LIN JAN v. LONG XIAOBO

HCA 1516/2012

[2021] HKCFI 1469

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1516 OF 2012

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BETWEEN

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J U D G M E N T

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Introduction

1.  This is the trial of the Action. 

Factual Background

2.  Global Green Tech Group Limited (“Company”) was at all material times a company listed on the Hong Kong Stock Exchange (Code no 274).  In 2011, it changed its name to and is now known as China Billion Resources Ltd. 

3.  In January 2010, 索朗多吉 Suo Lang Due Ji (“Suo”) became the Company’s largest shareholder, holding 14.56% of the Company’s issued share capital.

4.  By a written agreement between the Company and the Plaintiff dated 7 September 2010 (“Service Agreement”), the Plaintiff was appointed as an executive director of the Company for a term of 3 years.  According to the Plaintiff’s testimony, it was Suo, as the largest shareholder, who procured his appointment as director of the Company.  Instead of completing his 3-year term, the Plaintiff remained an executive director of the Company only until 30 June 2011 when he retired from its board of directors. 

5.  The Defendant was at all material times since 2010 an executive director of the Company.  On 15 April 2011, the Defendant replaced Suo as the largest shareholder of the Company after purchasing from Suo his 14.56% of the Company’s issued share capital[1] at the cost of over HK$528 million.

6.  Mr David Yip (“Yip”) was at all material times an executive director and the CEO of the Company.  He ceased to be the Company’s CEO in January 2012.

7.  Disputes had arisen between Yip and the Plaintiff from March/April 2011 onwards.  By a Writ of Summons dated 8 June 2011, Yip instituted HCA 946 of 2011 against the Plaintiff for damages for defamation and injurious falsehood (“HCA 946”).  According to the Plaintiff, the Defendant, being the Company’s largest shareholder, was keen to persuade the Plaintiff to resolve his disputes with Yip and not to seek re-election as executive director.  For that purpose, the Defendant allegedly agreed inter alia to pay the Plaintiff HK$4 million by 2 instalments of HK$2 million each as part of the June Agreement referred to below.

8.  The Plaintiff’s present claim against the Defendant is for a sum of HK$2 million, said to be the outstanding balance due under an agreement made between the parties in June 2011 (“June Agreement”).  The existence of the June Agreement is hotly contested by the Defendant.

The parties’ respective cases

9.  It is pleaded in paragraph 7 of the Statement of Claim that the June Agreement was made orally during 2 meetings between the Plaintiff and the Defendant, one on 14 June 2011 at the Defendant’s office in Shenzhen and the other in late June[2] 2011 at Pacific Coffee in Shun Tak Centre, Sheung Wan, and is evidenced by a hand-written document dated 4 July 2011 in Chinese signed by the Defendant[3] at the coffee shop of Four Seasons Hotel in Hong Kong (“Four Seasons Memorandum”).  It is not in dispute that the handwriting on the Four Seasons Memorandum was the Plaintiff’s. It is also not in dispute that the English translation of the Four Seasons Memorandum is as follows:

Agreement

Party A: LONG Xiaobo (HKID: XXXXXXX(X))

Party B: Jan LIN (HKID: XXXXXXX(X))

Date: July 4, 2011

Address: Four Seasons Hotel Hong Kong

As per discussion, Party A agrees to pay Party B four million in Hong Kong Dollars (HK 4,000,000).  Specific arrangement as below:

1. Party A shall pay Party B two million in Hong Kong Dollars (HK 2,000,000) before December 31, 2011

2. Party A shall pay Party B two million in Hong Kong Dollars (HK 2,000,000) before June 30, 2012

Signature of Party A: [signature]

Signature of Party B: [signature]

Witness (SUN Rui): [signature] (HKID No. XXXXXXX(X))

10.  It is pleaded in paragraph 6 of the Statement of Claim that pursuant to the June Agreement, in consideration of the Plaintiff agreeing not to take further action against Yip, not to seek re-election as a director of the Company and to forgo his entitlement to the share option under the Service Agreement, the Defendant agreed to:

(1) procure Yip to apologize to the Plaintiff;

(2) procure Yip to discontinue HCA 946;

(3) procure the Company to pay to the Plaintiff costs of HK$100,000 incurred by him in HCA 946;

(4) issue a public notice in the name of the Company to confirm the Plaintiff’s contribution to the Company; and

(5) pay to the Plaintiff HK$4 million by 2 instalments of $2 million each, the first to be paid on or before 31 December 2011 and the other to be paid on or before 30 June 2012.

11.  It is pleaded in paragraph 8 of the Statement of Claim onwards that following the making of the June Agreement, (i) Yip caused HCA 946 to be discontinued and apologized to the Plaintiff in writing, (ii) the Plaintiff’s solicitors received HK$100,000 from the Company as the agreed costs, (iii) on 6 July 2011, the Company issued a public announcement to thank the Plaintiff for his contribution to the Company and (iv) on 31 October 2011, the Defendant paid the 1^st instalment of HK$2 million to the Plaintiff but failed to pay the 2nd instalment.

12.  It is not in dispute that Yip had discontinued HCA 946^[4] and issued a written apology to the Plaintiff[5], the Company had paid the Plaintiff’s solicitors legal costs of HK$100,000^[6] and issued a public Clarification Announcement regarding Yip’s discontinuance of HCA 946 confirming the Plaintiff’s contribution[7].  Lastly, it is not in dispute that the Defendant had paid HK$2 million to the Plaintiff by a cheque dated 31 October 2011.

13.  On the Plaintiff’s side, there is no dispute that he had not offered himself for re-election as director at the Company’s AGM and had not taken legal action against Yip.

14.  As for the Defence, the Defendant denied the June Agreement as alleged by the Plaintiff. His pleaded case is that after he had had knowledge of HCA 946 and that the Plaintiff intended to make a claim against Yip, he approached the two to try to settle their disputes.  In the end, consensus was reached among the Plaintiff, the Defendant, and Yip prior to 22 June 2011, the effect of which was that Yip would discontinue HCA 946, the Plaintiff would not make a claim against Yip while the Company would pay the Plaintiff’s legal costs and issue a public Clarification Announcement. 

15.  As for the HK$2 million, although the payment itself is not in dispute, the Defendant denies it was made pursuant to the June Agreement.

16.  According to the Defendant’s case, the agreement to pay HK$4 million to the Plaintiff related to a separate agreement partly oral and partly in writing between the Plaintiff and the Defendant at a meeting held at the Four Seasons Hotel on 4 July 2011 (“Four Seasons Meeting”). The Four Seasons Meeting was attended by the Plaintiff, the Defendant and Sun. The Four Seasons Memorandum was relied upon by the Defendant as evidence of what was agreed at the meeting.

17.  The Defendant alleges that prior to the Plaintiff’s retirement as director of the Company, he had already been involved in a project in Hubei, PRC (“Hubei Project”) which, if successful, would be injected in to the Company.  However, in June/July 2011, the Company encountered difficulties in funding the Hubei Project.

18.  After his retirement, the Plaintiff offered to the Defendant to assist in arranging funding of US$60 million for the Hubei Project before the end of June 2012.  It was agreed between the parties that the Plaintiff would act as the Defendant’s consultant to obtain funding of US$60 million for the Hubei Project before end of June 2012 while the Defendant agreed to pay him HK$4 million for his services in successfully arranging the funding (“Hubei Agreement”).  According to the Hubei Agreement, the Defendant would pay HK$2 million to the Plaintiff on or before 31 December 2011 as part payment with the balance payable on or before 30 June 2012.  It was also a term of the Hubei Agreement that that the HK$2 million part payment would be refunded to the Defendant if the Plaintiff failed to obtain the required funding by the deadline.

19.  Pursuant to the Hubei Agreement, the Defendant paid the Plaintiff by procuring his company to issue a HK$2 million cheque dated 31 October 2011 to the Plaintiff.  However, since the Plaintiff failed to obtain funding for the Hubei Project as agreed, the Defendant claims that he is not liable to the Plaintiff to pay the balance of HK$2 million. The Defendant further counterclaims for the return of the HK$2 million already paid. 

Plaintiff’s unsuccessful O14 Application

20.  By summons filed on 20 February 2013, the Plaintiff applied for summary judgment against the Defendant (“O 14 Application”).

21.  On 4 June 2013, Master M Wong entered Judgment for the Plaintiff and ordered the Defendant to pay the Plaintiff HK$2 million together with interest (“Master’s Order”).

22.  By notice of appeal dated 18 June 2013, the Defendant appealed against the Master’s Order.

23.  On 4 September 2013, Mimmie Chan J handed down her Reasons for Decision allowing the Defendant’s appeal and setting aside the Master’s Order (“Appeal Judgment”).

24.  In the Appeal Judgment, the learned Judge was highly sceptical of the Plaintiff’s evidence for inter alia deviating from his own pleaded case.  For ease of reference, the relevant passages from the Appeal Judgment are set out below.

“The plaintiff’s pleaded claim on share options

12. The plaintiff’s pleaded claim is that the defendant agreed in June 2011 to pay $4 million to the plaintiff, in consideration (inter alia) of the plaintiff agreeing ‘to forgo his entitlement to the share options under his service agreement’. One of the matters raised in the Defence filed on 27 December 2012 is that the Company did not have any share option scheme during the period when the plaintiff was the executive director of the Company (paragraph 7 (c) of the Defence).

13. When the plaintiff applied for summary judgment, he referred instead (in his 1st affirmation filed in support on 20 February 2013) to the defendant agreeing in June 2011 ‘to transfer 1% of (the Company’s) issued shares’ to him ‘as compensation for his leaving the Company prematurely’. This is in stark contrast to the pleaded claim of forgoing entitlement to share options. In his 1st affirmation, the plaintiff also referred to the defendant having proposed on 4 July 2011 (the date of the Memorandum said to be evidencing the Agreement) to pay him $4 million in cash, instead of transferring the Company’s issued shares to him. As Counsel for the defendant highlighted, these assertions made in the plaintiff’s 1st affirmation constitute a deviation from the plaintiff’s case as pleaded in the Statement of Claim, that the Agreement was for him to forgo his entitlement to share options.

14. Also contrary to the plaintiff’s pleaded case is his service agreement with the Company, dated 7 September 2010 and exhibited to the plaintiff’s 1st affirmation, which makes no mention of the plaintiff’s claimed entitlement to share options. Clause 5.4 of such agreement only provides that the plaintiff may, at the discretion of the board, be granted share options under any share options scheme from time to time adopted by the company.

15. In his 2nd affirmation filed on 15 April 2013, the plaintiff sought to rely on a document (‘exhibit LJ-17’) to support his claim of alleged entitlement to share options. The source of exhibit LJ-17 is totally unexplained. It does not have the Company’s letterhead, does not bear any party’s signature, but is relied upon by the plaintiff to support his assertion that it was ‘everybody’s intention and understanding that certain personnel of the Company would be granted a share option’, and that he was promised an option for over 52 million shares, amounting to 1% of the issued share capital of the Company.

…

The plaintiff’s pleaded claim on costs

17. The plaintiff’s pleaded case in paragraph 6 of the Statement of Claim is that the defendant had in June 2011 agreed to procure Yip to apologize to the plaintiff, procure Yip to discontinue HCA 946, procure the Company to pay the plaintiff costs of $100,000 incurred by him in HCA 946, issue a public notice in the Company’s name to confirm the plaintiff’s contribution to the Company, and to pay $4 million to the plaintiff. In his 1st affirmation, however, the plaintiff referred to the sum of $4 million as representing the damage which Yip had caused to his reputation, the benefits that might have accrued to him in the years to come if he should continue to work as a director of the Company, and also his costs in HCA 946. Again, this is at variance with his pleaded case.

The evidence

18. The matter goes further than the plaintiff simply failing to verify his claim as pleaded. The documents produced by the plaintiff himself lend support to the defence …

19. The plaintiff’s case is that the oral Agreement was made in June 2011. It is not disputed that HCA 946 was discontinued on 22 June 2011. According to the email dated 24 June 2011 from the plaintiff to the defendant, HCA 946 had already been discontinued. The email of 24 June 2011 then referred to the plaintiff’s ‘preliminary view’ that Yip should pay the plaintiff’s legal costs, and compensation for the damage caused to the plaintiff’s reputation.

…

21. No mention was made in the 24 June 2011 email of any agreement to pay $4 million to the plaintiff …

22. The plaintiff seeks to rely on another email dated 3 July 2011 which he sent to the defendant, to support his claim of the Agreement having been reached the week before. However, in this email, the plaintiff referred to the issue of an apology and a clarification notice, the payment of his costs, and ‘the use of shares in the Company to resolve the matter of the compensation payable to the plaintiff’. The email of 3 July 2011 makes no mention of the alleged agreement to pay $4 million (the 1st instalment of which was to be paid by 31 December 2011), but referred instead to all matters of the compromise being ‘completed’ in the week following 3 July 2011.” (emphasis added)

The issues and the witnesses

25.  The Defendant submits and this court agrees that the 2 broad issues for this court’s adjudication are:

(1) Whether the Defendant had agreed to pay HK$4 million to the Plaintiff pursuant to the June Agreement in order to resolve the disputes between the Plaintiff and Yip in June 2011?

(2) Whether the Hubei Agreement between the Plaintiff and the Defendant for obtaining funding for the Hubei Project existed and whether the HK$2 million paid by the Defendant to the Plaintiff is refundable upon the latter’s failure to procure the necessary funding?

26.  Since there are only a few contemporaneous documents which can shed light on the issues, both counsel agreed that the outcome of this trial will turn largely on the credibility of the witnesses’ testimony. 

27.  At trial,

(1) the Plaintiff testified on behalf of himself;

(2) the Defendant called 2 witnesses:

(a) himself, and

(b) Sun who attended the Four Seasons Meeting.

28.  This court has carefully considered the testimony, as well as the demeanour, of all witnesses at the trial and assessed it against such of the documentary evidence as there is and the known and undisputed circumstances of this case.  This court has in particular considered the inherent probabilities or otherwise of the witnesses’ testimony and assessed their credibility accordingly.  In writing this Judgment, this court has reviewed its own notes taken at the trial (especially its observations on the manner in which the witnesses testified) and, out of abundance of caution, the official transcript of the trial. 

Deliberation

29.  In this court’s view, the Plaintiff is an evasive and unreliable witness and his testimony is highly incredible.  Further, the Plaintiff’s case as revealed in his oral testimony is inherently improbable and cannot be believed.  Among other things, there are a lot of discrepancies between his pleaded case, his oral testimony, his affirmations filed in the O 14 Application and the contemporaneous documents.  Such discrepancies will become apparent later in this Judgment.  So will the Plaintiff’s evasiveness in the witness box.

30.  First and foremost, during cross-examination on Day 2, the Plaintiff has substantially revised his pleaded case concerning the June Agreement. 

31.  His new case is that in June 2011, (i) he had not yet agreed not to take further action against Yip and (ii) the payment of HK$4 million to him was never discussed.  Instead, it was only on 4 July 2011 that the Plaintiff agreed not to take action against Yip while the Defendant agreed to pay him HK$4 million.  Further, the Plaintiff added one more term to the June Agreement ie the Defendant agreed to transfer 1% of the Company’s issued shares to him as compensation for his leaving the Company prematurely.

32.  Hence, on the Plaintiff’s new case, what was agreed on his part in June 2011 was simply that he agreed not to seek re-election as director and to forego his entitlement to the share option under his Service Agreement with the Company.  On the Defendant’s side, apart from what has been pleaded in paragraph 6(1) to (4) of the Statement of Claim, the Defendant also agreed to pay him 1% of the Company’s shares out of his own shareholding in the Company. 

33.  Pausing here, the Plaintiff’s new case is at odds with his affirmation dated 20 February 2013 filed in the O 14 Application (“Lin 1”) at paragraph 12 in which he affirmed inter alia that in June 2011, he and the Defendant had already reached an agreement that he would refrain from taking legal action against Yip.

34.  Moreover, the alleged agreement to give the Plaintiff 1% of the Company’s shares was never pleaded nor supported by the contemporaneous correspondence.  In his email to the Defendant dated 3 July 2011, the Plaintiff purported to sum up what had been agreed at the Pacific Coffee meeting on 29 June 2011.  There was no mention of the alleged agreement to pay him 1% of the Company’s share - all that was said in the email was “As for personal compensation, it must be done in accordance with our consensus and be resolved with company shares”. 

35.  This begs the question: if indeed the Defendant had already agreed to give the Plaintiff 1% of his Company shares at or prior to the Pacific Coffee meeting, why did the Plaintiff not simply say so in the email? The Plaintiff was asked for an explanation for this omission twice in the morning of Day 3.  Instead of giving a direct answer, all he did was to give lengthy but irrelevant answers as to why he sent the email to the Defendant.  This is a clear example of the Plaintiff’s evasiveness when he was confronted with a question to which he could not come up with a logic answer.  In this court’s view, the probabilities are that the Plaintiff had no explanation for the omission because there was simply no agreement between the parties about the 1% shares in the Company. 

36.  Regarding the Plaintiff’s alleged agreement to forego his entitlement to the share option under his Service Agreement, the indisputable evidence is that the Plaintiff did not have any entitlement to share option under his Service Agreement.  Clause 5.4 of the Service Agreement merely provided that, at the discretion of the Company’s board of directors, the Plaintiff may be granted share option.  Importantly, in June/July 2011, the Company did not have a share option scheme - this was admitted by the Plaintiff at paragraph 16 of Lin 1.

37.  When it was put to the Plaintiff that he had no entitlement to any share option, he disagreed.  When the Plaintiff was asked to read clause 5.4 of his Service Agreement which showed that the grant of share option was at the discretion of the board of directors, the Plaintiff’s answer was “To my understanding, that is not what it means here.” These answers show the Plaintiff is prepared to say anything in court, even though his answers are evidently contradicted by the evidence. 

38.  Another instance of the Plaintiff’s recalcitrance came when he was confronted with his own evidence at para 16 of Lin 1 which in no uncertain terms stated that “Although the Company did not have a share option scheme at the time, both the Defendant and I agreed that HK$4,000,000 represented my loss fairly.” Mr Lawrence Cheung then put to the Plaintiff that the Company did not have a share option scheme at the time. Instead of a simple “yes”, to this court’s surprise, the Plaintiff said “My understanding is that it had two meanings.”

39.  Yet another instance of the Plaintiff’s recalcitrance came when he was confronted with paragraph 3 of his 2nd affirmation filed in the O 14 Application (“Lin 2”) when he tried to clarify what he meant by “Although the Company did not have a share option scheme at the time …” in Lin 1.  At paragraph 3, the Plaintiff said he “meant to say the requisite formalities had yet been completed.” Mr Lawrence Cheung then put to him that he was not entitled to any share option at all as at June 2011.  Again, to this court’s surprise, the Plaintiff answered “That is not my understanding.”

40.  As submitted by Mr Lawrence Cheung, the Plaintiff’s alleged agreement not to seek re-election as director and to forego his entitlement to share option under his Service Agreement is worthless to the Defendant - there is no reason why the Defendant should offer anything to the Plaintiff in return.

41.  Even if the Plaintiff offered himself for re-election at the Company’s AGM, it was unlikely that he would be re-elected if the largest shareholder viz the Defendant refused to support him.  After all, it was Sou’s 14.56% shareholding in the Company which enabled the Plaintiff to be appointed a director in the first place.  With the Defendant’s same 14.56% shareholding, he could similarly have blocked the Plaintiff’s re-election as a director.  Regarding the agreement to forego his entitlement to share option, the simple fact is that the Plaintiff had no entitlement and there was no share option scheme at the time.  All these beg the question: why would the Defendant offer him 1% of his own shareholding which, on the evidence, was worth over HK$4 million in return for some worthless promises by the Plaintiff?

42.  When asked in court whether the Defendant, with his 14.56% shareholding in the Company, could block his re-election as a director at the Company’s AGM on 30 June 2011, the Plaintiff answered “not necessarily to be true”.  When it was put to him that if the Defendant did not support his re-election as director, he would not be re-elected, the Plaintiff’s answer was “I think that was only a possibility”. 

43.  The Plaintiff’s answers might perhaps be valid if he had the support of the other shareholders of the Company whose voting rights exceeded the Defendant’s voting rights attached to his 14.56% shareholding.  But there is no evidence that the Plaintiff had such support.  Still, that did not deter the Plaintiff from giving answers which fly in the face of logic. 

44.  Next, according to the Plaintiff’s new case, prior to 4 July 2011, the Plaintiff had not agreed not to take action against Yip.  If true, this would substantially if not completely defeat the purpose of the June Agreement which was to resolve the disputes between the Plaintiff and Yip in order to avoid any adverse effect on the Company’s image.  On the evidence, before the end of June 2011, Yip had already discontinued HCA 946 and issued a written apology to the Plaintiff while the Company had paid the Plaintiff’s solicitors legal costs of HK$100,000.  It seems to this court inherently improbable that the Defendant would have agreed to procure Yip to discontinue HCA 946 and issue a written apology to the Plaintiff without the latter’s agreement not to take further action against Yip.  Nor does it seem probable that Yip would have agreed to do so.

45.  Also on the Plaintiff’s new case, it was on 4 July 2011 that the Defendant agreed to pay him HK$4 million. According to paragraph 16 of Lin 1, the HK$4 million represented not only the damage done to the Plaintiff’s reputation and his costs in HCA 946, it also reflected the benefit that might have accrued to him if he continued to work as a director of the Company.  In so far as the Plaintiff’s costs in HCA 946 are said to have been included as a component of the HK$4 million, this is at variance with paragraph 6 of the Statement of Claim at which the payment of HK$100,000 legal costs by the Company was pleaded as a separate term from the payment of HK$4 million.

46.  During cross-examination, the Plaintiff’s explanation for the components of the HK$4 million shifted again and became something like this: (i) HK$2 million would be the sum of his salary for the remaining duration of his Service Contract[8], (ii) HK$1 million represented the amount of his claim against Yip for defamation and (iii) the remaining HK$1 million was the loss he suffered for foregoing his entitlement to share option. 

47.  This explanation completely defies common sense and suggests that the Plaintiff was improvising along the way.

48.  First, according to Clause 12 (i) of his Service Contract, the Company might forthwith terminate his employment if the Plaintiff was not re-elected as a director at an AGM.  There was thus no need for the Defendant to compensate him for the early termination of his employment - the Defendant could simply not support his re-election at the AGM.  In any event, even if the Plaintiff were somehow entitled to be compensated for the early termination of his employment, it should be the Company who compensated him, not the Defendant personally. 

49.  Second, the HK$1 million said to represent the amount of the Plaintiff’s claim against Yip for defamation is entirely arbitrary.  When asked in cross-examination as to how he arrived at this figure, his answer was “The figure was reached after I had a discussion with my solicitors.” Without the support of even a brief note of advice from his solicitors, that is just a self-serving bare assertion.  Moreover, it seems to this court inherently improbable that someone of the Defendant’s background with “more than 22 years of experience in the capital market business” and “has specialized in asset management, securities investment, merger and acquisition, and corporate reorganization” etc[9] would just take the Plaintiff’s word for it and accept that HK$1 million represented the amount of his claim against Yip for defamation.

50.  Third, the remaining HK$1 million was said to be the loss he suffered for foregoing his entitlement to share option.  As stated earlier, the Plaintiff had no such entitlement so he could not have suffered any loss as a result and the Defendant knew it.

51.  Lastly, in relation to the handwritten Four Seasons Memorandum said to be evidence of the June Agreement, the Plaintiff changed his testimony several times within minutes during cross-examination in the morning of Day 3. 

52.  It is not in dispute that it was the Plaintiff who drafted the Four Seasons Memorandum by hand at the Hotel on 4 July 2011.  The Four Seasons Memorandum was supposed to record what was agreed by the parties yet it only contained the Defendant’s promise to pay HK$4 million to the Plaintiff by 2 instalments: HK$2 million on or before 31 December 2011 and HK$2 million on or before 30 June 2012 and nothing else. 

53.  As it turns out, the Plaintiff has prepared a typewritten memorandum (“Typed Memo”) purportedly recording what was agreed at the Four Season Hotel on 4 July 2011.  The Typed Memo set out 5 terms including inter alia (i) the Defendant’s agreement to pay him HK$2 million on or before 31 December 2011 and HK$2 million on or before 30 June 2012 and (ii) in return, the Plaintiff’s promise to forgo his claim against Yip for defamation and related economic loss.  The Typed Memo was not signed by either the Plaintiff or the Defendant.  Otherwise, it would be highly corroborative of the Plaintiff’s case as to what was agreed on 4 July 2011. The inference to be drawn from it not being signed by the parties should be obvious.

54.  The Plaintiff was first asked what the Typed Memo was.  The Plaintiff’s answer, surprisingly, was that it was identical to the Four Seasons Memorandum.  This is of course nonsensical since the 2 documents are clearly different. 

55.  The Plaintiff was then asked the simple question: which document came into existence first.  His initial answer was that the Four Seasons Memorandum came into existence first.  The reason given by the Plaintiff as to why he subsequently prepared the Typed Memo was because his solicitors said the content of the Four Seasons Memorandum was not complete.  Then, the Plaintiff immediately changed his testimony and told this court the Typed Memo was the first draft of the Four Seasons Memorandum so it came into existence first.  The Plaintiff also said the Typed Memo was prepared at the Four Seasons Hotel on that day.  How the Plaintiff could have typed up that Memo at the hotel was never explained. Anyway, when the Plaintiff was asked again to confirm whether the Typed Memo came into existence first, the Plaintiff changed back to his original answer and said no - it was the Four Seasons Memorandum which came into existence first and represented what the Plaintiff and the Defendant had agreed on that day. 

56.  The Four Seasons Memorandum is relied upon by the Plaintiff as evidence of the June Agreement yet the way in which the Plaintiff kept changing his answers on oath is wholly unsatisfactory.

57.  To conclude, for the above reasons, the Plaintiff’s testimony simply cannot be believed - in which case, his claim must be rejected.

58.  Given this court’s rejection of the Plaintiff’s case on the HK$4 million, the only alternative left is that the Defendant’s promise to pay the Plaintiff HK$4 million was made pursuant to the Hubei Agreement - unless the state of the Defendant’s evidence is so unsatisfactory that this court is compelled to reject it as well, which this court does not find to be the case.

59.  The Defendant’s case on the Hubei Agreement is supported by the testimony of the Defendant himself.  It is also corroborated by the testimony of Sun.  Both witnesses were clear and firm whilst in the witness box that the promise to pay HK$4 million related to fees payable to the Plaintiff for arranging finance for the Hubei Project.  This court finds both witnesses truthful and accepts their testimony.  As Mr Lawrence Cheung submits, which this court agrees, the Defendant’s testimony was unshaken despite rigorous cross-examination by experienced Counsel.  As for Sun, she is an independent witness who has no motive to lie for the Defendant. This is because at the time of the trial, she was still working for the Company while the Defendant had already ceased to be a director and shareholder in 2019.  Her testimony was also unshaken during cross-examination. 

60.  As far as contemporaneous documents are concerned, the Plaintiff’s involvement in the Hubei Project is evidenced by inter alia:

(1) an email dated 15 September 2011 from the Plaintiff in which he reported to the Defendant his discussion with potential investors viz Lihua Fund and CCB International about financing the Hubei Project;

(2) an email dated 7 October 2011 from the Plaintiff to a Ms Yi who worked for the Hubei Project company; in that email, he portrayed a promising picture of the keen interests shown by some fund managers in the Hubei Project; importantly, the Plaintiff stated in the email that he had reported to the Defendant the interests shown by those fund managers. 

61.  While there is some evidence that the Plaintiff was already involved in the Hubei Project in early 2011 when he was working for the Company, there is no credible evidence to explain why he should go about meeting potential investors and fund managers after he had left it other than by reference to the Hubei Agreement.  It is true that the Plaintiff stated in his witness statement that he continued to be a consultant of the Company after he had ceased to be a director.  But arranging finance for the Hubei Project was not among the list of work he claimed to have done on behalf of the Company as a consultant.

62.  On the other hand, the Defendant’s case is corroborated by his correspondence with the Inland Revenue Department (“IRD”) between August and October 2013 when the IRD inquired of the Defendant about the payment of HK$2 million to the Plaintiff.  In essence, the Defendant’s reply was that the payment to the Plaintiff was in his capacity as financial consultant in relation to the Hubei Project.  The Defendant also said he did not pay the Plaintiff the balance of HK$2 million since in the end the Plaintiff had failed to obtain the necessary finance for the project. 

63.  To conclude, this court is satisfied that the Defendant’s case on the Hubei Agreement is supported by credible evidence and that his Counterclaim for the return of HK$2 million should be allowed. 

Disposition and costs order nisi

64.  The Plaintiff’s claim is hereby dismissed.

65.  There shall be judgment in favour of the Defendant on his Counterclaim in the sum of HK$2 million together with interest at the rate of prime plus 1% from 27 October 2016 to Judgment and thereafter at Judgment rate until payment.

66.  There shall also be an order nisi that costs of the Action, including all costs reserved, if any, be to the Defendant to be taxed if not agreed and paid by the Plaintiff forthwith, certificate for counsel.