CHINA MINSHENG BANKING CORP., LTD., HONG KONG BRANCH v. TOP POWER ENTERPRISES LTD AND OTHERS

HCA 265/2020

[2026] HKCFI 2698

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 265 OF 2020

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J U D G M E N T

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A.  INTRODUCTION

1.  In this action, the plaintiff claims against the 1^st and 2^nd defendants for the outstanding principal in excess of US$169 million plus fees, interest and default interest pursuant to a facility agreement, and against the 3^rd defendant under a guarantee.

2.  It is undisputed by the parties that the outstanding principal claimed had been advanced and unpaid (together with the relevant interest and fees).  However, the defendants contend that the plaintiff is not entitled to enforce any written agreements between the parties, since, pursuant to an oral agreement, the plaintiff had promised that it would not enforce any loan unless it had advanced a total of US$300 million to the 3^rd defendant in full (“the US$300 Million Loan”).  It is said that this took effect as a condition precedent to the defendants’ obligation to repay the debt and the plaintiff’s right of enforcement. (“the Alleged Oral Agreement”)

3.  Hence, the central issue of the trial is whether the Alleged Oral Agreement had been reached between the parties.

B.  UNDISPUTED BACKGROUND[1]

B1.  The original facility agreement

4.  Pursuant to a facility agreement dated 18 November 2013 (“the Original Facility Agreement”), a US$160 million term loan facility (“Facility A”)  and a US$90 million term loan facility (“Facility B”)  were made available by the plaintiff (as original lender, arranger, agent and security agent)  to the 1^st and 2^nd defendants (as borrowers).

5.  On the same day, the 1^st and 2^nd defendants drew down US$160 million and US$90 million under Facility A and Facility B respectively pursuant to the Original Facility Agreement.

6.  The said loans were for acquiring shares in an Australian company known as Victorian Iron Pty Ltd (“Victorian Iron Ltd”), which owned some iron mines in Australia (“the Mines”).

7.  Under Clause 6.1 of the Original Facility Agreement, all the loans were to be repaid on the “Final Maturity Date”, which was defined in Clause 1.1 thereof to mean 24 months after the first date on which the facility was utilized, i.e. 18 November 2015.

8.  At this time, the 1^st and 2^nd defendants had no relationship with the 3^rd defendant.

B2.   Taking Over of the 1^st and 2^nd defendants’ loans by the 3^rd defendant

9.  On 31 December 2014:

(1)  The defendants entered into an Amendment and Restatement Deed (“the 2014 Amendment Deed”)  to extend the final maturity date of the Original Facility Agreement to 18 November 2017;

(2)  The 3^rd defendant executed a personal guarantee (“the Guarantee”), whereby he guaranteed the repayment obligation of the 1^st and 2^nd defendants under the Original Facility Agreement as amended from time to time (“the Facility Agreement”).

10.  After restructuring of the loan granted under the Original Facility Agreement, the plaintiff waived the requirement for:

(a)  the share charge over 30% shares of Victorian Iron Ltd held by the minority shareholders; and

(b)  the charge over the mining licence held by Victorian Iron Ltd.

11.  On around 20 January 2015, the 3^rd defendant procured two companies controlled by him to acquire all the issued shares in the 1^st and 2^nd defendants.  By these transactions, the 3^rd defendant effectively took over the 1^st and 2^nd defendants’ liability of the loans granted under the Original Facility Agreement.

12.  On 23 January 2015, there was around US$35,540,361.23 in the 1^st and 2^nd defendants’ accounts with the plaintiff.  The 1^st and 2^nd defendants made a payment of US$35 million to the plaintiff in partial settlement of the debt under the Facility Agreement.

B3.  The plaintiff’s loans to the 3^rd defendant’s property investment projects in Singapore

13.  In early 2015, the first series of the 3^rd defendant’s property investment projects in Singapore commenced. It involved the following parcels of land in Singapore:

(1)  Woodlands Avenue 12 (Lot No 6166A/Mk13)  (“Land 1”);

(2)  Jurong West Street 41 (Parcel B)  (“Land 2”);

(3)  Lot number 10533N and Mukim no. 17 at Lorong 6 Toa Payoh / Lorong 4 Toa Payoh (“Land 3”); and

(4)  Lot number 5210T located at Dundee Road (“Land 4”).

14.  Shortly after the 3^rd defendant took over the said loan, the plaintiff made a series of loan facilities (totalling US$141,103,290.58)  to companies associated with the 3^rd defendant in support of his property investment projects in Singapore:

Project	Loan Arrangement
	Loan to	Date	Loan Amount	Actual Drawdown
Land 1	World Modern Investments Ltd (華茂投資有限公司)	11 February 2015	US$27,000,000 (“the World Modern Loan”)	US$23,450,865
Land 2	Jingdian International Trade Co Ltd (金典國際貿易股份有限公司)  (“Jingdian Ltd”)	5 March 2015	US$70,000,000 (“the Jingdian 1st Loan”)	US$11,651,780
Land 3		12 June 2015	S$85,000,000 (“the Jingdian 2nd Loan”)	S$14,054,605 (~US$10.28 million)
Land 4	Global Inv International Co Ltd (環球智富國際有限公司)	17 June 2015	S$131,000,000 (“the Global Inv Loan”)	S$130,822,307.31 (~US$95.71 million)
		Total:	US$255,038,565.80	US$141,103,290.58

15.  However, as the 3^rd defendant’s biddings of Land 2 and Land 3 were unsuccessful, the Jingdian 1^st and 2^nd Loans were repaid very shortly afterwards (on 23 March 2015 and 29 June 2015 respectively).  Only the World Modern Loan and the Global Inv Loan were actually used for investment.

B4.  Further amendments

16.  In around August/September 2015, Mr Lin Zhihong (“Mr Lin”), the then CEO of the plaintiff, left the plaintiff’s employment.

17.  In around December 2015, Mr Wang Chunning (“Mr Wang”), a then project manager of the plaintiff, also left the plaintiff.

18.  In around March 2016, the 3^rd defendant and Ms Du Xiuying (the 3^rd defendant’s sister)  (“Ms Du”)  had a meeting with, inter alia, Mr Huang Minghui (“Mr Huang”), the plaintiff’s then Deputy CEO, in Shenzhen.

19.  On 29 July 2016, Mr Du Yunfei (“Mr Du”)  was appointed as the plaintiff’s new CEO.

20.  In around September 2016, the 3^rd defendant met with Mr Du in Beijing.

21.  Subsequently, between 2017 and 2018, there were multiple rounds of discussion between Mr Du and the 3^rd defendant.  However, the plaintiff had provided no further funding for the 3^rd defendant’s other Singapore property investment projects.

22.  On around 12 November 2017, the extended final maturity date (18 November 2017)  was approaching (see [9(1)] above).  At around that time, the 3^rd defendant and Ms Du met Mr Du in Beijing.  Shortly after the meeting, in around late 2017 / early 2018, the plaintiff agreed to extend the final maturity date for the loans under the Facility Agreement.

23.  The parties then entered into an amendment deed dated 28 December 2017 (“the 2017 Amendment Deed”), which, inter alia, provided the followings:

(1)  Recital (B)  thereof stated that the parties intended to extend the final maturity date and revise certain terms under the Original Facility Agreement;

(2)  The amendments were set out under Clause 2.2, which were to take effect on the “Amendment Effective Date”[2];

(3)  Clause 2.2(a)  thereof extended the final maturity date to 15 November 2019;

(4)  Clauses 2.2(g)  and 6.1(a)  provided for a repayment schedule as follows:

Repayment Date	Repayment amount
17 November 2018	US$80 million
17 May 2019	US$80 million
Final Maturity Date	US$15 million

(5)  Under Clause 5 thereof, the 1^st and 2^nd defendants agreed to prepay US$30 million on or before the “Amendment Effective Date” (“the 2017 Prepayment Amount”). This was a condition precedent for the amendments to take effect.

24.  On 21 March 2018, a waiver letter (“the 2018 Waiver Letter”)  was executed, in which the plaintiff waived the 2017 Prepayment Amount as one of the conditions precedent.  The 1^st and 2^nd defendants in turn agreed to pay the 2017 Prepayment Amount by 5 April 2018.

25.  On the same day, an amendment letter was entered into (“the 2018 Amendment Letter”), which, inter alia, provided for a revised repayment schedule as follows:

Repayment Date	Repayment amount
17 August 2018	US$80 million
17 February 2019	US$80 million
Final Maturity Date	US$15 million

26.  On 17 August 2018, the 1^st and 2^nd defendants were supposed to repay US$80 million, but did not do so.

27.  The plaintiff issued a demand letter on 24 August 2018.

28.  On 17 February 2019, the 1^st and 2^nd defendants were supposed to repay another US$80 million, but again they did not do so.

29.  In around September 2019, the 3^rd defendant met with Mr Du again.

30.  In September 2019, the 3^rd defendant and his partner MCC Land (Singapore)  Pte Ltd (中冶置業新加坡有限公司)  successfully bid for his latest Singapore property investment project (“the Bernam Street Project”).  But the plaintiff ultimately refused to extend any loan to the 3^rd defendant for this project.

31.  In November 2019, the 3^rd defendant met with Mr Du in Beijing again.

32.  On 15 November 2019 (i.e. the Final Maturity Date), the 1^st and 2^nd defendants were supposed to repay the outstanding loan, but they did not do so.

B5.  The 1^st and 2^nd defendants’ repayment

33.  The 1^st and/or the 2^nd defendants had made various repayments under the Facility Agreement as follows:

Date	Nature	Made by	Amount (USD)
23 January 2015	Repayment	1st and 2nd defendants	35,000,000.00
3 February 2015	Interest	1st and 2nd defendants	3,379,802.08
24 July 2015	Interest	1st and 2nd defendants	3,522,780.38
27 July 2015	Interest	1st and 2nd defendants	756,680.56
7 March 2016	Interest	1st and 2nd defendants	4,552,244.34
28 September 2016	Interest	1st and 2nd defendants	4,084,465.49
29 June 2017	Repayment	2nd defendant	1,307,028.96
21 August 2017	Repayment	2nd defendant	3,270,000.00
19 September 2017	Repayment	1st defendant	6,920,319.20
19 October2018	Repayment	2nd defendant	9,232,544.72
29 October 2018	Repayment	1st defendant	19,548,937.03
27 June 2019	Repayment	1st defendant	3,458,447.77
27 June 2019	Repayment	2nd defendant	1,627,504.83

34.  On 9 January 2020, the plaintiff issued a default notice to the defendants, stating that the 1^st and 2^nd defendants had defaulted in payment under the Facility Agreement, and demanded repayment of the outstanding loan.

35.  On 11 March 2020, the plaintiff commenced the present proceedings against the defendants.

C.  THE DEFENDANTS’ CASE

36.  As aforesaid, the outcome of the action hinges on this Court’s finding on the existence of the Alleged Oral Agreement.

37.  As for the circumstances under which the Alleged Oral Agreement came into being and the effect thereof, the defendants pleaded in their Re-Amended Defence that:

“2. In or around August 2014, the 3^rd Defendant met with Mr Lin Zhi Hong (林治洪)  (‘Mr Lin’), the then President (行長)  of the Plaintiff in Hong Kong (‘August 2014 Meeting’).

3. During the August 2014 Meeting, Mr Lin represented to the 3^rd Defendant that:

(1)  There was a defaulted loan owed to the Plaintiff by the 1^st and 2^nd Defendants under the Original Facility Agreement (‘Defaulted Loan’).

(2)  Mr Lin was concerned that if the Plaintiff had failed to recover the Defaulted Loan, it would be detrimental to the Plaintiff’s business performance.

(3)  The 1^st and 2^nd Defendants originally took out the Defaulted Loan, with the principal of USD250 million, in order to acquire a 35% shareholding of Victorian Iron Pty Ltd, a company incorporated in Australia. The investment by the 1^st and 2^nd Defendants still had the potential to thrive.

(4)  The Plaintiff was seeking a suitable investor to acquire the 1^st and 2^nd Defendants and take over the Defaulted Loan.

(5)  The 3^rd Defendant should consider the business opportunity. If the 3^rd Defendant was willing to assist the Plaintiff and resolve the Defaulted Loan, the Plaintiff and the 3^rd Defendant could develop a long-term cooperation relationship to the benefit of both parties.

4. In or around early December 2014, the 3^rd Defendant informed Mr Lin that:

(1)  After due diligence, he considered that the 1^st and 2^nd Defendants’ assets did not have any economic value.

(2)  If the 3^rd Defendant were to take over the Defaulted Loan, his source of funds for repaying the Defaulted Loan would have to originate from his other investments.

(3)  At that time, the 3^rd Defendant was planning to invest in real estate development in Singapore. However, due to foreign exchange control in Mainland China, he experienced difficulty in obtaining sufficient funding for his investment.

(4)  If the Plaintiff agreed to provide US$300 million offshore funding to support the 3^rd Defendant’s property investment projects in Singapore, he could make use of those returns to repay the Defaulted Loan.

5. The 3^rd Defendant’s proposal was accepted by Mr Lin on behalf of the Plaintiff. Mr Lin agreed that the Plaintiff would not demand the repayment of the Defaulted Loan or enforce the security of the Defaulted Loan until the Plaintiff had provided credit of a total amount of US$300 million to the 3^rd Defendant.

6. Accordingly, in or around early December 2014, Mr Lin, on behalf of the Plaintiff and acting as the agent and security agent of the Lenders, reached an oral agreement with the 3^rd Defendant, acting on his own behalf and on behalf of the 1^st and 2^nd Defendants (the shares of which he was going to acquire), (‘Oral Agreement’)  that:

(1)  The 3^rd Defendant shall enter into the Guarantee to guarantee the repayment of the debts owed by the 1^st and 2^nd Defendants under the Original Facility Agreement.

(2)  The Plaintiff shall postpone the due date of the Defaulted Loan by three years. Upon the expiry of three years, the Defendants can further apply for, and will be granted, a two-year extension of the final maturity date.

(3)  In return, the Plaintiff shall provide loans totalling of US$300 million to support the 3^rd Defendant’s property investment projects in Singapore (‘US$300 Million Loan’).

(4)  Before the Plaintiff had fully provided the US$300 Million Loan to the 3^rd Defendant’s property investment projects in Singapore, (i)  the Defendants shall not be required to repay the debt under the Facility Agreement and (ii)  the Plaintiff shall not enforce its rights under the Facility Agreement, the Guarantee and other related security.  It is a condition precedent to the obligation of the Defendants to repay the debt under the Facility Agreement that the Plaintiff had fully provided the US$300 Million Loan to the 3^rd Defendant (‘Condition Precedent’).”

(emphasis added)

38.  In support of his pleaded case, the 3^rd defendant explained in his witness statement that:

“5. 我在2014年8月初來香港談生意，也順道和林行長約吃飯見面。林行長是一位有魄力和有擔當的銀行家，而我也自信是有投資願景的人，我們大家彼此一見如故，交流了對經濟及業務發展的看法。

6. 林行長為人爽快，也有眼光，他當時向我指出，民生銀行當時有一筆逾期貸款的項目未能收回，恐怕變為壞帳，這將不利於銀行的業績。但他覺得這個逾期貸款的項目還是可以盤活和有發展空間的，關鍵在於是哪個有魄力的企業家來接盤，他問我有沒有興趣考慮。對於開展不同業務的可能方案，我們做生意的，自然願意多聽多看。

7. 林行長向我簡單介紹了逾期貸款的背景，貸款的本金是2.5億美元，借款人是兩家公司力信企業有限公司(‘力信’)  (本案第一被告人)  以及景順實業有限公司(‘景順’)  (本案第二被告人)，主要負責人叫曾輝和劉潔。我是在林行長的介紹下，首次認識力信和景順兩家公司。

8. 據林行長的介紹，借款人的這筆貸款主要用來收購澳洲的維多利亞鐵礦公司的35%股權，貸款的抵押品包括了這家澳洲的維多利亞鐵礦公司的股權及探礦的證照等，還有廣東省從化市太平鎮的兩塊土地的抵押。

9. 林行長指出，民生銀行給力信和景順提供的貸款當時已經逾期，2.5億美元本金及利息未能清還。為避免遭受重大的損失，民生銀行正積極尋找辦法來解決力信和景順的該筆逾期貸款，其中一個方式是希望找到有實力的投資者來承接這筆債款。

10. 林行長認為我應有實力來承接這個逾期貸款的項目，希望與本人商討合作的可能性。他並向我表示，如我協助解決力信和景順的該筆逾期貸款，我和民生銀行香港分行建立起互助互利的關係，對往後彼此間的合作亦有幫助。我當場表示樂意考慮。

11. 作為生意人，我們投資任何項目也必定計算成本及代價。如果承接了這筆本金是2.5億美元的債務，我們在項目中必須有相應的收入才能抵償應付的本金及利息，以及本人要在這交易中得到一些利益才會划算。

12. 作為投資的前提，我承接這筆貸款的本金肯定不能在幾年內就還款的。在2014年9月或10月左右，我委託的同事去澳洲維多利亞當地就該鐵礦進行調研，得知力信和景順所持有的鐵礦資產已經沒有任何經濟價值。

13. 因此，要支付力信和景順的貸款本金及利息，必然需要在幾個不同的貸款項目之間拉上補下，讓其他項目的利潤來源作為還款的來源。

14. 我大約計算過，承接這筆貸款的本金2.5億美元，如果貸款可以延長5年的話，利息大概要付7,000 – 8,000萬美元左右。

15. 還款的來源方面，我當時預計要在我的其他投資項目裡面獲得。但我的投資項目也有資金需求，當時正在新加坡物色的房地產投資項目。可是，受到國內外滙管制的影響，我不能很容易地為我在新加坡的投資項目尋找到合適的資金。所以，如果民生銀行香港分行願意為我在中國內地境外提供3億美元貸款支持新加坡的房地產投資項目，這樣對我的投資會有實質的幫助，而且力信和景順的還款來源也能得到保證。

16. 我向林行長交流了以上的想法，若能獲得民生銀行香港分行在中國內地境外貸出美元資金讓新加坡的房地產投資項目投入順利開展，預計房地產投資項目的收入回報將能夠用於償還力信和景順的該筆逾期貸款的欠款。

17. 林行長也覺得我的財務計算很合理。首先，民生銀行香港分行既要減少問題貸款，但也是要發展業務的，是爭取和客戶之間的雙贏。因此，民生銀行香港分行是希望我來支持解決力信和景順的該筆逾期貸款，並不會要我做虧本生意的。當然，這段期間 (即在完全提供關於新加坡房地產項目的貸款之前)  不會要求我還款，也不會執行抵押和個人擔保。同時，民生銀行香港分行必會協助我確保貸款還款的資金來源。

18. 具體實施的方案，林行長代表民生銀行香港分行向本人口頭承諾了，為本人於新加坡的房地產投資項目一共提供3億美元的貸款。

19. 為了支持該投資項目及保證還款來源，林行長更代表民生銀行香港分行清楚承諾，在提供所有關於新加坡房產貸款之前，民生銀行將不會執行該筆預期貸款的相關抵押及擔保。

20. 林行長告訴我因為每年12月都是民生銀行香港分行年底的業績結算，希望我儘快在12月底解決力信和景順的這筆逾期貸款，這樣民生銀行香港分行在當年的業績便會比較理想。

21. 為了加快進度，林行長表示民生銀行香港分行的各部門及律師全面協助辦理我承接力信和景順的貸款所需的一切法律手續及所需的文件。

22. 就貸款期限來說，林行長指出不能一下子拿到5年貸款期限，可以第一次先把貸款期限定為3年，將來接近到期時再辦延期2年便可以了。

23. 總而言之，在約12月初的時候，林行長代表民生銀行香港分行跟我達成以下口頭協議 (‘口頭協議’):

23.1 我同意承接力信和景順的貸款2.5億美元，並簽署相關的個人擔保。

23.2 力信和景順的還款時間將首先設定為3年後，到期後可以再辦2年的延期。

23.3 民生銀行香港分行承諾及同意將逐步向我的新加坡房地產投資項目提供3億美元貸款。

23.4 民生銀行香港分行在向我的新加坡房地產投資項目提供3億美元貸款之前，民生銀行香港分行不會要求力信、景順和我償還貸款，也不會執行力信、景順貸款項下的抵押和本人的擔保。換句話說，民生銀行香港分行完全提供3億美元貸款是力信、景順和我償還貸款的先決條件。

24.  基於口頭協議，特別是民生銀行香港分行將逐步向我於新加坡的房地產投資項目在中國內地境外提供美元貸款為前提，我同意承接力信和景順的貸款。當時基於我對林行長的信任，我並沒有堅持用書面的方式記錄口頭協議。因為如果需要形成書面記錄的話，整個過程則會比較麻煩和需時。”

D.  CREDIBILITY OF WITNESSES

D1.  General principles

39.  The approaches for assessing the credibility of witnesses are well established, and are summarised as follows[3]:

(1)  Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2)  Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(3)  The court will also attach importance to the shift of a party’s case, consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency may be tested by a comparison between the witness’ oral testimony and his/her witness statement, and also his/her answers given to different questions during examination at the trial;

(4)  The court should consider a witness’ motive for deliberately not giving truthful testimony.  For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;

(5)  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;

(6)  On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility; 

(7)  The court should also consider whether a witness is evasive, argumentative and/or tends to give tangential speeches so as to avoid questions while being cross-examined;

(8)  While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.

40.  Since this trial concerns the question of existence of the Alleged Oral Agreement, and turns on the Court’s assessment of the credibility of witnesses, what DHCJ Jin Pao SC remarked in Leung Chin Sing, Rabo & Another v Ko Chun Hay, Kelvin [2021] HKCFI 2242 (a case in which the plaintiffs were suing for breach of an alleged oral finder’s fee agreement)  is relevant:

“42. 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.

43.  In Gestmin SGPS SA v Credit Suisse (UK)  Limited [2013] EWHC 3560 (Comm)  at [16-20], Leggatt J (as he then was)  set out a detailed analysis on the unreliability of human memory and the impact on the civil litigation process on recalling past events.  In view of these considerations, at [22], it was held that the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.  These observations were cited with approval by Kwan VP in Galleria (Hong Kong)  Ltd v DBS Bank, Hong Kong Branch [2021] HKCA 611 at [175].  I have found these observations to be of assistance and particular relevance in approaching the witness evidence in this case, and I respectfully agree with them.”

41.  The observations in [43] of Leung Chin Sing, Rabo & Another (supra)  are particularly important in the present case in which the witnesses have been asked to recall events which took place a long time ago.

D2.  The plaintiff’s witnesses

42.  The plaintiff has called a total of 4 witnesses, namely, Mr Huang, Ms Lei Jiamei (“Ms Lei”), Mr Tang Hongyang (“Mr Tang”)  and Mr Du.

43.  As pointed out by Mr Ng and Mr Chan for the defendants, none of these witnesses had first hand knowledge of the negotiations between Mr Lin and the 3^rd defendant, when the Alleged Oral Agreement was allegedly made.  Therefore, in the circumstances of the present case, the oral evidence of the plaintiff’s witnesses is of much less importance.

44.  Be that as it may, insofar as it is necessary, I find that all the plaintiff’s witnesses are credible witnesses.  They are all forthcoming in their evidence, and are apparently very fair witnesses. 

D3.  The defendants’ witnesses

45.  The same cannot be said in relation to the witnesses called by the defendants, namely, the 3^rd defendant himself, Ms Du and Mr Chi Haidong (“Mr Chi”).  I will give my view on their credibility generally below.

D3.1  The 3^rd defendant

46.  With greatest respect, I find that the 3^rd defendant is an unreliable and incredible witness.  It is adequate to refer to the following examples for the purpose of demonstrating why I make this finding.

(1)  He is an evasive witness.  For example, he evaded the question of whether the plaintiff is a regulated financial institution, and only agreed to give a positive answer (which must be an obvious answer)  after he had been asked the question 3 times.  In my view, this is a simple question which he must be able to answer.  He initially refused to do so apparently because he knew that a truthful answer would be detrimental to his case.

(2)  There are various internal inconsistencies in his evidence (which may be shown by a comparison between his oral testimony and his witness statements)  on key matters, which in my view cannot be explained by lapse of time. For example:

(a)  Although according to his witness statement, he only met with Mr Lin once at a dinner during August 2014 in which they discussed about taking up the loans under the Original Facility Agreement[4], he supplemented in court that he also met Mr Lin on the following day in the latter’s office.  He explained that he did not make that clear in his witness statement because he considered that the meeting on the following day should be considered together with the dinner meeting as the “same meeting”.  This does not make sense and I reject this explanation;

(b)  He stated in court that he had pointed out to Mr Lin at the meeting in early August 2014 in the latter’s office that Victorian Iron Ltd had no economic value.  This contradicts his evidence in his witness statement which is to the effect that he only knew that the company had no value by around September/October 2014 after he had sent a team to Australia to consider the economic value of the company and the Mines.  Such evidence in court also contradicts his evidence in paragraph 10 of his witness statement that he “當場表示樂意考慮” Mr Lin’s proposal for him to take up the loans of the 1^st and 2^nd defendants;

(c)  He stated in court that Mr Lin had shown him an evaluation report of the Mines in Melbourne owed by Victorian Iron Ltd during the meeting in early August 2014.  However, this was not mentioned in his witness statement at all;

(d)  He also stated in court that it was upon Mr Lin’s suggestion that he sent a team to Australia to consider the economic value of the company and the Mines.  This in effect contradicts his evidence in his witness statements in which he had never mentioned that the investigation was done upon Mr Lin’s request.  Rather, my view is that a correcting understanding of his witness statements is that it was he himself who formed the idea and decided to send a team to investigate;

(e)  He stated in court that he had in fact requested Mr Lin to reduce the Alleged Oral Agreement to writing, but Mr Lin refused due to the urgency of the matter at the time.  Such request was not mentioned in his witness statement at all;

(f)  He stated in court that, in around November/December 2014, neither he nor any of his companies needed capital. This contradicts paragraph 33 of his witness statement, which stated that his company 唐山港陸鋼鐵有限公司 was applying for a loan from the plaintiff at the time[5].

(3)  He also contradicted himself as to whether he had read the evaluation report of Victorian Iron Ltd which Mr Lin allegedly showed him during the meeting in early August 2014.  He initially mentioned twice in court that he had read it, but then changed his evidence to say that he in fact did not.

(4)  He also tended to give long answers to simple questions.  However, the problem is that there were many occasions when those long answers were not directly related to the questions at all, but just repeated his own story.

47.  As far as the new evidence given by the 3^rd defendant is concerned, his counsel argued that the plaintiff’s criticism of such evidence is unjustified because the 3^rd defendant was only “topping up” the evidence given in his witness statement, and that the 3^rd defendant could not anticipate all the questions which would be covered in cross-examination, and as a result, it is unfair to comment adversely on the 3^rd defendant’s failure to include certain matters in his witness statement, and allege that he had fabricated certain evidence while he was in the witness box. 

48.  In my view, the court of course should not jump immediately to the conclusion that certain evidence is a recent fabrication solely because such evidence is given for the first time by the witness at the witness box.  Whether the court should come to that conclusion depends on the circumstances.  For example, if the “top-up” evidence is important and obviously relevant in the case, then it would raise a big question mark as to why it was only mentioned at the witness box but not in the witness statement. In the present case, one of the obvious questions which the defendants have to address must be why the Alleged Oral Agreement, given its importance to the 3^rd defendant, was not reduced into writing.  If it were the 3^rd defendant’s evidence that a request had been made by him to reduce the agreement into writing but rejected by the plaintiff, it would only be natural if the factual matters relating to such a request were included in the witness statement, particularly when he in fact had explained why the Alleged Oral Agreement was not included as one of the terms in the written agreement (see paragraph 24 of his witness statement quoted in [38] above).  The fact that he did not do so, and then “added” such evidence only when he was cross-examined, is highly suspicious to say the least.  Coupled with the other features of his evidence, in respect of which I have quoted a number of examples above, the plaintiff’s counsel are totally justified to criticize the quality of the 3^rd defendant’s evidence.

D3.2  Ms Du

49.  In my view, Ms Du is an unreliable, if not incredible, witness.

50.  Firstly, she admitted that before she prepared her own witness statement, she had read the 3^rd defendant’s witness statement, and worse still, she said that she and the 3^rd defendant had put their heads together to “collectively recall” what happened at the material time.  That means her evidence is not her independent recollection of what happened back then.  That apparently affects the reliability of her evidence.

51.  Secondly, as pointed out by the plaintiff’s counsel, her witness statement is very short, and merely confirmed specific paragraphs of the 3^rd defendant’s witness statement regarding matters within her supposed personal knowledge.

52.  In Ho Sin Ying v. Chan Yui Ling (HCA 90/2010, unreported, 13 July 2012), DHCJ Saunders had made the following observations[6]:

“58. […] where witness statements are presented to the court which are substantially identical, it will often be unlikely that the court will be able to place any weight at all on either witness.

[…]

60. Too often solicitors forget that the purpose of a witness statement is for the witness to ‘tell their story’ to the court. The pre-prepared, pre-filed, witness statement is a substitute for the evidence in chief of a witness. The only proper way in which such a witness statement can be taken is for a solicitor to sit with the witness and question the witness, in the same way as evidence would have been elicited in the past in chief. From the answers to the questions the narrative, or ‘the story’, is built up in the form of a witness statement.

61. The fact that our system now requires full disclosure of a party’s case, in part by the exchange of witness statements prior to the trial, is not a license to solicitors to tailor or engineer witness statements in order that they may corroborate each other. If they do so, it will be transparent, as it is in this case, and it is likely that the court will reject the evidence of the witnesses.

62. Mr Chong sought to justify the identical paragraphs by saying that:

‘It is common in the legal profession that witness statements are prepared by solicitors upon the instructions given by the witnesses. The presentation of one’s evidence in a witness statement such as the choice of words, phrases, expressions and formatting preferences is usually a matter of style determined by solicitors who know much better than the witnesses as to the relevance and weight of different events and matters.’

63. With respect to Mr. Chong, that is no answer. It is right that solicitors know better than witnesses the relevance and the weight of different events and matters. That knowledge will define the questions that are asked of the witness in the course of the preparation of the witness statement. I accept that a solicitor may determine the formatting of a witness statement.

64.  But it is not for a solicitor to ‘choose’ the words, phrases, or expressions in a witness statement.  Those are all matters for the witness.  Where witness statements are identical it is difficult if not impossible to believe that the witnesses have independently provided, what Mr Chong correctly described as, the ‘raw materials’ for the preparation of the witness statement.”

53.  In my view, the above comments are equally applicable to the situation where a witness merely confirms the correctness of the statement of another witness, like what Ms Du did.  This is because in effect Ms Du is doing the same thing, as if she had copied part of the 3^rd defendant’s witness statement and treated it as her own.

54.  Thirdly, while Ms Du initially confirmed in court unequivocally that she was the manager of the 1^st and 2^nd defendants (she also stated without reservation in her witness statement that she assumed that post), she changed her evidence at the trial and alleged that she was not formally appointed as such, and that this was a title which she gave herself and the 3^rd defendant did not know about that.  

55.  When she was cross-examined on whether she was aware that the 3^rd defendant had testified in the witness box that she was not the manager of the 1^st and 2^nd defendants, she confirmed twice that she knew about that, but only to change her testimony subsequently, alleging that she in fact was unaware of the 3^rd defendant’s evidence on this matter.

56.  The defendants’ counsel submitted that whether Ms Du was the manager of the 1^st and 2^nd defendants is a trivial matter.  With respect, that misses the point.  The crux of the matter is that the 3^rd defendant had told Ms Du what he had testified in court[7], and Ms Du had tried to corroborate his evidence.  In my view, that must adversely affect the weight which the Court should place on her evidence.

57.  Fourthly, Ms Du alleged for the first time while she was in the witness box that she had asked the 3^rd defendant if the Alleged Oral Agreement could be reduced into writing.  I accept the plaintiff’s argument that it is clear that the 3^rd defendant and Ms Du had coordinated this improvised explanation for the absence of written documentation, and the fact is that they had never talked about this matter at the material time back in 2014.

58.  Fifthly, Ms Du alleged that she did not know the issue of the present case when she prepared her witness statement.  Given she is the 3^rd defendant’s sister, and since she had been assisting the 3^rd defendant in his business, the alleged ignorance on her part is simply incredible.  That, in my view, also casts great doubt on her evidence generally. 

D3.3  Mr Chi

59.  At all material times, Mr Chi was an executive director of KMG Resources Pty Ltd, a company beneficially owned by the 3^rd defendant.

60.  I also find that Mr Chi is an unreliable and incredible witness for the following reasons:

(1)  He always used “not recall” as an answer during cross-examination.  Even bearing in mind that the events which he was cross-examined on happened long time ago, I do not believe that he really could not recall the relevant events.  Rather, he was evasive;

(2)  Even if I am wrong in the above view, and if he indeed could not recall many of the matters asked, his poor memory should at least cast doubt on the reliability of his evidence;

(3)  In fact, he was also evasive when he was asked how much he had paid for the alleged purchase of KMG Resources Pty Ltd and when he bought the company, which admittedly was a highly valuable company at the time of the transaction.  He said he had forgotten the amount paid and when he bought it.  This is incredible;

(4)  There was an occasion when he even refused to answer a question (whether the 3^rd defendant instructed him to take over Victorian Iron Ltd approximately between June/July 2015 and August 2015)  on the basis that his answer would have to be based on “logical inference”.

E.  DISCUSSION

E1.  Credibility of the defendants’ witnesses

61.  It cannot be disputed that the defendants bear the burden to prove the Alleged Oral Agreement.  As aforesaid, this turns on the Court’s assessment of the credibility of the defendants’ witnesses.

62.  I have found above that none of the defendants’ witnesses is credible or reliable. 

63.  It follows that this Court does not accept their evidence on the existence of the Alleged Oral Agreement.

64.  That would be the end of the defence case.

65.  Be that as it may, it should be pointed out that the defence case is in fact not credible for many other reasons, which are explained further below.

E2.  No mention of the Alleged Oral Agreement in the 2014 Amendment Deed

66.  It is undisputed that the Alleged Oral Agreement is nowhere to be found in the 2014 Amendment Deed.

67.  In my view, if the Alleged Oral Agreement ever existed, given its importance to the defendants, the 3^rd defendant would have insisted that it be inserted into the 2014 Amendment Deed.  However, the fact is that it was nowhere to be found in the 2014 Amendment Deed. It is thus simply incredible that there was any Alleged Oral Agreement.

68.  In this regard, the 3^rd defendant had given a number of explanations as to why the Alleged Oral Agreement could not find its way into the 2014 Amendment Deed.

69.  He explained in paragraph 24 of his witness statement that:

“[…] 當時基於我對林行長的信任，我並沒有堅持用書面的方式記錄口頭協議。因為如果需要形成書面記錄的話，整個過程則會比較麻煩和需時。”

70.  In my view, given the amount at stake, it is incredible for the 3^rd defendant not to insist on including the Alleged Oral Agreement in the 2014 Amendment Deed because it was “troublesome” and “time-consuming”.

71.  As far as the time factor is concerned, it should be borne in mind that the 3^rd defendant was not in a hurry in concluding the deal by the end of December 2014.  In other words, the time factor did not concern him.

72.  Even if the 3^rd defendant’s evidence (that Mr Lin really wanted to complete the deal by the end of December 2014 so as to make the overall business performance of the plaintiff for the year 2014 looked better (“林行長告訴我因為每年12月都是民生銀行香港分行年底的業績結算，希望我儘快在12月底解決力信和景順的這筆逾期貸款，這樣民生銀行香港分行在當年的業績便會比較理想”))  is accepted, it is also his evidence that Mr Lin had promised that he would mobilize all departments, staff, and lawyers of the plaintiff to do everything in facilitating the process of preparing the relevant documents and completing all legal procedures (“為了加快進度，林行長表示民生銀行香港分行的各部門及律師全面協助辦理我承接力信和景順的貸款所需的一切法律手續及所需的文件”[8]). In other words, “troublesome” and “time-consuming” simply cannot be the reasons for not including the Alleged Oral Agreement in the legal documents.  After all, the terms of the Alleged Oral Agreement are not complicated.

73.  The 3^rd defendant also alleged that he trusted Mr Lin and the plaintiff.  He had this to say in paragraph 26 of his witness statement:

“[…] 民生銀行是知名的銀行，林行長也是非常卓越和知名的銀行家，因此我對他和民生銀行都是非常信任的。因此，我也全面配合他們的工作及業務需要。”

74.  In my view, it is incredible that an experienced businessman like the 3^rd defendant would, based on the so-called trust, agree to abandon all protections given to him by way of the Alleged Oral Agreement.

75.  In relation to the “trust” which he allegedly had for Mr Lin, it should be borne in mind that the 3^rd defendant only met Mr Lin for the first time in August 2014, and had only had a few meetings with Mr Lin since then until December 2014.  The 3^rd defendant also accepted that he was not old friend or business partner with Mr Lin, and that they did not have any long-standing relationship as of December 2014.  It is thus inconceivable that the 3^rd defendant would act upon such a “trust” in such a way.

76.  At the trial, the 3^rd defendant further explained that he had in fact requested Mr Lin to include the Alleged Oral Agreement in the 2014 Amendment Deed, but Mr Lin refused because of the urgency of the matter.

77.  As explained in Section D3.1 above, I find that this new allegation is incredible, for it would have been included in the 3^rd defendant’s witness statement if it were the truth.

78.  Furthermore, even if the agreement had to be signed by the end of 2014, there was no urgency as such: the first draft of the 2014 Amendment Deed was sent by the plaintiff to Ms Du on 19 December 2014 for comment, and the finalised version was only executed on 31 December 2014.  That means there were 12 days for the parties to revise the drafts.  That would be enough even if the public holidays in between are taken into account.

E3.  No mention of the Alleged Oral Agreement in the subsequent transaction documents

79.  Even if there were any urgency in the matter in December 2014, such urgency would no longer exist after the 2014 Amendment Deed had been executed.  However, the fact is that the Alleged Oral Agreement was not found in any subsequent documents executed by the parties, for example, the 2017 Amendment Deed, and the 2018 Amendment Letter.

80.  In fact, if the Alleged Oral Agreement existed, none of those documents would have been necessary because the defendants were not required to make any repayment yet at the material time, before the satisfaction of the alleged condition precedent.

81.  But the fact is that, by virtue of the 2017 Amendment Deed, the 1^st and 2^nd defendants were obliged to repay the plaintiff according to the following schedule:

Repayment Date	Repayment amount
17 November 2018	US$80 million
17 May 2019	US$80 million
15 November 2019	US$15 million

82.  Further, pursuant to the 2018 Amendment Letter, the 1^st and 2^nd defendants’ obligations to repay were revised as follows:

Repayment Date	Repayment amount
17 August 2018	US$80 million
17 February 2019	US$80 million
15 November 2019	US$15 million

83.  The aforesaid payment obligations are plainly inconsistent with the Alleged Oral Agreement.

E4.  Repeated repayment of principal and interest

84.  It is undisputed that the 1^st and 2^nd defendants had repeatedly made payments for principal and interesttotalling around US$96 millionsince early 2015 up to June 2019 (see Section B5 above).

85.  The 3^rd defendant had given a number of explanations as to why these repayments were made despite the plaintiff’s failure to satisfy the alleged condition precedent.

86.  Firstly, he stated that he made these repayments in order to maintain a good relationship with the plaintiff, so as to foster the smooth processing of the US$300 Million Loan as promised.  He said it was particularly necessary after Mr Lin had left the plaintiff on 31 August 2015, and after Mr Du became its new CEO in July 2016, as he was keen to maintain a good relationship with the plaintiff’s new management.

87.  The extreme weakness of such an assertion would be exposed once we take a look at the table under Section B5 above.  It can be seen that the 1^st and 2^nd defendants made repayments of interest (totalling around US$7.6 million)  in February and July 2015, that is, during the time when Mr Lin was still the CEO of the plaintiff.

88.  Furthermore, if the plaintiff had already promised to lend the 3^rd defendant US$300 million, there was no need for the 3^rd defendant to provide any “sweetener” to facilitate the further grant of the loan.

89.  Attention should also be drawn to an email dated 16 June 2015 sent by Mr King Tsao, who visited Singapore and conducted site visits in relation to the Jingdian 2^nd Loan and the Global Inv Loan in around June 2015.  In the said email which was his internal report, he stated that he had informed the 3^rd defendant that the plaintiff would “not increase the current exposures without solid ground and justifications”. Although the 3^rd defendant denied that Mr Tsao had ever said this to him, I do not accept his evidence.  I accept that it is more likely than not that what was stated in the email, which was a contemporaneous document, represents the truth.  The point here is that, if the 3^rd defendant had been told that no further loan would be granted to him without solid justification, he would not have made the further repayments subsequently if there was indeed any Alleged Oral Agreement. 

90.  Secondly, the 3^rd defendant claimed that the payments were made to relieve the plaintiff from internal half-yearly or annual assessment of business performance.  With respect, this explanation does not make sense.  First of all, this is an internal matter which should not bother an outsider like the 3^rd defendant.  Furthermore, on the defendants’ own case, the plaintiff must be taken to have agreed that no repayment shall be made under the Facility Agreement until the US$300 Million Loan was fully advanced.  On this basis, there ought to have been no internal assessment pressure requiring the plaintiff to chase for any repayment in the interim.

E5.  Negotiations in July 2017

91.  It is common ground that the plaintiff had sent demand letters to the defendants in March 2017 by reason of the defendants’ failure to pay interest pursuant to Clause 8.2 of the 2014 Amendment Deed.

92.  After that, parties engaged in negotiations in July 2017.

93.  On 18 July 2017, the plaintiff’s Ms Wang Yunjia (“Ms Wang”)  sent a repayment proposal to Ms Du for her consideration.

94.  By an email sent by Ms Du to Ms Wang dated 20 July 2017, Ms Du wrote:

“关于力信&景顺展期业务，在2017 年11 月底完成合计归还4000 万美金贷款本金后，对剩 余1.75 亿美元贷款本金进行展期处理时，我司对该贷款展期条件申请如下: 1、贷款重组日对此笔贷款原欠息、罚息等一切费用予以减免; 2、贷款本金减免20%; 3、贷款期限在原授信期限上展期 24 个月，授信到期日为2019 年11 月17 日; 4、贷款利息按照美元三个月Libor+0.7%计算，免管理费，利随本清。除上述条件外，其余保证担保、抵质押担保条件按贵行要求执行。

上述条件为我公司慎重考虑后提出，望贵行予以批准为盼。”

(emphasis added)

95.  On 27 July 2017, Ms Du sent another email to Ms Wang, with the following content:

“关于力信&景顺展期业务，经过杜总与贵行的沟通，对剩余1.75亿美元贷款本金进行展期处理时，我司对该贷款展期条件申请如下: 1、贷款重组日对此笔贷款原欠息、罚息等一切费用予以减免; 2、贷款期限在原授信期限上展期24个月，授信到期日为2019 年11 月17 日; 3、本金保持不 变，免除后期贷款利息，免管理费，到期还本。除上述条件外，其余保证担保、抵质押担保条件按贵行要求执行。

上述条件为上次回复展期条件后与贵行沟通后我公司提出条件，望贵行予以批准为盼。”

(emphasis added)

96.  Ms Du initially said in court that it was she who came up with the above proposed terms as contained in the emails dated 20 July 2017 and 27 July 2017 respectively. 

97.  However, she changed her evidence subsequently, and alleged that those terms were in fact suggested to her by Ms Wang (who allegedly drafted the emails), and such terms were arrived at after some internal discussions within the plaintiff.

98.  Ms Du’s evidence in this aspect is totally incredible and I reject the same.

99.  The lie is exposed by the undisputed fact that, on 3 August 2017, Ms Wang sent a final proposal to Ms Du, which is different from the proposals made by Ms Du in the above emails.  If Ms Du was telling the truth, then that means the plaintiff had asked the defendants to put forward proposals just to reject them one after another.  This is absurd.

100.  Further, as the emails show, Ms Du was “applying” to the plaintiff for certain concessions, which she “sincerely hoped the plaintiff would accept” (“望贵行予以批准为盼”).  If the defendants were not obliged to repay the loans in the first place by reason of the Alleged Oral Agreement, she would not have worded the emails in such a way.  Indeed, she did not have to ask for mercy at all. 

101.  The 3^rd defendant gave a different story.  He alleged that the wordings of the emails were provided by Mr Du (the plaintiff’s CEO).  This is equally incredible for the same reasons explained above.

E6.  Tender for the 1^st and 2^nd defendants’ loans in 2019

102.  In October 2019, the plaintiff sought to sell the 1^st and 2^nd defendants’ loans by tender.  Jingdian Ltd (which was the 3^rd defendant’s company)  was invited to submit a tender.  There is no dispute that Jingdian Ltd did in fact participate in the auction. 

103.  I accept the plaintiff’s argument that the 3^rd defendant’s willing participation in the auction – with no apparent objection or mention of the Alleged Oral Agreement – is inexplicable if the Alleged Oral Agreement existed.  This is because the 3^rd defendant knowingly exposed himself to immediate enforcement by third-party distressed debt investors, which are not privy to or bound by the Alleged Oral Agreement.  If the debt were assigned to any of these investors, the debt would be immediately enforceable against the defendants and the securities provided.  Put it in another way, if the Alleged Oral Agreement existed and suspended all repayment obligations until US$300 million was advanced, he would have immediately and strenuously objected to the public auction himself.  He would have protested that the debt was not yet due and therefore not assignable, and that auctioning it to third parties who could enforce it immediately would breach the Alleged Oral Agreement. The complete absence of any such objection demonstrates that no such agreement existed.

104.  The 3^rd defendant explained that the auction exercise was intended to reduce the principal payable.  This explanation is rejected. This is because there was no guarantee that he would succeed in bidding for the debt.  If he lost to someone else, the debt would become immediately enforceable with no “principal reduction” as intended.  Further, if the plaintiff agreed to reduce the principal repayable, there was no need for the parties to take so much trouble.  They could have just entered into a deed for this purpose.

105.  The defendants’ counsel argued that, in fact, the correct legal position is that the successful bidder would have to take the debt subject to equity.  Therefore, the Alleged Oral Agreement could still be raised by the defendants as a defence. 

106.  The problem with this argument is that, even if the defendants’ counsel are correct, there is no evidence that the 3^rd defendant knew about such “correct legal position” at the material time.  Therefore, his conduct of agreeing to participate in the auction may still be taken into account for the purpose of supporting the finding that there was in fact no Alleged Oral Agreement in existence. 

E7.  Commerciality of the transaction

107.  One of the matters which this Court needs to consider is the commerciality of the transaction. 

108.  It is undisputed that the 3^rd defendant had no acquaintance with the 1^st and 2^nd defendants or their controllers prior to the introduction to him by Mr Lin in August 2014.  The defendants’ counsel therefore submitted that there was no reason why the 3^rd defendant would help the 1^st and 2^nd defendants shoulder their huge liability under the Original Facility Agreement, and that there must be something in return for the 3^rd defendant that caused him to agree to take over their US$250 million worth of debts.  It was suggested by the defendants that there were only 2 possibilities: either the Mines controlled by Victorian Iron Ltd or the Alleged Oral Agreement.

109.  It was further submitted by the defendants that since the 3^rd defendant firmly believed that the Mines had no economic value at the time when the 3^rd defendant took over the 1^st and 2^nd defendants’ loans, the Mines could not have been the 3^rd defendant’s reason for doing so.

110.  The question here is: Did the 3^rd defendant really take the view back in 2014 that the Mines did not have any economic value as alleged?

111.  In my view, the answer must be “negative”.

112.  In this regard, reference should be made to an internal document of the plaintiff entitled 《景順實業重組貸款問題回覆》.  It was stated therein that one of the reasons why the 3^rd defendant was willing to take over the subject loans was because his company was planning to invest in a “direct reduced iron” (“直接还原铁”)  project in Dubai, and therefore the iron ore of Victorian Iron Ltd would serve as raw material reserve.  In my view:

(1)  The plaintiff must have been told by the 3^rd defendant about such a plan, otherwise there was no way that the author could put that in the document;

(2)  This is a contemporaneous document and therefore the Court should give full weight to the content thereof.  It should also be noted that the said document is an internal document of the plaintiff prepared for the purpose of considering the 3^rd defendant’s taking over of the subject loans.  There is no reason why (and there is no suggestion that)  the author of the document had to misrepresent the actual situation in the document;

(3)  W hether as a matter of fact Victorian Iron Ltd had any economic value objectively at the material time is irrelevant.  The crux of the matter is whether the 3^rd defendant himself considered in 2014 that Victorian Iron Ltd really had no economic value.  If he thought so, he would not have told the plaintiff about his intention to use the iron ore as raw materials for his project in Dubai.

113.  During cross-examination, the 3^rd defendant claimed for the first time that he never had any plan for any “direct reduced iron” project in Dubai.  This evidence is rejected. 

114.  In paragraph 11 of his supplemental witness statement, the 3^rd defendant stated that:

“雷小姐在證人陳述書的第18段還有另一個不準確的部分。雷小姐引述文件內容，指出我願意承擔力信和景順的逾期貸款的原因包括 ‘港陸[…]打算通過 (以維礦收購)  收購澳大利亞維多利亞州的礦山以作原材料儲備。該項目的可行性正在接受評估’。這份文件並沒有標明落款日期。不過，可以肯定的是，經過實地考察、並瞭解維礦公司維礦項目的具體情況後，我們得出的總結是維礦項目沒有任何可投資開採價值或任何經濟價值的。因此，維礦項目的鐵礦可以用作港陸原材料儲備的說法並不屬實。”

(emphasis added)

115.  The relevant part of part 18 of Ms Lei’s witness statement reads:

“根据《景顺实业重组贷款问题回复》文件中记录的内容，风险管理委员会提出的问题之一是为何当时由杜先生所控制的港陆愿意承担本案贷款。我们在回复中解释说，杜先生愿意承担对本案贷款的责任是出于下列原因:

(a)  […]

(b)  […]

(c)  港陆打算重建杜拜的铁矿项目，并打算通过 (以维矿收购)  收购澳大利亚维多利亚州的矿山以用作原材料储备。该项目的可行性正在接受评估。”

(emphasis added)

116.  It is obvious that while the 3^rd defendant dealt with Ms Lei’s assertion that he had a plan to use the iron ore as raw materials in his project in Dubai, he only refuted the same by saying that the Mines had no economic value.  He did not dispute the fact that he had a project in Dubai at all.  In my view, if there was no “project in Dubai” whatsoever as he alleged in court, he would have referred to that in the said paragraph.  In my view, that new evidence is apparently a recent fabrication. 

117.  Insofar as it is argued by his counsel that “[the 3^rd defendant] was plainly denying the existence of any projects (Dubai or anywhere)  to acquire the Mines and there was no acknowledgement of any alleged Dubai project”[9], with respect, this is made to be rejected.  The meaning of the paragraph quoted above is clear.

118.  For the purpose of proving that the Mines had no economic value, the defendants have called Mr Chi to give evidence.  In his witness statement, he purportedly explained why it was concluded after the investigation done in September/October 2014 that the Mines had no exploration value at all.  He then concluded at paragraph 11:

“總括來說，在2014年底的時候，维礦公司在澳洲維多利亞的鐵礦只有探礦證 (在澳洲申請勘探權益很容易，幾十萬澳幣便可以拿到數個。它的性質只是一個有年限的權益，不是擁有土地)。加上沒有可選技術、運營成本高、水、電、路、港口和環保等因素的不確定性，投資成本巨大，是毫無經濟價值的。我在澳洲考察實地之後就上述結論如實向杜總匯報。由於杜總比較忙，我一般都是電話彙報細節，文件中只有結論。當時準備的2014年2月的每月行政報告的複印件的第二頁 (見附件 ‘CHD-1’)，有關探礦的欄裏有提及以上結論，並建議KMG避免參與维礦項目。”

(emphasis added)

119.  I do not accept Mr Chi’s evidence for the following reasons:

(1)  As explained in Section D3.3 above, I find him to be an unreliable and incredible witness generally;

(2)  Mr Chi’s university degrees were in finance and business administration.  As of mid-2014, he had merely had 2 years’ experience in managing an iron ore company. His other “experience” included 3 to 5 years of trading, living near iron ore manufacturers as a child, and learning about iron mines from site-visits.  Therefore, very limited weight should be attached to his view on the value of the Mines.  As for the views held by the other experts in his team, the Court does not even have knowledge on what their expertise and experience are;

(3)  It is incredible that there is not a single document (apart from the “monthly executive report” marked as “CHD – 1” – see further below)  which sets out the analysis of the value of the Mines.  Mr Chi conveniently said that he only reported verbally via a telephone conversation to the 3^rd defendant what he and his team found.  This is incredible;

(4)  As for the “monthly executive report”, it was in fact a report for the month of February 2014.  It is a mystery as to why such a report existed more than half a year before the site investigation which was done in September/October 2014.  Even Mr Chi himself could not explain why.  No weight should therefore be attached to this report.

120.  In any event, it was the submission of the defendants’ counsel that:

“Mr. Chi’s experience is irrelevant because the issue is not whether the Mines had no value. As emphasised, the critical point is that Mr. Chi and D3 held such views, regardless of whether it was correct […]”[10]

121.  As aforesaid, I respectfully agree that the critical point is whether the 3^rd defendant held the view that the Mines had no value.  I hold that he did not hold such a view.

122.  That means the commerciality of the transaction can be explained by the 3^rd defendant’s view that he could make use of the Mines for his other business.

123.  In my view, there was another commercial rationale held by the 3^rd defendant, namely, that he was eager to establish a good relationship with the plaintiff, in the hope that such a relationship would help when he applied for further fundings for his property development projects in Singapore.  This rationale is in fact also mentioned in the plaintiff’s internal document 《景順實業重組貸款問題回覆》. 

124.  Having considered the commerciality factor from the 3^rd defendant’s perspective, I should now analyse the same from the plaintiff’s angle – is it inherently probable for the plaintiff to enter into the Alleged Oral Agreement?

125.  In my view, the answer must be “No”.  I accept the plaintiff’s argument that the Alleged Oral Agreement is commercially absurd to the plaintiff, and that no national financial institution would accept such terms.

126.  In this regard, the defendants claim that the plaintiff agreed to enter into the Alleged Oral Agreement because Mr Lin was concerned that if the plaintiff failed to recover the loans under the Original Facility Agreement (totalling US$250 million), it would be detrimental to the plaintiff’s business performance.

127.  However, as pointed out by the plaintiff’s counsel, the Alleged Oral Agreement would compound the plaintiff’s risk exposure exponentially, as the plaintiff would be committing to advance an even larger loan of an additional US$300 million.  By agreeing that the defendants had no repayment obligation until another sum of US$300 million was fully advanced, the plaintiff would voluntarily assume approximately half a billion US dollars in credit risk before receiving any repayment, and transform a US$250 million loan into US$550 million in aggregate exposure.

128.  Furthermore, it should also be noted that there was no agreement or discussion between the parties at all material times as to:

(1)  When was the deadline for the plaintiff to make available the US$300 Million Loan;

(2)  When is the deadline for the 3^rd defendant’s companies to draw down the US$300 Million Loan; and

(3)  When after the drawdown would the repayment obligation under the Facility Agreement be revived.

129.  Without these details, the time at which the plaintiff was entitled to recover the loan was totally uncertain.  This does not make sense.  I do not believe that the plaintiff or Mr Lin would have agreed to enter into such an agreement.

130.  The defendants’ counsel argued that the above were not essential terms of the Alleged Oral Agreement and could be worked out as the matter progressed.  With respect, this is beside the point.  The point is not whether those are or are not essential.  The crux of the matter is that the plaintiff would not have entered into the Alleged Oral Agreement without the confirmation of these matters.  Furthermore, in any event, the undisputed fact is that while the matters had indeed “progressed” for a long time, the parties had never discussed these matters.

E8.  Why US$300 million?  

131.  It may be recalled that the purpose of the Alleged Oral Agreement was, from the 3^rd defendant’s perspective, to secure the grant of the US$300 Million Loan.

132.  In my view, one of the factors which would affect the Court’s assessment of the credibility of the 3^rd defendant’s case is whether he could explain how he came up with the figure of US$300 million at the time of negotiation with Mr Lin in 2014.

133.  However, the 3^rd defendant could not give any satisfactory answer when he was asked about this in court.  He initially admitted under cross-examination that there was no on-going or concrete Singapore projects which required funding in November to December 2014.

134.  Pausing here, as pointed out under Section D3.1 above, according to his own evidence in witness statement, his company 唐山港陸鋼鐵有限公司 was applying for a loan from the plaintiff at the material time.  However, according to the plaintiff’s internal document 《景順實業重組貸款問題回覆》, the funding required was only US$260 million.  The amount does not match. 

135.  Coming back to the 3^rd defendant’s evidence in court, after he had been asked to clarify his answer repeatedly, he at one stage stated that he was about to start up two companies in Hong Kong and there was a need of US$300 million in order to invest in land development project in Singapore.  This evidence is incredible and I reject the same.  But in any event, at the end of the day, he agreed that his evidence could be summarized by saying that but for his cooperation with the plaintiff to resolve the non-performing loan problem (i.e. the unpaid loan under the Original Facility Agreement), neither he nor his companies needed any capital in November/December 2014.  That means the figure of US$300 million remained unexplained. 

136.  The 3^rd defendant’s case is that his rationale was that if the US$300 Million Loan was granted, then he could make use of the profit generated therefrom in the Singapore property development projects to repay the plaintiff for the loans under the Original Facility Agreement.  However, if he had no particular projects in mind at the material time, how could he work out the profit margin, etc. so as to come to a conclusion that he could make adequate profit to repay the plaintiff (not to mention to keep certain profit for himself)?

137.  This further supports the finding that the Alleged Oral Agreement is incredible.

E9.  The plaintiff’s loansto the 3^rd defendant’s investment projects in Singapore

138.  It is undisputed that the plaintiff had advanced 4 loans to companies associated with the 3^rd defendant, in support of his property development projects in Singapore.

139.  It was submitted on behalf of the defendants that these loans support the existence of the Alleged Oral Agreement.  They argued that:

(1)  The timing of the loans matches the Alleged Oral Agreement – the plaintiff made the first loan (i.e. the World Modern Loan)  just 3 weeks after the 3^rd defendant had taken over the 1^st and 2^nd defendants, and then other loans were extended over the following months;

(2)  The fact that the 3^rd defendant had submitted documents to the plaintiff before the loans for his Singapore projects were granted is not inconsistent with the Alleged Oral Agreement, because it was understood between the parties that Mr Lin’s promise did not mean that internal approval processes need not be gone through.  To the contrary, both the 3^rd defendant and Mr Lin knew that that had to be done.  However, one would have expected that the 3^rd defendant would pass any application process anyway.

140.  I do not think these arguments assist the defendants at all.

141.  Firstly, the evidence clearly shows that each loan granted for the 3^rd defendant’s investment in Singapore was independently considered and approved.  Extensive due diligence process had been gone through.  The plaintiff’s departments apparently did not endorse the loans as a rubber stamp.

142.  Secondly, if the Alleged Oral Agreement ever existed, one would expect that it would be mentioned in the internal documents created during the approval process.  However, it was not referred to at all.

143.  Thirdly, it can be seen from Mr King Tsao’s email dated 16 June 2015 that, during his site visit in around June 2015, he had even warned the 3^rd defendant that the plaintiff would not grant him further loan “without solid ground and justifications”.  This again shows that there was never any promise made by the plaintiff.  Further, there is no evidence that the 3^rd defendant had complained that this amounts to a breach of the Alleged Oral Agreement.  In this regard, the defendants pointed out that despite Mr Tsao’s remark, the plaintiff still proceeded to discuss with the 3^rd defendant over the financing of the Bernam Street Project.  This submission is not understood, for it is not the plaintiff’s case that the plaintiff would not even consider any funding application made by the 3^rd defendant or his companies.  Moreover, it is undisputed that the plaintiff had not approved any loan for this project at the end of the day.

E10.  The 29 September 2016 email

144.  It is undisputed that there was a meeting held in Beijing in around September 2016 between Mr Du (the plaintiff’s CEO)  and the 3^rd defendant.

145.  After the said meeting, Ms Du sent an email dated 29 September 2016 on behalf of the 3^rd defendant to Mr Tang (“the 29 September 2016 Email”).  It reads:

“关于减免承债贷款的申请

民生银行香港分行:

贵行与景顺实业有限公司和力信企业有限公司21500 万美元贷款合同到期后，因该两公司无力偿还致使贷款违约。后贵行找到本人希望能够承接该笔不良贷款，经协商贵行拟批复贷款用于开发新加坡房地产项目，实现盈利后以利润偿还该笔不良贷款。但由于贵行人事变动等原因，实际批复金额未达到预期，仅以华茂投资有限公司为主体批复23450856 美元，以环球智富国际有限公司为主体批复130822307.31 新币，本人用该笔贷款在新加坡开发房地产项目，经本人核算该项目预计盈利为6000 万美元左右。因贷款金额过低实现利润无法覆盖上述违约贷款本息，导致本人无力偿还上述债务。

后经本人与杜行长、汤总协商达成一致意见，因贷款额度未达到预期，本人仅就上述两笔批复贷款产生的预期利润6000 万美元为基数，用于偿还上述违约贷款的本金和利息，现本人已于2015 年7 月23 日支付利息428 万美元，2016 年3 月7 日支付利息455 万美元，本人将于近日支付利息410 万美元，上述利息共计1293 万美元。

  由于新加坡地产项目尚未盈利，本人希望支付完2016 年上半年度利息后，暂缓支付贵行利息，待新加坡地产项目完工实现利润后，一次性将余款 4707 万美元支付给贵行，剩余16793 万美元的本金和利息本人以及景顺实业有限公司和力信企业有限公司将不再承担，同时免除本人及KMG Resource 所有担保及资产抵押。同时希望贵行按照双方达成的一致意见做出审批文件”

杜振增        

2016 年9 月29 日”

(emphasis added)

146.  The defendants relied heavily on the 29 September 2016 Email in support of their case.  It was argued that the said email recorded the following matters which are fully consistent with the defendants’ case:

(1)  It was the plaintiff who approached the 3^rd defendant for taking over the loans under the Original Facility Agreement;

(2)  The plaintiff was to extend loans to the 3^rd defendant for his real estate projects in Singapore;

(3)  Repayments were to be made after the Singapore projects yielded profits;

(4)  The actual amount of loans extended was less than expected.

147.  With respect, the defendants’ arguments are totally unmeritorious.

148.  Firstly, as submitted by the plaintiff, none of the 4 points above remotely mentions that the plaintiff had agreed that the alleged condition precedent (the grant of the US$300 Million Loan)  had to be satisfied before the plaintiff was entitled to enforce the loans under the Facility Agreement against the defendants, and the 29 September 2016 Email simply does not support the existence of the Alleged Oral Agreement.  In this regard, it should be noted that the 3^rd defendant admitted that he had approved the content of this email before it was sent by Ms Du. 

149.  Secondly, the email was apparently only an “application” made by the 3^rd defendant, rather than an assertion of any contractual right as such.

150.  Thirdly, if the Alleged Oral Agreement ever existed, there would have been no need for the 3^rd defendant to ask for suspension of payment of interest.

151.  Fourthly, the said email in fact reflects very badly on the character of both the 3^rd defendant and Ms Du.  Although the email seems to suggest that an agreement had already been reached with the plaintiff’s Mr Du and Mr Tang, the fact is that no such agreement had been reached – As accepted by the defendants’ counsel, the proposal contained in the said email had not been accepted by the plaintiff at the end of the day.

152.  Fifthly, it is noteworthy that “earning profits out of the projects funded by the US$300 Million Loan” is simply not one of the conditions precedent for the plaintiff’s entitlement to enforce according to the defendants’ pleaded case[11].

153.  The defendants further argued that by the said email, the 3^rd defendant was proposing a clean break in view of the plaintiff’s failure to grant him the remainder of the US$300 Million Loan.  However, why did the 3^rd defendant have to bother about repayment at all if the Alleged Oral Agreement existed?  He did not need a clean break.  He only needed to make it clear to the plaintiff that he and his companies were not yet obliged to make any repayment to the plaintiff at the material time.  The fact that he did not make it clear is the strongest evidence to show that the Alleged Oral Agreement did not exist at all.

E11.  The plaintiff’s enforcement action

154.  It is undisputed that the plaintiff did not take enforcement action against the defendants in 2017 and 2018.  Relying on this fact, the defendants submitted that the plaintiff’s inaction in the face of the large unpaid sums strongly supports the defendants’ case on the Alleged Oral Agreement and suggests that relationship between the parties was not exhaustively governed by the terms of the Facility Agreement.

155.  With respect, this argument must be rejected:

(1)  As explained by Mr Du of the plaintiff (which I accept), the plaintiff considered all along that the 3^rd defendant still had the intention to repay, and it was because of this that the plaintiff had withheld taking any enforcement action;

(2)  The above is supported by the fact that a meeting was still held on as late as 2 April 2019 between the plaintiff and the 3^rd defendant to discuss further repayment plan;

(3)  Further, objectively, the 1^st and 2^nd defendants were still making repayments all the way up to June 2019.

E12.  Adverse inference

156.  In opposition to the plaintiff’s application for summary judgment, the defendants have procured Mr Lin and Mr Wang to provide affirmations for them.

157.  By an order dated 13 February 2023, Master David Chan directed that the affirmations of Mr Lin and Mr Wang might only be read at the trial on the condition that Mr Lin and Mr Wang attended court for cross-examination.

158.  Consequentially, the defendants listed both Mr Lin and Mr Wang as their witnesses for the trial.

159.  However, shortly before the commencement of the trial, the defendants informed the plaintiff and the Court that Mr Lin and Mr Wang had decided not to give oral evidence at the trial.

160.  Upon the above background, both the plaintiff and the defendants asked the Court to draw adverse inference against the other side.

161.  Without disrespect to counsel, I do not think any discussion on adverse inference is required in this Judgment, as there is sufficient evidence in the present case to allow this Court to come to a factual finding on the central issue herein.

E13.  Conclusion

162.  For reasons of the aforesaid, I find that the Alleged Oral Agreement did not exist at all.

F.  ORDER

163.  Judgment is therefore entered against the defendants. 

164.  For the avoidance of doubt, interest shall be calculated pursuant to the Facility Agreement rather than section 48 of the High Court Ordinance.

G.  COSTS

165.  I make a costs order nisi that the defendants shall bear the costs of the action (including all costs reserved), with certificate for two counsel, to be taxed on indemnity basis[12] if not agreed. 

166.  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper)  within 14 days hereof.