MILLION DECADE LTD v. TUNG TUNG FAI (also known as DONG HUI)

HCA 1062/2013

[2018] HKCFI 1807

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1062 OF 2013

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HCA 1063/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1063 OF 2013

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HCA 1066/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1066 OF 2013

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(Heard together)

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J U D G M E N T

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1.  There has been some unexpected development of this case. The claims in HCA 1062 and 1063/2013 have been dismissed because of the lack of witnesses. The remaining issue before me is whether Mr Tung Fai can succeed in his claim in HCA 1660/2013 (“this Action”).

2.  The nature of his claim has been set out in the Statement of Claim in this Action.  I do not want to repeat the same here.

3.  The Plaintiff in this Action, Mr Tung Fai (“Mr Tung”), is the only witness in this trial.

4.  Having carefully considered his evidence, I accept that Mr Tung has discharged the burden of establishing his claim in this Action.

5.  At the trial, Mr Tung provides a clear account of his dealings with the Defendant, Mr Wei Dong (“Mr Wei”).  He tells the court how he had assisted Mr Wei to list his food and restaurant businesses in the Stock Exchange in Hong Kong.  According to the written Cooperation Agreement made in June 2003 (“the Written Agreement”), Mr Wei’s company agreed to give 15% of the shares in the listed company to Mr Tung if the listing was successful.  In the case that the listing was unsuccessful, Mr Tung would have to bear all the costs associated with the unsuccessful listing of the company.

6.  Later, in order to attract other reputable investors to join the listed company, Mr Tung and Mr Wei agreed to cancel the Written Agreement and substituted it with the oral agreement which is the subject matter of this Action (“the Oral Agreement”).  Instead of getting the 15% shares, Mr Tung would get a sum of HK$150 million in return.  Mr Wei also promised to give him an additional sum of HK$50 million if he was to stay in the listed company for a period of 5 years.

7.  Mr Tung has been subjected to vigorous cross-examination by Ms Lee, counsel for Mr Wei for, about a day.  He provides straightforward answers to the questions and he has not evaded any questions put to him by Ms Lee.  His evidence has remained unshaken after cross-examination, and I accept that he is telling the truth.

8.  As I understand it, the main grounds put forward by Ms Lee to challenge Mr Tung’s evidence are as follows:

(i)   The reasons given by Mr Tung for the cancellation of the Written Agreement and the making of the Oral Agreement are incredible.

(ii)   The timing for the making of the Oral Agreement is unusual.

(iii)   It does not make commercial sense for the parties to have made the Oral Agreement.

(iv)   It is strange that Mr Tung, being an experienced businessman, had not disclosed the Oral Agreement in the listing prospectus issued by Fu Ji Holdings which was the listed company.

(v)   It does not make commercial sense for Mr Wei to have agreed to give an additional sum of HK$50 million for Mr Tung to stay in Fu Ji Holdings for a period of 5 years.

(vi)   It is strange that Mr Wei and Mr Tung had not reduced the Oral Agreement in writing.

(vii)   It is doubtful whether Mr Tung had played a crucial role in the listing process.

(viii)   Mr Tung has failed to produce any documentary evidence to prove the amount of pre-listing expenses incurred by him.

(ix)   It is strange that Fu Ji Holdings later reimbursed Mr Tung of the pre-listing expenses.

(x)   It is strange that Mr Tung had not included the alleged part payments under the Oral Agreement in his tax return.

(xi)   It is odd that there were no receipts for the alleged part payments under the Oral Agreement.

(xii)   It is strange that throughout the years, Mr Tung had not issued demand letters or pressed Mr Wei for the payment of the balance due under the Oral Agreement.

9.  Despite the vigorous cross-examination, Mr Tung provides credible explanations for all these queries raised by Ms Lee. 

10.  In my judgment, whether certain thing is reasonable has to be judged against the background of the case and the relationship between the individuals concerned.  It is clear that there was a high degree of trust between Mr Wei and Mr Tung at the material time, and so the lack of written confirmation for the Oral Agreement, written receipts for the part payments, and written records of the pre-existing expenses are quite understandable.  It also explains why Mr Tung had not actively pressed Mr Wei for the payment of the balance of the sum due under the Oral Agreement.

11.  Further, the listing of Fu Ji Holdings had brought about a great fortune for Mr Wei.  Instead of getting the shares or the shares options which were awarded to some other persons like the executive director, the benefit obtained by Mr Tung would be the sum stated in the Oral Agreement.  It does make commercial sense. 

12.  In fact, no one disputes the existence of the Written Agreement.  Under that arrangement, Mr Wei was prepared to give Mr Tung 15% of the shares of the listed company as a reward for his contribution to the listing process.  It would be very hard for me to accept that Mr Tung would have agreed to cancel the Written Agreement without some definite promise by Mr Wei to pay him something equivalent in return.

13.  At the trial, Mr Tung has also provided credible explanations as to why Mr Wei and he had to substitute the Written Agreement with the Oral Agreement.  He also genuinely believes that it was not necessary to disclose the Oral Agreement in the listing prospectus or to include the part payments under the Oral Agreement in his tax return.  I accept his evidence as the truth.

14.  There is an issue as to the reimbursement of the pre-listing expenses.  According to Mr Tung, it was the term of the Oral Agreement that he had to be responsible for the pre-listing expenses, and yet he got the reimbursement from Fu Ji Holdings.

15.  I do not accept that this factor would undermine the credibility of Mr Tung’s case.  According to Mr Tung, the parties were mainly concerned whether the listing would be successful or not.  In this regard, Mr Wei would have to rely on the expertise and connection of Mr Tung.  If the listing was successful, Mr Tung would get his 15% shares under the Written Agreement or later the sum of $150 million under the Oral Agreement.  The parties had not talked about the reimbursement of pre-listing expenses.

16.  According to the Defence filed by Mr Wei in this Action, if the Oral Agreement were to exist, Mr Tung was in breach of the terms of the Oral Agreement in not paying the pre-listing expenses.  However, it is clear that Mr Tung was not in breach of such term.  The fact that he obtained reimbursement from the listed company does not mean that he was in breach of the Oral Agreement in failing to pay for the pre-listing expenses.  If Mr Wei claims that Mr Tung had obtained benefit through unjust enrichment and as a result the reimbursement should be deducted from Mr Tung’s claim, Mr Wei had to plead the same in his Defence.

17.  Since I accept the evidence of Mr Tung, I also find that he had performed all his obligations under the Oral Agreement.  Mr Tung played a key role in the listing of Fu Ji Holdings.  There is no basis for Ms Lee to argue that Mr Tung was not involved in the whole process of the listing application, or that he did not pay all the costs of the listing application.

18.  In the present case, Mr Wei has not adduced any evidence to rebut Mr Tung’s case.  Unless the court is to reject Mr Tung’s evidence, it would be extremely difficult for Mr Wei to challenge Mr Tung’s claim in this Action.  In my judgment, the challenge put forward by Ms Lee cannot undermine the credibility of Mr Tung’s evidence and so I have no reservation in giving judgment in favour of Mr Tung.

19.  Mr Wei has also raised the limitation defence. However, section 23(3) of the Limitation Ordinance (Cap 347) provides:

“Where any right of action has accrued to recover any debt …, and the person liable or accountable therefore acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment. …”

20.  As I accept that the payments made at various times by Mr Wei’s camp were part payments under the Oral Agreement, the limitation period did not start to run until the last payment date in October 2008. 

21.  As the writ in this Action was issued in 2013, which was much earlier than the expiry of the limitation period in October 2014, the limitation defence cannot possibly succeed.  Further, there is no time bar for the claim in relation to the payment of $50 million.  The cause of action did not start to run from 17 December 2008, which was 5 years after Mr Tung remained in the management of Fu Ji Holdings.

22.  Mr Tong SC, counsel for Mr Tung, has urged me to draw adverse inference against Mr Wei for failing to call any witnesses in support of his case.  Since I accept Mr Tung to be a credible witness, it is not necessary for me to consider the “adverse inference” argument”.  In any event, Mr Wei’s wife, Madam Yao, was present in court in the first week of the trial. Without knowing the full background as to why she could not come back to Hong Kong to give evidence in the second week of the trial, it would be unsafe for the court to draw any adverse inference against Mr Wei’s camp simply because of the lack of supporting witnesses.

23.  Mr Tong has also urged me to refer the matter to the Director of Public Prosecutions for investigation of a suspected case of uttering false documents in support of the video link application which was made at the commencement of the trial.  Mr Wei’s solicitor produced some evidence with a view to show that Mr Wei had a recent operation in the Mainland and as a result he could not come to Hong Kong to testify.  In response to such application, Mr Tung was able to produce some evidence to show that the documents produced by Mr Wei are false.  Mr Wei then applied to withdraw the video link application without filing further documents or evidence.

24.  Without an opportunity to canvass the issue, the court cannot form a preliminary view about the falsity of the documents.  There is nothing to prevent Mr Tung to make a report to the police about the alleged falsity of documents, but I do not see it fit for the court to make a formal referral to the Director of Public Prosecutions for investigation without forming a preliminary view about:  (i) the falsity of the documents; and (ii) who should be responsible for uttering these documents.  However, I agree that, if Mr Tung were to make a report to the police, the matter deserves serious investigation.

25.  In respect of the costs associated with the video link application, there is no issue that Mr Wei’s camp would have to pay for the costs of the application.  As Mr Wei’s camp knew full well that Mr Tung would ask for the costs to be paid on an indemnity basis and they did not file any evidence in reply, I agree that the court can rely on the rebuttal evidence filed by Mr Tung which raises a serious issue about the authenticity of Mr Wei’s documents.  Hence, the court should order Mr Wei’s camp to pay for the costs on an indemnity basis.  I therefore so order.

Reasons for dismissing the striking out application

26.  At the commencement of the trial, I dismissed Mr Tung’s application to strike out certain parts of the pleadings of Mr Wei’s camp.  Apart from the issue of costs, this decision is now academic in view of the latest development of the case.  However, I feel obliged to give brief reasons for dismissing the striking out application.

27.  The effect of the proposed striking out application is that Mr Wei’s camp would be estopped from challenging the existence of the Oral Agreement, as the judge in the BVI proceedings found that the Oral Agreement existed after listening to the evidence of all the relevant witnesses including Mr Wei and Mr Tung.

28.  Mr Tung’s wife (Madam Kwok) and Mr Wei’s wife (Madam Yao) were involved in a hotel project which was operated under the name of the BVI company.  Madam Yao made an application in the BVI court to wind up the BVI company on the ground of unfair prejudice.  After a trial of 26 days, the judge in the BVI proceedings made an order to wind up the BVI company. However, despite the allegation of Mr Wei’s camp, the judge found that Mr Wei and Mr Tung did make the Oral Agreement which is the subject matter of this Action. Mr Tung therefore contends that relitigation of the issue already determined in the BVI proceedings constitutes an abuse of process.

29.  The parties in the present proceedings and the BVI proceedings are not the same.  Unless it amounts to abuse of process, Mr Wei should not be prevented from asking this court to rule on the existence of the Oral Agreement.

30.  In my judgment, the facts of the present case are far from establishing such abuse of process.

31.  First, though the judge in the BVI proceedings had been asked by counsel for Madam Yao to determine the existence of the Oral Agreement in the context of that particular case, the existence of the Oral Agreement was never a central or fundamental question in the BVI proceedings which formed the basis of the BVI judgment.  Further, counsel for Madam Yao had made it clear to the judge and the relevant parties that matters relating to the Oral Agreement between Mr Tung and Mr Wei would be determined by the Hong Kong court in the present proceedings.  In such case, no one was under any misapprehension and it was clear to all the parties that the matter would have to be adjudicated by the Hong Kong court afresh in the present proceedings, in which the court has to rule on the existence of the Oral Agreement and other related matters including, for examples, the terms of the Oral Agreement and whether the parties had performed all the obligations under the Oral Agreement.

32.  Second, it is too late now for Mr Tung to make the complaint based on abuse of process.  As observed by Ma CJ in Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72, the parties, in similar circumstances, had fully prepared for the trial.  If Mr Tung genuinely believes in the abuse of process argument, one would expect him to make an application earlier for the present trial to be fixed only after the delivery of the judgment in the BVI proceedings.  Though I accept Mr Tung to be a truthful witness in this trial, Mr Tung is an opportunist in making the striking out application after the judge made a favourable finding of fact in his favour.  It is certainly not unfair to him if the court is to adjudicate the matter again in this Action. In fact, if the BVI court were to make a finding against him on such issue, neither can Mr Wei’s camp is able to rely on such finding against him in this Action.

33.  Thirdly, the judge in the BVI court had not dealt with all the issues in this Action.  There are other outstanding issues, such as (i) what was the nature of the various payments made by Mr Wei’s camp to Mr Tung throughout the year; (ii) whether Mr Tung had performed his obligations under the Oral Agreement; and (iii) whether Mr Tung is entitled to receive the payment of $50 million under the Oral Agreement.

34.  In determining these outstanding issues, the court would have to consider the oral Testimony of Mr Wei, Madam Yao and Mr Tung.  The credibility of these witnesses would be an important issue in the trial.  If the court were to find that Mr Tung is not a credible witness, then whether the Oral Agreement existed would become a serious issue.  If the court were to find Mr Tung to be an untruthful witness, it would certainly be unfair to Mr Wei that he would be barred from challenging the existence of the Oral Agreement which is the central and fundamental issue for the claim in the Hong Kong proceedings.

35.  For these reasons, I dismissed the striking out application.  Obviously, the decision was made before the latest development of the case.  By that time, the court proceeded on the basis that there would still be a full trial of all the related actions.  The striking out application is now academic, because there are no available witnesses to support the case of Mr Wei’s camp and I accept Mr Tung to be a truthful witness after listening to his evidence.  Despite the final outcome of the case, there is no merit in the striking out application which was made at the commencement of the trial.

36.  I now listen to the parties’ submissions on the final wording of the order and the costs of the striking out application.