LAM CHOI YUK v. LAM HING WAN

DCCJ 4265/2021

[2024] HKDC 1279

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4265 OF 2021

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BETWEEN

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JUDGMENT

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A. Introduction

1.  We Skin Center Limited (the “Company”)[1] carried on a business of providing services relating to cosmetic treatment at a prime location in Mong Kok.

2.  This action is concerned with the disputes arising from the sale and purchase of the shareholding and interest in the Company.

3.  In the present trial, the Plaintiff (who is the purchaser) acts in person[2], and the Defendant (who is the seller) is represented by Ms Shirley Leung.

B. Factual Background

4.  Prior to 15^th June 2021, the Defendant was the sole director and sole shareholder of the Company.

5.  Pursuant to a power of attorney dated 29^th February 2021, the Plaintiff authorized his son in law, namely Mr Yip Lam Sum (“Mr Yip”), to represent her to deal with the matters in relation to the intended acquisition of the shareholding and interest in the Company.

6.  Through the arrangement of an agent named 323.COM.HK Ltd (the “Agent”), in around March 2021, Ms. Chan Ka Man Catherine (“Catherine Chan”), who is the Plaintiff’s daughter and Mr Yip’s wife, had various meetings with the Defendant. In these meetings, Catherine Chan and the Defendant discussed the details in respect of the intended acquisition[3].

7.  The parties soon struck a deal. Mr Yip on behalf of the Plaintiff (as purchaser)[4] and the Defendant (as seller) entered into a sale and purchase agreement dated 30^th March 2021(the “SPA”)[5], whereby the Plaintiff purchased all the issued shares and business operation of the Company from the Defendant at the consideration of HK$3,300,000. The SPA also contains 6 appendixes (collectively the “Appendixes”), which were signed and executed on 30^th March 2021, 31^st March 201, 29^th May 2021 and 5^th June 2021.

8.  According to the Defendant[6], in around early April 2021, Catherine Chan, with the Plaintiff’s approval and authorization, attended the Company’s business premises. She thoroughly inspected and reviewed the Company’s operation records, accounting documents and records of clients.

9.  It is not in dispute that[7] on the day before completion took place (ie 14^th June 2021), Catherine Chan and his sister, namely Kelly Chan, attended the Company’s business premises, and they extensively inspected and review the Company’s books and records. They were assisted by Mr Hui Pi Hoo (“Mr Hui”), who is a director of the Agent.

10.  On 14^th June 2021, the Defendant signed a declaration (the “Defendant’s Declaration”). In this document:-

(1) it was stated that Mr Yip was the Plaintiff’s attorney; and

(2) the Defendant guaranteed and declared to the purchaser (ie the Plaintiff) that she should not, inter alios, (i) take away, divulge and/or sell the customer information belonging to the Company; (ii) cause or procure the Company’s employees to resign and/or conspire with them to harm the Company; and (iii) carry on a competing business in Tsim Sha Tsui or Mong Kok within a period of 1 year.

11.  Pursuant to the terms of the SPA:-

(1) On 30^th March 2021, the Plaintiff paid a sum of HK$300,000 to the Defendant;

(2) On 7^th June 2021, the Plaintiff paid a further sum of HK$2,310,000 to the Defendant;

(3) On 15^th June 2021[8], completion took place and the Defendant handed over the Company’s business operation to the Plaintiff. The Plaintiff provided a cashier order of HK$660,000 to the Agent, who has been stakeholding the same. According to clause 5 of the Appendix dated 5^th June 2021, the sum of HK$660,000 shall be stakeheld until (i) a qualified accountant audited the Company’s books and accounts; and (ii) the Defendant discharged all the Company’s outstanding tax liabilities owed to the Hong Kong Government that accrued before the handover day (ie 15^th June 2021).

12.  The Plaintiff alleges that in around late June 2021[9], it was discovered that the Defendant breached the Agreement by, inter alios:-

(1) setting up a competing business;

(2) procuring or instigating the Company’s employees to resign;

(3) hiring the Company’s employees to work for her new business;

(4) misusing the customers’ information belonging to the Company and inducing the Company’s customers to use the services provided by her new business; and

(5) publicly proclaiming that her new business was a subsidiary of the Company.

13.  As elaborated in her witness statement[10], Catherine Chan found out from the Company’s clients that the Defendant set up a competing business in Central under the name of “SK-in Studio”, and the Defendant procured the Company’s clients to use the cosmetic services offered by this competing business. According to the public records, the company that purportedly operated the new business (ie SK-in Group Limited) adopted the Defendant’s home address as its registered address[11].

14.  On 26^th June 2021, the Plaintiff issued a notice of termination seeking to rescind the SPA.

15.  On 28^th June 2021 the parties had a meeting at the business premises of the Company in Mong Kok (the “28^th June Meeting”), and the same was attended by, inter alios, (1) Catherine Chan; (2) Ms Ng Shui Man Pamela (“Pamela Ng”), who is a certified public accountant engaged by Catherine Chan to handle the accounting matters in relation to the acquisition under the SPA; (3) Kelly Chan; (4) Mr Hui; and (5) the Defendant.

16.  According to the Defendant, Catherine Chan represented the Plaintiff to attend the 28^th June Meeting[12]. She suggested that Catherine Chan, Kelly Chan, Pamela Ng and Mr Hui were a team assembled by the Plaintiff (原告人團隊)[13].

17.  It is common ground that at the 28^th June Meeting, Catherine Chan, the Defendant and Mr Hui signed a home-made settlement agreement written in Chinese (the “28^th June Settlement Agreement”), and the same contained, inter alios, the following material terms:-

(1) Clause 1: It is acknowledged that the Defendant breached clauses 10.1, 15.1 and 15.3 of the SPA as well as the terms of the Defendant’s Declaration (see clause 2).

(2) Clause 2: After negotiation, the parties agreed that the consideration of the SPA should be changed and adjusted. Under the SPA, it was agreed that the consideration was HK$3,300,000, and this amount was not inclusive of the deposits and the price of the HIFU equipment[14]. It is now agreed that the consideration should be changed and adjusted to HK$2,000,000, and this amount would be inclusive of the deposits and the outstanding installments in respect of the HIFU machine.

(3) Clause 3: The Defendant shall forthwith refund (or pay) a sum of HK$1,675,737 to the Plaintiff by way of a cashier order.

(4) Clause 4: The Plaintiff promises that upon executing the present agreement, she would no longer seek to hold the Defendant liable for the wrongdoings that were committed prior to 28^th June 2021.

18.  The 28^th June Agreement was drafted by Mr Hui, who was the representative of the Agent. When Mr Hui gave oral evidence in Court, he said that the contents of the 28^th June Settlement Agreement were based on what the parties agreed during the 28^th June Meeting.

19.  According to the witness statement[15] of Catherine Chan , the breakdown of the aforesaid sum of HK$1,675,737 is as follows:-

Item	Amount
Old consideration under the SPA (ie HK$3,300,000) less the new consideration agreed under the 28th June Settlement Agreement (ie HK$2,000,000)	HK$1,300,000
Rental deposit (which is agreed to be excluded from the new consideration under the 28th June Settlement agreement and which is to be borne by the Defendant)	HK$366,505
Broadband service deposit	HK$2,800[16]
The first installment of the HIFU machine (which is agreed to be excluded from the new consideration under the 28th June Settlement agreement and which is to be borne by the Defendant)	HK$6,432[17]
Total:	HK$1,675,737

20.  In the late afternoon on 28^th June 2021, the Defendant issued a cashier order of HK$1,675,737. However, the payee of the cashier order was Catherine Chan, rather than the Plaintiff.

21.  In the circumstances, Mr Hui advised Catherine Chan to seek the Plaintiff’s approval before accepting the cashier order. Although Catherine Chan took the view that this was unnecessary, she followed Mr. Hui’s advice[18].

22.  It transpired that on the next day (ie 29^th June 2021), the Defendant informed Mr Hui that she would not sign the type-written version of the 28^th June Settlement Agreement and that she would not pay the sum of HK$1,675,737 at all.

23.  On 6^th September 2021, the Plaintiff commenced the present action against the Defendant. Her claim is straightforward. She sues on the 28^th June Settlement Agreement, and claims the sum of HK$1,675,737 against the Defendant[19].

24.  It is the Defendant’s case that she was coerced to sign the 28^th June Settlement Agreement at the 28^th June Meeting under the alleged under influence exerted by Catherine Chan, Kelly Chan, Pamela Ng and Mr Hui. The Defendant accuses them of[20]:-

(1) making untrue accusation against her in regard to alleged breaches of the SPA with high or strong voices and threatening gestures;

(2) prohibiting her from making phone calls to anyone;

(3) guarding her to sign the 28^th June Settlement Agreement; and

(4) threatening her that the Plaintiff’s legal representatives were already at Court; and

(5) threatening her that the Plaintiff’s legal representative would commence legal actions against her and report her to the Police if she refused to sign the 28^th June Settlement Agreement.

25.  Based on the aforesaid allegations, the Defendant alleges that she had concern over her personal safety[21]. This was why she unwillingly signed the 28^th June Settlement Agreement. The Defendant also stresses that she did not breach the terms of the SPA and/or the Appendixes at all.

26.  In these premises, the Defendant contends that the 28^th June Settlement Agreement was voidable and/or of no effect by reason of undue influence.

27.  Ms Shirley Leung (for the Defendant) also seeks to contend that Catherine Chan did not have the authority to enter into the 28^th June Settlement Agreement on behalf of the Plaintiff.

28.  In light of her stance that the 28^th June Settlement is liable to be vitiated and/or invalid, the Defendant suggests that the SPA still stands good and should be performed.

29.  In these premises, the Defendant brings the following counterclaims against the Plaintiff:-

(1) Relying on clause 3 of the Appendix dated 29^th May 2021, the Defendant counterclaims for the balance of the consideration of HK$660,000 (which has been stakeheld by the Agent);

(2) Relying on clauses 3.2 of the Appendix dated 5^th June 2021, the Defendant counterclaims for the outstanding installments[22] in respect of the HIFU machine (which should be borne by the Plaintiff);

(3) Relying on clause 3 of the Appendix dated 5^th June 2021 as well as an alleged verbal agreement with Catherine Chan that was reached on or around 6^th June 2021[23], the Defendant counterclaims for a sum of HK$421,006[24]. This counterclaim arises in the following circumstances. Some clients paid for the Company’s services by credit cards. Under the arrangement with Dai Sang Bank, it took a few months for the Company to receive the payments. Thus, after the business operation of the Company was handed over to the Plaintiff on 15^th June 2021, the Company continued to receive payments arising from the previous credit card transactions. Since these transactions had nothing to do with the Plaintiff, it was agreed (under clause 3 of the Appendix dated 5^th June 2021 as well as the verbal agreement with Catherine Chan) that the revenue in question belonged to the Defendant.

30.  The Plaintiff seeks to rely on the contents and effect of the 28^th June Settlement Agreement.

31.  Insofar as the counterclaim mentioned in paragraph 29(1) is concerned, the Plaintiff further contends that under clause 3 of the Appendix dated 29^th May 2021, the Agent shall only release the sum of HK$660,000 to the Defendant when the Defendant completely discharged the Company’s tax liabilities that accrued before 15^th June 2021 (ie the handover day). However, the Defendant failed to discharge the following tax liabilities on the part of the Company:

Years of Assessment	Outstanding Tax
2018/2019	HK$152,696
2019/2020	HK$16,849
2020/2021	HK$75,734
2021/2022 (provisional)[25]	HK$85,734
Total:	HK$331,013[26]

32.  As regards the counterclaim mentioned in paragraph 29(3) above, the Plaintiff seeks to rely on clause 3 of the Appendix dated 31^st March 2021, which provide that the parties should jointly verify the amount of receivables that belonged to the Defendant. The Plaintiff contends that since the intended verification exercise had not yet taken place, no payment obligation arose.

C. Witnesses

33.  The Plaintiff adduces evidence from (i) Mr Hui; (ii) Catherine Chan; and (iii) Pamela Ng.

34.  The Defendant adduces evidence from herself.

D. Legal Principles on Assessing Credibility

35.  In Lee Fu Wing v Yan Paul Po Ting [2009] 5 HKLRD 513 at 524, DHCJ Au (as Au JA then was) set out the well-established approach on assessing credibility. In the course of assessing the credibility of a party’s case, the Court shall consider the following matters:

(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; and

(4) the demeanour of the witnesses.

36.  In the context of adjudicating a dispute in relation to an alleged oral agreement or understanding, in Joint and Several Trustees of Yeung Wing Sing v Yeung Wing Sing & Anor [2021] HKCFI 2018 at para 26, Yvonne Cheng J pointed out that:

(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) care should be taken in regard 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; and

(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.

37.  The aforesaid approach is well-established: see eg Siu Miu Hua v Wu Ching Kuen [2024] HKCFI 232, para 84 (per Keith Yeung J); Hui Chi Ming v Koon Wing Yee [2023] HKCFI 93 at para 147; Salleh Abu Baker v Anway Ltd [2021] HKCFI 3407 at para 12 (per Recorder William Wong SC). I will apply the same in assessing the credibility of the parties’ case and their assertions.

E. The Plaintiff’s Claims against the Defendant in the Original Action

E1. Alleged Undue Influence

Legal Principles

38.  According to Chitty on Contracts (35^th Ed) at paras 11-081, 11-092 and 11-097:-

“The equitable doctrine of undue influence is a comprehensive phrase covering cases in which a transaction between two parties who are in a particular type of relationship may be set aside if the transaction is the result of an abuse of the relationship. Normally, the relevant relationship is one of trust and confidence, but it may also include relationships of emotional or physical dependency. If the claimant shows that the other party obtained it by abusing the relationship, this, as we shall see, is often termed “actual undue influence”, but it is better to refer to such cases as one in which undue influence is actually (or directly) proved.” (see para 11-081)

“In the subsequent House of Lords case of Royal Bank of Scotland v Etridge (No 2) the transactional classifications and the statements about when a presumption of undue influence will arise were criticized. In particular, it was pointed out that no presumption that the influence was undue will arise unless the transaction between the parties is one that is not readily explicable by ordinary motives. Further, Lord Hobhouse and Lord Scott criticized the “so-called Class 2B presumption in particular. And Lord Nicholls, whose opinion was supported by all their Lordships, remarked that the custom of distinguishing between cases of actual undue influence and presumed undue influence “can be confusing”. The question is more one of proof. The claimant may prove undue influence directly. Even if he does not do this, if nonetheless he shows that he placed trust and confidence in the other party in relation to the management of his affairs, and that the transaction in question is one that calls for explanation, that “will normally be sufficient, failing satisfactory evidence to the contract, to discharge the burden of proof and the transaction will be liable to be set aside.” (see para 11-092) (emphasis added)

“If there is no special relationship of the kind to be mentioned below, between the parties, or if there is such relationship but the transaction that is challenged is not one that “requires explanation”, the onus is upon the person seek to avoid the transaction to establish that undue influence was used” (see para 11-097)

39.  In Li Sau Ying v Bank of China (2004) 7 HKCFAR 579 at para 34, Lord Scott stated:-

“… where undue influence has to be proved but where the relationship between the parties is not a relationship that falls within Slade LJ’s Class 2A category, the parties will concentrate on whether the evidence justifies the inference that, on a balance of probabilities, the impugned transaction was procured by undue influence , that is to say, by an abuse by the allegedly dominant party of the trust and confidence reposed in him by the allegedly subservient party. References in such cases to, and attempts to invoke the assistance of, an alleged evidential presumption of undue influence are, in my opinion, likely to be …. a source of confusion and an impediment to the evaluation of the available evidence.” (emphasis added)

Deliberation

40.  Having considered the objective circumstances surrounding the present dispute, the inherent probabilities, the apparent logic of events, the contemporaneous documents, the evidence of the witnesses as well as the submissions advanced by the parties, I am firmly of the view that the Defendant was not coerced to sign the 28^th June Settlement Agreement under undue influence as alleged, and she exercised free will when she accepted the contractual terms stated in the 28^th June Settlement Agreement.

41.  First of all, I have carefully studied the transcript of the audio recording in respect of the discussions during the 28^th June Meeting. The transcript shows that that Catherine Chan, Kelly Chan and Pamela Ng (i) accused the Defendant of committing various wrongdoings; (ii) threatened to sue the Defendant and report her wrongdoings to the Police; and (iii) adopted a tough stance when they negotiated with the Defendant. However, I am not convinced that the Defendant was abused at all. Throughout the negotiation, Catherine Chan and Pamela Ng kept mentioning the complaints from the Plaintiff’s side, and the Defendant had opportunities to offer explanations and express her views. The Defendant was apologetic, and she was eager to settle the dispute. The Defendant even indicated that she was glad to encounter Catherine Chan and other representatives of the Plaintiff and that she was grateful for their kindness.

42.  The following discussions at the 28^th June Meeting (which are recorded in and reflected by the transcript) are worth-mentioning:-

(1) When Pamela Ng indicated that the Defendant should undoubtedly be held liable for an aggregate sum of HK$6.6 million pursuant to the terms of the SPA, the Defendant responded that if this were the case, there was nothing to discuss at all[27].

(2) Pamela Ng (i) accused the Defendant of taking away the most important assets of the Company (ie the clients) thereby rendering the Company valueless and (ii) threatened to resolve the dispute by legal means and report the matter to public authority if the Defendant insisted that she was right. Having heard Ms Ng’s accusations, the Defendant asked Ms Ng whether the Plaintiff’s side wished to return the Company to her or negotiate a new purchase price[28]. Ms Ng then indicated the Plaintiff’s side was open to the option that the purchase price be renegotiated[29].

(3) After Pamela Ng said that the interest in the Company was no longer worth HK$3.3 million as the Defendant diverted away its clients, the Defendant asked Ms Ng “then how much (咁係幾多呀？)”. When Ms Ng responded HK$2 million, the Defendant immediately agreed, and she said “can do, I can do this (可以，我可以啊)”[30].

(4) Catherine Chan said that but for the fact that the Defendant had a young daughter, she would have sued her and thus the Defendant should thank her daughter[31]. Ms Chan also said she hoped that the Defendant could walk on a right path in the future. After all, the Defendant was experienced in the industry and hardworking[32].

(5) In light of what Catherine Chan said, the Defendant appeared to suggest that some lies were told to the customers. The Defendant also said she felt very uncomfortable about the matter, and it was very wrong (“我都未試過這樣喱樣野，真係講啲大話，咁同啲客講，我覺得我自己都覺得好唔舒服….我覺得其實成件事係好好唔對囉。係呀，都好錯”)[33].

(6) When Catherine Chan reiterated that the Defendant should thank her daughter[34], the Defendant said that she thanked Ms. Chan and the Plaintiff’s representatives. She said “我真係多謝你哋。我真係多謝你哋。”. The Defendant further praised Catherine Chan and other representatives of the Plaintiff. She said that she could learn a lot from them. It appeared the Defendant also said that if she met them earlier, she would not have chosen a wrong path (“見到你哋做嘅真係好好，可以響你哋身上學到好多嘢，看到學到自己願望係可以咁樣做。如果一早識到你哋，就理論識我唔使或行偏左”)[35].

(7) When Catherine Chan talked about retribution and the importance of being kind (“呢個世界上只有係種善因，得善果”), the Defendant praised Catherine Chan and the Plaintiff’s representatives for being kind. It appeared she even said that they were a blessing to her “你哋真係好好好好好人。你你係我一個月，真係真係一個大恩典”[36].

(8) The Defendant also said that she was very grateful that her counterpart was Catherine Chan and the Plaintiff’s camp. She appeared to suggest that she was bothered by her conscience (“好好！好感恩遇到嗰個係你哋，我其實你一直同我傾，我都覺得良心係有啲不安…”)[37].

(9) During the conversations, the Defendant also talked about her inability to take care of her daughter and how she felt upset and annoyed about this[38].

(10) Towards the end of the 28^th June Meeting, Kelly Chan said that both Catherine Chan and the Defendant were capable businesspersons, and she asked the Defendant why she did not go towards a right direction (“點解你唔向一個正面嘅方向去行?”)[39]. In response, the Defendant said that she felt stressful as her husband thought that she was useless. Thus, she chose a wrong path, and thought of a quick way to earn a sum of money to impress her husband (“咁其實我就行歪咗，諗住一下子用方法搵一舊錢返嚟俾佢睇到”)[40].

(11) When the Defendant went on to complain that her husband disdained her, Catherine Chan expressed her views about the relationship between married couples (such as the importance of having the same values)[41].

43.  The Defendant suggests that the transcript and the audio recording did not capture all the conversations during the 28^th June Meeting. However, when the Defendant gave oral evidence, she confirmed that the discussions that were reflected by the transcript did take place. In fact, the Defendant’s legal representatives have studied the contents of the transcript and provided comments on the accuracy thereof (which the Plaintiff accepted)[42].

44.  I am of the view that had the 1^st Defendant genuinely believed that she did not commit any wrongdoings and that the accusations against her were groundless, she would not (i) have been apologetic during the 28^th June Meeting; and (ii) have readily agreed that the consideration of the transaction be reduced from HK$3.3 million to HK$2 million. The Defendant knew that the Plaintiff’s representatives had valid grounds to raise accusations against her, and she appreciated that the undesirable consequences that might arise if the dispute was not resolved immediately. This was why she agreed to terms in the 28^th June Settlement Agreement.

45.  In this connection:-

(1) When Catherine Chan gave oral evidence, she emphasized that from the purchaser’s perspective, the foremost concern that affected the value of the interest in the Company was its clients. Thus, it was wrongful and immoral for the Defendant to set up a competing business and then diverted the Company’s clients to her new business.

(2) Catherine Chan believed that the Defendant’s conduct was tantamount to fraud. Other the hand, the Defendant sought to sell the interest in the Company to the Plaintiff; on the other hand, the Defendant sought to take away the most valuable assets of the Company, ie the clients. Ms Chan also said the Defendant told her that she wished to sell the interest in the Company because she planned to emigrate to Canada. It transpired that this was a lie, and the Defendant simply operated a new business.

(3) Catherine Chan stressed that the 1^st Defendant started orchestrating her scheme of diversion in an insidious manner after she signed the SPA on 30^th March 2021, and her wrongdoings were only exposed after completion when the Company’s clients told her and her staff about the Defendant’s new business. Apart from diverting the Company’s clients, the 1^st Defendant also procured the employees to resign from the Company shortly before completion took place, and she arranged them to work at the new business. This was done to ensure that Company’s clients would be properly served at the Defendant’s new business.

(4) Catherine Chan’s evidence is consistent with the contents of the transcript, which shows the accusations against the Defendant during the 28^th June Meeting.

(5) Having reviewed the evidence, I am of the view that the Plaintiff’s representatives did have legitimate grounds to raise the aforesaid accusations against the Defendant, and I accept that those who attended the 28^th June Meeting (ie Catherine Chan, Kelly Chan and Pamela Ng) genuinely believed that the Defendant was liable for the wrongdoings that they alleged.

(6) I am also of the view the Defendant must appreciate that there was solid factual and evidential basis in support of the accusations against her. Otherwise, she would have rebutted the accusations against her outright and provided her justifications. Instead of doing so, the Defendant indicated that something very wrong happened, and she felt uncomfortable. She was also very apologetic. She even praised Catherine Chan and the Plaintiff’s representatives for being kind.

(7) Although the Defendant did not entirely accept the accusations against her, the forefront of her response was that she no longer solicited the Company’s clients after completion on 15^th June 2021. When this response was properly understood in context, this appeared to be a tacit admission on the part of the Defendant that she did divert the Company’s clients before completion took place on 15^th June 2021.

(8) The Defendant also said she did not tell the clients that the new business was associated with the Company and that she did not take away from clients’ information as a mobile phone that contained clients’ information was returned already. However, what the Defendant did not say was that (i) she and the Company’s former employees did not divert the clients before completion took place on 15^th June 2021; and (ii) the new business in Central had nothing to do with her.

(9) In any event, it is difficult to see how the Defendant may seek to disassociate herself from the new business (which used her home address in the public records). I am not convinced by the Defendant’s suggestions that the new business was operated by her friend[43] and that she merely allowed her friend to use her home address as the company’s registered address on a tentative basis. These suggestions defy common sense and are most unconvincing.

(10) For the above reasons, it was not the case that the Defendant was forced to accept some groundless accusations out of the blue. I am the view that the Defendant had good reasons to strike a settlement deal with the Plaintiff’s representative at the 28^th June Meeting, and the reasons were that the Defendant wished to avoid being sued and being exposed to further liabilities.

46.  Furthermore, I am also of the view that had the Defendant been worried about her personal safety and felt threatened as alleged, she would not have praised Catherine Chan for being kind and explained how grateful she was; nor would she openly talk about her daughter and the matters of her family (such as her relationship with husband).

47.  In this connection:-

(1) Catherine Chan was cross-examined in regard to various conversations during the 28^th June Meeting. It was suggested to her that she sought to threaten the Defendant and force her to accept an unfavourable deal.

(2) Catherine Chan denied these suggestions. She explained that she simply asked the Defendant to act honestly, and if she kept acting dishonestly, she might not be lucky the next time. I accept Catherine Chan’s explanation, which is consistent with the contents of the transcript. During the 28^th June Meeting, Catherine Chan repeatedly urged the Defendant to act as a righteous and proper person; otherwise, she would set a bad example for the daughter[44].

(3) I am not of the view that (i) Catherine Chan had threatened the Defendant about her personal safety; and (ii) her words carried connotation as to the personal safety of the Defendant and her family.

(4) Having observed how Catherine Chan testified in Court, I accept her evidence that she and other attendees did not use any threatening gesture throughout the 28^th June Meeting. Based on the conversations between the parties, it appears to me that Catherine Chan genuinely thought that she gave the Defendant an opportunity to repent, and the Defendant appreciated Ms Chan’s kindness.

(5) It also appears to me that the Defendant was satisfied with the outcome of the settlement negotiation (which was eventually encapsulated by the terms of the 28^th June Settlement Agreement), and she felt relieved that the Plaintiff’s representatives agreed not to sue her for the aforesaid wrongdoings. This was why she repeatedly expressed her gratitude to Catherine Chan (as well as other representatives of the Plaintiff) and engaged in conversations with them about her family matters. I am not of the view that the Defendant was worried about her personal safety.

48.  Second, I am not impressed by the Defendant’s evidence. I do not accept her explanations in regard to the discussions during the 28^th Settlement Agreement (which are recorded in and reflected by the transcript). In this connection:-

(1) When the Defendant gave oral evidence, she stressed that she reposed trust on Catherine Chan and Kelly Chan. This was why when they accused her of breaching the SPA and committing wrongdoings during the 28^th June Meeting, she was led to believe that she was indeed liable for the alleged wrongdoings. As such, she had no choice but to comply with their demands.

(2) I reject the Defendant’s suggestions that she reposed trust on Catherine Chan and Kelly Chan and that she was forced to comply with their demands. These suggestions cannot be true:

(a) The parties were strangers to each other until March 2021 when Catherine Chan and the Defendant discussed the intended acquisition under the arrangement of the Agent. The relationship between Catherine Chan and Kelly Chan on the one hand and on the other hand the Defendant was purely commercial in nature. This explained why when the Defendant was provided with the Company’s audited financial statements in the beginning of the 28^th June Meeting, the Defendant doubted the authenticity of this document (which showed her signatures and which was incontrovertible). It appears to me that the Defendant was cautious and skeptical about the assertions raised by Catherine Chan, Kelly Chan (as well as Pamela Ng). In any event, the Defendant appreciated that Catherine Chan and Kelly Chan (who are the Plaintiff’s daughters) represented the Plaintiff, whose interest was diametrically opposed to her own interest. In the circumstances, there could not be any trust and confidence amongst the parties as alleged.

(b) Moreover, the Defendant was a seasoned businessperson with commercial experience. Under her management, the Company generated considerable profits in the few financial years before the parties entered into the transaction under the SPA. I do not believe that the Defendant would mindlessly accept the accusations raised by Catherine Chan, Kelly Chan and Pamela Ng without thinking whether she committed the wrongdoings as alleged. Had the Defendant believed that no wrongdoings were committed, she would have rebutted the accusations and indicated that she could contest the legal proceedings that the Plaintiff’s representatives threatened to commence.

(3) When asked why she did not (i) make it clear that she had never diverted away any customer of the Company (whether prior to 15^th June 2021 or otherwise); and (ii) put forward a complete response that included all her defences and justifications, the Defendant said she was concerned that the Plaintiff’s representatives might insidiously record the conversations at the 28^th June Meeting.

(4) I do not accept the Defendant’s explanation, which is incredible and unconvincing. The Defendant’s explanation is not even consistent with her suggestion that she reposed trust on Catherine Chan and Kelly Chan. More importantly, had the Defendant been concerned that the conversations were insidiously recorded, the last things that she would have done was to express regret about her conduct and to speak to the Plaintiff’s representatives apologetically.

(5) The Defendant also said that she singlehandedly dealt with five or six persons during the 28^th June Meeting, and the Plaintiff’s legal representatives threatened that legal action would be commenced against her immediately. In the circumstances, she felt that she was threatened, harassed and/or oppressed.

(6) I accept that the 28^th June Meeting involved some intense discussions and the Defendant might feel stressed and uneasy at some points. However, it does not mean that she was abused, oppressed and/or unlawfully threatened. The Defendant did not go so far as to suggest she was told that she would not be allowed to leave until and unless she agreed to terms proposed by the Plaintiff’s representatives. Had this happened, the conduct of the Plaintiff’s representatives would have constituted false imprisonment, which is a serious criminal offence. The Defendant did report the matter to the Police[45]. However, there is no suggestion that the Police took any follow up action. Putting the Defendant’s case to the highest, it could only be said that she did not feel comfortable to leave the 28^th June Meeting due to the atmosphere and the seating arrangement[46]. Had the Defendant desired to leave the 28^th June Meeting, she could have done so. Indeed, she could have left when she went to the bank to arrange the cashier order. Although the Defendant alleges that she felt uneasy about Mr Hui’s presence, she did not go so far as to accuse Mr Hui of using force and/or making threats when they visited the bank together.

49.  Third, I am not of the view that the deal under the 28^th June Settlement Agreement was commercially inexplicable, unconscionable and/or to the manifest disadvantage of the Defendant as alleged. It appears to me that the deal makes commercial sense and is rational. In this connection:-

(1) I am impressed by the evidence of Pamela Ng[47], who was previously employed by a leading global accounting firm and vastly experienced in mergers and acquisitions.

(2) Pamela Ng strenuously denies Ms Leung’s suggestion that there was a malicious plan to coerce the Defendant to reduce the consideration of the transaction. Ms Ng said that in light of the complaints about the Defendant’s wrongdoings, the purpose of the 28^th June Meeting was to explore the possibility of settlement, and Catherine Chan (who represented the Plaintiff) wished to listen to the Defendant’s explanations.

(3) I accept Ms. Ng’s evidence, which is consistent with the contents of the transcript. The Defendant had opportunities to respond to the accusations from the Plaintiff’s side. The parties then discussed whether the transaction should be cancelled outright (in which case the Plaintiff’s side would seek full refund from the Defendant and sue her for damages). However, the parties eventually agreed to affirm the transaction, but reduce the consideration to HK$2 million.

(4) It was suggested to Pamela Ng that the consideration of HK$2 million was arbitrary and unreasonable. Ms Ng refuted this suggestion. Whilst Ms Leung (for the Defendant) pointed out that the Company earned considerable profits in the few financial years prior to 2021, Pamela Ng convincingly explained why this factor was no longer a relevant concern at the time when the 28^th June Meeting took place.

(5) Ms Ng accepted that one might value of the shareholding in a target company based on the profits generated in the previous years. However, this method was not workable in the present circumstances. This was because there was evidence showing that Defendant diverted away the clients (which were the Company’s only source of profits). In other words, it was no longer possible to predict the Company’s abilities to generate profits in the future.

(6) The view expressed by Ms Ng (who spoke from a professional’s point of view) echoed the evidence of Catherine Chan (who spoke from a businessperson’s point of view). As mentioned, Catherine Chan complained that the Defendant wrongfully took away the most important assets of the Company (ie the clients).

(7) Ms Ng further mentioned her candid view was that based on the accounting records and financial data, it was no longer advisable to acquire the interest in the Company. However, Catherine Chan (who represented the Plaintiff) still wished to acquire the Company due to commercial considerations. In the circumstances, Ms Ng adopted the figure in respect of the Company’s assets as shown in the latest audited financial statements, and she deducted the figures in respect of two accounting entries that did not constitute meaningful assets from a commercial point of view. Since the net figure was around HK$1.9 million odd, Ms Ng proposed that the revised consideration be HK$2 million. As evidenced by the contents of the transcript, Ms Ng did refer to the Company’s audited financial statements when the revised consideration was discussed.

(8) I accept Ms Ng’s evidence, and I disagree with the suggestion that the revised consideration was arbitrary, unreasonable and/or irrational. It is plain that the revised consideration reflected the fact that the client base of the Company, ie the only crucial asset of the Company (which was in an intangible form), was damaged. In fact, as stated in clause 1 of the 28^th June Settlement Agreement, the parties acknowledged that there were breaches of contract on the part of the Defendant.

(9) It is important not to lose sight that the revised consideration was the outcome of a compromise that the parties agreed after discussion and negotiation. For the reasons explained above, I am of the view that the Defendant accepted this compromise because she could avoid litigation (which would be costly) as well as the risk of being held liable for full refund as well as damages.

(10) For the above reasons, I am not of the view that the terms of the 28^th Settlement Agreement were commercially inexplicable. I also disagree that the deal under the 28^th Settlement Agreement was to the manifest disadvantage of the Defendant and/or unconscionable.

50.  Fourth, I am of the view that Mr Hui is an impressive witness, who is genuinely neutral. He candidly informed the Court that the Defendant was neither harassed nor coerced during the 28^th June Meeting:-

(1) When Mr Hui gave oral evidence on the first day of trial, he mentioned that as a director and/or representative of the Agent, his role was akin to an estate agent. He facilitated the parties to strike a deal and to resolve their differences. Whilst he would seek to make sure that the parties’ interests are protected, the parties were at liberty to agree on the commercial terms, and he was not in a position to intervene the parties’ commercial decisions.

(2) I accept Mr Hui’s evidence, which makes commercial sense. Based on the evidence before the Court, it does not appear to me that Mr Hui acted in bias in favour of the Plaintiff and/or her representatives (such as Catherine Chan). In my view, Mr Hui was a middleman who strived to be fair and reasonable. This was why Mr Hui did not hand over the cashier order of HK$1,675,737 to Catherine Chan and/or the Plaintiff when the Defendant instructed him not to do so. Likewise, he also followed Catherine Chan’s instruction and did not release the earlier cashier order of HK$660,000 to the Defendant.

(3) Towards the end of his evidence, Mr Hui even asked whether the Court could take possession of the two cashier orders, such that he would not need to keep them. In my view, Mr Hui was caught in the crossfire, and he was dragged into the disputes between the parties against his wish.

(4) In the premises, I do not accept with the suggestion that Mr Hui lied on oath in Court because he wished to earn the commission from the Plaintiff pursuant to the SPA. This serious accusation is inconsistent with the objective circumstances and against the inherent probabilities. The outstanding commission owed to the Agent is only a modest sum of HK$66,000, and the Plaintiff is undoubtedly liable. Mr Hui said that he did not push the Plaintiff and/or Catherine Chan to pay this sum because the dispute with the Defendant had not been resolved and he felt sorry about the current state of affairs. Catherine Chan also confirmed that she would pay the Agent as soon as the present dispute is resolved. The evidence of Mr Hui and Ms Chan makes sense, and I accept the same.

(5) I also accept Mr Hui evidence that although Catherine Chan was firm and tough during the 28^th June Meeting, the Defendant was not harassed and/or coerced by anyone. Mr Hui said that the discussions took place in a civilized manner, and no one raised his/her voices and/or made threatening gesture[48]. Mr Hui also said that Defendant made various phone calls during the 28^th June Meeting[49].

(6) Mr Hui was plainly unshaken throughout the cross-examination. He tried his best to answer the questions put to him. His answers were fair[50], direct, succinct and consistent with the objective circumstances. I am of the view his evidence was convincing and credible, and I accept the same.

(7) In his oral evidence, Mr Hui also said that although Catherine Chan was eager to settle the dispute on 28^th June 2021, she appreciated that it was not appropriate for her to accompany the Defendant to arrange the cashier order. In the circumstances, he acceded to Mr Catherine Chan’s request and accompanied the Defendant to arrange the cashier order. After all, he was a middleman. Mr Hui said that she had normal discussion with the Defendant when he accompanied the Defendant to attend the bank. The Defendant even arranged a cashier order of HK$140,000, and gave the same to Mr Hui for paying the commission to which the Agent was entitled under the terms of the SPA.

(8) I accept the aforesaid evidence of Mr Hui. Had the Defendant felt threatened and/or been worried about her personal safety, she could have sought assistance from the staff at the bank, and they could have reported the matter to the Police. Not only did she fail to seek help from the staff at the bank, she even issued another cashier order for defraying the commission payable to the Agent. This shows that the Defendant appreciated the services rendered by Mr Hui and/or the Agent at the time, and this was why she was willing to make payment on this occasion.

51.  For completeness, I should point out that I do not accept the following contentions and/or complaints raised by the Defendant:-

(1) The Defendant accuses Catherine Chan of alleging that Pamela Ng was a solicitor during the 28^th June Meeting[51]. Catherine Chan and Pamela Ng denies the Plaintiff’s allegations, and they insist that Ms Ng was introduced as a professional who assisted Catherine Chan to deal with the accounting matters relating to the transaction. Mr Hui said that he could not recall how Ms Ng was introduced. However, he had an overwhelming impression that Ms Ng was a competent professional as she was eloquent and capable of making assertions based on the figures in the documents. I accept that Pamela Ng was held out as a professional and that she raised various accusations against the Defendant in an eloquent and convincing manner. However, I cannot see how these facts would avail the Defendant’s case. As pointed out, the Defendant knew that Ms Ng represented the Plaintiff’s interest. In these circumstances, the Defendant did not even accept the authenticity of the Company’s audited financial statements (which showed her signatures) when the same were shown to her. There is no room to suggest that the Defendant reposed trust and confidence on Ms Ng. The reality was that the Defendant was skeptical about Ms Ng’s assertions, and she did exercise caution.

(2) It is suggested that Mr Hui (being a representative of the Agent) owed fiduciary duties to the Defendant. However, when the Defendant was asked by Ms Leung to identify the persons whom she allegedly trusted, the Defendant did not mention Mr Hui at all; she only referred to Catherine Chan and Kelly Chan. In the circumstances, there is no room for the Defendant to blame Mr Hui for her decision of entering into the 28^th June Settlement Agreement. In any event, the role of the Agent and/or Mr Hui was a broker (as opposed to a legal advisor). As such, it is doubtful as to whether the Agent and/or Mr Hui owed the Defendant any duties (not to mention fiduciary duties) in respect of her decisions to settle with the Plaintiff[52].

(3) Ms Leung contends that the Defendant’s Declaration on 14^th June 2021 is not supported by good consideration. In my view, the relevant issue is whether the parties had grounds to believe that the Defendant was liable for the accusations against her. For all the above reasons, I am of the view that the answer is in the affirmative. In any event, putting aside the effect of Defendant’s Declaration, at common law (and as a matter of business morality), the Defendant should not misuse the clients’ information belonging to the Company and divert away the Company’s clients. Prior to 15^th June 2021, the Defendant was the Company’s sole director, and the aforesaid conduct might constitute breach of fiduciary duties as well as breach of confidence. For the reasons elaborated above, the Defendant must have appreciated the risks of being exposed to various liabilities, and this was why she chose to enter into the 28^th June Settlement Agreement.

(4) The Defendant complains that whilst the Plaintiff’s representatives threatened to sue her immediately, they denied her request that she be given one day to consider the matter. The Defendant says that the parties acted so hastily that there were even errors in the figures (eg the monthly installment of the HIFU machine was HK$8,432, not HK$6,432). In my view, it was understandable as to why the Plaintiff’s representatives wished to confirm the settlement deal immediately. A person who has the experience of participating in settlement negotiation would appreciate that once the parties leave the negotiable table, the momentum would be lost, and it may not be easy to reinitiate meaningful negotiation afterwards. In any event, I cannot see why commercial parties who are in dispute with each other may not adopt a “hard-nosed” approach in the course of negotiation. The Plaintiff’s representatives did not owe the Defendant a duty to be soft and gentle. Whilst it was open to the Defendant to put forward counterproposals, she could walk away from the negotiable table and contest any legal proceedings commenced by the Plaintiff;

(5) The Defendant complains that the Plaintiff’s representatives threatened to sue the former employees of the Company. I cannot see why the Plaintiff’s representatives might not indicate their desire to hold the former employees liable for their alleged wrongdoings of assisting the Defendant to divert the Company’s clients and misusing clients’ information. Putting aside the terms in their employment contract, at common law these employees owed duties of confidentiality as well as duties of fidelity to the Company.

(6) Ms Leung submits that that the deal under the 28^th June Settlement Agreement was unfair. She argues that since the Plaintiff would continue carrying on the Company’s operation, the Defendant should not bear the rental deposit and the costs of the HIFU machine. However, as pointed out by Mr Hui, he handled many transactions where the vendors bore the rental deposits, and from a commercial point of view, what mattered most was overall sale price. I agree with Mr Hui. This is simply a matter of commercial bargaining.

52.  For all the above reasons, I find that:-

(1) The Defendant was not subject to any undue influence and/or coercion when she entered into the 28^th June Agreement, and she was not abused and/or oppressed throughout the 28^th June Meeting.

(2) The Defendant exercised free will when she chose to enter into the 28^th June Agreement. At the time, she did take the view that it was in her advantage to accept the deal thereunder, such that she could avoid (i) being sued by the Plaintiff; (ii) being held liable for full refund as well as damages; and (iii) incurring expenses in litigation.

E2. Catherine Chan had no Authority to enter into the 28^th June Settlement Agreement on behalf of the Plaintiff?

53.  Ms Leung (who strives her best to advance the Defendant’s interest throughout the trial) takes issue as to whether Catherine Chan had authority to enter into the 28^th June Settlement Agreement on the Plaintiff’s behalf. Ms Leung reminds me that (i) Mr Yip was the one who was authorized to sign the SPA pursuant to a power of attorney; (ii) Mr Hui took the view that Catherine Chan should not accept the cashier order without the Plaintiff’s authorization; and (iii) the 28^th June Settlement did not expressly say that Catherine Chan contracted on the Plaintiff’s behalf.

54.  For the following reasons, I am of the view that Catherine Chan must have authority to enter into the 28^th June Settlement Agreement on behalf of the Plaintiff.

55.  First of all, as stated in paragraphs 66 to 67 of the Defendant’s witness statement, at the 28^th June Meeting Catherine Chan represented the Plaintiff to demand her to (i) admit breach of the SPA; and (ii) agree that the consideration be reduced from HK$3,000,000 to HK$2,000,000. Even on the Defendant’s case, Catherine Chan (who is the Plaintiff’s daughter) acted on the Plaintiff’s behalf at the 28^th June Meeting, and she understood that this was the case. It does not appear to me that it is open to Ms Leung to make submissions that are contrary to her client’s case and evidence.

56.  Second, I accept Catherine Chan’s evidence that she was in fact authorized by the Plaintiff to negotiate with the Defendant and to strike a settlement deal with her at the 28^th June Meeting. When Catherine Chan was cross-examined, she (in tears) said that when she informed her mother, ie the Plaintiff, about the wrongdoings of the Defendant, the Plaintiff was distressed and she was worried about the financial loss. As such, the Plaintiff authorized her to negotiate and liaise with the Defendant and to reach a settlement deal with the Defendant if possible. Catherine Chan then asked Mr Hui to set up a meeting with the Defendant (ie the 28^th June Meeting).

57.  Catherine Chan’s evidence is credible and supported by the objective circumstances as well as the Defendant’s evidence. Even on the Defendant’s case, the Plaintiff authorized Catherine Chan to inspect the Company’s records and documents back in April 2021[53], and all along Catherine Chan was the one who liaised with her about the terms and conditions of the transaction[54]. There is no evidence that the Defendant had ever communicated with the Plaintiff at all; nor is there any suggestion that the Plaintiff was expected to attend the 28^th June Meeting personally. In the circumstances, it is unreal (and indeed absurd) to suggest that Catherine Chan (who liaised with the Defendant all along) acted without authority at the 28^th June Meeting. This was not, and could not be, the Defendant’s understanding at the time.

58.  Third, the 3 matters identified by Ms Leung would not avail her contention at all:

(1) The fact that Mr Yip was authorized to sign the SPA is neither here nor there. It is true that the Plaintiff authorized Mr Yip to sign the SPA. However, it does not follow that the Plaintiff could not authorize Catherine Chan (who was closely involved in the transaction) to negotiate settlement with the Defendant;.

(2) Mr Hui, who was a middleman and who was not privy to the discussion between the Plaintiff and Catherine Chan, had every reason to be cautious. Since the Plaintiff was the purchaser under the SPA, it was understandable as to why Mr Hui would, out of abundance of caution, advise Catherine Chan to seek the Plaintiff’s express approval before accepting the cashier order presented by the Defendant. Regardless of the views and opinion of Mr Hui and the practice that he adopted, the truth was that the Plaintiff duly authorized Catherine Chan to attend the 28^th June Meeting and to enter into a settlement agreement with the Defendant, and the Defendant did act on the basis that Ms. Catherine had authority to represent the Plaintiff.

(3) It is true that the 28^th June Agreement did not expressly state that Catherine Chan acted in the capacity of the Plaintiff’s agent. However, as mentioned, even on the Defendant’s case, Catherine Chan represented her mother, ie the Plaintiff, to liaise with her at the 28^th June Meeting[55]. Furthermore, whilst the 28^th June Agreement expressly referred to the SPA in the heading, the terms thereof concerned variations of the obligations on the part of the purchaser (ie the Plaintiff) and the vendor (ie the Defendant) under the transaction. In these premises, it is plain and obvious that Catherine Chan signed and entered into the 28^th June Agreement on behalf of the Plaintiff, and the Defendant knew and accepted that this was the case. This must be the mutual intention of the parties. There is no room to suggest that Catherine Chan, out of the blue, entered into the 28^th June Agreement in her own capacity. This suggestion would be wholly absurd, and contradictory to all the objective circumstances and incontrovertible facts.

59.  Fourth, even if Catherine Chan were not authorized to enter into the 28^th June Agreement on the Plaintiff’s behalf at the time when the 28^th June Meeting took place (which was not the case), the Plaintiff must have rectified Catherine Chan’s authority when she commenced the present action. Since the Plaintiff sued on the 28^th June Agreement (which was signed by Catherine Chan), she must have accepted that Catherine Chan was duly authorized to act on her behalf[56] as this is the premise of her claim in the present action. As such, any alleged defect regarding Catherine Chan’s authority must have been rectified already.

60.  For all the above reasons, I find that Catherine Chan did have authority to enter into the 28^th June Agreement on the Plaintiff’s behalf. I also find that the Plaintiff is a party to the 28^th June Agreement, and she is entitled to sue the Defendant in respect of her refusal or failure to perform the 28^th June Agreement.

E3. Sum Up

61.  For the above reasons, I reject the defences advanced by the Defendant, and I find that:-

(1) The 28^th June Settlement Agreement is valid and enforceable against Defendant;

(2) The Defendant breached the terms of the 28^th June Settlement Agreement by refusing and/or failing to pay the sum of HK$1,675,737; and

(3) The Defendant is liable to the Plaintiff for the said sum of HK$1,675,737.

F. The Defendant’s Counterclaim against the Plaintiff

62.  I now deal with the Defendant’s counterclaims against the Plaintiff.

F1. The Effect of the 28^th June Agreement

63.  None of the terms in the 28^th June Agreement suggests that the SPA was nullified in its entirety. In light of the matters set out above, it is plain that the purposes of the 28^th June Agreement were to

(1) affirm the transaction under the SPA, despite the notice of termination issued earlier on 26^th June 2021; and

(2) vary the consideration under the SPA.

64.  When Catherine Chan and Mr Hui were cross-examined, they both said that the terms of the SPA and the Appendixes should stand good unless they were superseded or varied by the terms of the 28^th June Agreement.

65.  In my view, the understanding of M Catherine Chan and Mr Hui is correct. This was exactly what the parties agreed at the 28^th June Meeting.

F2. The Balance Sum of HK$660,000

66.  It is common ground that the Agent has been stakeholding a cashier order of HK$660,000 that was drawn in favour of the Defendant.

67.  According to clauses 2 and 3 of the Appendix dated 29^th May 2021, the Agent shall take custody of a sum of HK$660,000, being 20% of the consideration, until a qualified auditor prepared the Company’s audited financial statements and the Defendant (ie the seller) pays the Company’s outstanding tax that accrued before the “day of handover” (ie 15^th June 2021)[57].

68.  It is Catherine Chan and Pamela Ng’s evidence that a Ms Yuen (who worked for the Company’s auditor) had reminded the Defendant to pay the outstanding tax owed to Hong Kong Government. However, the Defendant ignored the reminders. Hence, Catherine Chan paid the outstanding tax owed by the Company, and Pamela Ng assisted her to make an application to seek the Inland Revenue Department’s approval that the outstanding tax be paid by installments.

69.  As evidenced by the contemporaneous documents (such as the letters as well as the tax vouchers and receipts issued by the Inland Revenue Department), the Inland Revenue Department allowed the Company to pay the outstanding tax by installments, and the outstanding tax had been duly paid already. There is no suggestion that the outstanding tax was paid by anyone other than Catherine Chan.

70.  Whilst the Defendant alleges Ms Yuen never contacted her, she cannot deny the fact that she did not pay the Company’s tax that accrued before 15^th June 2021. In her reply & defence to counterclaim[58] filed on 24^th January 2022, the Plaintiff clearly pleads that the Defendant is not entitled to the sum of HK$660,000 because she refused to discharge the Company’s tax liabilities pursuant to clause 3 of the Appendix dated 29^th Mah 2021. The same point was reiterated in Catherine Chan’s witness statement dated 17^th March 2023[59].

71.  However, for reasons best known to the Defendant, she did not seek to liaise with the Plaintiff in regard to the Company’s tax liabilities; nor did she seek to reimburse Catherine Chan and/or the Plaintiff in regard to the tax payments.

72.  In her opening submissions, Ms Leung submits that I should order the Plaintiff to pay the Defendant an amount that was equivalent to HK$660,000 less the Company’s tax liabilities before 15^th June 2021.

73.  I am unable to accept Ms. Leung’s submission.

74.  The Defendant’s counterclaim is premised on clause 3 of the Appendix dated 29^th May 2021, which provides that the Agent shall only pay the sum of HK$660,000 to the Defendant after the Defendant pays all the Company’s outstanding tax incurred before 15^th June 2021 (ie the handover day). Until and unless the Defendant discharges the tax liabilities in question, the Agent’s contractual obligation to release payment does not arise.

75.  More fundamentally, the Plaintiff has not breached clause 3 of the Appendix dated 29^th May 2021 at all. The Plaintiff has duly discharged her contractual obligations by providing the Agent with a cashier order of HK$660,000 in favour of the Defendant. There is no breach of contract on her part. I cannot see how the Defendant may accuse the Plaintiff of breach of contract when she has been refusing to fulfill the condition precedent from the outset.

76.  In my view, the Defendant may[60] only have grounds to request the Agent to release the cashier order of HK$660,000 if and only if she is able and willing to reimburse Catherine Chan and/or the Plaintiff in regard to the tax that was paid. This has not been done. Thus, there is no basis on which the Defendant may seek the payment. In any event, the Plaintiff has been barking up the wrong tree by suing the Plaintiff, who has already fulfilled her contractual duties and who has not been keeping the sum of HK$660,000.

77.  In the premises, I dismiss the Defendant’s counterclaim for HK$660,000 against the Plaintiff.

F3. The Installments in respect of the HIFU Machine

78.  Relying on clauses 3.2 of the Appendix dated 5^th June 2021, the Defendant counterclaims for the outstanding installments of the HIFU machine in the amount of HK$101,184. The Defendant says that since she was the Company’s guarantor under the hire-purchase agreement, she was forced to pay all the installments.

79.  However, the provisions on the payment obligations in respect of the HIFU machine under the SPA have been varied or superseded by the terms of the 28^th June Settlement Agreement. Under clause 2 of the 28^th June Settlement Agreement, the parties agree that the installments in respect of the HIFU machine should be borne by the Defendant, and the amounts are included in the revised consideration of HK$2 million.

80.  For the reasons elaborated in Sections E1 and E2 above, I reject the Defendant’s allegations on undue influence, and I find that the 28^th June Settlement Agreement is valid and binding upon the Plaintiff and the Defendant.

81.  It follows that the Defendant’s counterclaim for the outstanding installments of the HIFU machine should be dismissed.

F4. Income arising from Credit Card Transactions prior to 15^th June 2021

82.  When Catherine Chan gave oral evidence, she accepted that the Defendant is entitled to the revenues arising from those transactions before 15^th June 2021 where the Company’s clients paid by credit cards. This concession is fair and appropropraite as the relevant terms of the SPA (ie clause 3 of the Appendix dated 5^th June 2021) have not been varied or superseded by the 28^th June Agreement at all.

83.  Catherine Chan also accepted that:

(1) The revenues arising from the credit card transactions prior to 15^th June 2021 were paid into the Company’s bank accounts maintained with Dah Sing Bank (“DSB”), which have not been used after 15^th June 2021[61]; and

(2) She told the Defendant that she could withdraw the funds from the Company’s accounts maintained with DSB, but the Defendant should inform her when she did so.

84.  After the parties’ relationship broke down due to the Defendant’s refusal to honour the 28^th June Settlement Agreement, Catherine Chan found out that the funds in the Company’s DSB accounts had been withdrawn. Since the Defendant was the only person who could operate the Company’s DSB accounts, Ms Chan believed that the withdrawals were made by the Defendant. However, the Defendant refused to admit that this was the case. In the circumstances, Ms Chan had a meeting with the officers of DSB, and arrangement was made to freeze the DSB accounts. Catherine Chan said that in light of the Defendant’s response, this arrangement was necessary in order to protect the funds in question.

85.  Ms Leung (for the Defendant) helpfully prepared a table with reference to the entries in the Company’s merchant payment statement and the bank statements of the Company’s accounts maintained with DSB. I accept that an aggregate sum of HK$658,079.61 was paid into the Company’s DSB accounts, and this aggregate sum was the revenue arising from the credit card transactions before 15^th June 2021.

86.  The Defendants admits that she withdrew HK$269,430.40 from the Company’s DSB accounts from 18^th to 25^th June 2021.

87.  Pamela Ng has studied and verified the contents of the Company’s bank statements. Apart from the said aggregate sum of HK$269,430.40, Ms Ng identified 3 withdrawals[62], which the Defendant disputes and/or does not admit:-

Dates	Withdrawals
18th June 2021	HK$56,000 (withdrawn from saving account with DSB)
28th June 2021	HK$8,432 (withdrawn from saving account with DSB)
21st June 2021	HK$53,196.45

88.  Insofar as the sum of HK$56,000 is concerned:-

(1) The Defendant suggests that she did not withdraw a sum of HK$56,000 from the Company’s DSB accounts on 18^th June 2021 at all as she merely transferred the sum from the Company’s saving account to the Company’s current account.

(2) As pointed out by Pamela Ng, when a sum was transferred from one bank account to another bank account within DSB, the bank statement issued by DSB would identify the number of the account to which the fund was transferred[63]. However, the bank statement issued by DSB does not show that the fund of HK$56,000 was transferred to the Company’s current account, and the destination of the fund was unknown. There was an inexplicable missing link.

(3) As of 18^th June 2021, the Defendant no longer operated the business of the Company. It appeared that there was no reason why instead of withdrawing the sum of HK$56,000 from the Company’s saving account with DSB outright, the Defendant would wish to transfer the sum to the Company’s current account with DSB.

(4) The Defendant could not offer any valid explanation when she gave oral evidence. After a long silence, the Defendant, with some hesitation, said she recalled that DSB imposed a restriction on the maximum amount of withdrawal, and the limit was HK$50,000 per day. If this were true, what the Defendant should have done was to withdraw HK$50,000 on 18^th June 2021. She could not circumvent the restriction by transferring the sum to the Company’s current account maintained with DSB.

(5) In the premises, I do not accept the Defendant’s explanation.

(6) I find that sum of HK$56,000 deposited into the Company’s current account with DSB on 18^th June 2021 did not emanate from the Defendant’s withdrawal from Company’s saving account with DSB on the same day. In other words, the Plaintiff did withdraw a sum of HK$56,000 from the Company’s saving account maintained with DSB, and the sum had not been returned to the Company.

89.  As regards the sum of HK$8,432:-

(1) I accept that the sum was debited for defraying an installment in respect of the price of HIFU Machine.

(2) However, following the findings set out in Sections E1, E2 and F3 above, the Defendant shall be responsible for the installments pursuant to the terms and conditions of the 28^th June Agreement.

90.  Lastly, as regards the sum of HK$53,196.45:-

(1) The bank statement issued by DSB shows that the sum was transferred from the Company’s current account to its saving account on 21^st June 2021, and the number of the Company’s saving account was expressly identified in the bank statement. There is no missing link at all.

(2) In the premises, I accept that the Defendant did not withdraw HK$53,196.45 from the Company as the same sum was subsequently paid into the Company’s saving account with DSB.

91.  For the above reasons, I find that apart from the aggregate sum of HK$269,430.40 (which is admitted), the Defendant also withdrew a sum of HK$56,000 and a sum of HK$8,432 from the Company’s bank accounts maintained with DSB. Thus, the total withdrawal was HK$333,862.40 (ie HK$269,430.40 + HK$56,000 + HK$8,432).

92.  In these premises, the Defendant is entitled to a sum of HK$324,217.21 (ie HK$658,079.61 (credit card revenue prior to 15^th June 2021 less HK$333,862.40 (total sum already withdrawn))

G. Orders and Disposition

G1. The Plaintiff’s Claims in the Original Action

93.  For the reasons set out in Section E above, I allow the Plaintiff’s claims in the original action, and I order the Defendant to pay the Plaintiff the sum of HK$1,675,737[64].

94.  The Plaintiff is entitled to interest at 1% above prime rate on the said sum of HK$1,675,737 from 6^th September 2021 (ie the date of the writ in this action) to the date of this judgment, and thereafter interest at judgment rate until payment in full.

G2. The Defendant’s Counterclaims

95.  For the reasons set out in Section F above, I dismiss all the counterclaims brought by the Defendant, save and except the counterclaim for the revenue arising from the credit card transactions before 15^th June 2021.

96.  I order the Plaintiff to pay the Defendant a sum of HK$324,217.21[65].

97.  The Defendant is entitled to interest at 1% above prime rate on the said sum of HK$324,307.21 from 22^nd October 2021 (ie the date of her defence & counterclaim) to the date of this judgment, and thereafter interest at judgment rate until payment in full.

G3. Costs

98.  Taking into account the net outcome, the relative success achieved by the parties and the time and resources spent on the issues in dispute, I make a costs order nisi that the Defendant shall pay 90% of the Plaintiff’s costs incurred in these proceedings (including all costs reserved).

99.  Any application to vary such costs order nisi shall be made within 14 days.

H. Other Matters

100.  I thank Ms Shirley Leung for her helpful assistance.