WONG CHI KAN v. SUTCHUNG INTERNATIONAL CO LTD

HCA 681 / 2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 681 OF 2006

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J U D G M E N T

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A.  Introduction

1.  This trial concerns the dispute in relation to the beneficial interest of the office premises at Nos. 5, 6, 7 and 8 on 11^th Floor, Workingbond Commercial Centre (“Workingbond Centre”), No. 162, Prince Edward Road West, Kowloon, Hong Kong (collectively, the “Offices”).

2.  The Offices were purchased in the name of the Defendant, Sutchung International Company Ltd (“Sut Chung”), at an auction in 2002 for a consideration of approximately $1.5 million. 

3.  It is common ground that:

(1)  Before the auction was held, Mr Hung Sut Chung (“Mr Hung”) and Mr Wong Chi Kan (“Mr Wong”) (the Plaintiff) had agreed to jointly purchase the Offices in equal shares in the name of Sut Chung.

(2)  After successfully bidding for the Offices at the auction, by completion in December 2002, it was Mr Wong who had paid the entire purchase price and the various expenses in the total sum of HK$1,553,843.14[1]. 

(3)  In between April and May 2003, Mr Wong had received a total of $800,000.00 through 4 remittances from the Mainland via a company known as Winsome Nice Development Ltd (“Winsome Nice”). 

(4)  Since about June 2003, the Offices have been occupied by Kai Hing Food Co Ltd (“Kai Hing) as its office with a monthly rental of $20,000.00. Kai Hing is a company owned by Mr Hung.

4.  It is Mr Wong’s case that he is in fact the entire and sole beneficial owner of the Offices because, before paying of the balance of the purchase price, Mr Hung had backed out from the agreement to jointly purchase the Offices.   Mr Wong therefore now seeks a declaration that Sut Chung has been holding the Offices on trust for him alone.  He also asks for an order that Sut Chung should transfer the legal title of the Offices to him. 

5.  The Defence in gist is that Mr Hung had never backed out from the agreement, and had contributed his half share of the purchase price by the payments of the abovementioned $800,000.00 It is also Sut Chung’s case that, consistent with Mr Wong having only half of the beneficial interest in the Offices, Kai Hing had since June 2003 been paying Mr Wong $10,000.00 as his half share of the $20,000.00 monthly rental of the Offices.

6.  Therefore, Sut Chung in its Counterclaim asks for a declaration that Sut Chung has been holding the Offices on trust for Mr Wong and Mr Hung in equal shares.

7.  In rebuttal:

(1)  Mr Wong denies that the $800,000.00 payments were Mr Hung’s contribution for the purchase of the Offices.  Mr Wong says these sums were monies remitted to him in relation to goods sold and delivered by his business in the Mainland. 

(2)  Mr Wong also denies that he had only received $10,000.00 monthly rental payment from Sut Chung.  He says he had been receiving the entirety of the $20,000.00 monthly rental between May 2003 and November 2005, consistent with his entire beneficial interest in the Offices.

B.  The issues

8.  In light of the above, and given the common ground that it was Mr Wong who had paid the entire purchase price for the completion of the purchase of the Offices and that Sut Chung is holding the Offices as a trustee only, the fundamental and central issues for determination at trial are:

(1)   Whether Mr Hung had backed out from the agreement to jointly purchase the Offices, and;

(2)   If not, whether the $800,000.00 received by Mr Wong was for the purpose of contributing Mr Hung’s half share of the purchase price and related expenses.

9.  In relation to the main issues, a number of subsidiary issues arise which are:

(1)  Whether Mr Wong is a beneficial shareholder of Sut Chung.

(2)   Whether Mr Wong was an employee of Kai Hing and had been receiving a monthly salary of $10,000.00 between April 2001 and October 2005.

(3)   Between June 2003 and November 2005, whether Mr Wong had been receiving half or the entirety of the $20,000.00 monthly rental of the Offices.

C.  Background

10.  Unless otherwise stated, the following relevant background facts are uncontroversial.

11.  Before 2000, Mr Wong and Mr Hung had been engaged in some business dealings.  The principal nature of these business dealings was the importation of frozen food into the Mainland together with transportation and delivery.  

12.  There was another person called Mr Wu Hoi Cheung (transliteration) (“Mr Wu”), who sometimes acted as the middleman in the business dealings.

13.  The said frozen food importation business sometimes involved “importing” into the Mainland frozen food which had not been properly declared, in the sense that the food that was actually imported was different from those declared on the importation documentations.  Apparently, this was done to avoid paying higher taxes for certain imported food, or to import frozen food which was banned from being imported into the Mainland. 

14.  Mr Hung initially carried on the business in the name of Kai Hing.  Later, in order to avoid certain outstanding debts, Mr Hung set up Sut Chung in September 2001 to continue to carry on some of the said business of frozen food importation and transportation. 

15.  When Sut Chung was set up, Mr Hung and one Ms Wong Kit Ling were its shareholders.  Ms Wong was employed as the buyer (or marketing manager) of Kai Hing.   Later, the shareholding of Sut Chung was changed to Mr Wong (i.e., the Plaintiff), Ms Wong and Mr Hung Ka Lung in the ratio of 40%, 40% and 20%.  Mr Hung Ka Lung is the nephew of Mr Hung.  They also became the directors of Sut Chung.   It is Mr Hung’s case that they are all holding the shares in Sut Chung on behalf of him.  Ms Wong and Mr Hung Ka Lung have given evidence in support of Mr Hung’s position. Mr Wong appears to contend that he holds the shares beneficially.

16.  Initially, Kai Hing had been renting the office space at Rooms 502-5 of Workingbond Centre for its business activities.

17.  Mr Wong had been physically working at Kai Hing’s office.  It is hotly disputed at the trial as to Mr Wong’s capacity in working at Kai Hing’s office.   Mr Wong says he had been for convenience working there as the business partner of Mr Hung.  Mr Hung however says since August 2000, after Mr Wong had closed down his own business, he was employed by Kai Hing to handle Kai Hing’s cargo business on a full-time basis and was paid a monthly salary of $10,000.00.

18.  In around August or September 2002, Mr Wong told Mr Hung that 6 units on the 11^th Floor of Workingbond Centre would be put up for sale in an auction.  The 6 units included the Offices and Nos. 2 and 3 of the 11^th Floor.  Eventually, Mr Wong and Mr Hung agreed to jointly purchase the Offices through Sut Chung.

19.  At the auction, Mr Wong together with one Mr Law Pui Tai successfully bid for the purchase of all the 6 units for the price of $2,150,000.00 in the name of Sut Chung and Mr Law.    Mr Law was a security guard at Workingbond Centre, and it was he who notified Mr Wong initially of the auction sale of the 6 units.

20.  The sale of the 6 units was completed on 9 December 2002.  It is common ground that at that time, it was Mr Wong who had paid the entire purchase price and the related expenses in relation to the Offices.   By a deed of exchange of the same date, the 6 units were split and unit Nos 2 and 3 were allocated to Mr Law.

21.  As mentioned above, Mr Hung says he had reimbursed Mr Wong $800,000 by the 4 payments made through Winsome Nice between April and May 2003 for the purchase of the Offices.  This represents his 50% beneficial ownership in the Offices.  

22.  Mr Wong however says Mr Hung reneged on the agreement to jointly purchase the Offices just before the completion, when Mr Wong asked him to contribute to the payment of the balance of the purchase price.  Mr Wong reluctantly accepted Mr Hung’s decision to back out from the agreement and Mr Hung had never paid any of the purchase price.   Mr Wong accepts that he had received the 4 payments, but they were monies remitted to him through Winsome Nice in respect goods sold and delivered under his and his brother’s business in the Mainland.   In other words, the payments did not come from Mr Hung.

23.  In about May 2003, the Offices were refurbished. Kai Hing then moved into them as its offices in June.  The rent was $20,000.00 per month.    Mr Hung says Mr Wong had been paid $10,000.00 per month out of the rent to reflect Mr Wong’s half ownership of the Offices.  Mr Wong on the other hand says he had been paid the entire monthly rent of $20,000.00 until November 2005, when Kai Hing suddenly ceased to pay him any rent.

24.  It is Mr Hung’s case that Kai Hing officially ended employing Mr Wong in November 2005 as Kai Hing had no more duties to assign to Mr Wong.  Mr Wong’s case is that he was suddenly asked not to go back to Kai Hing’s office in November 2005, and later Kai Hing also stopped paying him any rent.

D.  The evidence

D1.    Mr Wong’s case and evidence in support

25.  Initially, Mr Wong was the only witness who gave evidence in support of his case.    At the adjourned second part of the trial, with leave of the court, Mr Wong re-opened his case and further called one Mr Wong Yick Cheong to give evidence.  Mr Wong Yick Cheong was the conveyancing clerk who handled the conveyance of the Offices for Sut Chung. 

26.  Mr Wong’s relevant evidence in support of his case can be summarized as follows:

(1)  Mr Hung backed out from the agreement to purchase the Offices jointly sometime before the completion, as he said he did to have sufficient money.   Mr Wong therefore had to proceed with the transaction alone albeit reluctantly, as he did not want to lose the deposit he had already paid, and to affect Mr Law.

(2)  The $800,000.00 he had received was in relation to goods sold and delivered under his and his brother’s business in the Mainland.  He further elaborated in his oral evidence at trial that the business in the Mainland was carried on under the name of Zhi Da Hang (志達行), which was run by his younger brother Wong Chi Chung.  He further said his brother from time to time would instruct Winsome Nice to remit money to him for payments received by Zhi Da Hang, and these 4 payments were part of those.

(3)  He had been receiving the entire monthly rent ($20,000.00) paid by Kai Hing from June 2003, which was consistent with his sole ownership of the Offices.  However, Kai Hing suddenly stopped paying the rent in December 2005.

(4)  Further, he was never an employee of Kai Hing, but at all material times a business partner of Mr Hung.  The $10,000.00 he had been receiving from Kai Hing monthly before June 2003 was the share of profit that Mr Hung gave him.  However, Mr Hung had suddenly stopped giving him any such share of profit since June 2003. 

(5)  He had also made various loans to Mr Hung from time to time.  In his estimate, the outstanding loans together with unpaid profit owed to him by Mr Hung amounted to $10 million or so, although he had never chased Mr Hung for the repayment or an account.

27.  Mr Wong Yick Cheong’s evidence can be summarized as follows:

(1)  He was the conveyancing clerk of the solicitors’ firm acting for Sut Chung and Mr Law in the purchase of the 6 units after the auction. 

(2)  In around the end of November 2002, Mr Wong called and told him that as his (Mr Wong’s) partner was not going to share the purchase price, he wanted to use his own name instead of Sut Chung to purchase the Offices.  Mr Wong Yick Cheong then told him that he (Mr Wong) was not allowed to do so because it was a mortgagee sale, and under the memorandum of agreement for sale and purchase, a change of name was not permitted.  Mr Wong Yick Cheong also advised Mr Wong that if he gave up the purchase at that stage, the vendor would forfeit the deposit paid.  Mr Wong then said to Mr Wong Yick Cheong that he did not want the deposit to be forfeited and he did not want to cause any loss to Mr Law.  He therefore decided to pay the balance of the purchase price himself.

D2.    Sut Chung’s case and evidence

28.  Sut Chung’s principal case is that Mr Hung did not back out from the agreement with Mr Wong to purchase the Offices jointly.  Pursuant to the agreement, Mr Hung had caused the 4 payments to be made to Mr Wong representing the reimbursement of half of the purchase price (together with the related expenses) of the Offices.  

29.  Sut Chung has called Mr Hung, Ms Wong, Mr Hung Ka Lung, one Ms Tang Yuen Shan, one Mr Peng Chi Hui and one Mr Liang Xuan Lun to give evidence in support of the case.

30.  Mr Hung’s relevant evidence is in essence as follows:

(1)  All along, Mr Hung is the entire beneficial shareholder of Sut Chung.  However, as he was usually out of Hong Kong for business purposes, he had asked Mr Wong, Ms Wong and Mr Hung Ka Lung to hold the shares in Sut Chung on trust for him.

(2)  Kai Hing had been having business dealings with Mr Wu to import frozen food into the Mainland.  In 1996, Mr Wu introduced Mr Wong to Mr Hung to arrange Kai Hing’s frozen food shipments to the Mainland as well as for other shippers in the name of Kai Hing. For that purposes, Kai Hing paid Mr Wong’s business service fees of $100.00 per container.

(3)  In around August 2000, Mr Wu did not have any more business for Kai Hing.  Mr Wong also closed down his own business.  Kai Hing started to employ Mr Wong to handle Kai Hing’s cargo business on a full-time basis at a monthly salary of $10,000.00.  In addition to that, Kai Hing had also paid Mr Wong double pay usually in January each year, and special bonus from time to time. 

(4)  In about January 2003, Mr Wong told him that the purchase price and the related expenses incurred for the purchase of the Offices was about $1,600,000.00, and asked him to deposit $800,000.00 to Mr Wong’s bank account.  He agreed and promised to make the arrangements to do so.

(5)  Mr Liang is the boss of the company called Yuan Sheng Shi Pin (遠盛食品公司).  Mr Hung and Mr Liang had been good friends and business partners.  Kai Hing had been delivering frozen meats to Yuan Sheng on consignment for resale, and the two companies maintained a running account.  Whenever Yuan Sheng had sold Kai Hing’s frozen meats in the Mainland, after deducting expenses and its own charges, Yuan Sheng would credit the running account for Kai Hing.  From time to time, Yuan Sheng would remit money (out of this running account) to Hong Kong pursuant to Mr Hung’s instructions.

(6)  In around April 2003, Mr Hung asked Mr Liang to transfer $800,000.00 to Wong’s bank account in Hong Kong out of this running account. 

(7)  Mr Liang later told Mr Hung that he had made arrangements with one Mr Mo Cheng Gang of Winsome Nice to remit the said $800,000.00 to Mr Wong’s bank account in Hong Kong.  Winsome Nice acted like an underground bank to receive RMB from Yuan Sheng in the Mainland, and then made payments in Hong Kong in Hong Kong currency.  This was necessary in light of the Mainland’s foreign exchange control.

(8)  In around late May 2003, Mr Liang informed Mr Hung that he had deposited $800,000.00 to Mr Wong’s account in 4 payments through the above-mentioned arrangements between April and May 2003.  The particulars of the 4 payments are as follows:

Date	Amount (HK$)
8 April 2003	164,900.00
11 April 2003	200,000.00
23 April 2003	200,000.00
19 May 2003	235,100.00
Total:	800,000.00

(9)  Mr Liang also deposited to Mr Wong $300,000.00 in January 2004 as bonus as instructed by Mr Hung.   Later, Mr Liang faxed a hand-written note to Mr Hung for reference setting out these 5 payments (i.e., including the deposit of $300,000.00).

(10) In late June 2003, Kai Hing moved into the Offices at the monthly rental of $20,000.00.  Out of this monthly rental, Kai Hing paid $10,000.00 to Mr Wong, representing Mr Wong’s 50% beneficial interest in the Offices. Together with the $10,000.00 payment made to Mr Wong as salary, since June 2003 until October 2005, Kai Hing had been paying a total sum of $20,000.00 to Mr Wong monthly. 

(11) By October 2005, Mr Hung told Mr Wong that Kai Hing had been having no duties to assign to him, Kai Hing would end the employment relationship with him on 30 October 2005.

(12) Thereafter, Kai Hing continued to prepare a cheque of $10,000.00 for payment of half of the monthly rental to Mr Wong.  However, after collecting the cheque for November 2005, Mr Wong has refused to collect any further such cheques from Kai Hing.

(13) Later, on 11 January 2006, Ms Wong and Mr Hung Ka Lung respectively received a letter from Patrick K H Lam & Co, solicitors acting for Mr Wong, stating that Sut Chung has been holding the Offices for him only, and demanding them  (as directors of Sut Chung) to cause the transfer of the legal title in the Offices to Mr Wong.

31.  Ms Wong and Ms Tang gave evidence in support of Mr Hung’s above evidence: 

(1)   Ms Wong’s evidence confirms that she is only holding the shares in Sut Chung on behalf of Mr Hung. 

(2)   Ms Wong also said Mr Wong told her in around August or September 2002 that he would purchase Kai Hing’s office with Mr Hung in equal shares.  At various lunches with other colleagues of Kai Hing, she had also heard from Mr Wong again that he and Mr Hung had purchased the Offices together.  She accepted that the lunch occasions she referred to in the witness statement all took place before the completion of the purchase of the Offices.  But she added in her oral evidence that even after the completion, she had also heard Mr Wong saying the same thing.

(3)   Ms Tang joined Kai Hing in October 2000, and her evidence is in summary as follows:

(a)  She confirmed that Kai Hing had paid Mr Wong salary $10,000.00 per month from August 2000 (as informed by the former account clerk Mr Yiu) until October 2005. She also confirmed that under Mr Hung’s instructions, she had started to prepare monthly cheque payment of $20,000.00 to Mr Wong since June 2003, with the additional $10,000.00 being Mr Wong’s share of the rental payment.  Ms Tang also confirmed that Kai Hing had paid an extra $10,000.00 to Mr Wong in around January each year as double pay.

(b) In oral evidence, she further confirmed that she had also heard from Mr Wong at various lunches with the colleagues of Kai Hing that he was purchasing the Offices with Mr Hung together.  This happened both before and after the completion of the purchase of the Offices.

32.  Mr Liang is the major shareholder and a director of Yuan Sheng.  His relevant evidence is as follows:

(1)   He corroborated with Mr Hung’s evidence about the business relationship between Kai Hing and Yuan Sheng. 

(2)   He also confirmed that Mr Hung had instructed him to remit $800,000.00 from Kai Hing’s goods payments to Mr Wong, and that he had done so through the 4 payments via Winsome Nice.

(3)   He verified the copies of the hand-written note produced for the trial which set out the details of the 4 payments and the payment of $300,000.00.  He said this copy was a hand-written replica of the original one he had provided to Mr Hung in 2004 by fax.  He said he made such a replica as the writing on the original one he had found had very much faded.  He had destroyed the original one after making the replica. 

33.  Mr Peng is a director and the major shareholder of Winsome Nice.  He confirmed that Winsome Nice had been having business dealings with Mr Hung and Yuan Sheng through Mr Liang.  His relevant evidence can be further summarized as follows:

(1)  He confirmed that the 4 payment arrangements relating to the $800,000.00 were made through Mr Mo of Winsome Nice and Mr Liang.  He further said Mr Hung had once mentioned to him that these remittances to Mr Wong were related to their joint purchase of a property. 

(2)  He further confirmed that Winsome Nice also had business dealings with Mr Wong Chi Chung (i.e., Mr Wong’s brother) under Zhi Da Hang in the Mainland.  In 2003, Mr Wong Chi Chung had for 6 times asked Winsome Nice to deposit money that should have been paid to Zhi Da Hang to Mr Wong’s personal account in Hong Kong by cheques.  The total sum that had been so deposited is HK$690,000.00, and the details of these 6 payments are as follows:

2 January 2003	HK$100,000.00
18 August 2003	HK$130,000.00
4 September 2003	HK$100,000.00
21 October 2003	HK$110,000.00
16 December 2003	HK$100,000.00
23 December 2003	HK$150,000.00

D3.    Discussion

D3.1  Mr Wong’s evidence

34.  After hearing him in Court, on balance of probabilities, I reject Mr Wong’s evidence insofar as it conflicts with that of Mr Hung and the other witnesses for Sut Chung. My reasons are as follows.

35.  First, I find Mr Wong an unreliable witness.  He gave evidence generally in an evasive manner, giving long and convoluted answers to simple questions.  Moreover, and more importantly, on some of the essential matters, his evidence changed and is contrary to common sense:

(1)   When cross-examined on why, after Mr Hung had allegedly backed out from the agreement to jointly purchase the Offices, he had not sought to change the name of the purchaser to himself, he said he understood from Mr Wong Yick Cheong’s advice that, as the sale was a mortgagee auction sale, he was not allowed to change the name.  When asked why he did not seek to change the name after the completion of sale, he gave extensive evidence that it was so because he also understood (albeit he now recognised it to be incorrect) that advice to also mean that he could never change the name of the owner of the Offices.  He insisted on this answer to the extent that, when asked by the Court, he even said he believed it to be the case that Sut Chung would have to be the registered owner the Offices even until he died.

(2)   Not only is this latter part of the evidence contrary to common sense, it is inconsistent with and markedly different from what he said in his witness statement as to the reason why he did not change the name of the purchaser after completion.  At paragraph 22 of his first witness statement, he stated that “to avoid further payment of stamp duty and legal fees, I decided not to change the legal title back to me after completion”.  It is important to note that Mr Wong never mentioned this reason when he gave evidence under cross-examination.

(3)  When cross-examined on the circumstances under which he left Kai Hing in November 2005, he again went on to give a long and detailed evidence on how he suddenly received a call from Mr Hung while he was riding the MTR from Tseung Kwan O to Sheung Wan, telling him that he (Mr Hung) had decided (albeit without reasons) to stop paying him the rent and would not allow him to go back to the office.  He also gave detailed evidence on the content of this long telephone conversation and that he was very angry and unhappy about it.

(4) However, none of this evidence is contained in his two witness statements.  In the first witness statement, Mr Wong only dealt with the circumstances on how Kai Hing stopped paying him rent simply as follows:

“32.  However, since December 2005, Kai Hing had ceased to pay rent for the [Offices].

33.   Despite repeated requests and demands, Kai Hing still refused to pay rent.  I contacted Mr Hung about the rent arrear but he simply ignored my request.  As a result, I demanded the Defendant [to] transfer the legal title of the Property back to me.”

(5) If what he said in his oral evidence as to how Mr Hung suddenly called him and told him various unjustified reasons to stop paying him rent were true, I find it difficult to understand why he did not set it out in the witness statement in the first place.  This appears to me to be an afterthought which he came up with when he gave evidence in Court.

(6) Further, the evidence (as set out in his above-quoted witness statement) that it was because of Kai Hing’s continued failure to pay rent despite repeated demands that had led to his demand for the transfer of legal title is also inconsistent with his first solicitors’ letter sent respectively to Sut Chung[2], Ms Wong and Mr Hung Ka Lung[3] asking for the transfer of legal title of the Offices.  In these letters, nothing was mentioned about the consistent failure to pay rent.

(7) Mr Wong said under cross-examination during the first part of the trial that after Mr Hung backed out from agreement, he was angry with Mr Hung.  He therefore had a bad impression of Mr Hung, and had a discount on Mr Hung’s credit.

(8) However, when he was asked later in his cross-examination at the second part of the trial how he would describe his relationship with Mr Hung after the purchase of the Offices, he answered that they had a normal relationship and he trusted Mr Hung. 

(9) When this inconsistency was pointed out to him, he tried to explain it away by giving a convoluted answer that, as they were still doing business after the purchase of the property, although he no longer trusted Mr Hung, he still maintained a normal relationship with Mr Hung. 

(10)    I do not accept this explanation which does not make any sense to me.  In my view, this is yet another example where Mr Wong was prepared to come up with new evidence and to change evidence to suit the question and to try to deal with any inconsistency in his evidence.

(11)    In answering the Court’s questions on why he did not change the name of the owner of the Offices after the completion of sale, Mr Wong said a number of times that after the auction he knew that the Offices were “ours”.   In re-examination, he was asked to explain what he meant when he used the word “ours”.  He gave the answer that “ours” meant “self”.  When asked further by me as to how the word “ours” could mean “self”, Mr Wong was evasive and tried to give a number of vague answers, until at the end (after accepting that the word “ours” meant more than one person) he said what he used the word to refer to himself and his family members.

(12)    I find this evidence of Mr Wong wholly unacceptable.  The explanations are simply illogical and do not make sense.  It is clear to me that, after being alerted that he had said (perhaps without noticing it in the first place) that the Offices were “ours” in his evidence, he tried to make up some explanations as to why he used the word “ours”.  I am of the view that when he used the word “ours”, he was referring to himself and Mr Hung, and it is likely to be a Freudian slip on his part as to the true position of the ownership of the Offices after completion.

36.  Secondly, I also reject Mr Wong’s evidence as unbelievable that he had all along been a business partner of Mr Hung:

(1)  Under cross-examination, in support of his case that he was not an employee of Kai Hing but a business partner of Mr Hung, Mr Wong explained that the $10,000.00 he received monthly from Kai Hing from April 2001 to May 2003 was not salary but “profit” he received from Mr Hung.  When asked if this was the share of profit, why it was of the regular sum of $10,000.00 each month, Mr Wong explained that he never “cared” about how much profit he was entitled to share, and Mr Hung just casually gave him $10,000.00 each month.  Out of respect and his trust in Mr Hung, he had never asked what his share of profit should have been.  However, in his own estimate, together with various loans (also unparticularized) that he had made to Mr Hung, it should be in the region of $10 million.  He had not chased for this profit and loans because again of his respect for and trust in Mr Hung. 

(2)  I am unable to accept this evidence:

(a) When pressed upon under cross-examination, Mr Wong confirmed that he had made no capital investment in the alleged business partnership with Mr Hung, and he also simply could not confirm what was the agreed profit sharing ratio between him and Mr Hung.  This is most unlikely if there were in fact the business partnership as alleged by Mr Wong.

(b)    In my view, it is also entirely contrary to common sense that a regular payment of $10,000.00 each month over a period of more than 2 years represented the profit-sharing, when on the other hand, Mr Hung/Kai Hing was still owing to Mr Wong some $10 million or so.   These regular and constant amount monthly payments are in my judgment more consistent with the case that they were a form of salary payment.  This is particularly so as it is also undisputed that Mr Wong received an extra $10,000.00 each January.  This is more consistent with the case of a double pay, than Mr Wong’s evidence that this amounted to Mr Hung’s reimbursement of his (Mr Wong’s) travelling and out of pocket expenses.

(c)    Further, in light of Mr Wong’s evidence (as mentioned above) that he had already lost trust in Mr Hung after the completion of the purchase of the Offices (that is, December 2002), it is beyond me as to why Mr Wong was (and even up to today is) still happy and contented not to demand Mr Hung to pay him back the millions’ of outstanding profits and loans. 

(d)    Moreover, the evidence (a) that the $10,000.00 payments represented part of the sharing of profits out of his business partnership with Mr Hung, and (b) of the alleged outstanding profit and loans, for no good reasons, is not contained in his witness statements.

(e) Coupled with the above observations, in my judgment this is yet another matter made up by Mr Wong when he gave evidence at trial.

(3)  This is further underlined by Mr Wong’s evidence as to why he said the $20,000.00 he started to receive monthly from June 2003 onwards was the entirety of the rental payment.   When asked in cross-examination if this represented the full amount of the rent, what happened to the $10,000.00 “profit” he had been receiving for the past 2 years or more, he only said Mr Hung had suddenly and without any reasons stopped paying him this share of “profit”.  Again, he said he did not ask for the reasons why the payment of the “profit” stopped nor did he chase for it because he trusted and respected Mr Hung.

(4)   For the same reasons as set out above, I also reject this evidence as contrary to common sense and to Mr Wong’s own evidence that he had already lost trust in Mr Hung back in December 2002.

37.  Thirdly, I also reject Mr Wong’s evidence that the $800,000.00 payments he had received were remitted to him by his brother Wong Chi Chung for the business of Zhi Da Hang for the following reasons:

(1)  Mr Wong is generally an unreliable witness as observed above.

(2)  For no good reasons, Mr Wong has not called his brother to give evidence to support the case that it was he (the brother) who had remitted these sums to Mr Wong.  It is thus open to me to draw adverse inference for Mr Wong’s unexplained failure to call Mr Wong Chi Chung.  This is particularly so given the total lack of documentary evidence to support his case.  See Cavendish Funding Ltd v Henry Spencer & Sons Ltd [1998] 6 EG 146 at 148-149, where Aldous LJ cited the following passage from the judgment of Newton and Norris JJ in O'Donnell v Reichard [1975] VR 916 at 929:

“It is sufficient to say that in our opinion for the purposes of the present case the law may be stated to be that where a person without explanation fails to call as a witness a person who he might reasonably be expected to call, if that person's evidence would be favourable to him, then, although the jury may not treat as evidence what they may as a matter of speculation think that that person would have said if he had been called as a witness, nevertheless it is open to the jury to infer that that person's evidence would not have helped that party's case; if the jury draw that inference then they may properly take it into account against the party in question for two purposes, namely:

(a) in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party, and which relates to a matter with respect to which the person not called as a witness could have spoken; ...”

This citation was followed by Le Pichon JA in Li Sau Keung v. Maxcredit Engineering Ltd & Another [2004] 1 HKC 434 at 443G-444B, para 28.  See also: Aqua-Leisure Industries Inc v Impage Toys Europe BV (formerly known as Impag B.V.) (Unrep., HCA 3933/2000, 4 May 2006, Sakhrani J)  at para 216.

38.  Finally, I find Mr Wong’s evidence and case that he is the sole beneficial owner of the Offices inconsistent with the following objective facts:

(1)  He did not seek to change the name of the legal owner of the Offices even after completion.  I have already explained above my reasons for rejecting his explanations as to why he did not do so.

(2)  He had only received $10,000.00 from the monthly rental of the Offices.  Again, I have already explained above why I reject his evidence that he had been receiving the entirety of the rental income.

(3)  His own evidence that he regarded the Offices as “ours” after the completion of sale.  I have set out above my reasons why I reject his explanation that he used the word “ours” to mean himself and his family members. 

D3.2  Wong Yick Cheong’s evidence

39.  Mr Wong Yick Cheong was only called as witness by Mr Wong at the adjourned trial in July 2009 after Mr Wong had already closed his case in the first part of the trial and some of Sut Chung’s witnesses had already given evidence.  His witness statement was prepared just a few days before the resumed hearing on 27 July.  At the end of the day, I gave leave to Mr Wong to re-open his case and to adduce Mr Wong Yick Cheong as a witness.

40.  After hearing him in Court, I have decided not to attach any weight to Mr Wong Yick Cheong’s evidence.  This is so because:

(1)   It is Mr Wong Yick Cheong’s own evidence that between November 2002 and the time he gave his witness statement, he has handled over some 4,000 conveyance cases.  As a matter of common sense and logic, it is difficult to believe that he could still remember in detail the conversation he had with Mr Wong which took place some 6 to 7 years ago.

(2)   He explained that he could still remember the transaction because that was a mortgagee sale and that the names of the purchasers were a company (i.e., Sut Chung) together with a person (i.e., Mr Law), which was rare in his experience.   I do not accept this explanation.  I cannot see why these features of the matter would have made such an impression in him to remember the details of the conversation he had with Mr Wong.

(3)   Further, unless there are good reasons (and none is give), I find it of suspect as to why Mr Wong Yick Cheong was not called as a witness in the first place, but was only called after the adjournment of the first part of the trial, and after Mr Wong had closed his case.  This is particularly so as Mr Wong in his witness statement has already referred to the allegation that he was advised by his lawyer that he could not change the name of the purchaser.

(4)   Given the above reasons, I find it unsafe to attach any weight to Mr Wong Yick Cheong’s evidence.

D3.3  Mr Hung’s evidence

41.  I prefer and accept Mr Hung’s material evidence as to the beneficial ownership of the Offices and the payment of $800,000.00 insofar as it conflicts with Mr Wong’s evidence.  This is so because his evidence is consistent with the following objective matters:

(1)   There was no change of name of the legal owner of the Offices after completion of the sale and purchase.

(2)   Half of the $20,000.00 rental of the Offices was paid to Mr Wong.

(3)   Mr Wong’s own evidence that he regarded the Offices as “ours” after the completion of sale.

(4)   In the prompt reply to Mr Wong’s solicitors’ demand letter in January 2006, Ms Wong and Mr Hung Ka Lung stated in their solicitors’ letter dated 23 January 2006 the exact details of the 4 payments made through Winsome Nice which represented Mr Hung’s contribution to half of the purchase price and expenses.  This, on balance, shows that this is not an afterthought.

42.  I note that Mr Hung has given some inconsistent and unclear evidence as to how he had arranged the 4 payments to be made through Mr Liang and Winsome Nice, and the actual source of these 4 sums. He explained that he could not remember the events clearly as they occurred more than 6 years ago, and that he had a number of business operations in the Mainland, as a result of which he could have mixed up the matters.  I accept his explanations and do not find these inconsistencies sufficient to outweigh my above conclusion on Mr Hung’s evidence.

D3.4  Mr Hung Ka Lung’s evidence

43.  I accept Mr Hung Ka Lung’s evidence.  He gave evidence in a straightforward manner, and was hardly challenged under cross-examination. 

D3.5  Ms Wong’s evidence

44.  Ms Wong gave evidence in a straightforward and frank manner, and was hardly shaken under cross-examination.  I similarly accept Ms Wong’s evidence, save and except one aspect. 

45.  I would not attach any weight to her evidence on her also hearing Mr Wong saying that he had purchased the Offices with Mr Hung at various lunches after the completion.  This is so because this evidence for no good reasons is not contained in her witness statement.  I therefore find it unsafe to rely on this part of the evidence.

D3.6  Ms Tang’s evidence

46.  I also accept Ms Tang’s evidence.  She was hardly materially challenged under cross-examination and she gave evidence in an open and consistent manner.  However, I would also not attach any weight to her evidence that she had also heard Mr Wong saying that he had purchased the Offices with Mr Hung at various lunches after completion.  This is so because this evidence for no good reason is not contained in her witness statement.  It is also unsafe to rely on this part of the evidence.

D3.7  Mr Liang’s evidence

47.  Mr Liang also gave evidence consistently under cross-examination.  He was also direct and straightforward in answering questions.   I accept his evidence.

48.  However, I would not attach any weight to the copies of handwritten note produced at the trial and verified by him for these reasons:

(1)   Mr Liang’s evidence as to how these handwritten notes were made at the material times and how he replicated them from the original copy is vague and unclear. 

(2)   It is Mr Liang’s own evidence that the note produced is only a replica of the original.

(3)   Further, there are no good explanations as to why these notes were only produced at trial but not earlier. 

(4)   In the circumstances, I find it unsafe to rely on these documents. 

49.  On the other hand, I do not think there are sufficient materials before me to conclude that these handwritten notes were deliberately made up and created for the purpose of the trial as submitted by Ms Ng (counsel for Mr Wong).

D3.8  Mr Peng’s evidence

50.  Except the part of the evidence discussed below, Mr Peng’s evidence is generally firm, consistent and unshaken under cross-examination.

51.   However, in relation to the evidence that he knew that the 4 payments made to Mr Wong were related to the purchase of property, I find it to be unreliable.  My reasons are as follows:

(1)  Under cross-examination and when asked by the Court, Mr Peng gave contradictory explanations as to why he was told about the purpose of the payments. 

(2)  The evidence that Mr Hung told him about the purpose of the payments was not even contained in Mr Hung’s own witness statement.

52.  I therefore reject Mr Peng’s evidence that he knew about the purpose of the 4 payments.  But I accept his evidence that Winsome Nice was asked by Mr Peng of Yuan Sheng to make those payments to Mr Wong, and that Winsome Nice had also in the past remitted 6 sums of money to Mr Wong at the instruction of Mr Wong Chi Chung in relation to Zhi Da Hang’s business in the Mainland.

E.  Findings

53.  Given my above conclusions on the witnesses’ relevant evidence, I make the following findings on the main issues:

(1)   Mr Hung did not back out from the agreement to purchase the Offices jointly with Mr Wong.

(2)   Mr Hung caused the 4 payments in the total sum of $800,000.00 to be paid to Mr Wong as Mr Hung’s contribution to half of the purchase price and related expenses for the purchase of the Offices.  Although this sum was more than $776,921.65 (being the exact amount of the half share of the purchase price and expenses as agreed by the parties at trial), I accept Mr Hung’s evidence that Mr Wong at that time told him that the approximate amount for his half share was $800,000.00 and he relied on that to give instruction for the remittances.

(3)   Mr Hung and Mr Wong beneficially owned the Offices in equal share, which are held by Sut Chung on trust for them.

54.  Insofar as necessary, I also make the following findings on the subsidiary issues:

(1)   Mr Hung is the beneficial owner of all the shareholding in Sut Chung, and Mr Wong, Ms Wong and Mr Hung Ka Lung have been holding their respective shares in Sut Chung on trust for Mr Hung.   This is further supported by the lack of evidence that Mr Wong has contributed any capital to the setting up and/or running of Sut Chung.

(2)   The $10,000.00 Mr Wong had been receiving from Kai Hing monthly from April 2001 to May 2003 was salary payment, and Mr Wong and Mr Hung were not business partners for this period of time and thereafter.

(3)   In relation to the $20,000.00 Mr Wong had been receiving from Kai Hing monthly from June 2003 to November 2005, it was made of up of $10,000.00 as salary payment and $10,000.00 as half of the rental payment for the Offices.

(4)   Kai Hing terminated the employment relationship with Mr Wong with effect from November 2005.  From December 2005 ownwards, Mr Wong had refused to collect the $10,000.00 payment for half of the rental from Kai Hing.

F.  Conclusion

55.  For the above reasons, I dismiss Mr Wong’s claim and find in favour of Sut Chung’s Counterclaim.  I therefore make a declaration that Sut Chung has been holding the Offices on trust for Mr Wong and Mr Hung in equal shares.

56.  I further make an order nisi that costs of the action be to Sut Chung to be taxed if not agreed.  Unless any of the parties applies by Summons to vary it, the costs order nisi shall be made absolute 14 days from today.

[1] This is the agreed figure between the parties at trial.

[2] Dated 16 January 2006.

[3] Both dated 11 January 2006.