WU, YECHONG v. KWOK, SZE YIU GORDON AND OTHERS

HCA 1155/2021

[2026] HKCFI 3379

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1155 OF 2021

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JUDGMENT

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A.  Introduction

1.  Before this Court is a dispute concerning investment in a series of bonds (“Bonds”) issued by Nouxi Capital Limited (“Nouxi”), an indirect subsidiary of Peking University Founder Group Company Limited (“PKU”), due in 2023.

2.  The dispute involves three “sophisticated market participants”[1], each with extensive experience working in reputable finance and/or investment institutions.

3.  The plaintiff (“P”), who was formerly legally represented but acted in person at trial, had worked in assets management companies.

4.  The 1^st defendant (“D1”) and the 2^nd defendant (“D2”), together with the 3^rd defendant (“D3”), are represented by Mr Lau at the trial.

5.  D1 and D2 knew each other since the time when they studied at Massachusetts Institute of Technology in the late 1990s. Both of them had worked in financial and investment institutions for many years.

6.  D3 was at the material time the corporate vehicle used to hold the Bonds. The shareholders and directors of D3 are D1 and his wife.

B.  The Parties’ Respective Pleaded Cases

B1.  P’s Pleaded Case

7.  In this action, P sues the D1, D2 and D3 (collectively “Ds”) on the basis of an alleged agreement made on 25 November 2020 (“P’s Alleged Agreement”) between P, D1 (on his own behalf and on behalf of D3) and D2 in connection with investments in the Bonds.

8.  P’s pleaded case in his Amended Statement of Claim (“ASoC”), which was settled by his former counsel, is that P’s Alleged Agreement was partly oral, partly in writing and partly inferred from conduct[2].

9.  P’s pleaded case is that P’s Alleged Agreement contained the following express terms[3]:-

(1)  P, D1 and D2 would together make an investment in the Bonds up to a notional value of US$20 million as soon as practicable, and any profits arising out of such investment would be split equally between P, D1 and D2;

(2)  As D1 was unable to source any Bonds for purchase from his bank, Standard Chartered Bank (“SCB”), P would use his business contacts and relationships to locate sources for the purchase of the Bonds at a favourable price;

(3)  D1 would (through D3) purchase the Bonds from these sources up to a notional value of US$20 million on behalf of P, D1 and D2, using D1’s own funds in the first instance.

(4)  P had provided and would continue to provide investment advice to D1 in relation to the Bonds and D1’s other distressed investment, for so long as the parties retained the investment.

10.  P pleads that P’s Alleged Agreement was subject to the implied terms that[4]: -

(1)  D1 would account (or cause D3 to account) to P and D2 for their respective portions of the investment and/or its proceeds, upon request by P and/or D2 respectively;

(2)  Any of P, D1 and/or D2 could choose to exit the investment at any time, in which case the exiting party’s portion would be purchased by one of the other two parties, or would be realised on the market.

11.  In the alternative, P sues on the basis of an allegedly shared understanding (“P’s Alleged Understanding”), which was formed in circumstances and on terms exactly the same as P’s Alleged Agreement[5].

12.  P’s pleaded case is that in reliance on P’s Alleged Agreement / Understanding[6]:-

(1)  He used his business contacts and relationships to source the Bonds of notional value of US$16 million (in total) for D1 (the “$16m Bonds”) at favourable price;

(2)  Until May 2021, P continued to expend time and efforts to provide D1 with research, analysis and investment advice on the Bonds and D1’s other distressed investment;

(3)  P refrained from acquiring the Bonds himself from the market, and thereby gave up the opportunity of making significant profits for himself.

13.  In this regard, it is common ground that the $16m Bonds were acquired by D3 at a price around 9-11% of their notional value between 26 November and 30 November 2020. Whilst there is dispute between the parties as to whether the price was “favourable”, it is also common ground that P was involved in the purchase of the $16m Bonds and he provided details of the purchasing transactions to D1[7].

14.  Based on his case, P claims for a declaration that D1 (through D3) is and has at all material times been holding one-third of the $16m Bonds (or the proceeds thereof) on constructive trust for P, or that they are estopped from denying his one-third interest in the $16m Bonds[8].

15.  Further or alternatively, P also claims against D1 for loss and damage in respect of the alleged breach by D1 in (1) refusing to account (or to cause D3 to account) to him for his portion of the $16m Bonds; (2) using his alleged failure to pay the funding costs of the $16m Bonds as a pretext to resile from P’s Alleged Agreement; and (3) refusing to communicate with him after 7 May 2021 in relation to the $16m Bonds[9].

16.  In his written opening, P also refers to claims for damages based on unlawful means conspiracy and breach of fiduciary duty. As rightly pointed out by Mr Lau, these claims are not pleaded by P in his ASoC.

17.  During P’s oral opening, I explained to P that a litigant is not allowed to pursue an unpleaded case. Having heard my explanation, P did not indicate any intention to pursue his unpleaded unlawful means conspiracy claim or breach of fiduciary duty claim any further. P, however, invited this Court to seriously consider his unjust enrichment claim.

18.  In respect of such unjust enrichment claim, Mr Lau helpfully pointed out to this Court that such claim actually existed in the original Statement of Claim, but was deliberately deleted in its entirety when P sought leave to file and serve the ASoC. Such claim, therefore, was abandoned by P by way of the amendment.

19.  When P urged this Court to allow him to run this unjust enrichment claim, I raised the concern about whether this Court would have the relevant evidence to deal with such a claim. Mr Lau then helpfully brought to my attention that, in the Timetabling Questionnaire dated 15 March 2022 filed by P’s former solicitors, P indicated that he would seek leave to adduce expert evidence on “the fair market value of advisory services … of the kind provided by P to D1, from October 2020 to May 2021”. Plainly, such evidence relates to the quantum issue of such unjust enrichment claim. Presumably due to the fact that the unjust enrichment claim had later been abandoned, P eventually did not seek leave to adduce such evidence. As a result, both parties do not have reasonable opportunity to present their evidence on a crucial aspect of the unjust enrichment claim. In these circumstances, I do not consider it fair or appropriate to allow P to pursue his unjust enrichment claim.

20.  For the above reasons, in this Judgment, I would not consider and deal with the unpleaded claims of unlawful means conspiracy and breach of fiduciary duty, as well as the abandoned claim of unjust enrichment.

B2.  Ds’ Pleaded Case

21.  Although D3 has filed a separate set of Defence, its case is essentially the same as that pleaded by D1 and D2 in their Amended Defence (“ADef”).

22.  Ds deny the existence of P’s Alleged Agreement / Understanding. Specifically, in relation to D3, it is specifically denied that D1 had entered into any agreement on its behalf.[10] Their pleaded case is that: -

(1)  There was a common understanding formed between P, D1 and D2 at a meeting at Murray Hotel on 24 November 2020 that the three of them would target to purchase the Bonds of notional value of US$20 million in total (the “$20m Scenario”). In this $20m Scenario, D1 would pay for the Bonds of notional value of US$10 million, whereby D2 and P would each pay US$5m. They would respectively own such portion of the Bonds that were paid by them[11].

(2)  On the following day (i.e. 25 November 2020), when the parties envisaged that the $20m Scenario might not materialise, it was agreed at the telephone call between P and D1 at around 5:19pm that even if the $20m Scenario did not materialise, the three of them would invest “pro rata” of such Bonds that they managed to purchase based on the $20m Scenario, such that P would need to pay for his 25% portion of such Bonds (“Ds’ Alleged Agreement”).

(3)  It was an implied term of Ds’ Alleged Agreement that P had to pay for his 25% of the Bonds within reasonable time, which would be within two weeks of the execution of the order(s) for the purchase of the Bonds[12].

23.  Ds claim that at the material time, P had no financial capacity to pay for his 25% portion of the $16m Bonds[13], and that D1 had requested P to make payments of his portion on the following two occasions: -

(1)  On 26 January 2021, P and D1 had a call (the “26 Jan 2021 Call”) during which D1 requested P to pay for his 25% portion of the $16m Bonds before Chinese New Year, and also told P that he was incurring interest of 1.5% per annum to fund the purchase of the $16m Bonds[14].

(2)  On 23 February 2021, P, D1 and D2 had another phone call (the “23 Feb 2021 Call”) whereby it was agreed that P’s portion of the Bonds would be reduced to 20% of the $16m Bonds, and that he would have to pay by 30 April 2021, failing which P would be “out of” the deal[15].

24.  Ds’ case is that as a result of P failing to make payment by 30 April 2021, P ceased to have any interest over or right to participate in the investment in the $16m Bonds[16].

25.  As an alternative case, Ds advance the argument that even if P is able to establish his case, his case would be void or unenforceable for illegality since P would be carrying on or holding out to carry on regulated activities (namely, advice on securities and/or dealing with securities) without a licence from the Securities and Futures Commission (“SFC”), in contravention of s.114 of the Securities and Futures Ordinance, Cap 571 (“SFO”)[17].

C.  The Plaintiff’s Reply

26.  For the purposes of identifying the main issues which this Court needs to resolve at this trial, it is only necessary for me to set out some salient points pleaded by P in his Amended Reply to D1-2’s ADef.

27.  With regard to Ds’ allegation that he did not have the financial means to pay for the acquisition costs of his portion of the $16m Bonds: -

(1)  P denies such allegation.

(2)  In support of his case that he had financial means to pay for his portion of the $16m Bonds, P specifically relied on a loan agreement dated 1 December 2020 (the “Loan Agreement”) made between himself and his cousin, Mr Yan Yuguang (“Mr Yan”), whereby Mr Yan agreed to lend to P up to HK$7 million[18].

(3)  P admits that the 26 Jan 2021 Call did take place. He, however, says that the call was to discuss the latest developments of PKU restructuring, and the parties did not discuss anything with regard to the funding of the $16m Bonds[19].

(4)  P also admits the existence of the 23 Feb 2021 Call, but denies that the funding issue was discussed. P says that the call was for him to explain to D1-D2 the latest developments regarding the PKU restructuring and to advise D1 that it would be good time for his family members to purchase the Bonds[20].

(5)  P denies that there was any funding deadline agreed between the parties[21]. The reference to 30 April 2021 was simply a reference to such date on which he could have initiated negotiations about the funding arrangements[22].

28.  With regard to the illegality defence, P’s case is that a contract which contravenes SFO s.114 does not render it unenforceable. It is unnecessary for P to rely on the alleged illegality to make his claims. P is in any event entitled to pursue his claims on the basis that P’s Alleged Agreement / Understanding had not been fully executed, and it would be disproportionate to deny P’s claims based on the alleged illegality[23].

D.  The Issues of this Trial

29.  In his written opening, Mr Lau identified the following 6 issues to be resolved at this trial, namely: -

(1)  Whether P’s Alleged Agreement existed?

(2)  Whether P relied on and performed the Alleged Agreement?

(3)  Whether 30 April 2021 was agreed deadline for P to pay up his portion of the $16m Bonds? Or whether it was the date when the parties would start to negotiate the funding arrangements of the parties’ investment in the $16m Bonds?

(4)  If P’s Alleged Agreement existed, whether it was unenforceable or void for illegality?

(5)  Should P’s claim based on the Pallant v Morgan equity and/or proprietary estoppel be allowed?

(6)  Is P entitled to any relief, and against whom?

30.  In my view, given that both sides accept that some sort of agreement was reached on 25 November 2020 in respect of their investment in the Bonds, the core issue which this Court need to decide what the terms of such agreement were.

E.  Summary of the Evidence of the Parties

E1.  Events leading to the agreement on 25 November 2020

31.  There is no dispute that P and D1 only came to know each other through the introduction of D2 shortly before November 2020.

32.  The evidence before this Court is that on 9 October 2020, D2 asked P if he would be willing to meet his high-net-worth friend who owned some Bonds and who would like to hear P’s views on them[24]. As a result, D1 was introduced by D2 to P and met for the first time at Zuma on 14 October 2020[25].

33.  Although there is dispute as to whether P offered professional advice at the meeting at Zuma, what is not in dispute is that D1 at the meeting asked P questions about whether he should join the ad hoc committee of bondholders affected by the insolvency of PKU (the “Ad Hoc Committee”), and that P replied by saying that PKU might have a “side deal” with the members of the Ad Hoc Committee and hence there was a good reason for D1 to pay some legal costs to join the Ad Hoc Committee[26].

34.  It is P’s evidence that between 15 October 2020 and 24 November 2020, he shared critical information and analysis about the restructuring of and legal proceedings concerning PKU with D1, and recommended D1 to purchase more Bonds which were then trading in the market at very significant discount[27].

35.  D1 does not seriously dispute that he had communications with P in the said period of time concerning the Ad Hoc Committee and the PKU restructuring. D1 also accepted that P helped him to bargain down the engagement fees for joining the Ad Hoc Committee. D1, however, stressed that P at the time had just left Pinpoint Asset Management Limited and was starting his new business, LCM Partners, and seeking to “soft-sell” LCM Partners funds to D1[28].

E2.  Meeting at The Murray Hotel on 24 November 2020

36.  It is common ground that on the evening of 24 November 2020, P, D1, and D2 met for happy hour drinks and then dinner at The Murray Hotel. During this gathering, the parties engaged in a detailed discussion regarding the potential restructuring outcomes and expected recovery values of the Bonds. For the purposes of determining the issues at this trial, I do not consider it necessary to go into the details of such discussion, apart from pointing out that D1 and D2 denied P having advised them on the “investment rationale” at the gathering[29].

37.  It is P’s evidence that at the gathering, D1 said that his bank, Standard Chartered Bank ("SCB"), had been “unable” to source any Bonds at the price of US$11 cents on the day, and asked P’s assistance to source the Bonds.[30]

38.  This is denied by D1 and D2, who claim that D1 merely said that his order to purchase additional Bonds through SCB earlier that day had not been filled yet, and he did not say that he was “unable” to source the Bonds[31]. D1 maintains that he did not ask P for assistance to source the Bonds, and that it was just P who suggested that his trade friend at Barclays might have Bonds of notional value of US$20 million to sell. On that basis, D1 then said that he was minded to acquire Bonds of notional value of US$10 million, the actual price of which was around US$1 million at the time. P then indicated that he would like to have US$5 million; whereas D2 said that he would take up the remaining US$5 million upon checking with his compliance whether he could invest (the “$20m Scenario”)[32]. P further mentioned that he would pay D1 and “park” the bonds with D1 until his own new fund was set up and ready to hold the Bonds directly through a trading account[33].

39.  P, however, maintains that specific funding structures and definitive splits of the Bonds to be purchased were not discussed at the gathering on the evening of 24 November 2020[34].

E3.  The Agreement and the Sourcing of the $16m Bonds (25-30 November 2020)

40.  There is no serious dispute that on 25 November 2020, P discovered that the trader that he knew at Barclays was on leave and that his backup trader had already sold the Barclays’ holdings of Bonds to an outside counterparty at 9.25 cents per dollar, causing the parties to miss out that specific block. P then contacted another trader at Nomura to source the Bonds. P initially informed them that he successfully sourced a block of the Bonds of notional value of US$5m, which later increased to notional value of US$8 million at 10 cents per dollar[35].

41.  In this regard, it is of significance to highlight three sets of contemporaneous messages exchanged between the parties: -

(1)  First, P and D1 had the following WeChat exchanges: -

“P (2:51 PM): I got 5m at 10 [cents]

…

D1 (2:55 PM): 5m at 10 from? Sure, I will take it. Any chance you could get more from others? If not I could pro rata for three of us

P (2:55 PM): Yep”[36] (emphasis added)

(2)  Later, D1 and D2 had the following WhatsApp exchanges: -

“D1 (4:28 pm): Btw, Kevin said he found Usd5mm l0cents.

D2 (4:29 pm): oh shit, take it

D1 (4:33 pm): Yes. It is on hold now, trying to sort out logistics issues. I have asked Kevin to find more if he could. He asked me to take this 5 mm first. But I am happy to pro rata (the 20mm scenario we talked about, 10+5+5) this w you and Kevin.

…

D2 (4:34 pm): whatever works bro - you have a hole to climb out of ...

D1 (4:47 pm): Thanks bro. I think we should all make money together. Lets hope P find more”[37] (emphasis added)

(3)  After successfully sourcing Bonds of notional value of US$8 million (instead of just US$5 million), P and D1 also had the following WeChat exchanges: -

“P (4:56 pm): 8m at 10 flat of accrued

P (4:56 pm): Got done

D1 (5:14 pm): Great, let me give you a call.”[38]

42.  There is no dispute that at or shortly before 5:19pm of 25 November 2020, P and D1 had a phone call (the “25 Nov 2020 Call”). However, there is dispute as to what was discussed during the 25 Nov 2020 Call: -

(1)  It is P’s evidence that at that phone call, he discussed with D1 about the investment in the Bonds. In return for his guidance on the investment and efforts in sourcing the Bonds, D1 proposed that he would purchase the Bonds up to the notional value of US$20 million as a joint investment for all three of them (i.e. P, D1 and D2), and that any future profits arising out of such investment would be split equally between three of them. P agreed to D1’s proposal and D1 said he would relay the same to D2 to seek his agreement[39].

(2)  D1, however, claims that at the call, he simply confirmed that he would invest in the Bonds but would be happy to split the investment amongst three of them pro rata, like the $20m Scenario discussed at The Murray (i.e. 50% for D1, 25% for P, and 25% for D2). D1 also maintains that he did not mention anything about returning something to P for the alleged “investment advice” or “efforts in sourcing the Bonds”[40].

43.  Then, at 5:19 pm of 25 November 2020, D1 sent the following WeChat message to P which, as put by P at paragraph 10 of his Opening Submission, “crystalised” P’s Alleged Agreement:-

“D1 (5:19 pm): Btw, I greatly appreciate you let me take up position first. I think we should all make money together, especially you are the person sourcing and getting things done. I also told Ben the same – lets pro rata based on our 20mm scenario …” (emphasis added).

44.  There is no dispute that D3 proceeded to execute three distinct market transactions to acquire the $16m Bonds[41]:

(1)  A tranche of notional value of US$8 million at 10.0625 cents per dollar from Nomura on 26 November 2020 for a total price of US$805,000.

(2)  A tranche of notional value of US$3 million at 10.3125 cents per dollar from Goldman Sachs on 27 November 2020 for a total price of US$309,375.

(3)  A tranche of notional value of US$5 million at 11.6625 cents per dollar from Goldman Sachs on 30 November 2020 for a total price of US$583,125.

45.  It is P’s evidence that the $16m Bonds were acquired by D3 through his referring D1 to his contacts at Nomura and Goldman Sachs, and D1 systematically forwarded screenshots of the trade confirmation receipts to P via WeChat to notify him of the precise transaction details and average cost[42]. This appears to be not in serious dispute.

E4.  Funding Demands and the January and February 2021 Calls

46.  There is no dispute that on 6 December 2020, P attended a Sunday lunch hosted at D1’s home, which was also attended by D2 and D1's family members. Though there is dispute as to what was discussed at the lunch (which, in my view, is immaterial for the present purposes), there is no dispute that there was no conversation regarding how or when P would fund his portion of the executed transactions[43].

47.  It is D1 and D2’s evidence that some time before the Christmas holidays, on or around 19 December 2020, D1 met D2 to talk about P’s failure to fund his portion of the $16 Bonds. D2 offered to talk to P and asked P to pay by Christmas. D1, however, told D2 that payment before Chinese New Year (“CNY”) would be acceptable to him. After that, D2 had a chat with P and gently reminded him that he would only get his portion of the Bonds after payment to D1[44].

48.  P emphasises that since the acquisition of $16m Bonds, he continued to update D1 of the progress on matters concerning the Bonds and provide D1 with guidance on strategies in December 2020 and January 2021. At the time, the parties did not discuss anything relating to the funding of the $16m Bonds[45].

49.  There is no dispute that on 26 January 2021, a three-way conference call took place between P, D1, and D2 (i.e. the 26 Jan 2021 Call). There is, however, dispute as to what was discussed at the 26 Jan 2021 Call: -

(1)  D1 claims that during the call, he explicitly requested P to fund his portion of the $16m Bonds before CNY. He further informed P that he had been incurring bank interest of approximately 1.5% per annum to fund the total position, which P also owed him on pro rata basis[46].

(2)  P’s evidence, however, is that the parties discussed the latest developments surrounding the PKU restructuring and did not discuss anything about the funding of his portion of the $16m Bonds[47].

50.  It is D2’s evidence that on 29 January 2021, he had a lunch with P during which he told P to pay D1 his portion of the investment before CNY unless there was very substantial development in PKU Restructuring[48]. Later on the same day, D1 and D2 had the following WhatsApp exchanges: -

“D2 (5:23 pm): yo, btw I told Kevin about funding PKU if no resolution by CNY

D1 (5:29 pm): Thanks a lot man”[49]

51.  P denies that D1 and D2 never said that he needed to fund his portion of the investment before CNY; and the issue of funding costs was raised for the first time at his lunch with D2 on 29 January 2021. P claims that even though funding was not part of P’s Alleged Agreement, he was willing to pay “a reasonable amount of fund costs” to D1; and at a call in the evening of 29 January 2021, he asked D1 to clarify the amount of funding costs that D1 wanted him to pay, but D1 never gave any particulars about when or how such payment should be made[50].

52.  There is no dispute that P did not make any payment before CNY, which started on 12 February 2021, and on 23 February 2021, another joint conference call was conducted (i.e. the 23 Feb 2021 Call).

53.  According to D1 and D2, during the 23 Feb 2021 Call, D1 pressed P for payment and explicitly established a firm, final deadline of 30 April 2021, warning P that if he failed to clear his balance by that date, he would be completely "out" of the transaction. D1 and D2 also claim that it was agreed during this call that P's investment allocation would be lowered to 20% of the $16m Bonds (representing US$3.2 million notional) to accommodate the interest of family members in investing in the Bonds, to which P raised no objection[51].

54.  P, however, claims that there was no discussion at all relating to the funding of the $16m Bonds at the 23 Feb 2021 Call. The call was for him to explain the latest developments of the PKU restructuring and to give his opinion that it would be a good time for D1’s family members to purchase the Bonds[52].

55.  With regard to the final payment deadline of 30 April 2021 referred to by D1 and D2, P’s evidence is that 30 April 2021 was not a payment deadline, rather it was a date which the parties would evaluate the progress of the PKU restructuring and thereafter proceeded to negotiate the funding arrangements[53].

E5.  The 30 April 2021 Deadline and the Subsequent Breakdown in May 2021

56.  It is undisputed that P did not transfer any funds or interest payments to D1 on or before 30 April 2021.

57.  It is also not in dispute that on 7 May 2021, P met D2 for drinks at Spiga, where P brought up the subject of funding his portion.

(1)  P claims that D2 told him that D1 required him to fund a specific balance of HK$2.7 million and that D2 might fund his own portion over the upcoming weekend[54];

(2)  D2, however, denies providing any financial calculations or stating that D1 still wanted P to pay. On the contrary, he told P that P was already out of the deal[55].

58.  Later that evening, P sent text messages to D1 and D2 attempting to obtain direct payment instructions to fund his position. D1 chose to ignore P's messages[56]. On 11 May 2021, when D2 told D1 that P asked him about funding his portion of the investment, D1 asked D2 to tell P that “the deadline had passed”[57].

59.  On 12 May 2021, D2 informed P via WhatsApp that D1 was deeply upset and had declared that the deadline had passed. P immediately replied to D2 via WhatsApp, stating that the purported "deadline" was a pure excuse designed to cut him out of his rightful share of the investment[58]. Shortly thereafter on the same day, P also sent a WeChat message to D1 stating that: -

“P (11:33 am): Hey Gordon, there might be some mis-communication. But I never had any intention to leverage on you. All I wanted is all of us to make some money on the trade, as Ben is a very good friend. I am glad you can make some money back on PKU, as I said in early days, I see you as a friend. There’s no need for awkwardness on this. Now you know I am pretty good at this. Hopefully we can team up again in the future. All I wanted to say is I tried very hard and invested a lot of time on this trade. You should keep the bonds, I think there is a good chance it would go to 30c+. All the best mate” (emphasis added)

60.  The dispute escalated dramatically on 14 May 2021 when P met D2 at Catchic. D2 claims that P changed his tone entirely, demanded a flat payment of HK$2 million by the following Monday, and threatened to ruin D2's corporate finance career by filing a formal complaint to his employer, Rothschild, if he was cut out[59]. Shortly thereafter, D1 deleted P from his WeChat contact list, and D2 also blocked P on WhatsApp, terminating all direct communications[60].

E6.  The Authenticity of the Loan Agreement

61.  One of the issues raised by Ds concerns P’s financial capability. It is Ds’ case that at all material times, P lacked the independent financial capacity to fund his portion of the $16m Bonds, relying on bank statements showing minimal cash deposits and net liabilities.

62.  In support of his case that he had the means to fund his portion of the $16m Bonds, P relies upon a loan agreement dated 1 December 2020 (the “Loan Agreement”) signed between him and his cousin, Mr Yan Yuguang (“Mr Yan”), whereby Mr Yan agreed to extend a credit facility up to the amount of HK$7 million to P. That said, there is no dispute that P never submitted a formal Notice of Drawing, meaning that no funds were ever drawn down or advanced to P under this agreement.

63.  The Loan Agreement was not disclosed in the first two Lists of Documents filed on behalf of P. It was only disclosed in the 2^nd Supplemental List of Documents dated 5 January 2023.

64.  Ds challenge the authenticity of the Loan Agreement, contending the document was fabricated or backdated after the dispute arose. To support this allegation, Ds point out that the Loan Agreement described P’s residence as "16A Azura, Seymour Road, Mid-Level, Central" (the “Azura Property”). The documentary evidence, however, shows that P only entered into formal tenancy with the landlords of the Azura Property on 5 January 2021 and that the negotiations for such tenancy only started in late December 2020.

65.  Even though the dispute concerning the authenticity of the Loan Agreement is not directly related to the terms of the parties’ agreement with regard to their interests in the investment in the $16m Bonds, for the reasons explained below, this Court’s finding on the issue of authenticity would have an implication on this Court’s assessment on the issue of credibility.

F.  Analysis

F1.  Guiding Principles for Assessment of Credibility

66.  As explained this core issue concerns of the terms of an agreement which was concluded (at least) partly in oral, its termination of turn on the assessment of the credibility of the witnesses. In this regard, the relevant principles are summarised by DHCJ Jin Pao SC in Leung Chin Sing Rabo & Anor v Ko Chun Hay Kelvin [2021] HKCFI 2422 (at §41) as follows: -

“(1) contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2) 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;

(3) regard should be had to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence;

(4) care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness’ character;

(5) witnesses’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be had to their motives and to the overall probabilities.”

67.  In addition to those guiding principles for assessment of credibility set out in the foregoing paragraph, in Hu Lan v David Golden [2023] HKCFI 873, DHCJ H Au-Yeung (as he then was) made the following additional points (at §36): -

“… (5) It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;

(6) On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility;

(7) While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.”

68.  Applying all these guiding principles, I must reject P’s case regarding P's Alleged Agreement. My reasons for doing so are detailed below.

F2.  Inconsistency with Contemporaneous Communications

69.  To begin with, I must point out that P’s assertion of an "equal-split" agreement not only lacks documentary support, it is further contradicted by the contemporaneous WeChat and WhatsApp messages exchanged between the parties on 25 November 2020, the date on which P’s Alleged Agreement is said to have been concluded.

(1)  On 25 November 2020, during the initial discussions regarding sourcing the Bonds, D1 explicitly text-messaged P stating that if they could not secure more holdings, he could "pro rata for three of us” [61].

(2)  At 4:33 pm on the same day — shortly before the pivotal 25 November 2020 Call around 5:19 pm — D1 texted D2 via WhatsApp stating that he was "happy to pro rata (the 20mm scenario we talked about, 10+5+5) this w [D2] and [P]” [62].

(3)  At the time, the parties’ relationship was amicable. I cannot think of any reason why D1 would expressly state in his text message to D2 that the split discussed by the parties in the 20m Scenario was “10+5+5” if such discussion actually never happened. Similarly, I also cannot see why D2 would not express disagreement if what said by D1 was factually incorrect.

(4)  Immediately after the 25 Nov 2020 Call between P and D1, D1 sent a WeChat message to P (at 5:19pm) and said "I also told [D2] the same - lets protata (sic) based on our 20mm scenario …"[63]. In my view, it is simply implausible for D1 to tell P that the three of them would have an “equal split” in the proposed investment in the Bonds when just a moment ago, D1 texted D2 (at 4:33pm) that the split between the three of them would be “10+5+5”.

(5)  Crucially, at 9:19 pm on the same day, D1 sent a follow-up WeChat voice message to P explicitly stating, “我心目中暫時的說法就10個，你跟那個Droop 昨天是每人5嘛” [64]. Although under cross-examination, P claimed that he did not know “Droop” is the nickname of D2[65]. I do not accept such assertion. In my view, since the only concern of P and D1 on that day was their investment in the Bonds it is simply implausible for D1 to mention someone else who had nothing to do with such investment in the said voice message.

(6)  In any event, what is crystal clear is that D1 had consistently stated in his text message to D2 (at 4:33pm) and his voice message to P (at 9:19 pm) that the split between the parties would be “10+5+5”. Neither D2 nor P sought to raise any objection or seek any clarification from D1 in response to his express reference to such splitting ratio.

(7)  Had there been any agreement or understanding reached between the parties that their investment in the Bonds would be split equally between them, it is inconceivable that P and D2, both of whom were at all material times sophisticated financial professionals, would have failed to correct D1’s express reference to the “10+5+5” split.

70.  Another set of exchanges which, in my view, severely undermines P’s case is the parties’ exchanges on 12 May 2021: -

(1)  As stated above, it is P’s case that D1 acted in breach of P’s Alleged Agreement by, inter alia, refusing to communicate with him after 7 May 2021 in relation to the $16m Bonds.

(2)  In the evening of 11 May 2021 and the morning of 12 May 2021[66], P sent WhatsApp messages to D2 stating that he messaged D1 on funding but D1 had not replied. D2 then told P that “[he] tried to speak to [D1] about it, [D1] sounded very upset and all [D1] said is that the deadline has passed and that he is not a bank”. P replied to D2 and stressed he did nothing wrong “all it took is a few days past Apr 30”. Whilst P said to D2 that it was a “pure excuse”, he also said that that “[he] can let go the profits” though doing nothing wrong.

(3)  Shortly after the above exchanges with D2, P sent the following critical WeChat message to D1 (on 12 May 2021 at 11:33am) that: -

“Hey Gordon [i.e. D1], there might be some miscommunication. But I have never had any intention to leverage on you. All I wanted is all of us to make money on the trade, as Ben [i.e. D2] is a very good friend. I am glad you can make some money back on PKU, as I said in early days, I see you as a friend. There’s no need for awkwardness on this. Now you know I am pretty good at this. Hopefully we can team up again in the future. All I wanted to say is I tried very hard and invested a lot of time on this trade. You should keep the bonds, I think there is a good chance it would go to 30c+. All the best mate.”[67] (emphasis added)

(4)  In his written opening, P emphasised that D1 and D2 cut him off from the investment in bad faith[68]. When he testified, P confirmed to this Court that his case is one of bad faith. Then, this Court asked him if that being the case, why did he send the above message to D1 telling D1 to “keep the bonds”. P explained to this Court that he was ready to forgo his interest in the Bonds in order to keep the friendship.

(5)  I am unable to accept P’s explanation for three reasons: -

(a)  P did not have a long-standing friendship with D1. He only knew D1 through the introduction of D2 in October 2020, and their interaction throughout the entire period was predominantly related to the investment in the $16m Bonds, or other potential business opportunities. According to the said message, P anticipated that the value of the $16m Bonds “would go to 30c+”, which would be about 3 times the acquisition costs. It is hardly conceivable why P would let go such significant profits in order to keep his so-called “friendship” with D1.

(b)  Further, the relationship between P and D1 in my view was merely a commercial one based on mutual gain, rather than one based on personal affection. By mid-May 2021, it would be obvious to P that his commercial relationship with D1 had irretrievably broken. Thus, it would be most unlikely for P to let go any significant profits arising from the investment in the $16m Bonds for the sake of salvaging such broken commercial relationship.

(c)  More importantly, given that it is P’s own case that D1 deliberately cut him off from the investment in the $16m Bonds in bad faith by using the “pure excuse” of non-payment, it is simply unbelievable for P to voluntarily forgo his interest and potential significant profits in his share in the investment in the $16m Bonds.

(6)  Based on the above analysis, and for the additional reasons which I will further elaborate below, the parties’ exchanges on 12 May 2021 clearly show that, contrary to P’s case, it was an essential term of the parties’ agreement that P would need to come up with money to fund his share in the investment; and as a result of his failing to pay by the deadline of 30 April 2021, P effectively accepted that D1 was entitled to “keep the bonds”.

71.  Before moving on to the next topic, I wish to stress that it does not escape my attention that in a WhatsApp message sent by D1 to D2 on 1 May 2021 (at 9:55am), D1 said: -

“Bro, if [P] does not come back to me today. I will message him and tell him that I was expecting him to pay his share of money (with calculation). If he comes back and asks me to sell his shares out, I will ask him to settle first before selling or sell me at 15% discount as he never chip in (which I pissed off)”[69]

72.  P submitted that the above message contradicts Ds’ case that there was the agreed funding deadline of 30 April 2021. When P cross-examined D1 on this message, D1 said that he was just talking to D2 as to what he might do, but he eventually changed his mind and did not message P. I incline to accept D1’s explanation. In my view, even if the agreed deadline had passed, D1 might consider granting further indulgence if he wished to do so. The fact that D1 messaged D2 and told what he might do does not mean that 30 April 2021 was not the agreed deadline for funding. I cannot accept P’s submission that this message contradicts Ds’ case concerning the funding deadline.

F3.  Internal Inconsistencies and Contradictions in P’s Case and Evidence

73.  Another matter which loomed large at the trial is that P’s case is extremely fluid and keeps shifting on fundamental matters.

74.  One of such matters concerns whether payment was an essential term of the parties’ agreement: -

(1)  In paragraph 17.2.2 of his Amended Reply, P unequivocally asserted that “the plaintiff’s right and/or interest in his 1/3 portion of the investment (or the proceeds thereof) was not conditional upon payment or funding by the plaintiff to the 1^st defendant. In fact, funding arrangements were not specifically discussed.”[70] In the same vein, in paragraph 80 of his Witness Statement, P stated that since he had already performed his part of the deal by sourcing the $16m Bonds through his contacts and providing guidance to D2, he should be entitled to one-third of the $16m Bonds as agreed. In other words, up till the trial, P’s position was that his one-third interest in the $16m Bonds was a reward for his “investment advice and efforts in sourcing the Bonds”.[71]

(2)  On the first day of the trial, when this Court asked P to explain his case about what would happen to him if the $16 Bonds eventually become completely valueless, P accepted that his financial contribution was an essential part of the parties’ agreement. Later, P admitted during his oral testimony that his financial contribution was an essential part of the parties’ agreement from day one (i.e. 25 November 2020). P further admitted that it was his understanding that he had to pay within reasonable time, though he also emphasised that the funding deadline and arrangement were not discussed at the time.

(3)  Plainly, what P admitted in the course of the trial significantly departs from P’s Alleged Agreement which he had pleaded and relied on for the purposes of this action.

75.  In addition, P also changed his case significantly on some other fundamental aspects of his case concerning the parties’ agreement. For example: -

(1)  It is P’s pleaded case that one-third interest in the $16m Bonds was a reward for, inter alia, his “investment advice” under P’s Alleged Agreement[72]. However, when he testified at trial, P unequivocally said that he all along had no obligation to provide investment advice to D1, and that he only did so on friendly basis; and he further said that there was “nothing in return for investment advice” throughout the whole period.

(2)  Further, whilst it is P’s pleaded case that he would have one-third interest in the $16m Bonds under P’s Alleged Agreement made on 25 November 2020, P upon cross-examination admitted that “on 24 and 25 November 2020, there was no clear understanding of equal share of the Bonds or equal share of the profits”.

76.  In fact, when Mr Lau put his side’s case about the discussions at the Murray Hotel on 24 November 2020 and the 25 Nov 2020 Phone Call, P said multiple times that he could not remember.

77.  In light of the above contradictions and inconsistencies between P’s case and his evidence, and also in view of P’s apparent lack of memory of the parties’ discussion during the crucial time leading to the parties’ agreement, I must find that P is unable to discharge his burden to prove his existence of his Alleged Agreement and/or his Alleged Understanding.

F4.  Inherent Probabilities or Improbabilities

78.  In coming to the above conclusion, I have also taken into account the inherent probabilities or improbabilities of the parties’ respective cases.

79.  The dispute involves sophisticated market participants, each possessing extensive experience in reputable financial and investment institutions. In my view, P's case about his Alleged Agreement and/or Alleged Understanding is inherently improbable when examined against the commercial realities and the relationship dynamics between the parties.

(1)  P and D1 only met for the first time on 14 October 2020 through D2's introduction. They had known each other for less than six weeks before coming into their agreement on the investment in the Bonds on 25 November 2020. In my view, it is highly improbable that D1, an experienced investor and former director of Blackstone, would confer a valuable one-third interest in the Bonds upon a new acquaintance without demanding any commitments of financial contribution from P.

(2)  The Bonds were acquired through D3, a corporate vehicle owned half by D1 and half by his wife. There is no plausible commercial logic under which D3 (including D1 and his wife) would assume 100% of the initial capital risk while voluntarily agreeing to distribute two-thirds of any future profits to P and D2 out of thin air.

80.  P’s case regarding the developments of the matter between January and May 2021, in my view, also lacks apparent logic and common commercial sense: -

(1)  P maintained that the discussions at the 26 Jan 2021 Call and 23 Feb 2023 Call were limited strictly to discussing updates on the PKU restructuring, and that the funding arrangement was never raised. It is in my view inherently unlikely that D1 would not raise the issue of funding arrangement when he and his corporate vehicle (i.e. D3) had borne and would continue to bear the borrowing interests and capital risks in relation to the acquisition of $16m Bonds.

(2)  Further, there is no dispute that the parties had agreed the date of 30 April 2021 to be a date of some significance. It is Ds’ case that such date was the deadline for P to fund his portion of the investment; whereas it is P’s case that it was the date when the parties would evaluate the progress of the PKU restructuring and thereafter proceeded to negotiate the funding arrangements. In my view, it defies common sense for P to suggest that D1, who had bitten the bullet of funding the entire investment in the $16m Bonds, did not set any deadline for P to fulfil his obligation to pay, but simply set a date for further negotiation.

(3)  Indeed, as pointed out in paragraph 70(2) above, in the WhatsApp messages exchanged between P and D2 on 12 May 2021, P in response to D2’s assertion that “the deadline has passed” said that “all it took is a few days past Apr 30”[73]. Such exchanges clearly support Ds’ case that 30 April 2021 was the agreed deadline for P to fund his portion of the investment in $16m Bonds.

81.  In my judgment, P’s pleaded case about his Alleged Agreement, his Alleged Understanding lacks and the development of the events up to May 2021 lacks commercial logic and is inherently implausible. On the contrary, I find Ds’ case on these matters to be much more inherently credible in light of undisputed or indisputable circumstances, and also much more consistent with the contemporaneous exchanges between the parties.

F5.  Authenticity of the Loan Agreement

82.  As explained in paragraph 65 above, the dispute regarding the authenticity of the Loan Agreement[74] is not directly relevant to the issue as to the terms of the parties’ agreement. Yet, my finding on such dispute is a matter which I may take into account in assessing P’s overall credibility.

83.  The Loan Agreement was signed between P and his cousin, Mr Yan. It is presented by P as a piece of evidence to show that he had the financial support of Mr Yan to pay for his portion of the investment in the $16m Bonds.

84.  Mr Yan at paragraph 3 of his Witness Statement stated unequivocally that the Loan Agreement was signed by them on 1 December 2020. This statement was confirmed by P at paragraph 11 of his 7^th Affirmation filed in answer to the interrogatories administered by Ds.

85.  P’s address in the Loan Agreement is the Azura Property. However, the non-party discovery ordered by the Court revealed that the tenancy agreement in respect of the Azura Property was only entered into on 5 January 2021[75], i.e. more than a month after the alleged signing of the Loan Agreement.

86.  Worse still, the WhatsApp communications between the estate agent and the landlord shows that negotiations for the tenancy only started on 31 December 2020, and a decision to rent the Azura Property was only made by P and his partner after their viewing the Azura Property for the second time on 4 January 2021[76]. Accordingly, it is inexplicable why the address of the Azura Property was used in the Loan Agreement, which is allegedly signed on 1 December 2020.

87.  P's explanation in his oral testimony was that his partner had told him they would move to the Azura Property prior to 1 December 2020. I find such explanation to be unbelievable. I cannot think of any reason why P would use the Azura Property as his address in the Loan Agreement when he or his partner had not yet signed any tenancy to rent such property. Indeed, the WhatsApp messages between the estate agent and the landlord show that P or his partner only made an offer to rent the Azura Property at $68k-69k on 31 December 2020[77].

88.  Further, the reason why P and Mr Yan saw the need to sign a Loan Agreement is in my view most contrived. Both P and Mr Yan confirmed in their oral evidence that they grew up together with each other and had always been very close to each other; and before signing the Loan Agreement, Mr Yan had already given his verbal promise that he would advance the loan to P. P further confirmed in his oral testimony that he had no reason to doubt Mr Yan’s trustworthiness and, in any event, had no intention to sue Mr Yan if Mr Yan eventually decided not to lend him the money. If that being the case, it is hardly conceivable why P would need Mr Yan to sign the Loan Agreement to confirm Mr Yan’s commitment to lend him the money. Yet, it is Mr Yan’s oral evidence that it was P who insisted on signing a formal loan agreement.

89.  Furthermore, it is also questionable why Mr Yan would commit himself to lend money to P by signing the Loan Agreement. In paragraphs 5 to 7 of his Witness Statement, Mr Yan described himself as a professional equity investor with net assets of HK$10.5 million in his account with Interactive Broker as at November 2020. Upon cross-examination, Mr Yan accepted that if P decided to draw the loan of HK$7m immediately after the signing of the Loan Agreement on 1 December 2020, he would need to liquidate part of his investment portfolio to advance the loan to P. Further, Mr Yan also accepted that since P could draw the loan any time under the Loan Agreement, he might be compelled to sell his investment portfolio “at bad timing” in order to fulfil his commitment to lend the money to P. Although Mr Yan emphasised that he had very good relationship with P, it is in my view unbelievable that Mr Yan as a professional equity investor would commit to lend money to P in a situation which might require him to liquidate his investment portfolio at a loss.

90.  Lastly, I observe that there is a significant inconsistency in P’s evidence on how the Loan Agreement was prepared and signed. P said in paragraph 11 of his 7^th Affirmation that he showed a draft Loan Agreement to Mr Yan and Mr Yan commented on the key terms and conditions before it was finalised. However, in his oral testimony, P said that he did not send the draft Loan Agreement to his cousin, Mr Yan; he simply printed out his draft for Mr Yan’s execution and Mr Yan signed the same without making any comment. This inconsistency further casts doubt on P’s case on the genesis of the Loan Agreement.

91.  For all these reasons, I must reject the evidence of P and Mr Yan that the Loan Agreement was signed by them on 1 December 2020 as alleged. I accept the submission made by Mr Lau (on behalf of Ds) that the Loan Agreement was backdated and generated for the sole purpose of providing some support to P’s case that he had the financial means to fund his portion of the Bonds. Although P stressed in his closing submission that the Loan Agreement is not a prerequisite for establishing the existence of his Alleged Agreement / Understanding, I take the firm view that this matter, which essentially involved P presenting false and misleading evidence to this Court, seriously undermines my assessment of the overall credibility of P’s evidence. Insofar as it may be necessary, I find that P did not fund his portion of the investment by the agreed deadline of 30 April 2021 because he lacked the financial means to do so.

G.  Conclusion and Disposition

92.  By reason of the aforesaid matters, I must reject P’s case in its entirety. For the avoidance of doubts, I do not lose sight of any of the points raised by P in support of his case. However, they (whether individually or collectively) do not undermine or otherwise change my analysis leading to the conclusion that P’s case must be rejected in its entirety.

93.  Based on the evidence before me, I find that (1) the parties’ agreement at the time was that the agreed split of the investment in the $16 Bonds between P, D1 and D2 was 25%:50%:25%; (2) P’s entitlement to his 25% interest was dependent upon his paying such funding costs corresponding to his portion; (3) it was eventually agreed between the parties during the 23 Feb 2021 Call that P should pay his portion of the funding costs by 30 April 2021, but P failed to do so.

94.  In light of these findings, P is not entitled to the relief claimed in this action; and the other issues identified by Mr Lau at paragraph 29 above simply do not arise.

95.  In the circumstances, I would make the following orders: -

(1)  An order that P’s claims in this action be dismissed;

(2)  A costs order nisi that the costs of this action (including any costs orders reserved) be paid by P to Ds, to be taxed if not agreed. Any party who wishes to apply to vary such costs order nisi shall take out a summons to make the application within 14 days from the date of the handing down of this Judgment, failing which the same will be made absolute.

96.  Last but not least, I am grateful for Mr Lau’s assistance.