expressly addressed, I stress that I have considered all submissions before arriving at the conclusions set out at the end of this judgment.

6.  I now set out the parties’ respective cases.

THE PLAINTIFF’S CASE

7.  At the material time until his resignation in 2015, the Plaintiff was a businessman holding shares in Opal Cosmetics (Hong Kong) Limited (“Opal”), a cosmetics company, and was involved in its business as a director.

8.  The Defendant was introduced to the Plaintiff by Lee Hon Ting Jofee (“Jofee”), following which the Plaintiff employed the Defendant as a chemist in the Research and Development Department of Opal from 2011 to 2013.

9.  The Plaintiff and Jofee became acquainted in around 2008. Jofee was the owner of a business trading under the name “Hair Corner” and was a client of Opal.

10.  Hui Yau Kin (“Maverick”) was employed by Opal from around 2009 to 2013 in its Sales and Marketing Department. Maverick likewise became acquainted with Jofee through Opal.

11.  In or around late 2013, the Defendant, Jofee and Maverick decided to establish a new business in the cosmetics industry. For this purpose, they acquired an off-the-shelf company, namely Asia Gain Limited (“Asia Gain”).

12.  On 20 December 2013, the Defendant was appointed a director of Asia Gain.

13.  On 15 January 2014, the Defendant was transferred one ordinary share then held by Bosco Consultancy Limited, the sole founder member and first director of Asia Gain.

14.  On the same date, two new shares were allotted to Lam Wai Mei Shirley and Chen Kam Kang, the latter also being appointed a director. It is the Plaintiff’s case that those two individuals were representatives of Jofee and Maverick respectively, and held the shares on their behalf.

15.  Thus, as at 15 January 2014, the Defendant, Jofee and Maverick each effectively held an equal shareholding in Asia Gain.

16.  The Plaintiff asserts that he did not have knowledge of this new company until sometime in around March 2014, when the Defendant, Jofee and Maverick wished to increase the company’s capital and invited him to invest in their new business.

17.  In light of his impending retirement and resignation from Opal, the Plaintiff agreed to invest in the new business and to act as an advisor, without involvement in its day-to-day affairs and operations. The Plaintiff also decided to involve his childhood friend, Joe Pun (“Joe”), and agreed to subscribe for shares on behalf of himself and Joe in the ratio of 9:1.

18.  The parties — including the Plaintiff, the Defendant, Jofee and Maverick — reached a consensus that each shareholder would contribute capital in the form of $1 per issued share, together with an equal amount by way of a shareholders’ loan to the company. It was further agreed that the Defendant and Maverick would be responsible for the company’s day-to-day operations and decision-making, while the Plaintiff would not be involved save for occasionally offering advice.

19.  Against this background, the Plaintiff injected $600,000 into the company in around March 2014 in anticipation of a future allotment of shares.

20.  In or around November 2014, the Defendant expressed his desire to inject share capital into JMC in order to hold a 10% stake in the company. As he lacked sufficient funds to do so, he requested the Plaintiff to lend him $200,000 by way of a personal loan.

21.  The Plaintiff agreed and, on or about 24 November 2014, advanced to the Defendant a non-interest-bearing loan in the sum of $200,000 (“the 1^st Payment”) by cheque. It was agreed that repayment would be made upon the Plaintiff’s demand.

22.  The Defendant deposited the aforesaid cheque into his personal bank account. On 11 December 2014, the Defendant deposited $200,000 in cash into Asia Gain’s bank account.

23.  On 4 March 2015, Asia Gain changed its name to JMC Cosmetics Limited (“JMC”).

24.  On 5 March 2015, the following events occurred:

(1) JMC issued 300,000 new shares to Tam Lai Yin Dorcas (“Dorcas”), Joe’s wife. Dorcas held 270,000 shares on behalf of the Plaintiff and 30,000 shares on behalf of Joe.

(2) JMC issued 300,000 new shares to Cheng Hoi Lam, Maverick’s wife, to be held on Maverick’s behalf. By then, Maverick had contributed $600,000 to JMC.

(3) JMC issued 300,000 new shares to Yu Ong Hon International Limited (“Yu Ong Hon”), a company wholly owned by Jofee, to be held on his behalf. By then, Jofee had also contributed $600,000 to JMC.

(4) JMC issued 99,997 new shares to the Defendant. By that time, the Defendant had contributed $200,000 to JMC.

25.  On 6 March 2015, the two original shares previously held on behalf of Jofee and Maverick were transferred to the Defendant, resulting in the Defendant holding a total of 100,000 shares, representing 10% of the issued share capital of JMC.

26.  In its initial years, JMC operated at a loss. The Plaintiff considered this to be normal, based on his experience, in that new businesses commonly require five to six years to break even.

27.  As the losses persisted, Jofee decided to withdraw from JMC. On or about 3 April 2017, the 300,000 shares held by Yu Ong Hon on Jofee’s behalf were transferred to Dorcas, to be held for the Plaintiff and Joe in the agreed 9:1 ratio.

28.  Between April and September 2018, JMC was unable to pay the Defendant’s salary.

29.  During this period, the Defendant informed the Plaintiff of his personal cashflow difficulties. On or about 30 July 2018, the Plaintiff advanced a further non-interest-bearing loan of $100,000 (“the 2^nd Payment”) to the Defendant, on the same terms as the 1^st Payment, by cheque, which the Defendant subsequently deposited.

30.  In October 2018, Maverick decided to withdraw from JMC. The Defendant expressed his interest in acquiring 200,000 of Maverick’s 300,000 shares for $400,000 but lacked sufficient funds. He therefore requested the Plaintiff to advance a further personal loan.

31.  On or about 22 October 2018, the Plaintiff advanced $400,000 to the Defendant (“the 3^rd Payment”) on the same terms as the previous loans, by cheque. The evidence shows that the Defendant deposited the cheque into a joint bank account held with his wife on the same day.

32.  On 24 October 2018, the following events occurred:

(1) the cheque for $400,000 drawn on the joint bank account was cleared;

(2) 200,000 of the 300,000 shares held by Cheng Hoi Lam on Maverick’s behalf were transferred to the Defendant; and

(3) the remaining 100,000 shares were transferred to Dorcas, to be held on behalf of the Plaintiff and Joe in the agreed 9:1 ratio.

33.  The Plaintiff’s case is that from this point onwards, the Plaintiff (together with Joe) beneficially owned 70% of JMC, while the Defendant owned the remaining 30%.

34.  On 9 September 2019, Dorcas transferred 700,000 shares to Le Pin Limited (“Le Pin”), which held the shares on behalf of the Plaintiff and Joe.

35.  On 27 October 2019, JMC issued 6,300,000 shares to Le Pin and 2,700,000 shares to the Defendant.

36.  Between around November 2019 and February 2020, JMC again failed to pay the Defendant’s salary. On 13 December 2019, at the Defendant’s request, the Plaintiff advanced a further loan of $100,000 (“the 4^th Payment”) to the Defendant by cheque, which the Defendant deposited.

37.  In 2020, JMC’s business improved, and in April 2020 the company paid the Defendant his outstanding wages. It is the Plaintiff’s evidence that in or around May 2020 he orally demanded repayment of the loans, and that the Defendant replied that he would repay them.

38.  On 28 October 2020, the Plaintiff and the Defendant executed a written Separation Agreement, pursuant to which Le Pin would sell all its 70% shareholding in JMC to the Defendant with effect from 31 October 2020.

39.  It is the Plaintiff’s further case that, on or around the same date, he again orally demanded repayment of the loans, and that the Defendant responded that he would make repayment as soon as possible.

40.  As no repayment was forthcoming, the Plaintiff’s solicitors issued a demand letter to the Defendant on 5 May 2021. The Defendant having failed to comply, the Plaintiff issued the present Writ of Summons on 30 June 2021.

THE DEFENDANT’S CASE

41.  As noted, the Defendant admits having received the 1^st to 4^th Payments from the Plaintiff.

42.  However, it is the Defendant’s case that:

(1) the 1^st and 3^rd Payments were not loans but the Plaintiff’s injections of share capital into JMC through the Defendant’s bank account, made at the Plaintiff’s request; and

(2) the 2^nd and 4^th Payments were not loans but living allowances paid by the Plaintiff to the Defendant for the purpose of retaining him in JMC, on the mutual understanding and/or agreement that such payments were not required to be repaid.

43.  By way of background, the Defendant explains that:

(1) In around 2013, the Plaintiff, through Maverick, invited him to develop and operate a cosmetics business together with partners including the Plaintiff, the Defendant, Jofee and Maverick. The Plaintiff made an offer, which the Defendant accepted, that the Defendant would be appointed as one of the directors of the new company and that the Plaintiff would arrange for shares to be allotted and/or transferred to him as and when required, without the need for the Defendant to make any monetary contribution for the injection of capital into the company (“the JMC Agreement”).

(2) It was further agreed, upon discussions among all partners, that the Defendant would hold 10% of the shares while the other partners would each hold 30%.

(3) As a result, the four partners acquired Asia Gain in January 2014, and in March 2015, shares were allotted to reflect the agreed shareholding.

44.  Pursuant to the JMC Agreement, the Plaintiff advanced the 1^st Payment to the Defendant and asked the Defendant to inject the same into the bank account of JMC, which the Defendant did on 11 December 2014.

45.  JMC had since 2014 been operating at a loss.

46.  Following Jofee’s departure in April 2017, the Plaintiff, Maverick and the Defendant beneficially held 60%, 30% and 10% of the shares of JMC respectively.

47.  In around August 2018, the Plaintiff informed the Defendant that Maverick would depart from JMC and asked whether the Defendant was able and willing to run the business as Chief Executive Officer (“CEO”). The Plaintiff offered to make the 2^nd Payment to the Defendant as a living allowance for the purpose of retaining him. The Defendant agreed and accepted the 2^nd Payment on the mutual understanding that he was not required to repay it.

48.  In October 2018, the Plaintiff informed the Defendant that he would take up 100,000 of Maverick’s 300,000 shares, making him a 70% shareholder, and would arrange for the Defendant to take up the remaining 200,000 shares, making the Defendant a 30% shareholder.

49.  On 22 October 2018, the Plaintiff advanced the 3^rd Payment to the Defendant and asked him to inject the same into JMC’s bank account, which the Defendant did on 24 October 2018. On that same day, the share transfers referred to in paragraph 32 above were effected, and the Plaintiff and the Defendant became 70% and 30% shareholders of JMC respectively.

50.  In 2019, JMC continued to operate at a loss and the Defendant did not receive any or full remuneration for some months. In around December 2019, the Plaintiff offered to pay the 4^th Payment to the Defendant as a living allowance for the purpose of retaining him. The Defendant agreed and accepted the 4^th Payment on the mutual understanding that he was not required to repay it.

51.  It is admitted that the parties executed the Separation Agreement in October 2020. However, the Defendant denies that the Plaintiff made any demand for repayment of the four Payments in October 2020. It is the Defendant’s case that the demand letter from the Plaintiff’s solicitors dated 5 May 2021 was the first occasion on which the Plaintiff alleged that the four Payments were personal loans and demanded repayment.

52.  The Defendant further contends that, in respect of the 1^st Payment, the Plaintiff’s claim has in any event been time-barred.

ISSUES

53.  In my view, the following are the key issues I must determine:

(1) Whether the four Payments from the Plaintiff to the Defendant were loans; and

(2) Whether the Plaintiff’s claim for repayment of the 1^st Payment has been extinguished by limitation.

CREDIBILITY AND RELIABILITY OF WITNESSES

54.  Overall, except for the matters addressed below under the sections on demand for repayment and the limitation defence, I find the Plaintiff credible and I prefer his evidence insofar as it conflicts with the Defendant’s evidence.

55.  The Plaintiff’s evidence on the advancement of the four loans has been materially consistent throughout the proceedings and was not shaken in any significant respect under cross-examination. In particular: (i) his account of the circumstances in which each Payment was made, and of the agreed terms of repayment, remained stable across his witness statement, his Supplemental Witness Statement, and his 2^nd Supplemental Witness Statement (save for the issues of demand as a pre-condition and the Defendant’s undertaking to repay, addressed separately below); (ii) his explanation for not reducing the loans to writing — that he trusted the Defendant, and that payment by cheque would provide a contemporaneous record of the transactions — is coherent and unremarkable in the context of an informal arrangement between people known to each other; (iii) his evidence was corroborated in material respects by two independent witnesses, Jofee and Maverick, both of whom had no continuing financial stake in JMC at the time of trial and no obvious reason to favour the Plaintiff; and (iv) his account of the circumstances surrounding the founding of JMC and his own subsequent involvement is consistent with the undisputed documentary evidence — in particular, the company records showing that it was the Defendant, Jofee and Maverick, not the Plaintiff, who were the initial shareholders and directors of Asia Gain.

56.  Mr Lau argued that the Plaintiff was not credible and pointed to certain inconsistencies in his evidence. I have considered those submissions and do not regard those inconsistencies as material enough to undermine my general assessment of his credibility.

57.  Jofee gave evidence that it was initially his and Maverick’s idea to set up a new business. They then approached the Defendant, who was a chemist, to join as a partner. He said that later, when the business required more capital, Maverick invited the Plaintiff to join. I find him credible and reliable, and accept his evidence in those respects. That said, I do not place significant weight on his evidence on what he heard from the Plaintiff that the Plaintiff had lent money to the Defendant. He did not have any personal knowledge of whether and how the loans were advanced, and I do not regard his evidence on that specific point as reliable.

58.  Maverick’s evidence is largely consistent with Jofee’s. He struck me as a straightforward and candid witness, and I find him credible. Similarly, however, I do not place significant weight on his evidence that he was “given to understand” that the Defendant asked the Plaintiff to lend him money. He too lacked personal knowledge of the transactions, and I regard that aspect of his evidence as unreliable.

59.  As to the Defendant, I find him not credible, and I prefer the evidence of the Plaintiff over his on all matters in conflict (again, except on the issues of demand as pre-condition and the Defendant’s undertaking to repay). As a matter of personal background, at the material time the Defendant graduated from McGill University in Montreal, Canada with a degree in Bachelor of Engineering from the Chemical Engineering Department in 2010, and further obtained a Graduate Diploma of Management in 2011. He also completed a 1-year SCS Diploma course offered by the Society of Cosmetic Scientists between 2012 and 2013. He had working experience at Opal. He was not an unsophisticated person. Yet he sought to portray himself as naive and uninformed on a series of important matters, and when pressed for explanations he was often unable to provide any satisfactory account.

60.  For example, while the public records establish that he was appointed the sole director of Asia Gain in December 2013 and that he signed the Return of Allotment for the allotment of shares to Jofee’s and Maverick’s nominees in January 2014, the Defendant claimed not to know the contents of those documents. His evidence was internally incoherent: he first said that he did not read the documents when signing them because he trusted the other partners; he then said he signed them because he considered it reasonable to do so; and he finally conceded that in order to assess whether it was reasonable to sign, he must have had some understanding of what the documents said. Despite that concession, he maintained that he was unaware of their contents. I find him not truthful in this regard.

61.  Further, his case on material aspects shifted during the course of the proceedings. As elaborated in paragraphs 71 to 78 below, his case on whether he held the shares in JMC on behalf of the Plaintiff was shifting throughout the proceedings.

62.  In addition, the Defendant testified that in around 2016 other partners told him in Cantonese “你捱落去啦，公司你有份架” (meaning: “Hang in there; you have a share in the company”), and that this led him to believe he was an actual beneficial owner of shares in JMC. I find this hard to believe in light of his background and education. That a person who had joined a company as a founding director and was conducting himself as a partner in its operations would, for a period of years, be uncertain whether he personally owned any shares in it, and would accept such a casual remark as sufficient confirmation of beneficial ownership without ever seeking express confirmation from the Plaintiff — all of this defies credibility. When asked why he did not simply seek confirmation from the Plaintiff, he said it would not have been appropriate to ask. I find this utterly unconvincing.

63.  In analysing the core issues, I am guided by the foregoing general assessment of the credibility and reliability of each witness.

DISCUSSION AND FINDINGS

64.  I remind myself that the burden of proof lies on the Plaintiff to prove the making of the loan agreements, the making of the Payments, and the breach by the Defendant, namely, the failure to repay: Big Island Construction HK Ltd v Wu Yi Development Co Ltd & Anor (2015) 18 HKCFAR 364 at §80.

65.  I am further guided by the observation of Tang PJ at §64 of that case:

“64. As the discussion of the authorities show, although Seldon v Davidson was often cited few if any decisions turned on it. Disposal of a claim on the burden of proof should be rare and exceptional. I believe a judge should resolve conflicting versions of fact by deciding which is more probable uninfluenced by any consideration of who has the burden of proof. One should look to the burden for help as a last resort. In practice, it is difficult to conceive of a case where there is no evidence apart from the payment. Indeed, when a defence of gift is pleaded it suggests that evidence is available to prove it. Ditto, a claim that it was a loan. In a case where the contest is between a loan and a gift, it is difficult to conceive a case where the court has nothing more than the evidence of payment and receipt. Given the relatively short limitation period one or more of the protagonists is likely to be available. One would expect evidence to explain why the payment was made from the parties. Payments and receipts do not normally happen spontaneously. Moreover, the relationship of the protagonists, their evidence, the circumstances of the payment, its size, the alleged purpose of the payment or the use to which the money was put, are all matters which might help the court to decide the character and effect of the payment ...”

66.  Having considered the evidence and the submissions, and for the reasons that follow, I find that the 1^st to 4^th Payments were all loans advanced by the Plaintiff to the Defendant.

The founding of JMC and the alleged JMC Agreement

67.  I find, on the balance of probabilities, that the JMC business was initially a venture between the Defendant, Jofee and Maverick, and that the Plaintiff was only subsequently invited to join. I accept the Plaintiff’s case and reject the Defendant’s case in this regard.

68.  As early as 20 December 2013, the Defendant was appointed as the sole director of Asia Gain.

69.  On 15 January 2014, the Defendant became a shareholder of Asia Gain following a transfer of one share to him. On the same day, two new shares were allotted to Lam Wai Mei Shirley and Chen Kam Kang, who held them on behalf of Jofee and Maverick respectively. At that point in time, the only shareholders of Asia Gain were the Defendant, Jofee and Maverick. The Plaintiff was not among them. I find it unlikely that, had the Plaintiff been one of the founding partners of the business, he would not have been made a shareholder from the outset — whether in his own name or through a nominee. The undisputed company records are more consistent with the Plaintiff’s case than the Defendant’s.

70.  One might theorise an exception: that the Plaintiff’s interest was represented by the Defendant’s share, ie, that the Defendant was holding his share on trust for the Plaintiff. If so, the Defendant’s case might be more internally coherent on this point. However, the Defendant’s evidence in this regard is highly unsatisfactory.

71.  In the Defendant’s Answer to Request for Further and Better Particulars of the Defence (“the Answer”), by letter dated 3 December 2021, the Defendant pleaded that he was told that due to a “non-compete” agreement between the Plaintiff and his previous employer, the Plaintiff was unable to hold shares in any company that might compete with his previous employer; and that the Plaintiff accordingly requested the Defendant to hold shares of JMC for the Plaintiff while the Plaintiff acted as a “sleeping partner and person in control” of JMC. On this pleaded case, the Defendant was holding his JMC shares on trust for the Plaintiff.

72.  I find no evidence-based reason why the Plaintiff would have chosen the Defendant in particular as his nominee. The Defendant was merely an employee in the Plaintiff’s prior business.

73.  Furthermore, the Defendant’s trust case is in any event contradicted by the shareholding structure that emerged following the share restructuring in March 2015, after the Plaintiff had injected $600,000. As of 5 March 2015, there were four beneficial owners: the Plaintiff and Joe (through Dorcas, who held 30% on their behalf); Maverick (through Cheng Hoi Lam, holding 30%); Jofee (through Yu Ong Hon, holding 30%); and the Defendant, holding 10% in his own name. If the Defendant was holding his 10% only for and on behalf of the Plaintiff, there is no explanation for why the Plaintiff did not simply have all his shares held through Dorcas, resulting in a 40% stake through a single nominee. Having two separate trustees — Dorcas for 30% and the Defendant for a further 10% — would be an unnecessarily complicated and risky arrangement, and no rational explanation for it has been offered.

74.  I also consider it inherently improbable that the Defendant would have agreed to become merely a nominee or trustee in respect of shares beneficially owned by the Plaintiff, while holding no beneficial interest of his own in a company he was founding and operating.

75.  Importantly, in his own witness statement, adopted as his evidence-in-chief, the Defendant stated that on 5 March 2015 the Plaintiff became a 30% shareholder through Dorcas, and he became a 10% shareholder, holding all shares in his own name. This is flatly inconsistent with the case advanced in his Answer.

76.  When I raised the question during the Defendant’s opening speech as to whether the Defendant’s shareholding was held on trust for the Plaintiff, Mr Lau was unable to provide a direct answer and sought instead to reframe the issue: he submitted that regardless of the nature of the shareholding, the Defendant was not required to make any monetary contribution. That non-answer only highlights the inconsistency.

77.  Under cross-examination, the Defendant at one point stated that he was unsure whether the Plaintiff intended to gift shares to him or to ask him to hold shares for the Plaintiff. This, if anything, negates the trust case advanced in the Answer, since it acknowledges that — even in the Defendant’s own understanding — the Plaintiff may never have asked him to hold shares on trust at all.

78.  Later in cross-examination, the Defendant reverted to saying that as of March 2015 he was holding his shares for the Plaintiff, but that by around 2016 he had come to believe the shares actually belonged to him beneficially. This shifting account is a further indicator that the Defendant was not giving truthful evidence. I reject it entirely.

79.  I find that the Defendant never held any shares in JMC on trust for and on behalf of the Plaintiff. Returning to the position as at January 2014, when the Defendant became one of three shareholders of Asia Gain, he was in fact a beneficial owner of the company in his own right.

80.  If, as the Defendant alleges, the Plaintiff was involved as a founding partner of the business from the outset, it is very unlikely that he would have had no interest in the company at all when it was incorporated. Even if he could not be named as a registered shareholder for whatever reason, he would have ensured that a nominee held shares for him.

81.  I therefore find, on the balance of probabilities, that the Plaintiff was not yet a partner in the business in January 2014. At that time, the business was owned by the Defendant, Jofee and Maverick, as reflected in the shareholding structure of Asia Gain. I further find that the three founding partners subsequently required additional capital and accordingly invited the Plaintiff to become a new partner. The evidence of the Plaintiff, Jofee and Maverick on this point is consistent, credible, and supported by the documentary record, and I accept it.

The 1^st Payment

82.  It is the Plaintiff’s evidence that on or about 24 November 2014 he drew the cheque for the 1^st Payment to the Defendant and gave it to him. This was not challenged by the Defendant, and I find it as a fact.

83.  The Plaintiff says the 1^st Payment was a loan to the Defendant to enable him to subscribe for and purchase shares in JMC. The Defendant says it was the Plaintiff’s own injection of share capital into JMC, channelled through the Defendant’s account at the Plaintiff’s request.

84.  In my view, the Defendant’s case is highly improbable. If the Plaintiff intended to inject his own capital into the new business, there was no discernible reason for him to do so in such an indirect fashion — by writing a cheque payable to the Defendant personally, having the Defendant deposit it into his own bank account, and then having the Defendant withdraw the money in cash and deposit it into JMC’s bank account. The same result could have been achieved far more simply by the Plaintiff depositing cash or making a transfer directly into JMC’s bank account. Under cross-examination, the Defendant himself agreed that the method used was “a bit strange”. I agree. The strangeness of the arrangement is, on the Defendant’s own account, unexplained, and it significantly undermines the credibility of that account.

85.  The Plaintiff’s prior conduct confirms the point. As shown by JMC’s internal accounting records — which the Defendant did not dispute — the Plaintiff had already injected $600,000 directly into Asia Gain by March 2014 without routing it through the Defendant. There was therefore no precedent and no apparent reason to introduce such a convoluted arrangement for the present payment.

86.  The position in March 2015 strongly corroborates the Plaintiff’s account. The Plaintiff, Jofee and Maverick each made contributions of $600,000 to JMC to obtain their respective 30% stakes. This evidence was not challenged. It follows from the consensus that a 10% stake required a proportionate contribution of $200,000. The Defendant held precisely a 10% stake in JMC, and the 1^st Payment was precisely $200,000. The correspondence between the amount and the agreed contribution for a 10% shareholding is entirely consistent with the 1^st Payment having been a loan advanced by the Plaintiff to enable the Defendant to fund his own share subscription.

87.  More generally, for the reasons set out above, I prefer the Plaintiff’s evidence to the Defendant’s.

88.  I find that the 1^st Payment was a loan advanced by the Plaintiff to the Defendant to enable the Defendant to make his capital contribution and acquire his 10% shareholding in JMC.

The 2^nd Payment

89.  It is undisputed that JMC’s business was loss-making and failed to pay the Defendant’s salary in a timely manner between April and September 2018, with those arrears only being settled in November 2018.

90.  The Plaintiff alleges that the Defendant told him that he had many personal outgoings including payments towards his property, cars and other household or family expenses and therefore had cashflow issues. Therefore, the Plaintiff agreed to lend the Defendant a further loan of $100,000.

91.  The Defendant’s case is that in around August 2018, the Plaintiff informed him that Maverick would be leaving JMC, asked whether he was willing to continue running the business as CEO, and offered him the 2^nd Payment of $100,000 as a living allowance to retain him in that role. He says the payment was made on the mutual understanding that it was not repayable.

92.  I reject the Defendant’s account for the following reasons.

93.  First, as a matter of chronology, the Defendant’s account is undermined by the contemporaneous documentary evidence. The cheque for the 2^nd Payment bears the date 30 July 2018, which predates the alleged August meeting. On the Defendant’s own case, the payment was offered as a retention allowance in consequence of a discussion that had not yet occurred. No explanation has been offered as to why the Plaintiff would have prepared and issued the cheque before even approaching the Defendant about Maverick’s departure or inviting him to continue as CEO. The more natural inference is that the cheque was issued because the Defendant had already approached the Plaintiff with a request for a loan, which is consistent with the Plaintiff’s evidence.

94.  Second, and relatedly, the evidence establishes that Maverick did not depart from JMC until October 2018, and that the Plaintiff only informed the Defendant of Maverick’s departure in around October 2018. It is accordingly difficult to accept that, as early as August 2018, the Plaintiff was already offering the Defendant a “retention allowance” in connection with a situation that had not yet come to pass — and that he had already prepared the cheque for it before the conversation took place.

95.  Third, the Defendant’s account is inherently improbable as a matter of commercial sense. At the time, JMC owed the Defendant several months of outstanding salary. If the Plaintiff was genuinely the driving force behind JMC, as the Defendant contends, and if his purpose was to retain the Defendant, the obvious course of action would have been to procure JMC to discharge the outstanding wage arrears. Instead, it is said that the Plaintiff chose to make a personal gift of $100,000 without first seeking to clear the company’s debt to the Defendant. The Defendant could not explain why the Plaintiff would take this approach rather than simply having JMC pay what it owed. I do not find this credible.

96.  I find it much more probable that the 2^nd Payment was initiated by the Defendant’s own request for financial assistance, as the Plaintiff testified. Given that JMC had failed to pay the Defendant’s salary for several months and the Defendant was experiencing cashflow difficulties in meeting personal outgoings, it is entirely plausible that he approached the Plaintiff for a personal loan to tide him over.

97.  I find that the 2^nd Payment was a personal loan advanced by the Plaintiff to the Defendant.

The 3^rd Payment

98.  The Defendant’s pleaded case regarding the 3^rd Payment is that the Plaintiff asked him to inject the funds into JMC’s account. The Defendant deposited the cheque for the 3^rd Payment on 22 October 2018 and transferred the corresponding amount to JMC on 24 October 2018 — the very day on which 200,000 of Maverick’s shares were transferred to the Defendant and the remaining 100,000 to Dorcas.

99.  Under cross-examination, the Defendant agreed that the 3^rd Payment was used to purchase Maverick’s 200,000 shares. He also agreed that the Plaintiff purchased the remaining 100,000 shares from Maverick, though he was uncertain whether the Plaintiff made any payment in respect of them.

100.  He further said, in cross-examination, that the Plaintiff in fact made the purchase payment on the Defendant’s behalf and expressly told the Defendant that he was gifting the 200,000 shares to the Defendant.

101.  Notably, if the Plaintiff was at that point making a gift of 20% of JMC’s shares to the Defendant, it is remarkable that the Defendant did not take the opportunity to seek clarification as to whether his existing 10% shareholding was likewise beneficially his, or merely held on trust for the Plaintiff. His failure to do so — on a matter of obvious and significant personal importance — is another indication that the Defendant was not giving a truthful account.

102.  On the Defendant’s own account that this was a gift to him, it is entirely unclear why the Plaintiff had to advance the money to the Defendant first, for the Defendant then to transfer it to JMC. The Plaintiff could simply have paid JMC directly and arranged for the shares to be registered in the Defendant’s name.

103.  What the evidence does clearly establish is this: $400,000 was transferred to the Defendant’s personal bank account, an equivalent sum was immediately transferred to JMC’s bank account two days later, and the direct consequence of that transaction was that the Defendant received 200,000 additional shares in JMC. This sequence of events is entirely consistent with, and most naturally explained by, the Plaintiff advancing a personal loan to the Defendant to fund the Defendant’s acquisition of shares from Maverick.

104.  I find that the 3^rd Payment was a loan advanced by the Plaintiff to the Defendant at the Defendant’s request, for the purpose of enabling him to purchase 200,000 shares from Maverick.

The 4^th Payment

105.  It is common ground that between November 2019 and February 2020, JMC again failed to pay the Defendant’s salary.

106.  The Defendant says that on a few occasions when he raised with the Plaintiff whether they should continue to run JMC, the Plaintiff asked him not to leave and to continue to assist him in JMC. In around December 2019, the Plaintiff offered the 4^th Payment as a living allowance to dissuade the Defendant from leaving.

107.  The Plaintiff, on the other hand, says the 4^th Payment was a personal loan advanced in circumstances similar to those giving rise to the 2^nd Payment.

108.  I accept the Plaintiff’s evidence, for reasons similar to those set out in relation to the 2^nd Payment. In particular, I find it implausible that — in circumstances where the Defendant had not tendered any resignation and was merely discussing with the Plaintiff whether the business should continue — the Plaintiff would proactively offer to make a payment to him as a retention device. That is the Defendant’s case, but it is not a convincing one. The more probable account is that the Defendant, again experiencing cashflow difficulties due to unpaid salary, requested a personal loan from the Plaintiff, who agreed.

109.  I find that the 4^th Payment was also a personal loan from the Plaintiff to the Defendant.

Demand for repayment

110.  I find that the Plaintiff made an oral demand for repayment on or about 28 October 2020, when the parties entered into the Separation Agreement, and not at any earlier date. I reject the Plaintiff’s evidence that earlier oral demands were made (including any alleged demand in May 2020).

111.  My reason for rejecting the earlier demands is that they were entirely absent from the Plaintiff’s solicitors’ demand letter of 5 May 2021, from the Statement of Claim, and from the Plaintiff’s original witness statement. These are precisely the documents in which one would expect any earlier demand to have been mentioned if it had in fact been made. The earliest oral demand on the Plaintiff’s own documentary record is the one said to have been made in October 2020.

112.  That said, I do not accept the Defendant’s evidence that the first demand was not made until the solicitors’ letter of 5 May 2021. On this issue, I turn to my earlier assessment of the parties’ respective credibility, which leads me to prefer the Plaintiff’s account.

The Defendant’s submissions

113.  I now address some of the principal submissions advanced by Mr Lau on behalf of the Defendant.

114.  Mr Lau highlights the absence of contemporaneous documents showing the alleged loans, and submitted that this is fatal to the Plaintiff’s case. With respect, I disagree, for several reasons. First, even in the absence of written documentation, the Court may accept a party’s oral evidence on the nature of a transaction where it finds that evidence credible, as I do here. Second, in respect of the 1^st and 3^rd Payments, something happened to the Defendant’s shareholding in JMC after each payment: $200,000 was deposited into JMC’s account, followed by the Defendant’s formal acquisition of a 10% stake; and $400,000 was deposited into JMC’s account and 200,000 shares were then transferred to the Defendant. This close temporal and quantitative correspondence is itself cogent evidence that the Payments were connected to the Defendant’s acquisition of shares, which is more consistent with personal loans than with the Plaintiff’s own undisclosed capital injections routed through the Defendant.

115.  I am not surprised that the loans were not reduced to writing. The sums involved were not of such magnitude as to call for formal documentation from a person of the Plaintiff’s commercial experience and financial standing. Moreover, these were not transactions between strangers dealing at arm’s length, but informal arrangements between people who had known one another through a shared business venture.

116.  Mr Lau also submitted that, at the time of the 3^rd Payment, the shares of JMC were unattractive and there was little incentive for any person to borrow money to invest in the company. He argued that the Plaintiff would not have lent $400,000 without hesitation or discussion as to how and when it could be repaid. With respect, I disagree. First, as stated above, the amount was not, in context, especially large to the Plaintiff. Second, it was the Defendant’s own evidence under cross-examination that he himself was confident about the company’s future prospects after Maverick’s departure: he criticised Maverick’s “reckless spending and poor budgeting” and believed that once he took full control, the company would improve. I formed a clear impression from the Defendant’s evidence that there was a good rationale for the Defendant to continue investing in JMC at that point, and that the Plaintiff, as a fellow shareholder, would have had reason to support that aspiration.

117.  Mr Lau further submitted that the Separation Agreement dated 28 October 2020 made no mention of the four loans. This is factually correct but does not, in my view, support the inference the Defendant seeks to draw from it. The Separation Agreement was concerned with the mechanism for unwinding the parties’ business relationship and restructuring their shareholdings in JMC and related companies. The four Payments were personal financial dealings between the Plaintiff and the Defendant, independent of the company’s affairs. That they were not included in a corporate restructuring document is entirely unsurprising.

Conclusion on factual findings

118.  Accordingly, I find that the 1^st to 4^th Payments were all personal loans advanced by the Plaintiff to the Defendant.

119.  In light of this factual finding, it is unnecessary for me to deal with the Plaintiff’s alternative claim based on unjust enrichment.

THE LIMITATION DEFENCE

120.  However, the matter does not end there. In respect of the 1^st Payment advanced on 24 November 2014, the Defendant raises a limitation defence under section 4 of the Limitation Ordinance (Cap 347), on the basis that the Writ of Summons was issued on 30 June 2021, more than six years after the date of the loan.

121.  Mr Lau submitted that the common law position on the limitation period for repayment of a loan is that, where no time for repayment is stipulated, the cause of action accrues immediately upon advancement of the loan. He cited Lee Siu Fong Mary v Ngai Yee Chai [2006] 1 HKC 157 at §10; M.S. Fashions Ltd & Ors v BCCI (1993) 3 WLR 220 at 237H–238A; Re Li Yonghong [2025] HKCFI 3307 at §14; Lee On Wai (李安恵) v Athora Lux Invest SCSP-Loan Origination [2025] 5 HKLRD 553 at §§6.10–6.11; and Secretary for Justice v The Hong Kong & Yaumati Ferry Co Ltd & Anor (HCA 15329/1999, 22 December 2006) at §§378–379.

122.  Ms Sat submitted that where demand is a pre-condition for repayment, time does not begin to run until a demand is made, citing FBC Construction Co Ltd v Big Island Construction (HK) Ltd (HCA 1363/2008, 28 December 2009) at §14 and Re Leco Watch Case Manufactory Ltd [2015] 2 HKLRD 87 at §§10–12. She argued that since the Plaintiff did not make a demand until 2020, the claim is not time-barred.

123.  I must therefore first determine whether demand was a pre-condition for repayment of the 1^st Payment. This is a question of fact, to be decided by reference to what the parties agreed at the time the loan was made.

124.  In my judgment, demand was not a pre-condition for repayment of the 1^st Payment. My reasons are as follows.

125.  The demand letter from the Plaintiff’s solicitors dated 5 May 2021 contains no assertion that demand was a pre-condition for repayment. To the contrary, it states that the Defendant “promised to [the Plaintiff] that [the Defendant] would repay the loan as soon as possible or upon [the Plaintiff’s] demand.” That formulation is inconsistent with demand being a pre-condition. It reflects, rather, a position in which the Defendant regarded the debt as already subsisting, had undertaken to discharge it as soon as possible, while the Plaintiff additionally retained the right to make a demand if necessary.

126.  In paragraph 6 of the Statement of Claim dated 29 June 2021, the Plaintiff pleaded both that (i) the Defendant undertook to the Plaintiff to repay the loans as soon as possible, and (ii) in any event agreed that the loans shall be due and become immediately repayable upon the Plaintiff’s demand. The same allegation appeared in the Plaintiff’s witness statement dated 2 September 2024.

127.  While the wording of the second part might, read in isolation, suggest that demand was a pre-condition for repayment, the first part is irreconcilable with such a construction. If demand were truly a pre-condition such that no repayment obligation arose at all until a demand was made, the Defendant would have been under no legal duty to repay anything at any time of his own accord. On that reading, the undertaking to “repay as soon as possible” would be entirely devoid of content: a borrower cannot be obliged to repay as soon as possible if, in truth, he has no obligation to repay until the lender chooses to demand it.

128.  It was only after the Defendant raised the limitation defence that the Plaintiff’s case and evidence in this regard shifted. In the Re-Re-Amended Reply dated 26 February 2026, a new paragraph was introduced alleging that demand was a pre-condition for repayment. In the Plaintiff’s 2^nd Supplemental witness statement dated 5 March 2026, the Plaintiff stated, for the first time, that when he advanced the first loan to the Defendant, he said in Chinese “咁我有需要你還再還返畀我啦” (meaning “So when I need you to, repay it back to me”). Significantly, the earlier part of the undertaking (i.e. to repay “as soon as possible”) was absent from that later statement. I find that the pre-condition argument, and the factual narrative crafted to support it, were late inventions introduced in response to the limitation defence. I reject them.

129.  Ms Sat further relied on the doctrine of estoppel. She submitted that when the Plaintiff made his oral demand, the Defendant gave an oral undertaking that he would repay the loans as soon as possible; that this constituted a representation that the Defendant would not rely on any limitation defence; that the Plaintiff reasonably acted on that representation; and that, but for the representation, the Plaintiff would have immediately commenced legal proceedings to protect his position.

130.  I am not persuaded that the Defendant is estopped from relying on the limitation defence. First, on the balance of probabilities, I reject the allegation that the Defendant made any such oral undertaking. By October 2020, it was common ground that the parties’ relationship had broken down, leading them to negotiate and execute the Separation Agreement. Against that backdrop, there is no persuasive explanation as to why the Plaintiff would have accepted or acted upon a bare oral undertaking from the Defendant — given in a context of evident mutual distrust — and then refrained from commencing legal proceedings for a number of months thereafter.

131.  Even if I were wrong, I do not accept that a mere undertaking to repay “as soon as possible” amounts to a clear and unequivocal representation that the Defendant would forgo any limitation defence. The representation, to found an estoppel, must be clear and unambiguous: Dawn Jade Ltd & Anor v Himanshu Girdhar Dua (CACV 4/2014, 13 January 2015) at §§47–48. A commitment to repay “as soon as possible” does not, without more, constitute such a representation.

132.  I therefore hold that the Plaintiff’s claim in respect of the 1^st Payment is time-barred.

CONCLUSION

133.  The 2^nd to 4^th Payments were personal loans advanced by the Plaintiff to the Defendant, which the Defendant has refused to repay. I give judgment in favour of the Plaintiff in the sum of $600,000, being the aggregate of the 2^nd Payment ($100,000), the 3^rd Payment ($400,000) and the 4^th Payment ($100,000).

134.  In respect of the 1^st Payment, although I find that it was also a loan, the claim is time-barred and accordingly fails.

135.  I award the Plaintiff interest on the sum of $600,000 at 1% per annum above the HSBC Best Lending Rate, from 28 October 2020 (being the date of the oral demand for repayment) to the date of this judgment, and thereafter at the judgment rate until full payment.

COSTS

136.  The Plaintiff has succeeded on the principal factual issue of whether the Payments were loans, but has failed on the limitation defence in respect of the 1^st Payment. The limitation issue raised a distinct and separate point, which required additional legal argument and occupied a not insignificant portion of the trial. In my discretion, I consider it appropriate to reflect the Plaintiff’s partial failure in the costs order.

137.  I make an order nisi that the Defendant do pay 75% of the Plaintiff’s costs of the action, including all costs reserved, to be taxed if not agreed, with a certificate for Counsel. Any application to vary this order nisi shall be made by way of summons filed within 14 days of the date of this judgment.

138.  I thank Ms Sat and Mr Lau for their helpful assistance throughout the trial.