LEUNG MING BIU v. WU HIU LING

DCCJ 1362/2018

[2021] HKDC 73

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1362 OF 2018

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JUDGMENT

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1.  This is the trial of a contractual claim. The contract alleged is an entirely oral one, being an agreement “to run the business of selling PLLA together”[1], arising out of the circumstances set out below. The plaintiff now claims against the defendant for an order for the taking of an account or alternatively damages to be assessed.

2.  The plaintiff is represented by Mr Keith Tam of counsel.  The defendant had been acting in person, but at trial, she is represented by Mr Paul Wu and with him Mr Frederick Chan, both of counsel.

3.  The plaintiff and Ms Joanne Pun (“Joanne”) gave evidence for the plaintiff’s case.  The defendant was the only witness for her case.

4.  The background to the dispute is this.

BACKGROUND AND COMMON GROUNDS

5.  The plaintiff was an experienced merchant previously owning and operating one D & B International Trading Co Ltd, dealing in, among others, beauty medical products.  Joanne has been his assistant for over 10 years.

6.  The defendant was an experienced business woman.  She was a shareholder and director of KBM International Group Limited (“KBM”), which traded in medical beauty products. She was also a shareholder and director of Grand Palace Medical International Limited (“Grand Palace”) which operated beauty centres.

7.  The defendant got acquainted with Joanne and the plaintiff in about 2008 or 2009.  The defendant and Joanne got along well.

8.  In late 2014, the plaintiff and Joanne were minded to begin importing and trading in a facial aesthetic treatment product called poly-L-lactic acid (“PLLA”).  The PLLA product consisted of a needle with a thread containing poly-L-lactic acid.  The needle was used to puncture the skin and lead and deposit the thread to the precise spot under the skin.  PLLA products need to be administered by registered doctors.  The PLLA products had a life span of 2 years.

9.  It is common ground that the plaintiff and Joanne were new to the PLLA business and Joanne had tried to source PLLA products for the plaintiff but the price and terms of the quotations obtained were far from competitive; while the defendant had been dealing with a similar product called PDO since 2012, and with PLLA since 2013, and had good contacts in Korea to source PLLA at competitive terms.

10.  Also in late 2014, the defendant’s son Xavier, who was then 19 years old, returned from the UK when his study there was not going as well as hoped.  Xavier was in two minds as to whether he should further his studies or start working.  There was apparently some tension between him and the defendant.  A good rapport however had been developing between Joanne and Xavier.

11.  On Joanne’s suggestion, it was agreed between her and the defendant that Joanne could help mentor Xavier by going into business with him (“the New Business”), and Xavier could thereby gain some practical business experience.

12.  For that purpose, a new limited company (with the intended name of Energy International Group Limited) was being incorporated to trade in PLLA with the plaintiff to contribute 2/3 of the capital and Xavier 1/3 (“the Newco”).

13.  As to what was agreed, and if so by whom, relating to the Newco and the New Business are matters disputed.

14.  It is however common ground that in mid-January 2015, Xavier signed certain document(s) relating to the setting up of the Newco.  It was the defendant’s evidence, which was not seriously disputed, and I find, that sometime between mid-January to the Chinese New Year Joanne and Xavier asked the defendant through KBM to, and the defendant did, order certain quantities of PLLA products for the purpose of the New Business (“the Subject PLLA”).

15.  Sometime after that but before the Lunch Meeting (defined below), Xavier changed his mind and decided that he wanted to go to Australia to further his studies and would no longer participate in the Newco or the New Business.  The plaintiff then halted or cancelled the incorporation of the Newco.

16.  It is apparently the plaintiff’s pleaded case that the subject oral agreement was then reached between him and the defendant, which is disputed by the defendant.  The reason why I say apparently will be made clear later when the plaintiff’s pleaded case is looked at more closely.

17.  The plaintiff, Joanne and the defendant met for lunch on 20 March 2015 (“the Lunch Meeting”).  Either at the Lunch Meeting, or shortly after on the same day, a cheque in the sum of HK$81,733 drawn on a bank account in the joint names of the plaintiff and Joanne was issued to the defendant, which was banked in that afternoon.  The said sum of HK$81,733 represented 2/3 of the sum total of the purchase price, transportation costs and the costs of labels of the Subject PLLA totalling at HK$122,600, broken down as follows:-

(a)  The price of 5,000 pieces of PLLA Mono at HK$10.14 a piece - HK$50,700

(b)  The price of 5,000 pieces of PLLA Screw at HK$14.04 a piece - HK$70,200

(c)  Transportation costs : HK$1,200

(d)  Costs of labels : HK$500

18.  It is not seriously disputed that the said PLLA Mono and PLLA Screw were those ordered by KBM as mentioned in paragraph 14 above.  They were thus the Subject PLLA.  They were stored in the premises of KBM in Tuen Mun.

19.  What was discussed and/or agreed in the Lunch Meeting are matters hotly in dispute.  The parties also diverged in their recollection, or interpretation of, what transpired then after.

20.  On 8 September 2015, Joanne took 320 pieces of PLLA Mono.  On 11 January 2016, Joanne took 200 pieces of PLLA Mono and 200 pieces of PLLA Screw.

21.  In 2015 and 2016, the precise time was not clear, the defendant introduced programmes and packages in Grand Palace’s beauty centres for the application, and therefore sale, of her share of the Subject PLLA to their customers.  It is the defence case that by that time, there was an agreement between her and Joanne to divide the Subject PLLA equally (分貨).

22.  On 10 May 2017 and by that time the life span of the Subject PLLA has expired, a sum of HK$20,433, representing the 1/6 (the difference between 2/3 and 1/2) of the said sum of HK$122,600 was transferred by the defendant into the bank account in the joint names of the plaintiff and Joanne.

23.  Around May to June 2017, the defendant has given the plaintiff/Joanne an account of the 2,500 pieces of PLLA Mono and the 2,500 pieces of PLLA Screw, being, according to the defendant, the plaintiff’s half share of the Subject PLLA stored with KBM (“the Account”).

24.  The Account[2] the defendant has given was:-

(a)  of the 2,500 pieces of PLLA Mono, Joanne took 520 pieces and the remaining 1,980 pieces were sold at HK$5 a piece, therefore payable to the plaintiff was HK$9,900; and

(b)  of the 2,500 pieces of PLLA Screw, Joanne took 200 pieces, therefore 2,300 pieces remained.  Of these 2,300 pieces, 100 pieces were sold at $10 a piece ($1,000 was already paid to the plaintiff), 500 pieces were sold at HK$6 a piece = HK$3,000; therefore payable to the plaintiff was HK$3,000 and remaining for collection were 1,700 pieces.

25.  It is not disputed that the defendant was always ready and willing to pay to the plaintiff or Joanne HK$12,900 (HK$9,900 + HK$3,000) and to let them collect the remaining 1,700 pieces of PLLA Screw.

26.  The plaintiff did not accept the Account.  His case is, and the plaintiff is presently claiming, that the defendant was contractually required (a) to share with him the profit earned from the sales efforts mentioned in paragraph 21 above, (b) to share with him the loss sustained by the sale of some of the Subject PLLA at below costs and by the expiry of the 1,700 pieces PLLA Screw, (c) to render a full account and to verify that account with the disclosure of all related documents, and (d) to pay him the sum found due after the account is taken.

27.  The plaintiff then instructed his solicitors to issue a letter to the defendant dated 29 June 2017, which was replied to by the defendant’s letter dated 6 July 2017.  After another round of correspondence, the plaintiff commenced proceedings against the defendant in the Small Claims Tribunal claiming a sum of HK$49,060[3].  In the middle of the substantive hearing on 14 November 2017, the plaintiff discontinued the small claim as he indicated he wanted to seek production of documents, an account and then payment of the sum found due, which, he was informed, were outside the jurisdiction of the Small Claims Tribunal to grant.

28.  On 4 April 2018, the plaintiff commenced this action.

THE PLAINTIFF’S PLEADED CASE ON THE ORAL AGREEMENT

29.  As the defendant hotly disputed the existence of the oral agreement and the terms thereof alleged, and the plaintiff’s pleaded case is quite lacking in particulars and not really precise, I think it better to set out at length the plaintiff’s case as pleaded in his Amended Statement of Claim^[4] (“ASoC”):-

“4.  In or about January 2015, the plaintiff, Joanne and the Defendant met together and the defendant represented to the Plaintiff that, according to her broad experience in selling medical aesthetic products, she thought that importing PLLA from Korea would be profitable.  The Defendant had good contact and connection with potential buyers of PLLA.  The Defendant suggested the Plaintiff to set up a company with her son, Mr. Xavier Lam (“Xavier”), to focus on selling PLLA.  The Defendant would like his son to gain business experience and she would assist his son in selling PLLA.

5.  The Plaintiff agreed to set up a company with Xavier in selling PLLA.  The Plaintiff would be responsible for management and administrative works while Xavier would be responsible for sales and marketing of PLLA.  The Plaintiff and the Defendant orally agreed that the Plaintiff would be responsible for 2/3 of the total capital investment and therefore would be entitled to 2/3of the total profits and loss, if any, of selling the PLLA.  On the other hand, Xavier would be responsible for 1/3 of the total capital investment and therefore would be entitled to 1/3 of the total profits and loss, if any, of selling the PLLA.

6.  By virtue of the Defendant’s representation as aforesaid in paragraphs 4 and 5, the Plaintiff instructed a secretarial company to set up a company in the name of “Energy International Group Limited” to run the business in selling the PLLA with Xavier.

7.  At around March 2015, the Defendant notified the Plaintiff that Xavier was going to pursue his study in Australia.  Therefore, the idea of establishing a company together with Xavier would be postponed.  The Plaintiff therefore cancelled the said secretarial service for setting up a company. However, the Defendant told the Plaintiff that she would take up Xavier’s role and responsibility in joining the Plaintiff for the sale of the PLLA.

Agreement made between the Plaintiff and Defendant

8.  The Plaintiff and the Defendant orally agreed to run the business of selling PLLA together with identical terms as previously agreed with the Plaintiff and Xavier.  The agreed [sic] to contribute 2/3 of the total capital investment. He would be entitled to 2/3 of the total profits and loss of selling the PLLA, if any.  On the other hand, the Defendant agreed to contribute 1/3 of the total capital investment.  She would be entitled to 1/3 of the total profits and loss of selling the PLLA, if any (“the Agreement”).

9.  Meanwhile the Plaintiff asked Joanne to get the quotation price of buying PLLA from Korea.  Joanne has good contacts with sellers for PLLA in Korea.

10.  On 20 March 2015, the Defendant invited the Plaintiff and Joanne to have a face-to-face meeting at Tack Hsin Restaurant (德興火鍋海鮮酒家) at 12/F., Peninsula Centre, 67 Mody Road, Tsim Sha Tsui, Kowloon, Hong Kong.  At the said meeting, the Defendant informed the Plaintiff and Joanne that she had already brought PLLA from Korea.  According to the calculation of the Defendant, the total purchase costs of PLLA, including the transportation fees, amounted to HK$122,600 (“Investment Fund”) :

Particulars of the Investment Fund

	Quantity	Amount
a.   PLLA Mono       (HK$10.14 per       PLLA Mono)	5,000 pieces	HK$50,700
b.   PLLA Screw       (HK$14.40 HK$14.04 per       PLLA Screw)	5,000 pieces	HK$70,200
c.   Transportation costs		HK$1,200
d.   PLLA label		HK$5000 HK$500
Total		HK$122,600

11.  The Plaintiff accepted the Defendant’s proposed Investment Fund for trading PLLA. Pursuant to the Agreement, the Plaintiff was required to pay 2/3 of the amount of the Investment Fund.  The Plaintiff immediately issued a cheque dated 20 March 2015 payable to the Defendant in the sum of HK$81,733 as his share of the capital Investment.

12.  The Defendant was required to pay HK$40,857 as 1/3 of the total Investment Fund according to the Agreement.

13.  At the material time, both the Plaintiff and the Defendant agreed that the selling price per each piece of PLLA Screw was HK$35, and HK$28 per each piece of PLLA Mono.  Further, the Defendant represented to the Plaintiff that she had already contacted with potential whole-seller to buy the PLLA from the Plaintiff and the Defendant.

14.  Since or about 20^th March 2015, the Defendant kept all the Investment Fund and all the products of PLLA.

15.  The Plaintiff relied on the Defendant’s vast experience in selling medical aesthetic products, including PLLA, and her selling channels in entering into the agreement.  The Defendant was responsible for the selling of the PLLA on behalf of the parties.

16.  In or about May 2017, the Defendant informed the Plaintiff that for easy calculation of the profit gained under the Agreement, she was willing to increase her capital investment from 1/3 to 1/2 in order to receive 1/2 of the total gross profit.  The Plaintiff agreed with such an arrangement, and the Defendant paid HK$20,434, being the Defendant’s balance of the Investment Fund, to the Plaintiff.  The Plaintiff and the Defendant had each invested half of the total capital (i.e. HK$61,300), and therefore each of them should be entitled to half of the profits and loss of the sale of PLLA (“2^nd Agreement”).”

30.  Thus, according to the plaintiff’s pleaded case, there were 2 oral agreements reached, with the second one agreed to “with identical terms” as the first one.

31.  The first one is pleaded in paragraph 5 of the ASoC – “The Plaintiff agreed to set up a company with Xavier in selling PLLA …” (“the 1^st Oral Agreement”).  It is however not clear whether it was alleged to have been reached in the same meeting pleaded in paragraph 4; and if not, when and between whom the agreement was reached.

32.  The second one is pleaded in paragraph 8 of the ASoC, reached allegedly between the plaintiff and the defendant upon Xavier’s exit which has “identical terms” as the 1^st Oral Agreement (“the 2^nd Oral Agreement”).  It is the 2^nd Oral Agreement that the plaintiff is now suing on.  It is again not pleaded as to when and where this oral agreement was reached.

33.  A fair reading of the ASoC would indicate that the 2^nd Oral Agreement was reached before the Lunch Meeting on 20 March 2015, because after pleading the 2^nd Oral Agreement in paragraph 8, it was then pleaded in paragraph 9 that in the meantime the plaintiff and Joanne asked the defendant to obtain quotations for the supply of PLLA, and then the Lunch Meeting was pleaded in paragraph 10.

34.  The manner the 1^st and the 2^nd Oral Agreements were pleaded fell far short of what is required by O 18 r 19 of the Rules of District Court, and has not complied with the trite requirement of pleading an agreement, as noted in paragraph 18/12/3 of the Hong Kong Civil Procedure 2021:-

“(2) Agreement – The pleading should state the date of the alleged agreement, the names of all parties to it, and whether it was made orally or in writing, in the former stating by whom it was made and in the latter case … , and in all cases setting out the relevant terms relied on …”

35.  In the plaintiff’s opening, this court asked Mr Tam to particularise and spell out what those “identical terms” were.  Mr Tam, doing the best he could, only referred the court to what was pleaded in the ASoC and could not add anything further.

36.  One main aspect of the plaintiff’s case now is that under the 2^nd Oral Agreement it was the defendant’s contractual responsibility to sell the Subject PLLA.  As can be seen from what was pleaded, that allegation came from the pleas that under the 1^st Oral Agreement “Xavier would be responsible for sales and marketing of PLLA” (paragraph 5 of the ASoC”) and that the 2^nd Oral Agreement has “identical terms” as the 1^st Oral Agreement.

37.  So far as the defendant’s contractual responsibility to sell is concerned, the plaintiff confirmed more than once while giving oral evidence that his case is that the defendant need to provide all the sales channels, information and efforts at her own costs, save the costs of labels at HK$500 which was included in the sum of HK$122,600.  That means that all such costs were to be borne by the defendant and were not to be deducted from the revenue to arrive at the profit.

38.  The plaintiff also pleaded that there should be a term implied into the 2^nd Oral Agreement:-

“20. Further, there should be implied terms and duty under the Agreement and the 2^nd Agreement that the Defendant should provide account, customer invoices, receipts, delivery records, bank statements, shipping documents and any other documentary proof for the Plaintiff’s inspection in order to verify the sale and purchase of the said PLLA and the account of the Investment Fund.”

39.  There is one other matter I need to mention relating to the plaintiff’s pleaded case.  In paragraphs 29 to 41 of the plaintiff’s opening written submissions, Mr Tam contended that there subsisted a partnership between the plaintiff and the defendant within the meaning of the Partnership Ordinance Cap 38 and that the relief now sought were pursuant to sections 26, 30 and 38 thereof.  The plaintiff never pleaded any partnership, the Partnership Ordinance or the said sections thereof in the Statement of Claim.  Unsurprisingly, Mr Wu strongly objected in his opening submissions and took a pleading point during the plaintiff’s opening.  After some argument and a short adjournment, Mr Tam asked to withdraw those paragraphs in the opening submissions, rather than requiring this court to make a ruling.  I gave leave to so withdraw but ordered the plaintiff to pay the defendant’s costs of and occasioned by these paragraphs on indemnity basis.

THE DEFENDANT’S PLEADED CASE

40.  The defence case, which was pleaded by her when acting in person, in gist is this:-

(a)  In January 2015, Joanne suggested to help mentor Xavier by doing business together with him, and thereby giving Xavier some practical business experience.

(b)  Xavier did sign a document to set up a new limited company for the purpose of them doing business together.

(c)  In mid-January 2015, Joanne sent WhatsApp messages to her asking her for advice about sourcing PLLA products, which later led to Joanne asking the defendant to purchase PLLA on their behalf; and the defendant therefore ordered the Subject PLLA for the purpose of the New Business.

(d)  It was in mid-April 2015 that Xavier finally decided to go to Australia to further his studies.

(e)  In mid-March 2015, as the Subject PLLA was due to arrive, she chased Joanne for payment.  Joanne, the plaintiff and her then had the Lunch Meeting.  The plaintiff’s 2/3 was paid from the joint account of the plaintiff and Joanne, as Joanne intended that the plaintiff would invest 1/3, Joanne 1/3 and Xavier 1/3.

(f)  It transpired that the Newco was not set up, the so-called administration work to be undertaken by the plaintiff was non-existent and Joanne has not done anything regarding the sale of the Subject PLLA and therefore there was no mentoring of Xavier.

(g)  Shortly after, the plaintiff decided to withdraw from the New Business.  The defendant then suggested and agreed with Joanne to split the Subject PLLA half and half between them.

(h)  On 8^th September 2015, Joanne took part of the Subject PLLA to begin her own sales effort.

(i)  In the meantime, the defendant began selling her half of the Subject PLLA to the existing customers of Grand Palace through the introduction of promotional programmes and packages.  The defendant also made attempts to sell the Subject PLLA to other wholesalers and traders.  Joanne and her also set up a booth in an exhibition to sell the Subject PLLA.

(j)  Later on, as the Subject PLLA were approaching the expiry of their life span and with Joanne/the plaintiff’s agreement, the remaining PLLA Mono and some of the PLLA Screw were sold at very cheap prices.

(k)  She has given the Account to the plaintiff/Joanne, which was true and accurate, and has been ready and willing to pay to them the sum of HK$12,900 and to return to them the unsold but expired 1,700 pieces of PLLA Screw.

41.  The defendant denies that she has entered into any agreement to “run a business together with the plaintiff”, as she has not been getting along well with the plaintiff.  She particularly disputes that she has entered into any agreement with the plaintiff whereby she contractually obligated herself to be responsible for selling the Subject PLLA and to provide, at her own costs, the sales channels (like the beauty centres of Grand Palace and/or its customer base), information (like the list of doctors that have been working with KBM or Grand Palace and the contacts of customers of these two companies) or sales efforts. 

THE APPROACH AND THE LEGAL PRINCIPLES

42.  Mr Wu submitted, and not disputed by Mr Tam, that the crucial factual question is what were the terms that were actually agreed upon under the 2^nd Oral agreement, if any, by the plaintiff and the defendant.

43.  Mr Wu placed reliance on the following passage in FCL (London) Limited v Lisa Voice[5] in relation to the court’s approach and particularly in considering the inherent probabilities of the competing versions advocated by the parties, which was not contested by Mr Tam:-

“The determination of issues of fact relevant to an agreement made orally depends, essentially, upon three factors.  One is the evidence of the witnesses who were present when the agreement was made.  The demeanour of each relevant witness is plainly critical to the assessment of the weight to be given to the evidence of that witness.  A second is what indications can be found in contemporaneous documentation, and any documentation produced by any of the relevant witnesses before the commencement of the litigation, of what was in fact agreed.  The third is inherent probabilities.  The more extreme the consequences for one party or the other of the agreement being to one effect rather than the other contended for, the less likely it is that the agreement envisaged such consequences.  These factors are not independent of each other.  The process of assessing the evidence of the relevant witnesses involves considering what each says about documents which appear not to support their evidence as to what was agreed and how each deals with any suggested extreme consequences of that for which he or she contends upon the opposite party.” (paragraph 33, per DHCJ Richard Seymour QC)

44.  Mr Tam cited the following passage from the Court of Final Appeal case of New World Development Co Ltd and Others v Sun Hung Kai Securities Ltd & Another[6] submitted that they are apposite:-

“… an agreement is not incomplete in this fatal sense merely because it “leaves something which still has to be determined”. It is often possible for the court to discern in the parties’ agreement the intended principles, criteria or machinery, express or implied, for determining specific contractual rights and liabilities without requiring the parties to arrive at further agreement. Where this is possible, the agreement is not “incomplete”...” (per Ribeiro PJ at 417I-J)

“The courts will endeavour to find practical meaning in commercial agreements and are reluctant to strike down as too vague and uncertain agreements which businessmen have made and acted upon...” (per Ribeiro PJ at 418I)

45.  Those passages cited by Mr Tam concerned whether and when an agreement might fail for uncertainty, which is a very different issue from, and a secondary one after his court has resolved, the issue of fact as to what was actually orally exchanged, and then what was, or was not, thereby agreed.

46.  It is common ground between the parties that “in the case of a contract which is entirely oral or partly oral, evidence of things said or done after the contract was concluded are admissible to help decide what the parties actually agreed”[7].

DISCUSSION

What was actually agreed as to the respective roles and contractual responsibilities of the plaintiff/Joanne and Xavier in the Newco and/or the New Business?

47.  As we have seen, it is the plaintiff’s case that it was agreed in the 2^nd Oral Agreement that it would have identical terms as the 1^st Oral Agreement, I will therefore first deal with what was in fact agreed, if any, under the alleged 1^st Oral Agreement.

48.  I first note that there is no documentary evidence proffered by either party in relation to this 1^st Oral Agreement.

49.  In his witness statement, the plaintiff said in paragraph 6 basically this, which is his pleaded case: that he and the defendant agreed to set up the Newco to run the New Business, and that Xavier was to be responsible for marketing and sales, he would be responsible for administrative work and Joanne would assist Xavier and him.  There, he did not spoke to any factual matters.  He did not say anything as to when and how that agreement was reached, not to mention the contents of the relevant conversation(s), even just as best he could remember, from which the 1^st Oral Agreement arose.  Particularly, I note that there is nothing said about the meeting that took place in or about January 2015 between him, Joanne and the defendant as pleaded in paragraph 4 of the ASoC (“the Pleaded Meeting”).  In his oral evidence, he also did not mention the Pleaded Meeting; nor did he mention any direct conversation he had with the defendant relating to the 1^st Oral Agreement. 

50.  This is most surprising, as according to the plaintiff’s pleaded case, the Pleaded Meeting was at least an important event, if not a crucial one in which the 1^st Oral Agreement was reached.

51.  The defendant’s evidence was that from previous encounters with the plaintiff, she found herself not inclined to interact with the plaintiff though they remained acquaintances.  In relation to the subject matters in this litigation, she mainly communicated with Joanne, and rarely with the plaintiff.  In January 2014, there was tension between Xavier and her and she was very busy in that in addition to running her businesses she was also studying a course.  The tenor of her evidence was that she agreed in principle to Joanne’s said suggestion of going into business with Xavier, but she seemed to know little about the details of the arrangement discussed between Xavier and Joanne, and that she had not had any direct conversation with the plaintiff about the Newco or New Business and she had not agreed with the plaintiff in the manner as alleged by him.

52.  Again and most notably, the defendant was not cross-examined by Mr Tam about the existence of the Pleaded Meeting or what occurred or were spoken therein, or about any conversation or communication during which the 1^st Oral Agreement was allegedly reached.

53.  In oral evidence, Joanne also said that in relation to the subject matters in this action, it was she, rather than the plaintiff, who mainly communicated with the defendant. And I so find.  Mr Wu submitted, and not disputed by the plaintiff, and I find, that all the evidence amply showed that Joanne acted as the agent of the plaintiff in her dealings with the defendant relating to the Subject PLLA.

54.  In Joanne’s witness statement, likewise, there was also no mention of the Pleaded Meeting, nor was such a meeting mentioned in her oral evidence either, nor was any direct conversation between the plaintiff and the defendant relating to the 1^st Oral Agreement mentioned in her witness statement or her oral evidence.

55.  In the premises, I find that the Pleaded Meeting, as alleged in paragraph 4 of the ASoC, did not take place.

56.  In cross examination, Joanne said she thought she would get 1/2 of the profits earned from the plaintiff’s share in the New Business even though she herself would not be investing any money in the Newco.  When asked why she thought she would get such a share, she answered that the arrangement regarding the New Business (“the Arrangement”) was that:-

(a)  Xavier and her together would be responsible for sales and marketing – by paying visiting to doctors together - under the guidance of the plaintiff who was an experienced salesman; afterwards, Xavier and her would be doing the sales and marketing of the New Business “automatically” (自動波);

(b)  the plaintiff initially was to give her and Xavier some training and tips, and then maybe to visit the first few doctors with them to show them what to do and what to say, and then was to give them guidance afterwards; and

(c)  the defendant would be responsible for sourcing the PLLA. 

57.  I accept and find that the Arrangement was the one reached in relation to the Newco and the New Business.  My reasons for so finding are:-

(a)  Joanne was the plaintiff’s own witness.

(b)  By all accounts, Joanne was the central figure in that she was the liaison between the plaintiff and the defendant, and she was the person talking to Xavier about the Newco and New Business.

(c)  This arrangement was in line with Joanne’s suggestion to the defendant, which the latter agreed, namely, that Joanne would help mentor Xavier by going into business with him and Xavier could thereby gain some practical business experience.

(d)  The Arrangement had commercial sense for everyone, in that each was required to make his/her respective contribution while earning proportionate and meaningful benefits. In other words, it was win-win for all involved:-

(i)  The plaintiff would invest 2/3 of the money, expand limited effort in an area he was experienced in, but could use the opportunity to springboard himself into the PLLA business, and to earn some profit.

(ii)  Joanne would provide the main effort in the undertaking, but could earn 1/3 share in the overall profit without investing money, at the same time help mentor Xavier as she wished and offered to the defendant, and could springboard the plaintiff and maybe herself into the PLLA business.

(iii)  The defendant would invest 1/3 of the money and use her connection to source the PLLA, but could thereby support Xavier by creating the opportunity for him to be mentored by Joanne and to gain practical business experience, and the profit earned could be given to/shared with Xavier as money the young man earned for himself.

(iv)For Xavier, he would need to put in the effort, but could be benefitted as above said.

58.  This Arrangement was very different from the pleaded “terms” of the 1^st Oral Agreement, particularly in these two aspects : (a) Joanne was the main person (though together with the young Xavier) in propelling the sales and marketing efforts, and (b) the plaintiff was also supposed to chip in the sales and marketing effort through the said initial training and guidance and then subsequent guidance as well.

59.  Moreover, the plaintiff’s pleaded case of the 1^st Oral Agreement was, as pleaded in the first sentence of paragraph 5 of the ASoC, “The Plaintiff agreed to set up a company with Xavier in selling PLLA” (my emphasis).  It is also the plaintiff’s case in evidence, and common ground, that the company being set up was a limited company.  For a limited company, the rights and liabilities of the shareholders are governed by its articles of association unless there is a separate shareholders’ agreement altering the same.  As to how various aspects of the business of the company is to be performed and by which employee or personnel or outside third party is a matter of internal management and arrangement. The expenses spent in generating sales would normally be part of the expenses of the company to be deducted from the revenue to arrive at the profit. Against such norm and considering all the evidence, in my view,

(a)  the Arrangement, which I find for, was an understanding, as a matter of internal management of the Newco, reached by the parties relating to their roles in the running of the New Business; and

(b)  it was very inherently improbable that Xavier had agreed to an agreement, which would effectively be a shareholders’ agreement, whereby he was contractually the only party “responsible for sales and marketing of PLLA” all at his own costs, such that, as is now contended by the plaintiff, such obligation as part of “the identical terms” was passed onto the defendant because she agreed to the 2^nd Oral Agreement which was in “identical terms” as the 1^st Oral Agreement.

60.  In the premises, it is my clear conclusion that the 1^st Oral Agreement as pleaded is not proved.  Rather, I find only that the plaintiff had agreed to form a company to trade in PLLA with him and Xavier as the shareholders with the respective shareholdings at 66.66% and 33.33% with the Arrangement as an understanding, rather than an enforceable contract, regarding the respective roles of the plaintiff, Xavier, Joanne and the defendant.

Was the 2^nd Oral Agreement reached before the Lunch Meeting, as apparently alleged by the plaintiff in the ASoC, or in the Lunch Meeting as now alleged in evidence, or reached at all?

61.  It cannot be disputed that the burden of proving the 2^nd Agreement rests on the plaintiff.

62.  It must be noted at this early juncture that the terms of the 2^nd Oral Agreement now contended for by the plaintiff are not identical to the terms of the 1^st Oral Agreement, as I find them above.

63.  That notwithstanding, I would first compare the pleaded case with the evidence as given in the witness statements and then discuss the oral evidence.  Again for the 2^nd Oral Agreement, save the documents evidencing payment, there is little contemporaneous documents that are probative.

64.  As to the pleaded case, I have made the observation above in paragraph 33 that from a fair reading of the ASoC, the plaintiff’s pleaded case is that the 2^nd Oral Agreement was reached before the Lunch Meeting.

65.  However, in the plaintiff’s witness statement, the following was said and I quote:-

“8. 在2015年3月時，被告人通知Joanne和我，她的兒子Xavier將會去澳洲讀書，我向被告人表示新公司正在註冊中，詢問他是否要取消相關註冊。被告人表示公司註冊可以取消。

9. 在2015年3月20日，被告人邀請我和Joanne出席位於九龍尖沙咀麼地道12號半島中心12樓之德興火鍋的面談。… 在席間，被告人告訴我和Joanne她會取代Xavier處理之前PLLA線的相關業務即負責市場銷售、支付1/3之營運資金及收取1/3之利潤或虧損（“合作協議”）…。”

66.  I would make two observations.  Firstly, it is now said there that the 2^nd Oral Agreement was reached in the Lunch Meeting, and not before.  It is very different from his pleaded case.  Secondly, I find it most incredible that over the crux of the parties’ dispute - the existence and the contents of the terms of the alleged 2^nd Oral Agreement – only so few and scanty words were said in the plaintiff’s witness statement, and no account was attempted to be given as to what the words spoken by the plaintiff and the defendant were, so as to show objectively what was agreed, and not even the gist of the conversation was given.

67.  Yet, Joanne in her witness statement said this:-

“8. 在2015年2月時，因年近農曆新年及忙於處理原告人之其他事宜，因此沒有立刻跟進成立新公司出售PLLA線之事宜。但在2015年3月時，被告人對我及原告人表示Xavier要到澳洲升學，而要退出新公司。而被告人表示她會取代Xavier處理PLLA線的相關業務及負責1/3之營運資金。

9. 在2015年3月20日，被告人邀請我和原告人到九龍尖沙咀麼地道12號半島中心12樓之德興火鍋面談。在席間被告人表示已購入PLLA線，並要求原告人支付$81,733之PLLA線營運資金。

10. 被告人表示她已找到大拆家，他/她會購入我們一半的PLLA線，但被告人沒有透露其他的詳情。

11. 我們亦商討PLLA線的售價。最後定出PLLA Mono線是每條$28，而PLLA Screw線每條每條 (sic)$35。

12. 其後，我獲悉原告人與被告人在出售PLLA線事宜上多有爭執 …”

68.  According to Joanne, the defendant indicated that she would “會取代Xavier處理PLLA線的相關業務” in February 2015, and nothing was said about reaching the 2^nd Oral Agreement in the Lunch Meeting, which was contrary to what the plaintiff said in his witness statement.  Even from the plaintiff’s own witnesses, very different accounts were given regarding such an important aspect of the plaintiff’s case.  Moreover, I would note that what Joanne here said as to the gist of what were discussed in the Lunch Meeting were very much the same as what the defendant’s evidence was relating to that meeting.

69.  In oral evidence, Joanne was asked as to whether “會取代Xavier處理PLLA線的相關業務” meant that the defendant would replace Xavier and visit the doctors together with Joanne.  Joanne completely dodged that question and answered that she was worried that she would be the only person handling the Subject PLLA as both the plaintiff and the defendant had said earlier that they were busy and would not be bothered with such a small deal.  It seems to me quite clearly, that regarding this “會取代Xavier處理PLLA線的相關業務”, nothing concrete was agreed between Joanne and the defendant.

70.  In oral evidence, the plaintiff was asked if the defendant actually said during the Lunch Meeting the words “佢取替Xavier”, the plaintiff’s answer was “一定有” and he explained because the defendant continued to source the PLLA after Xavier had decided to withdraw.  I find the plaintiff was mistaken as to the sequence of these two events.  The plaintiff was then adamant and emphasized that there had to be intended a cooperation between the parties (合作) regarding the Subject PLLA as it was discussed there that KBM would be the entity selling the Subject PLLA in place of the then non-existent Newco and that sometime afterwards they had in fact worked together in the premises of KBM to stick the labels onto the Subject PLLA.  When he was asked what was agreed in the Lunch Meeting, he said that the intended selling prices of HK$28 for PLLA Mono and HK$35 for PLLA Screw were and that they need to print the labels.

71.  In oral evidence, the plaintiff maintained that because they were “cooperating” in this business, the responsibility to sell was solely on the defendant (therefore the fact that he or Joanne later on did not participate in the sales efforts as understood under the Arrangement was neither here nor there) and the defendant therefore had to share with him all the profit she made from the sales achieved through her own effort, sales channels or resources, while at the same time only the transportation costs of HK$1,200 and label costs of HK$500 would be counted and all the other costs were to be borne by the defendant herself.  I would also add that in cross-examination, it was shown that while his pleaded case was that his responsibility in this “cooperation” was “management and administrative works”, there was really no substantive work involved.

72.  Having thus examined the matters and the evidence closely, I think it is already abundantly clear that the plaintiff’s claims over the alleged 2^nd Oral Agreement have neither substance nor merits. 

73.  Having heard and observed the plaintiff carefully when he was giving evidence, my clear impression is that he was a strong minded, opinionated but presumptuous person, who was quick to assume whatever that was not said or was not clear to his favour, and to give his own perceptions and assumptions as facts.  I do not find him a reliable witness.

74.  That aside, I also view as unreliable the evidence given by him orally concerning what transpired in the Lunch Meeting.  I so view because this dispute had been heard before the Small Claims Tribunal in November 2017, the plaintiff also had a second opportunity to review the whole matter and then signed the statement of truth to the Statement of Claim on 4 April 2018, and then he had a third opportunity to yet recollect and recount the pertinent matters when he signed his witness statement dated 27 November 2018.  Yet, as we have seen, they are sorely lacking in particulars regarding the relevant events, particularly the Lunch Meeting, and what transpired and were conversed therein.  Moreover, the respective accounts given in the witness statements of the plaintiff and Joanne as to when and how the 2^nd Oral Agreement was reached contradicted each other. It thus defiles belief that against such history and circumstances, the plaintiff could now at trial recollect the purported details accurately.  I simply do not accept his such evidence as credible or reliable.

75.  Though I find Joanne a generally credible witness, for the same reason articulated above I am also doubtful about, and do not accept, her evidence given orally regarding the additional details of the Lunch Meeting, which were not much in any case, which were not mentioned in her witness statement.

76.  On the contrary, I find the defendant a generally credible and reliable witness and accept her case.

77.  Even if I were to accept the plaintiff’s evidence regarding what were said/agreed in the Lunch Meeting, in my judgment and I would find as secondary facts, that no agreement as contended could be understood to have been reached by those verbal exchanges recounted as having said in the Lunch Meeting.  The alleged contractual terms/obligations arose only from the plaintiff’s own subjective interpretation of what “cooperation” would entail rather than as having been agreed between the parties.

78.  Moreover, I find the observation of DHCJ Richard Seymour in FCL (London) Limited v Lisa Voice most apposite: that “The more extreme the consequences for one party or the other of the agreement being to one effect rather than the other contended for, the less likely it is that the agreement envisaged such consequences.”.  I find the commercial consequences contended for by the plaintiff as to the relative benefits and obligations between himself and the defendant so extreme and disparately and unreasonably favourable to him but detrimental to the defendant that I find it most inherently probable that the parties would have agreed to such a contractual arrangement.

79.  In the result, I have no hesitation to conclude that the alleged 2^nd Oral Agreement is not proved and to reject the plaintiff’s claim.  I find that because the parties found themselves having to deal with the Subject PLLA which was ordered but the Newco and New Business no longer existed, the plaintiff and the defendant had agreed to pay for their costs and acquired them in the respective shares of 2/3 and 1/3, and there was a loose understanding to cooperate, and not a contractual obligation, to try to sell them together; and among that understanding were the intended prices. 

THE EVENTS AFTER

80.  My above findings and conclusion are sufficient to dispose of this action.  However, for completeness, I will briefly make the below findings in relation to some of the more pertinent but disputed events or interpretations of them.  Unfortunately, there were a lot of disputes between the parties over various matters, some of them trivial, and I do not intend or find it necessary to deal with them all.

81.  As said, the Subject PLLA was then stored in the premises of KBM.  I find that it was so because of convenience and the need for refrigeration rather than any contractual obligation.

82.  I find that the defendant had mentioned to the plaintiff and Joanne about a wholesaler that she contacted who might buy half or a substantial part of the Subject PLLA, but the wholesaler later lost interest, as the defendant said.  No legal obligation arose from such mentioning even though the plaintiff seemed to have some complaints over it.

83.  It is common ground that some arguments developed between the plaintiff and the defendant.  They disputed among others as to whether the defendant was obligated to give to the plaintiff a list of doctors who had been cooperating with Grand Palace.  The fact that the plaintiff sought such information militates against the plaintiff’s case that the defendant was the only party obligated to sell the Subject PLLA.

84.  After the arguments, the plaintiff decided not to be further involved in the business of the Subject PLLA and would let Joanne handle it.  I accept the defendant’s evidence, which is not seriously disputed by Joanne, that after the Subject PLLA arrived, there was not much effort expended by the plaintiff and Joanne in trying to market and sell the Subject PLLA save the plaintiff chasing the defendant about the intended purchase by the wholesaler.

85.  On balance of probabilities, I accept that the defendant and Joanne, the latter acting as agent for the plaintiff, shortly then after had agreed to divide the Subject PLLA between the plaintiff and the defendant, and to divide them in the proportion of half and half equally instead of the original 2/3 and 1/3.  I so find because:-

(a)   Printed on the delivery note dated 8 September 2015[8] were the quantities of PLLA Mono and PLLA Screw of 2,500 pieces each.  The defendant’s evidence was that by that time she and Joanne had agreed to divide the Subject PLLA in equally and she thought Joanne was coming to take delivery of the plaintiff’s whole lot, therefore, it was printed there the said quantities.  However, she was later told by Joanne over phone that Joanne was only taking the delivery of 320 pieces of PLLA Mono. Therefore, she manually put a line across the quantity of “2,500.00 PCS” for both PLLA Mono and PLLA Screw and wrote 320PCS against PLLA Mono.   Joanne then signed the delivery note when she took delivery of the 320 pieces of PLLA Mono.

(b)  Had there been no agreement to divide the Subject PLLA equally, there is no reason why that delivery note was printed with “2,500.00 PCS” as quantities for both types of PLLA.

(c)   It is Joanne’s evidence given orally that she took those 320 pieces of PLLA Mono to Mainland China for marketing and sales purposes.  On evidence, there is no other explanation, except the said agreement to divide, as to why Joanne at that juncture changed to become so active in trying to market and sell them.

(d)  I find it telling that in her witness statement Joanne had not mentioned at all about taking delivery of 320 pieces of PLLA Mono in September 2015 and then 200 pieces each of PLLA Mono and PLLA Screw in January 2016, and that when giving evidence, Joanne initially was very hesitant to, though later did, agree that the signature on the said delivery note was hers.

(e)   Between the defendant and Joanne, I find the defendant a more credible and reliable witness and prefer her evidence in this matter.

86.  I find that the said agreement to divide served to make clear and confirmed the parties’ position, and that then after, each would be responsible for selling his/her own share.

87.  I accept the defendant’s evidence that she was able to sell her share of the Subject PLLA through various programmes and promotions as Grand Palace and she had with previous efforts cultivated the cooperation with a group of registered doctors who would perform medical beauty procedures and Grand Palace/she previously had hosted training courses, at Grand Palace’s/her expenses, for these doctors to be familiarized with the procedures.

88.  I find that the plaintiff/Joanne have never even suggested or attempted to render an account to the defendant of the 520 pieces of PLLA Mono and 200 pieces of PLLA Screw taken by Joanne.  This militates against the plaintiff’s contention that under this “cooperation” between them, they were supposed to share profit/loss together.

89.  Eventually and as are not disputed, 1,980 pieces of PLLA Mono and 500 pieces of PLLA Screw from the plaintiff’s share were sold, with the plaintiff/Joanne’s agreement, at a loss at the respective prices of HK$5 and HK$6 a piece.

90.  In May 2017 when the life span of the Subject PLLA has expired and around the time when the plaintiff requested for an account, the defendant paid to the plaintiff a sum of HK$20,433, representing 1/6 the Subject PLLA at costs, and I find, pursuant to the agreement between the defendant and Joanne to divide the Subject PLLA equally, rather than, as the plaintiff said, he agreeing to change his share in the Subject PLLA to half then and accepting the said sum of HK$20,433 because the defendant said it was easier to calculate[9].

91.  I accept, essentially as Mr Wu submitted, that as the 2^nd Oral Agreement is not proved, the general law would govern, thereby on proper analysis the defendant (through KBM) had been holding the plaintiff’s share of the PLLA under a bailment.  I find that she has properly discharged her obligation under the bailment by rendering the Account, tendering the sum of HK$12,900 and asking the plaintiff to take delivery of the 1,700 pieces of PLLA Screw, which she was willing and ready to do.

CONCLUSION AND DISPOSAL

92.  In the premises, I dismiss the plaintiff’s claim.

93.  At the beginning of trial, Mr Wu and Mr Chan have indicated that Mr Chan appeared on a pro bono basis and the defendant would only seek certificate for one counsel.  I would make a costs order nisi that the plaintiff do pay the defendant the costs of this action, with all costs reserved, if any, with certificate for one counsel to be taxed if not agreed.  This costs order nisi will become absolute within 14 days unless any party applies by summons to vary.

94.  Lastly, I thank Mr Wu, Mr Chan and Mr Tam for their assistance.