SHUM YEUNG v. CHAN CHOI HAR IVY AND OTHERS

HCA 547/2014 and
HCA 774/2017
(Consolidated)

[2025] HKCFI 1877

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTIONS NOS 547 OF 2014 AND 774 OF 2017

________________________

________________________

(Consolidated by the Order of Mr Registrar S Kwang dated 16 January 2019)

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J U D G M E N T

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1.  This is a claim for conspiracy to injure by unlawful means.

2.  Mr Shum Yeung (沈洋) (“Mr Shum”), the plaintiff herein, made such claim firstly against Ms Chan Choi Har Ivy (陳璟儀) (“Ms Chan”)[1], the 1^st defendant herein, in HCA 547/2014 and subsequently also against Ms Keung Wai Fun Samantha (姜惠芬) (“Ms Keung”) and Mr Cheung Chun Hin Samson (張俊軒) (“Mr Cheung”), respectively the 2^nd and 3^rd defendants herein, in HCA 774/2017. Unless otherwise stated, the word “defendants”, when used in this judgment, refers to Ms Chan, Ms Keung and Mr Cheung collectively.

3.  HCA 547/2014 and 774/2017 were consolidated by the order of Mr Registrar S Kwang dated 16 January 2019.

4.  On the day before the commencement of the trial, the solicitors who had been representing the defendants came off the record. Acting in person, the defendants applied on the first day of the trial for an adjournment to enable them to arrange new representation. After hearing the defendants, I refused such last-minute application and the defendants conducted their defence in person.

5.  As the defendants were unrepresented, with the agreement of Mr Martin Wong (and within him, Miss Jacquelyn Ng), counsel for Mr Shum, the trial proceeded on the basis that, where the parties’ respective cases differ, the defendants’ factual case had been put to, and denied by, Mr Shum and his witnesses. In other words, no Browne v Dunn[2] point would be taken against the defendants should these actions go further.

6.  In this judgment, unless otherwise indicated, all monetary figures are denominated in Hong Kong dollars.

A.  BACKGROUND

7.  The background to these consolidated actions can be summarised as follows.

A.1  The parties and other relevant persons / entities of interest

A.1.1  Individuals and their relationships

8.  Mr Shum is a businessman engaging in real estate development in the PRC. In particular, he was the indirect owner and developer of a real estate project in Hua Du, Guangzhou (廣州市華都) known as the Monte Carlo Development (蒙地卡羅山莊) (“Development”), which he held through one Guangzhou Huadu Jiaye Property Development Co Ltd (廣州市花都佳業房地產開發有限公司) (“Jiaye”), a PRC domestic company wholly owned by Mr Shum.

9.  Ms Chan is married to one Law Kin Ming (“Mr Law”), a solicitor practising as a consultant of S H Chan & Co (“SHC”), a firm of solicitors in Hong Kong.

10.  Ms Keung and Mr Cheung are mother and son.

A.1.2  The Blu Spa group of companies

11.  Blu Spa Holdings Limited (富麗花.譜控股有限公司) (“BSH”), a Cayman Islands company, was co-founded by Ms Chan and Mr Law.

12.  BSH had, since 19 February 2002, been listed on the Growth Enterprise Market Board of The Stock Exchange of Hong Kong Limited with the stock code 8176.

13.  BSH had over the years changed its name a few times to:

(1)  China AU Group Holdings Ltd (中國金豐集團控股有限公司) since 1 February 2010;

(2)  EDS Wellness Holdings Ltd since 18 April 2013;

(3)  Skynet Group Ltd (航空互聯集團有限公司) since March 2016; and

(4)  SuperRobotics Ltd (超 人 智 能 有 限 公 司) since 12 September 2017.

To avoid confusion, Blu Spa Holdings Limited shall, throughout this judgment, be uniformly referred to as “BSH” regardless of the aforesaid changes of name.

14.  Blu Spa (Hong Kong) Limited (富麗花.譜 (香港) 有限公司) (“BSHK”), a Hong Kong private company, is an indirect wholly-owned subsidiary of BSH.

15.  At all material times, both BSH and BSHK were under the control of the defendants. More specifically, Ms Chan was the vice chairman, executive director, authorised representative and compliance officer of BSH until at least March 2013. Ms Keung was formerly BSH’s 35.56% shareholder and chief executive officer. Mr Cheung was a director of BSH, serving from 1 August 2008 to 13 February 2012. He was also a director of BSHK.

A.2  The dispute

16.  In about 2008, Mr Shum became desirous of selling the entire Development to a single buyer.

17.  He recalls that Ms Chan was introduced to him at about the end of 2008. Ms Chan in turn introduced Ms Keung and Mr Cheung to Mr Shum in around mid 2009 and told Mr Shum that their company (which turned out to be BSHK) was interested in purchasing about 70% of the Development (“Subject Parts”) to operate a beauty services training academy (美容服務職業培訓學校) (“Academy”).

18.  The Subject Parts were: (1) 148 shops of a commercial complex named 蒙地卡羅商場 (Monte Carlo Mall) (“Shops”) and (2) all 39 flats of a 3-storey residential building called 溢盈商務公寓 (“Flats”), within the Development.

19.  In anticipation of the sale of the Subject Parts, Mr Shum transferred the ownership of those parts from Jiaye to Guangzhou Yaji Properties Co Ltd (廣州市雅基置業有限公司) (“Yaji”), a newly formed wholly foreign-owned enterprise in the PRC which was in turn wholly held by a Hong Kong company called E In Industrial Limited (溢盈實業有限公司) (“E In”).

20.  Mr Shum initially owned all the shares in E In, making him the indirect owner of the Subject Parts through Yaji. All such shares were later transferred to a BVI company called Vertical Signal Investment Limited (“Vertical Signal”)[3], making Vertical Signal the sole owner of E In and, indirectly through Yaji, the Subject Parts. According to Mr Shum, this step was taken at the request of Ms Chan and Ms Keung because their company wished to acquire shareholding in a BVI company, rather than a Hong Kong company.

21.  By a sale and purchase agreement dated 30 April 2010 (“SPA”), Mr Shum agreed to sell, and BSHK agreed to purchase, at the price of $80,000,000: (1) 70 issued and fully paid shares in Vertical Signal (which then represented 70% of the entire issued share capital of the company) and (2) the outstanding loans owed by Vertical Signal (and its subsidiaries) to Mr Shum, which stood at approximately $55,679,000 (or RMB50,000,000) as at the date of the SPA. Mr Cheung signed the SPA for and on behalf of BSHK.

22.  Prior to, and upon the signing of, the SPA, BSHK had paid to Mr Shum sums totalling $45,000,000 as deposit and part payment (“Deposit”), leaving a balance of $35,000,000 (“Balance Price”) outstanding.

23.  Mr Shum recalls that Ms Chan was the driving force for BSHK in this transaction, which was handled throughout by Ms Chan on behalf of BSHK.

24.  Underlying the SPA was the sale and purchase of the Subject Parts between Mr Shum and BSHK.

25.  It is worthy of note that some of the Shops (“Sold Shops”) had already been sold to buyers in Hong Kong by the time of the SPA. Mr Shum had to repurchase the Sold Shops and did so before the long stop date which was 30 August 2010 under the SPA (“Long Stop Date”).

26.  After the execution of the SPA, Mr Shum and BSHK had entered into, inter alia, 4 extension agreements dated 25 August 2010, 29 October 2010, 30 April 2011 and 2011[4] (“EAs” collectively) for the deferral of the Long Stop Date to various later dates, the last of which was 30 April 2012.

27.  In case Mr Shum should fail to repurchase all the Sold Shops by the Long Stop Day (extended aforesaid by the EAs), the parties also signed a supplemental agreement dated 1 February 2011 (“SA”). By the SA, the parties recited Mr Shum’s representations to BSHK: (1) that the ownership of the majority of the Subject Parts had already been transferred to Yaji as evidenced by the ownership certificates (房屋所有權證) that had been issued to Yaji and (2) that the ownership certificates in relation to the remaining Subject Parts (“Outstanding Parts”) had not yet been issued to Yaji but were in the process of being transferred to Yaji (recital paragraph (C)). It was further anticipated, in recital paragraph (D), that the transfer of ownership of the Outstanding Parts might still be pending on the completion of the SPA.

28.  By the SA, Mr Shum and BSHK agreed that the SPA should be completed in accordance with the terms thereof even if the ownership of the Outstanding Parts or parts thereof had not yet been transferred to Yaji. In such situation, BSHK could defer the payment of the Balance Price ($35,000,000) to 7 days after the transfer of ownership of all the Outstanding Parts to Yaji, and the receipt of all ownership certificates relating thereto by Yaji (clause 3.2).

29.  According to Mr Shum, by 19 July 2011, in performance of the SPA, he had already delivered to BSHK the original ownership certificates relating to (1) 124 of the Shops (out of a total of 148), including the then repurchased Sold Shops and (2) all the Flats (“Ownership Certificates”), together with the company kits of Vertical Signal and all its subsidiaries (“Company Kits”). By the end of 2012, still considering the SPA effective, Mr Shum handed over, and BSHK accepted, the ownership certificates in relation to the remaining 24 Shops (included in “Ownership Certificates”).

30.  In addition, Mr Shum had also procured (1) the appointment of Mr Cheung as the legal representative (法人代表) of Yaji, the immediate owner of the Subject Parts and (2) the issuance by the relevant PRC authorities of all permit(s) / licence(s) required for the operation of the proposed Academy.

31.  Then, Mr Shum recalls that in early April 2012, Ms Chan informed him that there had been a change of ownership and management of BSH and the new majority shareholder were not interested in investing in the Subject Parts. It intended to rescind the SPA and recover the Deposit ($45,000,000) paid to Mr Shum. Ms Chan further claimed to have found a new buyer for the Subject Parts so that Mr Shum would not suffer any loss by agreeing to terminate the SPA and then selling to the alleged new owner. Ms Chan also presented to Mr Shum a termination agreement and asked him to sign the same.

32.  Mr Shum declined BSHK’s request to terminate the transaction because he had, as summarised in [29] and [30] above, substantially performed his obligations under the SPA as supplemented by the SA.

B.  MR SHUM’S COMPLAINTS OF FRAUD AND FORGERIES

B.1  Fraudulent scheme

33.  According to Mr Shum, after his express refusal to terminate the SPA, the defendants perpetrated against him a fraudulent scheme (“Fraudulent Scheme”), with the intention to cause Mr Shum loss and damage including, in particular, the loss of both the Deposit and the Subject Parts.

34.  In this regard, it is pleaded in paragraph 36 of Mr Shum’s consolidated statement of claim that the Fraudulent Scheme was executed in 3 main parts.

B.1.1  Forged termination of the SPA

35.  First, Mr Shum’s signature was forged on a variety of documents, including one purporting to be a deed of termination dated 5 April 2012 and signed by Mr Shum and Mr Cheung on behalf of BSHK (“Disputed DoT”). On the face of this document, Mr Shum and BSHK agreed to terminate the SPA (clause 2.2), with the former also agreeing to:

(1)  return the Deposit by 2 instalments of $4,500,000 and $40,500,000 (“Deposit Balance”) respectively upon, and within 3 months from, the signing of the Disputed DoT (clause 2.3);

(2)  pay BSHK an extra sum of $4,500,000 (“Extra Sum”) within 3 months from the signing of the Disputed DoT. Mr Shum would, however, be released from the obligation to pay the Extra Sum if he repaid the Deposit in compliance with clause 2.3 (clause 2.1); and

(3)  in the event of default, pay interest calculated from day to day from the date of default at 30% per annum (clause 2.4).

36.  In this connection, Mr Shum also contests what purported to be his signature on 4 “repayment extension agreements” respectively dated 4 July 2012, 24 July 2012, 3 August 2012 and August 2012[5] (“1^st Disputed REA” to “4^th Disputed REA” respectively and “Disputed REAs” collectively). The effect of each successive Disputed REA was to extend the time by which Mr Shum was to repay the Deposit Balance ($40,500,000) under the Disputed DoT to various later dates, the last of which was 12 September 2012. The Disputed REAs bored Ms Chan’s signature for and on behalf of BSHK.

B.1.2  Fake return of Ownership Certificates and Company Kits

37.  Second, a false impression was created that the Ownership Certificates and the Company Kits had been returned to Mr Shum through his alleged authorised representative, one NCA International Holdings Limited (“NCA”).

38.  This was achieved by forging Mr Shum’s signature on what appeared to be: (1) an authorisation dated 1 April 2012, whereby Mr Shum purportedly authorised NCA to collect the Ownership Certificates and the Company Kits from BSHK (“Disputed NCA Authorisation”) and (2) an acknowledgment of receipt dated 5 April 2012, whereby Mr Shum acknowledged receipt of the Ownership Certificates and the Company Kits (“Disputed Receipt”). To date, Mr Shum had not received any of the Ownership Certificates or Company Kits. This, in effect, deprived Mr Shum of the ownership of the Subject Parts.

B.1.3  Fraudulent pledge of the Shops

39.  Third, 124 of the Shops were, without Mr Shum’s consent or knowledge, purportedly pledged by Yaji to secure the repayment of a loan of RMB12,000,000 for a fixed term of 2 months expiring on 8 June 2012 under a loan agreement (抵押借款合同) dated 9 April 2012 (“1^st Yaji Loan Agreement”). On the face of the 1^st Yaji Loan Agreement, Yaji was represented by Mr Cheung (who had by then been appointed as Yaji’s legal representative), in the first loan transaction including the signing of the 1^st Yaji Loan Agreement.

40.  The remaining 24 Shops were, also without Mr Shum’s consent or acknowledge, purportedly pledged by Yaji to the same lender to secure the repayment of an additional loan of RMB7,000,000 for a fixed term of 2 months expiring on 9 November 2012 under a supplemental loan agreement (借款補充協議書) dated 10 September 2012 (“2^nd Yaji Loan Agreement”).

B.2  Other forged documents and fraudulent acts

40.  Subsequently, by a letter before action dated 17 September 2012 from D S Cheung & Co (“DSC”), solicitors, BSHK demanded Mr Shum to make payment pursuant to the Disputed DoT.

41.  SHC responded to DSC’s said letter by 2 replies respectively dated 24 and 25 September 2012, which purportedly clarified that the sum due under the Disputed DoT should be $40,500,000, not $45,000,000, which would be paid by 30 October 2012 by a bank guarantee (in form and substance acceptable to BSHK) to be issued by 15 September 2012. In so replying to DSC, SHC purportedly acted on behalf of Mr Shum. It would be recalled that SHC was the firm of solicitors from which Ms Chan’s husband, Mr Law, practised as a solicitor in Hong Kong. Mr Shum’s evidence is that he had not instructed, nor authorised, SHC to represent him and SHC’s correspondence with DSC purportedly on his behalf actually took place without his authority or knowledge.

42.  When BSHK later commenced HCA 1775/2012 against Mr Shum, Mr Shum’s signature was forged on a letter dated 26 September 2012 and countersigned by Ms Chan on behalf of BSHK, purporting that Ms Chan was authorised by Mr Shum to instruct another firm of solicitors namely, ONC Lawyers (“ONC”), to act for Mr Shum (“Disputed D1 Authorisation”). Mr Shum denies having signed this document. Nor had he instructed, or authorised, ONC to represent him. Indeed, he had never ever communicated with anyone from ONC.

43.  Lastly, Mr Shum’s signature was further forged on what were made out to be 2 deeds of settlement respectively dated 1 November 2012 and 29 January 2013, purporting to settle HCA 1775/2012 (“1^st Disputed Settlement” and “2^nd Disputed Settlement” respectively and “Disputed Settlements” collectively).

44.  By the 1^st Disputed Settlement, Mr Shum purportedly accepted liability to pay about $42,000,000 by the end of November 2012. Ms Keung declared (falsely according to Mr Shum) on the 1^st Disputed Settlement that the signature purporting to be that of Mr Shum was witnessed by her and appended in her presence (“Disputed D2 Declaration”).

45.  Under the 2^nd Disputed Settlement, which made reference to Mr Shum having made some payments since November 2012, Mr Shum was said to have agreed to pay $38,000,000 by March 2013.

46.  Unless otherwise stated, the term “Disputed Documents”, when used in this judgment, refers to and includes: (1) the Disputed DoT; (2) the Disputed REAs; (3) the Disputed NCA Authorisation; (4) the Disputed Receipt; (5) the Disputed D1 Authorisation; (6) the Disputed Settlements; and (7) the Disputed Acknowledgment (defined below) collectively.

47.  It is Mr Shum’s case that he had not signed any of the Disputed Documents bearing his purported signature nor made any payments alleged in such documents to be due from him to BSHK or BSH. Any such alleged payments, if made at all, were made and/or arranged by Ms Chan without Mr Shum’s authority or knowledge, probably to keep up the appearance of the terminated status of the SPA as a result of the Disputed DoT.

B.3  Ms Chan’s alleged admissions of forgeries to Mr Shum

48.  In this connection, it appears from Mr Shum’s evidence that Ms Chan had twice admitted to him the forgeries.

49.  First, on about 29 September 2012, at Mr Shum’s office in Guangzhou, Ms Chan dropped onto her knees and orally admitted to Mr Shum that she had forged Mr Shum’s signature on a termination agreement dated 5 April 2012 (which would have been the DoT) and made some payments due thereunder to SBHK. Ms Chan asked for Mr Shum’s forgiveness. She said that she had already resold the Subject Parts. She just needed more time for the buyer’s payment, which she would then use to pay to BSHK under the Disputed DoT. She further claimed to have reached an understanding with the management of BSH that it would cease its claim against Mr Shum under HCA 1775/2012 (see the next section) once it had received payment under the Disputed DoT.

50.  Second, by a Chinese declaration dated 7 March 2013 drafted by her husband, Mr Law, Ms Chan stated that she had forged Mr Shum’s signature multiple times and made payments that Mr Shum had incurred under such forged documents. It was also her idea to retain ONC in Mr Shum’s name. She promised to attend court with BSH on 26 March 2013 to withdraw HCA 1775/2013.

51.  In addition, Ms Chan undertook by another Chinese statement dated 26 April 2013 drafted by Ms Chan with the assistance of Mr Shum’s secretary/assistant, Madam Li Jingying (李敬英) (“Ms Li”), at Mr Shum’s Guangzhou office that if HCA 1775/2013 was not dismissed by BSH before 15 May 2013, Mr Shum could take all actions available to “show his innocence” (“沈洋先生為表達自身的清白, 將採取一切有關行動”). She would have “no complains” (“本人並無怨言”).

B.4  HCA 1775/2012

52.  By a writ of summons issued by BSHK against Mr Shum on 25 September 2012 under HCA 1775/2012, BSHK claimed against Mr Shum $39,127,500 plus contractual interest calculated from day to day at 30% per annum from 1 May 2013. The sum of $39,127,500 was said to be the then outstanding Deposit Balance repayable by Mr Shum.

53.  It was BSHK’s case in HCA 1775/2012 that Mr Shum had repaid it $4,500,000 upon the signing of the Disputed DoT. Thereafter, at Mr Shum’s requests, they repeatedly agreed by the Disputed REAs, which Mr Shum also signed, to extend the date for the payment of the Deposit Balance and the Extra Sum. The final extended date was 14 September 2012. Mr Shum maintains that he had not paid the Deposit Balance, or the Extra Sum, by such date or at all.

53.  BSHK further claimed in HCA 1775/2012 that after the commencement of action, Mr Shum had signed the Disputed Settlements, by which he admitted his indebtedness to BSHK and BSHK agreed to grant Mr Shum time for making payment. Thereafter, Mr Shum did repay a principal sum of $4,050,000 on 13 November 2012 and interest totalling $5,727,126.67 from 6 July 2012 to 16 January 2013.

54.  Mr Shum claims that he did not know about HCA 1775/2012 until the writ of summons was brought from Hong Kong to his office in Guangzhou. In this connection, Mr Shum explains that he has limited understanding of the English language and had to rely on his employee, Mr Herman Fung (“Mr Fung”), to translate to him English documents, including English emails. However, Mr Fung left in March 2011. Thereafter, no one took up the translation duty, until another staff, Mr Lun Wing Wah (“Mr Lun”), a senior accounting clerk under the supervision of Mr Fung, was asked to do so from about the end of 2013. In this period, Mr Shum did not read the English emails sent by Ms Chan attaching documents and drafts prepared by ONC relating to HCA 1775/2012. In any event, she had told him that they only concerned procedural matters.

55.  Mr Shum denies having signed the Disputed D1 Authorisation or instruct, nor authorise, ONC to represent him. He never communicated with anyone from ONC.

56.  In the meantime, by a deed of assignment dated 28 January 2013 (“Assignment”), BSHK assigned the cause of action pursued by it in HCA 1775/2012 to BSH. BSHK further produced to BSH a memorandum of acknowledgement dated 28 January 2013 (“Disputed Acknowledgment”) whereby Mr Shum, through ONC purportedly as his solicitors, acknowledged notice of the Assignment and confirmed that he would pay all sums due under the Disputed DoT and the Disputed REAs to BSH. According to BSH, after the Assignment, BSH did receive from Mr Shum payment of principal in the amount of $1,822,500 on 29 January 2013 and interest payment of $3,861,702.69 calculated up to 31 May 2013.

57.  On 6 September 2013, upon BSH’s application, Deputy High Court Judge Bebe Chu (as she then was) entered summary judgment against Mr Shum in the amount said to be still outstanding under the Disputed DoT and the Disputed Settlements (“1775/2012 Judgment”).

58.  Turning then to Mr Shum’s position, first, he never signed any of the Disputed Documents. The signatures purporting to be his on those documents were in fact not signed by him at all. Rather, they were forged by and/or under the instructions of Ms Chan. Second, Mr Shum never paid any money to BSHK or BSH whether pursuant to the DoT or at all. The aforesaid alleged payments, if made at all, were made or arranged by Ms Chan herself and not by or from Mr Shum.

59.  Mr Shum became aware of the full extent of the fraud practised on him only when enforcement action was taken against him. He then applied in HCA 1775/2012 to set aside the HCA 1775/2012 Judgment. However, Mr Shum failed as the court held that it was functus officio[6].

60.  Mr Shum had no option but to satisfy the 1775/2012 Judgment (which was affirmed on appeal).

B.5  HCA 200/2015

61.  To complete the background, I should also mention that Mr Shum had commenced a separate action against BSH in HCA 200/2015 to set aside the HCA 1775/2012 Judgment. However, he failed again for the same reason[7].

B.6  BSH’S PUBLIC ANNOUNCEMENTS

62.  Given BSH’s listed status, it did announce the termination of the SPA and the negotiation thereof on 30 March 2012 and 5 April 2012.

C. MR SHUM’S CLAIMS IN THESE CONSOLIDATED ACTIONS

63.  Against the aforesaid background, Mr Shum claims herein against each of the defendants for damages or an inquiry as to damages that has been suffered by him as a result of the Fraudulent Scheme.

D.  THE DEFENCE

64.  In defence, the defendants deny, and put Mr Shum to proof of, the forgeries and fraud attributed to them by Mr Shum.

E.  RELEVANT LEGAL PRINCIPLES

65.  In Kuwait Oil Tanker Co SAK v Al Bader [2000] 2 All ER (Comm) 271 at [108], the English Court of Appeal defined the tort of conspiracy to injure by unlawful means as follows:

“A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so.”

66.  In Hong Kong, the Court of Appeal held in Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537 at [17] that the following matters were elements of the tort and must be pleaded:

“(a) An agreement made between two or more persons. The [unlawful] means of carrying out the agreement … must be set out.

(b) The intention to injure the plaintiff ….

(c) The acts that were carried out pursuant to the agreement and the stated intention.

(d) The damage caused to the plaintiff.”

67.  The following principles were also pronounced in Kuwait Oil Tanker Co SAK v Al Bade, supra:

“110. … It is not necessary that every overt act is done by every conspirator, but the act must be done pursuant to the conspiracy or combination.

111. … it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. … it is not necessary for the conspirators all to join the conspiracy at the same time, but … the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of …

112. In most cases it will be necessary to scrutinise the acts relied upon in order to see what inferences can be drawn as to the existence or otherwise of the alleged conspiracy or combination …

…

118. … in order to establish an unlawful means conspiracy, it is necessary to establish an intention to injure the claimant but not a predominant intention or purpose to do so.

120. … In many contexts it will be necessary in order to prove intention to ask the court to infer the relevant intention from the primary facts. … In the case of a conspiracy to defraud by wholesale misappropriation it would be absurd to argue that the conspirators did not intend just that”.[8]

68.  In a case of fraud, it must be proved that the defendants had actual or blind-eye knowledge of the circumstances constituting the fraud. Mere negligence or carelessness by the defendant would be insufficient (Take Point Investment Holdings Ltd v Ngai Lok Kei [2020] HKCFI 1709 at [104]).

69.  As for the burden, and standard, of proof, it is trite that the plaintiff has to prove his case on the balance of probabilities. A charge of fraud is a gravely serious matter. The more serious the allegation is the less likely it is that the event occurred and the stronger should be the evidence before the court can conclude that the charge is established on the balance of probabilities (A Solicitor v The Law Society of Hong Kong (2008) 11 HKCFAR 117 at [65] & [72] – [84], applying Re H [1996] AC 563).

F.  ISSUES

70.  Bearing in mind these principles, the dispute between the parties raises the following issues:

(1)  whether Mr Shum had agreed to the termination of the SPA;

(2)  if so, whether what appeared to be Mr Shum’s signature on each of the Disputed Documents was forged;

(3)  if so, whether the forgeries were committed by, or under the instructions of, Ms Chan;

(4)  if so, whether the defendants conspired to cause loss to Mr Shum by the Fraudulent Scheme;

(5)  if so, whether Mr Shum has thereby suffered any loss and damage.

G.  THE EVIDENCE

G.1  Mr Shum’s factual evidence

72.  Mr Shum gave evidence of the facts set out above, both via his written witness statement dated 10 May 2016 and supplemental witness statement dated 7 September 2020 and oral testimony in court.

73.  In addition, he also called Mr Lun and Ms Li.

74.  Mr Lun was employed as a senior accounting clerk from April 2011. His superior was Mr Fung who had left Mr Shum’s employ on 31 March 2011. Mr Lun says that he did not have access to Mr Shum’s email accounts and had not been required to translate Mr Shum’s emails until after September 2013 when he was requested by Mr Shum to assist with HCA 1775/2012, including translation of English documents forwarded by Mr Shum from his email account.

75.  Ms Li gave evidence from Guangzhou through live video link. She first worked for Mr Shum in 2007 as his secretary, later becoming his assistant and deputy general manager. She said that, pursuant to the SPA, ownership certificates of the Subject Parts were collected by the defendants in batches from Mr Shum’s Guangzhou office. By 19 July 2011, except for 24 shops, all ownership certificates of the Subject Parts had been handed to BSHK. The ownership certificates of those 24 shops, were later collected by Ms Chan on two occasions, on 12 October 2012 and 29 November 2012.

76.  Ms Li further recalls that on 6 October 2012, Ms Chan visited Mr Shum’s office in Guangzhou alone and was brought to his room. As Ms Li was about to leave the room, Mr Shum called her back, whereupon she saw that Ms Chan was kneeling on the floor. She helped Ms Chan to get up and sit down. As she stood outside the room with the door open, Ms Li heard Ms Chan admitting that she had forged Mr Shum’s signature on a document to terminate the SPA. She had also said that she had sold the Subject Parts to a new buyer and she needed time to pay BSHK so that BSHK could withdraw the case against Mr Shum. In the end, Mr Shum gave s Chan time to resolve matters.

77.  According to Ms Li, on about 26 April 2013, Ms Chan again visited Mr Shum’s office alone. At Mr Shum’s request, Ms Li fetched a piece of paper on which Ms Chan and wrote and signed a statement to the effect that the action by BSHK was caused by her and she undertook to arrange for its withdrawal by 15 May 2013. The statement was then given to Mr Shum.

G.2  The defence’s factual evidence

G.2.1  Ms Chan

78.  Ms Chan claims that it transpired only after payment of the Deposit that Mr Shum did not in fact have complete title to all the Subject Parts in the sense that he had sold some of the Shops to other buyers. Despite repeated agreed extensions of the LSD, Mr Shum failed to bring in the outstanding ownership certificates. The delay held up the completion of the SPA. As this was very unsatisfactory to BSH and BSHK, Ms Chan suggested to Mr Shum that BSHK would be willing to cancel the SPA if he were to repay the Deposit, and he could then find a buyer with a higher price. By about January 2012, Mr Shum was agreeable to the termination of the SPA as he had found a new buyer, but he needed the new buyer to pay him first before he could repay BSHK.

79.  In the meantime, Ms Chan resigned her positions in BSH on 7 March 2012, but remained a director of BSHK with a view to resolving all outstanding issues relating to the SPA. She negotiated the Disputed DoT with Mr Shum, and he issued the Disputed NCA Authorisation for the return of the Ownership Certificates. The Disputed DoT was prepared by DSC. After it was signed by Mr Cheung on behalf of BSHK, it was given to her to take to Mr Shum’s Guangzhou office, where it was signed by him in front of her. On the same day, BSHK received a total of $4,500,000 by way of two cashier orders. Also on the same day, an assistant of Mr Shum collected from DSC the Ownership Certificates as reflected by the Disputed Receipt.

80.  A few months after the termination, Ms Chan understood from Mr Shum that he was having difficulties with his new buyer and had to use the Ownership Certificates to obtain finances. He asked her for extensions of time to repay BSHK. As a result, Mr Shum and BSHK entered into the Disputed REAs, which she says, were signed in the same manner as the earlier extension agreements and supplemental agreement for extending the LSD. This meant that she took them to his Guangzhou office and he signed them in her presence.

81.  By 17 September 2012, BSHK issued a demand letter through DSC to Mr Shum for payment under the Disputed DoT. She went to meet Mr Shum in his Guangzhou office after he received the demand letter. At his request, she contacted her husband for Mr Shum to speak him on the phone. Afterwards, Mr Shum gave her documents to bring back to her husband. Subsequently, SHC responded to the demand letter on Mr Shum’s behalf.

82.  By about 25 September 2012, BSHK commenced action in HCA 1775/2012. She went to see Mr Shum in his Guangzhou office after he received notice of the writ. He asked for help in instructing lawyers to defend the action in order to buy more time. She suggested instructing ONC. He agreed and asked Ms Li to prepare the Disputed D1 Authorization. After both Mr Shum and Ms Chan had signed the document, Ms Chan returned to Hong Kong and gave the D1 Authorization to ONC. On the same day, ONC filed an acknowledgment of service in HCA 1775/2012 on behalf of Mr Shum.

83.  Ms Chan told Mr Shum that she would call him from ONC’s offices to allow him to convey his instructions directly to the solicitor. There were also occasions when all of them discussed the action through telephone conferences in ONC’s offices. Ms Chan would send the documents and drafts prepared on his instructions by ONC by email.

84.  By the end of October 2012, BSHK was pressing Mr Shum for payment, including by a statutory demand. At Mr Shum’s request, she was able to convince BSH’s new management to agree to yet another time extension. Mr Shum and BSHK therefore entered into the 1^st Disputed Settlement.

85.  By December 2012, Ms Chan resigned as director of BSHK. Mr Chan did not pay under the 1^st Disputed Settlement. In January 2013, the new management requested her to contact Mr Shum to see if he would agree to an assignment of the action to BSH and be given more time to make payment. Mr Chan readily agreed, and she was given the 2^nd Disputed Settlement to take to his Guangzhou office. Mr Shum signed it and she brought it back to ONC.

86.  As for her alleged admissions, Ms Chan denied making any such admission in her consolidated defence. However, she did not deal with the alleged verbal admission in her witness statement. Regarding the alleged written admission, she stated that she did not make them, setting out a number of points in response including:

(a)  Though similar to her own signature, certain differences appeared on her purported signatures on the written admissions.

(b)  She had not attempted to write in Chinese for many years, although she should be able to do so.

(c)  There is a clear difference in the handwriting and style of the two written admissions.

(d)  The contents were absurd and no one would sign these admissions unless under coercion.

(e)  There was no reason for her to make the admissions, as it made no commercial sense for her to take over Mr Shum’s responsibility to repay BSH.

87.  Further, Ms Chan had signed on blank pieces of papers at the requests of Mr Shum, thereby suggesting that her signatures to the written admissions were genuine but the contents were written after she had signed the same, and not by her.

G.2.2  Ms Keung

88.  According to Ms Keung, after she ceased to be involved in BSH, she continued to assist Ms Chan and Mr Cheung (her son) who remained a director of BSHK.

89.  She was asked by Ms Chan on about 1 November 2012 to take the 1^st Disputed Settlement to BSH’s then solicitors, Anthony Siu & Co (ASC). When she arrived at ASC’s offices, a solicitor pointed out that no one had signed the document as a witness and asked her to do so. As the document had already been executed, she thought it was a mere formality and signed it as witness as directed by the solicitor.

90.  She had no idea that Mr Shum’s signature was forged. She was not aware of any scheme by the Ms Chan or BSHK to defraud him. She was only an innocent bystander caught up in the dispute between Mr Shum, Ms Chan and BSHK.

91.  Although Ms Keung’s witness statement was limited to how she came to sign the 1^st Disputed Settlement as a witness, under cross-examination and in her closing submission she supported and adopted Ms Chan and Mr Cheung’s case in relation to the disputed termination of the SPA, the return of the Ownership Certificates to Mr Shum and the pledge of the Shops under 1^st and 2^nd Yaji Loan Agreements. She did not deal with these matters in her witness statement because she thought she only needed to deal with the false witness issue and was not aware of the conspiracy allegation. She could not remember if her former lawyers had advised her of Mr Shum’s claim.

G.2.3  Mr Cheung

92.  According to Mr Cheung, BSH decided to terminate the SPA in early April 2012 because Mr Shum was unable to complete despite repeated extensions of time. At the direction of the BSH board, he executed the Disputed DoT, which was then taken by Ms Chan to Mr Shum for his signature. The document was then brought back by Ms Chan after it was signed by Mr Shum.

93.  Thereafter, Mr Cheung was directed by BSH to return the Ownership Certificates and Company Kits to Mr Shum. For this purpose, he took these items to DSC’s offices.

94.  At DSC’s offices, Mr Cheung met Mr Shum’s representative who presented the Disputed NCA Authorisation. Upon collecting the items, Mr Shum’s representative issued the Disputed Receipt and gave him two cashier orders for the total sum of $4,500,000. Ms Chan was also present on this occasion. The representative explained that he came to collect the items because Mr Shum had transferred all the shares in Yaji to him. The representative further said that he needed to borrow money in the Mainland by mortgaging the Subject Parts. As Mr Cheung was still Yaji’s legal representative and it would take a few weeks to change the legal representative, Mr Cheung was requested by the representative to go with him to the Mainland to execute the mortgage. Mr Cheung confirmed with Ms Chan that this was true. Ms Chan told him to assist the representative. Mr Cheung therefore travelled to the Mainland with the representative and executed the 1^st Yaji Loan Agreement.

95.  For the sake of good record, Ms Chan has also summonsed Mr Sherman Yan, the Managing Partner and Head of Litigation and Dispute Resolution of ONC. I propose not to set out his evidence, which appears to me to be too marginal to have any probative value.

G.3  Handwriting expert evidence

96.  Mr Shum also called a handwriting expert, Mr Leung Sze Chung (“Mr Leung”), to examine (1) his purported signature on the Disputed Documents and (2) Ms Chan’s purported signature on the said 2 written admissions. The admissibility of Mr Leung’s report is not challenged.

97.  Mr Leung takes the view that Mr Shum’s purported signature on the Disputed Receipt was of a different style from, and cannot be compared with, his known signatures. He cannot offer an opinion on the authenticity of this signature.

98.  As for all the other disputed signatures of Mr Shum, Mr Leung finds that they exhibited a number of differences from his known signatures, and appeared to have been produced with awkward writing movement and poor line quality as opposed to the rhythmic writing movement and fluent line quality characteristic of the undisputed ones. He concludes that they were probably not appended by Mr Shum.

99.  Among the differences referred to in reaching his conclusion, Mr Leung noted in paragraph 4.4.4 that the horizontally oriented loop of the disputed signatures could not be found in any of the known signatures which were adorned with two long curved strokes. The two curved strokes cannot be found in any of the disputed signatures.

100.  As for Ms Chan’s disputed signatures on the two alleged written admissions, Mr Leung has likewise compared them to her known signatures. In paragraph 3.5 of his report, Mr Leung recognises that there is natural variation in the handwriting of an individual. Nevertheless, he finds Ms Chan’s disputed signatures to be naturally produced and similar to her known signatures with respect to the line quality, structural detail and connection characteristics. He concludes that they were written by Ms Chan herself.

101.  The defendants have not adduced any handwriting expert evidence.

102.  I prefer Mr Shum’s evidence to that of the defendants for reasons that would become apparent in the next section.

H.  WAS THERE AN AGREED TERMINATION OF THE SPA?

103.  To my mind, this fundamental question must be answered in the negative.

104.  Leaving aside gaps and inconsistences in the defendants’ evidence, the alleged termination of the SPA simply does not sit well with the crucial fact that Mr Shum continued to deliver, and Ms Chan continued to collect, the ownership certificates of all the Outstanding Parts (24 shops) on 12 October 2012 and 29 November 2012 which, at the risk of stating the obvious, was well after the alleged agreement to terminate the SPA and only consistent with the existence of the SPA. It just makes no scene for Mr Shum to retrieve ownership certificates from BSHK on one hand and to deliver more ownership certificates to BSHK on the other.

I.  ARE THE DISPUTED DOCUMENTS FORGERIES?

105.  It follows from the conclusion that there was no agreement to terminate the SPA that (1) the Disputed DoT (by which the very alleged termination was agreed) and (2) the other Disputed Documents (which were allegedly generated in enforcement of the Disputed DoT) are forgeries.

J.  WHO COMMITTED THE FORGERIES?

106.  I have reminded myself of the quality of evidence required in proof of fraud.

107.  Given Ms Chan’s pivotal involvement in the transaction, she is the prime (and indeed the most obvious) suspect.

108.  I find, on the balance of probabilities, that the purported signatures of Mr Shum on the Disputed Documents were forged by, or under the instruction of, Ms Chan.

K.  DID THE DEFENDANTS CONSPIRED TO CAUSE LOSS TO MR SHUM BY THE FRAUDULENT SCHEME?

109.  That Mr Shum would, and actually did, suffer loss as a result of the Fraudulent Scheme should have been plain to the defendants.

110.  The question is whether Ms Keung and/or Mr Cheung conspired with Ms Chan to cause such loss. I find, on the balance of probabilities, that they did. Both of them were involved in the transaction of the SPA and its aftermaths. Mr Cheung signed the Disputed DoT purportedly for and on behalf of BSHK. Ms Keung falsely declared on the 1^st Disputed Settlement that the signature purporting to be that of Mr Shum was witnessed by her and appended in her presence, which she must know to be untrue.

L.  DISPOSITION

111.  For the reasons stated above, I allow Mr Shum’s claim and direct an inquiry before a Master as to the loss and damage suffered by Mr Shum in consequence of the Fraudulent Scheme and an order that the defendants pay Mr Shum the amount found to due to him on the inquiry.

112.  I also make an order, on a nisi basis that the defendants should pay Mr Shum his costs of the action up-to-date, to be taxed on a party and party basis with certificate for 2 counsel.

113.  Last, I thank Mr Martin Wong and Miss Jacquelyn Ng for their fair assistance.