SONG JUNFU v. CHING SHING AND ANOTHER

HCA 1896/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1896 OF 2011

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J U D G M E N T

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A. THE PARTIES AND THE ISSUES

1.  In this action, the plaintiff (“Song”) sues the 1^st defendant (“Ching”), alternatively the 2^nd defendant (“Da Hing”) for recovery of two sums, both alleged to be loans made to Ching which he failed to repay upon demand.

2.  It is common ground that two sums, namely SGD20,000 and RMB3,000,000 were advanced by Song, and there has been no repayment.  The issues to be determined between the parties can be summarized as follows:

(1) whether the sum of SGD20,000 advanced by Song to Ching in February 2008, together with SGD45 representing banking charges (“the Alleged 1^st Loan”), was a loan; and

(2) whether the sum of RMB3,000,000 advanced by Song to Ching in February 2010 was a loan, which when unpaid in May 2010 was consolidated with the accrued interest thereon in the sum of RMB270,000 to form a consolidated loan of RMB3,270,000 (“the Alleged 2^nd Loan”) repayable on demand.

3.  The defence case as pleaded on behalf of Ching to the two issues above are as follows:

(1) The Alleged 1^st Loan was not a loan, but represented a sum which Song undertook to reimburse to Ching for engaging a finance consultant to raised funds for an acquisition project they were working on.

(2) The RMB3,000,000 was not a loan.  Song agreed to pay Ching RMB3,000,000 for Ching to make investments for him, and to share with him the profit arising therefrom on an equal basis.  There was no interest agreed to be payable to Song on the sum. 

(3) Alternatively, the sum of RMB3,000,000 was a loan made to Da Hing, not Ching.

(4) Alternatively, if the Alleged 2^nd Loan (being RMB3,000,000 plus interest RMB270,000) was a consolidated loan at all, it was a loan to Da Hing, not Ching, and neither was Ching liable as guarantor of the loan.

4.  At the trial in the course of cross‑examination of Ching by counsel for Song[1], he accepted that the sum of RMB3,000,000 was advanced to him, not Da Hing. In the circumstances, any issue arising from the allegation that the sum was a loan to Da Hing collapsed.  The alternative allegation put forward on behalf of Song that Ching was a guarantor of the loan if it was made to Da Hing also fell away.  The remaining issues before me were as defined under §2 above.

B. THE ALLEGED 1^st LOAN

B1. Background facts

5.  Song was a businessman who was trained in forestry and was knowledgeable in the wood industry.  Having obtained his Master degree and PhD degree both in the United States, he worked for two American companies before starting up on his own businesses in mainland China under the name of Shanghai Junyuan Industrial Co Ltd in 1998, and subsequently Junyuan Specialty Paper (Shanghai) Co Ltd.  His evidence was that at the material time his business was going well and there was no evidence to suggest otherwise.

6.  Ching was a businessman residing in Hong Kong, having emigrated from China in 1988. At the date of commencement of this action he was the only shareholder and director of Da Hing.  Da Hing carried on a variety of businesses including pharmaceuticals, and had interest in a number of mainland companies.

7.  Song became acquainted with Ching in 2006 through a project relating to the acquisition from Shanghai Songrui Enterprise Development Co Ltd of a wood project in Ningxia (the “Songrui Project”).  The Songrui Project suffered from serious delays, and nothing came of it in the end.  Thereafter Song and Ching stayed in contact, and had met socially from time to time for entertainment and to exchange business information.

8.  In June 2007 Ching discussed with Song about a project to acquire a company known as “東北(延邊)木業有限公司” (“the Northeastern Project”) that owned a plywood production plant.  Ching saw great development potential in the company, which was heavily in debt.  Ching claimed that he was working on the project from as early as mid 2006.  Information and views on the Northeastern Project were exchanged between them.

9.  On 25 August 2007 an agreement in Chinese (“the August 2007 Agreement”) was entered into between two parties, namely, Party A representing the combined interest of Ching and two other persons including one named 尤稼莊 (“Mr You”), and Party B being Song.  Under the agreement the parties agreed to jointly form a new company either in Hong Kong or a BVI company for the purpose of the Northeastern Project with a division of shareholding of 75% for Party A and 25% for Song.

10.  Under clause 4 of the August 2007 Agreement, Song agreed to lend between RMB10,000,000 to 15,000,000 to the new company to be formed for a term of 6 to 12 months, against the provision by Party A of a collateral acceptable to Song as a guarantee for repayment[2]. Under clause 5 of the Agreement, the loan from Song was to be paid in 2 or 3 instalments to “吉林三木公司”(Jilin Sanmu Company) or a special account of “延边安图” (Yanbian Antu), the first of such instalments to be remitted before the end of August 2007.

11.  Under clause 6 of the August 2007 Agreement, all other capital needed for the acquisition and the resumption of production of the plant, including to discharge its debts to other parties, was to be the responsibility of Party A alone.

B2.  Factual disputes

12.  The defence alleged that Song failed to raise the necessary funds to comply with clause 4 of the August 2007 Agreement.  It is alleged that as a result of his inability to come up with the funds, he suggested to enlist the help of his friend Mr John Duncanson (“Duncanson”) to act as a fund raising consultant for a retainer fee of CAD20,000, which Ching allegedly regarded as too high.  In order to persuade Ching to agreed to his suggestion, Song was alleged to undertake to reimburse Ching for the consultancy fee.  The sum of SGD20,000 was said to have been advanced by Song to Ching for this purpose.

13.  Song disputes the circumstances of the advancement of the sum of SGD20,000.  According to him, his obligation under clause 4 to inject funds into the company never arose, because no new company was formed under clause 3 of the agreement, and no collateral for the loan, satisfactory or otherwise, had ever been put forward by Ching or Party A for his consideration or acceptance, as required under clause 4.  As the project was unable to go ahead as envisaged under the August 2007 Agreement, he introduced Duncanson to Ching as a fund raising consultant so he could give advice to Ching and Mr You, who wished to go ahead with the project on their own.  In return he was hoping to obtain an introduction fee or success fee.

14.  Song’s case is that the sum of SGD20,000 was a loan requested on an urgent basis by Ching, unconnected with the engagement of Duncanson.  As Ching told him, he needed a hundred to two hundred thousand Hong Kong dollars to ease his cash flow problems.  He had had to call upon the help of his friend in Singapore to transfer some money into his SGD account in Singapore in order to effect the advancement. The currency was therefore in Singapore dollars. It is common ground that the first demand for repayment in writing was made on 13 December 2008[3], but the sum remains unpaid.

15.  Song relied on a promissory note dated 11 March signed by Ching as evidence of the loan.  The note referred to the sum of SGD20,000 as a loan but did not make reference to the banking charges of SGD45.  Ching’s defence is that the note did not mean what it said: he was persuaded by Song to sign the note in order to satisfy his wife, who was allegedly in control of the family’s finances and would be displeased to discover the money used on a consultant.

B3.  Legal principles on evaluation of evidence

16.  At trial, Song gave oral evidence, and so did his wife on his behalf.  Ching gave evidence without calling any other witnesses for the defence.  I am conscious that both issues identified above turn on the credibility of the witnesses’ evidence, which I shall assess against the available contemporaneous documents.  The contemporaneous documentary evidence is of particular importance in this case as a tool for testing and assessing inherent probabilities of the oral evidence against the facts that are known: Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439 at §135.

17.  The following is a useful reminder of the list of factors relevant to assessment of credibility of witnesses from Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513 at §53:

(1) Whether the party’s case is inherently plausible or implausible;

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(3) Whether it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests.  This is relevant to the assessment of his overall credibility;

(4) The demeanour of the witnesses.

B4.   Evaluation of evidence

18.  Ching’s version of the evidence relating to the Alleged 1^st Loan is premised on Song having failed to perform his part of the obligation under the August 2007 Agreement as an explanation for his willingness to pay for Duncanson’s consultancy fee out of his own pocket.  Counsel for the plaintiff Mr Siu argues that whether Song did or did not fail to provide the loan as agreed is irrelevant to his claim.  As I see it, it does have some relevance, but only to a limited extent, as defined above.

19.  The starting point is the terms of the August 2007 Agreement.  In my view, clause 4 makes it clear that the advancement of the loan of RMB10,000,000 to RMB15,000,000 was conditional upon the provision of collateral to the satisfaction of Song[4]. The context of the commercial arrangement was that Song will come up with a large amount of cash to be injected into the new company in an attempt to put the plant back into production, such cash to be provided as a secured term loan. In the absence of some form of security provided to the satisfaction of Song, he could not be expected to part with the large sum of money.  While the formation of a new company pursuant to clause 1 should not have been a real problem, there should have been evidence of the provision of collateral for Song’s consideration before the loan could be expected to be provided, if Ching did offer any for Song’s approval.  On the basis of the above analysis, I am unable to accept defence Counsel’s submissions to the contrary.

20.  In answer to Song’s testimony in this regard, Ching’s evidence in his witness statement was that he considered that the new company was to be formed only after the loan was in place, implying there was no obstacle to Song providing the loan except for his own financial constraints.  In his supplemental witness statement, documentary evidence of email communications dated July 2007 between Song and himself on the name of the company to be set up was provided. The certificate of incorporation of the new company named “Triwood Resources Holdings Limited 三木資源控股有限公司” is dated 26 November 2007.

21.  The deadline imposed under clause 4 for the provision of the loan against a collateral was the end of August.  Amongst the emails relied on by Ching as evidence of his attempts to provide collateral, only one of them was dated before the deadline – 7 August 2007.  However, its contents shows that a credit guarantee company was named to be responsible for providing “a financing guarantee on behalf of us to Bank”.  Song in oral evidence explained that a brochure of the credit guarantee company was provided[5], but no guarantee was offered to him for consideration.  Ching under cross-examination at first told the court that no guarantee could be offered until the assets of the project to be acquired could be valued, and Song had no objection to that.  On the other hand, having accepted that what the company identified by way of a brochure to introduce its services was not a collateral in itself, he argued that “the company is a guarantee” and it was provided to Song for his consideration.

22.  I find Ching’s evidence incomprehensible and untruthful in this regard.  His answers pertaining to the above were self‑contradictory at times and made no sense when considered with the documentary evidence.  I reject his evidence in so far as it was intended to suggest that collateral was offered to Song in consideration of his advancing the loan.

23.  On 29 August 2007, Ching sent an email to Song requesting him to remit RMB2‑3 million by the end of August, and another RMB6 million by 15 September, and the remaining sum by the end of September.  There was no mention of the provision of guarantee or collateral.  From the email exchanges up to 3 September 2007[6] and the oral evidence of Song, it was clear that Song was still stalling the payments, while there was no further attempt to on the part of Ching to provide a satisfactory collateral to guarantee repayment either.  Thereafter, there was no more exchanges regarding the payment of the loan or collateral.  The parties, however, continued to explore ways to work together on the project in other forms of cooperation.  The above evidence is not seriously contradicted by Ching’s oral evidence.

24.  Song approached Duncanson shortly prior to 26 September 2007 and told him about the project.  In the email correspondence to ensue, he apprised him of the background of the project and requested him to help find investors in Canada.  It is not disputed that by then, the August 2007 Agreement was very much treated as overtaken by events, with the parties no longer seeking to implement or enforce its terms.  The parties however continued to communicate and were actively looking for other ways to make the project work to the common advantage of all.  Ching also agreed that Song was seeking a commission or success fee if financing was achieved through Duncanson, and shareholding in the new company[7]. Further information was exchanged between Da Hing and Duncanson through Song as an intermediary, leading to a meeting in Shanghai to discuss the project in mid October 2007.  These negotiations are well documented.

25.  By an email dated 26 October 2007, Duncanson quoted his fee (on behalf of his consultancy “Duncanson Investment Research”) to Da Hing as follows: a success fee of 5% of the fund raised, and CAD20,000 for a retainer which would be deducted from the success fee, exclusive of expenses[8]. Further negotiations followed in the next few weeks, with Song also negotiating with Ching for his own success fee of 4.5% of the funds raised and other interest in the project if Duncanson succeeded in raising funds[9]. By early December 2007, Duncanson was pressing Ching/Da Hing, through Song, for payment of half of the retainer fee[10]. It is important to note that in the email correspondence between Ching and Song on this topic, there was never any suggestion on the part of Ching that Song should be forwarding payment of the fee whether to Da Hing or directly to Duncanson.  In the consultancy agreement concluded between Da Hing and Duncanson, there was no mention of Song’s liability for the consultancy fee either.  When cross-examined on why that was so, Ching was unable to offer any meaningful answer.  The sum of CAD10,000 was reported by Ching to have been paid eventually on 5 December 2007.

26.  Counsel for Ching Mr Yuen submits that Song had clear commercial reasons for agreeing to pay for Duncanson’s fee, as the acquisition project could then be salvaged and turned into a success.  However, this submission does not find support in the correspondence when read as a whole.  While it is common ground that Song remained interested in helping to make the project possible, such as raising funds, the correspondence showed that the parties were exploring other ways of financing the project.  I accept the evidence that Ching and You were intending to go ahead without the funds that Song was not ready to provide without collateral.  Introducing Duncanson was just a way to help to find the necessary funds to push the project ahead, with new terms to be agreed.  With the difficulties already encountered in fund‑raising, it is understandable that Song would seek to participate in the project in ways that no longer required him to commit large sums of money of his own without collateral, but still making contribution to the project as an experienced business in plywood production.  This was reflected in Ching’s offer to Song of a success fee plus shareholding in the event that Duncanson managed to raise the necessary funds.

27.  In the light of the evidence outlined above, I find it inherently improbable that there was any agreement for Song to reimburse the consultancy fee payable by Ching/Da Hing to Duncanson.  On the basis of my finding that Song did not fail to perform his obligation under the agreement, the evidence did not demonstrate any incentive or justification for Song to offer to pay for the fee on his own.

28.  Further, the tri‑partite negotiations show that the contracting party and the party ultimately regarded as being responsible for his engagement and his fee was Ching/Da Hing alone.  Further, instructions to Duncanson on the project, as Song accepted, had come from him, not Song.  However, under cross-examination by Mr Siu, Ching was unable to explain why that was so if it were Song who was paying for the service. When asked to pay the first half of the retainer fee, Ching did not turn around to ask Song for payment.  However, when Song was approached some two months later to provide the sum which he did in SGD20,000, he was expected to transfer it within a matter of days. No credible explanation was offered on the above oddities as to timing if there existed a correlation between the two.

29.  It is common ground that the agreement between Duncanson and Da Hing was terminated in June 2008, after the former received the full retainer fee.  Ching agreed that he decided to terminate his service without notifying or consulting Song.  He received half of the retainer minus expenses as the agreed refund without repaying any of the money to Song.  When asked why he did so, Ching was again unable to give any explanation apart from confirming the facts.

30.  Next, in order to make good his case, Ching had to explain why the sum advanced to him by Song at the end of February 2008 allegedly for reimbursing him for Duncanson’s fee was in Singaporean currency and in a sum not equivalent to the fee paid to Duncanson.  On top of that he had written out a promissory note in his own hand dated 11 March 2008 clearly referring to the sum advanced as a loan.

31.  Under cross‑examination by Mr Siu, Ching could offer no explanation on the currency apart from alleging that he had asked to receive the RMB equivalent of CAD20,000.  I do not feel able to substitute counsel’s submission in this regard for his evidence.  When asked if he had pointed out the deficiency in the sum in SGD20,000 compared to CAD20,000, Ching initially said he had raised over the phone.  When asked why he had not for once raised it in email when he had been told by Song that the money that was on its way was SGD20,000, he could give no meaningful answer except to say there was too much content and it was not possible to repeat everything, falling back only on their October 2007 agreement that the fee was to be CAD20,000.

32.  As for why he thought he was entitled to retain the refund, which amounted to about CAD4,000, Ching explained that he was already out of pocket by HKD10,000 given Song only paid SGD20,000.  As the amount of the refund would not have been foreseeable until account was rendered at termination in mid‑2008, that would not explain why he did not point out there was a deficiency when he knew only SGD20,000 was going to be credited, nor why he considered it appropriate to terminate the consultancy agreement without informing Song.

33.  Ching’s evidence on the note acknowledging the loan was that it was made out on the request of Song to avoid any issue raised by his wife.  Song denied that and considered the suggestion insulting to his wife, who was an independent and educated woman.  Having heard the oral evidence of Song and his wife, Madam Yumei Ma (“Mrs Song”), on the issue, I can find no reason to disbelieve them. Mrs Song was herself an educated woman who had a career herself in taking care of the administrative and personnel aspects of her husband’s business.  Given her background, I would not be surprised if Song shared with her information on loans he had made (as he did regarding the Alleged 2^nd Loan), but I would not have expected him to find his bank statements trawled through by his wife with a demand for explanation on every major item of expenditure.  She gave oral evidence in court and was subjected to cross‑examination by counsel for Ching.  She came across as a confident and straight-forward witness who had nothing to hide.  On the other hand, for the same reasons relevant to my findings on the veracity of Ching’s evidence on this issue as a whole, I find Ching’s evidence on the note he gave to Song acknowledging the debt inherently improbable.

34.  Next, Ching was challenged on his response to Song’s request for repayment of the SGD20,000, with an account number provided to him in a separate email to receive repayment[11]. The email of Song was copied to Rebecca, the assistant of Ching who was responsible for translating all correspondence in English for Ching’s perusal. Ching had responded without denying his liability to return the money, save to say the request was noted.  Without offering repayment he said that the project was pending finalization, and once finalized he would “make [Song] with great reward”.  He also requested “such message” to be addressed to him personal in the future without copying to another person.  Ching’s email could only be reasonably read as a stalling email acknowledging the debt with no promise of any repayment by a deadline.  There was no plausible explanation given by Ching why that was not a fair interpretation.

35.  Having considered submissions advanced on behalf of Ching, but given the inherent improbabilities on the version of events alleged by Ching, and its conflict with the contemporaneous documents, I find his evidence inherently unreliable and untruthful. 

36.  I reject Ching’s evidence that Song agreed to reimburse him or Da Hing for the sum of CAD20,000 or any sum representing the fee payable or paid to Duncanson.  His version of events was not borne out by the contemporaneous documents at all.  On the other hand, the documentary evidence supports Song’s case that Duncanson was engaged by Da Hing/Ching at the expense of Da Hing/Ching.

37.  On the other hand, I prefer Song’s evidence on why and how the advance of SGD20,000 came to be made as it largely accords with the documentary evidence put before me.  I also accept his evidence that he did not take more effective measures in recovering the loan until February 2011 because the sum involved was not large, and they continued to have business and social dealings since the loan was made.  However, by February 2011, Ching had already defaulted in the Alleged 2^nd Loan (as discussed below), which was a much larger loan.  It was not surprising that demand for repayment was made in tandem with the larger loan.  In the extensive cross‑examination undertaken by counsel for Ching, Mr Yuen, Song gave direct, ready, logical and convincing answers even where many of the answers required straying into areas not covered by the witness statements and documents before me.  I find him a credible witness and I can find no reason to disbelieve him.

38.  I have thoroughly considered all the submissions made for Ching by counsel Mr Yuen on how the oral and documentary evidence should be interpreted.  Whenever they are premised upon the testimony of Ching being accepted, they fall for the reason that Ching’s testimony is rejected.

B5.   Conclusion on the alleged 1^st loan

39.  To conclude, in the absence of counsel for Ching disputing the liability to repay an additional SGD45 by way of banking charges, I find that Ching is liable to repay Song the loan with banking charges in the sum SGD20,045.

C.      THE ALLEGED 2^ND LOAN

C1.    Background facts

40.  There are few background facts to mention in respect of the Alleged 2^nd Loan save that the parties continued to be in a cordial personal and business relationship at the material time despite the Alleged 1^st Loan remained outstanding.

41.  It is common ground that, Song remitted RMB3,000,000 to the person designated by Ching on 24 February 2010, as evidenced by bank transfer documents.  The dispute is whether the sum was advanced upon an agreement made for Ching to invest the sum on behalf of Song with profits to be shared between them equally, or whether it was an interest‑bearing term loan of three months at the interest rate of 3% per month made to Ching. On this matter the documentary evidence by way of correspondence is sparse.

C2.    The plaintiff’s case

42.  Song’s case is that Ching first approached him in February 2010 about borrowing a short-term loan of RMB3,000,000 for him to take advantage of an investment opportunity but he declined.  Ching approached him again on 24 February 2010 and pleaded to borrow the same amount urgently, but only for as little as one to two weeks, indicating that he was willing to pay interest as much as 3% per month. Song reluctantly agreed.  Ching requested the money urgently within the week and provided over the phone the account details of a person for the transfer to be made.  A promissory note was received from Ching setting out the terms of the loan on 11 March 2010.  Song noticed that the note showed Da Hing as borrower with Ching signing on its behalf, but against the query of Song, Ching made excuses not to change it.

43.  Mrs Song came to know of the loan as Song had told her about it in about May 2010. In late May 2010, the three‑month term loan expired, but Ching had no intention to repay it as promised.  The pretext given by Ching at the time was that he was making great profit using the borrowed money as capital, and it would not be the right to withdraw at the time.  Mrs Song, who learned about it through her husband, decided to give him a call to let him know that they would rather he repaid the loan.  Ching however managed to persuade the couple to allow him to extend the loan for another month, but insisted that he had to confirm in writing that he would repay the loan with interest soon. Another promissory note was therefore made and sent to Song (referred to as “the 4^th Note” below).

44.  Song’s case on this loan is supported by the following documents[12] the authenticity of which was unchallenged:

(1) A note signed by Ching dated 24 February 2010 but said to have been received by fax on 11 March 2010 where he acknowledged receiving a term loan (3 months) of RMB3,000,000 (“the 1^st Note”).

(2) A note signed by Ching dated 23 May 2010 where he acknowledged receiving a term loan (1‑2 months) of RMB3,270,000 (“the 4^th Note”).

(3) Printouts of a number of cell phone text messages and emails exchanged before 30 June 2011 demanding for repayment of the outstanding loan/loans with interest, and responses thereto.

C3.    The defence case

45.  The defence case, as pleaded, was that there was an agreement that Song would “give” Da Hing RMB3,000,000 for purchasing convertible bonds to be issued by a Japanese listed company called Katchikaihatsu Co Ltd and for making other investments, and the profit arising from the investment was to be shared equally between Da Hing and Song.  Information on the convertible bonds sent to Song in April 2010 was relied on.  Song indeed purchased some of the bonds thereafter in his own name in June 2010.

46.  The alternative case pleaded was that if the sum was not so “given” as alleged above, it was a loan made to Da Hing, for which Mr Ching was not liable to repay whether as debtor or guarantor.  However, as both alternative defence cases are fact‑sensitive, they do not sit comfortably with each other. Only one of them could be true.  I refer to §§15‑18 and 20 of the Supplemental Witness Statement of Ching Sing, wherein he set out detailed evidence he would give in support of the primary defence case, which allegations are repugnant to the alternative case pleaded.  At the trial, counsel for Song Mr Siu outlined the two alternative cases specifically to Ching, whereupon he stated that only the first version was true, ie the RMB3,000,000 was a sum given to him by Song for investment[13]. There remained no evidence to support the alternative case save the various promissory notes relied on, which could not be interpreted to support the alternative case in a way inconsistent with the testimony of Ching.  I must accordingly treat the alternative plea as having been abandoned by reason of the evidence of Ching, and reject any submissions made thereon.

47.  Central to the defence case were two additional notes said to have been made on the request of Song and sent to him, that Song disputed he had ever seen before discovery in this action:

(1) A note also dated 24 February 2010, which acknowledged that Song made a 3‑month term loan to Da Hing in the sum of RMB3,000,000 with interest at 3% per month, with instructions to be remitted to the account of the third‑party specified (“the 2^nd Note”).

(2) A further note also dated 24 February 2010 with Ching signing as “Ching Sing of Da Hing” acknowledging receipt of a 3‑month term loan of RMB3,000,000 from Song, stipulating that all profits arising from the sum would be split between the company and Song in equal shares (“the 3^rd Note”).

48.  In support of the allegation that the 2^nd and 3^rd Notes were indeed sent to Song on his request, Ching relied on an outgoing fax record sheet apparently dated 11 March 2010 showing the number of pages that were faxed through at certain times.

C4.    Evaluation of disputed evidence

49.  I would first assess the parties’ respective versions on the delivery and receipt of the 1^st Note (relied on by Song), and the 2^nd and 3^rd Notes (relied on by Ching) all on 11 March 2010.  The delivery and receipt of the 4^th Note is not in dispute.  The following is a table summarizing the evidence given by Song and Ching respectively on the delivery and receipt times of the faxed documents:

Recorded Time/No.of pages.	Song’s evidence[14]	Ching’s evidence[15]
11.20am/ 1 pg	Received ID copy of Ching	Faxed out 1st Note at 11.20am
4.44pm/ 2 pgs	Received 1st Note (1 pg) at 4.45pm	Faxed out2nd Note (1 pg) at 4.44pm
4.48pm/ 1 pg	Received 1st Note again at 4.48pm	Faxed out 3rd Note at 4.48pm

50.  The ID copy of Ching sent to Song bore the fax header recording the time of receipt as 11.20am on 11 March 2010.  It was the first of the three documents relating to the Alleged 2^nd Loan that Song said was received by him on that day.  Ching was confronted with this when cross‑examined by Mr Siu, whereupon he alleged the document was falsified.  In the absence of any prior notice to challenge the authenticity of this document, I am unable to take this objection seriously at all.  I find it more probable than not that the ID copy, not the 1^st Note as Ching said, was in fact sent at 11.20am.  I also accept that the 4^th Note was received twice (4.45pm and 4.48pm), and that no other document was received at 4.44 to 4.45pm.  I believe in the evidence of Song in this regard.

51.  I am unable to accept the evidence of Ching in relation to the circumstances in which the 2^nd Note and the 3^rd Note were allegedly created, nor his evidence that the 1^st and 4^th Notes were created just to pacify the wife of Song, for the following reasons:

(1) On the evidence of Ching, by contrast to the 1^st Note, the 2^nd and 3^rd Notes were intended to record the nature and terms of the transaction as between the two of them rather than for the benefit of deceiving any third party.  However, the notes do not in fact support what Ching said about the nature of the advance, ie money “given” to Ching for investment with a profit sharing arrangement.  Instead, both notes made clear references to the money being a “loan” (“借款”).

(2) The alleged agreement made no commercial sense.  It was for Song the lender to take all the risks whereas he Ching could only profit from the arrangement at no cost of his own.  The equal sharing of profits without corresponding provision on sharing of losses made the deal far too favorable to Ching to be a real commercial deal.  In coming to this view, I bear in mind the amount involved, the fact that Ching was not an investment adviser by profession, the fact that there was no evidence of any other incidents when large sums of money were entrusted upon Ching for similar purposes whether by Song or other persons, and the fact that the money was intended to be invested in relatively high risk products with no guarantee of return.

(3) Madam Yumei Ma (Mrs Song) gave evidence to the effect that she had a higher education and had been helping her husband on the administrative and personnel aspects of his business.  She said she had no knowledge in finance and did not control her husband’s investment activities, which evidence was not challenged by counsel for Ching, Mr Yuen. Apart from Ching’s assertion, there is nothing to prove that Song would need the fabricated notes to protect himself against the wrath of his wife.  In view of the background and their respective role in Song’s business, I take the view that Mrs Song was not the kind of controlling wife as Ching would have this court believe.  I find it most unlikely that Mrs Song would have been able to exert so much influence on Song as to push him into causing documents to be fabricated at his own commercial and other risks in order to appease his wife.  The evidence of Mrs Song is credible and I have no reason not to believe it.  The fact that a similar allegation was rejected by me in relation to the Alleged 1^st Loan is also a relevant consideration.

(4) Counsel made submissions relying heavily on the notes as stating that the loan was one made out to Da Hing, not him, and that fact alone made Song’s version incredible, as any businessman would not have accepted the risk of making a large unsecured loan to a company.  For reasons I have already given above, I reject that submission save that in assessing Song’s evidence, this court is perfectly entitled to apply the degree of prudence of an ordinary businessman.  Ching’s argument cuts both ways in that it would not have satisfied Mrs Song either, if the loan were made to a little known company with no collateral.  Bearing in mind that the relationship between the parties remained cordial at that stage, I accept Song’s evidence that the 1^st Note being the receipt evidencing the loan arrived over two weeks after the money was transferred, and he had no choice but to reluctantly accept it under protest.  I also accept that the 4^th Note was made in the circumstances as stated by Song.  On both occasions, Ching, having secured the money in his hand, decided to leave an exit for himself by putting down the name of his company as the borrower, contrary to their oral agreement.

(5) Further, if Ching’s version was true, it made no sense that he did not ask for the creation of an additional note to record the advancement as not in fact a loan.  When Mr Siu put this suggestion to Ching, he was unable to give any meaningful explanation except to say that he never considered the risk.  In any event the allegation cannot possibly sit well with the “investment money” allegation.

(6) My view is fortified by the absence of any documentary evidence reporting any profits or losses from time to time. When challenged under cross-examination, Ching’s evidence was that he did report to Song “frequently”. He said when Song made a profit, he wanted to cash out his investment. When they both lost the money, he had taken him to court.  If indeed the nature of the dealing between them was as Ching would have this court believe, I should think Song was quite entitled to demand return of his investment with profit when there was profit to take. His evidence that Song never asked for written statements of the investment account, not even after all was lost, was plainly incredulous.

(7) When asked how he was expecting to calculate profits without any records of stock transactions made for Song, Ching was again unable to give any meaningful answer.  The records showed that Ching was buying and selling in large sums on divers dates, and he accepted that the funds were not all Song’s money, but were “all mixed up” with his own.  He told this court that it would have been impossible to work out the profit arising from Song’s funds separately from that arising from his own, save by treating a proportion of the earnings as his.  I do not see how that was even possible when unmarked funds and parts thereof were invested and liquidated at different times on different stocks.  Again, it was beyond belief that such an arrangement for investment could be acceptable to anyone entering into a commercial arrangement.

52.  All the above factors add up to make the defence case inherently implausible.

53.  The events that took place after Song became worried that Ching might not have intended to repay the loan are not themselves crucial to the issue of the nature of the transaction.  However when viewed together with the evidence of the parties, they constitute powerful evidence driving home the case of Song.

54.  It was the evidence of Song and Mrs Song that since mid 2010, they had made numerous phone calls to Ching asking for repayment of the RMB3,000,000 loan.  At first he said he would repay it, but never said when.  From August 2010, he did not even pick up his calls on most occasions, and rarely did he revert with text messages or email.

55.  Song put in evidence a bundle of printouts of cell phone text messages and emails[16] to Ching that speak for themselves.  There is no suggestion that any of the messages were fabricated.  On the other hand, responses from Ching was few and far between.  It shows a consistent pattern since at least September 2010 of numerous attempts on the part of Song to chase for repayment of the outstanding loan of RMB3,000,000, with no response from Ching other than short replies asking Song to wait longer.  It is notable that there was no denial of the advance being a loan throughout.  Song’s repeated pleas for repayment fell on deaf ears.  This pattern persisted beyond April 2011, when telephone text messages were no longer responded to by Ching.

56.  A rare email from Song was received on 30 June 2011, sent from an account not his usual email account of Da Hing.  It was apparently in response to a text message from Song on the same day (agreed English translation): “Dr Song, how are you, telephone short message received.  I will do my best.  From now on please communication with (sic) this email because I have been working outside a lot lately.”  In the same email, Ching complained about Song talking to Mr You, Ching’s business partner in the Northeastern Project, impliedly objecting to Song exposing his indebtedness to him.  When Song pressed further by email for a repayment schedule in August 2011, Song replied on 29 August as follows (agreed English translation): “working on it”.

57.  Ching was cross‑examined extensively on these communications.  His answers were no more than prevarications which were mostly incoherent when considered against the texts.  His explanation that when he said he was thinking of ways out in answer to Song’s chasing messages, he was referring to how the investment project could go forward, not repaying the loan, but did not find it necessary to correct Song.  I find his explanation wholly unbelievable and have no hesitation in rejecting it.  When Ching’s version is assessed against the contemporaneous telecommunication records relied on by Song, there is little room for doubt that the version presented by Song is the truth.

58.  Mr and Mrs Song also gave evidence on a meeting with Ching on 8 October 2010, which was Mrs Song’s first personal encounter with Ching.  That was the first time when Ching suddenly and for the first time suggested that the RMB3,000,000 was not a loan to him, but was investment money from Song.  As expected the meeting did not end on a good note.  Given my findings above, it follows that I find it inherently probable that the meeting took place as stated in the evidence of Mr and Mrs Song.  On the other hand, I reject the evidence in §§21 to 22 of the Supplemental Witness Statement of Ching relating to Mrs Song.

59.  In his desperation to hold together a case that is so inherently implausible, it was inevitable that Ching had come across as defensive and untruthful as a witness.  Given the quality of the documentary evidence relied on by him against that relied on by Song, to it was hardly surprising that he was unable give any acceptable explanation on the points identified above to make good his case.  The credibility of his evidence in relation to the Alleged 2^nd Loan is inevitably further adversely affected by my findings under the Alleged 1^st Loan. I have no hesitation in rejecting his evidence in so far as it is inconsistent with the evidence of Song.

60.  Having considered all the submissions of counsel for Ching, including lengthy submissions on the credibility of the contending versions of the evidence of the witnesses, I remain convinced that the plaintiff has discharged the burden of proving his case, and the defence case must be rejected.

C5.    Conclusion on 2nd alleged loan

61.  Accordingly, I conclude that Ching is liable to repay to Song the Alleged 2^nd Loan in the sum of RMB3,270,000 representing the original loan of RMB3,000,000 and agreed accrued interest in the sum of RMB270,000, together with interest.

D.      CONCLUSION

62.  I give judgment to the plaintiff against the 1^st defendant in the sums of:

(1) SGD20,045.00 with interest at 1% above HSBC Best Lending Rate from 13 December 2008 to the date of judgment; and

(2) RMB3,270,000.00 with interest at the contractual rate of 3% per month from the date of 23 May 2010 to the date of judgment.

63.  In view of my comments in §§45‑46 above, I also make an order nisi that the 1^st defendant and 2^nd defendant shall pay the plaintiff the costs of the action to be taxed on a party and party basis, if not agreed.

64.  It remains for me to thank counsel for all parties for their able assistance.