CHEUNG KWAI CHI v. KING CHARTER ENTERPRISES LTD AND ANOTHER

HCA 1365 / 2017

[2023] HKCFI 3031

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1365 OF 2017

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JUDGMENT

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Introduction

1.  This is the trial of the Action.

2.  The Action concerns 2 properties viz (1) 1^st Floor & Flat Roof of Kin Man Building, Nos. 66-74, Castle Peak Road, Kowloon, Hong Kong (“Kin Man Flat”); and (2) Shop No. 4 on Ground Floor of Kin Man Building (“Kin Man Shop”) (collectively “Kin Man Properties”). The 1^st Defendant was at all material times since 28 February 2003 and is the registered owner of the Kin Man Flat. The 2^nd Defendant Lam Kan Yim (“Deceased”) was at all material times since 28 February 2003 and still is the registered owner of the Kin Man Shop.

3.  The Deceased passed away in the middle of these proceedings in December 2021.[1] He had a daughter Ms Lam Wai Shan (“Ms Lam”), his sole executrix, and a son Mr Lam Shu Yuk (“Mr Lam”).

4.  As for 1^st Defendant, both Ms Lam and her husband were at all material times and are its only 2 shareholders and directors. Mr Lam was at all material times its authorized agent and representative.

5.  The Plaintiff is the cousin of the mother of Mr Lam and Ms Lam and is thus described as their aunt.

6.  The Plaintiff’s principal claim is that she holds 20% beneficial interests in the Kin Man Properties and she seeks declarations to that effect together with various consequential orders.

7.  It is not in dispute that the Plaintiff originally had 20% beneficial interests in the Kin Man Properties at the time of their purchase. The 1^st and 2^nd Defendants’ case is that the Plaintiff had orally agreed to sell and the 1^st Defendant had agreed to buy the Kin Man Properties (“Buy Out Agreement”) in about November 2008 at the price of HK$2,304,875 (“Sum”). The Plaintiff had received the Sum by way of 7 deposits into her Hang Seng Bank Account between 20 November and 23 December 2008 from the 1^st Defendant (whether through Mr Lam or otherwise). The Defendants therefore raises a counterclaim that the Plaintiff had ceased to have any interests in the Kin Man Properties since 1 December 2008.

8.  The receipt of the Sum by the Plaintiff is not in dispute. However, the Buy Out Agreement is denied by the Plaintiff. While the Plaintiff accepts that sometime in mid-2008, Ms Lam, on behalf of the 1^st Defendant, had offered to buy out the Plaintiff’s interests in the Kin Man Properties, she refused to sell on the ground that she believed property was a good investment. Rather, the Plaintiff’s case as pleaded in the Re-Amended Reply and Defence to Counterclaim (“RARDC”) is that, pursuant to an oral agreement between her and Mr Lam in November 2008 (“Shun Fuk Buy Out Agreement”), the Sum was used to buy out all her beneficial interests in 6 elderly homes in which she and Mr Lam had jointly invested since 1996.

Material Facts

9.  The parties have helpfully submitted to this court an Agreed Summary of undisputed facts. The following are derived from the Agreed Summary together with other facts which are uncontroversial.

10.  Between around 1996 and 2003, the Plaintiff and Mr Lam had undertaken multiple joint investments in properties including inter alia the 6 elderly homes particularised below since 1996 and the Kin Man Properties in 2003.[2] There was no written agreement or any kind of formal documentation in respect of any of these joint investments.

11.  By an oral agreement made on or about 11 January 2003 between the Plaintiff and Mr Lam on behalf of the 1^st and/or 2^nd Defendants, the parties agreed to jointly invest (“Kin Man Joint Investment Agreement”) in the purchase of the Kin Man Properties.

12.  Under the Kin Man Joint Investment Agreement, it was agreed inter alia that:

(a)  The Plaintiff and the 1^st Defendant owned 20% and 80% of the beneficial interests in the Kin Man Properties respectively;

(b)  The 1^st Defendant should hold both the Kin Man Flat and the Kin Man Shop as registered owner, with 80% of beneficial interests in each of them holding for itself and the remaining 20% on trust for the Plaintiff;

(c)  The purchase price of the Kin Man Flat was HK$10 million and the purchase price of the Kin Man Shop was HK$2 million, totalling HK$12 million;

(d)  The Kin Man Properties be mortgaged to Hang Seng Bank for a loan of HK$9.6 million to finance their purchase, with HK$8 million secured by the Kin Man Flat and HK$1.6 million secured by the Kin Man Shop;

(e)  The balance of the purchase price and all other expenses such as agency fees, stamp duty etc incurred for the purchase of the Kin Man Properties be paid by the Plaintiff and the 1^st Defendant in accordance with their respective share of beneficial interests in the Kin Man Properties.

13.  By a formal Sale and Purchase Agreement dated 20 February 2003, Core Trading Company Limited agreed to sell and the 1^st Defendant agreed to purchase the Kin Man Properties at the consideration of HK$12 million (“SPA”).

14.  By a Sub-Sale and Purchase Agreement dated 21 February 2003, the 1^st Defendant agreed to sub-sell and the 2^nd Defendant agreed to sub-purchase the Kin Man Shop at the consideration of HK$2 million (“Sub-SPA”).

15.  By an Assignment dated 28 February 2003, the Kin Man Flat was conveyed into the name of the 1^st Defendant as legal owner (“Kin Man Flat Assignment”).

16.  By another Assignment dated 28 February 2003, the Kin Man Shop was conveyed into the name of the 2^nd Defendant as legal owner (“Kin Man Shop Assignment”).

17.  By a Deed of Mortgage dated 28 February 2003, the Kin Man Properties were mortgaged to Hang Seng Bank (“1^st Hang Seng Mortgages”) for a loan of HK$9.6 million.

18.  The Plaintiff had contributed 20% of the initial purchase price and expenses for the Kin Man Properties. The remaining 80% was paid by the 1^st Defendant.

19.  The purchase of the Kin Man Properties was subject to existing tenancy. At all material times, the Kin Man Properties were rented out.

20.  The Plaintiff had contributed 20% towards the monthly mortgage repayments of the 1^st Hang Seng Mortgages by deducting from her part of the rental income generated from the leasing of the Kin Man Properties from February 2003 to November 2008.

21.  By a Share Certificate dated 21 July 2008 signed by Ms Lam on behalf of the 1^st Defendant, it was certified that the Plaintiff held 20% beneficial interests in the Kin Man Properties (“Share Certificate”).

22.  The Defendants do not dispute the Plaintiff’s 20% beneficial interests in the Kin Man Properties prior to their alleged termination on 1 December 2008 by way of the alleged Buy-out Agreement (such alleged termination and the existence of the alleged Buy-out Agreement is disputed by the Plaintiff).

23.  In November and December 2008, the Plaintiff received a total of HK$2,304,875 in her Hang Seng Bank Account (account number 371-260605-882) from the 1^st Defendant (whether through Mr Lam or otherwise) as follows:

Date of payment	Amount
20 November 2008	HK$300,000
20 November 2008	HK$300,000
27 November 2008	HK$300,000
03 December 2008	HK$400,000
15 December 2008	HK$610,000
15 December 2008	HK$310,000
23 December 2008	HK$84,875
Total:	HK$2,304,875

24.  The Plaintiff had received her full share of rental profits from leasing out the Kin Man Properties for the period up to 30 November 2008 in 2 instalments:

(a)  On 2 May 2008, HK$226,112 for the period from 28 February 2003 to 31 December 2007; and

(b)  On 2 March 2009, HK$124,488 for the period from 1 January to 30 November 2008.

25.  The Plaintiff has not received any further rental profits for the period as from 1 December 2008.

26.  Years after the alleged Buy Out Agreement, (i) on 11 March 2010, the Defendants mortgaged the Kin Man Properties with the Hang Seng Bank; (ii) on 1 November 2012, the Defendants mortgaged the Kin Man Properties with HSBC.

27.  Separately, since 1996, the Plaintiff and Mr Lam agreed to jointly invest in the following 6 elderly homes (“Elderly Homes Joint Investment Agreement”):

No.	Name of the elderly homes	Address	Plaintiff’s beneficial interests
1	Tan Kwai Old Men Garden Limited (“Tan Kwai Elderly Home”)	2nd Floor, Fu Chau Building,《別人/》 Nos.485-491 Un Chau street, Cheung Sha Wan, Kowloon, Hong Kong.	20%
2	Shun Fuk Home for Aged (“Shun Fuk Elderly Home (Un Chau Street Branch)”)	3rd Floor, Fu Chau Building, Nos.485-491 Un Chau Street, Cheung Sha Wan, Kowloon, Hong Kong.	10%
3	Shun Fuk Home for Aged (“Shun Fuk Elderly Home (Pei Ho Street Branch)”)	1st Floor, Lung On Building, 173 to 179 Pei Ho Street and 45 Un Chau Street, Sham Shui Po, Kowloon, Hong Kong.	10%
4	Shun Fuk Home for Aged Limited (“Shun Fuk Elderly Home (Wai Bun Branch)”)	Ground Floor to 2nd Floor, Wai Bun Building, 126-130, Pei Ho Street, Sham Shui Po, Kowloon, Hong Kong.	10%
5	Shun Fuk Home for Aged (Holding) Limited (“Shun Fuk Elderly Home (Kwai Hing Branch)” )	2nd to 3rd Floor, Man Shing Building, No. 109-115 Wo Tong Tsui Street, Kwai Hing, New Territories, Hong Kong.	10%
6	Shun Fuk Home for Aged (Holding) Limited (“Shun Fuk Elderly Home (Tuen Mun Branch)” )	1st Floor, Man Shing Building, No. 7 Kai Fat Path, Tuen Mun, New Territories Hong Kong.	10%

28.  There was no written agreement for the Elderly Homes Joint Investment Agreement and the Plaintiff has never been involved in the management and the operation of the above elderly homes.

29.  On 30 November 2002, the Shun Fuk Elderly Home (Pei Ho Street Branch) was sold at the price of HK$2,280,000. On 25 February 2004, the Shun Fuk Elderly Home (Kwai Hing Branch) was sold at the price of HK$2,138,000. On 11 April 2006, the Shun Fuk Elderly Home (Wai Bun Branch) was sold at the price of HK$2,632,500.

30.  Since April 2006, the Plaintiff held beneficial interests in only 3 elderly homes ie Elderly Homes no. l, 2, 6 of the above table.

31.  By 2 letters dated 20 January 2017 from Messrs B. Mak & Co on behalf of the Plaintiff to the 1^st and 2^nd Defendants, the Plaintiff requested them to recognise her 20% beneficial interests in the Kin Man Properties, transfer the 20% legal title back to her and to account for the rental profits generated from the Kin Man Properties since January 2009. In the letter to the 1^st Defendant, the Plaintiff made a demand on it in the following terms:

“We are given to understand that the property, namely, 1^st Floor & Flat Roof, Kin Man Building, Nos. 66-74 Castle Peak Road, Kowloon [3] (hereinafter the “Property”), was purchased by Ms. Cheung upon mutual agreement with your company. Pursuant to the said agreement, Lam Wai Shan, a Director of your company, had substantiated that Ms. Cheung holds 20% of equity in the Property.

Therefore, Ms. Cheung currently holds beneficial interest amounting to 20% of equity in the Property, which is to say, your company is currently holding the said 20% of equity on trust for Ms. Cheung.

We are instructed that your company has been leasing the Property and collecting rent therefrom since January 2009 (to date). However, as of now, Ms. Cheung has yet to receive the 20% of rent in respect of the said period, which ought to be beneficially owned by her.

To this end, Ms. Cheung hereby requests that your company:-

1.  Transfer 20% of the legal title in the Property, at no cost, to Ms. Cheung by way of deed; and

2.  Account for all rental income derived from the Property from January 2009 to the present, and, to provide the relevant supporting documents such as lease agreements and bank deposits.” (emphasis add)

32.  By letter dated 2 February 2017 from Messrs Wat & Co on behalf of the 1^st and 2^nd Defendants to Messrs B. Mak & Co, they replied as follows:

“Our client would like to point out that any interest your client may hold in the Property[4], whether the same pertains to legal title or beneficial ownership, has long been extinguished. Your client had requested in 2008, for our client to dispose of all her interests in the Property on a monetary basis. In this regard, our client had also deposited all the relevant funds into the Hang Seng Bank account of your client as per agreement, which was sometime in November or December that year.” (emphasis added)

33.  By letter dated 14 February 2017, Messrs B. Mak & Co on behalf of the Plaintiff responded as follows:

“We are instructed that our client has never demanded your clients to purchase and has never sold her share in the Properties to your clients. Your clients’ allegation that they have purchased our client’s share in the Properties is denied.

Without prejudice to our client’s position as aforesaid, we would be obliged if you would let us know the following particulars of your clients’ allegation (which is denied):-

1. The date on which your clients allegedly made payment to our client;

2. The amount allegedly paid to our client; and

3. Copy documentary proof, such as bank transfer advice or cheque deposit advice.” (emphasis added)

34.  There was no further exchange of correspondence between the parties.

35.  On 12 June 2017, the Plaintiff commenced the present Action.

36.  By an expert report of Jones Lang LaSalle Limited (“JLL”) commissioned by the Defendants dated 3 May 2019, the market value of the Kin Man Properties as at 8 August 2008 was assessed at HK$26 million and as at 10 November 2008 was assessed at HK$22.5 million.

Deliberation

The Core Issue

37.  It can be seen from the above that the core dispute in this case is the purpose of the Sum admittedly paid to the Plaintiff in November/December 2008. As elaborated in the Agreed List of Issues in Dispute as Issue 1:

“Given that it is not disputed that the Plaintiff received through her Hang Seng bank account with account no. 371-260605-882 (i.e. the Hang Seng Bank Account) a total of HK$2,304,875 from Mr. Lam (acting on behalf of the 1^st Defendant) between 20 November 2008 and 23 December 2008, what was the purpose for such payment by Mr. Lam and/or the 1^st Defendant to the Plaintiff? Specifically:-

(1)  Was the payment of HK$2,304,875 (as alleged by the Defendants) for the purpose of buying out the Plaintiff's 20% beneficial interest in the Kin Man Properties (the existence of which prior to 1^st December 2008 is not disputed by the Defendants) in 2008 pursuant to the Buy Out Agreement (which is denied by the Plaintiff) such that the Plaintiff no longer holds any beneficial interest in the Kin Man Properties since 1 December 2008?

(2)  If the answer to subparagraph (1) hereinabove is in the negative, whether or not the payment of HK$2,304,875 was, as is the Plaintiff's case (which is denied by the Defendants), for the purchase of the beneficial interests in and of the 6 elderly homes then held by the Plaintiff as particularised at paragraph 4A of the Amended Defence and Counterclaim of the 1^st and 2^nd Defendants filed on 4 July 2019 pursuant to the alleged Shun Fuk Buy-Out Agreement (as defined at §8(5) of the Re-Amended Reply and Defence to Counterclaim filed on 6 January 2021).” (emphasis added)

38.  In his Closing at para 4, Mr Wong SC emphasises that the sole focus of this trial is on whether the Defendants can discharge their burden to prove the essential elements of the Buy-Out Agreement. The other sub-issues are merely sideshows that do not have any material bearing on the focus and core of the present dispute. His submission is that the Defendants fail to discharge such a burden of proof and that should be the end of this otherwise a very simple case.

39.  This court agrees with Mr Wong SC, but only up to a point.

40.  Mr Khaw SC accepts in his Reply Submissions that the Defendants bear the burden of proof of the Buy-Out Agreement on the basis that he who asserts must prove. However, he also submits, correctly, the Plaintiff has put forward a positive case of the Shun Fuk Buy-Out Agreement as the explanation for her receipt of the Sum, as to which the burden of proof is on her.

Witnesses

41.  As far as witnesses are concerned, on the Plaintiff’s side, the Plaintiff testified on her own behalf.

42.  On the Defendants’ side, they have called 3 witnesses:

(a)  Mr Lam.

(b)  Ms Lam.

(c)  Ms Shing Wun Man - one of the purchasers in the sales contract relating to the Shun Fuk Elderly Home (Wai Bun Branch) dated 11 April 2006.

43.  There is no doubt that the Plaintiff and Mr Lam are the two main witnesses: Ms Lam’s testimony is largely corroborative of part of Mr Lam’s[5] while Ms Shing’s testimony is wholly peripheral[6] as she does not purport to have any personal knowledge of the Core Issue at all.

44.  At this stage, it is pertinent for this court to give a short profile of the two main witnesses, largely based on the information supplied by their legal advisers as per this court’s request.

45.  The Plaintiff was born in 1954 in the Mainland. She came to Hong Kong in 1981, having finished secondary education in the Mainland. The Plaintiff is a Fellow Chartered Financial Practitioner. Between 2002 and 2017, she was an insurance financial consultant with an annual income of between HK$500,000 and HK$1 million.

46.  At para 31 of Cheung 1, the Plaintiff set out her impressive residential property portfolio for self-use, rental income or for her daughters during the 10 years from 2003 to 2012. In particular, the Plaintiff bought a property every year in 2006, 2007, 2008 and 2009.

47.  At para 20 of her Supplemental Witness Statement (“Cheung 2”), the Plaintiff said this:

“20.…Before I retired I was a financial consultant and had attended some CFP courses. Other than insurance, I understand what trust is and the importance of retirement plans due to an ageing population. The 20% of beneficial interest in the Kin Man property was arranged in a form of trust under King Charter, it was a long term investment. Since I had participated in property investment in the early 80s, I have had a lot of experience in the volatile property market in Hong Kong in the last 4 decades, I would not sell the beneficial ownership in the Kin Man property, which I had intended to use for my retirement, at such a low price because of the short-term volatility in the market in 2008.”

48.  At trial, the Plaintiff impressed this court as a very shrewd person, particularly careful with her investments and finance. This is not surprising given her qualification as a Fellow Chartered Financial Practitioner and her occupation as an insurance financial consultant. Further, in comparison with Mr Lam, she is a more eloquent witness.

49.  Mr Lam was born in 1974 in the Mainland and came to Hong Kong in 1984 at the age of 10. He finished Secondary One education in Hong Kong and started working, at first part time. He had worked in a Hong Kong style café or “Cha Chaan Teng” in 1988/89, a metal hardware store in 1989/90 and as a hawker in 1991/92. Since 1992, Mr Lam began to be engaged in property investment in Hong Kong. Since late 1994, Mr Lam began his involvement in the family business in the operation of elderly homes founded by his father. Thereafter, Mr Lam was more and more into property investment. In Lam 2, Mr Lam had exhibited a list of 12 residential properties he jointly invested with the Plaintiff in equal shares in the 4 to 5 years between 1996-97 and 2003-04. According to the list, most of the properties were resold within a very short time and at a profit.

50.  At trial, Mr Lam at times impressed this court as not being quite able to get to the point of the questions put to him. However, this court does not find Mr Lam as an evasive or shifty witness. Rather, this court is of the view that his performance at the witness box is likely a reflection of his education level, without any disrespect to him.

The Court’s approach

51.  The nature and purpose of the payment of the Sum to the Plaintiff is a purely factual issue which dates back almost 15 years ago. Both the Plaintiff and the Defendants have given competing versions of it without the support of any direct contemporaneous documentary evidence.

52.  As expected, the Plaintiff heavily criticises the Defendants’ case on the Buy Out Agreement as convoluted, shifting, and is no more than a self-serving metamorphosis. The Plaintiff also launches a lengthy attack on Mr Lam’s credibility, and to a lesser extent Ms Lam’s. Similarly, the Defendants also extensively criticize the Shun Fuk Buy Out Agreement and the Plaintiff’s credibility in their Closing.

53.  In these circumstances, the resolution of the core issue depends to a very large extent on this court’s finding on the credibility of the two main witnesses. This court has carefully considered the manner in which they testified including their demeanour and assessed it against the known and undisputed circumstances of this case. This court has in particular considered the inherent probabilities or otherwise of their testimony and such of the documentary evidence as there is, or rather the absence of it, and assessed their credibility accordingly.

54.  This court has also taken heed of the following observations of the recent English Court of Appeal in Natwest Markets Plc v Bilta (UK) Ltd (In Liquidation) [2021] EWCA Civ 680 at [49] - [51]:

“49. In a case such as the present, where the events in question took place over 9 years before the trial and occurred in a narrow period of around 3 weeks, the salutary warnings about the recollections of witnesses in Gestmin SGPS SA v Credit Suisse UK Ltd [2015] EWHC 3560 at [22] and Blue v Ashley [2017] EWHC 1928 at [68] are pertinent. It was therefore of paramount importance for the Judge to test that evidence against the contemporaneous documents and known or probable facts if and to the extent that it was possible to do so.

50. We say, “if and to the extent that it was possible to do so”, because it is important to bear in mind that there may be situations in which the approach advocated in Gestmin will not be open to a judge, or, even if it is, will be of limited assistance. There may simply be no, or no relevant, contemporaneous documents, and, even if there are, the documents themselves may be ambivalent or otherwise insufficiently helpful. The case could be one about an oral promise which turns entirely on the word of one person against another’s, and the uncontested facts may well not point towards A’s version of events being any more plausible than B’s. …

51. Faced with documentary lacunae of this nature, the judge has little choice but to fall back on considerations such as the overall plausibility of the evidence; the consistency or inconsistency of the behaviour of the witness and other individuals with the witness’s version of events; supporting or adverse inferences to be drawn from other documents; and the judge’s assessment of the witness’s credibility, including his or her impression of how they performed in the witness box, especially when their version of events was challenged in cross-examination. Provided that the judge is alive to the dangers of honest but mistaken reconstruction of events, and factors in the passage of time when making his or her assessment of a witness by reference to those matters, in a case of that nature it will rarely be appropriate for an appellate court to second-guess that assessment.” (emphasis added)

55.  Echoing the observations above, Mr Khaw SC submits orally in Closing, which this court largely agrees, that the key material events in the present case happened about 15 years ago and it is very difficult to reconstruct a complete picture of what happened and what went through each party’s mind, given the long lapse of time and the lack of relevant contemporaneous documentation. When analysing the evidence, this court should avoid getting bogged down with the minute details. Rather, this court should and will look at the bigger picture and take a holistic approach in assessing the parties’ competing cases.

Buy Out Agreement

56.  Since it is common ground that the Plaintiff had 20% beneficial interests in the Kin Man Properties up to at least 30 November 2008, and since the burden of establishing the Buy Out Agreement is on the Defendants, this court will examine it first in light of the Plaintiff’s criticism of it.

57.  The Defendants’ case on the Buy Out Agreement, as based on the Amended Defence and Counterclaim (“ADCC”) and Mr Lam’s witness statements and oral testimony, is summarised in these terms in their Closing.

(a)  In or around October 2008, the Plaintiff enquired with Mr Lam over a telephone call as to whether he would be interested in buying out her 20% beneficial interests in the Kin Man Properties on the basis that (i) she has then purchased 2 properties at the Harbour Place in Hung Hom which were both due to complete in late 2008 and (ii) she was worried about the potential impact of the financial crisis in the wake of Lehman Brothers on her ability to complete the purchase.

(b)  After some consideration and negotiation, Mr Lam agreed to purchase the Plaintiff’s 20% beneficial interests if she would agree to adopt HK$18 million as their valuation. This was below the then estimated market value of the Kin Man Properties as Mr Lam took a dim view of the property market. About a week later, the Plaintiff agreed to Mr Lam’s proposed valuation.

(c)  After deducting all relevant and necessary expenses including the outstanding mortgage balance and rental deposits etc., the Plaintiff agreed to sell and Mr Lam on behalf of the 1^st Defendant agreed to buy the Plaintiff’s 20% beneficial interests for the Sum. The computation of the Sum was at the time done by an accounting staff of the 1^st Defendant Ms Ng Kah Lai (“Ms Ng”). Ms Ng had left the 1^st Defendant around 10 years ago and could no longer be located.

(d)  Mr Lam/the 1^st Defendant did not have sufficient cash immediately available at the time. Hence, it was agreed that payment of the Sum would be by instalments.

(e)  The 1^st Defendant paid a total of HK$2,304,875 ie the Sum to the Plaintiff’s Hang Seng Bank Account between 20 November 2008 and 23 December 2008.

(f)  The Plaintiff and the 1^st Defendant agreed to adopt 30 November 2008 as the cut-off date, after which the Plaintiff ceased to have any interests in the Kin Man Properties.

The Plaintiff’s criticism

58.  To discredit the Buy Out Agreement, the Plaintiff submits in her Closing that there are at least 12 problems with the Defendants’ case. Putting them simply, the 12 problems are these.

59.  First, Mr Lam has confirmed in cross-examination that he has a low command of English and had not read the original Defence and Counterclaim, contrary to para 3 of Mr Lam’s 1^st witness statement (“Lam 1”). He was thus not in a position to adopt the contents of it as part of his Lam 1. Ms Lam’s witness statement has also not adopted the contents of the original Defence and Counterclaim or the ADCC as her evidence. This made the Defendants’ case on the Buy Out Agreement seriously deficient in evidence, such that it is bound to fail.

60.  Second, the Plaintiff has adduced the “Share Certificate” signed by Ms Lam on behalf of the 1^st Defendant dated 21 July 2008 and the pre-action correspondence between the Plaintiff’s and the Defendants’ solicitors in January and February 2017 in establishing the Plaintiff’s agreed 20% beneficial interests in the Kin Man Properties.

61.  Third, the Defendants ignored the Plaintiff’s reasonable enquiries by her solicitors’ letter dated 14 February 2017 on the particulars and supporting evidence that the Plaintiff’s 20% beneficial interests had been sold to the Defendants.

62.  Fourth, Mr Lam’s allegation that the Plaintiff was in urgent need of money to complete the purchase of two properties in Harbour Place, Hung Hom (海濱南岸) (“Harbour Place Properties”) was destroyed by the “completion statements”[7] dated 19 November 2008 for HK$957,672.80 and dated 4 December 2008 for HK$1,419,126.54. Further, as a matter of fact, at least HK$1 million out of the Sum was paid to the Plaintiff after the completion of the said two properties.

63.  Fifth, the Buy Out Agreement is highly uncertain, incredible and unbelievable when Mr Lam could not explain why he thought that the Plaintiff had agreed to it when there were essential terms outstanding, including inter alia the payment schedule, the number of instalment payments, the deductions that the Plaintiff would have to give credit to etc. In particular, there is no explanation as to why there was the alleged urgent need of money on the part of the Plaintiff on the one hand but on the other hand the Plaintiff somehow agreed that Mr Lam could take all the time in the world to make payment by instalments, without specifying by how many instalments or the amount for each instalment.

64.  Sixth, the internal inconsistency within the Defendants’ assertions over time. For instance, the Defendants’ assertion in their solicitors’ pre-action letter, which stated that all payments for the purchase of the Plaintiff’s 20% beneficial interests had already been made in November/December 2008, is flatly contradicted by the evidence that the Plaintiff still received payment after the completion of the Buy Out Agreement ie a sum of HK$124,488 was paid to the Plaintiff on 2 March 2009 as her share of rental profits of the Kin Man Properties.

65.  Seventh, there is no documentary proof that the 7 deposit slips comprising the Sum were related to the purchase of the Plaintiff’s 20% beneficial interests. Further, the Plaintiff’s 20% beneficial interests could not be worth only HK$2,304,875.

66.  Eighth, the computation and agreement of the Sum as the purchase price for the Plaintiff’s 20% beneficial interests was introduced by Mr Lam for the first time belatedly in Lam 2. They are illogical and do not make any common sense. Further, they are essential matters and usually a person would have been able to recall them in his first witness statement rather than later.

67.  Ninth, it is inherently improbable for the Plaintiff to sell her 20% beneficial interests at HK$2,304,875 since it is substantially below market price and goes against the Defendants’ valuation evidence of HK$26 million and HK$22.5 million as at 8 August and 10 November 2008 respectively, which has factored into account the financial crisis in 2008. On the basis that HK$2,304,875 equals to the net value of the Plaintiff’s 20% beneficial interests, it means that the total net value of the Kin Man Properties after deduction of the outstanding mortgage balance was merely HK$11,524,375, which does not make any sense.

68.  Tenth, the Defendants’ belated assertion in Lam 2 that the Plaintiff’s interests in the 6 Elderly Homes[8] were sold to Mr Lam in July 2009 for HK$600,000 is utterly incredible, particularly when the assertion is not supported by any documentary evidence and lacks commercial sense.

69.  Eleventh, Mr Lam and Ms Lam’s evidence is incredible, unbelievable and at times illogical.

70.  Twelfth, Mr Lam’s concession at cross-examination that the Plaintiff and him maintained a good and trusted relationship at all material times substantially discredits the minor criticisms raised against the Plaintiff’s case.

71.  After setting out the 12 problems with the Buy Out Agreement in her Closing, the Plaintiff then launches a lengthy attack on the credibility of Mr Lam himself.

72.  As this court sees it, the bulk of the points made by the Plaintiff in her attack on Mr Lam’s credibility is the opposite side of the same coin as her attack on the Buy Out Agreement (which is substantially based on Mr Lam’s testimony). The fact that the Plaintiff makes similar attack twice does not render it twice as convincing.

73.  Parts of the Plaintiff’s attacks on Mr Lam are highly subjective eg Mr Lam was “long-winded, talkative and has fabricated and/or concocted his testimonies to advance a false case”, Mr Lam’s evidence is “exaggerated and misleading” or “Mr Lam’s reaction in Court is not genuine”.

74.  In this court’s view, the points made in support of such attacks are mainly focused on relatively peripheral matters. Eg (1): a general statement at the beginning of Lam 1 that he had “regularly” distributed dividends to the Plaintiff which is not supported by the evidence that rental profits from the Kin Man Properties were only distributed once in May 2008 and once in March 2009. Eg (2): the assertion of an unfounded counterclaim against the Plaintiff for outstanding tax payments for the financial years 2007 - 09 in the sum of HK$19,894, which was dropped by his Leading Counsel in Opening. Eg (3): Mr Lam said during cross-examination on Day 3 that he was angry and shocked when he saw the demand letters from the Plaintiff’s solicitors dated 20 January 2017 but that was not mentioned in any of his witness statements.

75.  This court does not find such attacks on Mr Lam to be particularly helpful in resolving the Core Issue. As this court states earlier, it will concentrate on the bigger picture and not get bogged down with the minute details. If this court does not find the alleged problems with the Buy Out Agreement are objectively such as to render the Defendants’ case unbelievable and should be rejected, the additional subjective and personal attacks on Mr Lam will still be considered by this court but they are unlikely to tilt the balance in favour of the Plaintiff in this court’s overall assessment of the parties’ cases.

76.  This court now turns to the problems with the Buy Out Agreement.

77.  The first problem is surprisingly unrealistic.

78.  Even if Mr Lam had confirmed in court that, owing to his low command of English, he had not read the original Defence and Counterclaim or the ADCC for that matter, that does not mean the Defendants are somehow abandoning their pleaded case. At the risk of stating the obvious, pleadings are there to set out the material facts of a party’s case, not to prove it. Proof comes in the form of evidence and, in the case of the Buy Out Agreement, the evidence principally comes from Mr Lam’s testimony and the various documents presented at the trial.

79.  Second, the “Share Certificate” only proves an undisputed fact ie the Plaintiff’s 20% beneficial interests as at 21 July 2008. It does not render the subsequent Buy Out Agreement reached in November 2008 untenable.

80.  Rather, as submitted in the Defendants’ Closing, the “Share Certificate” is in a way against the Plaintiff as it demonstrates the internal inconsistencies of her case.

81.  This is because it is the Plaintiff’s evidence that the purpose for which she requested the “Share Certificate” from Ms Lam was to make it abundantly clear that she only agreed to sell her interests in the elderly homes, as opposed to her 20% beneficial interests in the Kin Man Properties in order to avoid any confusion or misunderstanding in the future. If that were the true purpose of the Plaintiff, one cannot help wonder why it was not spelt out in the “Share Certificate” that her 20% beneficial interests were not for sale, despite expression of interests from Ms Lam. On the other hand, if a written document was really required to make it abundantly clear that she only agreed to sell her interests in the elderly homes, it would have made more sense for that document to be provided by Mr Lam himself as the potential buyer of the Plaintiff’s interests in the elderly homes.

82.  Back in July 2008, there was simply no need for the Plaintiff to seek a document to record her 20% beneficial interests since there is no evidence that anyone was seeking to query that. After all, the Plaintiff had been content to do without such a document since the Kin Man Joint Investment Agreement in January 2003.

83.  Further, on the Plaintiff’s evidence, it was only in November 2008 that she reached an agreement on the phone with Mr Lam to sell her interests in the elderly homes. Back in July 2008, the parties have yet to sort out how to calculate the price. So why is there the need to make abundantly clear on a piece of paper about the disposal of her interests in the elderly homes when she had not even agreed on the terms of sale to Mr Lam?

84.  The 2 demand letters from the Plaintiff’s solicitors on 20 January 2017 did not establish the Plaintiff still had 20% beneficial interests in the Kin Man Properties as at the date of the letters – they only asserted it. That assertion was quickly refuted by the reply from the Defendant’s solicitors dated 2 February 2017 to the effect that the Plaintiff’s 20% beneficial interests had been disposed of and paid for by the Defendants in November/December 2008, which is the gist of the Buy Out Agreement. As far as the payments into the Plaintiff’s Hang Seng Bank Account in November/December 2008 are concerned, they are now accepted by the Plaintiff as true, even though she disputes the nature and purpose of them.

85.  Indeed, given the lapse of time of over 8 years between 2008 and 2017, the Defendants’ ability to set out the gist of their case in reply within 2 weeks is impressive and is something this court will take into account in assessing the veracity of the Defendants’ case.

86.  Third, the Plaintiff’s enquiries by her solicitors’ letter dated 14 February 2017 were only concerned with the date and amount of the payments as well as documentary proof. These are now undisputed facts. The fact that the Defendants’ solicitors did not see fit to engage further with the Plaintiff’s solicitors in correspondence is neither here nor there.

87.  The fourth problem is about the Plaintiff’s cash flow situation given her need to complete the purchase of the 2 Harbour Place Properties towards the end of 2008.

88.  It seems to this court an oversimplification that the 2 “completion statements” dated 19 November 2008 and 4 December 2008 were in themselves sufficient to demonstrate the Plaintiff’s liquidity strength. The Plaintiff might eventually have enough cash to complete the purchase. But it is a non sequitur to suggest that she would not have tried to obtain that cash by offering to sell the Kin Man Properties to the Defendants prior to the 2 completion dates. The undisputed fact is that the Plaintiff had received 4 payments from the 1^st Defendant between 20 November and 3 December 2008 totalling HK$1.3 million, prior to the 2^nd completion date of 5 December 2008. Further, the Plaintiff’s depiction of the circumstances under which she purchased the 2 Harbour Place Properties and their completion also casts doubts on her credibility.

89.  The starting point, as set out in the Defendants’ Closing, is of course the global financial crisis in late 2008 caused by the sudden collapse of Lehman Brothers which caught everyone by surprise.

90.  On the documentary evidence, the Plaintiff entered into the sale and purchase Agreements for the 2 Harbour Place Properties during the presale stage on 27 December 2007, almost a year prior to the crisis. The completion dates of the 2 properties were a year later on 20 November 2008 and 5 December 2008 respectively.

91.  In Cheung 1 at paras 31 and 32, what the Plaintiff said was this:

“31. …in December 2007, I purchased a 2-bedroom flat in Harbour Place for renting out (it has been a rental property all the time since December 2008); in late 2008 I purchased another flat in Harbour Place and have lived in it after renting it out for some time…The property I purchased in December 2007, the flat in Harbour Place, was an off-plan [sic][9] property, it was completed after one year, in December 2008.

32. In around mid-2008 (before 21 July 2008), before the completion of the Harbour place property, I tried to approach banks for mortgage loans. The bank requested me to add some young people as guarantor. I contacted Lam Wai Shan (transliterated) and asked her to be my guarantor, to my surprise, she refused…” (emphasis added)

92.  The Defendants submit in Closing that the omission to mention that the other Harbour Place property was in fact bought in December 2007 is obviously in an attempt to avoid giving any impression of the potential financial strain she would be put under when both properties had to be completed at more or less the same time towards the end of 2008. This court is prepared to give the Plaintiff the benefit of the doubt and will not draw such an adverse inference against the Plaintiff. This is because as a matter of fact, both properties were to be completed more or less at the same time in 2008, and the financial strain on her would have been the same, whether or not they were purchased at the same time in 2007.

93.  However, it does seem odd for a seasoned and regular property investor to have forgotten she had actually bought 2 pre-sale properties, instead of 1, in the same Tower 6 of the same housing estate at the same time. One may think that given the Plaintiff’s portfolio of property investments, some sort of memory lapse is not surprising. However, when this was pointed out to the Plaintiff in cross-examination, her explanation was that it could be the problem with her solicitor, not her memory. Further, precisely because of the Plaintiff’s impressive portfolio of property investments, it stands to reason that she would have a contemporaneous written record of them so that it was not necessary for her to rely solely on her memory. But no such written record was adduced by the Plaintiff in evidence.

94.  The purchase price of the 2 Harbour Place Properties added up to over HK$10 million and the completion date happened to fall shortly after the financial crisis. In Lam 2 at para 32, Mr Lam mentioned a telephone conversation between him and the Plaintiff as a prelude to the Buy Out Agreement:

“I recall that on a certain day in or around October 2008, I suddenly received a call from Cheung Kwai Chi. In the course of the conversation, she told me that she had acquired two units at the Harbour Place in Hung Hom, for which the mortgage loan would be signed shortly, at the end of the year. However, considering the financial crisis in the wake of Lehman Brothers, she was concerned that the mortgage loan would not be approved. In addition, she mentioned that she was getting on in years and did not wish to hold on to too many properties, and enquired if I was interested in buying out the 20% beneficial interest she held in the two properties in Kin Man Building…”

95.  In Cheung 2 at paras 23 and 24, the Plaintiff disputes the existence of this conversation and is adamant that she had no liquidity problem at the time. The Plaintiff said towards the end of 2008, she was not short of cash and was not affected by the collapse of the Lehman Brothers. She had already prepared the funds needed to complete the 2 Harbour Place Properties and there was no need to sell the Kin Man Properties to raise funds. Further, her 2 daughters had returned to Hong Kong to work and they could be her guarantors for the mortgage loans if required.

96.  The Plaintiff then enclosed a 1-page excerpt of her savings account passbook at the Bank of China (“BOC”) which shows transactions between 8 and 28 October 2008. She also enclosed a 7-day time deposit slip of a Dah Sing Bank account in the name of her and her daughter in the sum of HK$2.5 million dated 29 October 2008 and an A/C Balance Enquiry Form of Dah Sing Bank dated 14 November 2008 showing a balance of slightly over HK$2.5 million in a joint account with her daughter.

97.  The Defendants’ observation in their Closing is that between 8 and 23 October 2008, the Plaintiff’s BOC account maintained a relatively consistent balance of around HK$300,000-400,000. Upon a withdrawal of HK$180,000 on 23 October 2008, there were only HK$158,060.71 left in the account. It was by virtue of 3 large deposits on 23, 24 and 27 October 2008 of almost HK$2.5 million that the balance of the BOC account suddenly jumped to over HK$2.58 million on 27 October 2008 which the Plaintiff immediately transferred out on the same day. According to the Plaintiff, the HK$2.5 million then went to Dah Sing Bank to earn some interest. Upon maturity of the time deposit, the money was eventually used to complete the purchase of the 2 Harbour Place Properties.

98.  The Plaintiff was cross-examined on the origin of these 3 large deposits. The long and short of her answer was that the incoming funds were her own money and were transferred from her various other bank accounts into her BOC account.

99.  The Defendants submit that was the first time the Plaintiff claimed she had funds in other bank accounts which could be used to complete the purchase of the 2 Harbour Place Properties and she was not strapped for funds. However, she has never disclosed any statements or passbooks of those other bank accounts. According to this court’s review of the transcript, her explanation for not disclosing documents relating to those other bank accounts was that she had shown them to her lawyer but was advised that they were not necessary as long as she could show she had HK$2.5 million for the purpose of completion.

100.  In this court’s view, it is bizarre for the Plaintiff to disclose that 1-page excerpt of her BOC account which initially did not have HK$2.5 million in it but not the statements or passbooks of the other bank accounts from which the HK$2.5 million were transferred into her BOC account. If the whole point of that part of Cheung 2 is to repel the allegation that the Plaintiff was in some sort of liquidity strain, then the more she disclosed about her liquid assets, the more convincing her evidence would be.

101.  In Ngai Chu v Lau Pong Chun trading as Yau Pong Construction unrep, CACV 402 of 2004, 16 November 2005 at [1], Ma CJHC (as he then was) made this observation on the failure of a party to disclose relevant documents:

“In my view, there has been a failure on the part of the respondent to comply with his obligations as to discovery :- see paragraphs 16 and 17 below. Where relevant, and a fortiori crucial, documents are not discovered, quite apart from this being a breach of a party’s obligations in a civil action (as well as the professional obligations of his legal representatives where they are aware of this), this failure may well often result in a court making adverse findings as to that party’s credibility in the area where the failure has taken place.” (emphasis added)

102.  If the Plaintiff considers her discovery obligation covers that 1-page excerpt of her BOC account, the same obligation should equally cover the statements or passbooks of the other bank accounts from which the HK$2.5 million were transferred. The above observation by Ma CJHC is apt to apply to this part of the case.

103.  To conclude on the fourth problem, this court does not find the Plaintiff’s evidence to be such as to destroy the Defendants’ case that the prelude to the Buy Out Agreement is as stated in Lam 2. On the contrary, upon proper analysis, there is valid ground to cast doubt on the Plaintiff’s credibility generally and, specifically on her liquidity strength around October/ November 2008.

104.  The fifth problem concerns the ultimate issue in this case. This court will reach a conclusion after considering all the evidence.

105.  But there is one argument of the Plaintiff which can be dealt with immediately ie the lack of explanation of the alleged urgent need of money on the part of the Plaintiff on the one hand and the Plaintiff’s willingness to agree Mr Lam’s suggestion of payment by instalments, without specifying the number of instalments or the amount of each.

106.  In this court’s view, the argument is superficially attractive but ultimately the answer to it depends on the Plaintiff’s liquidity status. Since the Plaintiff’s financial documents at the material time are not completely before this court, one cannot come to a definite conclusion of her liquidity status one way or another. But that also means this court cannot rule out the possibility that the Plaintiff was prepared to agree to whatever she was able to elicit from Mr Lam in order to get some, even if not all, cash for the purpose of completing the purchase of the 2 Harbour Place Properties.

107.  The sixth problem is surprisingly bad. There is no inconsistency between what was stated in the letter from the Defendants’ solicitors dated 2 February 2017 that all payments for the purchase of the Plaintiff’s 20% beneficial interests had been made in November/December 2008 and the fact that a sum of HK$124,488 was paid to the Plaintiff on 2 March 2009. The nature of the payment of HK$124,488 is undisputed: it was only in respect of the Plaintiff’s share of rental profits of the Kin Man Properties from 1 January up to 30 November 2008[10]. This undisputed nature of the payment is wittingly or unwittingly omitted from the elaboration of the sixth problem.

108.  The first part of the seventh problem is something that afflicts both parties to this Action. Neither the Defendants nor the Plaintiff can produce any contemporaneous documentation to directly support their respective cases on the Buy Out Agreement or the Shun Fuk Buy Out Agreement. The submission of lack of relevant documentation from one side simply neutralizes that from the other.

109.  As for the submission that the Plaintiff’s 20% beneficial interests could not be worth only HK$2,304,875, this is part and parcel of the eighth and ninth problems and can be dealt with together.

110.  The problems can be analysed in 3 aspects: first, whether it was Ms Lam or the Plaintiff who initiated the undisputed discussions on the buyout of the Plaintiff’s 20% beneficial interests in mid-2008; second, Mr Lam’s delayed explanation in Lam 2 of the calculation of and the Plaintiff’s agreement to HK$2,304,875 as the purchase price, and third, whether HK$2,304,875 was a gross undervalue.

111.  The first aspect goes towards the credibility of the Plaintiff and Ms Lam and Mr Lam.

112.  One starts with Cheung 1 at paras 32 and 47.

113.  The Plaintiff’s narrative is that sometime in mid-2008, there were discussions between her and Ms Lam when Ms Lam suggested to buy out her 20% beneficial interests based on an opening valuation of the Kin Man Properties at HK$28 million. The occasion of the discussions was that in around mid-2008, the Plaintiff approached banks for mortgage loans for the purpose of the completion of the 2 Harbour Place Properties. The banks requested some young people to act as her guarantors. The Plaintiff first contacted Ms Lam, as opposed to her 2 young working daughters, to act as her guarantor. To her surprise, Ms Lam refused but suggested to buy out the Plaintiff’s 20% beneficial interests. Since that was not what the Plaintiff needed, she rejected the offer without making a counter-offer. The Plaintiff further points out that even based on a valuation of HK$28 million, the net worth of her 20% beneficial interests, after deducting the outstanding mortgage loans, was around HK$4.4 million. Hence the sum of HK$2,304,875 was a gross undervalue.

114.  All these are disputed by Ms Lam.

115.  The Defendants’ query of the Plaintiff’s narrative is simple: the Plaintiff’s 2 daughters were young and were in gainful employment with reputed employers in 2008. According to the Plaintiff, they could easily have acted as her guarantors for the mortgage loans: Cheung 2 at para 23. When being cross-examined on why her daughters were not naturally her first choice, the Plaintiff was not able to come up with a satisfactory explanation other than that she was very close to Ms Lam.

116.  The Defendants’ query is a valid one but is obviously only one out of many factors in assessing the Plaintiff’s credibility. The Plaintiff might legitimately have thought she was close to Ms Lam, but why she did not think she was even closer to her 2 daughters was not explained.

117.  Mr Lam’s narrative is that it was the Plaintiff who initiated the discussions. It boils down to the Plaintiff’s liquidity status and her financial need to complete the purchase of the 2 Harbour Place Properties.

118.  On the second aspect, Cheung 1 and Lam 1 were mutually exchanged on 6 December 2018. In Lam 1 at para 19, Mr Lam gave a terse description of the Buy Out Agreement:

“To cut a long story short, the Plaintiff had transferred her entire interests in the Two Properties to me at the price of HK$2,304,875 on 30 November 2008. Further, she agreed that I could make payment in instalments, for which I did.”

119.  In Lam 2 at paras 32 to 38, Mr Lam responded to Cheung 1 by explaining inter alia how the Buy Out Agreement came about at the initiation of the Plaintiff in October 2008, in the context of the financial crisis and the impending completion of the 2 Harbour Place Properties. Mr Lam also set out how the sum of HK$2,304,875 was arrived at by the 1^st Defendant’s accountant Ms Ng and the objective assessment as to why this sum was something that the Plaintiff actually agreed to.

120.  Albeit not in some many words, the Plaintiff comes close to suggesting that part of Lam 2 is a recent fabrication. This court does not agree. As this court sees it, there is nothing untoward for Mr Lam to respond to Cheung 1 that the sum of HK$2,304,875 was a gross undervalue only in Lam 2. The validity or otherwise of the calculation of the Sum was not something highlighted in the pleadings. The Plaintiff only pleaded in para 8(1) of her original Reply and Defence to Counterclaim that the Buy Out Agreement never existed.

121.  The more relevant aspect of the Plaintiff’s criticism, described as the ninth problem, is that the sum of HK$2,304,875 was a gross undervalue and it is inherently improbable for the Plaintiff to have accepted it.

122.  Mr Lam’s account of the negotiation initiated by the Plaintiff is that according to her, the Kin Man Properties were probably worth between HK$22 to 23 million. As submitted in the Defendants’ Closing, this estimate is not far off from the valuation of JLL of HK$26 million in August 2008 and HK$22.5 million in November 2008. JLL’s valuation is not disputed by the Plaintiff.

123.  Mr Lam’s evidence is that he anticipated that property prices in Hong Kong would continue to drop and he told the Plaintiff that he was not interested in buying out her 20% beneficial interests unless she agreed to a lower valuation of the Kin Man Properties at HK$18 million. As observed by JLL, the market valuation of the Kin Man Properties did fall more than 13% in the 3 months between August and November 2008. This supports Mr Lam’s evidence that he took a dim view of the property market at the time.

124.  According to Mr Lam, eventually, the Plaintiff agreed. Mr Lam then instructed Ms Ng to do the calculation of the amount due to the Plaintiff after taking into account all necessary deductions. Owing to the lapse of time, Ms Ng could no longer be reached and her calculation could no longer be retrieved. But Mr Lam’s reconstruction of Ms Ng’s calculation of the value of the Plaintiff’s 20% beneficial interests produces a very close figure of HK$2,307,167 to the sum of HK$2,304,875.

125.  In this court’s view, the sum of HK$2,304,875 may or may not be an undervalue. But even if it were, it does not mean the Plaintiff would not have accepted it. It all depends on the direction of the property market as perceived by the parties in late 2008 and whether the Plaintiff indeed had liquidity constraints.

126.  The tenth problem ie the Defendants’ assertion in Lam 2 that Plaintiff’s interests in the 6 Elderly Homes[11] were sold to Mr Lam for HK$600,000 in July 2009 is incredible, is not a problem with the Buy Out Agreement as such. It is just one of the general credibility issues when assessing the veracity of Mr Lam’s testimony. Once this court is able to come to a conclusion as to the relative probability of the Buy Out Agreement and the Shun Fuk Buy Out Agreement as representing the truth, and they cannot both be true, it is unnecessary to dwell on whether the Plaintiff’s interests in the 3 remaining elderly homes were eventually sold to Mr Lam in July 2009 for HK$600,000 or not. The matter was closed in November 2008.

127.  The eleventh problem is the substantially the same as the fifth one as it concerns the ultimate Core Issue.

128.  Lastly, the twelve problem is not a problem at all.

129.  Whether or not Mr Lam conceded in cross-examination that he and the Plaintiff maintained a good and trusted relationship at the material time, the objective fact remains that it is only in January 2017, 8 years after the Buy Out Agreement and the payment of the Sum that the Plaintiff for the first time instructed her solicitors to send a written demand on the Defendants. Accepting the Plaintiff and Mr Lam were in good and trusted relationship at various points in time of their joint investment in properties, that does not mean the Plaintiff was casual or laidback in protecting the return from her property investments. Waiting for 8 years before making a written demand on the Defendants for an account of the rental profits since January 2009 is not consistent with this court’s assessment of the Plaintiff as a shrewd investor, careful with her finance.

130.  On the contrary, the twelve problem submitted by the Plaintiff highlights a curious feature of her case.

131.  In the letters dated 20 January 2017 from her solicitors, the Plaintiff asserted her 20% beneficial interests and demanded 2 things from the Defendants: (i) to transfer the 20% legal title back to her; (ii) to account for the rental profits generated from the Kin Man Properties since January 2009.

132.  The assertion of her 20% beneficial interests and the demand for (i) is intriguing. The Plaintiff maintains that the “Share Certificate” dated 21 July 2008 was and is valid and is sufficient proof of her 20% beneficial interests. It also appears to be her stance that the alleged the Buy Out Agreement asserted by the Defendants was a fiction and unknown to her until at the earliest Messrs Wat & Co’s reply on 2 February 2017. On the evidence, there is no particular reason why, on 20 January 2017, the Plaintiff suddenly thought she had to demand the transfer of the 20% legal title from the Defendants. There is no explanation of this in Cheung 1 - the only explanation for sending out the demand letters dated 20 January 2017 is that the Defendants had for years failed to distribute to the Plaintiff her share of rental profits and both Mr Lam and Ms Lam had been evading her: paras 39 to 41 Cheung 1. This is telling.

133.  The demand for (ii) is understandable if the Plaintiff’s case were accepted, albeit it was inexplicably late. On her case, the Plaintiff has not been receiving her share of rental profits from 2009 even though she was entitled to them. Yet, the Plaintiff is unable to point to any documentary evidence which records her attempts to demand from Mr Lam or Ms Lam her share of rental profits after 30 November 2008. The Plaintiff might well consider instructing solicitors to make a demand as a last resort, but there was nothing to prevent her from making enquiries with or demands on Mr Lam and Ms Lam prior to 20 January 2017 by SMS, WhatsApp or WeChat etc. Yet no such records have been disclosed.

134.  All in all, this court is not persuaded that the 12 problems are such as to cast serious doubts on the inherent probability of the Defendants’ case on the Buy Out Agreement. On the contrary, for reasons explained above, many of the points raised by the Plaintiff with regard to the 12 problems do “backfire” and raise serious doubts on her credibility as a witness.

The Plaintiff’s case generally and the Shun Fuk Buy Out Agreement

135.  In her Closing, the Plaintiff’s case has been put as simple and straightforward, making ample common sense.

(a)  First, the Plaintiff still holds the 20% beneficial interests as clearly and unequivocally confirmed by the “Share Certificate” dated 21 July 2008.

(b)  Second, the Plaintiff has set out her position as early as in the pre-action letters issued in January and February 2017. By contrast, apart from certain unparticularised assertions in the letter dated 2 February 2017 from the Defendants’ solicitors, the Defendants effectively evaded the Plaintiff’s position and even ignored the follow up letter from the Plaintiff’s solicitors dated 14 February 2017.

(c)  Third, regarding the purpose of the Sum received by the Plaintiff and the valuation of her remaining interests in the 6 elderly homes, the Plaintiff’s case that the Sum was for the purchase of her interests in the 6 elderly homes under the Shun Fuk Buy Out Agreement is much more straightforward and credible, when it is compared with Mr Lam’s allegation that a total sum of HK$600,000 was paid by him to purchase the Plaintiff’s interests in them in July 2009. In particular, there is no evidence show the payments to Ting Lai King and 葉廣雲 on 14 July 2009 in the sum of HK$300,000 each somehow related to the buyout of the Plaintiff’s remaining interests in the 6 elderly homes.

136.  The first 2 points have already been examined in connection with the second of the 12 problems. They are hardly as straightforward and supportive of the Plaintiff’s claim as she suggests.

137.  The third point about the Shun Fuk Buy Out Agreement requires some detailed examination. But as a preliminary observation, this does not agree that, in order to resolve the Core Issue, it is necessary to compare the relative credibility of the Plaintiff’s case on the Shun Fuk Buy Out Agreement and Mr Lam’s case that the Plaintiff’s interests in the remaining 3 elderly homes were sold to him in July 2009 for HK$600,000. According to Agreed Issue 1, the comparison should be between the Buy Out Agreement and the Shun Fuk Buy Out Agreement. Once that is resolved, and this court is in the process of resolving it, the Core Issue will be resolved. In the scheme of things, it matters little whether this court accepts or rejects Mr Lam’s case aforesaid. Even if this court were to reject Mr Lam’s case aforesaid, this court is of the view that such rejection will not be sufficient to dent his credibility to such an extent that this court should also reject the Defendants’ case on the Buy Out Agreement as a whole.

138.  This court shall now examine the Plaintiff’s case on the Shun Fuk Buy Out Agreement.

139.  This Agreement was originally pleaded at para 8(5) of the Reply and Defence to Counterclaim filed on 27 September 2017 as a simple oral agreement in November 2008 by the Plaintiff to sell to Mr Lam all her interests in the 6 elderly homes for HK$2,304,875, inclusive of all outstanding dividends due to the Plaintiff up to 30 November 2008.

140.  At para 1(c) of the Further and Better Particulars of the Reply and Defence to Counterclaim filed on 9 November 2017 (“Answer”), the Plaintiff pleaded that she held between 10% and 20% of beneficial interests in all 6 of the elderly homes up to and including 30 November 2008. It was the Plaintiff’s case that the exact sum of HK$2,304,875 was consideration to buy out her interests in those 6 elderly homes.

141.  At para 1 (e) of the Answer, the Plaintiff sought to answer the Defendants’ request as to how the sum of HK$2,304,875 was arrived at in respect of the Shun Fuk Buy Out Agreement. It was pleaded that the consideration of HK$2,304,875 was offered by Mr Lam to the Plaintiff. The Plaintiff considered the offer to be acceptable to her, according to her estimation of the value of her interests as stated in para 1 (c) above, and accepted the offer.

142.  This is obviously incorrect since it is now accepted in the Agreed Summary of Undisputed Facts that 3 of the 6 elderly homes had already been sold in November 2002, February 2004 and April 2006. It was impossible for the Plaintiff to have held beneficial interests in all the 6 of the elderly homes and sold them to Mr Lam by 30 November 2008.

143.  Since the Shun Fuk Buy Out Agreement is meant to be an alternative explanation for the receipt of the Sum by the Plaintiff in November/ December 2008, one would have expected her to be careful with what she pleaded in the original Reply and Defence to Counterclaim and the Answer. Yet, the Plaintiff even got it fundamentally wrong with what she claimed she had sold to Mr Lam.

144.  It was only after more than 3 years, in her RARDC filed on 6 January 2021, that the Plaintiff acknowledged the problem with her Shun Fuk Buy Out Agreement when she pleaded at para 4(1a):

“…The Plaintiff repeats paragraph 8(5) below and reiterates that the Plaintiff sold her interests in Shun Fuk (including 6 elderly homes) on 30 November 2008, i.e. the Shun Fuk Buy-Out Agreement as pleaded at paragraph 8(5) below. Further, it is averred that although the Plaintiff only held interests in 3 Shun Fuk elderly homes (i.e. elderly homes nos. 1, 2, 6 in Paragraph 4A of the Defendants’ Amended Defence and Counterclaim) as of November 2008, the Plaintiff had not yet received all proceeds of sale for her interests in Nos. 3 to 5 elderly homes previously sold to third parties as pleaded at paragraph 4A(3) below. ”

145.  In para 4A(3) of the RARDC, it was pleaded that:

“…The Plaintiff only received HK$414,000 being a part of her shares of the sale proceeds for her share of interests in No. 3 and 5 of the elderly homes set out in the table at paragraph 4A of the Amended Defence, and the Plaintiff has not received any sale proceeds for her share of interests in No. 4 of the elderly homes set out in the same table.”[12]

146.  The revised Shun Fuk Buy Out Agreement was pleaded in para 8(5) of the RARDC:

“In or around November 2008, by an oral agreement between the Plaintiff and Mr Lam during a telephone conversation, the Plaintiff agreed to sell, and Mr Lam agreed to buy, all of the Plaintiff’s interest in Shun Fuk to Mr Lam at the consideration of HK$2,304,875 around HK$2,300,000, inclusive of all outstanding unpaid purchase price of Nos. 3-5 elderly homes as referred in paragraph 4A(3) above and dividends of Shun Fuk due and owing to the Plaintiff up to and including 30 November 2008 (“the Shun Fuk Buy-Out Agreement”). Pursuant to the Shun Fuk Buy-Out Agreement, a total of HK$2,304,875 was paid to the Plaintiff between 20 November 2008 and 23 December 2008.”

147.  Consistent with the inaccurate pleadings aforesaid, in Cheung 1[13] at para 14, the Plaintiff said until 30 November 2008, she still had beneficial interests in the 6 Shun Fuk elderly homes.

148.  At para 36 of Cheung 1, the Plaintiff went to great length to explain the method she adopted at the time in assessing for herself that the sum of HK$2,304,875 offered by Mr Lam was a reasonable price. Putting it simply, the Plaintiff’s method was to add up (1) her beneficial interests in the elderly homes valued at HK$1,842,980 on a P/E ratio of 10, (2) unpaid dividends owed to her, the amount of which was unknown and (3) other residual values e.g. rental deposits, tax reserves, licences, goodwill etc.

149.  The Defendants submit there are a number of problems with this explanation. As this court sees it, the most important problem is that only 1 component in the method used by the Plaintiff is quantified ie HK$1,842,980 on a P/E ratio of 10. As for unpaid dividends, the Plaintiff simply did not know the amount whereas there was no attempt to quantify the other residual values at all. Indeed, when the Plaintiff was cross-examined on these other residual values on Day 2, she said she did not have the relevant figures. She just trusted Mr Lam.

150.  Then, in Cheung 2 [14] at para 18, the Plaintiff put forward a revised explanation of the method used in assessing the reasonableness of the sum of HK$2,304,875. According to this revised explanation, the detailed figures of which are contained in a table exhibited to Cheung 2, the sum was made up of (1) her beneficial interests in the 3 unsold elderly homes valued at HK$1,842,980 on a P/E ratio of 10, (2) outstanding sale proceeds of the 3 elderly homes already sold and (3) other residual values e.g. rental deposits, management deposits etc.

151.  Cheung 2 creates different problems for the Plaintiff. As pointed out by the Defendants, the problem with this revised explanation is that it is inconsistent with what is pleaded in para 8(5) of the RARDC which contains an element of outstanding dividends due and owing to the Plaintiff up to 30 November 2008.

152.  More fundamentally, Cheung 2 raised for the first time the allegation that there were outstanding sale proceeds of slightly over HK$400,000 for the 3 elderly homes already sold back in 2002, 2004 and 2006, in line with the red amendments to the Reply and Defence to Counterclaim. The Defendants deny there were such outstanding sale proceeds at all – they have produced some documentary evidence to support their case that full payments had been already been made to the Plaintiff for the 3 sold elderly homes. For the present purpose, it is not necessary to decide whether the Defendants’ documentary evidence is sufficient proof of their case. The fundamental query is this: how could the Plaintiff have remembered, without contemporaneous records, such details of how much remained due and owing to her for transactions dated back to 2002, 2004 and 2006, years from the date when she made Cheung 2 in 2019?

153.  Lastly, the Defendants submit that the timing of the Shun Fuk Buy Out Agreement is suspicious.

154.  According to Cheung 1, the Plaintiff first asked Mr Lam to buy out her then interests in the elderly homes in 2006. What prompted the request was that she felt the elderly home business was in stagnation and the target of opening 10 elderly homes had not been achieved. When she asked Mr Lam to let her participate in the management of the existing elderly homes and to take part in launching new ones, Mr Lam rejected her request. The Plaintiff then asked Mr Lam to buy out her interests in the elderly homes. Mr Lam also rejected that on the ground that he was cash-strapped by reason of his property investment in the Mainland.

155.  After that rejection, there was a considerable time gap of over 2 years before the Plaintiff and Mr Lam finally reached the Shun Fuk Buy-Out Agreement in November 2008. It does not appear from Cheung 1 that anything much, if at all, happened during that time gap. What one can find from Cheung 1 is that, in mid-2008, around the time when she rejected Ms Lam’s offer to buy out her 20% beneficial interests at a valuation of HK$28 million, the Plaintiff urged Mr Lam to expedite her withdrawal from the elderly homes business. All of a sudden, in June or July 2008, Mr Lam called her from the Mainland and offered to personally buy out her interests in the elderly homes. There was no evidence of any negotiation between the two on the price as such. Even up to the time when the Shun Fuk Buy-Out Agreement was concluded in November 2008, Mr Lam did not explain and the Plaintiff did not ask how the offering price of HK$2,304,875 was arrived at.

156.  During cross-examination on Day 2, the Plaintiff said from 2006 onwards, Mr Lam was always not in Hong Kong but she had contact with him on the phone from time to time. However, Mr Lam was busy developing his real estate business in the Mainland and he was very hard to reach. This part of her evidence is not in Cheung 1 but this court would not go so far as to conclude that it is a recent fabrication, as suggested in the Defendants’ Closing. What this court does query is that if Mr Lam was so hard to contact by phone, and if the Plaintiff was so anxious to withdraw from the elderly home business, why did she not try to contact Mr Lam by SMS, WhatsApp or WeChat? It is not the Plaintiff’s evidence that she had done so and no such records have been disclosed.

157.  To conclude, for reasons explained above, this court finds the Plaintiff’s case on the Shun Fuk Buy Out Agreement highly unsatisfactory and unbelievable. If so, that is really the end of the matter as far as the purpose of the payment of the Sum to the Plaintiff is concerned.

Buy Out Agreement vs Shun Fuk Buy Out Agreement - conclusion

158.  Taking a holistic approach to the evidence adduced by both sides, for reasons explained above, this court finds Mr Lam[15] is a credible witness and his factual account of the Buy Out Agreement[16] is inherently more probable and coherent - his credibility has withstood the test of vigorous cross-examination by Mr Wong SC and the attacks in the Plaintiff’s Closing. The same cannot be said of the Plaintiff’s case on the Shun Fuk Buy Out Agreement and her credibility in general. This court therefore makes a finding of fact in favour of the Defendants’ case on the Buy Out Agreement and rejects the Plaintiff’s case on the Shun Fuk Buy Out Agreement as incredible.

159.  To conclude, this court finds the Defendants have discharged their burden of proof in relation to the Buy Out Agreement. That is dispositive of the Core Issue in this case.

Agreed Issues (2) and (3)

160.  Agreed Issue 2 presupposes the Plaintiff succeeds on the Core Issue and concerns whether her claim is nonetheless barred by reason of laches, acquiescence and/or waiver. Given this court’s conclusion on the Core Issue, the Plaintiff’s claim fails and this issue does not arise for consideration.

161.  Agreed Issue 3 concerns whether the mortgages over the Kin Man Properties entered into by the Defendants in March 2010 and November 2012 were unauthorised and in breach of the Kin Man Joint Investment Agreement. It is common ground that once the Core Issue is decided in favour of the Defendants, this issue also falls away since the 2 mortgages post-dated the completion of the Buy Out Agreement.

Agreed Issue (4)

162.  Agreed Issue 4 concerns (i) whether the Sub-SPA and the Kin Man Shop Assignment, both in February 2003, were entered into or caused to be entered into by the 1^st Defendant without the authorisation or knowledge of the Plaintiff and in breach of the Kin Man Joint Investment Agreement and (ii) whether the Plaintiff is entitled to an account of profits and/or damages.

163.  Assuming for the sake of argument that these transactions were entered into without the authorisation or knowledge of the Plaintiff, the short answer is that there is no suggestion that the Plaintiff is said to have suffered any loss as a result or any profits are said to have been made by the 1^st Defendant as a result. Under the Sub-SPA, the 1^st Defendant simply sold the Kin Man Shop to the 2^nd Defendant at the same price as agreed under the Kin Man Joint Investment Agreement ie HK$2 million and the transaction had no adverse effect on the Plaintiff’s 20% beneficial interests in the Kin Man Shop. Further, the breach of the Kin Man Joint Investment Agreement which took place in February 2003 is clearly time-barred.

164.  To the credit of Mr Wong SC, no submissions have been made on this issue in his Closing.

Disposition and costs order nisi

165.  The Plaintiff’s Claim in this Action is dismissed.

166.  As for the Defendants’ Counterclaim, there shall be (i) a declaration that the Plaintiff had ceased to have any interests in the Kin Man Properties since 1 December 2008 and (ii) an order that the lis pendens registered in the Land Registry and bearing Memorial Number 17061401850032 against the Kin Man Properties be vacated. The rest of the Defendants’ Counterclaim are not pursued.

167.  Given that the Counterclaim which is not pursued constitutes only a very small part of the Defendants’ case and has not occupied much, if any, of the trial, there shall be an Order nisi that Costs of the Action, including the costs of the Counterclaim, be to the Defendants, to be taxed if not agreed, and paid by the Plaintiff forthwith, certificate for 2 Counsel.

168.  Lastly, this court thanks counsel on both sides for their helpful assistance.