HENRY YIJIAN CO., LTD v. KINGSON INTERNATIONAL LTD

DCCJ2061/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2061 OF 2011

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JUDGMENT

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1.  In these proceedings the plaintiff claims against the defendant for the sum of $124,200.10. The defendant is a company incorporated in Hong Kong. The plaintiff claims that it had paid certain expenses amounting to $124,200.10 for and on behalf of the defendant. When demanded by the plaintiff, the defendant refused to make any repayment.

The evidence of the plaintiff

2.  Mr Yau Pak Sum (“Mr Yau”) testified for the plaintiff.  His evidence is that in early 2009, he and Mr Tsui Sze Wai (“Mr Tsui”) decided to form a joint venture (“the joint venture”) to develop the business of design, development, production, marketing, sales and distribution of fixing and anchoring systems and other construction products.  For this purpose the plaintiff was incorporated on 3.4.2009 in Hong Kong, and上海恆利益建幕牆製作有限公司 (Shanghai Henry Yijian) was incorporated in Mainland China on 14.5.2009.  On 3.8.2009 the defendant was incorporated in Hong Kong by Mr Yau and Mr Tsui as the holding company of the joint venture.  It was agreed by both of them that in due course the shareholdings of the plaintiff would be transferred to the defendant as part of the joint venture.

3.  The curtain wall business undertook by the plaintiff and Shanghai Henry Yijian was a mature business very similar to the business Mr Yau was running prior to the decision to form the joint venture.  As a result, the plaintiff and Shanghai Henry Yijian commenced operation and became revenue-generating very soon after their incorporation.  On the other hand, the fixing and anchoring system business was a new line of business requiring substantial preparation work, which included the setting up of a large factory in Mainland China.  When the defendant was incorporated, it was envisaged that it might take 1 to 2 years before the defendant would become operational.

4.  As the plaintiff was revenue-generating but the defendant was not, and as the plaintiff and the defendant would be part of the same group at the end, Mr Yau and Mr Tsui agreed verbally that the plaintiff would pay for certain expenses for the defendant and the defendant would repay the plaintiff upon the plaintiff’s demand.  The invoices for these expenses were passed to the plaintiff for processing.  The plaintiff would pay for them and record in its accounting system that they were amounts due from the defendant.

5.  Details of these expenses paid by the plaintiff for the defendant was set out in schedule 1 to the Amended Statement of Claim.  All the items set out therein are properly supported by contemporaneous debit notes (“DN”) issued by the plaintiff to the defendant and other supporting documents.

Expenses paid by the plaintiff for the defendant

6.  The 1^st item of HK$3,020 is supported by DN No HY-DB011/09 dated 29.10.2009 and invoices from KV Travel Limited Nos 37931, 37939 and 37940.  This expense is for the payment for the air ticket for Mr Yau to fly to Shanghai and the hotel fee for himself and Mr Tsui in Shanghai.  They went to Shanghai on business of the defendant.

7.  The 2^nd item of HK$2,657 is supported by DN No HY-DB016/09 dated 5.5.2009 and the statement issued by Kempinski Hotel Shenyang, China on 22.10.2009.  This expense is for the hotel fee for Mr Yau himself, Mr Tsui, a Mr Tsang Koon Ying and a Mr Yam Yee Wong (“Mr Yam”) for a visit to Shenyang, Liaoning, Mainland China.  They were there to explore the feasibility of building a factory for the fixing and anchoring system business in Tieling, Liaoning Province, Mainland China （中國遼寧省鐵嶺縣）. The trip was to study the site and to meet some government officials.  Mr Yam was a consultant engaged by Mr Yau and Mr Tsui for the defendant to negotiate with the local government at Tieling for the factory site and other licensing and regulatory issues for the factory.

8.  The 3^rd item of HK$3,616.60 is supported by DN No HY-DB004/10 dated 27.1.2010 and the receipt issued by Renaissance Harbour View Hotel, Hong Kong on 27.1.2010.  This expense is for a dinner to entertain the mayor of Tieling in Hong Kong.  Mr Yau paid for the dinner by his visa card and obtained reimbursement from the plaintiff.

9.  The 4^th item of HK$22,336 is supported by DN No HY-DB009/10 dated 3.2.2010 and invoices from KV Travel Limited Nos 38855, 38871, 38899, 39439, 39449, 39508 and 39521.  This expense is for the payment for the air ticket for Mr Yau himself to fly to Vancouver and the hotel fee for Mr Yau himself and Mr Yam in Vancouver, and the hotel fee for Mr Yam and various business contacts in Macau and Hong Kong between the period from November 2009 to January 2010.  The products of the defendant were intended for overseas customers in North America and Europe.  So there was a need for Mr Yam and Mr Yau to visit North America to meet with potential customers.

10.  The 5^th item of HK$1,165.50 is supported by DN No HY-DB013/10 dated 5.3.2010, a sundry expenses claim form of the plaintiff and an invoice issued by Meyer Company for HK$128 for black marker pens and an invoice issued by 順通花店for HK$664 for flowers.  This expense is for the signing ceremony of an agreement for the land on which the factory for the fixing and anchoring system business was to be located.

11.  The 6^th item of HK$10,750 is supported by DN No HY-DB019/10 dated 31.3.2010 and invoices from KV Travel Limited Nos 39795, 39799, 39996 and 39997.  This expense is for payment of the air tickets for Mr Yau and Mr Yau Chik Wai (the son of Mr Yau, and the sole shareholder and director of the plaintiff) to Shanghai, air ticket for Mr Tsui to Shenyang and the hotel fee for Mr Yam and a Mr Zhao Chen in Hong Kong.

12.  The 7^th item of HK$1,660 is supported by DN No HY-DB020/10 dated 31.3.2010, copies of receipts for buying 3 Octopus cards, a receipt issued by Travel Expert Ltd for 3 adult tickets for Disneyland and a receipt for buying a mobile phone SIM card.  This expense is for the entertainment of 3 guests from Mainland China when they were in Hong Kong.

13.  The 8^th item of HK$115 is supported by DN No HY-DB033/10 dated 8.6.2010 and an invoice issued by www.print-100.com for printing of name cards and the delivery charge.

14.  The 9^th item of HK$850 is supported by DN No HY-DB034/10 dated 10.6.2010 and invoice of KV Travel Limited No 40243.  The nature of the expense is for the payment of the hotel fee for Mr Yam in Hong Kong. 

15.  The 10^th item of HK$3,030 is supported by DN No HY-DB047/10 dated 26.8.2010 and the invoice of KV Travel Limited No 41038.  The nature of the expense is the hotel fee for Mr Yam in Hong Kong.

16.  Items 11 to 15 on the schedule are the consultancy fees paid to Mr Yam for the period from March 2010 to July 2010 when he was engaged by Mr Tsui and Mr Yau as a consultant to further the business of the defendant.  They agreed to pay him a consultancy fee for HK$15,000 per month.  The said consultancy fees were paid by the plaintiff on behalf of the defendant.

17.  The 11^th item of HK$15,000 is supported by DN No HY-DB023/10 dated 14.4.2010, and an invoice and an official receipt from Yam’s Group Inc.

18.  The 12^th item of HK$15,000 is supported by DN No HY-DB024/10 dated 28.4.2010, and an invoice and an official receipt from Yam’s Group Inc.

19.  The 13^th item of HK$15,000 is supported by DN No HY-DB032/10 dated 8.6.2010, and an invoice and an official receipt from Yam’s Group Inc.

20.  The 14^th item of HK$15,000 is supported by DN No HY-DB041/10 dated 26.7.2010, a copy of the cheque No 119870 (HSBC) issued by the plaintiff and the cheque deposit advice.

21.  The 15^th item of HK$15,000 is supported by DN No HY-DB045/10 dated 26.7.2010, a copy of the cheque No 119874 (HSBC) issued by the plaintiff and cheque deposit advice.

22.  The item of HK$13,400 was deleted from Schedule 1 to the Amended Statement of Claim.  It covered expenses for meals with officials of the Tieling Government paid by Mr Tsui using his personal credit card for the defendant in January 2010.  Mr Tsui passed a copy of his credit card to the plaintiff to claim for reimbursement.  It was recorded in the plaintiff’s accounting record as an amount due from the defendant.  It was subsequently discovered that the plaintiff had not reimbursed Mr Tsui for this item.  Hence it is deleted from Schedule 1.

Knowledge of the defendant of the expenses claimed

23.  On 9.3.2010, Ms Judy Chan (“Judy”, the accountant of the plaintiff), and Mr Yau met with Mr Tsui at Mr Tsui’s office to discuss the accounting system of the plaintiff.  Mr Tsui instructed Judy at the said meeting that she should report to him the financial and accounting matters of the plaintiff.  Judy sent the plaintiff’s management accounts of various dates to Mr Tsui by email on 24.3.2010, 5.5.2010, 17.5.2010, 15.6.2010 respectively.  On 15.6.2010, Judy sent to Mr Tsui a package of the financial statement and ledger of the plaintiff of May 2010 for his perusal by email.  In the said package, there is the balance sheet of the plaintiff as of May 2010, on which there was an item of “Loan to Kingson Int’l Ltd” of HK$196,421.70.  This sum was the total amount of expenses paid by the plaintiff for the defendant up to 30.5.2010.  There is also a schedule entitled “Loan to Kingson Int’l Ltd” in the said package which provides the breakdown of this sum of HK$196,421.70.  The 1^st to 7^th items and the 11^th to 12^th items on Schedule 1 of the Amended Statement of Claim are also found on the said schedule.  Neither Mr Tsui nor the defendant commented on or objected to the content of the schedule entitled “Loan to Kingson Int’l Ltd” at the relevant time.

24.  On 17.7.2010, Mr Tsui met with Mr Tsang and Mr Yau himself.  By that time Mr Tsang had been invited by Mr Yau and Mr Tsui to be a partner in the joint venture.  The discussion amongst them at the meeting revealed that there was a fundamental breach of the agreement between the three of them.  A valid basis for the joint venture to continue no longer existed and it was therefore terminated.  On 1.9.2010 Mr Yau directed Judy to send to Mr Tsui the debit notes and supporting documents for the expenses paid by the plaintiff on behalf of the defendant up to August 2010 to demand for repayment.  On 21.9.2010, Mr Tsui sent an email to Judy, asking her to provide invoices and receipts for the expenses paid on behalf of the defendant for checking and verification.  In response Judy emailed to him on 24.9.2010 that the supporting documents had been sent to him on 1.9.2010. Mr Tsui did not respond to this email.  On 14.1.2011 Judy again emailed to Mr Tsui to demand for repayment of the expenses paid by the plaintiff for the defendant. Mr Tsui did not respond to this email.

The evidence of the defendant

25.  The key witness for the defendant is Mr Tsui, a shareholder of the defendant.  He is also a director and shareholder of Merit Pacific Investment Limited, which is a corporate director of the defendant.  According to him, on 13.4.2010, Mr Yau and he signed the joint venture agreement.  He denied the existence of any agreement made between the plaintiff and the defendant whereby the defendant had agreed to pay any amount of money to the plaintiff upon demand.  The plaintiff has never formed part of the joint venture and has taken no place in it.

26.  According to him, the sum of HK$3,020 was incurred in or around July 2009 for air tickets and hotel fees in Shanghai.  At that time, the defendant was not even incorporated.  He did go to Shanghai with Mr Yau in July 2009 upon Mr Yau’s invitation to see Mr Yau’s companies in Shanghai.  He believes that it was part of Mr Yau’s scheme to lure him to take part in the business that he was trying to convince him to invest in.

27.  The sum of HK$2,657 pre-dated the joint venture agreement and also the incorporation of the defendant.  This alleged sum was incurred in or around October 2009 in Shenyang, Liaoning.  At that time, the defendant was not even incorporated.  In October 2009 he did go to Shenyang with Mr Yau who invited him to go there to convince him that he had connections and dealings with the Chinese authorities in Tieling, Liaoning, which was near Shenyang.  They went to Tieling via Shenyang.  It was part of Mr Yau’s scheme to lure him to take part in the business that he was trying to convince him to invest in.

28.  The sum of HK$3,616.60 was alleged spent by Mr Yau in Hong Kong on or around 27.7.2010, prior to the joint venture agreement.  Nothing shows that his amount was spent in relation to the defendant, or the joint venture agreement.

29.  The sum of HK$22,336 covers expenditure by Mr Yau and some other persons in the period from 13.11.2009 to 1.2.2010.  It includes air tickets to Vancouver, Macau and some hotel fees in Hong Kong.  The alleged air tickets to Vancouver were related to travels by Mr Yau and Mr Yam in November 2009.  At that time, the defendant had not been incorporated.  The joint venture agreement had not been signed.  Mr Yau and Mr Tsui were still in negotiation of the business.  Nothing shows that this amount was spent in relation to either the plaintiff, or the defendant, or the joint venture agreement.  The alleged hotel fees spent for the defendant in Macau and in Hong Kong took place in January 2010.  At that time, the joint venture agreement was not signed. 

30.  The sum of HK$1,165 covers expenditures spent on or around 29.1.2010 for signing agreement with the Chinese authorities of Tieling, Liaoning.  Nothing shows that this would be in any way related to the joint venture business and to the defendant.

31.  The sum of HK$10,750 covers air tickets to Shanghai and Shenyang in March 2010 and hotel fees of Mr Yam and Zhao Chen in Hong Kong in or around early April 2010.  Amongst the alleged HK$10,750, there was an expenditure of HK$3,640 being air tickets to and from Hong Kong/Shanghai by Mr Yau and his son Mr Yau Chik Wai (ie the director/shareholder of the plaintiff).  It was for a trip in March 2010.  If it was so spent, it was spent before the joint venture agreement was signed.  Both Mr Yau and the plaintiff had business in Shanghai. The joint venture did not have business in Shanghai.  The defendant also had nothing to do with anything in Shanghai.  This expenditure could not possibly be spent by the plaintiff for and on behalf of the defendant.

32.  The alleged sum of HK$10,750 also covers an air ticket for him to fly to Shenyang in March 2010.  It pre-dated the joint venture agreement.  It was another trip that he was invited by Mr Yau to go to Liaoning in an attempt to lure him to sign the joint venture agreement.  It has nothing to do with the defendant.

33.  The alleged sums of HK$2,900 and HK$4,450 covered by the alleged HK$10,750 were for hotel accommodation of Zhao Chen and Mr Yam in Hong Kong in early April 2010, before the joint venture agreement was signed.  These items were not related to the defendant and were not related to the joint venture.

34.  The plaintiff’s documents show that the alleged expenditures in the sums of HK$1,660 and HK$115 for octopus card, Disneyland tickets and mobile phone card were incurred in February and March 2010 before the joint venture agreement was signed.  He does not know who went to play in Disneyland.  The plaintiff’s documents in relation to the octopus card top-ups show only some value deposited to 3 different octopus cards.  He does not know what they were about. The situation is the same for the alleged payment for the mobile phone card. Nothing shows that these items are related to the defendant or to the joint venture.

35.  The plaintiff’s documents show that the alleged sum of HK$115 for the printing of name cards were for Mr Yau only.  Although it appears from the relevant invoice that the invoice was billed to the defendant, the defendant had never received any such invoice until documents discovery in this action. 

36.  The alleged sums of HK$850 and HK$3,030 being hotel accommodation of Mr Yam had nothing to do with the defendant.  After the joint venture agreement was signed, Mr Yam worked for Kingson PRC.  All expenses related to Mr Yam should be paid by Kingson PRC, and not the defendant.  Further, Mr Yam also had other business dealings with Mr Yau which were not related to the defendant.  Nothing shows that these sums of HK$850 and HK$3,030 were related to the defendant.

37.  The alleged sum of HK$75,000 being Yam’s consultancy fees were paid for Mr Yam’s service to Kingson PRC.  It was Kingson PRC which should be responsible for paying these amounts.  Mr Yam had never worked for and/or otherwise contracted or commissioned by the defendant to do any work.

38.  The amount of $13,400 was actually spent by him during and in the course of pre-agreement negotiation.  This has nothing to do with the plaintiff.

Analysis of evidence

39.  When giving evidence, Mr Tsui admitted that he had told Mr Yau that the plaintiff would eventually form part of the joint venture.  However, he denied this in the defence and in his witness statement.  In this respect what the stated in the defence and in his witness statement is therefore not truthful.

40.  He admitted that he had prepared the proposed group chart for the joint venture dated 4.9.2009 and had explained the intentions to Mr Yau.  According to the proposed group chart, if implemented, the plaintiff would be wholly owned by the defendant.  As early as 4.9.2009, Mr Tsui told Mr Yau he planned to have the plaintiff, 上海恆利益建裝潢and上海恆利益建幕牆to become part of the joint venture.  So the plaintiff is closely related to the defendant.

41.  Mr Tsui demanded Judy, the plaintiff’s accountant, to send him for his review the plaintiff’s general ledger and financial statements.  He received Judy’s emails on divers dates including the one dated 15.6.2010 with the financial statements and the plaintiff’s general ledger of May 2010 (the “May 10 financial information”).  He reviewed part of the May 10 financial information.  Mr Yau and Mr Tsui had already signed the joint venture agreement on 13.4.2010.  Hence he was no longer a “potential investor” in the joint venture when he reviewed the May 10 financial information.  He asked Judy to use the email account judy.ng@grouphk.com (the “Email Account”) to communicate with him regarding the plaintiff’s business.  He was the administrator of the Email Account and had the authority to oversee all incoming emails to the Email Account.  On 21.9.2010 he told Judy that all emails sent to the Email Account would be copied to the administrator’s account.  Clearly in doing all these things he was exercising management control over the plaintiff’s affairs, and its staff member, namely, Judy.

42.  He admitted that he had received the May 2010 financial information and reviewed part of it.  Items 1 to 7 and 11 to 12 of the claimed items on Schedule 1of the amended statement of claim are based on a schedule entitled “Loan to Kingson Int’l Ltd” in the information.  These items were contemporaneously recorded as expenses paid by the plaintiff on behalf of the defendant.  This is consistent with the terms of the verbal agreement.  If the items in the schedule did not constitute loan to the defendant, it would be natural for him to raise objections.  But he did not do so.

43.  He had also claimed reimbursements from the plaintiff of HK$13,400 spent on a meal on 28.1.2010 to entertain the representatives of the Chinese authorities from Tieling, Liaoning.  San Tang, his secretary, provided his credit card for January 2010 and the invoice from the Excelsior dated 28.1.2010 to Daisy Wong (the plaintiff’s administrative staff).  San Tang would not have done so without his instruction.  The purpose for his doing so is that he wanted to claim reimbursement from the plaintiff for the HK$13,400 he paid with his credit card for the meal with the representatives from Tieling, Liaoning on 28.1.2010.  Clearly this is consistent with the plaintiff’s case that there was a verbal agreement and the promises of refunding by the defendant in respect of reimbursements through the plaintiff.

44.  The claim of HK$13,400 was shown in a schedule entitled “Loan to Kingson Int’l Ltd”, in the May 10 financial information.  He denied having made such a claim for reimbursement from the plaintiff in his oral evidence.  His oral evidence to court for the said claim was that San Tang provided the invoice from The Excelsior and his credit card statement to Daisy Wong without this approval.  He did not know that San Tang had provided the invoice from the Excelsior and his credit statement to Daisy Wong until the start of his litigation.  He admitted he had received and reviewed the May 10 financial information, but he did not read everything in detail.  He was not aware of the said claim being included in the Loan to Kingson Int’l Ltd schedule.  His evidence in this respect is inherently unbelievable.  Credit card statement is a personal property.  How could his credit card statement come into the possession of San Tang without his approval!

45.  In para 42 of his witness statement, he said that he had asked the plaintiff to furnish to him some records and receipts for consideration.  Then he claimed that the “matters were left unattended to until the plaintiff’s filing of this action”.  Under cross-examination, he admitted that he had on 21.9.2010 asked Judy by email to provide him with invoices and receipts for the expenses paid by the plaintiff on behalf of the defendant for verification.

46.  He further admitted that Judy had replied to his email on 24.9.2010. The supporting documents and debit notes for the expenses paid by the plaintiff for the defendant up to 31.8.2010 were sent to him on 1.9.2010.  The supporting documents and debit notes for the expenses paid by the plaintiff for the defendant in 30.9.2010 were sent to him in October 2010.  He admitted that he had received the said supporting documents and debit notes.  He claimed that the matters were left unattended to.  He said that he had called Mr Yau on the phone, telling him that Mr Tsui had made a mistake.  This phone call was not mentioned in his witness statement.  Under paragraph 42 of his witness statement, he said, “But it seems that the matters were left unattended to until the plaintiff filing of this action.”  If he made a phone call to Mr Yau, it means that he attended to the matters.  This simply contradicts his evidence that he had called Mr Yau on the phone.  His evidence is incredible.

47.  Regarding the payments of Mr Yam’s consultancy fee, there is documentary evidence that the plaintiff had issued 3 cheques in the amount of HK$15,000 each to Mr Yam and deposited them in Mr Yam’s bank account in Hong Kong on 8.6.2010, 26.7.2010 and 30.7.2010.  There are for the above 3 payments.  It is indisputable that these payments were made by the plaintiff by cheques to Mr Yam, and the corresponding invoices and receipts issued by Mr Yam’s company were addressed to the defendant.  Mr Yam said that these receipts were all prepared by the plaintiff’s staff and he just signed them without reading them. It is difficult for this court to believe what he said.  At that time these proceedings had not been instituted.  There is no incentive or motive for the plaintiff’s staff to concoct something untrue!

48.  Mr Tsui did not make any response after receiving the supporting documents and debit notes.  If he really had the queries in his mind as shown in his witness statement about the various items claimed by the plaintiff, then he should have raised them with the plaintiff there and then.  But he did not. This is simply because the said documents and debit notes reflect the truth. 

Whether there were actual payments

49.  The defendant submitted that the claimed items were not actually paid by the plaintiff.  It also relies on the “admission” of Mr Yau during cross-examination that the alleged payments were paid by him personally and/or by other persons related to the plaintiff and were not actually paid by the plaintiff to the payees.  I do not attach weight to this “admission”.  It is clear from his oral evidence that he did not handle or prepare the accounting records of the plaintiff.  He did not have personal knowledge to say whether the claimed items were paid by the plaintiff. 

50.  According to Mr Yau, after the termination of the joint venture, he directed the plaintiff’s staff to collect all the supporting documents for the claimed items and record them as amounts due from the defendant at the relevant time. This shows that the claimed items were not actually paid for by Mr Yau himself or by other people and then reimbursed by the plaintiff.

51.  I accept the submissions of the plaintiff’s counsel regarding the payment of various claimed items.   Those submissions were reasonable and logical.  Item 1 of HK$3,020 was airfare and hotel fee.  The invoices were issued by the travel agent KV Travel Limited to the plaintiff.  According to the supporting documents for other claimed items, KV Travel Limited was frequently used by the plaintiff.  It is unlikely that someone else, be it Mr Yau or other staff of the plaintiff, would settle KV Travel Limited’s invoices.  It is more likely than not that the plaintiff had paid for this item at the relevant time.

52.  Item 2 of HK$2,657 was hotel fee for Mr Tsui, Mr Yau and Mr Tsang in Shenyang.  The supporting invoice was issued by Kempinski Hotel Shenyang to DW1’s Group Inc.  Mr Yau’s evidence regarding this invoice is that the hotel rooms were booked in the name of Mr Yam’s Group Inc to take advantage of a discount arrangement with the hotel.  This evidence is supported by Mr Yam’s oral evidence.  It is unlikely Mr Yam’s company would have paid for the item and did not obtain reimbursement from the plaintiff.

53.  Item 3 of HK$3,616.60 was expense for the dinner with the representatives from the authorities of Tieling, Liaoning in Hong Kong on 27.1.2010.  It was Mr Yau’s evidence that he paid for the meal with his own credit card and then presented the receipt to the plaintiff to claim for reimbursement. It is normal commercial practice for staff of a company to pay for entertainment expenses first and then claim reimbursements from their employers, and the company would reimburse these employees.  It is more likely than not that the plaintiff had reimbursed Mr Yau.

54.  Item 4 of HK$22,336 was for the airfare and hotel fees for various persons.  The supporting invoices were issued by KV Travel Limited.  For the same reason referred to under item 1, it is more likely than not that the plaintiff had paid KV Travel Limited for this item at the relevant time.

55.  Item 5 of HK$1,165.50 was sundry expenses incurred for the signing ceremony for the agreement between the defendant and the Tieling authorities on 28.1.2010.  The supporting document was a 雜支現沽單dated 29.1.2010.  It is normal commercial practice for staff of a company to pay for miscellaneous expenses of small amounts first and then claim reimbursements from their employers, and the company would reimburse these employees.  It is more likely than not that the plaintiff had reimbursed those employees.

56.  Item 6 of HK$10,750 was for the airfare and hotel fees for various persons. The supporting invoices were issued by KV Travel Limited.  For the same reason referred to under item 1, it is more likely than not that the plaintiff had paid KV Travel Limited for this item at the relevant time.

57.  Item 7 of HK$1,660 were sundry expenses for the entertainment of certain guests and/or staff.  It is normal commercial practice for staff of a company to pay for miscellaneous expenses of small amounts first and then claim reimbursements from their employers, and the company would reimburse these employees.  It is more likely than not that the plaintiff had reimbursed those employees.

58.  Item 8 of HK$115 was for the printing of name cards.  The supporting document is an invoice to the defendant.  The amount is small.  It is more likely than not that the said invoice was settled by the plaintiff by its petty cash.

59.  Item 9 of HK$850 was the hotel fee for Mr Tsui.  The supporting invoices were issued by KV Travel Limited.  For the same reason referred to under item 1, it is more likely than not that the plaintiff had paid KV Travel Limited for this item at the relevant time.

60.  Item 10 of HK$3,020 was the hotel fee for Mr Yam.  The supporting invoices were issued by KV Travel Limited.  For the same reason referred to under item 1, it is more likely than not that the plaintiff had paid KV Travel Limited for this item at the relevant time.

61.  Items 11 to 15 are consultancy fee to Mr Yau.  By virtue of the cheques drawn in the plaintiff’s name, it is more likely than not that payments of Mr Yam’s consultancy fee were paid by the plaintiff, as per the verbal agreement.

Ratification of contract

62.  Section 32A(1)(b) of the Companies Ordinance provides:-

“(1) Where a contract purports to have been made in the name or on behalf of a company at a time when the company has not been incorporated-

(a) ……

(b)               the company may, after incorporation, ratify the contract to the same extent as if it had already been incorporated at that time and as if the contract had been entered into on its behalf by an agent acting without its authority.”

At the relevant time, Mr Yau and Mr Tsui were the beneficial owners of the entire shareholdings of the defendant and they controlled respectively the directors of the defendant.  In the premises, Mr Yam and Mr Tsui collectively had the power and authority to ratify the verbal agreement.  By their actions of presenting invoices for expenses they incurred for the defendant after the defendant’s incorporation to the plaintiff to claim for reimbursement pursuant to the verbal agreement, they ratified the verbal agreement by conduct.

63.  By asking for further clarification of the plaintiff’s expenses and not denying the verbal agreement or any items under the “Loan to Kingson International” in his email to Judy on 21.9.2010, Mr Tsui had impliedly acknowledged the verbal agreement between the plaintiff and the defendant. 

64.  At the material time, the board of directors of the defendant was under the control of Mr Yau and Mr Tsui.  The treatment of the claimed items as amounts owed by the defendant to the plaintiff was impliedly agreed to by the board of directors of the defendant in that:-

(1)   Mr Yau instructed Judy to record the claimed items as amounts owed by the defendant to the plaintiff in the plaintiff’s accounting records; and

(2)   Mr Tsui did not raise any objection to the recording of the claimed items as amounts owed by the defendant to the plaintiff in the plaintiff’s accounting records after receiving them from Judy.

65.  I accept the plaintiff’s evidence, and I reject the defendant’s evidence where it conflicts with the plaintiff’s evidence.  I am satisfied that the plaintiff has proved, on the balance of probability, its claims against the defendant in the sum of HK$124,200.10.

66.  I order that the defendant do pay, within 14 days from today, to the plaintiff the sum of HK$124,200.10, with interests thereon, at judgment rate, commencing from 1.6.2011 until satisfaction.

Costs

67.  I order that the defendant do pay costs of this action to the plaintiff, to be taxed, if not agreed, with certificate for counsel.