CHAN YAT MAN v. TUNG PO (H.K.) TECHNOLOGY ENTERPRISE LTD

HCA 2904/2017

[2022] HKCFI 2937

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2904 OF 2017

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BETWEEN

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JUDGMENT

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A. Introduction

1.  By Writ of 15 December 2017, the plaintiff (“P”) claims against the defendant (“D”) for repayment of an alleged loan (the “Loan”) in the sum of HK$5,000,000 (the “HK$5m”[1]) with interest. D denies liability, on the basis that that sum was actually not a loan. It further counterclaims against P as director/fiduciary/agent for having caused D to make certain payments to himself or other third parties.

2.  This is the trial.

3.  Mr Matthew Ho appeared for P. Mr Patrick YS Lau appeared for D.

B. D’s application to put in additional documents

4.  On the morning when the trial commenced, Mr Lau sought leave to produce certain additional documents. Mr Ho[2] objected to 2 of them, they being:

(a) the Decision of Wilson Chan J of 12 October 2018 in HCLA 8 & 9/2018[3] wherein His Lordship refused P leave to appeal against the decision of the Labour Tribunal dismissing his earlier claim against D; and

(b) the Decision of Au-Yeung J of 6 September 2018 in HCLA 10/2018[4] wherein Her Ladyship refused 陳玉儀(“YY Chan”) leave to appeal against the decision of the Labour Tribunal dismissing (apart from one item on interest) her earlier claim against D.

5.  YY Chan is a witness whom P intends to call in this trial.

6.  Mr Ho accepted that findings of facts by one tribunal in separate proceedings are not admissible before this court for the purpose of proving those facts. He informed this Court that the purposes of producing those judgments are two-fold: (1) as previous inconsistent statements of what P and YY Chan have said, and (2) to show that they have insisted upon the pursuit of their versions on appeal.

7.  Whether those judgments constitute previous inconsistent statements is dependent upon, apart from anything else, whether what P and YY Chan are recorded therein to have said are inconsistent with what they have themselves stated in any of their statements filed for the purpose of this trial. The recitation of facts in those judgments is not full. That is perfectly understandable given the fact that leave to appeal is only permissible on law and excess of jurisdiction. In seeking to point to the inconsistency which D seeks to rely on against P, Mr Lau in my view is seeking to read a lot into the judgment which are not apparent on its face. In the case of YY Chan, even Mr Lau accepts that any inconsistency is not apparent.

8.  I note further that the issues involved in those claims are different from those in the present trial. Any inconsistency is not clear on their face. The relevance of those judgments even as previous statements is very marginal at best. I in any event fail to see how P’s and YY Chan’s insistence upon pursuing their appeals has any bearing on the present case.

9.  The application to adduce those judgments was made late. P has no opportunity to, in response, adduce before this court their actual witness statements filed before the Tribunal in order to explain any purported discrepancy. I note that the judgments have been uploaded quite some time ago. No valid explanation has been tendered for the lateness.

10.  In my view, P will be prejudiced by such late production of documents and for inarticulate purposes. I refuse D leave to do so.

11.  D is to bear the costs of the application, in any event, and on an indemnity basis. I record that 3 hours have been spent on the application.

C. The agreed facts

12.  The following facts are agreed by the parties[5], or are otherwise not in dispute.

13.  Relevant to the parties:

(a) D is a Hong Kong company. It was incorporated in 1992;

(b) Mr Chan Yat Fai (“Chan Yat Fai”, and together with P the “Chan Brothers” as appropriate) is P’s younger brother. He passed away on 14 October 2017;

(c) Mr Chan Cheuk Wai (“Chan Cheuk Wai”) is P’s son;

(d) In 2012 and 2013, D’s directors and shareholders were:

(i) P (holding 810,000 shares),

(ii) Chan Yat Fai (holding 1,110,000 shares),

(iii) Mr Leung Kam Loi Kenny (“Leung”) (holding 1,110,000 shares), and

(iv) Chan Cheuk Wai holding 670,000 shares;

(e) Immediately before 13 March 2017, D’s directors and shareholders were:

(i) P (holding 810,000 shares),

(ii) Chan Yat Fai (holding 1,780,000 shares), and

(iii) Leung (holding 1,110,000 shares);

(f) On 13 March 2017, P and Chan Yat Fai completed the sale and transfer of their respective shareholding in D to Leung and Mr Sit Man Ho (“Sit”)[6]. On that day, P and Chan Yat Fai also resigned as directors of D[7];

(g) Immediately after the said transfer of shares on 13 March 2017:

(i) the shareholders of D became:

(1) Leung (holding 2,590,000 shares), and

(2) Sit (holding 1,110,000 shares);

(ii) Leung became the sole director[8];

(h) Whilst not part of the agreed facts, there is no dispute that Homebridge Industrial Limited (“Homebridge”) was at the material time a company of which P was the sole director. P describes it as a company under his name (我名下的公司[9]).

14.  Relevant to the alleged Loan, the following facts have been agreed:

(a) On 26 March 2013, a cheque in the sum of HK$5,000,000 (the “Cheque”), issued by P in favour of D, was deposited into D’s bank account (183-255793-001);

(b) An account voucher of D of the same date (RV2013030014, the “26/3 Voucher”)[10] was issued in which the payment via the Cheque was marked as “SZ INDIGO REPAYMENT TO HKTP”;

(c) Specifically, the 26/3 Voucher shows that:

(i) ledger account number 30-000-020 (with the name “HSBC HKD C/A 004-183-255793-001 SZ INDIGO REPAYMENT TO HKTP”) was debited with HK$5,000,000; and

(ii) ledger account number 40-000-130 (with the name “INDIGO CURRENT ACCOUNT SZ INDIGO REPAYMENT TO HKTP”) was credited with HK$5,000,000;

(d) On or about 25 June 2013, P signed a “Confirmation for Audit Purposes”[11] (the “Audit Confirmation”) which states that, as at 31 March 2013, D’s indebtedness to P was HK$3,000,000;

(e) In D’s Financial Statement for the year ended 31 March 2017 signed by Mr Leung (“D’s 2013 FS”), under the section “Related Party Disclosures”[12], an item “Interest paid to Director” in the sum of 131,178.93 was recorded;

(f) In relation to SZ Indigo mentioned above:

(i) SZ Indigo was company incorporated in the Mainland;

(ii) Its full name originally was 深圳市英廸高數碼有限公司. On 16 April 2010, its name was changed to 深圳市英高廸貿易有限公司;

(iii) Its business licence was suspended (吊銷) by “深圳市市場監督管理局” on 7 December 2012, and the suspension was published on 12 December 2012 through public notice (編號: 深市監企公告【2012】21號);

(iv) Though not part of the agreed facts, there is no dispute that SZ Indigo is an affiliated or related company of D. At §18 of P/WS1[13], P mentioned another Mainland company called「創東蒲」, and says that “兩所國內公司成立的目的，都是為方便[D]做帳目，實際上亦為[D]所控制”;

(v) P has engaged Ms Shi Nam (史楠) as an expert to prepare a report on SZ Indigo (the “Expert Report”). The Expert Report has been adduced as agreed evidence.

15.  Relevant to the Counterclaim, 12 payments (the “12 Payments”) have been admitted:

(a) On or about 29 December 2016, a sum of HK$57,066 was paid by D to Messrs W K To & Co (“WK To”), solicitors acting for P in DCCJ 21118/2001 via a cheque no.568414, in payment of fee note dated 22 December 2016 issued by WK To to P[14] (“Payment #1”);

(b) On or about 26 January 2017, a sum of HK$36,500 was paid by D to Chan Yat Fai (“Payment #2”);

(c) On or about 28 February 2017, the P signed purportedly on behalf of D a cheque in the sum of HK$178,266.67 payable to Chan Yat Fai[15] (“Payment #3”);

(d) P signed the following cheques purportedly on behalf of D[16] (“Payments #4 to #12”):

#	Cheque date	Cheque no.	Amt (HKD)	Payee
Bank of China (Hong Kong) Limited
4	13.03.17	000232	6,789	HK Government
5	13.03.17	000229	100,000	Chan Yat Fai
6	15.03.17	000236	1,625	P
7	15.03.17	000238	6,000	YY Chan
8	15.03.17	000235	5,729	Winland Property Management Ltd
9	29.03.17	568465	60,000	Cash (Received by Hung Shu Kiu)
HSBC
10	15.03.17	722540	250	HSBC
11	30.03.17	367273	5,000	YY Chan
12	10.04.17	367274	6,000	Cash (Received by YY Chan)

D. The trial bundle, and dispute on authenticity of certain documents

16.  The trial bundle comprises 7 box files. Except those items described below, authenticity of all other items is not in dispute.

17.  I record that the accuracy of the audio recording transcripts at items 121 to 124 of Bundle 6 (“Transcript #1”, “Transcript #2”, “Transcript #3” and “Transcript #4” respectively) are actually agreed, despite the fact that they were originally included as part of Bundle 6 under the heading “Documents authenticity not admitted by the Defendant”.

18.  In respect those documents disputed by P:

(a) They are items 103 to 112 in Bundle 6, which are copy account ledgers, balance sheets and purchase orders;

(b) As Mr Ho has clarified, P does not seek to put forward any positive case of impropriety against D in respect of those items. Their authenticity is disputed primarily because of the lateness in their discovery. D to put to strict proof thereof;

(c) I will come back and rule on their authenticity.

19.  In respect of the documents disputed by D:

(a) D has filed Notices of Non-admission in relation to items 113 to 120 in Bundle 6;

(b) Mr Lau, in the course of his opening submissions, and upon my request, clarified that despite D’s Notices of Non-admission, D would maintain its challenge in respect of only the following 3 documents;

(c) Item 117[17] (the alleged “Homebridge Loan Receipt”):

(i) It is described as “Copy 2 cheques … (with words of acknowledgment written)”;

(ii) It is a one-page document. Towards the top are copies of 2 cheques dated 1 December 2016 of HK$700,000 and HK$2,300,000 respectively by P and Homebridge to D;

(iii) Under the copies towards the bottom are the following words:

“以上款項由[Homebridge]借出給[D]周轉之用，利息以現在銀行透支利息4.5厘計算，東蒲股東以各人股份比例作出私人担保，立此為據。”

(iv) At the bottom and on its face are P’s and Leung’s signatures;

(v) Leung denies that that signature is his;

(d) Item 119[18] (the “Shareholder Capital Increase Agreement”):

(i) It is a one-page document headed “股東增資協議書”. It is dated 25 March 2013. Party A is Chan Yat Fai. Party B is Leung;

(ii) Towards the top are the following words:

“甲乙雙方均為香港東蒲科技實業有限公司股東(各佔有30%股權)，協議由甲方增資港幣伍佰萬元正給香港東蒲科技實業有隈公司(以下簡稱爲公司)，目的用於減低公司應收賬，同時不影響乙方現有的30%公司股權，以上增資甲方將會收取公司2%年息作爲回報(即HK$5,000,000元X 2% = HK$100,000元／年），如乙方退股或轉讓公司股權，乙方應在退股或轉讓公司股權後三個月內退還給甲方30%股份比例的增資額，即港幣伍佰萬元正X30% = 港幣壹佰伍拾萬元正給甲方。”

(iii) Under the above words are on its face the signatures of Chan Yat Fai and Leung;

(iv) Under the signatures at the bottom is a copy of the Cheque;

(v) Leung denies that the signature is his;

(e) Item 120[19] (the alleged “25/3 Receipt”):

(i) It is a one-page document, and described as “Copy of [the Cheque] (with words of acknowledgment written and signed by Chan Yat Fai on behalf of [D]”. It is dated 25 March 2013;

(ii) At the top are the following words:

“現收到陳日文先生以私人名義借款港幣伍佰萬元正給香港東蒲科技實業有限公司作周轉之用，匯豐銀行支票號碼：786185 以上借款會收取每年港幣壹拾萬元正作爲利息，由陳日輝先生代爲收取。以上借款香港東蒲科技實業有限公司各股東同意作出按股份比例作出私人擔保。”

(iii) Under those words is a copy of the Cheque;

(iv) Under the copy of the Cheque is Chan Yat Fai’s signature with D’s company chop.

20.  I will come back to rule on the authenticity of the above disputed items at the latter parts of this Judgment.

E. Parties’ pleaded cases

21.  P’s claim is a straightforward one: the HK$5m transferred to D via the Cheque is a loan repayable on demand, with contractual interest of 2% per annum, which D has failed and refused to repay.

22.  By its Amended Defence and Counterclaim of 7 May 2020 (“AD&C”), D denies that the Cheque represents any loan. It avers:

(a) that P agreed to issue the Cheque to D for and on behalf of SZ Indigo in satisfaction of trade receivables owed by SZ Indigo to D (the alleged “Repayment Agreement”). According to the Further and Better Particulars of 4 April 2018 provided by D, the alleged Repayment Agreement was made orally on 26 March 2013 during a meeting between P, Chan Yat Fai and Leung, and is evidenced in writing by inter alia the 26/3 Voucher and D’s 2013 FS[20];

(b) further or alternatively, that:

(i) the Loan was “void, unenforceable and/or liable to be set aside in that it was entered into by [P] to benefit himself and/or his brother in actual conflict of interest and in breach of his fiduciary duties” (§7.1 of the AD&C),

(ii) P “clearly and unequivocally waived his entitlement … to repayment of the sum paid under the Cheque or for interest thereon” (§7.2 of the AD&C), or

(iii) P is “estopped from contending that the Cheque was paid for some other purpose or that it constitutes a debt owed to him by [D]” (§7.3 of the AD&C).

23.  Despite D’s pleaded case;

(a) Mr Lau in the course of his opening submissions informed this court that:

(i) should this Court find that the Loan in fact exists, D will no longer pursue its defence on the basis of conflict of interest and breach of fiduciary duties (as pleaded in §7.1 of the AD&C);

(ii) except to the extent of it overlapping with the defence of estoppel, D will not run the pleaded defence of waiver as a separate defence (as pleaded in §7.2 of the AD&C);

(b) In the course of his closing submissions, Mr Lau further informed this court that D would no longer rely upon the defence of estoppel, as D acknowledged difficulty in establishing the element of detriment;

(c) The only remaining issue therefore relates to the nature of the HK$5m paid via the Cheque, and in particular whether it is a loan from P to D (as claimed by P), or whether it was paid by P for and on behalf of SZ Indigo in order to settle/reduce the trade/account receivables owed by it to D (as claimed by D).

24.  D also counterclaims (the “Counterclaim”) for alleged breach of fiduciary duties on P’s part, in that P had caused the 12 Payments in the total sum of HK$463,225 to be made (and the related cheques issued) for his own or Chan Yat Fai’s benefit.

25.  In respect of the Counterclaim, I record that:

(a) In the course of his opening submissions and Leung’s cross-examination, Mr Lau clarified and accepted that P as a director (prior to his resignation) had his authority to act on behalf of D. Mr Lau further clarified that the validity of the Letter of Authorization (defined below) is not in dispute. The crux of the issue is therefore whether the nature of the 12 Payments and the related cheques outwith P’s authorities vested in him on the above bases;

(b) In the course of his cross-examination, Leung stated that D would withdraw the parts of its Counterclaim in respect of Payments #8 and #10;

(c) In his closing submissions, Mr Lau confirmed that D would also withdraw the part of its Counterclaim in respect of Payment #9;

(d) Parties are ad idem that they would not trouble this Court with any leave to withdraw those parts of the Counterclaim. This Court may simply proceed to dismiss those claims;

(e) What remain relevant are therefore Payments #1-7, and #11-12.

26.  P filed his Re-Re-Amended Reply and Defence to Counterclaim on 2 June 2020 (“R&D”). P pleads, inter alia, and in so far as still relevant, as follows:

(a) The alleged Repayment Agreement is denied;

(b) The Loan was approved during a meeting of D on 25 March 2013. The meeting was attended by P, Chan Yat Fai and Leung. Despite P’s attendance, the latter two constituted a sufficient quorum. P disclosed his interest that he would receive interest for the Loan. The Loan was approved[21];

(c) The business licence of SZ Indigo in the Mainland has been suspended by 深圳市市場監督管理局 since 7 December 2012, and has never been revived. The suspension was published on 12 December 2012. Upon the suspension, SZ Indigo has been unable to conduct any business in the Mainland, and has ceased to have any commercial value. It would in the circumstances be “devoid of commercial sense for [P] to make payment to satisfy the trade receivables of a company which had no commercial and/or business value”[22];

(d) In respect of the Counterclaim, P’s principal defence is that he had the requisite authority to make the 12 Payments and to issue the relevant cheques on D’s behalf. He relies on his position as a director of D prior to his resignation, a directors’ meeting in about February 2017 authorizing Payment #3 for the termination of his employment, and the letter of authorization of 15 March 2017 (the “Letter of Authorization”) signed by Leung on D’s behalf authorizing P to continue to sign and issue cheques on D’s behalf until further notice[23]. P further in so far as necessary relies on the defence of set-off.

F. The agreed issues

27.  The agreed issues are as follows:

(a) Whether the sum of HK$5,000,000 paid by P to D was a loan from P to D, or whether it was payment by P to D to settle/reduce the account receivables due from SZ Indigo (“Issue#1”);

(b) If that was indeed a loan, whether the Loan carries interest at 2% per annum (or HK$100,000 per year) (“Issue#2”);

(c) Whether P was estopped from denying that the sum of HK$5,000,000 was paid P in order to settle/reduce the account receivables due from SZ Indigo (“Issue#3”);

(d) As to the Counterclaim, whether P was duly authorized by D to make the 12 Payments and whether the 12 Payments were rightfully made (“Issue#4”); and

(e) Whether the P is liable to account and repay to D any of the payments under the Counterclaim that are still being pursued (“Issue#5”).

28.  In the course of opening submissions, counsel upon my request clarified that Issue#2 is likely to be intricately linked to Issue#1, as various documents, if accepted by this court, suggest that the interest for the Loan was HK$100,000 per annum, which is equivalent to 2%. It is not as if the interest was agreed to be in a fixed sum, and that parties are in dispute as to what level of interest the Loan carried in terms of percentage.

29.  As recorded above, the pleaded defence of estoppel will no longer be relied upon. Issue#3 ceases to be of any relevance.

30.  Issue#4 should also be modified by taking out Payments #8 to #10. The updated total of the Counterclaim is HK$397,246.67.

G. Witnesses

31.  For P:

(a) the following factual witnesses, and in the following order, have been called:

(i) P himself, who has given 4 witness statements (“P/WS1”, “P/WS2”, “P/WS3” and “P/WS4”);

(ii) Chan Manzi (陳敏姿, “MZ Chan”), who has given one witness statement (“MZ Chan/WS”). She was a member of D’s employed accountants between 2000 and 2011;

(iii) Hung Shu Kiu (洪樹嬌, “Hung”), who has given one witness statement (“Hung/WS”). Hung was P’s assistant. Her evidence covers mainly the transfer of P’s and Chan Yat Fai’s shares in D to Leung and Sit in early 2017 and the authenticity of certain documents which are no longer in dispute;

(iv) Tai Siu Ching (戴少清, “Tai”), who has given one witness statement (“Tai/WS”). Mr Tai is a partner of WK To, P’s legal advisers. His evidence concerns only the preparation of CYF/WS[24]; and

(v) YY Chan, who has given one witness statement (“YY Chan/WS”). YY Chan is P’s younger sister. Her evidence covers principally her interpretation of one of the audio transcripts (Transcript #3) and some of the Payments under the Counterclaim;

(b) In respect of Chan Yat Fai:

(i) he has passed away;

(ii) Before his death, he gave a statement dated 9 October 2017[25], with an attachment which has been described as the Interest Matching Table[26] (“CYF/WS/Body” and the “CYF/WS/Table” respectively, and “CYF/WS” collectively);

(iii) Pursuant to the order this Court gave during the pre-trial review, CYF/WS has been adduced as hearsay evidence, with liberty to D to make submissions on their weight.

32.  For D:

(a) The following factual witnesses have been called:

(i) Leung, who has given 5 witness statements (“D/WS1”, “D/WS2”, “D/WS3”, “D/WS4” and “D/WS5”); and

(ii) Wong Lam (黃琳, “Jeffy Wong”), who has given 3 witness statements (“Wong/WS1”, “Wong/WS2” and “Wong/WS3”). Jeffy Wong has been engaged by D as the employed accountant from about July of 2011 till (save the period between about mid December 2016 and end of March 2017) now;

(b) In respect of Chan Oi Ying (陳愛英, “OY Chan”):

(i) one witness statement OY Chan has been filed (“OY Chan/WS”);

(ii) In the course of his opening, Mr Ho informed this court that she would not be called. As stipulated in O.38 r.2A(6), no party may put OY Chan/WS in evidence. However, as some of P’s witnesses have in reply made reference to certain parts of OY Chan/WS, and having heard parties, whilst I did not order OY Chan/WS to be expunged, I directed that it remains so as to allow (but only so as to allow) those parts of the evidence adduced by P which make reference to it to be understood in their proper context;

(iii) Leung has filed an affirmation of 1 August 2022 explaining the reasons why OY Chan would not be called. That affirmation has been admitted without objection from Mr Ho, and has been adopted by Leung as part of his evidence in chief. Leung has also been cross-examined on the same.

33.  In addition to the above factual witnesses, and as I have mentioned above, the Expert Report has also been adduced by agreement. Ms Shi Nam has not been called.

H. Credibility of witnesses

H.1. The applicable law

34.  Parties have cited no authority to me. The applicable principles and considerations are however well-established, and are not in dispute[27]. I remind myself when considering a witness’ credibility the importance of considering the inherent likelihood or unlikelihood of the witness’ evidence, the consistency of the witness’ evidence with undisputed or indisputable evidence, with contemporaneous conduct and documents, and the internal consistency of the witness’ evidence. I need to consider the totality of the evidence. I warn myself against attaching undue weight on demeanour, though demeanour is obviously relevant when considering credibility.

H.2. Findings on credibility

35.  The crux of P’s evidence may be summarized as follows:

(a) In P/WS1 at §6[28], P claims that:

“約於2013年初，東蒲營運狀況不佳，於是於2013年3月25日下午，我、陳日輝和梁錦來三人於東蒲當時在葵涌梨木道88號達利中心15樓1504室的辦公室進行會議，會議上提及需要我借出港幣300至500萬元作為長期借款，最後決定由我向東蒲貸款港幣500萬元作周轉之用 …”

(b) Under cross-examination, upon being asked the time when Chan Yat Fai and Leung first requested loan from him, he first said that it was about a week or several days before that meeting. He then said that he was not sure. He said that at that initial stage, HK$3m to 5m was requested, and the final figure had not been determined;

(c) A meeting took place in the afternoon of 25[29] March 2013. It was only during that meeting when it was determined that HK$5m would be lent. By the time when everything had been decided upon, it was already evening. Chan Yat Fai instructed Jeffy Wong to prepare the Cheque. As the Cheque could no longer be banked that day, P gave Jeffy Wong instruction to date it 26 March 2013. The 25/3 Receipt was then prepared and signed. As Leung had left by the stage, Leung did not sign on it;

(d) He only discovered the Shareholder Capital Increase Agreement in about October 2017 after Chan Yat Fai’s death, and when he was going through Chan Yat Fai’s properties;

(e) He was not aware of the use which the HK$5m was subsequently put to, and before discovery by D in the present action, he had never seen the 26/3 Voucher.

36.  I find that P is neither an honest nor a reliable witness. His evidence is inherently improbable, materially inconsistent with contemporaneous documents and undisputed events, and full of inconsistencies. His evidence[30] that his title with D as「財務經理」was titular and that he was not involved in D’s daily operation are inconsistent with his own statement given in the Labour Tribunal against D[31]. I will set out the reasons in further detail later when I consider the issues.

37.  I find Tai to be an honest and reliable evidence. There is no inconsistency in his evidence, which is inherently probable and straightforward. He has no motive for him to lie at all. I accept his evidence.

38.  I find Hung, YY Chan and MZ Chan basically to be honest witnesses. Their evidence however, as summarized above, and in so far as P’s claim in concerned, is peripheral. Specifically in respect of MZ Chan, she had left D for some time by 2013 when the Cheque was issued. And in relation to Hung, as D has withdrawn the part of its Counterclaim in respect of Payment #9 (which was paid to Hung), her evidence in that regard is no longer relevant.

39.  The core of Leung’s evidence is as follows:‌

(a) In middle of 2012, he noted the substantial account receivables due from D’s main Mainland business. If those account receivables were not handled prior to the year 2012/2013 audit, they would be required by the auditor to be treated as bad debts, in which case even D’s capability to bid for government works in Hong Kong would be affected. In order to ease the pressure, he requested the Chan Brothers to handle them before 2013 financial yearend, or else he might not be able to be involved with D further. He told Chan Yat Fai that he might withdraw as shareholder. It was at that stage when P first suggested that he would provide HK$5m to D to reduce the account receivables. The main reason for P doing so was to assist Chan Yat Fai, who had been principally responsible for D’s Mainland business. Jeffy Wong knew about that too, who confirmed that in early 2013, Chan Yat Fai told her that P would provide HK$5m to D to reduce the account receivables of SZ Indigo;

(b) The HK$5m had however not been forthcoming for several months. It was ultimately on 25 March 2013 when P was told that there would be a meeting with the Chan Brothers on 26 March 2013. A meeting then took place on 26 March 2013. Jeff Wong was on occasions called into the meeting. P first of all revealed that he had sold one of his properties at the Jubilee Garden (the “Jubilee Garden Property”). P was then in the position to provide the HK$5m promised;

(c) But then at some stage during that meeting in the absence of Jeffy Wong, P suddenly requested that in the future, should D have profit for the distribution of dividends or that should D be sold, P should have the priority to be benefited and be repaid the HK$5m, and that all shareholders should, pro rata in accordance with their respective shareholding in D, pay P from the monies they were to receive. Leung was upset. Chan Yat Fai pacified him. The Chan Brothers then produced a handwritten document which they had prepared and asked Leung to sign. Leung explained under cross-examination that P in fact had the option of not providing the HK$5m. If he chose not to, D would not be able to go on. In compromise, Leung therefore signed on that document (the “Handwritten Agreement”). He regarded it as a promise by the shareholders (the “Promise”). He did not keep a copy of the same, and it has not been disclosed by P;

(d) The Cheque was therefore not a loan by P to D, but was a sum provided by P to reduce the account receivables owed by SZ Indigo to D. The various WhatsApp messages and audio recordings which P has produced and relies upon should be understood in the light of the above, and the existence of the Handwritten Agreement and Promise.

40.  Jeffy Wong’s evidence is consistent with Leung’s evidence in so far as Jeffy Wong’s involvement is concerned. In particular, she was adamant that the meeting took place on the morning of 26 March 2013. She was called to the meeting on occasions and received instructions to prepare the Cheque and the 26/3 Voucher. The Cheque was issued and dated the same date as that of the meeting. She received instructions to prepare the 26/3 Voucher from Chan Yat Fai in the present of both P and Leung.

41.  I find both Leung and Jeffy Wong to be honest and reliable witnesses. Their versions of events are in my view inherently probable, materially consistent with contemporaneous documents and conduct, and do not suffer from any material inconsistency. I accept their evidence. I prefer their evidence to that of P’s in cases of differences. Again, I will go into more details later when I consider the issues.

42.  I make it clear that whilst I am going to discuss the details of the witnesses’ credibility on an issue-basis, I have considered all the relevant evidence, facts and circumstances in the round before reaching any view on credibility.

I. CYF/WS – Its weight

43.  Chan Yat Fai has passed away. CYF/WS has been adduced with no objection on admissibility.

44.  Neither Mr Ho nor Mr Lau has in their written closing submissions addressed section 49 of the Evidence Ordinance (Cap 8). I in the course of their oral closing invited submissions from them, which I have taken into account.

45.  The weight to be attached to hearsay evidence is governed by section 49 of the Evidence Ordinance, that:

“Considerations relevant to weighing of hearsay evidence

(1) In estimating the weight, if any, to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.

(2) For the purposes of subsection (1), regard may be had, in particular, to the following—

(a) whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;

(b) whether the original statement was made contemporaneously with the occurrence or existence of the matters stated;

(c) whether the evidence involves multiple hearsay;

(d) whether any person involved had any motive to conceal or misrepresent matters;

(e) whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose;

(f) whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight;

(g) whether or not the evidence adduced by the party is consistent with any evidence previously adduced by the party.”

46.  Having considered the following matters, I have decided to place no weight upon CYF/WS:

(a) Chan Yat Fai has passed away. It is no longer possible to call him;

(b) The contents of CYF/WS/Body are primarily direct hearsay;

(c) The above 2 considerations weigh in favor of placing some weight on CYF/WS/Body;

(d) Against the above 2 considerations are however the following strong countervailing considerations;

(e) The contents of CYF/WS/Table are indirect hearsay. At §7 of CYF/WS/Body, a sentence in manuscript has been added, that:

“有關利息的支付，可見於附件由東蒲會計發給我的对數表。”

(f) The addition of that sentence suggests that the CYF/WS/Table was not referred to in the original draft. Indeed, P claims[32] that it was located by him based on what Chan Yat Fai had told him, and that he brought it along to the hospital on 9 October 2017 for Chan Yat Fai’s confirmation;

(g) However, Chan Yat Fai had failed to specify in CYF/WS/Body the exact identity of the person who prepared the CYF/WS/Table, when he received it, and the circumstances in which he did;

(h) Jeffy Wong denied having prepared the CYF/WS/Table;

(i) CYF/WS/Body was not made contemporaneous with the issue of the Cheque. It was made some 4-and-a-half years after the event;

(j) As said Chan Yat Fai failed to say when exactly CYF/WS/Table was prepared. It is however a summary of various payments in 3 accounting years. It is by nature not a contemporaneous document;

(k) Not only CYF/WS is not a contemporaneous document, it was prepared in fact specifically as a statement for the purpose of being used in proceedings by P for recovery of the alleged Loan;

(l) In his oral closing, Mr Ho submitted in this regard that at the time contemporaneous to the events, there was no need to made CYF/WS as there was no proceedings no foot, and Chan Yat Fai had no health issue. Those facts however do not alter the fact that CYF/WS is not a contemporaneous document;

(m) Chan Yat Fai was P’s brother. It is also P’s case that Chan Yat Fai was authorized to receive interest payments arising from the alleged Loan on P’s behalf, and that he had in fact received them. He had motive to conceal and misrepresent matters in P’s and his own favour;

(n) Even more worrying is P’s self-conflicting evidence in relation his involvement in the preparation of CYF/WS, and the evidence from Tai and YY Chan which conflict with P’s versions:

(i) Tai’s evidence is that he attended a hospital, explained to Chan Yat Fai the contents of CYF/WS in draft, allowed him ample time to add or amend, and then witnessed his signature;

(ii) When under cross-examination, P initially confirmed that, not just on the day when CYF/WS was signed at the hospital, but throughout the whole time when CYF/WS was prepared, his participation was limited to being a witness witnessing the process, and that the lawyer recorded what Chan Yat Fat said;

(iii) P claimed that all that were important had been recorded, that what Chan Yat Fai had said principally related to interest, lending money, and that he had signed a capital increase agreement. He said further that in the process of preparing CYF/WS, Chan Yat Fai had told him that he (Chan Yat Fai) and Leung had agreed to change the alleged Loan to and as capital increase, which he (P) had no knowledge of;

(iv) It was then pointed out to P that neither the Shareholder Capital Increase Agreement nor the use of the HK$5m as capital increase have been mentioned in CYF/WS;

(v) P then changed his evidence and claimed that their sister (i.e. YY Chan) had also participated in the process, that he had become confused as to whether Chan Yat Fai had mentioned those matters before the lawyer, that it should be the case that Chan Yat Fai mentioned the bulk of CYF/WS (from §5 onwards) to their sister in the hospital in the company of other family members;

(vi) That version is however contradicted by YY Chan herself, who testified in Court that she did not discuss with Chan Yat Fai in relation to the preparation of CYF/WS, and was not involved in any discussion or question-asking in that regard. It was P who gave her a handwritten document which she typed up, and that that was her only involvement. I accept her evidence in this regard;

(vii) P has failed to reveal the handwritten document which he gave his sister and how it was prepared;

(viii) I note further Tai’s evidence, and in particular §4 of Tai/WS, that:

“原告人告訴我，他已經和陳日輝先生詳細傾談陳述書的內容。我於是按原告人覆述陳日輝先生的指示，準備一份由陳日輝先生作出的陳述書草稿，就他所知所信的事情陳述。”

(ix) In the course of is oral evidence, Tai confirmed that for the preparation of CYF/WS, he had only received instructions from P. Whilst he had met Chan Yat Fai before for other purposes, for the preparation of CYF/WS, he only met Chan Yat Fai once on 9 October 2017 in the hospital for the purpose of explaining the draft to him and making any addition or alteration which Chan Yat Fai might request;

(x) I accept Tai’s evidence that the contents of the draft statement were provided by P to him. P has failed to explain how he gathered the instructions he gave Tai;

(xi) I find that P’s involvement in the preparation of CYF/WS was much more pro-active and substantial then what he has claimed;

(xii) According to Tai, whose evidence I accept, P had told him that “他已經和陳日輝先生詳細傾談陳述書的內容”. Mr Ho in his written closing[33] submits that despite Tai’s evidence, “there is no significant trace that [CYF/WS] was dominated by P’s subjective idea or was involuntary”. That is completely off the point. What is important is that the evidence before me suggests, and I so find, that CYF/WS is an account which was made by Chan Yat Fai in collaboration with P for the purpose of it being used in future legal proceeding to be initiated by P against D;

(xiii) I find that P has sought to conceal and misrepresent about his involvement in the preparation CYF/WS, and his collaboration with Chan Yat Fai. Such conduct in my view suggests an attempt on his part to prevent proper evaluation of the weight of CYF/WS;

(o) Mr Ho submits that the contents of CYF/WS are substantially consistent with the Shareholder Capital Increase Agreement and the 25/3 Receipt. However, Chan Yat Fai failed to refer to either of the documents, which failure I find inherently most improbable if those two documents were in fact in existence when CYF/WS was prepared. Further, as will be explained further, I am of the view that P has failed to establish the authenticity of the Shareholder Capital Increase Agreement and the 25/3 Receipt;

(p) CYF/WS has failed to explain why Chan Yat Fat failed to reveal to P the 26/3 Voucher or the use of the HK$5m;

(q) In respect of the incompleteness of CYF/WS, Mr Ho submits[34] that because Chan Yat Fai’s “lifespan was counting”, “it came with little surprise that the statement cannot come with more documents (apart from the Interest Matching Table) or in-depth analysis of the board’s financial decision apart from [Chan Yat Fai’s] own testimony”;

(r) I do not accept those submissions. What is expected is not the attachment of any complicated or lengthy document, nor any in-depth analysis of any decision, but simply a reference to the 25/3 Receipt and Shareholder Capital Increase Agreement which Chan Yat Fai had himself allegedly signed, and an explanation as to why he did not inform P of the use of the HK$5m. Chan Yat Fai’s health and “lifespan” have nothing to do with the incompleteness;

(s) In support of his submissions that weight should be attached to CYF/WS, Mr Ho also makes reference to the payment of interest (HK$100,000 per annum) by D between 2014 and 2016 and the CYF/WS/Table:

(i) I have highlighted the problems in relation to the CYF/WS/Table, and in particular the lack of evidence on its authorship;

(ii) In relation to the payment of interest, Jeffy Wong has in Wong/WS2 at §1 explained, with reference to certain Skype and WhatsApp communications she had had with Chan Yat Fai[35], how she was given instructions by Chan Yat Fai to do so, and how Chan Yat Fai sometimes enquired the balance for him to do “Claim Paid”. She simply accepted the instructions as Chan Yat Fai was one of her bosses, and did not enquire whether Leung was aware of those payments;

(iii) Leung has denied having consented to or been notified of those payments;

(iv) The fact that the interest payments have been booked as having been used to off-set some of Chan Yat Fai’s personal expenses only goes to show the accuracy of the accounts, but otherwise has limited value in corroborating P’s case, as Mr Ho seeks to argue;

(v) There are also material parts of CYF/WS which are inconsistent with other evidence. The most telling points relate to §7, wherein Chan Yat Fai claimed inter alia that:

“大的於2013年3月份的時候，由於東蒲營運狀況不佳，董事局提出由陳日文向東蒲借出港幣伍佰萬元，作為營運資金，東蒲每年支付回10萬元利息給陳日文，並由我代收 …”

(vi) As I will explain further below, any discussion on P’s provision of HK$5m could not have started only in early March 2013, as Chan Yat Fai and P (as I will explain) sought or seeks to say. P had to sell the Jubilee Garden Property in order to come up with sufficient funds. The process of selling that property started latest in December 2012.

J. Issue#1 – whether Loan from P to D, or whether payment by P to D to settle/reduce the account receivables due from SZ Indigo

J.1. Discussion of the evidence

47.  There is no dispute that P did issue the Cheque. The question is what the Cheque was issued for.

48.  I have set out the crux of the parties’ respective cases above.

49.  P’s case that Leung and Chan Yat Fai requested money from him only several days or a week before he issued the Cheque is inconsistent with parties’ contemporaneous conduct:

(a) Leung has on 2 occasions[36] said that P on 26 March 2013 told him that he (P) had to sell his Jubilee Garden Property to come up sufficient funds for the HK$5m. P has never refuted that. In the course of cross-examination of Leung, Mr Ho only took the line that even with the disposition of the Jubilee Garden Property, which was sold at HK$3.82m, P would still have to come up with the balance of HK$1.2m. That however with respect misses the point. According to the relevant land search records[37], the agreement for the sale and purchase of the Jubilee Garden Property is dated 13 December 2012, and the assignment 14 January 2013. The point therefore is that given those dates, the decision to provide money by P to D could not have been reached only in March 2013, but latest by the time when P first took steps to sell the Jubilee Garden Property, which was December 2012 latest;

(b) Given the need to sell the Jubilee Garden Property, I find it hard to believe that P could not recall the time when D’s alleged need of money was first raised. In my view, he was simply evasive there;

(c) That P had already taken steps to gather money by December 2012 is on the other hand consistent with and supports D’s case that the discussion with and agreement by P to provide funds took place in mid-2012;

(d) D’s case in this regard is also supported by Transcript #1;

(e) Transcript #1 relates to a conversation between Chan Yat Fai and Leung. There is no agreement as to the time when the transcribed conversation took place. P’s case is that it took place on 12 June 2015. In any event, there can be no dispute that it took place after P’s issue of the Cheque;

(f) During that conversation, Leung and Chan Yat Fai were recorded as have discussed about the use of the HK$5m, and that it had been used to reduce certain “AR” (which is accepted to mean “account receivables”);

(g) The following exchange appears:

“Leung:	仲然知佢嗰嚿錢講咗五百萬佢都唔係即時畀呀，佢要等到八個月後係財政年度…
Chan Yat Fai:	講咗啦，佢一早講咗啦係3月31日之前吖嗎…
Leung:	佢話仲然之前…
Chan Yat Fai:	係呀…
Leung:	真係去到3月31日之前咪比囉,
Chan Yat Fai:	係囉，係囉 ”

(h) The need to provide the HK$5m before the end of D’s financial year supports D’s case, as only then would the account receivables that would appear in that year’s financial statement be reduced[38];

(i) When cross-examined about that, P denied having promised to provide the HK$5m before 31 March 2013. But when being asked further as to why he gave Jeffy Wong instructions to date the Cheque 26 March 2013 when according to him it was issued on 25 March 2013, P answered:

“下意識，係今日入唔到票，寫聽日，係好正常，我寫27號都得格、寫28號都得格，都係31前之嘛 …”

(j) It was put to him that in a slip of tongue, he had revealed the truth;

(k) Unless P had in fact promised to provide the HK$5m before the financial year end, he would have no reason to mention “31^st” in that answer in effect as a deadline. In my view, P did indeed in a slip of tongue confirm a fact which supports an important aspect of D’s case.

50.  The aspects of P’s case in relation to the date when the meeting wherein the Cheque was issued, the creation of the 25/3 Receipt, and the discovery of the Shareholder Capital Increase Agreement are inconsistent and inherently improbable:

(a) There is no dispute between the parties that a meeting took place during which the Cheque was issued. I will for ease of reference called it the “Meeting”. The differences are the date when, and the circumstances in which, the Meeting took place;

(b) I have summarized P’s case in this regard. In gist, he says that the Meeting took place on the afternoon of 25 March 2013 when both the Cheque and the 25/3 Receipt were issued and signed, but that the Cheque was only banked the following date. Both Leung and Jeffy Wong are adamant that the Meeting took place on the morning of 26 March 2013, and that the Cheque was dated and banked on the same date;

(c) P’s case in this regard has not always been the same as it now is:

(i) In 3 letters of demand issued by WK To on his behalf on 21 September, 20 October and 13 November 2017[39], it was said that the Cheque was issued (“開出” in that first letter, and “簽發” in the other two) on 26 March 2013;

(ii) Those letters of demand should be read in the context of D’s replies, and in particular:

(1) its letter of 27 September 2017, wherein D challenged P’s demand and said that:

“本公司認為現在[P]既沒有借據又沒有借貸記錄文件提交情況下委托 貴所出信追款－事，實感莫明奇妙。”

(2) D’s reply letter of 21 November 2017, wherein it said that:

“如沒有收到有效證據情況，本公司亦不會補充回答。”

(iii) Until re-amendment in April 2019, P’s Reply and Amended Reply both pleaded that the Meeting took place on 26 March 2013, and that the Cheque was issued during that meeting;

(iv) It is quite apparent that P and his legal advisers did not have the 25/3 Receipt in front of them when they prepared the letters of demand and the earlier versions of the pleadings, otherwise they would not have stated and pleaded those matters as they did;

(v) The existence of the 25/3 Receipt was first mentioned only on 11 October 2018 in P/WS1. Particulars as to its preparation were however scanty. At §8 thereof[40], it is only referred to as “一張由東蒲預備的收據”;

(vi) In reply to D’s notice of non-admission, and in relation to the 25/3 Receipt, P says at §4 of P/WS2[41] that there are two originals to that document, that Chan Yat Fai had given one to him (P) for safekeeping, and that he (P) was still retaining the original;

(vii) No credible explanation has been tendered as to why, if P all along had had the original, he had not produced the 25/3 Receipt early on, and despite D’s challenge for lack of “借據” and “借貸記錄文件”;

(viii) In his witness statements, P has failed to provide any particulars as to how and when the existence of the 25/3 Receipt first came back to his mind, and when he first located and retrieved the same;

(ix) I accept Mr Lau submissions[42] that it is simply unconvincing as it is quite unbelievable that P had not found such an important document until late 2018 despite repeated challenges from D and the rounds of pleadings;

(d) On top of the above is also the fact, as I have observed when discussing the weight of CYF/WS, that Chan Yat Fai had also failed to mention the existence of the 25/3 Receipt in CYF/WS/Body, or that he had signed one;

(e) P and Chan Yat Fai were brothers. In comparison, it would have been much more important for them to secure Leung’s acknowledgment of the alleged Loan. Even if, as P claims, Leung had left the office by the time the 25/3 Receipt got to be signed, there can be no reason why they could not have followed up on the matter and asked Leung to add his confirmation back onto the 25/3 Receipt;

(f) On the question of follow-up, P in P/WS1 at §9[43] in fact has the following to say:

“之後，我託陳日輝協助我跟進上述借款的事宜，包括安排各人簽署確認書，以確認於上述的會面中同意的有關擔保事宜。正如我於下面所述，陳日輝其後有安排梁錦來簽署「股東增資協議書」以確認上述擔保條款。”

(g) However, the contents of the Shareholder Capital Increase Agreement are substantially and materially different from those what P now claims were discussed during the Meeting. I have reproduced the material parts of the Shareholder Capital Increase Agreement above. Both the source of the funds and the nature of the payment were different from the terms of the alleged Loan;

(h) P’s evidence on the discovery of the Shareholder Capital Increase Agreement is also contradictory and inherently improbable:

(i) Leung denied having signed it;

(ii) P claims that he does not have contemporaneous knowledge of its creation. At §11 of P/WS1[44], P states his view that it was not signed on 25 March 2013, but about half a year after the Meeting to book the HK$5m[45]. P however said under cross-examination that that was only his guess;

(iii) At one stage of his evidence during cross-examination, he claimed that Chan Yat Fai had in fact told him that the Shareholder Capital Increase Agreement was inside a file cabinet (“快勞櫃”), and that he (P) found it in a file (“文件夾”). But then later, he changed his evidence and claimed that in fact, though Chan Yat Fai had told him about the agreement between Chan Yat Fai and Leung in relation to capital increase, he (P) was not sure whether Chan Yat Fai had actually told him that a written agreement had been signed;

(iv) I find P’s evidence inherently most improbable. If Chan Yat Fai had told him about any oral agreement between him (Chan Yat Fai) and Leung, and assuming the existence of the Shareholder Capital Increase Agreement, it is inherently improbable that Chan Yat Fai would not have told P further about the existence of a written agreement, or that P would not himself have asked whether there was any;

(v) P has failed to say when he was so told by Chan Yat Fai. If that happened before the preparation of CYF/WS, it would be most incredible that it was not mentioned therein; and even if after, it would still be incredible that CYF/WS was not updated to include it;

(vi) All the above should also be contrasted with what P says at §5 of P/WS2[46], that he only found the Shareholder Capital Increase Agreement after Chan Yat Fai’s death when he searched through Chan Yat Fai’s property;

(vii) P has in any event failed to explain exactly when after Chan Yat Fai’s death he first found the Shareholder Capital Increase Agreement, and the circumstances in which he allegedly did;

(i) The evidence of Leung and Jeffy Wong in relation to the Meeting is however inherently likely, consistent, and supported by contemporaneous documents which include the Cheque and the 26/3 Voucher (the latter of which I will deal with further next). I accept their evidence in this regard, and reject P’s evidence claiming otherwise.

51.  P’s case being inconsistent with the 26/3 Voucher:

(a) There can be no dispute that as least as a matter of accounting treatment, the HK$5m was used to reduce the account receivables owed by SZ Indigo to D;

(b) P claims that the use of the HK$5m was a matter for Leung and Chan Yat Fai, and that he had no contemporaneous knowledge of its use or the 26/3 Voucher;

(c) I do not accept his evidence in that regard. No explanation has been offered as to why there was, or why Chan Yat Fai saw, any need or reason for hiding from P that use of the HK$5m. It is inherently improbable that his brother would have done so;

(d) The contents of the 26/3 Voucher on the other hand are entirely consistent with D’s case that the HK$5m was injected into D to reduce the account receivables and to avoid any auditing issues that they might give rise to;

(e) Jeffy Wong’s evidence is that during the meeting of 26 March 2013 when Chan Yat Fai gave her instructions to prepare the 26/3 Voucher, P was present. I see no inconsistency between this and what she has said at §15 of Wong/WS1. As explained by her upon cross-examination, she stresses there (at §15) that Leung was present when those instructions were given to her, not because P was not there, but merely because Leung subsequently left (as she proceeds to describe at §16). P was all along there;

(f) I accept Jeffy Wong’s evidence in this regard.

52.  P’s evidence that he provided the HK$5m to D “作周轉之用” is not, at least, the whole truth, if not actually misleading. As at March 2013, prior to the alleged Loan, D was indebted to P. On 26 March 2013, D repaid P a sum of HK$824,000. On 2 April 2013, D repaid P another sum of HK$3,000,000. Assuming the best in favour of P, only at most about HK$1.2 m out of the HK$5m would be available to D for use.

53.  P’s case that the Loan was a loan by him to D is fundamentally contradicted by the Audit Confirmation which he signed:

(a) The Audit Confirmation is dated 25 June 2013. It was issued by D’s auditor. The contents are partly bilingual. Under cross-examination, P accepted that he understood it as being a confirmation for audit purpose[47] that as at 31 March 2013, the amount due by D to him[48] was HK$3,000,000[49]. P signed it. He accepted also that he had signed similar confirmations before (in fact every year);

(b) P, according to his case, had only made the Loan to D 3 months before in March 2013. It had not been repaid. It is inherently most improbable that he would have signed the Audit Confirmation if the HK$5m was in fact a loan from him to D;

(c) His explanation as to why he signed it is self-contradictory and incredible;

(d) Under cross-examination, P said that he signed the Audit Confirmation hurriedly within 10 to 20 seconds, and without checking the amount (“無對數”);

(e) He has given no explanation as to why he could not have taken the time he believed he needed to properly appreciate the implication of the document; nor has he given any explanation as to why it was necessary for him to sign it hurriedly. He was the boss. He could have taken his time;

(f) In any event, the document is not complicated. It would not have taken P much time to realise that the figure set out therein was incorrect if he had in fact given the Loan;

(g) Further, the explanations he gave under cross-examination as to why he signed the Audit Confirmation are different from those he gave in his P/WS1[50]. In his witness statement, he claims that as he did not know English, even though the Audit Confirmation was partly in Chinese, he would not have fully understood its contents without someone explaining them to him, that Jeffy Wong did not explain the contents to him, that she had the intention to conceal, or that she had been instructed not to explain the document to him;

(h) In fact, given his acceptance upon cross-examination that he understood the contents of the Audit Confirmation, and the fact that he had signed similar documents before, his explanation given in P/WS1 are in any event incredible;

(i) Jeffy Wong’s evidence is that she brought the Audit Confirmation to P for his signature. She explained the contents to him. He signed in in front of her. I find her evidence inherently likely. I accept her evidence.

54.  P’s contradictory evidence in relation to the preparation of CYF/WS, which I have set out in Section I above, also substantially and adversely affect my view on P’s credibility.

55.  In relation to the 5/1/17 Receipt[51]:

(a) As recorded above, it is part of the agreed evidence that on 13 March 2017, P and Chan Yat Fai completed the sale and transfer of their respective shareholding in D to Leung and Sit;

(b) The relevant sale and purchase agreement is dated 5 January 2017[52]. It was agreed inter alia that the consideration of HK$3,000,000 was to be paid in 3 instalments;

(c) The first instalment was paid on 5 January 2017. A receipt bearing that date was signed by P and Leung[53] (the “5/1/17 Receipt”);

(d) The 5/1/17 Receipt is a one-page document. Towards the top is the copy of a cheque issued by Leung to P for the 1^st instalment of the consideration. Under it are the following words:

“上述支票為轉讓70%東蒲股權第一期支付(全数為三百万)；待全数于28-02-2017前結清后同時結束于陳日文借500万給東蒲公司的个人担保責任。此收据待上述支票过賬后正式作實” (Emphasis added)

Under those words towards the bottom are the signatures of Leung and P;

(e) Mr Ho relies heavily on the 5/1/17 Receipt, and in particular the underlined words;

(f) Leung’s evidence is as follows. He accepted that the words on the 5/1/17 Receipt were written by him. He said that before payment of the 1^st instalment, he and P had agreed that upon completion of the sale and purchase of the shares, the HK$5m P made available for reduction of the accountable receivables would be cancelled (一筆勾銷). P explained that the Handwritten Agreement was with Chan Yat Fai and he (P) would need to get it from him. When he (Leung) and P met up for the payment of the 1^st instalment, the intention was for P to produce the Handwritten Agreement so that they could sign in cancellation of the same. P however suddenly said that he did not have the Handwritten Agreement as Chan Yat Fai had misplaced it. Surprised, and noting that both SZ Indigo and 創東蒲were both D’s affiliated companies, he (Leung) simply used the term “東蒲公司” to denote SZ Indigo. He accepted that his use of terms was not professional or precise. But at that time, the relationship between him and the Chan Brothers was still good. He also pointed to D’s letter of response[54] to one of P’s letters of demand, where he said that the terms “東蒲公司” did not denote D, but that the HK$5m concerned payment of account receivables;

(g) Relevant to the above:

(i) I note that in the WhatsApp messages on 9 and 15 February 2017 with P[55], Leung also said:

“到時請準備埋我簽了這張五百万借據”

“…你方便可以下午在公司見面完全交票及注銷500借据事宜”

(ii) Leung said that he was therein also referring to the Handwritten Agreement and the cancellation of the same;

(iii) P’s evidence on that message is again self-conflicting. In P/WS3 at §10[56], P claims that Leung was seeking therein to cancel the 25/3 Receipt. But when under cross-examination, he claimed that the document referred to in that WhatsApp message was a “借據”, not a receipt, and not the 25/3 Receipt (which was a receipt). He further claimed that the “借據” was in fact the Shareholder Capital Increase Agreement. That, as submitted by Mr Lau which I agree, is not convincing at the very least, as P at §10 of P/WS3 specifically quoted a phrase which is substantially the same as one phrase in the 25/3 Receipt (but which does not appear on the Shareholder Capital Increase Agreement);

(h) In my view, the 5/1/17 Receipt has to be considered together with all the other evidence, and in particular Leung’s evidence on the Handwritten Agreement and the Promise. On the totality of the evidence before me, I find Leung’s explanation above on the use of the term “東蒲公司” in the 5/1/17 Receipt plausible, and are inherently probable. I accept his evidence in that regard.

56.  In both his opening and closing submissions, Mr Ho has made reference further to various messages and recorded conversations between Leung and variably Chan Yat Fai and P, and between Jeffy Wong and Chan Yat Fai. I have dealt with above the Skype and WhatsApp communication between Chan Yat Fai and Jeffy Wong, Transcript #1 between Chan Yat Fai and Leung, and the WhatsApp message on 9 and 15 February 2017 between P and Leung. All those and other messages and recorded conversations, when considered in the totality of the evidence, and in particular Leung’s evidence on the Handwritten Agreement and the Promise, are at best equivocal. In particular:

(a) In a WhatsApp message between Chan Yat Fai and Leung on 8 August 2016[57], there was the following exchange:

“Chan Yat Fai:	我想安排Jeffy從公司retain earning支出0.5M作為還5M中部份借款”
Leung:	現在cash优先使用日常支出，account payable和銀行还款 … 是否可以用來清付5M欠款我看不出來關係，到不如用股東分紅出数后對衝这筆款項”

Chan Yat Fai’s request to use “retain earning” to repay part of the HK$5m, and Leung’s stance of using only the shareholders’ dividends, are in my view in fact consistent with Leung’s evidence in relation to the terms of the Promise, that P would only be repaid out of dividends or when the D was sold;

(b) In a WhatsApp message between Chan Yat Fai and Leung on 26 August 2015[58], Leung said:

“I just have a lunch with Louis Mak discussing the possible acquisition for our company, he counter offers 8M to buy us without taking up the 5M loan of big Chan …”

“… But the 5M loan for big Chan will be settled by existing shareholders”

Leung accepted that “big Chan” is referable to P. He said that at stage when that WhatsApp exchange took place, there was a potential purchaser to the shares in D. He was called Louis Mak (“Mak”). During a discussion with Mak, and upon being asked about D’s liabilities, Leung informed him of the HK$5m provided by P and the Promise. Leung said that “the 5M loan of big Chan” was referable to the HK$5m provided by P to reduce the account receivables from SZ Indigo. I note further that the last quoted sentence is in fact consistent with the Promise, and that according to its terms, the HK$5m was only repayable by the existing shareholders;

(c) Leung was also referred to a number of messages in which he was said to have been teaching Jeffy Wong[59] and YY Chan[60] to make false accounts. Under cross-examination, Leung said that he was not the company accountant. He was only consulting and discussing with the accounting staff ways of booking certain sums. The matters discussed were however not implemented.

57.  Mr Ho submits that D’s case is inherently improbable. He submits that Leung could not force P and Chan Yat Fai to purchase his minority shares, that there was no motivation on P to do so, that there is no evidence that Leung was irreplaceable as a director, and that D’s net profits for 2012 and 2013 were low. Leung accepts that he could not force his shares in D upon P or Chan Yat Fai. Nor is he suggesting that he was irreplaceable, just that he as a project manager of a number of D’s on-going projects would be difficult to replace. I accept his evidence in this regard. I accept further his evidence on what he recalls to be P’s verbatim words, that his (P’s) purpose was to help his brother, and as to how his brother was to use the HK$5m, he would not interfere. In relation D’s income, it should be noted, as Leung said under cross-examination, that D’s directors in fact received remuneration as such, which they would no longer be able to if D ceased its business. I find Leung’s case to be overall inherently probable. I do not accept Mr Ho’s submissions in this regard.

J.2. Authenticity of the challenged documents

58.  It is convenient for me to now come back and deal with the authenticity of the challenged documents.

59.  Counsel have not specifically dealt with them in their closing submissions.

60.  In respect of the documents challenged by P, Jeffy Wong has covered them in Wong/WS3. I am of the view that their authenticity has been established.

61.  In respect of the documents challenged by D:

(a) I have set out my observations on the 25/3 Receipt and the Shareholder Capital Increase Agreement. P’s evidence on the authorship, provenance, storage and discovery of those 2 documents are plagued with all sorts of inconsistencies and inherent improbabilities. For the reasons set out above, and on the evidence, I am not satisfied that P has established the authenticity of those 2 documents;

(b) In respect of the Homebridge Loan Receipt, P says that it was drafted by Jenny Yu, the accountant of Homebridge[61]. P has not been meaningfully challenged in the course of cross-examination in that regard. Leung only says that according to his memory, he had not signed the same[62]. On the evidence before me, I am satisfied the authenticity of the Homebridge Loan Receipt has been established.

62.  Relevant to the Homebridge Loan Receipt, I add the following:

(a) Mr Ho relies on the Homebridge Loan Receipt as evidence of another loan by P to D with interest[63];

(b) I accept that the Homebridge Loan Receipt evidences a loan from Homebridge to D (the “Homebridge Loan”). I note however that the Homebridge Loan Receipt is dated 1 December 2016, some 3-and-a-half years after the Cheque;

(c) I have nonetheless taken into account the Homebridge Loan Receipt. I have considered it together with the totality of the evidence. In my view, the fact that the Homebridge might be interest-bearing is of very limited value in supporting P’s case that the HK$5m, provided some 3-and-a-half before that, was in fact also an interest-bearing loan by P to D.

J.3. The expert evidence on SZ Indigo

63.  I have recited P’s reply that given the revocation of the licence of SZ Indigo, it would be “devoid of commercial sense for [P] to make payment to satisfy the trade receivables of a company which had no commercial and/or business value”.

64.  I find however that P was willing to provide the HK$5m because he wanted to help his brother. In any event, as submitted by Mr Lau which in my view makes sense, that the fact that SZ Indigo was legally prohibited from conducting business did not mean that there could not be any actual, albeit illegal, transactions between D and SZ Indigo.

65.  The Expert Report is of limited value in the resolution of the issues before this court. Mr Ho in fact has not gone into its contents in his submissions.

J.4. Findings and conclusions

66.  I have stated various findings of this Court in the course of discussing the evidence. I recite and state the main ones as follows. For the reasons set out above, I reject P’s evidence that the Meeting took place on 25 March 2013. I reject his evidence the HK$5m was an interest-bearing loan to by him to D. I find that P has failed to established the authenticity of the 25/3 Receipt and the Shareholder Capital Increase Agreement. I accept Leung’s and Jeffy Wong’s evidence which I have summarized in §§39 and 40 above. Specifically, I accept their evidence and find that the Meeting took place on the morning of 26 March 2013. I accept Leung’s evidence that the HK$5m was money provided by P to D for reduction of account receivables due at the material time from SZ Indigo, and I so find. P was willing to do so in order to assist Chan Yat Fai. I accept Leung’s evidence that he used the term “東蒲公司” in the 5/1/17 Receipt to denote SZ Indigo. I accept also Leung’s evidence as to the existence of the Handwritten Agreement and the Promise. The references in the various messages and Transcripts to any loan by P, “借據”, “擔保責任” etc. should be understood in the context of the Handwritten Agreement and the Promise, and are referable to them.

67.  I answer Issue#1 accordingly.

K. Issue#2

68.  In the light of my conclusion on Issue#1, Issue#2 is not engaged.

L. Issue#3

69.  Mr Lau has abandoned Issue#3. It is no longer relevant.

M. Disposition of P’s claim

70.  I accordingly dismiss P’s claim.

N. The Counterclaim

71.  I go through the 12 Payments in turn.

N.1. Payment #1

72.  Payment #1 was HK$57,066 paid by D to WK To.

73.  It is not P’s pleaded defence that Payment #1 related to any business or affairs of D. His pleaded defence[64], and as put by Mr Ho in his written closing, is that Payment #1 sum has been set-off against the amount due to P in his director’s account[65], and the 2016/17 Financial Statement shows no amount due from director at the year end of 31 March 2017[66].

74.  The evidence on the accounting treating of Payment #1 is scanty. Mr Lau points to Voucher No PV 2016120028[67] showing that Payment #1 was debited to the A/C No. 90-000-090 named “Legal & Professional Fee” instead of P’s director’s account with D. However, that treatment of Payment #1 does not exclude the possibility of any subsequent set-off as suggested by P. Indeed, in D/WS3 at §45[68], Leung acknowledges that he was no longer able to trace the related accounts documents. The reliance by Leung[69] upon the accounting treatment of 2 repayments by D to P of an unrelated loan takes his case no further.

75.  Whilst I am of the view that P is not an honest and reliable witness, the onus remains on D to prove its case on the Counterclaim. I am not satisfied that it has.

76.  I dismiss the part of D’s Counterclaim in relation to Payment #1.

N.2. Payment #2

77.  Payment #2 was HK$36,500 paid by D to Chan Yat Fai in January 2017 as his salary (net of MPF).

78.  D does not dispute that Chan Yat Fai was at that stage still entitled to his salary. His complaint is that as Chan Yat Fai was on sick leave at that stage, he was only entitled to 4/5 of his pay, and that he had been overpaid by HK$7,600[70]. Mr Lau accepts that this is what this part of D’s Counterclaim now reduces to[71].

79.  Mr Ho submits that Chan Yat Fai’s salaries had been paid through auto-paid, that he had been paid his full salaries despite his illness, and that P was merely discharging his duty as a director to follow the usual practice of D in payment of its directors’ salary/fee.

80.  I note D’s pleaded case in this regard, that “[P] wrongfully caused [D] to pay Chan Yat Fai a sum of HK$36,500 which [D] was not liable to pay”[72].

81.  Given the fact that the payment was effect via autopay, no case has been made out to the effect that P had personally caused that sum to be paid.

82.  What D’s real complaint might be P’s nonfeasance in failing to update the autopay instructions.

83.  The relevant facts however have not been canvassed.

84.  I am not satisfied D has made out the part of its Counterclaim in relation to Payment #2, which I dismiss.

N.3. Payment #3

85.  Payment #3 related to Chan Yat Fai’s salary for February 2017, payment in-lieu of notice, severance pay and long service pay.

86.  Payment #2 was effected by a cheque of D signed by P[73].

87.  Chan Yat Fai resigned as a director on 13 March 2017. Mr Lau submits that Chan Yat Fai therefore was not entitled in law to any payment in lieu of notice, severance pay and long service pay. Mr Ho has not in his closing argued otherwise.

88.  Mr Lau submits that the amount of overpayment was hence HK$155,366.67.[74]

89.  P’s case is that the payment was authorized by the directors in February 2017. Mr Ho has also pointed to the fact that Chan Yat Fai had in fact waived HK$100,000 on the ground that D did not have sufficient funds to pay what was perceived to be his full entitlement.

90.  In the R&D, at §20.1, P pleads that the relevant meeting of P, Chan Yat Fai and Leung took place in about February 2017 at D’s office.

91.  Leung was cross-examined about that alleged meeting. It was put to him that the alleged meeting took place in February 2017 at D’s office. Leung replied firmly that that meeting was a fabrication. He said that Chan Yat Fai was invited back for the Chinese New Year Eve dinner. That was towards the end of January 2017. After that, he (Leung) had never seen Chan Yat Fai back at D’s office. Leung was adamant that he had not attended any meeting as alleged by P.

92.  I accept Leung’s evidence in this regard. I reject P’s evidence about the existence of that alleged meeting. I repeat further my findings on P’s incredibility and unreliability as a witness.

93.  I allow this part of D’s Counterclaim to the extent of HK$155,366.67.

N.4. Payment #4

94.  Payment #4 concerns the payment of stamp duty by D in relation to the sale and purchase of the shares in D in March 2017.

95.  On credibility, I do not accept P’s evidence, denied by Leung, that Leung had agreed to the payment of stamp duty by D.

96.  Mr Ho accepts[75] that unless there was an agreement to such effect, the stamp duty should not have been borne by D.

97.  I allow this part of D’s Counterclaim in the sum of HK$6,789.

N.5. Payment #5

98.  Payment #5 concerned the interest payment in the sum of HK$100,000 to Chan Yat Fai arising from the alleged Loan.

99.  I repeat my findings on Issue#1, which parties accept bear directly upon this part of D’s Counterclaim.

100.  I allow this part of D’s Counterclaim, in the sum of HK$100,000.

N.6. Payment #6

101.  This relates to an interest payment arising from the Homebridge Loan.

102.  I repeat my findings on the Homebridge Loan Receipt and the Homebridge Loan above.

103.  I dismiss this part of D’s Counterclaim in relation to Payment #6.

N.7. Payments #7, #11 and #12

104.  The account documents support that these three sums were booked as petty cash. YY Chan has confirmed their nature.

105.  D’s case effectively is that one cannot tells what exactly those sums had been spent for or applied towards.

106.  In my view, D has not made out any case in relation to these payments. Their payments were within P’s authority under the Letter of Authorization. Given the nature of petty cash payments, the absence of evidence on their precise application does not support any adverse inference of impropriety.

107.  I dismiss the parts of D’s Counterclaim in relation to these 3 Payments.

N.8. Payments #8, #9 and #10

108.  These parts of the Counterclaim have been withdrawn, which I dismiss.

O. Issue#5

109.  In my view, the Counterclaim is essentially a monetary one. No submission has been made to me in closing, nor do I see any justification in ordering any account.

110.  I will only order that P shall pay D monetary damages in the sum of HK$262,155.67.

P. Disposition of the Counterclaim

111.  In summary, I allow the parts of D’s Counterclaim based on Payment #3 (to the extent of HK$155,366.67), Payment #4 (in the sum of HK$6,789) and Payment #5 (in the sum of HK$100,000), in the total sum of HK$262,155.67. I decline however to make any order for the taking of any account.

Q. Overall disposition

112.  For the above reasons, this Court:

(a) dismisses P’s claim; and

(b) allows D’s Counterclaim to the extent of HK$262,155.67 in terms of monetary damages, as set out above.

113.  I make the following orders nisi:

(a) That P do pay pre-judgment interest to D on the sum of HK$262,155.67 at the rate of prime plus 1% from the date of the filing of the Defence and Counterclaim to the date of this Judgment, and post-judgment interest to D on that same sum at judgment rate from the date of this Judgment to the date of full payment; and

(b) That P shall bear the costs of both the Claim and the Counterclaim (including all costs reserved and in the cause, save those costs in respect of D’s application to adduce additional documents recorded in Section B above), to be taxed if not agreed.