PC ENTERPRISES (HK) LTD AND ANOTHER v. CHAN WAI CHING

DCCJ 375/2019

[2021] HKDC 966

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 375 OF 2019

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JUDGMENT

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1.  In this action the plaintiffs claim that the defendant had misappropriated funds from them in the total sum of HK$1,064,240.10 through 13 online bank transfers.

2.  This judgment is divided into the following sections :

Section		Paragraphs
Background and salient events		3-26
The 13 Transactions		27-32
Overview of the parties’ respective case		33-38
Witnesses		39-40
The considerations and approach in evaluating evidence		41
The removal of the plaintiffs’ documents by D		42-57
Had D been in possession of the primary security tokens ?		58-77
D’s case regarding the system and practice allegedly put in place in the Financial Department regarding the workflow, control and execution of the payments - the evidence of Cherry versus the evidence of Richman		78-95
Reliability and credibility of PT and D as witnesses		96-98
TRANSACTIONS 1, 2, 5, 6, 7, 11, 12 AND 13 – WERE THEY REPAYMENTS OF THE 2 LOANS ALLEGEDLY MADE BY D TO P1 THROUGH PT?
Overview		99-100
D’s case and evidence		101-115
The plaintiffs’ case and evidence		116-122
Discussion		123-153
TRANSACTIONS 3 AND 8 – WERE THEY PARTLY PAYMENTS OF BONUSES TO D AS AGREED AND PARTLY PAYMENTS OF BALANCE OF UNPAID SALARY AND OF BACK PAY?
The parties’ case		154-164
Discussion		165-166
TRANSACTIONS 4, 9 AND 10		167-172
CONCLUSION AND DISPOSAL		173-177

Background and salient events

3.  The plaintiffs were, and are still, in the business of operating veterinary clinics/hospitals/shops under the name “Pets Central”.

4.  The 1^st plaintiff (“P1”) was incorporated in March 2012.  Apparently, around that time there was certain restructuring of the “Pets Central” business whereby P1 was incorporated to take over certain assets and operations and P1 became the owner and operator of the “Pets Central” clinic/hospital/shop in Mongkok, North Point, and Tseung Kwan O and a mobile veterinary.  P1 then also became the majority shareholder of the 2^nd plaintiff (“P2”) which owned and operated the Pets Central clinic/hospital/shop in Sai Kung.  P1 thereafter became responsible for managing the administration, finance and personnel affairs of P2.

5.  The defendant (“D”) was an accountant.  In the documents produced in this action, D was often referred to by her other name Beau.  She was employed by P1 as its Finance and Administration Manager from 23 April 2012 to 15 January 2014.  Her job duties also included, among others, the finance and administration work of P2, for which P1 was responsible.  Her monthly salary was HK$29,000 when she was first employed.  It was increased to HK$34,750 in August 2012.  It was again increased in April 2013 under the below arrangement.

6.  On 15 April 2013, as requested by D for her personal tax planning reasons, P1 signed a contract with one Well Time Consultancy Limited (“Well Time”) whereby D was employed by P1 as a Finance & Administration Manager “on a loan out basis from Well Time”, commencing on 1 April 2013, for a monthly salary/fee of HK$41,250.

7.  The finance and administrative work of P1 and P2 were performed by the joint Finance Department of the plaintiffs which was situated in an office unit in Kwun Tong (“the Office”).  D was essentially the head of the Finance Department as all the staff there reported to her, while D reported to Dr Pauline Taylor (“PT”).

8.  PT was one of the founders of Pets Central.  She was a very experienced veterinary surgeon having graduated from Edinburgh University in 1978.  She has been a director of P2 overseeing the administrative aspect of its business since its incorporation in 2006.  At the material time, apart from being a director of P2, she was also the Group Manager cum Chief Operating Officer of P1 overseeing the operation of the Group.  She was also the consulting veterinary surgeon of the Group.  Among these positions and duties, most of her work time were spent as a surgeon working in the clinics/hospitals.  She would usually only attend the Office one to two times a week.

9.  In this section, I will skip the events relating to the dispute between the parties as to whether D had never had possession of the 2 bank tokens, as she claimed, or whether at various times she had them, as the plaintiffs claimed.  The 2 tokens were issued by the respective banks which would generate a password to execute online transfers/payments.  It is common ground that the 13 subject transfers could not have been executed without them.  I will go into these events when dealing with this factual dispute.

10.  According to the defence case, there was also a particularly important event that occurred in late April 2013, namely, that D had brought to the Office RMB105,000 and Euro 60,000 in cash and handed them to PT as loans to P1.  D also said that she had several conversations with PT concerning the repayment of the Euro loan and interests to be paid to D thereon.  The plaintiffs and PT categorically denied that there were such loans or that the conversations and events allegedly relating to them had taken place at all. Again, I will deal with the two alleged loans below.

11.  One of the underlying theme of the plaintiffs’ case was that the management and reporting of the Group’s financial position by way of cash flow reports and management accounts had been lagging behind and not satisfactory. This was particularly so after the resignation of the Accounts Assistant Ms Bowie Sin in late July 2013.  D did not seriously dispute that but explained essentially that the financial affairs of the Group was left in a state of chaos after the re-structuring, and which she had to deal with and that there were other difficulties and such.

12.  Apparently, the relationship between PT and D began to deteriorate by mid to late 2013.  The parties’ respective case concerning what caused the deterioration were diagonally different.

13.  D in her witness statement said that the relationship deteriorated because (a) she often chased PT for the repayment of the Euro loan and she declined to make further loans to P1 and (b) D “discovered many instances about [PT] mixing up personal and company expenses”[1] which D disagreed and did not condone and therefore led to strains in their relationship.  However, I must immediately note that none of those allegations that there were instances where PT “[mixed] up personal and company expenses”, which were serious allegations against the probity and integrity of PT, were put to PT during her cross-examination to give PT a chance to respond.

14.  While the plaintiffs’ stance was that the deterioration was caused by (a) the growing dissatisfaction over D’s work, (b) D’s repeated delay and refusal to return to PT the bank tokens; and (c) the plaintiffs discovered in late December 2013 that D had changed the particulars of the primary contact person for P1-HS Account (defined below) from PT to D.  In this connection, it is common ground[2] that by the time D resigned in mid January 2014, the management accounts for October 2013 were not quite ready while those for November 2013 onwards had not been prepared.  It is the plaintiffs’ case that this change of primary contact for P1-HS Account without their knowledge and consent and D’s response in their communications regarding this matter triggered PT’s suspicion.

15.  On 15 January 2014, D tendered a resignation letter (which was dated 14 January 2013, but nothing turns on this apparent typo) terminating her employment with P1 with effect from 13 March 2014.  At the same time and by a letter dated 13 January 2014, the Accounts Assistant Cherry Chan Ka Yin (“Cherry”) also tendered her resignation.

16.  On 17 January 2014, PT tried to retrieve D’s personnel file stored in a locked cabinet in the main area of the Office, but it could not be found.  PT reported the matter to the police and on 21 January 2014 wrote an email to D complaining of the matter[3].

17.  Evidently alerted to the seriousness of the situation and on 18 January 2014, which was a Saturday, PT met with an accountant Mr Anthony Richman (“Richman”).

18.  On Monday 20 January 2014, the board of directors of P1 had a meeting. They resolved to remove D as an authorized person from every bank account of Pets Central with immediate effect and to engage Richman as a consultant financial director and advisor to the Board during the transition period to the new financial management.

19.  On the same day, ie 20 January 2014, PT and Richman met with D, among others, to try to obtain from D the information in relation to the day-to-day operation of the Group and the audit information D was working on which was already overdue.  D refused to hand them over unless she was given 2 months’ pay for her resignation to take effect immediately.

20.  It was the plaintiffs’ allegations and disputed by D that on the next day, ie 21 January 2014, at about 9:15 am when PT was arriving at the Office, she saw two staff (one of whom was Mr Cheung Tsz Kwan (“Cheung”)) carrying a large black plastic bag of documents walking down the stairs to dispose of it upon D’s instructions.  PT stopped them and discovered that the bag contained various documents of the plaintiffs.  PT sent an email to D on the early hours of 22 January 2014[4] recording and complaining about this.

21.  Then on 22 January 2014, upon preliminary review of the plaintiffs’ financial matters, Richman and his team found there were financial records missing and they also reported that they discovered irregularities on the financial controls of the plaintiffs.

22.  It was also the plaintiffs’ allegations that later on they learned from Cheung that in mid January 2014 but prior to D’s resignation, D had asked Cheung to arrange for a courier, and the courier did come, to transport 2 boxes of documents from the Office to an address in Lai Chi Kok and the reason given was that D needed them to work from home (“Removal of Documents by Courier”).

23.  The plaintiffs’ case is that D had wrongfully removed various documents of the plaintiffs, including among others, D’s personnel file, corporate minutes, shareholder notes, bank account records, various accounting records, day-to-day transaction records, and such[5]. D does not admit having removed such documents and put the plaintiffs to strict proof[6]. I will deal with this subject in due course.

24.  After the bank records the plaintiffs requested from the banks were received (as the original records kept in the Office were found missing), Richman and his team found that at least HK$1,064,240.10 had been transferred to D’s bank accounts through 13 transfers without any authority.  All of these transfers were recorded in the ledgers as payments to payees other than D and for apparently legitimate purposes, with most of them unconnected with D.  It was also found that regarding most of these 13 transfers, the payee names recorded in the banking system to expedite the transfers were not the actual names of the holders of the destination bank accounts.

25.  On 24 March 2014, the plaintiffs reported to the Hong Kong Police the said unauthorized transfers as theft[7]. Apparently, for one reason or another the police investigation is still in progress and the result is still pending to date[8].

26.  In September 2016, the plaintiffs commenced this claim as HCA 2268/2016, which was subsequently transferred to the District Court.

The 13 Transactions

27.  Of the said total sum of HK$1,064,240.10 paid by the said 13 transfers,

(a)  A total amount of HK$468,599.10 was transferred from P1’s bank account held with Hang Seng Bank no 395-404833-001 (“P1-HS Account”) by 10 transfers; and

(b)  A total amount of $595,641.00 was transferred from P2’s bank account held with HSBC no 400-157848-001 (“P2-HSBC Account”) by 3 transfers.

28.  There was no dispute that the said sums of HK$468,599.10 and $595,641.00 belonged beneficially to P1 and P2 respective at the time of the transfers.

29.  It is also not disputed that, save the money in Transaction 8 and Transaction 10 (defined below) which were transferred into a bank account held in the joint names of D and her brother-in-law, one To Fuk Sung (“TFS”), the money in the other 11 transfers was transferred into 3 bank accounts held in D’s sole name.  The details of these bank accounts are:-

(a)  Bank of China Account no 012-774-10049561 held in D’s sole name (“D-BOC Account”)

(b)  Hang Seng Bank Account no. 239-032337-001 held in D’s sole name (“D-HS337 Account”)

(c)  Hang Seng Bank Account no. 347-304701-888 held in D’s sole name (“D-HS701 Account”)

(d)  Hang Seng Bank Account no. 347-475592-888 held in the joint names of D and TFS (“D-HS Joint Account”)

30.  In the parties’ pleadings and throughout these proceedings, these 13 transfers have been referred to as “Transaction 1” to “Transaction 13” respectively, as identified and detailed below.  For ease of reference and consistency, I will continue to refer to them by the same abbreviations. The relevant details of the 13 Transactions are:-

From P1-HS Account :
Transaction No.	Date	Amount in HK$	Payee’s name / description as recorded in ledger / voucher of P1	Payee’s name as recorded in the bank’s auto payment report	Bank account no of recipient as recorded in the bank’s Auto Payment Report	Holder of the recipient bank account
1	20 May 2013	$57,250	Cenvet Australia PTY LTD	Well Time	D-BOC Account	D
2	31 May 2013	$76,000	IDEXX Distribution Inc.	Well Time	D-BOC Account	D
3	31 July 2013	$217,000	Consultancy and Service Fee	Well Time	D-BOC Account	D
4	30 Sept 2013	$8,130.10	Petty cash expenses	Chan Wai Ching	D-HS701 Account	D
5	8 Nov 2013	$13,429.00	Accrued expenses - Salaries	Tong Kai Man Philip	D-HS701 Account	D
6	8 Nov 2013	$14,575.00	Accrued expenses – Salaries	Choi Hiu Ying	D-HS701 Account	D
7	8 Nov 2013	$13,200.00	Accrued expenses – Salaries	Siu Mei Ki	D-HS701 Account	D
8	19 Dec 2013	$52,000.00	Current account PC Media	United Italian Corp	D-HS Joint Account	D & To Fuk Sung
9	15 Jan 2014	$8,948.00	PCE-HSB395-404833-883 C/A	Leung Wing Cheong	D-HS701 Account	D
10	15 Jan 2014	$8,067.00	PCE-HSB395-404833-883 C/A	Yim Ho Ying	D-HS Joint Account	D & To Fuk Sung
Total		$468,599.10
From P2-HSBC Account :
No.	Date	Amount in HK$	Payee’s name / description as recorded in ledger / voucher of P2	Payee’s name as recorded in the bank’s auto payment report	Bank account no of recipient as recorded in the bank’s Auto Payment Report	Holder of the recipient bank account
11	19 June 2013	$200,000.00	C/A with PCGC	BOC Credit Card	D-BOC Account	D
12	19 June 2013	$100,000.00	C/A with PCGC	C Vetapet	D-HS337 Account	D
13	30 Sept 2013	$295,641.00	HSBC4001-5784-8828-0001 C/A	PCGC Visa	D-BOC Account	D
Total		$595,641.00
Grand Total		HK$1,064,240.10

31.  The information set out in the above table under the “Payee’s name/description as recorded in ledger/voucher” and “Payee’s name as recorded in the bank’s auto payment report” was extracted from the ledger/vouchers of the plaintiffs and from the banks’ auto payment reports and it was not disputed by D that such was so recorded.

32.  Looking at such information, it can be readily seen that

(a)  In respect of Transaction 5 to Transaction 13, the name of the payee as recorded in the bank’s auto payment report in respect of each transfer was not that of the holder of the recipient account, which was yet different from the name of the payee/description as recorded in ledger or voucher of the respective plaintiff.

(b)  In respect of Transaction 1 to Transaction 4, there were also such inconsistencies, though to a lesser extent, as will be explained.

Overview of the parties’ respective case

33.  The plaintiffs’ case is straight forward, which is that the 13 Transactions were all unauthorized and all the money were transferred without their knowledge or consent.  D therefore had misappropriated the funds.  D thus had breached an expressed term of her employment contract with P1 to act in its best interest and also had breached an implied term of good faith and fidelity.  D has also been thereby unjustly enriched.  She is also liable in conversion.

34.  D does not dispute that she would be liable if the 13 Transactions were unauthorized.

35.  D’s pleaded case is that all the 13 Transactions were authorized by PT for the following payments of P1:-

(a)  Transaction 1 and Transaction 2 – for the repayment of a loan of RMB 105,000 D made to P1.

(b)  Transaction 5, Transaction 6, Transaction 7, Transaction 11, Transaction 12 and Transaction 13 – for the repayment of the principal and interest of a loan of Euro 60,000 D made to P1.

(c)  Transaction 3 – for the payment of D’s bonus for 2012, her 4 months’ salary plus “MPF subsidies” and back pay of agreed increase in salary for 3 months.

(d)  Transaction 4 – for the reimbursement of certain expenses D paid on behalf of P1.

(e)  Transaction 8 – for the payment of her 2^nd half year bonus for 2013.

(f)  Transactions 9 and 10 – for the payment of her overtime work.

36.  It is D’s pleaded case that “the Defendant had not kept the Primary Security Token at the material time”[9], and that “she did not know where Ms Taylor kept her security devices for Hang Seng Bank and HSBC”[10]. She also did not know why the respective payee’s name for Transactions 5 – 13 was not recorded as hers in the banks’ auto payment reports.

37.  While it has not been expressly pleaded[11], D in her witness statement and at trial ran a contention that

“in view of the accounting system intact in the Plaintiffs, it would be virtually impossible for anyone in the Plaintiffs to make any transfer of funds without the knowledge of all accounting staff and especially without the knowledge of Ms Taylor who had been keeping an extreme close watch on the figures of the Plaintiffs on a day to day basis.”[12]

In support of her such contention, D has devoted 9 pages in her witness statement (page 8 – 16) to elaborately describe and explain the system and practice allegedly put in place in the Financial Department regarding the workflow, control and execution of the payments.  D also called Cherry to testify in support of her such contention.

38.  Since D does not dispute that the said sum of HK$1,064,240.10 was beneficially owned by the plaintiffs and that the sum was transferred into her said 4 bank accounts as aforesaid, but said that they were transferred with the plaintiffs’ authority, D has at least an evidentiary burden to prove such authority as she alleged.

Witnesses

39.  The plaintiffs called 5 witnesses to testify.  They were PT, Richman, Mr Kurt Rafael Verkest (“Verkest”) who is a director and beneficial shareholder of P1, Cheung and Mr Lai Tak Ming, the Financial Manager of P1 since July 2014.

40.  D herself and Cherry gave evidence for D’s case.

The considerations and approach in evaluating evidence

41.  In the context of this case, it is helpful to be reminded of the pertinent considerations and approaches to evaluating evidence.  Mr Singh, counsel for the plaintiffs, referred me to a recent judgment of DHCJ MK Liu in Progetto Jewellery Co Ltd v Lau Chiu Ying[13], in which the learned judge summarized them neatly, and I gratefully quote:-

‘28. In respect of evaluating the evidence given by witnesses, a valuable guidance has been given by DHCJ Eugene Fung SC in Hui Cheung Fai and another v Daiwa Development Limited, in which the learned judge said:-

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) ……

78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: e.g. Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J).

79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).”

29.  Similar guidelines can also be found in Lee Fu Wing v Yau Po Ting Paul [2009] 5 HKLRD 513, in which DHCJ Au (as he then was) said:-

“53. In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations the following:-

(1) Whether the party’s case is inherently plausible or implausible.

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable.

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility.

(4) The demeanour of the witnesses.”

30.  If a witness has told lies on a central issue, that may have a significant adverse impact on the credibility of his or her evidence as a whole.  As said by Sir John Dyson in MA (Somalia) v Secretary of State for the Home Department:

“31. ....... where a claimant tells lies on a central issue, his or her case will not be saved by general evidence unless that evidence is extremely strong. It is only evidence of that kind which will be sufficient to counteract the negative pull of the lie. But much depends on the bearing that the lie has on the case……

32. Where the appellant has given a totally incredible account of the relevant facts, the tribunal must decide what weight to give to the lie, as well as to all the other evidence in the case, including the general evidence……

33.   ...... where the appellant tells lies on a central issue in the case, the [tribunal] may conclude that they are of great significance……It will be a matter for the [tribunal] to decide whether the general evidence is sufficiently strong to counteract what we have called the negative pull of the appellant’s lies.”

31.  In a civil litigation in which a serious allegation such as fraud is made, evidence proving the allegation must show a preponderance of probability.  The degree of probability must be commensurate with the occasion. However, that does not mean that the court is looking for a degree of probability higher than the civil standard. Rather, it means that the more inherently improbable the act in question, the more compelling would be the evidence needed to satisfy the court on a preponderance of probability.’

The removal of the plaintiffs’ documents by D

42.  It is logical that I will first deal with this matter.  My finding on this issue, and therefore as to why certain accounting records and documentary evidence are not available, evidently would be an integral and important part of the context in assessing the parties’ various allegations.

43.  As mentioned in paragraph 23 above, D in her Defence did not deny it, but pleaded that she did not admit it and put the plaintiffs to strict proof.

44.  I will first deal with the incident that happened on 21 January 2014 as described in paragraph 20 above.  Though D spent some time at trial disputing this incident, it was really not particular important.  I need only mention it in passing.  The incident was recorded contemporaneously in the email sent by PT at 1:05 am on 22 January 2014[14] in which PT listed the documents found inside the bag.  D replied by email the next morning[15].  As can be seen in these email exchanges, the main concern expressed by PT was that D should have shredded those documents containing confidential personal information, like clinical records, credit card slips and such.  The only class of documents listed there that might be relevant to the 13 Transactions were “copies of bank statement”.  As PT had managed to stop the disposal, these copies of bank statement presumably have been saved by the plaintiffs.

45.  Of significance really is the Removal of Documents by Courier.

46.  The main evidence on the Removal of Documents by Courier was given by Cheung in his witness statement.  He recounted that in or about mid January 2014 prior to D’s resignation on 15 January 2014, D asked him to arrange a courier to collect from the Office two boxes of documents to be delivered to an address in Lai Chi Kok, which address Cheung could not now recall.  He was informed by D that the documents were transported as she need them in order to work from home.  He did not know what the documents were, but they were contained in the company box files.  He recalled that D paid the driver HK$100 for the delivery.

47.  PT’s evidence, which I accept, was that on about 22 January 2014, she went into D’s room in the Office (“D’s Room”) and to her astonishment found that all the box files there containing the plaintiffs’ documents were empty, whereupon she immediately reported the matter to the Police.  As said, it is the plaintiffs’ case that the documents found missing included D’s personnel file, corporate minutes, shareholder notes, bank account records, various accounting records, bank statements, day-to-day transaction records and shareholder details (“the Missing Documents”).  It is PT’s evidence given orally, which was not challenged and therefore I accept, that the Missing Documents were all along stored inside D’s Room, save D’s personnel file which was store in a locked cabinet in the main area of the Office.

48.  Though Cheung’s witness statement was exchanged on 1 February 2018, D did not file any supplemental witness statement to rebut Cheung’s said evidence.  Notably, Cheung’s such evidence was not challenged in cross-examination.  D also did not respond to Cheung’s such evidence concerning the Removal of Documents by Courier when she was giving her oral evidence in chief.  As mentioned, D also did not respond to or dispute that the Missing Documents (save D’s personnel file) were originally stored in D’s Room and that they were no longer there on 22 January 2014, as PT said.  D also did not seriously dispute that she had access to the key of the said locked cabinet in the main area of the Office.  In all, D said little, if anything at all, about the Removal of Documents by Courier or the loss of Missing Documents.

49.  I find it most unusual and telling that in the face of such direct and detailed allegations of conducts so serious, D all along has not responded to them at all.

50.  Cheung was direct and frank when he was giving evidence.  I find him an honest and reliable witness.  I accept his evidence set out in paragraph 46 above and find as facts the matters so testified to.  Specifically, I find that in mid January 2014 but prior to the 15 January 2014, D had, without authority and under the pretext that she needed the documents to work from home, removed 2 boxes of the plaintiffs’ documents from the Office.

51.  I move to consider next whether the documents so removed were the Missing Documents.

52.  In this connection, I take particularly note that in D’s email sent at 12:35 pm on 23 January 2014[16] (which was the next day after PT discovered that documents were no longer in D’s Room) D said that she promised that upon fulfilment of “my expectations”, among others, she would “complete Nov 2013 report” and effect a “perfect handover”.  To be able to complete the November 2013 report, D had to have all the transaction records for that period.  To effect a “perfect turnover”, she would need to turn over all the plaintiffs’ documents previously stored in D’s Room.  Thus, I find that D impliedly said that all those documents were in her possession and control.

53.  Considering also (a) that the Removal of Documents by Courier would have been close to 15 January 2014 when D tendered her resignation, (b) save D’s personnel file all the Missing Documents were stored inside D’s Room, (c) D had access to D’s personnel file, (d) there is no suggestion that any of the other staff could or would have removed the Missing Documents, and (e) it is in any event highly improbable that any of the other staff would do so, I find on balance of probabilities that the 2 boxes of documents removed in the Removal of Documents by Courier contained the Missing Documents.

54.  I thus find that the plaintiffs’ allegations proved that D has wrongfully removed and kept the Missing Documents.

55.  It follows that I also find that D has all along been in wrongful possession and control of various transaction records and accounting documents relevant to the 13 Transactions, and yet, she has withheld them and not discovered them for the purpose of this action.

56.  In my judgment, such was very reprehensible conduct, and it affronts this Court.

57.  I will bear this very much in mind when I continue to adjudicate on various issues and would draw such adverse inference against D as appropriate, particularly in relation to D’s allegations that there should have been documents bearing the signature of PT evidencing her approval of the 13 Transactions.

Had D been in possession of the primary security tokens?

58.  As mentioned, regarding both the P1-HS Account and the P2-HSBC Account, a token in respect of each account was required to operate them online.  The token is used to generate a password to access certain features or to perform certain functions online.  More than one token can be issued in respect of each of these accounts, and they may have different level of security, restricting or enabling the holder of that token to access or perform certain functions.

59.  It is common ground that in respect of the P1-HS Account and the P2-HSBC Account, the arrangement was that only a primary security token could generate a password to execute transfers or payments online, and the transfers/payments could be executed in a batch in one go; while a secondary level token only allowed the holder to, among others, input, change and then store the information regarding the transfers/payments to be made.  Such information included evidently the bank account number of the transferee/payee, the name of the transferee/payee and the amount.  Apparently, at the time of the 13 Transactions and in respect of the 2 said accounts, the online system would not check and require the inputted name of the transferee/payee to match the actual name of the holder of the bank account to be transferred/paid into.

60.  It is common ground that only PT was issued primary security tokens, one each in respect of the P1-HS Account and the P2-HSBC Account.  While D and some of the accounting staff in P1 were issued with secondary level tokens in respect of the 2 said accounts, evidently for them to check the status of the 2 said accounts online to find out if certain payments in or out had been made and to ascertain the balance and such, and to input the information of the transfers/payments to be made.

61.  In paragraphs 27 to 43 of the witness statement of PT, she set out extensively and in detail her evidence regarding this issue, explained and supported by documents.  In gist:-

(a)  In about August 2012, her mother was diagnosed with cancer which required her to travel back to Scotland frequently.  During those travels she kept the 2 primary security tokens with her and would review the proposed online transactions via emails and then approved and executed them.

(b)  In mid February 2013, her mother passed away and she had to travel urgently to Scotland to attend to her mother’s affairs and make funeral arrangements.  This time, she did not bring the 2 primary security tokens with her but entrusted and authorized D to use them to execute the online transfers/payments after she had given the approval in respect of the transaction(s).  PT all along kept in a small bag the 2 primary security tokens together with a small piece of paper written thereon the passwords used to operate the 2 primary security tokens.  The small bag was kept in a locked drawer in PT’s office in the Office.  On that occasion, she told D where the small bag was and where the key to the said locked drawer was hidden.

(c)  After her return in late February 2013, D informed her that D’s secondary level token for P1-HS Account was not working properly and that she was unable to do any work without its use.  Since then until mid 2013, D regularly asked and PT would regularly lend to D her primary security token for P1-HS Account.  PT would either hand to D the small bag containing her 2 primary security tokens or when PT was not in the Office, PT would tell D to get the small bag from her locked drawer.

(d)  In mid 2013, D claimed that she had not received a replacement token from Hang Seng Bank.  Since D had gained PT’s trust and PT was regularly not in the Office, PT allowed D to keep hold of the small bag containing the 2 primary security tokens.

(e)  During these times when the 2 primary security tokens were regularly lent to or allowed to be kept by D, D was supposed to present PT with a list of payments due to 3^rd parties with supporting invoices or statements for PT to approve, and upon PT’s approval, the payments would be executed by using the 2 primary security tokens.

(f)  However, it is PT’s evidence that on numerous occasions, D informed PT that the information for these payments to be inputted online was not ready for PT’s review prior to her leaving the Office.  Also, in early September 2013, one of the main veterinarians in one of the clinics resigned with immediate effect, and PT had to work every day in the clinics in September 2013 and in the subsequent months 4 to 5 days a week.  PT therefore spent significantly less time in the Office and as D had gained her trust, she did not cross-check the online transfers/payments executed (or caused to be executed) by D with the 2 primary security tokens.

(g)  In August 2013, PT had a meeting in the Office with Leung Lok Man Carmen (“Carmen”) of Hang Seng Bank in which, among others, PT chased after her the replacement token.

(h)  In mid November 2013, the Office received 2 letters from Hang Seng Bank addressed to D, one of which PT thought should contain the replacement token. PT then instructed D to activate the token that she received from Hang Seng Bank.

(i)  However, by mid December 2013, D still had not returned the small bag with the 2 primary security tokens to PT.  D only returned them on or about 17 December 2013.

(j)  To corroborate her above account, PT produced a number of documentary evidence showing that D had used the primary security token on 1 October 2013, that PT had not had the said token on 1 October 2013, that she had chased D to process the replacement of the token and that she had chased D for the return of the tokens on 17 December 2013 and D said that she would do so.  The documentary evidence consists of

(i)  an email sent by her on 31 October 2013 to Carmen[17] following up various matters discussed at the meeting held in August 2013;

(ii)  an email recovered by a staff of P1 from the server which was sent on 1 October 2013 at 22:55 by D from her yahoo email account “beauchan0122@yahoo.com.hk” to D’s email account in P1 “beau.chan@pets-central.com” and copied to “beauchan0122@gmail.com” with no content but containing an attachment bearing the filename “Screenshot_2013-10-01-22-42-52.png”[18] (“the Screenshot Email” and “the Screenshot”) which was a screenshot of the computer screen of the online banking of P1-HS Account executing an “autopay” to be made on 3 October 2013 to Coyle David John and Verkest in the respective sums of HK$50,000 and HK$40,000, being “A01 PCE SALARY” executed by the token having the user name “PUSER1” at 10:41 pm on 1 October 2013. (there is no dispute that the said 3 email addressed were all D’s and “PUSER1” was the user name of PT’s primary security token for P1-HS Account);

(iii)  A string of 3 emails[19] beginning with an email sent by Reagan Rizzolo on 1 October 2013 attaching the October 2013 statement.  This email was then forwarded by Rebecca Watson of Pets Central to D copied to PT asking D to pay per the statement.  The string ended with PT’s email to Rebecca, D and 3 other personnel of Pets Central sent at 10:53 am on 2 October 2013 in which PT said

“Beau is on leave today. Lets ask her to sort it tomorrow as I currently don’t have access to our IT banking account”;

(iv)  An email from PT to D copied to “pdekrassel@pets-central.com” sent at 6:24 pm on 6 November 2013 in which PT said

“As discussed please process a secondary user for yourself to log in for our PCE bank accounts tomorrow. I will be taking back the primary user access level. I have already discussed this with our banker Carmen. Please let me know if there are any problems for you to do this, I expect it will take around one week all in to sort this out. Email me when it has been done.”

(v)  A string of 4 emails all sent on 17 December 2013, beginning with one PT sent at 00:25 in which PT said, among others,

“Beau I also want my banking devise as I assume you now have yours …”.

D then replied by email sent at 9:06am in which she said to PT, among others,

“Don’t waste time on the key, the key can be returned to you any time, I have my key last week…”.

PT then replied by email sent at 10:03am with the subject “Banking Device” in which PT said

“Beau. Haven’t you used and activated your banking key ? The passwords came in when you spent your week in China and I have been asking for my key to be returned for some time. If not get it done today before Peter and I come into the office to meet you make sure your bank key works. I will be taking mine to leave with my vet partners when I am gone.”

D then replied by email sent at 11:17 am that

“SURE

YOUR KEY WILL BE RETURNED TO YOU TODAY”

(k)  PT specifically denied that she had the 2 primary security tokens at the time of the Screenshot Email, or that she had executed the payments captured in the Screenshot.

62.  As said, it is D’s pleaded case that “the Defendant had not kept the Primary Security Token at the material time”^[20], and that “she did not know where Ms Taylor kept her security devices for Hang Seng Bank and HSBC”^[21].

63.  However, in her witness statement[22], D said:-

“… I want to emphasize that I had never taken the primary security tokens of either Hang Seng Bank or HSBC from Ms Taylor by myself at any material time. She did on occasions left the primary security token of either the Hang Seng Bank or HSBC in my office in the latter part of 2013 as she came into my office on an extremely frequent basis as mentioned above. Since I never had access or information about Ms Taylor‘s personal security password I could never process any payments by using these security tokens even I had them on hand. Indeed, I confirm that from the date I joined the 1^st Plaintiff until the date I left, I had not even in [sic] one occasion used the primary security token to transfer any amount out from the 1^st and or the 2^nd Plaintiff. Even during the periods which Ms. Taylor was away from Hong Kong including February and August 2013, Ms. Taylor still continued to execute transfer of each and every single sum from the 1^st Plaintiff and the 2^nd Plaintiff by herself personally. Perhaps I would further clarify that even if I had negligently kept the primary security tokens of either the Hang Seng Bank or the HSBC when Ms. Taylor left them in my office, the only reason why I had not returned them to her immediately would be that I would believe Ms. Tailor would be free to collect them on my desk anytime as she was free to come into my office anytime she desired.”

64.  Thus, D has changed her case from she “had not kept the Primary Security Token at the material time” to that of PT leaving the primary security tokens in D’s Room on occasions and she had kept them, albeit “negligently”. In my view, D has now shifted her case to accepting that she has had possession and control of the primary security tokens, but now contends that she did not have the password and categorically denies having used them even once.

65.  Next, I note that despite the fact that PT gave such a detailed account corroborated with, and giving detail explanations by reference to, the said documents, D has not sought to file a supplemental witness statement to respond to them.  D also did not seek to respond to them in her oral evidence in chief.

66.  Notably and among others, D did not respond to PT’s evidence that the 2 primary security tokens were lent to D because D said her secondary level token for P1-HS Account was not working and that there had been various communications regarding the obtaining of a replacement from Hang Seng Bank, which as alluded to above, was well supported by documents.

67.  The Screenshot Email and the Screenshot prima facie showed that D had used the primary security token for P1-HS Account to execute transfers on 1 October 2013.

68.  In cross-examination, D gave the explanation for the first time that the Screenshot in fact was sent to her by PT in a Skype message, which she then sent from her yahoo email address to her email address at work.  When pressed, D could not give any satisfactory reason why this explanation was not given any earlier.

69.  Without hesitation, I reject her such evidence as untrue and an afterthought.

70.  Firstly, it can be seen from the Screenshot that the banking instruction was executed at 10:41 pm on 1 October 2013.  The filename of the Screenshot is “Screenshot_2013-10-01-22-42-52.png” which in all likelihood is a time-stamp filename indicating that the Screenshot was captured at 22 hours 42 minutes and 52 seconds on 1 October 2013.  The Screenshot Email was sent at 22:55pm on 1 October 2013.  The time sequence thus showed that the execution of the banking instruction, the capturing of the Screenshot and then the sending of the Screenshot Email were done almost instantaneously one after the other and within several minutes, bearing in mind that one would need a bit of time to perform the computer operations in between, namely capturing the screen, saving the Screenshot image, calling up the email program, typing out the email addresses and such.

71.  If it were, as D alleged, that the banking instruction was executed, the Screenshot captured and then sent, by PT through Skype to D, which D then emailed it to her other email addresses, then PT would have to capture the Screenshot immediately after executing the instruction, then immediately send it to D via Skype, and D would have to check her Skype program immediatelyafter the message was sent by PT to realize that she received a new message from PT, D would have to immediately open and read that message from PT, decide to email to herself the Screenshot and immediately do so.  And I would add and ask that these all happened at close to 11 pm that day with such coordinated and immediate timing without any prior communication between PT and D or any reason for urgency?  I think such scenario and timing was highly improbable.

72.  Secondly, in the string of emails set out in paragraph 61(j)(iii) above sent on 1 October 2013 and 2 October 2013, PT clearly informed and explained to P1’s personnel, D included, that the payment would be taken care of by D as PT did not have access to internet banking.  If PT were executing banking instruction making payment of salary in the late evening of 1 October 2013, one simply cannot perceive any reason why she did not also take care of the payment in question but instead blatantly lied to D and 3 other personnel in P1 that she did not have access to internet banking (and doing so in writing by email). Again, I find such scenario most highly improbable and completely incredible.

73.  Thirdly, PT has referred to and spoken about the Screenshot Email in detail in her witness statement.  Therefore, D has been alerted long before trial about the importance of this email for this issue.  D has had ample time and opportunity to investigate and then respond.  Yet, this factual allegation that the Screenshot was in fact sent by PT via Skype was not put to PT during her cross-examination for PT to respond, and was not given in evidence during D’s own evidence in chief.  I find it hard to believe that D would suddenly remember it during her cross-examination.  In my view, such allegation was clearly an afterthought made up by D when she was pressed during cross-examination.

74.  I thus find that D, and not PT, was in possession of the primary security token of P1-HS Account at the time and that D had indeed used it to execute the payments as shown in the Screenshot.  Consequentially, I also find that D lied in evidence when she said that the Screenshot was sent to her by PT via a Skype message and that she lied in her witness statement when she said that she did not have the password to operate the primary security token of P1-HS Account and when she said that she had never used the said token, not even once, to execute a payment/transfer.

75.  I take the view that these issues regarding whether D had had possession of the primary security tokens and the passwords to use them and whether she had ever used them to transfer funds in the plaintiffs’ said bank accounts are central issues, and over which I have found that D has lied.  In the circumstances, I hold that such lies on these central issues have a significant adverse impact on the credibility of D’s evidence as a whole.

76.  I accept PT’s evidence summarized in paragraph 61 above as I find her an honest and reliable witness (for reasons given in due course) and her evidence is well supported by documents.

77.  By reason of the above matters, I find that D has had possession of the 2 primary security tokens in the periods as testified to by PT.

D’s case regarding the system and practice allegedly put in place in the Financial Department regarding the workflow, control and execution of the payments - the evidence of Cherry versus the evidence of Richman

78.  D called Cherry as her only other witness.  She was employed by P1 as an Assistant Accountant from about April 2013 to February 2014.  In the Office, she reported to D.  As have mentioned, she resigned at the same time as D.  D clearly looked out for Cherry at the time of resignation as in D’s email sent at 12:35 pm 23 January 2014^[23] mentioned in paragraph 52 above, D expressed her “expectations” to include “pay the monthly salary to Cherry and I on time” and “to issue a good reference letter to Cherry and I”.

79.  Cherry’s duties included the usual ones, but particularly relevant is that her duties included the entering and posting of payment vouchers in P1’s computer accounting system at the time called the Flex System.

80.  It was shown on the face of all the 9 vouchers regarding the 13 Transactions (“the 9 Vouchers”), except Voucher PVB3040091, that they were posted by “Cherry”.  Voucher PVB3040091 was recorded in the Flex System as posted by “Beau” (ie D).  It was Cherry’s evidence that, for a reason that I need not detail here, she used D’s log-in to post this particular voucher.  For ease of reference, I list below the 9 Vouchers:-

(a)   Transaction 1 – Voucher PVB3020108[24]

(b)   Transaction 2 – Voucher PVB3020109[25]

(c)   Transaction 3 – Voucher PVB3040091[26]

(d)   Transaction 4 – Voucher PVB3060092[27]

(e)   Transactions 5, 6 and 7 – Voucher PVB3080141[28]

(f)   Transaction 8 – Voucher PVB3090121[29]

(g)   Transactions 9 and 10 – Voucher STB3100001[30]

(h)   Transactions 11 and 12 – Voucher JVB3030011[31]

(i)   Transaction 13 – Voucher JVB3060010[32]

81.  That being the case, it was expected that Cherry would give some evidence shedding light on why the payee names and particulars as recorded in the 9 Vouchers were in most cases completely different from the particulars shown in the bank’s auto payment reports and also different from those given and alleged in the defence case.  Cherry’s evidence given in her witness statement and in chief, however, did not touch on the 13 Transactions and the 9 Vouchers at all.

82.  Essentially, Cherry’s evidence given in her witness statement, and emphasized in her oral evidence, was that there was a fool-proof system and practice in the Finance Department regarding payments to the plaintiffs’ creditors and internally.  In gist, each sum would be ascertained and then matched with the bills or invoices, and the payments required to be paid would often be summarized in a sheet and the bills and invoices would be attached thereto, which then would be verified by D and then passed onto PT for approval by appending her signature on the “documents”, and then the payments executed, afterwards the papers would be returned to another staff called Alan Chan for verification, thereafter the papers would be passed on to Cherry and she would enter the particulars into the Flex System to post the corresponding payment vouchers.  Cherry then said that for payments requested internally by other departments of the plaintiffs, essentially the same procedures were followed except that there would be a payment requisition form to be filled out and again with the supporting documents attached, and the remaining procedures were the same as payments to creditors.

83.  Cherry emphasized that all payments made must have been already approved by PT and there must have been documents showing PT’s approval.  Later on in oral evidence, she insisted that she acted as “the final check”, despite by the time the papers reached her the payments would have already been made, to make sure that everything was in order beforeshe would enter and post the payment voucher.

84.  It is however and importantly her evidence given in her witness statement that “I was not in much contact with Ms Taylor … With respect to the accounting department, the person responsible for liaising with Ms Taylor was through the Defendant.”[33] (my emphasis).  In cross-examination, she confirmed that arrangement, and further gave evidence that if she found that something was not in order, or if there was doubt as to whether the payment was approved, she would seek and receive clarification from D, and rarely if ever directly from PT.  It is also PT’s evidence that in these matters she worked with D only and not the other staff.

85.  It is also Cherry’s own evidence that she did not know how and by whom the payments were actually made or executed.

86.  In cross-examination, she was shown Voucher PVB3020108 regarding Transaction 1 and asked why it was recorded in that voucher that the sum of HK$57,250 was paid to CENVET (it is not disputed that CENVET was an Australian supplier of the plaintiffs) for “DRUGS COST-201304” when the sum was paid into D’s bank account and the payee recorded in the bank’s auto payment report was “Well Time”, Cherry looked surprised and also answered that she was surprised. She could not give any explanation why that was so.  She was further asked if she knew that the money under the 13 Transactions was paid into D’s bank accounts.  She answered she did not know.

87.  Quite clearly, had her testimony about the system and practice were true and consistently followed as said, such should and could not have happened.

88.  Cherry was further shown the General Ledger regarding the 20 odd instances of payments made to CENVET from 30 April 2013 to 30 November 2013[34]. It can be seen there that invariably the currency exchange rate was recorded and the payment sum was in an odd and not a round figure.  For example, in the entry dated 31 May 2013 under voucher PUB3020011 for HK$18,919.20, the particulars recorded were “CENVET – DRUGS COST 201305 AUD2584.89@7.3193” (my emphasis).  In all the other entries regarding payment to CENVET except Transaction 1, the sums were invariably not a round figure and the exchange rate so recorded.  I find therefore that it should have been very clear to Cherry that Transaction 1 was evidently out of ordinary, that she ought to have noticed it at the time.  It also seems highly probable that Cherry at the time did not have the invoice before her when she posted Voucher PVB3020108 as the invoice would in all likelihood invoiced a sum in Australian dollars and whatever the payment document was should show the currency exchange rate.  Yet, when these were shown to Cherry, she could not at all give any answer or explanation as to why she posted Voucher PVB3020108 containing such particulars that were so out of ordinary.  Cherry simply said she had no recollection of the transaction or why that was so.

89.  Similarly, the particulars recorded in Voucher PVB3020109 regarding Transaction 2 were “IDEXX – MONTHLY PAY 201302-05” for the payment of HK$76,000.  Again, the General Ledger[35] shows that of the 20 odd instances in the same period where payments were made to IDEXX, the particulars recorded in all the vouchers, except Transaction 2, were something like “IDEXX – LAB TEST COST 201304 USD530.62@7.9100” (my emphasis) and the sums were in odd and not round figures.  Again, Transaction 2 was clearly an odd one out when compared to other payments to IDEXX which oddity, I also find, Cherry ought to have noticed at the time.  Again, when asked, she could not give any answer.  Likewise, I find it highly probable that she was not shown or had not seen the invoice for Transaction 2 before she posted Voucher PVB3020109.

90.  She was further asked by the court whether she was shown the 9 Vouchers and the other documents specific to the 13 Transactions during the preparation and prior to the signing of her witness statement.  She answered in the negative.  That was most surprising and extraordinary, and immediately invoked the query as to why Cherry, the maker of these highly relevant vouchers, was not shown them by D who called her as a witness.

91.  On the matter of the system and practice, I also have regard to the evidence of Richman concerning the results of his review of the accounting and financial matters of the plaintiffs in late January 2014.  He found many irregularities, among others and relevant to this issue, that accounting postings and processes were unorthodox, including (a) proper account payable and receivable process or systems were not used, (b) inaccurate debtor and creditor positions, and (c) account payable invoices posted after they were settled, lack of controls on authorization, invoice number check.  The picture thus presented by Rickman was far from that presented by Cherry.

92.  I am favourably impressed by Richman as a witness when he gave evidence via video link.  He was direct, straightforward and articulated when answering question.  He directly said so without hesitation when he could not remember or was not sure.  He was not shaken at all in cross-examination.  I find him an honest, reliable and fair witness.  I accept his evidence in full, and prefer his evidence over Cherry’s concerning the so-called system and practice.

93.  Considering all of the above, I find the evidence given by Cherry concerning the so-called system and practice, particularly that she would check to ensure everything was in order before she entered and posted a voucher, is a make-believe and I reject her such evidence.

94.  Having make the finding above and my findings that D had had possession of the primary security tokens and the passwords to use them, and also taking into account the lack of credibility and reliability of D as a witness, which I will allude to, I also reject D’s long and elaborate evidence[36] regarding the same so-called system and practice and also reject her contention that “in view of the accounting system intact in the Plaintiffs, it would be virtually impossible for anyone in the Plaintiffs to make any transfer of funds without the knowledge of all accounting staff and especially without the knowledge of Ms Taylor”.  Likewise, I find D’s such contention a make-believe, and moreover, a crafty excuse.

95.  In all, I do not find Cherry a reliable witness generally.  I however do specifically accept Cherry’s evidence, given in her witness statement as well as repeated in oral evidence, and I find, that (a) she rarely had contact with PT in her work, and (b) if there was anything unsure, out of order, or need clarification regarding payments, she sought and received clarification and instruction from D and not from PT.  Therefore, I also find that if Cherry were given the understanding that the 13 Transactions were authorized by PT, she was given such understanding by D and not PT.

Reliability and credibility of PT and D as witnesses

96.  It is convenient here before I deal specifically with the 13 Transactions to give my view on the credibility and reliability of PT and D as witnesses.

97.  PT was straightforward, direct, attentive, measured and careful in giving evidence and answering questions.  When she was unsure or could not remember over matters which might help the plaintiffs’ case, she nevertheless said so directly without hesitation.  Many of the important aspects of her evidence were well supported by documents, which she has explained in detail in her witness statement.  She was not shaken in her cross-examination, nor was D able to find anything inconsistent or contradictory in her evidence.  I am favourably impressed by her as a witness.  I believe she was trying to tell the truth the best she could.  I find her an honest and reliable witness and accept her evidence in full.

98.  I cannot nearly say so regarding D.  I find her a calculated and thoughtful witness, but a very evasive and untruthful one.  I think in many instances she was lying and making things up along the way.  Some of those instances I have referred to above.  When pressed on material matters, she often hesitated and did not answer the question directly, but would refer to other matters or circle back to certain vague themes (not facts) favourable to her case (like the plaintiffs’ accounts were messy), or divert to other matters. In diverting to these other matters, she often mixed up the time, place, people or events, unless one clarified with her or pinned her down.  I formed the distinct impression that in some of the instances she purposefully did so to confuse.  Often times, a simple question had to be asked and pressed upon her multiple times before she would give a straight answer.  She was often argumentative.  In all, I am most unfavourably impressed by her as a witness.  I find her a dishonest and utterly unreliable witness.  I will without hesitation prefer the evidence of PT over D’s whenever they conflict.  I will be very cautious regarding her evidence, to the point that, unless her evidence on a specific matter is supported or corroborated by documentary, undisputed or indisputable evidence, I would tend not to accept it.

TRANSACTIONS 1, 2, 5, 6, 7, 11, 12 AND 13 – WERE THEY REPAYMENTS OF THE 2 LOANS ALLEGEDLY MADE BY D TO P1 THROUGH PT?

Overview

99.  It is D’s pleaded case that Transactions 1 and 2 were repayment by instalments to her of a loan of RMB 105,000 she made to P1 through PT (“the RMB Loan”); and Transactions 5, 6, 7, 11, 12 and 13 were repayment by instalments of another loan of Euro 60,000 she made to P1 through PT (“the Euro Loan”). As it is D’s case that both loans were made on the same occasion.  I will deal with them together.

100.  In the below table I recap Transactions 1, 2, 5, 6, 7, 11, 12 and 13, but this time in chronological order:-

Transaction No.	Date	Amount in HK$	Payee’s name / description as recorded in ledger / voucher of P1	Payee’s name as recorded in the bank’s auto payment report	Bank account transferred from	Bank account no of recipient as recorded in the bank’s Auto Payment Report
1	20 May 2013	$57,250	Cenvet Australia PTY LTD	Well Time	P1-HS Account	D-BOC Account
2	31 May 2013	$76,000	IDEXX Distribution Inc.	Well Time	P1-HS Account	D-BOC Account
11	19 June 2013	$200,000.00	C/A with PCGC	BOC Credit Card	P2-HSBC Account	D-BOC Account
12	19 June 2013	$100,000.00	C/A with PCGC	C Vetapet	P2-HSBC Account	D-HS337 Account
13	30 Sept 2013	$295,641.00	HSBC4001-5784-8828-0001 C/A	PCGC Visa	P2-HSBC Account	D-BOC Account
5	8 Nov 2013	$13,429.00	Accrued expenses – Salaries	Tong Kai Man Philip	P1-HS Account	D-HS701 Account
6	8 Nov 2013	$14,575.00	Accrued expenses – Salaries	Choi Hiu Ying	P1-HS Account	D-HS701 Account
7	8 Nov 2013	$13,200.00	Accrued expenses - Salaries	Siu Mei Ki	P1-HS Account	D-HS701 Account

D’s case and evidence

101.  D’s case and evidence in gist is as follows.

102.  In early 2013, an ex-colleague of hers repaid her in cash RMB105,000 (“the RMB”) that D had lent him earlier to purchase his apartment.  Around the same time, D’s sister in Germany also repaid to D about Euro 60,000 in cash (“the Euro”) which D lent her in earlier years to assist her to run her restaurant business in Germany.  She kept both sums in cash at home.  In oral evidence, D said that both the RMB and the Euro were carried in cash from PRC and from Germany respectively into Hong Kong and handed to her (which would explain why there was no bank records of payments in and out of these sums).

103.  In a conversation with PT in about April 2013 in the Office, D told PT about the said 2 repayments and that D kept those currencies at home.  On another occasion when she was travelling with PT in the latter’s car to the Mongkok clinic, PT suddenly became sentimental and told D that she was under great pressure as P1’s cash flow was tight and a lot of suppliers were chasing for payment.  PT then asked D directly if she would lend the RMB and the Euro to P1.  D decided to “assist the 1^st Plaintiff”[37] and lend them to P1, but only on a short term basis.

104.  Later in a day in April 2013 (the date was not specified by D in her witness statement), D brought the RMB and the Euro in cash to the Office and handed them to PT.  PT then signed on D’s diary (“the Diary”) for confirmation as receiving the sums on behalf of P1.  PT also took a photocopy of the page in the Diary for her record and told D that she would show the record to the board of directors.  After a while, PT came to D’s Room and proposed an exchange rate of 1:1.269, which D accepted and “we both put on record” the converted amount of HK$133,250 (RMB105,000 x 1.269).  For the Euros, PT told D the exchange rate would be 1:10.5, which D agreed and the converted amount of HK$630,000 was also put down in the Diary as a record.

105.  D kept on reminding PT in the next few weeks that the RMB Loan was only a short term loan.  PT returned the RMB Loan to D by 2 lots, namely by Transaction 1 and Transaction 2 on 20 May 2013 and 31 May 2013 whereby HK$57,250 and HK$76,000 were respectively paid into D-BOC Account, which was the bank account D used at the time to receive her salary.

106.  D did not know who made Transaction 1 and Transaction 2 and when, and why the payee shown in the bank’s auto payment report was “Well Time”.

107.  As the Euro Loan was not yet repaid, D had a discussion with PT in the Office in early June 2013 concerning its return and that D would demand interest.  PT came to D’s Room later and proposed an interest rate of 3.6% per annum which D agreed and immediately marked it down in the Diary.

108.  On about 19 June 2013, D noted that there were 2 outgoing sums from P2 in the amounts of HK$100,000 and HK$200,000 (which were Transactions 11 and 12), which she later discovered were deposited into D-BOC Account and D-HS337 Account respectively.  D subsequently asked PT why these 2 transfers were made from P2 and not P1 and was told by PT that P2 owed P1 money and PT would report this inter-company transfer to the board of directors of P2 later.

109.  Pausing here, I note that D did not say why even though Transactions 11 and 12 were made at the same day from P2-HSBC Account, they were however transferred into 2 different bank accounts belonging to D, and in respect of Transaction 12, how PT would know about the D-HS337 Account and how PT would have the account number.

110.  D continued to chase after the repayment of the remainder of the Euro Loan in July and August 2013.  D also chased after PT on 3 September 2013 when they attended the directors’ meeting of P1.

111.  On 30 September 2013, D was told by her account clerk that there was an outward transfer by P2 of HK$295,641 (Transaction 13) which D later discovered had been deposited into D-BOC Account.  D immediately checked with PT and when later that day they met in the Office, PT confirmed that the sum was for partial repayment of the Euro Loan.  They both then marked down in the Diary that P1 had returned altogether HK$595,641 (HK$100,000 + HK$200,000 + HK$295,641) to D.  D told PT that there was still some principal outstanding and interest as well.

112.  Later in November 2013, PT requested D to prepare “a list of interest” for the Euro Loan for her review.  D then prepared the interest calculation sheet which D said was this, and I reproduce the table at paragraph 38 of her witness statement[38] :-

Principal	Remarks
Euro 60,000 x 10.5 (exchange rate) = HK$630,000	Item (5) 13,429 + item (6) 14,575 + item (7) 13,200 + item (11) 200,000 + item (12) 100,000 + item (13) 295,641 = HK$636,845
	Principal of HK$200,000 x 51 days interest at 3.6% per annum = HK$1,020
	Principal of HK$100,000 x 51 days interest at 3.6% per annum = HK$510
	Principal of HK$295,641 x 153 days interest at 3.6% per annum = HK$4,523.31
	Principal of HK(13,429 + 14,575 + 13,200) x 192 days interest at 3.6% per annum = HK$791.12
	Total interests on the principals = HK$ (1,020 + 510 + 4,523.31 + 791.12) = HK$6,845

113.  Then on 7 November 2013, PT called D and told D that she had made the outstanding repayments (remaining principal and interest) to D.  D checked and found that 3 deposits of HK$13,429, HK$14,575 and HK$13,200 were transferred online to D by P1 (Transactions 5, 6 and 7).  After PT came to the Office confirming further that the 3 said sums had been deposited to D, they signed in the Diary confirming the complete repayment.

114.  I particularly note that D said nothing about the corresponding vouchers regarding all these alleged repayment instalments, and about whether she knew that these repayments had been posted into the Flex System as being paid to other payees and for purposes other than repayment of loans of P1.

115.  According to D, she could not proffer the Diary as documentary proof of the RMB Loan and the Euro Loan because she could not retrieve it.  In this regard, D’s evidence given in her witness statement was thus :-

“25. At this juncture, I regret pointing out that the diary which I kept all the records concerning the loans lent to the 1^st Plaintiff had been left in the Kwun Tong office of the 1^st Plaintiff and I had been unable to retrieve it until now. The reason is that when I tendered my resignation on 15 January 2014, although I had given sufficient time upon my notice of termination, Ms. Taylor did not allow me to go back to the office from around 24 January 2014 and I did not have time to organize my materials. I will explain more details with regards to this incident below.”[39] (my emphasis)

“50. Indeed, I had only removed my personal belongings from the Plaintiffs as mentioned above, since I was deterred from going back to the 1^st Plaintiff’s office after I tendered my resignation, I did not even have chance to clear out some personal belongings in the office including my diary which kept quite a lot of records for the 13 sums. Pausing here, the 1^st Plaintiff had been acting unfairly to me by not paying me salaries/consultancy fees for January 2014 …”[40] (my emphasis)

The plaintiffs’ case and evidence

116.  The plaintiffs’ response and evidence in a nutshell is that these allegations about the 2 loans were completely fabricated by D and were entirely untrue.

117.  PT said categorically that she had never asked D to lend money to herself, P1 or P2 and all D’s claims are false[41].

118.  Richman gave clear evidence in his witness statement that in late January 2014 when he and his team reviewed the plaintiffs’ financial matters, they worked in conjunction with the staff of the joint Finance Department of the plaintiffs to go through the available financial and accounting records. They found absolutely no record or evidence whatsoever (a) of such loans having been made to the plaintiffs, (b) of any repayments of such alleged loans, and (c) any traceable receipt of cash by the plaintiffs from D.

119.  Importantly, Richman in his oral evidence in chief was specifically asked and he was equally clear that he found no bank receipts, or unallocated cash, or any expenses or creditors of the plaintiffs being paid from financial resources outside of the plaintiffs around and after the time of the alleged 2 loans.  His such evidence was not challenged, and as alluded to later, in fact was expressly and clearly accepted by D.

120.  The following matters can be gleaned from the vouchers and bank’s auto payment reports corresponding to the 8 transactions in question:-

(a)   Transaction 1 (HK$57,250 transferred into D-BOC Account on 20 May 2013):

(i)  Voucher PVB3020108^[42] recorded the payee was “CENVET AUSTRALIA PTY LTD” and particulars were “CENVET – DRUGS COST – 201304”;

(ii)  The auto payment report[43] showed that the payee was “Well Time”, particulars were  “Service” and account number that of the D-BOC Account.  The transfer was executed among a batch of 3 payments.

(b)   Transaction 2 (HK76,000 transferred into D-BOC Account on 31 May 2013):

(i)  Voucher PVB3020109^[44] recorded the payee was “IDEXX DISTRIBUTION INC” and particulars were “IDEXX – MONTHLY PAY 201302-05”;

(ii)  The auto payment report[45] showed that the payee was “Well Time”, particulars were “Service” and account number that of the D-BOC Account.  The transfer was executed among a batch of 27 payments.

(c)   Transaction 11 and Transaction 12 (HK$100,000 and HK$200,000 transferred on the same day, ie. 19 June 2013 to respectively D-BOC Account and D-HS337 Account):

(i)  Voucher JVB3030011[46] recorded that a sum of HK$300,000 was paid to the payee “C/A PCGC” and the particulars were recorded as “TRANSFER SK CA TO PCGC – 2011/12 share legal fee”.  It is not disputed that “PCGC” meant Pets Central Greater China (HK) Ltd.

(ii)  The auto payment report[47] showed that payee names were respectively “BOC Credit Card” and “V Vetapet”, particulars were respectively “BOC OVERSEAS” and “SK RETAIL 1303 4A”, and the account numbers were respectively that of the D-BOC Account and the D-HS337 Account”.  The 2 transfers were executed as a batch.

(d)   Transaction 13 (HK$295,641 transferred to D-BOC Account on 30 September 2013):

(i)  Voucher JVB3060010[48] recorded the payee was “HSBC4001-5784-8838-0001 C/A” and the particulars were “PCGC DRUGS COST AP-POB-201309”.

(ii)  In the bank’s auto payment report[49] , the payee was “PCGC VISA”, particulars were “OVERSEAS DRUGS” and the account number was that of D-BOC Account.

(e)   Transactions 5, 6 and 7 (the respective sums of HK$13,429, HK$14,575 and HK$13,200 all transferred to D-HS701 Account on the same day, ie 8 November 2013):

(i)  Voucher PVB3080141[50] recorded that a total sum of HK$369,477 was paid, the payee was “ACCURED (sic) EXPENSES SALARIES” and particulars were “ACCRUED EXPENSES SALARIES – 201310”.

(ii)  The auto payment report[51] showed that the payees for Transactions 5, 6 and 7 were respectively “TONG KAI MAN PHILIP”, “CHOI HIU YING” and “SIU MEI KI”, the particulars were respectively “PC560 MK PHILIP”, “PC567 MK” and “PC577 NP MAGGIE”. These 3 Transactions were executed on the same day among a batch of 22 transfers.  These 22 transfers totalled to HK$369,477.  All the payees in these 22 transfers were individuals.  These individuals apparently were persons entitled to salary because among them were Verkest and Coyle David John to whom salary payments were made as captured by the Screenshot.

121.  In PT’s witness statement, the following evidence was also given, which was unchallenged:-

(a)  Regarding Transaction 5, the person appeared as the payee in the bank’s auto payment report, namely Tong Kai Man Philip, left the employment of P1 on 3 November 2013.  A cash cheque dated 4 November 2013 number 684900 was issued to him for “Final Salary” in the sum of HK$13,429[52]. P1’s bank statement recorded that the cheque was cashed the same day[53]. Yet, the exact same sum was purportedly paid to him by online transfer 3 days later under Transaction 5.

(b)  Regarding Transaction 6, the person appeared as the payee in the auto payment report, namely Choi Hiu Ying, was and still is an employee of P1.  The salary payments to her have always been made to her own Hang Seng Bank account number 383-822XXX-XXX[54] which was not the D-HS701 Account.

(c)  Regarding Transaction 7, the person appeared as the payee in the auto payment report, namely Siu Mei Ki, was a part-time ex-employee of P1.  The salary payments to her have always been made to her own bank account number 014-701-10XXXXXX[55] which was not the D-HS701 Account.

(d)  Regarding Transaction 12, the name appeared as the payee in the auto payment report, namely V Vetapet, was one of the plaintiffs’ suppliers. The plaintiffs had contacted V Vetapet who confirmed that they have never received a payment equivalent to HK$100,000 on 19 June 2013 and that such a sum was not related to any transactions between the plaintiffs and V Vetapet.  The bank account number of V Vetapet was Shanghai Commercial Bank 025-33024XXX-XXX[56].

122.  Moreover and importantly, PT in oral evidence said to the effect, which I accept, that she would not know or remember the bank account numbers of the many suppliers, creditors and employees of the plaintiffs.  So, while executing the payments online, especially when executing them in a batch and in a hurry, she would just glance through the information uploaded and presumably verified by D, and when there was nothing unusual in the amounts or regarding the names of the payees, she would trust D and the staff and execute them.

Discussion

123.  D does not challenge that there was absolutely no record or evidence whatsoever in the plaintiffs about these 2 alleged loans or their repayments. I find that most extraordinary, bearing in mind particularly the amount of the 2 loans, totalled to HK$763,250, was not an insubstantial sum and there were, according to D, altogether 5 instances of repayment spanning from late May to early November 2013, and at a time when the plaintiffs were cash tight.

124.  The explanation given by D, vaguely and convolutedly without any specifics as to time and other details, was to the effect that she had been intending to make entries into the plaintiffs’ accounting system of those loans and repayments, but PT had told her more than once to put it on hold as it was not yet decided how to enter them, and that as the audit was not due and it was therefore not urgent, she let it slide up to the time she decided to resign.

125.  That said, before I discuss it further, it is necessary to refer to this, which in my view is a very material matter because it puts things in a very different light and context.  The matter is this.

126.  I have mentioned in paragraphs 118 and 119 above that it was Richman’s evidence in gist that there was no trace at all of money being received, in whatever form or means, by the plaintiffs around the time and after the alleged loans were made.  When pressed in cross-examination, D also categorically and clearly accepted that after the 2 loans were made, there was no cash in equivalent or substantially similar amount (HK$763,250) being deposited into the plaintiffs’ bank accounts or otherwise finding its way into the financial resources pool of the plaintiffs.  Based on such clear evidence of Richman, which I accept, and such acceptance by D, I so find.

127.  Given so, there would have to be the following significant implications.

128.  According to D’s version, PT was sentimental and gave the reason for asking for the loans being P1’s cash flow was tight and a number of creditors were chasing for payment, whereupon D agreed to “assist the 1^st Plaintiff”^[57] by providing the loans as short term loans to ease P1’s cash flow.  Therefore, the reason for asking given by PT for, and the reason for D agreeing to making, those 2 loans was entirely clear.  Yet, having given the RMB and Euros to PT by way of loans to P1, the RMB and Euros did not find its way into P1 (or P2)’s system to ease its cash flow or to pay the chasing creditors.  D as the Finance and Administration Manager had to know about it and had to be bearing the pressure of handling and paying the creditors as much as she said PT had.  D, by all inherent probabilities, should have been alarmed and surprised that PT did not channel the RMB or Euros into the plaintiffs’ pool of resources, as expected.

129.  Even more so, by the time of the total repayment of the RMB Loan by Transactions 1 and 2 by late May 2013, D, by all inherent probabilities, ought to realize that (a) not only was the cash flow position of P1 not eased by the 2 loans, but in fact the position had been made worse because PT not only had not channelled the RMB and Euros into the plaintiffs, but had indeed siphoned out the amount of the RMB Loan by using P1’s money to repay D, (b) what PT represented as the reason and purpose of the 2 loans were not true, and (c) PT might be misappropriating money from P1 by so doing.

130.  Now, the above must have been even more apparent and accentuated, and therefore more alarming, by the time of Transactions 11 and 12, when another substantial total sum of HK$300,000 was transferred to D on 19 June 2013.  The plaintiffs’ cash flow position thus had been made worse by then by HK$433,250 (HK$57,250 + HK$76,000 + HK$200,000 + HK$100,000).  By that time, it would have been very clear that PT was paying off the 2 loans from money belonging to the plaintiffs while she was keeping the RMB and Euros without channelling them into the plaintiffs.

131.  Therefore, by all accounts and inherent probabilities, if D’s version were true, after receiving the “repayments” from P2-HSBC Account of HK$300,000 on 19 June 2013, D

(a)  should have been very alerted and alarmed, if not upset;

(b)  ought to have asked, if not confronted, PT as to why the RMB and Euros were not paid into the plaintiffs but money from the plaintiffs was used to repay her, and that was effectively siphoning money off from the plaintiffs and was making the plaintiffs’ cash flow position worse; and

(c)  should have been alerted to making proper entries, records or documentation of the 2 loans as soon as possible, to protect herself if anything else, as she must be aware that the loans were made in cash and by then without any proper documentation and evidence, any person witnessing, and entries being made to the plaintiffs’ accounting system, while such substantial sums (totalling HK$433,250) by way of repayment had been paid from the plaintiffs’ bank accounts into hers (which would be evidenced by bank statements), and the arrangement might involve wrongful siphoning off of money from the plaintiffs to PT; and D herself might thereby became implicated in it.

132.  Yet and most surprisingly, whether in her witness statement or oral evidence, she mentioned nothing about these implications, or that she was in any way alarmed and surprised at the time, or she had asked PT why she did not put the RMB and Euros into the plaintiffs’ resource pool, or that the cash flow of the plaintiffs became yet tighter, or that she was suspicious of PT’s such conducts and so on; not one bit.

133.  Even more telling is that, as mentioned above, the plaintiffs made a report to the Police on 24 March 2014 of theft by D.  D in oral evidence said that she realized that the accusations made against her were very serious in nature; and D further confirmed that she has never made a report to the Police against PT since then until now.  Had D’s version been true, in the face of such serious accusations, one would expect D to tell the Police the full version and, in order to clear herself, report that it was in fact PT who siphoned money off from the plaintiffs by this scheme of obtaining the 2 loans from D, then keeping the RMB and Euros herself, and then used the plaintiffs’ money to repay D, and that she was just unfortunately implicated in the scheme because she trusted PT and so on.  This court finds it simply inconceivable and highly improbable that D has not done so.

134.  This court finds it even more inconceivable and highly improbable that if PT had siphoned the money off from the plaintiffs, had D’s version been true, that PT would have so quickly and readily hired Richman, a very competent and an independent accountant, to review the financial matters of the plaintiffs, reported to the Police on 21 and 22 January 2014 that D’s personnel file and the Missing Documents were missing, and then reported to the Police against D for theft on 24 March 2014.  By so quickly and readily did so, PT would have risked sure exposure of her own wrongful conducts, if D’s version were true.

135.  Moreover, viewed against the above matters as the full and proper context, I find it completely incredible, and reject, D’s explanation as to why she had not made the entries into the plaintiffs’ accounting system of the 2 loans and their repayments.

136.  I find it also incredible, had D’s version been true, that she would not have informed Verkest, another director and beneficial owner of the shares in P1, of the 2 loans and their part repayments with the plaintiffs’ money when Verkest met with D in the Office, by appointment to talk about the cash flow position of P1, several days after the directors’ meeting was held on 3 September 2013.

137.  D’s evidence that she had been intending to make entries into the plaintiffs’ accounting system of the 2 loans and their repayments but was stopped by PT is most hard to understand and believe for this other reason that in fact “the repayments” had already been entered and posted into the plaintiffs’ accounting system by the vouchers detailed about.  As mentioned, these repayments were not recorded as loan repayments, but as some other payments made to other payees for other purposes.  It is common ground, and D must know, that once these vouchers/ledgers were posted and stored in the Flex System, they could not be erased or changed, and to “correct” them, corresponding corrective entries, if that was at all possible, would have to be made to rectify them.  That would be complicated and difficult and later on might require explanations to be given to the satisfaction of the auditors.  In this regard, Transactions 5, 6 and 7 (the respective sums of HK$13,429, HK$14,575 and HK$13,200) would be more complicated to make any “correction” on as they were entered and posted in Voucher PVB3080141 as being subsumed under the total sum of HK$369,477.

138.  In my judgment, D must have known shortly after the posting of these vouchers that these “repayments” had already been entered into the plaintiffs’ accounting system per the corresponding vouchers because

(a)  she was the Finance Manager of the plaintiffs;

(b)  such a substantial total amount of withdrawals from the plaintiffs’ bank accounts (HK$433,250) had to be accounted for, particularly against the background that the plaintiffs were cash tight, suppliers were chasing for payment and the directors were anxious about the cash flow position;

(c)  Cherry was the staff entering and posting the corresponding vouchers and it is her evidence, which I have found for, that whenever there were queries, or anything unsure or anything not in order, Cherry would seek clarification and instructions from D;

(d)  the manner of repayment by such instalments – an odd amount of HK$57,250 (Transaction 1); 3 very particular amounts but in the same day of HK$13,429, HK$14,575 and HK$13,200 (Transactions 5, 6 and 7), and an odd amount of HK$295,641 (Transaction 13) – must have alerted D and raised her interest as to why they were so and how they were accounted for in the plaintiffs’ accounts, even though, according to D, she was told by PT that they were repayments of the 2 loans; and

(e)  in the 2^nd half of 2013, particularly from October on, D had been chased after by the board of directors of P1 for the management accounts and cash flow position of P1 and P2.

139.  Thus, having known that the repayments had been posted and entered into the plaintiffs’ accounts as something else altogether, it is not at all clear, and she did not explain, what D meant when she gave evidence that she had been intending to make entries into the plaintiffs’ accounts the 2 loans and their repayments.

140.  In the premises, I do not accept D’s evidence that she had been intending to make entries of the 2 loans and their repayments into the plaintiffs’ accounting system.

141.  Moreover, I also find incredible D’s version of events as to how the interest was calculated in respect of the Euro Loan and therefore how the total sum of HK$636,845 was repaid (by Transactions 11, 12, 13, 5, 6 and 7) as being the principal plus interest.  It will be recalled that D’s evidence, as summarized above, was that D told PT on 30 September 2013 (after the sum of HK$295,641 was repaid that day) that there was some principal still outstanding on the Euro Loan and interest as well.  D’s evidence then was that in November 2013 (without giving the date), PT asked D to prepare a “list of interest” which D did per the table reproduced in paragraph 112 above.  D’s evidence then was that on 7 November 2013, PT transferred the 3 sums of HK$13,429, HK$14,575 and HK$13,200 (under Transactions 5, 6 and 7); D then concurred that the remaining principal and interest were repaid and D and PT then signed on the Diary to confirm.

142.  Quite clearly, according to D’s version, at the time when PT asked D to prepare “a list of interest”, PT did not say, and D would not know, that PT would repay the balance of principal and interest on 7 November 2013.  Moreover, PT did not say, and D would not know that the remaining balance plus interest would be repaid by 3 separate transfers of respectively HK$13,429, HK$14,575 and HK$13,200.  Therefore, when calculating interest per the said table, D would not have known that the interest on the said 3 sums would be calculated for precisely 192 days as recorded in the table and the repayment would not be made by 3 separate transfers of those precise sums.

143.  Equally, according to D’s evidence in paragraph 24 of her witness statement, it was “Later in a day in the month, ie April 2013” that she brought the RMB and Euros to the Office to give to PT.  No specific date was mentioned.  In fact, throughout D’s witness statement, there was no mention that she remembered the date she handed PT the RMB and Euros or what that date was.  Given that there was no exact date of the making of the Euro Loan, D should not have been able to give evidence on “a list of interest” in which “51 days”, “153 days” and “192 days” were the precise periods for the calculation of interest for those sums, as she stated in the said table.

144.  In the premises, I do not accept D’s evidence that the interest was agreed to and calculated under such circumstances as she alleged.  In fact, in my view, the story about the interest payment, PT asking for “a list of interest” and the so called “a list of interest” thus prepared were all stories made up and figures put together afterwards by D such that the figures would match the sum of HK$636,845 (sum total of payments under Transactions 11, 12, 13, 5, 6, and 7) so as to explain why the total was an odd figure and how the last instalment (allegedly consisting of part principal and part interest) could be and were paid in one go.

145.  I also find D’s whole story that PT and D only made written record of the 2 loans in the Diary highly improbable and most incredible.  According to D, the RMB and Euros were handed over in the Office.  There is no reason why a more formal record in the form of a short written note or an IOU was not typed out there and then and signed.  I find that D as an accountant, and as the lender, must have appreciated the importance of record and proof.  Similarly, I find that PT was an experienced business operator who would also have appreciated the importance of keeping written record over such substantial loans made by cash.  However and according to D, when PT repaid the entire RMB Loan by late May 2013 and repaid the entire Euro Loan (plus interest) in early November 2013, PT did not ask for any written acknowledgment from D that PT had so repaid and was contend that only D kept a record in the Diary.  I have also mentioned above that in May and then mid-June 2013, D should have been very alert to keep full and proper documentation and to make entries into the plaintiffs’ accounts to protect herself, which D had not done.  Considering all these, I simply find D’s whole story about documenting the 2 loans only in the Diary defies belief, and I reject it.

146.  I also reject D’s allegation that she could not retrieve the Diary.  As we have seen, in her witness statement, all D said was that she was “deterred” from going back to the Office after she had tendered the resignation letter. However, it is common ground, and not disputed by D, that she was in the Office on 20 January 2014 when Richman and PT talked with D.  D was also in the Office on 21 January 2014 and it will be recalled that on that day she instructed 2 staff to dispose of certain documents.  When D cross-examined PT, there was no specific allegation put by D to PT as to how PT did not allow D to return to the Office.  PT denied that she had done so.  There is no evidence from D that she has requested to go back to the Office to retrieve the Diary (which she claimed was so important, not just because it contained the record of the 2 loans but for other reasons as well).  I find the allegation that there was such a diary doubtful, but in any case I find that PT had not disallowed D to return to the Office as D alleged, and I reject D’s evidence that she did not proffer the Diary as evidence because she could not retrieve it.

147.  D said she did not know how Transactions 1, 2, 11, 12, 13, 5, 6, and 7 were made, or why the repayments were made in the manner of these 8 transactions, but her evidence is that everything was done by PT and then informed to her by PT that they were repayments.  I find such a scenario most highly improbable, for these reasons:-

(a)  There were a number of details to be filled out and uploaded to the online banking system before the transfers were executed in a batch.  For instance, “the particulars” uploaded for Transactions 5, 6 and 7 were respectively “PC560 MK PHILIP”, “PC567 MK” and “PC577 NP MAGGIE” and for Transaction 11 and 12 were “BOC OVERSEAS” and “SK RETAIL 1303 4A” respectively.  I do not find PT as particularly familiar with these abbreviations and codes in the plaintiffs’ accounting system.  I tend to believe that these details were uploaded by one who was conversant with them. There is no evidence, or even suggestion, that PT had worked with Cherry or other accounting staff to upload those.  As said, I find that PT only worked with D in the Office.

(b)  The other important detail uploaded was the account number.  PT gave evidence that the D-BOC Account was the account by which D received her salary after the introduction of Well Time in 2013; and that previously the account D used to receive salary was the D-HS701 Account, which PT therefore might know. However, PT’s evidence was that the plaintiffs knew that D-HS337 Account belonged to D only afterwards.  D did not dispute that, nor proffer any evidence regarding how PT knew the number of the D-HS337 Account.

(c)  I therefore find, on balance of probabilities, that the data uploaded to the banking system regarding the said 8 transactions were not uploaded by PT. I find that they would have been uploaded by any of the staff in the Office who had a secondary level token or by D when she was in possession of the 2 primary security tokens, which also enabled the holder to upload or change the information previously uploaded.

(d)  I completely discard the possibility that PT personally entered and posted the 9 Vouchers.  Clearly, the particulars of the corresponding vouchers contained a lot of abbreviations and account codes which I find PT was not familiar with.  There is no evidence that PT knew Cherry’s log-in password such as to post the 8 of the 9 Voucher by using Cherry’s log-in.  There is also no evidence from Cherry that PT had asked Cherry to enter and post the 9 Vouchers.  While Cherry generally did not remember anything specific about the 9 Vouchers, however, if it were PT who asked her to enter and post all or any of them, in my view, Cherry would have remembered it as something quite unusual, as according to her, PT and her rarely had contact.

(e)  I therefore find that PT did not enter and post or caused to be entered and posted the 9 Vouchers or any of them.

(f)  This scenario alleged by D that “PT did everything” in fact, if true, meant that PT was the master mind and fraudster behind it all.  However, firstly, it is not disputed that under the 13 Transactions all the money actually went into D’s accounts.  Secondly, as I have found, the 9 Vouchers (as an integral part of the scheme) were not posted or caused to be posted by PT. Thirdly and as said, it was extraordinary that D did not report to the Police against PT.  Fourthly and conversely and as said, PT would have surely exposed her own wrongful conduct by so quickly and readily hired Richman to review the plaintiffs’ financial matters.  Fifthly, it seems to me quite clear from hearing Verkest, that PT was trusted by all the directors and shareholders of the plaintiffs.  Lastly, PT all along had the primary security tokens which enabled her to take (or even misappropriate) the funds from the plaintiffs’ bank accounts without involving D in such a protracted scheme.

148.  I therefore find D’s version that PT had been making the repayments in the manner of the 8 transactions, with the corresponding vouchers as the cover of these repayments most highly improbable, and I reject it.

149.  Yet further, if D’s allegations were true, there is no reason why she would wrongfully remove, kept and withheld the discovery of the Missing in this action.  On the contrary, she would have every reason to discover them to prove her case and to clear herself from the Police investigation.

150.  In this connection, Mr Lun effectively submitted that I need to resolve first what D’s role in these transactions was, ie. precisely what D had done regarding these transactions.  With respect, I do not think I need to resolve that before I can decide whether these payments to D were authorized or not. In any case, having heard all the evidence and considered the matters in the round, it seems to me that these 8 transactions (in fact, all 13 Transactions) were executed under one of the 3 scenarios:-

(a)  By D using the primary security tokens and the passwords, which she possessed, to execute them without obtaining PT’s authorization orally or by other form of communication, like email, either before or after the execution.

(b)  By D using the primary security tokens and the passwords, which she possessed, to execute them, but with PT’s approval/authorization obtained orally or by other form of communication either before or shortly after, but the details given in the communication were per those set out in the bank’s auto payment reports, which prima facie looked legitimate, while the actual destination bank account number was that of one of D’s bank accounts.

(c)  By PT using the primary security tokens on occasions when she still had possession of them, but because the name(s) of the payee(s) in the data uploaded to the online banking system and the amount(s) seemed legitimate (though the destination bank account number was that of one of D’s bank accounts); and PT being not aware of it, executed the transaction(s) as one (or several) in a larger batch.

151.  By my above analyses, which lead me to reject various material aspects of D’s version, and also considering that D has lied over some central issues as above mentioned and also my very unfavourable view towards her credibility and reliability generally, I have no hesitation in rejecting D’s version and find against her case that she had made the RMB Loan and Euro Loan.

152.  Having so concluded, I find it not necessary to further consider the forensic attacks levied by Mr Singh against D’s case, and I do so without disrespect to Mr Singh.  For completeness, I would indicate that there is a degree of validity in Mr Singh’s criticism that D failed without explanation to call witnesses who would be in a position to give very pertinent evidence, namely, D’s ex-colleague (who was not even named) and her sister, both of whom, according to D (in oral evidence) carried from PRC the RMB in cash and from Germany the Euros 60,000 in cash into Hong Kong and then repaid D the same.  I agree that I should draw an adverse inference over such part of D’s evidence that these 2 persons, if called as witnesses, could have given direct evidence on.

153.  In all, having rejected the 2 loans, which are the only basis put forth by D for contending that Transactions 1, 2, 5, 6, 7, 11, 12 and 13 were authorized, I hold that the said 8 transactions were unauthorized and D had no lawful basis to receive or keep the money transferred into her bank accounts under the said 8 transactions.  She must return the same with interest.

TRANSACTIONS 3 AND 8 – WERE THEY PARTLY PAYMENTS OF BONUSES TO D AS AGREED AND PARTLY PAYMENTS OF BALANCE OF UNPAID SALARY AND OF BACK PAY?

The parties’ case

154.  In Transaction 3, HK$217,000 was transferred to the D-BOC Account on 31 July 2013.

155.  The auto payment report[58] recorded the particulars as “CONSULT”, the payee’s name as “WELL TIME” and the destination account number that of the D-BOC Account.  It was executed as one single transaction and not among others in a batch.

156.  id="_Hlk78799115">156.     The corresponding voucher, Voucher PVB 3040091[59], recorded the payee as “Consultancy and service fee” and particulars as “CONSULTANCY AND SERVICE FEE 201304-07”.

157.  D’s pleaded case was that of the sum of HK$217,000

(a)  HK$12,000 was payment of the difference in salary for the months of January, February and March of 2013 at HK$4,000 a month (HK$40,000 – HK$36,000);

(b)  HK$165,000 was for the payment of salary for the months of April, May, June and July of 2013 at HK$41,250 a month; and

(c)  HK$40,000 was bonus payment for the year 2012.

158.  D explained in her witness statement[60] that when Well Time was interposed in April 2013, the agreement was that her salary would be increased from HK$36,000 to HK$40,000.  But as MPF would not be paid to Well Time, the amount of salary/fee was increased to HK41,250 a month to include HK$1,250 as representing the MPF she would have been entitled to.  D said that around April 2013, PT, Peter de Krassel and her agreed that she would be paid a month’s salary as bonus for 2012 and D would be paid back the difference of HK$4,000 a month (being difference between the new salary of HK$40,000 and the old salary of HK$36,000) for the months of January to March 2013.

159.  In Transaction 8, HK$52,000 was transferred on 19 December 2013 to the D-HS Joint Account.

160.  The auto payment report[61] recorded the particulars as “MEDICAL”, the payee’s name as “UNITED ITALIAN CORP” and the destination account number that of the D-HS Joint Account.

161.  The corresponding voucher, Voucher PVB 3090121[62], recorded the payee as “Current Account – PC media” and particulars as “COMMUNICATION-PCM-POB”.

162.  D evidence in her witness statement regarding Transaction 8[63] essentially was that in November 2013, it was decided by PT that D’s bonus would be 1.3 months’ salary which D accepted (HK$40,000 x 1.3 = HK$52,000).  The reason why it was paid into the D-HS Joint Account was because on 19 December 2013 D was already considering resigning from P1 in early January 2014 and she was thinking of taking a trip to visit her sister and her husband TFS in Germany together with her mother.  The sum was therefore deposited into the D-HS Joint Account (in D’s and TFS’s names) to offset the equivalent of Euro she could receive from her sister and TFS during the visit.

163.  I note that D did not even attempt to offer any explanation, if the sum were agreed as bonus, why the payment was so wrongly entered and posted in Voucher PVB 3090121 as aforesaid and why the auto payment report would record that sum as apparently paid to “UNITED ITALIAN CORP”; rather than having been properly and correctly recorded.  According to her case, those sums were rightfully hers, and being the Finance Manager and the person to whom Cherry answered to, there simply was no reason why they could be so wrongly recorded.

164.  The plaintiffs’ evidence was:-

(a)   PT and Peter de Krassel had never agreed with D, whether in April 2013 or November 2013, about giving her any bonus.

(b)   PT and Peter de Krassel had never agreed with D the difference in salary for the months of January, February and March of 2013 at HK$4,000 a month.

(c)   The plaintiffs referred to and relied on a letter from Pets-Central to D dated 13 December 2013[64] in which the plaintiffs confirmed a discussion with D about D’s bonus but did not mention that any bonus was agreed to be paid.  The letter further mentioned that “When evaluating your performance and determining your bonus, we shall take into account the fact that you are not a participant in the Company MPF scheme and reward you accordingly.”  In oral evidence, PT said that there was a discussion, but nothing was agreed.

(d)   Richman gave evidence there was no record of any approval for such bonuses to D, or any receipt by D acknowledging receipt of the alleged bonuses; while there were letters acknowledging payments of monthly service fees to Well Time in the sum of HK41,250 a month.

(e)   Richman also gave evidence that there was no record of approval of such alleged back pay of the difference in salaries for the months of January to March 2013, or record acknowledging the receipt of the same.

(f)   From the banking records, the following payments were made from P1-HS Account to D and Well Time from January 2013 to January 2014 were seen[65]:

Item	Date	Payee name	Bank account no.	Amount in HK$
1	31 Jan 2013	Chan Wai Ching	D-HS701 Account	$34,750
2	28 Feb 2013	Chan Wai Ching	ditto	$34,750
3	27 Mar 2013	Chan Wai Ching	ditto	$34,750
4	30 Sep 2013	Chan Wai Ching	ditto	$8,130.10
5	18 May 2013	Well Time	D-BOC Account	$57,250
6	31 May 2013	Well Time	D-BOC Account	$76,000
7	15 Jul 2013	Well Time	D-BOC Account	$41,250
8	31 Jul 2013	Well Time	D-BOC Account	$217,000
9	30 Aug 2013	Well Time	D-BOC Account	$41,250
10	2 Oct 2013	Well Time	D-BOC Account	$41,250
11	30 Oct 2013	Well Time	D-BOC Account	$82,500
12	2 Dec 2013	Well Time	D-BOC Account	$41,250
13	31 Dec 2013	Well Time	D-HS701 Account	$41,250

(g)   Items 4, 5 and 6 above are subject matters of Transactions  4, 1 and 2 respectively (they are deal with somewhere else in this judgment).

(h)   From April to December 2013, D was entitled to 9 months’ salary at HK$41,250 each month totalling to HK$371,250.  Therefore, if the allegation of entitlement to back pay of HK$12,000 and the alleged bonuses were not established, D was overpaid by: HK$217,000 (Transaction 3) + HK$52,000 (Transaction 8)  + HK$41,250 x 5 + HK$82,500 - HK$371,250 = HK$186,500.

Discussion

165.  I find against D’s allegation that P1 has agreed to pay D (a) back pay in the total sum of HK$12,000, (b) bonus for 2012 in the sum of HK$40,000 and (c) bonus for 2013 equivalent to 1.3 months’ salary in the sum of HK$52,000, for the following reasons:-

(a)   D’s case on there being the alleged agreements between P1 and her regarding the back pay and bonuses was not evidenced by any documents or records at all, which was most unusual as evidently these payments and their receipts by D/Well Time were expected to be documented for proper accounting and tax purposes.  D has not been able to explain why there was such an unusual lack of documents.

(b)   There is no reason why regarding Transaction 8, which D said was for bonus for 2013 which was agreed, Voucher PVB 3090121 has not properly and correctly recorded the payment as such.  As said, D did not even try to offer an explanation.

(c)   In the middle of trial, D alleged for the first time that the payment made on 30 October 2013 in the sum of HK$82,500 (item 11 above) in fact consisted of another bonus agreed to be paid to her in the sum of HK$41,250. This was never ever mentioned anywhere before.  I find it totally incredible that only now, 4 years into this action, that D remembered that in fact there was another sum of bonus paid to her.  I reject her such evidence.

(d)   For various reasons already expressed, I find D a completely unreliable and untruthful witness and I prefer the evidence of PT over hers and reject D’s evidence regarding these alleged agreements to pay her back pay and bonuses.

166.  In the result I accept the plaintiffs’ calculation above that regarding Transactions 3 and 8, D was overpaid by HK$186,500, which sum D was therefore not authorized to receive and keep.  D must return the same with interest. Insofar as may be necessary, I also find in relation to Transaction 8 that D is unjustly enriched and/or is liable for conversion, and must pay damages equivalent to the amount transferred thereunder, with interest.

TRANSACTIONS 4, 9 AND 10

167.  These 3 transactions were in the respective sums of HK$8,130.10, HK$8,948 and HK$8,067, paid into D-HS701 Account for the first 2 sums and into D-HS Joint Account for the third sum. Transaction 4 was made on 30 September 2013 while Transactions 9 and 10 were made on 15 January 2014.

168.  D’s case is that (a) Transaction 4 was reimbursement of expenses she paid for meals and miscellaneous expenses on P1’s behalf for the period between May to August 2013, (b) Transactions 9 and 10 were payments to compensate D’s overtime work at HK$100 an hour for about 170 hours as agreed to by PT (the sum total of Transactions 9 and 10 is HK$17,015).

169.  I accept Richman’s evidence that there were no records whatsoever supporting the alleged reimbursement and overtime expenses.

170.  For reasons that I have given, I prefer the evidence of PT over that of D, which I do not accept.  PT’s evidence[66], which I accept, is that she recalled authorizing D to execute Transactions 9 and 10 on 15 January 2014 to pay the sums to Leung Wing Cheong and Yim Ho Ying respectively and lent D the primary security tokens to do so, which D later returned to her.  She so authorized at the time because she knew they both were employees that had left P1’s employment when she was in the United States, but she wasn’t aware (which she subsequently found out) that they had already been paid their respective termination payments by cheques and that the actual destination bank account numbers for Transactions 9 and 10 were respectively D-HS701 Account and D-HS Joint Account, which were in fact belonged to D and not the two said ex-employees.

171.  Moreover, there was no explanation from D whatsoever why Voucher STB3100001 recorded Transactions 9 and 10 as paid to “PCE-HSB 395-404833-883 C/A” and the particulars as “TRANSFER REFUND”, or why the auto payment report showed that the respective sums were paid to “Leung Wing Cheong” and “Yim Ho Ying” with the respective particulars of “PC 388 NP MAGGIE” and “PC587 MOB CHEONG”, while they were actually paid into her bank accounts.

172.  In the result I reject D’s case that Transactions 4, 9 and 10 were authorized and hold that she must return the 3 sums of HK$8,130.10, HK$8,948 and HK$8,067 with interest.  Insofar as may be necessary, I also find in relation to Transaction 10 that D is unjustly enriched and/or is liable for conversion, and must pay damages equivalent to the amount transferred thereunder, with interest.

CONCLUSION AND DISPOSAL

173.  By reason of all the matters alluded to above,

(1)  I enter judgment in favour of P1 against D in the sum of HK$386,099.10 (Transactions 1, 2, 4, 5, 6, 7, 9 and 10: HK$57,250 +HK$76,000 + HK$8,130.10 + HK$13,429 + HK$14,575 + HK$13,200 + HK$8,948 + HK$8,067 and Transactions 3 and 8 in the total sum of HK$ HK$186,500).

(2)  I enter judgment in favour of P2 against D in the sum of HK$595,641 (Transactions 11, 12 and 13: HK$200,000 + HK$100,000 + HK$295,641).

174.  Mr Singh asked that interest be paid by D from the date of Transaction 1, ie 20 May 2013, when the other 12 Transactions were not yet made.  I do not think that is just.  Rather, I would order that interest at the Prime Lending Rate plus 1% per annum be respectively paid to the 2 plaintiffs on the said respective sums of HK$386,099.10 and HK$595,641 calculated from 15 January 2014 (date of Transactions 9 and 10, which were the last in time) to the date of this judgment, and then after at judgment rate until full payment.

175.  I note that on 8 November 2016, a sum of HK$1,064,240.10 was paid by D into the Court of First Instance pursuant to the Order of Campbell-Moffat J.  I give leave for the said sum together with all accrued interest thereon be paid out forthwith, in (partial or complete) satisfaction of the judgments plus interest in favour of the respective plaintiffs, as follows:-

(a)   HK$386,099.10 be paid out through its solicitors to the 1^st plaintiff;

(b)   HK$595,641 be paid out through its solicitors to the 2^nd plaintiff;

(c)   The remainder be paid out to the plaintiffs through their solicitors in proportions pro rata to their respective judgment sums in satisfaction of the interest awarded to the respective plaintiffs; and

(d)   In the unlikely event that after satisfying the plaintiffs’ judgments with interest there still remains a balance, the balance shall be kept in Court for subsequent payment of costs to the plaintiffs.

176.  On costs, Mr Singh submitted in closing submissions, which I agree provisionally, that there are features in this case justifying an award of costs on indemnity basis.  Not only is this a particularly blatant case of breach of duty of good faith and fidelity by an employee, D also wrongfully removed and withheld very relevant documents, she lied and made up stories, raised many challenges which went beyond reasonable, was most evasive in giving evidence and was raising new but totally unmeritorious matters thereby prolonging her cross-examination and the trial.  I would order on nisi basis that D do pay the plaintiffs their costs, including any costs reserved, at High Court scale when the action was proceeding in that Court and at the District Court scale after it was transferred, with certificate for counsel, to be paid on an indemnity basis.  This costs order nisi will become absolute within 21 days unless any party applies by summons to vary within that time.

177.  Lastly, I thank both counsel and Mr Georgiou for their assistance.