NG KIN NAM v. MAK SHIU TONG

HCA 2888/2018

[2024] HKCFI 3241

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2888 OF 2018

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J U D G M E N T

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A. INTRODUCTION

1.  The Plaintiff (“Mr Ng”) claims against the Defendant (“Mr Mak”) for breach of an oral agreement to (inter alia) indemnify him for loss consequential on purchase of shares and to guarantee him a $60m profit; alternatively, for misrepresentation.

B.  THE FACTUAL BACKGROUND

2.  Save as otherwise indicated, the following are not disputed or indisputable, and I find them as facts.  I gratefully adopt some of these matters from the parties’ agreed statement of facts, chronology and dramatis personae.  To enable the parties’ respective cases to be better understood, a number of matters on which the parties disagree will also be referred to in this section; I will leave the resolution of the factual disputes to a subsequent section.

B1.  The parties

3.  Mr Ng is a businessman and factory owner.

4.  CCT Land Holdings Limited, now known as GBA Holdings Limited (“the Company”) is listed on the Hong Kong Stock Exchange.

5.  Mr Mak was the Chairman, Chief Executive Officer and an Executive Director of the Company during the relevant period.

6.  Mr Mak was also the Chairman, Chief Executive Officer and an Executive Director of CCT Fortis Holdings Limited (“CCT Fortis”), also listed on the Hong Kong Stock Exchange.  CCT Fortis held approximately 16.72% of the share in the Company as at 22nd December 2015.

7.  Between January to March 2016, Mr Mak, through CCT Fortis, was interested in 79,567,100,000 shares in the Company.

B2.  The Possible Transaction

8.  On 21st December 2015, the Company made a public announcement (“the Company’s 21.12.2015 Announcement”), which included the following information.

8.1  On 21st December 2015, the Company entered into a memorandum (“the Memorandum”) with Xinxing Pipes (Hong Kong) Co Limited (“Xinxing Pipes”), which was a wholly-owned subsidiary of Xinxing Ductile Iron Pipes Co Ltd (“Xinxing Ductile”), regarding a possible subscription of new shares in the Company.

8.2  According to the Memorandum, Xinxing Pipes intended to apply funds of $1.2b to subscribe for new shares in the Company (termed “the Possible Transaction” in the Memorandum).  If the Possible Transaction proceeded to completion, Xinxing Pipes might become a controlling shareholder (within the meaning of the Listing Rules) of the Company.

8.3  Completion of the Possible Transaction was to be subject to a number of conditions precedent, including (1) approval from the Company’s independent shareholders to the issue of new shares and (2) a whitewash waiver from the Executive Director of the Corporate Finance Division of the Securities and Futures Commission from Xinxing Pipes’ obligation to make the mandatory general offer.

8.4  Xinxing Pipes would be appointing professionals to carry out due diligence in respect of the Company, and the Company would use its best endeavours to cooperate with Xinxing Pipes in respect of its due diligence work.

8.5  Xinxing Pipes and the Company would use their best endeavours to negotiate the detailed terms and conditions of the Possible Transaction and enter into a definitive share subscription agreement within ninety days of the date of the Memorandum (termed “the Long Stop Date”), failing which the Memorandum would cease to have any effect.

8.6  Xinxing Ductile was a company established in mainland PRC, listed on the Shenzhen Stock Exchange, and the largest manufacturer of ductile iron pipes and steel gratings, in terms of production scale, in the world.

9.  Page 3 of the Company’s 21.12.2015 Announcement contained the following statement of caution.

“CAUTION

No definitive share subscription agreement has yet been entered into between the Company and [Xinxing Pipes] in relation to the Possible Transaction.  Further, the Possible Transaction will be subject to a number of conditions precedent, including the Independent Shareholders’ approval of the Possible Transaction and the Whitewash Waiver and the granting of the Whitewash Waiver by the Executive, and these conditions precedent may or may not be fulfilled.  As such, the Possible Transaction may or may not proceed. Shareholders and potential investors of the Company should thus exercise caution in dealing in the securities of the Company.”

10.  On 22nd December 2015, CCT Fortis made a public announcement (“CCT Fortis’ 22.12.2015 Announcement”), which included information and a statement of caution similar to that in the Company’s 21.12.2015 Announcement.

11.  On 18th March 2016, each of the Company and CCT Fortis announced that a supplemental memorandum to the Memorandum had been entered into between the Company and Xinxing Pipes, pursuant to which the Long Stop Date had been extended by three months to 20th June 2016.

12.  Mr Mak’s case is that in about mid-2015, Mr Sam Chan had cold-called Mr Mak through the latter’s personal assistant Ms Iris Woo, seeking to introduce Xinxing (which was interested in cooperating with listed companies in Hong Kong) to the Company and CCT Fortis.  Mr Sam Chan had told Mr Mak that he was familiar with a Mr Yu from Xinxing.^[1] There then followed further negotiations between Xinxing and the Company and CCT Fortis, including meetings arranged by Mr Sam Chan between Mr Mak and Mr Yu, culminating in the Company entering into the Memorandum with Xinxing Pipes.  The parties had then engaged professionals, including lawyers and auditors, to carry out and facilitate the due diligence exercise.

B3.  Mr Mak’s sale of shares in the Company

13.  Mr Mak owned shares in the Company through CCT Fortis. On 29th December 2015, a week after the Company’s 21.12.2015 Announcement, Mr Mak reduced his (indirect) shareholding in the Company from 85,993,100,000 to 79,567,100,000 shares, at the price of $0.030.  He continued to reduce his shareholding in the Company until it stood at 63,567,100,000 shares, or 47.34% of the shareholding, by 24th May 2016.

14.  In particular, on or about 27th April 2016, Mr Mak disposed of 10,000,000,000 shares in the Company at an average price of $0.035 per share.

B4.  The Placement

15.  On 25th September 2015, CCT Fortis made a public announcement that it had entered into an agreement with Jade Assets (an indirectly wholly-owned subsidiary of CCT Fortis) and Glory Merit International Investment Ltd (“Glory Merit”), pursuant to which Glory Merit agreed to buy (1) from Jade Assets, a promissory note due by the Company to Jade Assets and (2) from CCT Fortis, eight promissory notes due by the Company to CCT Fortis, for a total consideration of $300m.

16.  On 26th January 2016, CCT Fortis made a public announcement that consent had been given by CCT Fortis and Jade Assets to Glory Merit to place ten billion shares of the Company at $0.035 per share; that Glory Merit had appointed Kingsway Financial Services Group Limited (“Kingsway”) as the placing agent to place the aforesaid shares; and that Glory Merit had agreed that the net proceeds from the placing would be remitted to the Company in settlement of the $300m consideration payable under the agreement of 25th September 2015 (“CCT Fortis’ Placing Announcement”). I refer below to this placing exercise as “the Placement”.

17.  Glory Merit was either owned by, or associated with, Mr Yu. (This was Mr Mak’s evidence at trial, not contradicted by any evidence adduced by Mr Ng.)

B5.  Mr Sam Chan’s approach to Mr Ng

18.  In about January 2016, Mr Sam Chan, a business advisor, told Mr Lawrence Lok, an investment advisor and friend of Mr Ng, about Xinxing Pipes’ proposed acquisition of a controlling stake in the Company.

19.  There is divergence as to what was said.

19.1     Mr Ng’s case is that, according to Mr Lawrence Lok:

19.1.1  Mr Sam Chan hoped that Mr Lawrence Lok would tell Mr Ng that Mr Mak wanted to sell part of his shares in the Company;

19.1.2  Mr Sam Chan passed several documents to Mr Lawrence Lok to pass on to Mr Ng, including the Company’s 21.12.2015 Announcement and a corporate brochure of Xinxing Ductile;

19.1.3  Mr Sam Chan claimed to represent Mr Mak in setting out five conditions for Mr Ng to take over part of Mr Mak’s shares in the Company, as follows (“the Five Terms”):

(a)  Mr Ng could purchase six billion shares of the Company under the arrangement and instructions of Mr Mak;

(b)  the purchase price of the six billion shares would be $0.035 per share according to instructions (“ 根據指示 ”);

(c)  the purchased shares would not be locked up and could be sold within six months according to instructions;

(d)  Mr Mak guaranteed that if Mr Ng sold all the shares within six months of purchase, Mr Ng would receive a return of $60m;

(e)  Mr Mak personally guaranteed that if the share price of the Company fell below the purchase price of $0.035 per share within six months after Mr Ng’s purchase, Mr Mak would compensate him for all losses including the guaranteed return of $60m.

19.2    Mr Ng says that a lunch was arranged to discuss Mr Mak’s proposed sale of shares in the Company.

19.3    Mr Mak’s case is that Mr Sam Chan wanted to invite Mr Mak to meet Mr Ng, who might invest in the Company and become a substantial shareholder holding more than 5% of the Company’s shares.  Mr Mak agreed that this would be a good idea.  A lunch was arranged accordingly.

B6.  The First Lunch

20.  In January or February 2016, a lunch meeting took place at West Villa Restaurant in Causeway Bay (“the First Lunch”).  The attendees included Mr Ng, Mr Mak, Mr Lawrence Lok and Mr Sam Chan. Mr Mak says that Ms Iris Woo also attended, but Mr Ng says that she did not. 

21.  Again, the parties differ as to what was said at the First Lunch.

22.  Mr Ng’s case is that:

22.1    Mr Mak elaborated on his business background and credibility, referring to his extensive experience in doing business in mainland China, and describing himself and Mr as fellow manufacturers and factory owners;

22.2    Mr Mak then introduced the Possible Transaction and tried to persuade Mr Ng to take over part of his shares in the Company, saying that given Xinxing’s strong military background in mainland China, the Hong Kong Stock Exchange would approve the proposed acquisition.  Mr Mak further said that the acquisition of the Company was inevitable, whereupon its share price would rise;

22.3    Mr Mak kept promoting the Possible Transaction and his personal guarantee; he guaranteed that the Possible Transaction would be smooth, and that Mr Ng would definitely not lose anything; Mr Mak personally confirmed and emphasised that the Five Terms relayed on his behalf by Mr Sam Chan to Mr Lawrence Lok were true, and that Mr Mak could guarantee Mr Ng’s investment principal; he repeatedly stressed that Mr Ng’s capital would be protected and that he would receive a return of $60m within six months;

22.4    Mr Ng asked for a written guarantee through a lawyer, but Mr Mak adamantly refused;

22.5    after the First Lunch, Mr Lawrence Lok pointed out to Mr Ng that he had had a client who had successfully bought shares in a transaction with Mr Mak in the same manner, so Mr Ng dropped his request (for a written guarantee).^[2]

23.  Mr Mak’s case is that:

23.1    he and Mr Ng casually talked about their respective backgrounds and respective companies’ achievements, and their experience with factory businesses in mainland China;

23.2    he mentioned that the Possible Transaction was progressing in accordance with the public announcements, but he never represented to Mr Ng that Xinxing’s take over of the Company was due to be executed;

23.3    he did not offer to sell his shares in the Company to Mr Ng, or mention any guarantee or indemnity;

23.4    the lunch was a casual lunch and its purpose was for the parties to get to know each other as Mr Ng might become a substantial shareholder in the Company.

B7.  The Second Lunch

24.  In about February 2016, a second lunch meeting took place at Fan Tang restaurant in Causeway Bay (“the Second Lunch”).  The attendees were again Mr Ng, Mr Mak, Mr Lawrence Lok and Mr Sam Chan. Additionally, a Mr Yu, representative of Xinxing, joined the lunch.  Mr Mak says that Ms Iris Woo also attended, but Mr Ng says that she did not.

25.  Mr Ng’s case is that:

25.1    the First Lunch did not resolve his concerns about the returns and risks of the proposed acquisition of the Company’s shares, and he therefore did not make any commitments to Mr Mak. Mr Mak suggested inviting a representative of Xinxing to a further lunch to discuss the details;

25.2    Mr Mak introduced Mr Yu as the assistant to the CEO of Xinxing and its representative in Hong Kong.  Mr Yu also claimed to represent Xinxing.  However, both Mr Ng and Mr Lawrence Lok noticed that Mr Yu’s business card stating that he was from the “Poly” group of companies, and they asked about this.  Mr Yu explained that Poly and Xinxing were both part of the military system in mainland China, and that he represented Xinxing in Hong Kong.  Mr Mak also gave assurances about Mr Yu’s identity;

25.3    Mr Yu said that Xinxing was preparing to expand its business and plans to establish a listed company platform in Hong Kong, making the acquisition of the Company inevitable. Given that the Company had already issued a substantial amount of shares, its share price would undoubtedly rise following the positive news;

25.4    Mr Mak repeatedly assured Mr Ng that the Five Terms were true, and that Xinxing was about to acquire the Company, guaranteeing that Mr Ng would not suffer any loss from his acquisition of shares in the Company and that he would receive a guaranteed return of $60m within six months of purchasing the shares;

25.5    Mr Ng and Mr Lawrence Lok emphasised that Mr Mak’s and Mr Yu’s assurances were the basis of Mr Ng’s acquisition of shares in the Company and that the Five Terms had to be true, otherwise the risk for Mr Ng would be too high.

26.  Mr Mak’s case is that:

26.1    Mr Sam Chan arranged the Second Lunch because Mr Ng wanted to meet Xinxing’s representative, and Mr Sam Chan wanted Mr Mak to be present as well;

26.2    Mr Sam Chan and Mr Lawrence Lok introduced Mr Yu to Mr Ng.  Mr Ng and Mr Yu casually talked about their respective backgrounds and their companies’ backgrounds and achievements.  They also mentioned the Possible Transaction and the related announcements;

26.3    Mr Mak said that the Possible Transaction was progressing in accordance with the announcements, but he did not represent that Xinxing’s takeover of the Company was due to be executed, nor did he offer to sell shares in the Company to Mr Ng or mention any guarantee or indemnity.

B8.  The Alleged Oral Agreement; Mr Ng’s acquisition of shares in the Company

27.  It is Mr Ng’s case that at the end of February 2016, and after repeated urging by Mr Mak through Mr Sam Chan, he decided to trust Mr Mak’s statements and guarantees, and he therefore orally agreed, through Mr Lawrence Lok, with Mr Sam Chan to accept Mr Mak’s arrangement and the Five Terms.  He says that he asked Mr Lawrence Lok to convey his decision to Mr Sam Chan and Mr Mak.  He says that there was therefore an oral agreement between him and Mr Mak, as follows (“the Alleged Oral Agreement”):^[3]

27.1    Mr Ng would purchase six billion shares in the Company at $0.035 per share through Mr Mak’s designated as per his instructions;

27.2    the acquisition of the Company by Xinxing was inevitable;

27.3    Mr Ng could freely sell the shares at any time after purchase, with Mr Mak personally guaranteeing in his own name that:

27.3.1  if Mr Ng sold the shares within six months of purchase, Mr Ng would receive a guaranteed return of $60m;

27.3.2  if the share price of the Company fell below $0.035 per share within six months of his purchase, he would compensate all monetary losses and the guaranteed profits of $60m.

28.  On 9th March 2016, Mr Ng bought two billion shares in the Company at $0.035 per share.

29.  On 22nd March 2016, Mr Ng bought a further two billion shares in the Company at $0.035 per share.

30.  On 12th April 2016, Mr Ng bought a further two billion shares in the Company at $0.035 per share.

31.  Mr Ng has not sold his six billion shares in the Company (“the Shares”).

B9.  The “termination” of the Memorandum

32.  On 20th June 2016, the Company announced that no definitive share subscription agreement had been entered into between the Company and Xinxing by the Long Stop Date, so that the Memorandum was “terminated” and ceased to have any effect (“the 20.06.2016 Termination Announcement”).

33.  Xinxing Ductile made an announcement to similar effect on 22nd June 2016.

B10.  The Company’s share price

34.  The closing price of the Company’s shares at various dates was as follows:

34.1    $0.018 on 20th June 2016;

34.2    $0.019 on 21st June 2016;

34.3    $0.017 on 29th June 2016;

34.4    $0.014 on 12th October 2016.

35.  The share price never went above $0.035 from the time of the First and Second Lunches up to 12th October 2016 (six months after Mr Ng’s third purchase of shares in the Company).

B11.  Meetings between the parties after the First and Second Lunches

36.  Mr Ng’s case is that after the 20.06.2016 Termination Announcement, there was a lunch at Pak Loh Chiu Chow Restaurant in Causeway Bay to discuss compensation for him (“the Disputed Pak Loh Lunch”).  He says that Mr Mak asked for more time on the basis that the six-month period had not yet expired, and that there was a new plan to attract more investors.  Mr Mak says that there was no such lunch.

37.  The parties do agree that there was at some point a lunch at Lei Garden Restaurant in Wanchai (“the Lei Garden Lunch”).  They do not agree on what took place at the lunch.

37.1    Mr Mak’s case is that in around April or May 2016, Mr Ng treated him and his employees to have shark’s fin soup at Lei Garden.  Mr Mak says that he attended together with Ms Flora Cheng (an executive director of the Company), Mr Sam Chan and Mr Lawrence Lok.

37.2    Mr Ng’s case is that the lunch took place after the Disputed Pak Loh Lunch, and Mr Mak proposed compensation in cash, shares, or investment cooperation opportunities.

38.  The parties also agree that there was then a further lunch at Pak Loh Chiu Chow Restaurant, which was attended by Mr Ng, Mr Mak, Mr Lawrence Lok and Ms Flora Cheng (“the Undisputed Pak Loh Lunch”).  Again, they differ as to what took place at the lunch.

38.1    Mr Mak says that it took place before the 20.06.2016 Termination Announcement, and that Ms Iris Woo also attended; it was a lunch to return Mr Ng’s hospitality at the Lei Garden Lunch.

38.2    Mr Ng says that it took place in July 2016,^[4] after the 20.06.2016 Termination Announcement, and that Ms Iris Woo was not present; it was a lunch to discuss compensation for him.  He says that Mr Mak proposed some unrealistic solutions, which were all delaying tactics.

39.  Mr Lawrence Lok further met with Mr Sam Chan several times in 2017 and 2018.

B12.  Mr Ng’s demand letter

40.  On 12th November 2018, Messrs Cheung & Choy on behalf of Mr Ng issued a demand letter to Mr Mak alleging the making of the Alleged Oral Agreement, and complaining that although Mr Mak knew that there was no proof of funds for Xinxing’s takeover of the Company, he misrepresented to Mr Ng that the takeover was going to be implemented. The letter demanded an indemnity for Mr Ng’s loss of $162m based on the closing price of $0.08 as at 12th October 2016, together with $60m as guaranteed profit.

41.  On 5th December 2018, Messrs Haldanes on behalf of Mr Mak replied to the demand letter, denying the Alleged Oral Agreement.

C.  THE ISSUES

42.  The agreed issues for my determination are as follows.

42.1    Was the Alleged Oral Agreement made?

42.2    Was the Alleged Oral Agreement breached?

42.3    Was the Alleged Oral Agreement procured by misrepresentation?

42.4    Is Mr Ng entitled to the relief claimed in the Statement of Claim?

D.  PRINCIPLES APPLICABLE TO THE ASSESSMENT OF EVIDENCE

D1.  Assessment of credibility

43.  As there is no documentary evidence of the Alleged Oral Agreement, the credibility of the witnesses’ evidence is important.  Mr Ng gave evidence on his own behalf, and also called Mr Lawrence Lok to give evidence.  Mr Mak gave evidence on his own behalf, and also called Mr Sam Chan, Ms Iris Woo and Ms Flora Cheng to give evidence.

44.  In assessing the witnesses’ evidence, I have had regard to the principles summarised in Hui Cheung Fai v Daiwa Development Ltd, unreported, HCA 1734/2009, 8 April 2014 at [77] to [83] (DHCJ Eugene Fung SC).  In particular:

44.1    contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

44.2    in deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

44.3    regard should be had to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence;

44.4    care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness’ character;

44.5    witnesses’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be had to their motives and to the overall probabilities.

45.  I have also had regard to the summary of relevant principles made by HH Judge Simon Barker QC in Northampton Borough Council v Cardoza and others [2019] BCC 582:

“36. As to the considerations applicable to evaluating evidence, a useful starting point is Goff J’s (as he then was) observation as to resolving conflicts of evidence in Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 LL Rep 1 at p.57:

‘… Where there is a conflict of evidence … reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth’.

37. Factors relevant to the evaluation of a witness’s evidence were identified by Lewison J (as he then was) in Painter v Hutchinson [2007] EWHC 758 (Ch) at [3] when addressing the unsatisfactory nature of the defendant’s approach to giving evidence. These included: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure. This was not intended to be an exhaustive list, but it is important and very helpful.

38. A useful recent reminder or guidance on the approach to the evidence of factual witnesses, and expanding on the guidance given by Goff J in The Ocean Frost, was given by Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm). After noting that human memory is fallible and that the process of litigation and preparing for trial tends to interfere further with the reliability of human memory, particularly where a lawyer has had a hand in drafting a witness’s evidence and the witness’s memory has been refreshed by reading documents, Leggatt J concluded that the best approach for a judge to adopt at the trial of a commercial case is to base factual findings on documentary evidence and known or probable facts and the inferences to be drawn therefrom. Witness evidence, written and oral, is not without purpose; but, its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’s motivations, personality and working practices.^[5]

39. In similar vein, in the recent case of Freemont (Denbigh) Ltd v Knight Frank LLP [2014] EWHC 3347 (Ch) reference was made to an article written by Bingham J (as he then was) entitled “The Judge as Juror: The Judicial Determination of Factual Issues” published in [1985] 38 Current Legal Problems 1-27. Bingham J considered the approach to deciding upon the reliability of a witness’s evidence and regarded the following to be helpful indicators of where the truth lies: the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred; the internal consistency of a witness’s evidence; and, the consistency of a witness’s evidence with what (s)he has said or deposed on other occasions. Bingham J considered that the credit of a witness in matters not germane to the litigation was of less assistance, and that the demeanour of a witness was on the whole not a reliable pointer to a witness’s honesty.”

46.  I have further borne in mind the reminder of K Yeung J in Siao Miu Hua v Wu Ching Kuen [2024] HKCFI 232 at [84] that: 

“It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie”.

D2.  Assessment of whether contract made

47.  The parties cited various authorities on the question of how to assess whether a contract was made.  I do not propose to rehearse them all here, but will simply identify the key points sought to be made by the parties from such authorities.

48.  On behalf of Mr Ng, emphasis was placed on authorities saying that the witnesses’ evidence should be assessed by reference to contemporaneous documents, their subsequent actions, and events which are agreed or clearly demonstrated to have happened (for example, Mansion Place Ltd v Fox Industrial Services Ltd [2021] EWHC 2972 (TCC) at [55] (Eyre J)).

49.  ID v LU [2021] 1 WLR 4992 at [57] (Judge Pelling QC) was cited to make the point that there is no general principle that the absence of a written record leads inevitably to the conclusion that no contract was concluded; the question of whether a contract was made should be determined after an assessment of the whole of the evidence.

50.  On behalf of Mr Mak, reference was made to Leung Chin Sing, Rabo v Ko Chun Hay, Kelvin [2021] HKCFI 2242 at [42] where DHCJ Jin Pao SC said:

“It is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been purely by word of mouth but of which there is no contemporaneous documentary record of any kind. The prevalence of e-mails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint: Blue v Ashley [2017] EWHC 1928 (Comm) at [65] per Leggatt J (as he then was); Music Holdings Property HK Ltd v Ooi Lean Choo [2020] HKCFI 1312 at [58] per Ng J. Because the value of a written record is understood by anyone with business experience, its absence may, depending on the circumstances, tend to suggest that no contract was concluded: Blue v Ashley at [49]; Wing Hing (1956) Co Ltd v Nissin Foods Co Ltd [2021] HKCFI 638 at [56] per DHCJ Abraham Chan SC.”

51.  At the end of the day, the authorities show that the question of whether or not the Alleged Oral Agreement was made is simply a question of fact to be decided by reference to the particular circumstances of the present case, and after a consideration of all the evidence.

52.  Mr Ng is the one who bears the burden of proving that the Alleged Oral Agreement was made, containing the terms relied on by him. It is not for Mr Mak to disprove it, or to prove that some other alternative events took place.

E.  WHETHER THE ALLEGED ORAL AGREEMENT WAS MADE

53.  Mr Ng acquired the Shares in three tranches in March and April 2016.  It was common ground that Mr Ng could not have acquired such a substantial amount of shares in the market without having caused a significant fluctuation in the share price.  In his oral closing submissions, leading counsel for Mr Ng, Mr William Wong SC (leading Mr Look Chan Ho and Mr Billy Liu), submitted that on the evidence, there were two possible candidates as to the source of the shares acquired by Mr Ng: (1) the Placement (by Glory Merit of ten billion shares at $0.035 per share through its placing agent Kingsway), and (2) the ten billion shares disposed of by Mr Mak at $0.035.^[6]

54.  Mr Wong submitted that on the balance of probabilities, I should find that Mr Ng acquired the Shares from Mr Mak, given that there were matters which eliminated Glory Merit as the source of the Shares, and there were matters which positively pointed to Mr Mak as being the source.

55.  The matters relied on by Mr Wong as eliminating Glory Merit were as follows.

55.1    Mr Mak’s evidence that he had no idea that Mr Ng had entered into any contract with Mr Yu (the owner or representative of Glory Merit).  It was said that given that Kingsway was the placing agent for the Placement, and was also the financial adviser for the Company, Mr Mak would have known if Mr Ng had purchased shares from Glory Merit in the Placement.

55.2    The fact that Mr Sam Chan did not suggest, and in fact positively disowned any suggestion, that there was a contract between Glory Merit and Mr Ng.

55.3    The subsequent conduct of the parties in that Mr Ng did not make any complaint or claim against Mr Yu or Glory Merit that they were in breach of contract.

55.4    Mr Ng’s evidence that he chased after Mr Mak from June 2016 to November 2018 for compensation, through Mr Lawrence Lok and at meals with Mr Ng.

55.5    Mr Mak’s evidence that he was not surprised when he received Mr Ng’s solicitors’ demand letter of 12th November 2018. When Mr Lawrence Lok informed Mr Sam Chan about the commencement of the current proceedings, Mr Sam Chan did not even ask why Mr Ng was suing Mr Mak rather than Mr Yu.

56.  The matters relied on by Mr Wong as positively pointing to Mr Mak were as follows.

56.1    Mr Mak was eager to offload his shares in the Company, so that he would have been looking for someone who had the financial ability to buy them from him.

56.2    The unrealistic evidence from Mr Mak’s side that at the First and Second Lunches, the parties only engaged in casual chitchat, without discussing the merits of investing in the Company.

56.3    The credibility of the respective witnesses who gave evidence at trial.

56.4    The inherent probabilities of the situation.  In particular, Mr Mak’s case that there was no contact between the parties after their meals in 2016 up until Mr Ng’s demand letter of November 2018 was unbelievable; there must have been some oral chasers for payment leading up to the issue of the demand letter.

57.  Having considered all the evidence, I have concluded that the Alleged Oral Agreement was not made as alleged.  I now set out the main matters which have gone into my consideration. For the purposes of organisation, they of course have to be set out point by point, but that is not to say that any of the points have been considered only in isolation; I have endeavoured to consider them against the entirety of the evidence as urged by Mr Wong.

E1.  The source of the Shares

58.  Mr Ng fails to show, on a balance of probabilities, that the Shares came from Mr Mak.

59.  The price of the Company’s shares under the Placement was $0.035, and the dates on which Mr Ng acquired the Shares (9th March, 22nd March and 12th April 2016) fell within the placing period of 26th January to 30th April 2016.

60.  Furthermore, it is Mr Ng’s own pleaded case that he purchased the Shares from Kingsway, which was the placing agent for the Placement (albeit that he claimed that Kingsway was Mr Mak’s stockbroker).  Indeed, when it was put to Mr Ng that he acquired the Shares pursuant to the Placement, Mr Ng did not deny it outright, but claimed that he bought the Shares based on Mr Mak’s arrangement.^[7]  Mr Ng further said that he would never have acquired shares from a person whom he had not seen or talked to (Glory Merit), and Mr Lawrence Lok said that that there was no reason for Mr Ng to have bought so many shares from an unknown third party. Their evidence was that they purchased through Kingsway because this was Mr Mak’s arrangement.  However, there was no evidence that Kingsway was Mr Mak’s stockbroker; the point was not put to him.  What was put was that Kingsway was the Company’s financial advisor in the negotiations with Xinxing, which Mr Mak acknowledged.

61.  Mr Wong submitted that Mr Mak could have asked, but did not ask, Kingsway to produce any documents to show that there was an agreement between Mr Ng and Glory Merit or Mr Yu for the purchase of the Shares.  However, the burden is not on Mr Mak to prove that Mr Ng bought the Shares from Glory Merit; the burden is for Mr Ng to prove the Alleged Oral Agreement, and insofar as he seeks to show that he acquired shares from Mr Mak rather than from Glory Merit in discharging this burden, it is for Mr Ng to show it.  It is not said that Mr Ng tried but was unable to obtain documents from Kingsway to show the counterparty with which he transacted, or from Mr Mak to identify the buyers of the ten billion shares he disposed of at $0.035 per share.

62.  Mr Sam Chan’s evidence was that after CCT Fortis announced that consent had been given to Glory Merit to proceed with the Placement, Mr Yu asked him to find investors who might be interested in investing in the Company by purchasing its shares from Glory Merit through the Placement, and Mr Sam Chan agreed to help.  In cross-examination, Mr Sam Chan said that when he approached Mr Lawrence Lok to tell him about the opportunity to invest in the Company’s shares, he told Mr Lawrence Lok that the seller of the shares would be Glory Merit.  I accept Mr Sam Chan’s evidence in this regard (and will address points made against his credibility below).

63.  As mentioned above, Mr Wong submitted that Mr Mak had no idea that Mr Ng had entered into any contract with Mr Yu or Glory Merit. However, the fact that Mr Mak may not have had any such specific knowledge is not particularly probative as to whether or not Mr Ng acquired any shares under the Placement; whilst Mr Mak in his capacity as (inter alia) chairman of the Company and CCT Fortis may have had a general interest in following the progress of the Placement, it does not necessarily mean that Mr Mak would have been aware of all the transactions pursuant to the Placement.

64.  Mr Wong also submitted that Mr Sam Chan had disowned knowledge of any contract between Glory Merit and Mr Ng.  To be more precise, Mr Sam Chan’s evidence was that he was aware that Mr Ng purchased six billion shares in the Company, so he deduced that there had been a transaction between Mr Ng and Mr Yu or Glory Merit; he did not have direct knowledge of any contract between Mr Ng and Mr Yu or Glory Merit, but nor was he suggesting that there was no such contract.  In my view, this evidence does not go towards eliminating Glory Merit as a possible source of the Shares, contrary to Mr Wong’s submission.  It is evidence that is equally consistent with Glory Merit as being the source of the Shares.

65.  Mr Wong submitted that the subsequent conduct of the parties showed that Mr Yu or Glory Merit was not the counterparty with whom Mr Ng had contracted, as Mr Ng chased after Mr Mak for compensation, Mr Ng did not chase after Mr Yu for compensation, Mr Ng issued proceedings against Mr Mak rather than Mr Yu or Glory Merit, and Mr Sam Chan did not express surprise when he was told about proceedings being commenced against Mr Mak rather than Mr Yu.  Leaving aside for present purposes whether or not I accept the evidence as to Mr Ng’s chasers and Mr Sam Chan’s reaction, it seems to me that in any event, these matters do not particularly assist in ruling out Mr Yu or Glory Merit as the party from whom Mr Ng acquired the Shares, since on Mr Ng’s case, it was Mr Mak who made various promises to him and not Mr Yu or Glory Merit.  (Of course, Mr Ng says that the chasers to Mr Mak followed on from a breach of the Alleged Oral Agreement, but the point is that the lack of chasers is equally consistent with Mr Ng having acquired the Shares pursuant to the Placement, which acquisition would not necessarily have involved Mr Yu making any promises about the performance of the Company’s shares to Mr Ng.)

E2.  The commerciality of the terms of the Alleged Oral Agreement

66.  Counsel for Mr Mak, Mr Victor Dawes SC (leading Mr Thomas Wong), submitted that the Alleged Oral Agreement did not make commercial sense and was illogical.  I agree.

66.1    The terms of the Alleged Oral Agreement would have meant that Mr Ng could make a guaranteed $60m profit from a $210m investment within six months, equivalent to a guaranteed return of 57% per annum, which surely was too good to be true.

66.2    One of the pleaded Five Terms was that Mr Mak personally guaranteed that if^[8] the share price of the Company fell below the purchase price of $0.035 per share within six months after Mr Ng’s purchase, Mr Mak would personally indemnify Mr Ng for all losses.  Another term was that Mr Mak guaranteed a $60m profit within six months of Mr Ng’s purchase. However, the price of the Company’s shares at all material times was lower than $0.035.  Thus under the Alleged Oral Agreement, Mr Ng would have been entitled to claim for loss (and also the $60m guaranteed profit) immediately upon his purchase of the Shares.  This makes no sense.

66.3    In cross-examination, Mr Ng had difficulty explaining how the Alleged Oral Agreement would operate.  In the end he agreed that the terms meant that he could have sold the Shares during (for example) the fourth month if the price was below $0.035 (since the Alleged Oral Agreement expressly provided that he was free to sell them at any time during the six months), and then he would have immediately been entitled to recover his principal together with $60m.  If so, then surely Mr Ng should have sold the Shares immediately upon his purchase or at least during the six-month period, since the share price never reached $0.035 at any point, so that he could have recovered his principal and $60m profit.  He could not explain why he did not do this, save to say that if he did so, he would be doing Mr Mak wrong.  The answer does not suggest that Mr Ng considered that Mr Mak was under a binding obligation to compensate him.

66.4    The illogicality of the Alleged Oral Agreement also means that it is quite unlikely that Mr Mak would have offered to transact on the lines of the Five Terms.  At the time of the First and Second Lunches, the Company’s share price was below $0.035.  Making the alleged offer would have exposed Mr Mak to an immediate liability to pay $60m plus the difference between the market price of the Shares and what Mr Ng had paid for them.  No reason has been put forward as to why Mr Mak would have made such an offer.

66.5    Mr Wong sought to rationalise Mr Ng’s evidence regarding the meaning and effect of the Alleged Oral Agreement as being that if the Company’s share price was higher than $0.035 at any time during the six months after Mr Ng’s purchase, then he could not seek damages against Mr Mak, and it was only if the share price was continuously lower than $0.035 during the six-month period that Mr Ng could claim against Mr Mak.^[9]  However, this is not the pleaded case.  It would also still be unworkable.  It would have meant that had the share price briefly reached $0.035 and then fallen back below $0.035 for the rest of the six months, Mr Ng would nevertheless have been disentitled from making any claim against Mr Mak.  This would have been the case even though Mr Ng might well not have had the opportunity of selling any shares whilst the share price was above $0.035 – a very likely situation as at the time of Mr Mak’s alleged offer, since daily turnover of the Company’s shares in January and February 2016 was relatively low compared to the volume of shares held by Mr Ng, and any attempt to sell in significant quantities would have pushed the share price down.

67.  Of course, the fact that an agreement does not make commercial sense, or is illogical, does not necessary mean that it was not made.  However, it makes it less likely, as a matter of inherent probability, that it was made.  This is particularly so in the present case where both parties were experienced businessmen.  Furthermore, if, as Mr Ng says, he had wanted to find out more about the proposed deal at the First Lunch, then presumably he would have thought about how the terms of the Alleged Oral Agreement would have operated in practice at the time (and in cross-examination, he confirmed that he understood the terms).  He would not be trying to make sense of the terms for the first time only in cross-examination, and be unable to explain the illogicality of the arrangement.

68.  In my judgment, the lack of commerciality and illogicality of the Alleged Oral Agreement militates strongly against it having been made.

E3.  Mr Mak’s eagerness to sell his shares in the Company

69.  As mentioned above, Mr Wong submitted that Mr Mak was eager to offload his shares in the Company, and would therefore have been looking for someone who could buy from him.

70.  However, it could equally be said that Glory Merit was keen to find investors who would take up the shares on offer under the Placement; the payment for such shares would go towards satisfaction of the consideration due by Glory Merit to CCT Fortis and Jade Assets. Furthermore, it was Mr Sam Chan’s evidence that he approached Mr Lawrence Lok following on from Glory Merit’s request to him to assist in finding investors for the Placement.  It was put to Mr Sam Chan that had he been concerned to arrange a deal between Glory Merit and Mr Ng, then it did not make sense that Mr Yu did not participate in the First Lunch. However, Mr Sam Chan explained that Mr Yu was not in Hong Kong at the time, that the First Lunch was arranged to enable Mr Mak and Mr Ng to socialise, and then the Second Lunch was arranged to enable Mr Yu to join.

71.  It was put to Mr Mak that his eagerness to sell shares in the Company was demonstrated by the fact that shortly after the Company’s 21.12.2015 Announcement, CCT Fortis rapidly disposed of a large number of shares in the Company.  It was said that the explanation of why there should be such a disposal, even though the Possible Transaction was supposed to be beneficial for the Company, must be that Mr Mak knew “from day one” that the Possible Transaction would not materialise – a classic “pump and dump” operation.  This line of cross-examination was based on a number of Shareholding Disclosure forms produced on the first day of the trial.

72.  Mr Mak made some attempts to explain that in fact, CCT Fortis had started to sell shares in the Company in September 2015, prior to any deal being finalised with Xinxing.  To the extent that he could not give chapter and verse to refute the accusation that he engaged in a “pump and dump” operation, I agree with Mr Dawes’ submissions that this should not be held against him.  The allegation that Mr Mak knew from the outset that the Possible Transaction was doomed to failure and that he carried out a “pump and dump” operation – essentially an allegation of dishonesty and fraud – was not pleaded.  Indeed, even in the closing submissions for Mr Ng, it was said that his case was not one of fraud.^[10]  Mr Dawes submitted that had the allegation been properly pleaded, Mr Mak would have adduced evidence to show that it was not a case of “pumping”, for example by tendering other board members or professional advisers of the Company as witnesses, or by disclosing relevant contemporaneous documents; nor of “dumping”, for example by calling the Company’s or CCT Fortis’ company secretary to explain the entries in the Shareholding Disclosure forms and other witnesses to explain the reasons for CCT Fortis’ sale of shares in the Company, or by disclosing relevant contemporaneous documents to explain such reasons.

73.  Mr Mak denied that the Possible Transaction was a “pump and dump” operation.  He named the professional advisers engaged for the Possible Transaction for both sides, including lawyers, financial advisors, and auditors; and he said due diligence was carried out throughout the process, involving these professionals.  Furthermore, Xinxing was a Fortune Global 500 company and there is no reason appearing from the evidence (or suggested by Mr Ng) for it to have participated in a fraudulent scheme in conjunction with the Company.

74.  The more serious an allegation is, the less likely it is that the event in question occurred, and hence, the more cogent should be the evidence before the court concludes that the allegation is established on the balance of probability: Re H (Minors) [1996] AC 563 at 586C-H (Lord Nicholls).  I do not see how, on the state of the evidence before the court, I can find that Mr Mak was eager to persuade Mr Ng to acquire his shares when the evidential underpinning sought to be relied on for this is the unpleaded allegation that he engaged in a “pump and dump” scheme.^[11]

75.  I therefore reject the submission that Alleged Oral Agreement has to be assessed against the background that Mr Mak was eager to offload his shares in the Company and was looking for someone to buy them from him.^[12]

E4.  The First and Second Lunches

76.  Mr Wong submitted that the purpose of the two lunches was to discuss the acquisition of shares in the Company by Mr Ng as a willing buyer and from Mr Mak as a welling seller.

77.  Mr Wong relied on the following.^[13]

77.1    Mr Mak was eager to offload his shares in the Company.

77.2    It was Mr Ng’s evidence that the First Lunch was a serious lunch.

77.3    It was Mr Mak’s own evidence that (as relayed by Ms Iris Woo to him) Mr Sam Chan wanted to invite him to meet Mr Ng, who might invest in the Company and become a substantial shareholder by holding more than 5% of its shares; Mr Sam Chan thought it would be good to have a meeting so that the parties could get to know each other, and Mr Mak agreed.

77.4    Mr Yu was not present at the First Lunch, so if the purpose was to enable Mr Ng to get to know the controlling shareholder of the Company, this made no sense as Xinxing would, on successful completion of the Possible Transaction, become the controlling shareholder, so that Mr Ng ought to have been introduced to Xinxing’s representative Mr Yu rather than to Mr Mak.

77.5    It was Mr Ng’s evidence that the Second Lunch was arranged as he still had concerns about the risks and returns of the deal proposed under the Alleged Oral Agreement.  He was concerned as to whether the Possible Transaction was genuine and whether it would definitely go ahead.  Therefore, arrangements were made for him to meet a representative of Xinxing.

77.6    It was incredible that Mr Mak was not curious as to why Mr Ng wanted to meet Mr Yu.

77.7    There was no basis to suggest that the Second Lunch was arranged for Mr Ng and Xinxing to conclude a deal.

77.8    It was not disputed that the Possible Transaction, its progress, and the Company’s 21.12.2015 Announcement and CCT Fortis’ 22.12.2015 Announcement were discussed at the First and Second Lunches.  As regards the First Lunch, it was Mr Ng’s unshaken evidence that Mr Mak made an oral offer to Mr Ng during the First Lunch along the lines of the Alleged Oral Agreement.  It was inherently improbable that the parties did not mention that Mr Ng might invest in the Company, or that the Possible Transaction was only briefly mentioned but not in detail, as Mr Mak claimed.  After all, Mr Sam Chan’s evidence was that whilst the parties mainly discussed information that had already been announced, they did actually also discussed something “outside the announcement”.

77.9    As regards the Second Lunch, Mr Mak was evasive when cross-examined as to whether Mr Ng asked about the prospects of the Possible Transaction, in that it was “only when [he] was asked “yes or no” twice that he eventually agreed that the [Possible] Transaction was being mentioned”.

77.10   It was inherently improbable that when Mr Ng asked about the prospects of the Possible Transaction at the Second Lunch, Mr Mak’s answer was based on the public announcements, and to the effect that the transaction was in progress and subject to various matters such as due diligence, the Hong Kong Stock Exchange and the minority shareholders.

77.11   Mr Sam Chan was untruthful when he said that at the Second Lunch, there was no discussion about the sale and purchase of shares in the Company and that the main purpose was for Mr Yu to talk about the future investment of Xinxing, the enterprises into which it was going to invest, and its background and types of business.  After all, Mr Sam Chan was a broker and surely sought to bring together buyer and seller.

78.  My assessment of these points is as follows.

78.1    I have already set out why I do not consider it right to assess the First and Second Lunches by reference to Mr Mak’s supposed eagerness to offload his shares in the Company.

78.2    There have been opposing descriptions of the First Lunch as being “serious” (Mr Ng) or “casual” (Mr Mak). These are rather general descriptions and there is not necessarily a sharp distinction between the two.  I bear in mind that this was a meeting arranged at a restaurant and over a meal, rather than in a corporate boardroom, so that “seriousness” has to be taken in that context in any event.  Even if the First Lunch was “serious”, I do not see that this can much advance Mr Ng’s case that the purpose of the lunch was to discuss Mr Mak’s sale of shares to Mr Ng, or that the inherent probabilities point to an agreement having being concluded at the lunch. Similarly, the fact that it is undisputed that Mr Sam Chan wanted to arrange for Mr Ng to meet Mr Mak as Mr Ng was a potential investor in the Company does not say much about the inherent probabilities of whether an agreement was discussed or concluded.

78.3    Regarding the First Lunch, Mr Mak said that Mr Ng’s potential investment was not discussed.  He said that whilst the topic of the Possible Transaction would have come up and Mr Ng might have asked a few questions about it, Mr Mak would not, as an experienced director of a listed company, have gone into details about a deal that had not been realised; he would only have told him things along the lines of the contents of the public announcements.  This does not seem to me to be inherently improbable as alleged, bearing in mind that Mr Mak was the director of a listed company and ought not to have been disclosing inside information.  As regards Mr Sam Chan’s agreement to Mr Wong’s proposition in cross-examination that the parties discussed something “outside the announcement”, Mr Sam Chan disagreed with the suggestion that this included Mr Ng’s concern about the risk of his investment into the Company.  It was not further clarified with Mr Sam Chan what matters “outside the announcement” were discussed.

78.4    When Mr Wong put to Mr Mak that there was not much point for Mr Ng to get to know the outgoing controlling shareholder of the Company, Mr Mak said “yes and no”, because the acquisition would take a period of time, so that the functions and intentions of the outgoing controlling shareholder remained important.  As Mr Wong then put to Mr Mak, it was therefore important for an incoming investor to understand the direction of the existing controlling shareholder (and Mr Mak agreed).  I therefore do not see what mileage can be obtained from the absence of Mr Yu from the First Lunch.  It will also be remembered that Mr Sam Chan’s evidence was that Mr Yu was not in Hong Kong at the time of the First Lunch, and that the First Lunch was for Mr Mak and Mr Ng to meet, with Mr Yu joining at the Second Lunch.

78.5    Mr Mak explained that he was not curious as to why Mr Ng wanted to meet Mr Yu as he was often, in his capacity as the chairman of a listed company, invited to join meals or cocktails, and there was no reason for him to question his invitations every time they were made; everyone had been happy at the First Lunch and when Mr Sam Chan said that a further lunch would be arranged for Mr Ng to meet Mr Yu, he was not curious about this.  This does not strike me as an incredible answer.  Given that it was known that Mr Ng was interested in investing in the Company and that Xinxing would take the place of Mr Mak as the controlling shareholder, why would Mr Mak have questioned Mr Ng’s reasons for wanting to meet Xinxing’s representative? Indeed, it follows from the logic of the questions put to Mr Mak in cross-examination about Mr Ng wanting to meet the incoming controlling shareholder of the Company that it was quite natural for Mr Ng to have wanted to meet Xinxing’s representative, and that there was no particular reason for Mr Mak to have queried this.

78.6    As regards the point that there was no basis to suggest that the Second Lunch was arranged for Mr Ng and Xinxing to conclude a deal, it is not Mr Mak’s case that the Second Lunch was arranged for this purpose.

78.7    Insofar as it was Mr Ng’s evidence that the Second Lunch was arranged because of his concerns about Mr Mak’s proposed deal, and about the Possible Transaction, this evidence does not really advance an argument as to what the inherent probabilities of the purposes of the Second Lunch were (unless one were to first accept Mr Ng’s evidence about the First and Second Lunches, in which case it would not be necessary to resort to probabilities and inferences in the first place).

78.8    As regards the Second Lunch, I do not agree that Mr Mak was being evasive when cross-examined as to whether Mr Ng asked about the prospects of the Possible Transaction by reason of having to be “asked “yes or no” twice” before he “eventually” agreed that the transaction was mentioned.  What actually happened was that he was interrupted at the start of his answer, and then the question of “yes or no” was put to him twice before he could further answer.

78.9    Nor do I agree that it is inherently improbable that at the Second Lunch, Mr Mak answered queries about the prospects of the Possible Transaction by reference to what had been publicly announced.  Mr Mak explained that at the Second Lunch, it was mainly Mr Yu who did the talking, and he was there just to keep them company.  This does not seem to be inherently improbable given that the Second Lunch had indeed been arranged for Mr Ng to meet Mr Yu.

78.10   I do not see the basis on which I can find Mr Sam Chan to be untruthful when he said that at the Second Lunch, Mr Yu talked about Xinxing’s background and its future plans, and that a sale and purchase of shares in the Company was not discussed.  Even though Mr Sam Chan was a broker and even though he had been asked by Glory Merit to find investors for the Placement, it is not inconceivable that his approach was to introduce the parties and then let them contact each other.  His evidence was that Mr Yu and Mr Ng exchanged name cards at the lunch and became friends, and he considered that it would be natural if they contacted each other afterwards.

79.  It is appropriate here to deal with the evidence of Ms Iris Woo. Mr Ng says that she was not present at the First and Second Lunches, but Mr Mak says that she was.  Her evidence was that she did not hear any discussions about the sale of any shares in the Company, or any guarantee or indemnity as claimed by Mr Ng.  I found Ms Iris Woo to be a straightforward and honest witness, and I accept her evidence that she was present at the First and Second Lunches.  I also accept, at a general level, her evidence that the lunches were essentially social occasions at which Mr Ng and Mr Mak (and Mr Yu at the Second Lunch) got to know each other. However, I do not place much weight on her evidence as to the details of what was discussed, as her responsibility was for administrative matters such as arranging meetings, and whilst she would sit in during Mr Mak’s meetings at the office, she was not involved in commercial negotiations. Thus whilst she was able to say that there was some discussion about the Possible Transaction and the Company, she was unable to remember what was discussed, and she was unaware that the Possible Transaction fell through in June 2016.  I therefore do not derive much from this evidence beyond what I consider to be her general impression that the lunches were essentially social occasions.

80.  I am therefore not persuaded, on a balance of probabilities, that the purpose of the two lunches was to discuss the acquisition of shares in the Company by Mr Ng from Mr Mak.

E5.  The meetings after the First and Second Lunches

81.  The parties differ starkly as to their accounts of the meetings which they had subsequent to the First and Second Lunches.  Mr Ng says that they met on three occasions, all after the 20.06.2016 Termination Announcement, and they were about his demands for compensation.  Mr Mak says that they met only on two occasions, both before the 20.06.2016 Termination Announcement, and that they were amicable social occasions at which they took respective turns to treat each other to good food and wine.

82.  The parties do agree that on the second and third of these occasions (the Lei Garden Lunch and the Undisputed Pak Loh Lunch), Ms Flora Cheng was present.  It will be recalled that Ms Flora Cheng was an executive director of the Company.  Her evidence is that by the time of Lei Garden Lunch, Mr Ng had become a substantial shareholder of the Company, and that (as Mr Mak told her) he invited Mr Mak’s side to have lunch so that the parties could get to know each other.  She said that it was a social occasion at which Mr Ng and Mr Mak talked about their respective backgrounds, their experience and their achievements, including their success in running factories.  As she herself had experience of running factories, she participated in the conversation as well.  As for the Undisputed Pak Loh Lunch, Ms Flora Cheng said that this was Mr Mak returning Mr Ng’s hospitality.  She disagreed that at either of the lunches, she was tasked with dealing with matters of compensation for Mr Ng.

83.  Mr Wong submitted that Ms Flora Cheng’s evidence was “unreliable if not untruthful”,^[14] on the basis that the parties had already met and shared their respective background, experience and achievements (at the First and Second Lunches) so that it was improbable and unbelievable that they would have talked about the same matters again.

84.  I do not agree that it was improbable or unbelievable for the parties to have arranged to meet socially again after Mr Ng had become a substantial shareholder in the Company and at a time when the Possible Transaction had not yet fallen through (so that any negative feelings about this would not yet have arisen).  Ms Flora Cheng’s evidence was that the Lei Garden Lunch took place in April or May 2016, and that the Undisputed Pak Loh Lunch took place in May or June 2016.  The cross-examination of Ms Flora Cheng proceeded on the basis of the dates she gave in her witness statement, and it was not suggested that the lunches took place after six months after Mr Ng had bought the Shares.  On that basis, no issue of compensation for Mr Ng would have arisen.

85.  I accept the evidence of Ms Flora Cheng.  She gave evidence in a straightforward manner.  Unlike Ms Iris Woo, who was responsible for administrative matters and therefore may or may not have fully understood the nature of the discussions between Mr Ng and Mr Mak, Ms Flora Cheng has been an executive director of the Company since August 2002 and would have understood what they were discussing.  Whilst she was not involved in the negotiations over the Possible Transaction, or with Mr Yu, she clearly had a grasp of the parts played by Mr Yu and Xinxing, and was able to answer counsel’s questions about them.  She said that she participated in Mr Ng’s and Mr Mak’s discussions about running factories as she herself had such experience. If she had been asked at the lunches to deal with compensation for Mr Ng, this is surely something she would have recalled.  I bear in mind that given her position, she may have some inclination to assist Mr Mak’s side rather than Mr Ng’s, but I do not see any reason to find that she was being untruthful in her evidence.  The mere fact that she did not mention in her witness statement that she participated in the discussion about running factories does not make her evidence unbelievable, when the focus of the witness statement was not about what she said at the lunches.  The claim that the lunches were social occasions is not unbelievable, as I have earlier explained.  Other than these two matters, no other reason has been identified as to why I should find that Ms Flora Cheng was untruthful or unreliable.

86.  Other than Ms Flora Cheng’s evidence, Mr Wong submitted^[15] that Mr Ng’s evidence as to what happened at the Disputed Pak Loh Lunch, the Lei Garden Lunch and the Undisputed Pak Loh Lunch should be accepted as it was unshaken, whereas Mr Mak’s evidence was incredible in saying that the parties remained cordial even after the Possible Transaction fell through.

86.1    However, Mr Mak’s evidence is that the Lei Garden Lunch and the Undisputed Pak Loh Lunch took place before the 20.06.2016 Termination Agreement, so that the parties would not have had reason to fall out before then.  It is therefore not incredible.

86.2    I do not find it possible to say that I should prefer Mr Ng’s version over Mr Mak’s simply by comparing the two competing versions of what happened at the lunches alone.

86.3    In the light of the matters discussed in the next section, however, and given Ms Flora Cheng’s evidence, I have come to the view that I do not accept Mr Ng’s version, and instead accept Mr Mak’s version, of what happened at the lunches (including his evidence that the Disputed Pak Loh Lunch did not take place).

E6.  The period between June 2016 and November 2018

87.  Mr Wong submitted that Mr Mak’s case that there was a lack of complaint from Mr Ng after the Possible Transaction fell through in June 2016, up until the letter from Messrs Cheung & Choy in November 2018, was incredible; and if there had not been any prior complaint, then Mr Mak’s claim not to have been surprised on receipt of the letter, out of the blue, was incredible.  Furthermore, Mr Sam Chan’s evidence that Mr Lawrence Lok did not chase him for compensation on behalf of Mr Ng during that period, and only discussed other potential projects, was incredible, given that they did discuss the failed Possible Transaction.

88.  It seems to me that one could equally question Mr Ng’s conduct during the period.  On his case, Mr Mak was in breach of the Alleged Oral Agreement by October 2016 at the latest.^[16]  In fact, in his oral testimony, Mr Ng said that when he learned from a public announcement that the Possible Transaction had fallen through in June 2016, he realised that Mr Mak’s assurances would not come true and so he instructed Mr Lawrence Lok to go after Mr Mak for the money.  Mr Ng says that he was concerned that Mr Mak would run off with his money or that he would not otherwise keep his promises.  Yet no written demand was made either by Mr Ng or Mr Lawrence Lok in writing in this period of over two years. When asked about this, he said that it had occurred to him to put matters in writing, but that Mr Mak told him that the six-month period had not yet expired.  Of course, this does not explain the silence during the period of over two years after such expiry.  He acknowledged that whilst he had originally agreed to Mr Mak’s stance of not recording the Alleged Oral Agreement in writing, circumstances had changed after the Possible Transaction fell through.  Yet he still did not make any complaint in writing. In cross-examination, Mr Ng sought to explain this by saying that although it had occurred to him to get something in writing from Mr Mak, Mr Mak then arranged for the Disputed Pak Loh Lunch, at which Mr Mak told him not to worry and that he would not suffer any loss, and that there would be further investors.

89.  This is a case where Mr Ng alleges that that there was an oral agreement and that Mr Mak failed to provide any compensation for at least two years, and where Mr Mak alleges, on the contrary, that there was simply no agreement in the first place.  Silence during the two years is consistent with Mr Mak’s case (as there would have been nothing to correspond about in terms of an agreement), and much less consistent with Mr Ng’s case, particularly given his concerns.

90.  There is also a further point.  As mentioned, Mr Ng said that although it had occurred to him to get something in writing from Mr Mak, Mr Mak then arranged for the Disputed Pak Loh Lunch, at which he was assuaged.  On Mr Ng’s case, there then followed the Lei Garden Lunch and the Undisputed Pak Loh Lunch.  However, in his witness statement, Mr Ng had said that the three lunches organised to discuss compensation for him resulted from a meeting between Mr Lawrence Lok and Mr Mak at the Company’s office in Wanchai, at which Mr Mak admitted that the Possible Transaction had fallen through because of Xinxing’s lack of proof of funds, and indeed the Company knew this at the time when the Possible Transaction was announced, misleading investors; Mr Ng had then demanded that Mr Mak find a solution, and the three lunches were then organised.  The witness statement had dated this critical meeting at the Company’s office as having taken place in August 2016, and originally, Mr Lawrence Lok had said the same in his own witness statement. However, in Mr Lawrence Lok’s supplemental witness statement, he corrected the date of the meeting to August 2018.  The implications of this are that the three lunches could not have resulted from any meeting in August 2016 at which Mr Mak made the alleged admission and Mr Ng’s consequent demand for a resolution, and that the lunches cannot be the explanation for Mr Ng’s silence between June 2016 and November 2018.  They of course also call into question Mr Ng’s account of what transpired at the lunches, and whether the Disputed Pak Loh Lunch took place at all as alleged by Mr Ng.

91.  The chronology further throws doubt on Mr Lawrence Lok’s account of his two meetings with Mr Sam Chan.

91.1    The first took place on 15th June 2017, and it is said that at this meeting, Mr Sam Chan essentially acknowledged that he, Mr Mak, and Mr Yu knew from the beginning that the Possible Transaction would not succeed and that they had misled Mr Ng into investing for their own gain.  The second meeting was on 20th December 2018, and it is said that at this meeting, Mr Sam Chan admitted that Mr Mak had agreed to the Five Terms. Mr Lawrence Lok’s evidence is that he arranged the 15th June 2017 meeting following on from the meeting at the Company’s office, at which Mr Mak is said to have suggested that Mr Lawrence Lok should go after Mr Yu to recover Mr Ng’s losses; the purpose of the 15th June 2017 meeting was to understand more about the termination of the Possible Transaction and Mr Yu’s role.  This evidence does not make sense if the meeting at the Company’s office in fact took place in August 2018.

91.2    If Mr Sam Chan had made such admissions at these two meetings, it is surprising that Mr Lawrence Lok did not make any written record of the same.

91.3    For his part, Mr Sam Chan says that he did meet Mr Lawrence Lok on 15th June 2017, but it was for the purpose of discussing other projects; he says that he also met Mr Lawrence Lok on 20th December 2018 and that the purpose of the meeting was for the latter to tell him about the commencement of the present proceedings.

91.4    In the circumstances, I accept Mr Sam Chan’s account of these two meetings.

F.  WHETHER THE ALLEGED ORAL AGREEMENT WAS BREACHED

92.  In the light of my findings in the previous section, this issue does not arise for consideration.

G.  WHETHER THE ALLEGED ORAL AGREEMENT WAS PROCURED BY MISREPRESENTATION

93.  Again, in the light of my earlier findings, this issue does not arise for consideration.

94.  In any event, I agree with Mr Dawes that the complaint of misrepresentation has not been properly pleaded and is not open to Mr Ng. My reasons, in brief, are as follows.

94.1    The misrepresentation complained of in the Statement of Claim (as confirmed by Mr Wong in his oral opening submissions) is that Mr Mak misrepresented to Mr Ng that Xinxing’s takeover was going to be implemented according to the public announcements.

94.2    In order for a statement to be actionable, it must be one of present fact and not future fact: Cartwright, Misrepresentation, Mistake and Non-disclosure, 6th ed., paragraph 3-44.  If a speaker makes an honest statement of what will happen in the future, this is simply a prediction and not a statement of fact or a representation: Cartwright, paragraph 3-45.  If, on the other hand, the speaker does not believe his statement of what will happen in the future, then he is not telling the truth about his present state of mind and his representation is actionable as a fraudulent one.

94.3    There is no plea as to what Mr Mak was not telling the truth about.  There is no plea as to why it was untrue.

94.4    Insofar as Mr Ng is instead advancing a case of non-fraudulent misrepresentation pursuant to s.3 Misrepresentation Ordinance (Cap.284) as stated in his written opening submissions, this was not pleaded, thereby prejudicing Mr Mak (for example, had he been aware of this, he could have pleaded and prepared a defence based on the proviso to s.3(1) Misrepresentation Ordinance, or a defence of contributory negligence: Cartwright paragraphs 7-27, 7-28).

H.  WHETHER MR NG IS ENTITLED TO THE RELIEF CLAIMED IN THE STATEMENT OF CLAIM

95.  In the circumstances, Mr Ng is not entitled to the relief claimed.

I.  DISPOSITION

96.  I dismiss Mr Ng’s claim.  I further make a costs order nisi that Mr Ng is to pay the costs of and occasioned by the action to Mr Mak, with certificate for two counsel, to be taxed if not agreed.  Such costs are, however, not to include the costs incurred by Mr Mak in engaging transcription services for the trial, which services were not used by Mr Ng’s team.