CHINACHEM FINANCIAL SERVICES LTD v. CENTURY VENTURE HOLDINGS LTD

CACV 98/2023, [2025] HKCA 265

On Appeal From [2023] HKCFI 457

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 98 OF 2023

(ON APPEAL FROM HCA NO 410 OF 2013)

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J U D G M E N T

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The Court:

1.  This is the Court’s judgment on the Defendant’s appeal against the judgment of Deputy High Court Judge Winnie Tsui (as she then was) dated 28 February 2023 dismissing the Defendant’s counterclaim against the Plaintiff.

BACKGROUND FACTS

2.  The dispute between the parties has a long history. However, for the purpose of the present appeal, the relevant underlying facts can shortly be stated as follows.

3.  The Plaintiff is a limited company incorporated in Hong Kong on 4 March 1993, and a member of the Chinachem group of companies.

4.  The Defendant is a limited company incorporated in the BVI on 8 May 2009.

5.  In about 1995, the Plaintiff was desirous of investing in the shares of a banking corporation in Mainland China called “中國民生銀行” (China Minsheng Bank Corporation Limited) (“the Bank”). However, due to some prevailing legal and/or regulatory restrictions in the Mainland concerning foreign investment in financial institutions, the Plaintiff made the investment in the name of “中國中小企業投資開發有限公司” (China Small and Medium Enterprise Investment Co Ltd) (“China SME”), a Mainland company. Through China SME, the Plaintiff invested the total sum of US$10,940,000 for a block of shares of the Bank, which eventually grew to a total of 737,101,904 shares (“the Shares”), including bonus shares and other additions derived from the Plaintiff’s investment.

6.  In due course, the value of the Shares increased substantially, and dispute arose between the Plaintiff and China SME over the ownership of the Shares. The Plaintiff’s position was that the Shares and the dividends which had been paid on the Shares belonged to it beneficially, while China SME’s position was that the relationship between them was one of debtor and creditor, and thus it was only required to make repayment of a loan due to the Plaintiff.

7.  The aforesaid dispute gave rise to legal proceedings commenced by China SME against the Plaintiff in the Beijing Higher People’s Court (“BJHC”) in 2001. On 8 July 2002, the BJHC gave a judgment (“the First Instance Judgment”) holding that although the relationship between the Plaintiff and China SME was that of principal and agent, the arrangement between them was contrary to the prevailing financial regulations concerning foreign investment in financial institutions, and thus the Plaintiff could only recover the initial capital investment of US$10,940,000 together with (part of) the dividends paid on the Shares in the sum of RMB 45,814,912 as compensation, but not the Shares.

8.  The Plaintiff was not satisfied with the First Instance Judgment, and lodged an appeal (“the Appeal”)[1] to the Supreme People’s Court in Beijing (“SPC”). The Appeal was heard on 18 April 2003. However, the SPC did not render any judgment in the Appeal notwithstanding a lapse of more than 6 years. Apparently, the SPC was trying to facilitate a mediation between the Plaintiff and China SME during the intervening period.

9.  It was in those circumstances that the Defendant came into the picture. Mr Lam Yee Hung and his brother, Mr Lam Yee Kung, apparently had good “connections” in China, and represented to the Plaintiff that they could help the Plaintiff achieve a more favourable outcome than the First Instance Judgment. For the purpose of disposing of the present appeal, it is not necessary to go into the details about the negotiations between the Plaintiff and the Lam brothers. It is common ground that the Plaintiff and the Defendant (of which Mr Lam Yee Hung was a director and shareholder) eventually entered into a written agreement in Chinese called “委托索償債權協議” (Commissioned Claims Recovery Service Agreement) dated 25 August 2009 (“the Agreement”), under which the Plaintiff (as 甲方 in the Agreement) engaged the Defendant (as 乙方 in the Agreement) as “litigation and claims recovery agent” in relation to the Appeal and the underlying dispute with China SME over the Shares.

10.  The recitals to the Agreement stated, so far as relevant, the following:

“(1) 甲方與中國中小企業投資開發有限公司 (原中國鄉鎮企業投資開發有限公司) (下稱「中小企」) 就中國民生銀行股權糾紛一案，於2002年7月8日北京市高級人民法院頒下 (2001) 高經初字第341號民事判決書，及於2002年8月2日頒下民事裁定書，裁判文書主文明確：甲方可獲中小企償還借款本金壹仟零玖拾肆萬美元 (US$10,940,000)，和肆仟伍佰捌拾壹萬肆仟玖佰壹拾貳元人民幣 (RMB45,814,912 元) 的賠償金。(下統稱「一審得益」)。

(2) 甲方於2002年7月15日向最高人民法院 (下稱「最高院」) 提出上訴 …。本案現正在最高院進行二審訴訟 (下稱「本案」)。

(3) 根據北京市高級人民法院一審判決的意見顯示，由於甲方 (「上訴人」) 的民事商業行為確有存在不符當時的中國法律法規的行為和事實，加上各種案外因素的影響和幹擾，導致二審合議庭至今未能審結。

…

(5) 乙方是專門從事內地債權、債務糾紛處理的專門機構。為了加快推動本案的進展，息訟平爭，搭建法律依據和溝通工程，乙方願意就本案二審訴訟向甲方根據本協議項下的裁判及 / 或和解方案提供委托索償權服務。

(6) 乙方曾就本案與其相熟的北京市地石律師事務所江學平律師和龍翼飛律師 (下稱「地石事務所」) 進行討論和分析研究，確認有信心為甲方在二審訴訟取得最後的勝訴。乙方因此向甲方提出由甲方聘請乙方出任其訴訟及債權索償代理及委托地石事務所出任甲方的訴訟代表以取代波士德事務所，並代表甲方參加二審訴訟及調解，以及向中小企取得索償。

(7) 在乙方同意盡最大努力及促使地石事務所盡最大努力為甲方爭取利益最大化的前提下，本協議雙方本着平等互利及經友好協商後同意簽訂本協議，及同意本協議項下的委託安排和利益分配。”

11.  The following express terms of the Agreement are relevant for the present purpose:

“1. 裁判方案

本案如以法庭裁判的方式審結：

1.1 裁判原則：風險自負，但乙方須盡最大努力及促使地石事務所盡最大努力為甲方取得勝訴及最大利益。

…

1.4 如二審維持原判，甲方二審所得的利益 (下稱「二審得益」) 少於一審得益或與一審得益相同，則二審得益全部歸甲方。

1.5 如二審實體改判，甲方在法理上勝訴，二審得益大於一審得益，則等同一審得益金額的部份得益先歸甲方所有；二審得益減去一審得益，其餘額按執行程序完成後的實得利益稱為可分配利益 (下稱「可分配利益」) 由甲、乙雙方按照本協議附表所列的比例分配。

…

5. 甲乙雙方的承諾

5.1 乙方承諾須盡最大努力為甲方爭取利益最大化，並進一步承諾盡其努力於本協議簽署之日起六個月內，爭取令本案取得二審結果 (不論以調解或裁判方式審結)。

5.2 乙方承諾以其專業經驗保證二審結果在法理上甲方勝訴，利益必須比一審結果優越 (下稱「理想二審結果」)。

…

7. 時間為要素

雙方對本協議任何條文內所設之時限必須嚴格遵守。

…

9. 協議有效期

除根據第10條提前終止，本協議的有效期由簽署之日起十八個月終止。惟對於本案執行程序方面的安排，甲乙雙方可協商變更或延長本協議的有效期。

10. 終止

倘若發生下列情況之一時，甲方可書面通知乙方終止協議，且不影響甲方的任何權利：

…

(c) 乙方未能於本協議簽署之日起六個月內，令本案取得理想二審結果；或 …

11. 一般事項

…

11.5 本協議未經協議雙方書面同意不得變更或修收。

…

15. 管轄法律

本協議須受香港法律管轄並根據香港法律解釋，而雙方同意服從香港法院的非專有管轄權。”

12.  Two of the above provisions of the Agreement are of particular relevance to the present appeal. First, Clause 9 provided that, save in the event of early termination under Clause 10, the Agreement would terminate 18 months after the signing of the Agreement, ie on 25 February 2011 (“the Expiry Date”). Second, Clause 11.5 provided that any change or amendment to the Agreement required the written consent of both parties.

13.  Pursuant to a Supplemental Agreement (1) dated 12 January 2010 signed by both parties, the original deadline for obtaining the desired second instance litigation result (“the Desired Result Deadline”) under Clause 10(c) of the Agreement was extended by 6 months to 25 August 2010.

14.  There was no further written agreement signed by the parties to extend or further extend the Desired Result Deadline or the Expiry Date. Although the Defendant did present 4 further draft supplemental agreements to the Plaintiff seeking an extension of the Desired Result Deadline under Clause 10(c) and/or the Expiry Date under Clause 9 of the Agreement during the period from August 2010 to November 2011, none of them was signed by the Plaintiff.

15.  It is not in dispute that the Defendant failed to obtain the desired second instance litigation result by the extended deadline of 25 August 2010, and 25 February 2011 passed without any apparent progress achieved in relation to the Appeal, or any settlement between the Plaintiff and China SME, whether by way of mediation or otherwise.

16.  Eventually, on 29 October 2012, the SPC handed down a judgment in the Appeal (“the SPC Judgment”), in which the SPC upheld the First Instance Judgment’s finding that the agreement between the Plaintiff and China SME was invalid, but held that the Plaintiff was entitled to receive a portion (40%) of the value of the Shares and dividends paid on the Shares, in addition to recovery of its original capital investment in the amount of US$10,940,000. According to the Defendant, the award made by the SPC in favour of the Plaintiff far exceeded the Plaintiff’s recovery under the First Instance Judgment by around RMB 1.9 billion. The Defendant’s position is that it is entitled to a share of the excess recovery made by the Plaintiff in accordance with the ratio set out in an annex to the Agreement.

17.  On 21 June 2012, a meeting took place in Beijing between representatives of the Plaintiff and the Defendant to discuss the Agreement (“the Beijing Meeting”). There is a dispute as to what was said at that meeting, but it is clear from the respective records of the meeting produced by the parties that:

(1)  The Plaintiff took the stance that the Agreement had expired, though it wanted to continue the engagement of the Defendant.

(2)  The Defendant did not agree that the Agreement had expired, and clearly communicated its disagreement to the Plaintiff[2].

The parties failed to reach any agreement at the Beijing Meeting.

18.  By a letter dated 23 November 2012 from Norton Rose (the Plaintiff’s former solicitors) to the Defendant, Norton Rose stated that the Agreement had expired by effluxion of time on 25 February 2011. Norton Rose also gave notice to the Defendant that it was no longer authorized to represent the Plaintiff in connection with the litigation between the Plaintiff and China SME relating to the Shares in Mainland China.

19.  In February 2013, the Defendant commenced proceedings against the Plaintiff to enforce the Agreement in the BJHC (“the Beijing Action”).

20.  On the other hand, in March 2013, the Plaintiff commenced the action below (“the Hong Kong Action”) against the Defendant seeking, inter alia, a declaration that the Agreement had expired by effluxion of time, and a further declaration that the Defendant was not entitled to receive any remuneration from the Plaintiff under the Agreement. The Defendant’s subsequent application to stay the Hong Kong Action was unsuccessful. Hence, there were parallel proceedings in Beijing and Hong Kong concerning the same subject matter, ie the Agreement.

21.  On 30 April 2020, the BJHC gave a judgment (“BJHC Judgment”) in the Beijing Action dismissing the Defendant’s claim against the Plaintiff on the ground that the Agreement was illegal and unenforceable as a matter of Hong Kong law (being the governing law of the Agreement), because (i) it was a champertous agreement, and (ii) more importantly, the Defendant’s performance of the Agreement seriously damaged the public interest, and involved conduct interfering with the exercise of independent judicial power and the proper administration of justice in Mainland China (“世創公司在履行《委托索償債權協議》過程中的違法行為其嚴重程度已經損害了社會公共利益，包括宣稱不當獲得審判秘密並以此為獲利手段。 … 在案證據足以證明世創公司在履行《委托索償債權協議》過程中具有干預司法、擾亂正當訴訟程序的主觀意願。此外，… 世創公司以勸捐、代捐行為對正在進行的訴訟施加不正當影響。… 世創公司作為一家外國企業，在中華人民共和國境內必須遵守中華人民共和國法律。《中華人民共和國憲法》《中華人民共和國人民法院組織法》《中華人民共和國民事訴訟法》均規定，人民法院依照法律規定獨立行使審判權，不受行政機關，社會團體和個人的干涉。世創公司的行為妨礙了司法公正，損害了社會公共利益。”).

THE JUDGMENT

22.  The Hong Kong Action was tried by the Judge in November/December 2021. At the trial:

(1)  The Plaintiff’s primary case was that the Agreement had expired by effluxion of time on 25 February 2011 or, at the latest, by 21 June 2012[3]. The Plaintiff’s alternative case was that even if the Agreement had not expired, it was unenforceable in Hong Kong on the grounds of illegality and/or because it was contrary to the public policy in Mainland China and/or Hong Kong. More specifically, the Plaintiff contended that the performance of the Agreement involved breaches of the Mainland laws and regulations and such breaches were sufficiently serious, and the Defendant’s conduct in the performance of the Agreement was contrary to the public policy in Mainland China[4].

(2)  On the other hand, the Defendant contended that by reason of the parties’ conduct, the Agreement subsisted after 25 February 2011 because it was substituted by a new contract in the same terms save without a definite time limit. It was entitled to receive remuneration in the sum of RMB 949,343,827.55 in accordance with the new contract (“the New Contract Ground”)[5]. Alternatively, the Defendant’s contended that –

(a)  on the same factual premise, the Plaintiff was estopped from relying on the express terms of the Agreement to allege that the Agreement had expired. Accordingly, the Plaintiff was liable to pay remuneration in the same sum under the Agreement to the Defendant (“the Estoppel Ground”)[6]; or

(b)  the Defendant was entitled to be paid the same sum (ie RMB 949,343,827.55), or such other sum as the court considered reasonable for the services it had rendered to the Plaintiff on the basis of unjust enrichment or quantum meruit (“the Unjust Enrichment Ground”)[7].

There were some other grounds raised by the Defendant on the pleadings, but they were not pursued at the trial[8].

23.  The Judge received oral evidence from:

(1)  4 factual witnesses called by the Plaintiff (Mr Joseph Leung, Mr K P Chan, Mr David Parker, and Ms Winnie Chung), and an expert on PRC law (Professor Liu Li); and

(2)  3 factual witnesses called by the Defendant (Mr Lam Yee Hung, Mr Lam Yee Kung and Mr Joseph Pang), and an expert on PRC law (Mr Chen Zhuo).

24.  On 28 February 2023, the Judge gave a written judgment (“the Judgment”) finding, in substance, in favour of the Plaintiff.

25.  In the Judgment, the Judge pointed out that although there were a number of discrete factual disputes which required her determination, overall speaking, the parties’ factual cases were not that far apart. The main difference lay in the focus or emphasis which each party attempted to place on different parts of the factual narrative[9]. However, to the extent that there was a conflict between the evidence of the Plaintiff and that of the Defendant, the Judge preferred the former, holding that the Plaintiff’s witnesses were generally credible and their evidence was consistent with the documentary evidence, inherently probable and internally consistent, while the Defendant’s evidence contained some notable internal inconsistencies, and a number of new revelations were made in the course of the cross-examination of the Defendant’s witnesses which cast doubt on the general credibility and reliability of the Defendant’s evidence[10]. The Judge expressed grave doubt over the credibility and reliability of Mr Lam Yee Kung’s evidence[11], found that the reliability of Mr Joseph Pang’ testimony on the whole was in doubt[12], and was sceptical of accepting Mr Lam Yee Hung’s evidence at face value[13].

26.  The Judge also accepted the opinion of Professor Liu, the Plaintiff’s expert on PRC law[14].

27.  At §366 of the Judgment, the Judge identified 5 issues which required her determination:

“(1) Issue (1) – whether the Agreement had prima facie expired on 25 February 2011.

(2) Issue (2) – whether the Agreement had been substituted with the alleged new contract, as alleged by the defendant.

(3) Issue (3) is no longer applicable.

(4) Issue (4) – whether the plaintiff is estopped from contending that the Agreement had expired on 25 February 2011.

(5) Issue (5) – if Issue (2) and/or Issue (4) are answered in the affirmative, whether the Agreement is nonetheless unenforceable on the grounds of illegality and/or that it is contrary to the public policy of the PRC and/or Hong Kong, and if so, whether the plaintiff is not permitted to allege that the Agreement is unenforceable.

(6) Issue (6) – whether the defendant is entitled to RMB 949,343,827.55 (or some other sum) pursuant to the Agreement, or on the basis of unjust enrichment.”

28.  The Judge next considered the evidence and made various factual findings before coming to the following conclusions in respect of the 5 issues:

(1)  In respect of Issue (1), she held that the Agreement had prima facie expired on 25 February 2011 (§445 of the Judgment).

(2)  In respect of Issue (2), she declined to hold that the alleged new contract had come into existence, and rejected the New Contract Ground (§459 of the Judgment).

(3)  In respect of Issue (4), she held that the representation allegedly made by the Plaintiff was not made out, and there could be no reliance by the Defendant on the representation. Accordingly, she rejected the Estoppel Ground (§469 of the Judgment).

(4)  In respect of Issue (5), she held that the Agreement was unenforceable as the Defendant’s actual performance of its obligations was in serious violation of the public policy in Mainland China, and also because the Defendant’s conduct was seriously incompatible with the public policy in Hong Kong, in that it abused, prevented or impeded the due course of justice, or perverted the course of justice (§§474 and 475 of the Judgment).

(5)  Lastly, in respect of Issue (6), she held that the Defendant had failed to show that the Plaintiff had been enriched by its work, and thus the claim for unjust enrichment must fail (§487 of the Judgment).

29.  Having reached the above conclusions, the Judge dismissed the Defendant’s counterclaim against the Plaintiff. The Judge declined to grant the declarations sought by the Plaintiff on the ground that (i) declaratory relief was discretionary in nature, and (ii) as she had already made substantive rulings on the rights and obligations of the parties in relation to the Agreement, the grant of the declarations would not serve any useful purpose (§492 of the Judgment). The Judge also made a costs order nisi that the Plaintiff was to have the costs of the action and the counterclaim, including any reserved costs, to be taxed if not agreed, with a certificate for two counsel.

THE NOTICE OF APPEAL

30.  The Defendant’s Notice of Appeal contains 10 paragraphs under 2 sub-headings: (i) the “Contract Claim”, and (ii) the “Illegality Defence”.

31.  §§1-4 of the Notice of Appeal relate to the “Contract Claim”, and challenge the Judge’s rejection of the Defendant’s case that after 25 February 2011, the Agreement was substituted by a new contract in the same terms save without a definite time limit. §§5-10 of the Notice of Appeal relate to the “Illegality Defence”, and challenge the Judge’s finding that the Agreement (and, by extension, the alleged new contract) was not enforceable on the ground of illegality. Pausing here, it can be seen from the Notice of Appeal that the Defendant has abandoned any reliance on the Estoppel Ground and the Unjust Enrichment Ground.

DISCUSSION

(i)  The Contract Claim

32.  The Defendant raises 2 substantive grounds of appeal in §§1-4 of the Notice of Appeal.

33.  First, Mr Tang (for the Defendant) argues that the Judge, in reaching her conclusion that the Agreement had never been renewed or substituted by a new contract, relied heavily on her findings that “the defendant knew at all material times that the plaintiff was subject to the [plaintiff’s] decision-making process” and “the defendant knew that in order to extend the time limits under the Agreement, it was necessary for the plaintiff to agree to the extension in writing”[15]. In so doing, says Mr Tang, the Judge erred in law by relying on the subjective intention of the parties (not to be bound in the absence of a signed written agreement), instead of assessing the objective intention of the parties as shown by their continuous working relationship[16].

34.  This argument plainly has no merit, because the Judge’s said findings relate to the Defendant’s knowledge as objectively ascertained, and not its subjective intention.

35.  There is no dispute about the applicable legal principles on implied contract, which are set out in the judgment of the Court of Final Appeal in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, at §§36 to 40. The Judge was well aware that the test for determining whether an implied contract had come into existence was an objective one[17], and repeatedly reminded herself to consider the “objective conduct” of the parties and look at the matters “objectively”[18].

36.  The Judge’s finding that the Defendant knew at all material times that the Plaintiff was subject to its decision-making process was based on the facts and matters stated at §422 of the Judgment:

“The fact is fully supported by the contemporaneous documents, including most notably the reports and documents written by the defendant itself: see paras 120 to 126 above. I reject the suggestion of ‘negotiation tactics’ made by Lam Yee Kung for the first time in the witness box. I also draw support from the various admissions made by Joseph Pang concerning the defendant’s knowledge in his cross-examination: see paras 108, 115, 117 and 118 above. Furthermore, the objective facts are that the defendant’s emails were sent to members of the Exco and that the various draft supplemental agreements were also sent by the defendant to members of the Exco for approval.” [emphasis added]

37.  The “reports and documents” referred to by the Judge at §§120 to 126 of the Judgment included minutes of mediation hearings held on 14 October 2009 and 29 June 2010 in Beijing, minutes of a mediation session in Shenzhen, and an email sent by the Defendant to the members of the Plaintiff’s executive committee (referred to in the Judgment as “the Exco”) dated 13 July 2020. These were not internal documents of the Defendant, and evidenced the Defendant’s objective knowledge. The Judge also relied on the “objective” facts that the Defendant’s emails were sent to the members of the Exco, and that the various draft supplemental agreements were also sent by the Defendant to the members of the Exco for approval as evidence of the Defendant’s knowledge about the Plaintiff’s decision-making process. Again, these are matters known to both the Plaintiff and the Defendant.

38.  The Judge’s finding that the Defendant knew that in order to extend the time limits under the Agreement it was necessary for the Plaintiff to agree to an extension in writing, was based on “the written modification only clause in the Agreement”[19] (ie Clause 11.5 of the Agreement). This is a matter which plainly was within the objective knowledge of the Defendant.

39.  As pointed out by the Judge, these 2 findings concerning the Defendant’s knowledge were in fact accepted by the Defendant’s own witnesses (Mr Lam Yee Hung and Mr Joseph Pang) in evidence[20], and were never in any serious dispute.

40.  Second, the Defendant complains that the Judge erred in principle by failing to “consider or consider adequately” various items of objective evidence being contemporaneous and objective words and conduct between the Plaintiff and the Defendant referred to at §3(1)-(5) of the Notice of Appeal (see §41 below). Had the Judge not erred in principle and placed proper weight on the contemporaneous evidence, she would have arrived at the conclusion that the parties had by their objective conduct formed a new contract on the same terms as the Agreement save that there was no expiry date.

41.  The matters which the Defendant contends the Judge failed to consider or consider adequately were:

(1)  the Defendant’s continuous performance of its obligations under the Agreement after 25 February 2011;

(2)  the Defendant’s “Open Letter” of 9 November 2011;

(3)  the Plaintiff’s clear and open acceptance of the Defendant’s continuous performance after the Open Letter;

(4)  the Defendant’s continuous performance even after the delivery of the SPC Judgment on 29 October 2012; and

(5)  the Plaintiff sent the termination notice not only after the receipt of the SPC Judgment, but after the Defendant had rendered further performance regarding execution and securing China SME’s agreement to satisfy the SPC Judgment.

42.  The applicable principles for appeals against findings of fact made by a trial judge are well-settled, and will not be repeated here: see China Gold Finance Ltd v CIL Holdings Ltd (CACV 11/2015, unreported, 27 November 2015), §§11-24.

43.  The Judge found that notwithstanding the Defendant’s knowledge that the Agreement had expired and had not been renewed or extended, it continued to work on the Minsheng dispute in the hope that the Plaintiff would renew the expired Agreement or enter into a new agreement with it (§432 of the Judgment). The Judge explained how she came to this finding at §§433 and 434 of the Judgment:

“[433] There can be no dispute that the defendant knew that the Agreement had expired on 25 February 2011 in accordance with its terms. I have found above that it knew that it was necessary for the plaintiff to agree to an extension in writing due to the written only modification clause. It also knew that any extension would need the approval of the Exco. In my view, that was why the defendant kept sending the various draft supplemental agreements to the members of the Exco for approval. None of these further supplemental agreements were signed.

[434] It is true that the plaintiff continued to deal with the defendant after the scheduled expiry. It is also true that it did not ask the defendant to cease providing services. Nor did it ever expressly indicate to the defendant that the Agreement had expired. However, it must be borne in mind that the parties were operating in a commercial context, with a high-value contract at stake. The parties had taken the trouble to document their arrangements in the Agreement and the Supplemental Agreement. The parties did not deal with each other in an informal manner. Lam Yee Kung, Lam Yee Hung and Joseph Pang are all business savvy individuals. In the circumstances, I accept Mr Fung’s submission that the court is entitled to infer that they carried on working on the Minsheng dispute after the scheduled expiry, not because they believed that the Agreement was still subsisting. Rather they did so because they were hoping for an extension of the Agreement or a new contract and that was why they took the risk that the defendant might not get paid for the things which they did after 25 February 2011.”

44.  The Judge rejected the Defendant’s argument that the objective conduct of the parties pointed to the existence of a new contract, and took the view that their conduct was “in fact consistent with (1) there being no subsisting contract between the parties, and (2) the Defendant attempting to persuade the Plaintiff to renew its engagement and hoping to have the Agreement renewed or extended, or for a new agreement to be entered into in relation to the Minsheng dispute” (§453 of the Judgment). The Judge’s reasons for coming to this view were set out at §§455-456 of the Judgment:

“[455] The starting point of the analysis must be the express terms of the Agreement. Reasonable people in the position of the parties must be taken to know that (1) the Agreement was scheduled to expire on 25 February 2011, and (2) any change to its provisions, including any extension or renewal of its terms, must be done in writing. That is the objective knowledge of the parties at the time.

[456] Against this background, the defendant continued to send various drafts of the supplemental agreements to the plaintiff to extend the term of the Agreement. But, save for the Supplemental Agreement, none of these further agreements were signed by the plaintiff. In my view, objectively speaking, the parties cannot be taken to have entered into a new contract merely by reason of the fact that the defendant continued to work and the plaintiff continued to accept their services. It must be remembered that we are here talking about a contract which was worth hundreds of millions of dollars. Objectively speaking, the conduct of the parties was consistent with the defendant trying to secure an extension or renewal of the Agreement after its scheduled expiry.”

45.  Having reached these findings, it is clear that the Defendant’s case of new contract implied by conduct must be rejected. As stated by Ribeiro PJ in Shanghai Tongji, at §38, “[t]he conduct relied on must be unequivocally referable to the contract sought to be inferred”. In other words, in order to give rise to an implied contract by conduct, the conduct in question must be “consistent only with there being a new contract implied, and inconsistent with there being no such contract” (Mitsui & Co Ltd v Novorossiysk Shipping Co (The Gudermes) [1993] 1 Lloyd’s Rep 311, at 320 per Staughton LJ, quoted with approval by Ribeiro PJ at §39 of Shanghai Tongji).

46.  Insofar as the Defendant’s complaint that the Judged failed to “consider …” the matters referred to at §41 above is concerned, such complaint is unsustainable:

(1)  The fact that the Defendant continued to perform or render services to the Plaintiff after the Expiry Date, and the Plaintiff accepted the services without any indication that it considered there to be no subsisting contract between them (this being the main plank of the Defendant’s argument in support of the New Contract Ground) was considered in depth by the Judge at §§275-292 of the Judgment.

(2)  The fact that the Defendant continued to perform or render services to the Plaintiff ever after the delivery of the SPC Judgment was considered by the Judge at §§305-317 of the Judgment.

(3)  The Defendant’s Open Letter of 9 November 2011 was considered by the Judge at §§457-458 of the Judgment.

47.  Insofar as the Defendant’s complaint that the Judge failed to “… consider adequately” the matters referred to at §41 above is concerned, such complaint is equally unsustainable. The weight that may be given to any particular piece of evidence is generally a matter for a trial judge. A complaint that a trial judge has failed to consider adequately a particular piece of evidence cannot support a complaint that the judge erred “in principle” as alleged at §3 of the Notice of Appeal. The Court of Appeal may interfere with the Judge’s finding of fact at §432 of the Judgment if the finding is plainly wrong. However, the Defendant has failed to show that the Judge’s finding was not supported by evidence, or was based on a misunderstanding of the evidence. In our view, the Judge’s finding is one which was reasonably open to her on the evidence.

48.  There are a few other specific points raised by Mr Tang that we shall deal with briefly.

49.  First, Mr Tang places heavy reliance on RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753, and Anchor 2020 Ltd v Midas Construction Ltd [2019] EWHC 435 (TCC)[21] to argue that there was a new contract between the Plaintiff and the Defendant based on performance. In our view, these 2 cases offer no assistance to the Defendant’s case. They did not establish any new legal principles, but were decisions on their own facts.

50.  Second, Mr Tang relies on a statement at §4-212 of Vol 1 of Chitty on Contracts (35^th Edn) (“Where there has been substantial performance, courts are especially reluctant to reach the unrealistic conclusion that the parties lacked intention to be legally bound”) as a “legal principle”/“settled legal principle”, and submits that regrettably this principle did not seem to have been brought to the Judge’s attention[22]. We agree with Mr Fung, SC (for the Plaintiff) that this statement cannot be regarded as a statement of general legal principle. In our view, it is simply a statement of how the court may draw an inference about the existence of an implied contract in some factual circumstances. It is telling that the above statement in Chitty is immediately followed by the following: “The objective test is, however, here (as elsewhere) subject to the limitation that it does not apply in favour of a party who knows the truth”. In the present case, the Judge found as a fact that the Defendant knew that the Agreement had expired and had not been renewed or extended, but continued to work on the Minsheng dispute in the hope that the Plaintiff would renew the expired Agreement or enter into a new agreement with it. In other words, the Defendant was well aware of the fact that there was no subsisting contract with the Plaintiff.

51.  Third, Mr Tang asserts that the fact that the Defendant kept asking the Plaintiff to sign the draft 2^nd supplemental agreement (and the subsequent drafts) indicates only that (1) the Defendant was trying to protect its position by reducing the contractual arrangement into writing so that the Plaintiff could not retract in the future, and (2) the Plaintiff did not want to incontrovertibly bind itself to an extended/renewed Agreement[23]. Mr Fung submits that this is a new factual case which was not raised by the Defendant at the trial. Mr Tang does not say otherwise. Anyhow, this assertion is contrary to the Judge’s finding that the Defendant repeatedly asked the Plaintiff to sign supplemental agreements because the Defendant knew it was necessary for the Plaintiff to agree to an extension in writing due to Clause 11.5 of the Agreement and that any extension of the Agreement would need the approval of the Exco (§433 of the Judgment). In our view, this assertion now advanced by Mr Tang does not advance the Defendant’s appeal.

52.  In all, the Defendant’s grounds of appeal under the “Contract Claim” fail.

(ii)  The Illegality Defence

53.  The above conclusion means that strictly speaking, the illegality defence does not arise for consideration. We shall nevertheless deal with it briefly for the sake of completeness.

54.  The Judge made the following critical findings at §§436 to 438 of the Judgment:

(1)  The Defendant’s promise to make a donation to Renmin University was made with a view to influencing the opinion of the China Banking Regulatory Commission in favour of the Plaintiff, as well as procuring a successful result for the Plaintiff in the Appeal.

(2)  The Defendant had taken improper steps since late 2010 to influence the senior management of the SPC, including Judge Wan (a Vice President of the SPC). The appointment of Judge Wan as a PhD supervisor and his daughter’s enrolment as a PhD student at Renmin University were made for the purpose of (1) expediting the progress of the Appeal, and (2) procuring Judge Wan to accept the specialists’ view that the relationship between the Plaintiff and China SME was one of entrustment so that the Minsheng shares would be awarded to the Plaintiff.

(3)  The Defendant had obtained and divulged confidential information about the internal meetings and deliberations within the SPC in relation to the Appeal with a view to using such information for the purpose of obtaining a favourable outcome for the Plaintiff in the Appeal.

55.  Based on the above findings and Professor Liu’s opinion, the Judge held that the Defendant’s conduct amounted to an interference with the independent exercise of judicial power of the SPC and the administration of justice in Mainland China, and the Defendant had accordingly violated the public policy in Mainland China. Hence, the Agreement was not enforceable as the case came within the fourth type of illegality summarized in Johnston, Conflict of Laws in Hong Kong (2^nd Edn, 2012), at §5-012, which was quoted with approval by Lord Collins of Mapesbury NPJ in Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544, at §39[24], namely –

“Fourthly, violation of foreign laws in the actual performance of a contract may, even though not required or initially intended, lead to the unenforceability of the contract before a Hong Kong court, regardless of its proper law. It has recently been stated in England at first instance that a contract will not be enforced if it has been ‘performed in such a way that one party (or both parties) commits a legal wrong’. It is, however, respectfully suggested that this is to state the principle too rigidly, and that a more flexible approach having regard to the seriousness of the foreign illegality is required to determine whether public policy and comity really require enforcement of the contract to be denied in such a case.” [emphasis added]

56.  The Judge further held that the Defendant’s conduct was seriously incompatible with the public policy in Hong Kong because it abused, prevented or impeded the due course of justice, or perverted the course of justice. On this ground also, the Judge held that the court should not enforce the Agreement[25].

57.  The Defendant does not challenge the finding of facts made by the Judge mentioned at §54 above[26], but contends that the Judge erred in law in the following aspects:

(1)  Ryder is about violation of foreign law, not public policy;

(2)  the Judge failed to consider the incidental/peripheral nature of the violations and the disproportionality of the violations and the severity of the total unenforceability of the Agreement;

(3)  the performance of the Agreement did not necessarily require the performance of the objectionable acts by the Defendant as found by the Judge; and

(4)  the Judge failed to consider the Plaintiff’s complicity in the illegality.

58.  None of the above arguments has merit. In respect of §57(1) above, as held in the BJHC Judgment, the Defendant’s conduct involved violations of PRC laws, in particular《中華人民共和國憲法》,《中華人民共和國人民法院組織法》 and 《中華人民共和國民事訴訟法》. After the handing down of the Judgment in the present case, the SPC gave a judgment in the Defendant’s appeal against the BJHC Judgment upholding the findings of the BJHC concerning the Defendant’s violations of 《中華人民共和國人民法院組織法》 and 《中華人民共和國民事訴訟法》[27], and held that the Defendant’s conduct was contrary to the public interest and public policy in Mainland China.

59.  In respect of §57(2)-(4) above, we do not accept that the Defendant’s objectionable conduct can be said to be “incidental” or “peripheral” only. The Defendant was actively engaged in the objectionable acts which constituted interference with the judicial process and the administration of justice in Mainland China. As found by the Judge, the Defendant’s acts were done for the very purpose of procuring a favourable outcome for the Plaintiff in the Appeal, that being what the Defendant needed to achieve in order to earn its remuneration under the Agreement. The Defendant’s conduct was intentional, and amounted to serious violations of PRC law and the public policy in Mainland China. Any attempt to abuse, prevent or impede the due course of justice, or pervert the course of justice, whether in Hong Kong or elsewhere, must, in our view, also be regarded as being seriously incompatible with the public policy in Hong Kong as held by the Judge. The Judge was well aware of the Defendant’s argument that the Plaintiff was complicit in the illegality and took that matter into account in declining to grant the declarations sought by the Plaintiff.

60.  As is clear from what Lord Collins said in his judgment in Ryder, at §39 quoted above, the seriousness of the conduct (or illegality) is an important factor whether considering the issue of the enforceability of the relevant contract. For the purpose of disposing of the present appeal, it is not necessarily to decide whether the approach adopted by the UK Supreme Court in Patel v Mirza [2017] AC 467 (a case on local illegality) ought to be applied in the case of foreign illegality. On any view of the matter, the Defendant’s conduct was very serious. The integrity of the judicial process in Mainland China was being threatened. The Defendant was at least a prime mover behind the illegality, and actively pursued the objectionable conduct for the purpose of seeking a monetary benefit for itself. The denial of the Defendant’s claim under the Agreement would not be a disproportional response to its illegality. We do not consider that the Judge was wrong to take the view that the Agreement should not be enforced at all by the Hong Kong court.

DISPOSITION

61.  The Defendant’s appeal is dismissed.

62.  The parties are agreed that costs should follow the event. We make an order that the Defendant shall pay the Plaintiff’s costs of the appeal, to be summarily assessed. The Plaintiff seeks indemnity costs, on the grounds that the Defendant has (1) conducted the appeal and raised completely unmeritorious points in disregard of well-established principles, (2) raised challenges in its skeleton that are not mentioned in the Notice of Appeal, (3) raised points in the appeal which do not arise, are not raised in the Notice of Appeal and/or are academic, (4) abandoned challenges of findings of fact only in the skeleton, and (5) included in the appeal bundles excessive materials which are not referred to and have no possible relevance in the appeal. We have carefully considered the Plaintiff’s criticisms. While we are of the view that the Defendant’s appeal has no merit, we do not consider the Defendant’s conduct to be sufficiently serious to justify ordering the Defendant to bear the Plaintiff’s costs on an indemnity basis. Accordingly, the Plaintiff’s costs shall be assessed on the normal party-and-party basis.

63.  The Defendant shall have leave to file and serve a statement of objections (limited to 2 pages) to the Plaintiff’s Statement of Costs dated 24 February 2025 within 14 days from the date of this judgment. Subject to such further directions as may be given, the Court will proceed to assess the Plaintiff’s costs without further reference to the parties.

64.  By way of postscript, there is one matter which we should record in this judgment. By Linklaters’ letter and the court’s letter both dated 27 February 2025, the Defendant was made aware of the previous involvement of one member of this Court at an early stage in the present litigation between the Plaintiff and the Defendant more than 10 years ago. The court also informed the parties that the said member had no recollection about the case save for the names of the parties, the subject matter in dispute (relating to some shares in the Bank), and there were some allegations concerning things happening within the SPC. The court also invited the parties to make representations (if any) which might impact on the composition of the court hearing this appeal. On 27 February 2025, Haldanes, on behalf of the Defendant, wrote to the court (copied to Linklaters) stating that, notwithstanding the previous involvement of the said member in the matter, the Defendant was happy to leave all arrangements relating to the composition of the court in the hands of the court. The Plaintiff did not make any further written representation on this matter. At the hearing of the appeal on 4 March 2025, both parties expressly confirmed that they would not take any objection to the composition of the court, or any member of the court, hearing the present appeal now or in future on the ground of bias, whether actual or apparent. In other words, both parties have expressly waived any objection or potential objection to this Court’s composition on the ground of bias, actual or apparent.