HERO INVESTMENTS LTD v. TSANG KWONG CHIU KEVIN AND OTHERS

HCA 1577/2018

[2024] HKCFI 2029

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1577 OF 2018

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BETWEEN

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(By Original Action)

AND BETWEEN

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(By Counterclaim)

________________

JUDGMENT

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A. INTRODUCTION

1.  This action involves 2 opposing camps.

2.  One camp consists of Hero Investments Limited (“Hero”), the Plaintiff by Original Action and 1^st Defendant by Counterclaim, and its current sole shareholder Mr Hong Zhaojui (“Hong”), the 2^nd Defendant by Counterclaim.

3.  The other camp consists of Mr Tsang Kwong Chiu Kevin (“Tsang”), the 1^st Defendant by Original Action and Plaintiff by Counterclaim, and his 2 wholly owned companies Oxley Investment Co Ltd (“Oxley”) and Corporate Capital Advisory Limited (“Corporate Capital”), respectively the 2^nd and 3^rd Defendants by Original Action.

4.  Hero now by Original Action sues Tsang, Oxley and Corporate Capital (together “the 3 Defendants”) for misappropriation of funds said to be belonging to Hero totalling HK$15,703,180 (“the Subject Sum”). Hong said that the Subject Sum belonging to him which he injected into Hero as his investment vehicle and Tsang, the investment advisor engaged by Hero and him, who was given authority to operate certain accounts of Hero, misappropriated them.

5.  The fact that the Subject Sum was caused to be withdrawn and taken by Tsang was expressly admitted by him.

6.  Tsang’s case is that an oral agreement has been reached between him and China City Construction Holding Group Company (“CCCG”), the 3^rd Defendant by Counterclaim, whereby CCCG agreed to pay him certain service fees, and that pursuant to an agreement on payment subsequently reached between him and CCCG, Hero, which had been incorporated and wholly owned by him, was transferred to Hong, being an employee of CCCG, on 31 March 2015 to be held on trust by Hong as part of the payment arrangement and the Subject Sum was part of the service fees paid by CCCG to Tsang through Hero. Tsang further claims that CCCG still owes him an outstanding balance of the service fees in the sum of HK$6,690,278.

7.  By Counterclaim, Tsang claims against Hong for the return of the entire shareholding of Hero and against CCCG for the payment of the said outstanding balance.

8.  As will be mentioned in more detail, CCCG did not contest Tsang’s said claim and allowed default judgment to be entered by Tsang against it.

9.  The 2 camps now respectively advocate their own completely different version of facts concerning (a) the events leading to their first and crucial meeting on 30 March 2015 in Tsang’s office in Hong Kong, (b) what were discussed and agreed in that meeting, (c) the events leading to and the reasons for the transfer of the entire shareholding in Hero by Tsang to Hong, (d) the events relating to and the reasons for Tsang being given authority to operate the accounts of Hero after the transfer, (e) the origin and ownership of the money injected into Hero and the reasons why certain sums were injected on certain dates, (f) the reasons accounting for the patterns of investment by Hero and the significance of certain dates relating to such patterns of investment, and (g) the reasons surrounding certain deposits into Hero’s bank accounts by Tsang and payment of certain Hero’s expenses by Tsang.

10.  Hong and Tsang are the only witnesses for the respective camps. Both of them have filed a main witness statement and a supplemental one. Evidently, which of their versions is accepted by this Court would determine the outcome of this trial.

B. THE BASIC FACTS

11.  Some of the personalities and facts narrated in this Section B might at first brush appear unconnected and truncated, but their connection and relevance would become apparent as the parties’ respective case unfold.

Dramatis personae

12.  In his witness statements, Hong gave little information about his personal background. Only an address in Shenzhen as his residential address and that at some point he had worked for a subsidiary or related company of CCCG were given.

13.  According to Hong’s oral evidence, he is a citizen of PRC and a university graduate, and has been working in accounting field since about 1995 and has been a qualified accountant. Since 2009 and at the material times, Hong had been employed by the headquarters of CCCG as an accounting officer and was deployed to work as the Manager of the Finance Department in a subsidiary of CCCG situated in Guizhou Province, where he resided, earning about RMB 25,000 to 30,000 a month.

14.  In cross-examination, Hong confirmed that in 2015 (a) he had no relative or family in Hong Kong or Macau and he had never resided in Hong Kong or Macau, (b) he had invested in stocks in the Mainland but had never invested in any stock in Hong Kong, (c) he had a bank account and a piece of real property in Macau which he had acquired long before 2015, and (d) his wife had been living in Shenzhen since 1990s.

15.  Hong left the employment of CCCG in 2016.

16.  Tsang was and is a qualified accountant in Hong Kong since 1995. He has been working in the financial industry in Hong Kong for many years. He has worked as Chief Financial Officer and Finance Director in companies listed in Hong Kong and has also been providing capital market and transaction advisory services.

17.  Oxley and Corporate Capital are companies incorporated by Tsang who all along has been their sole director and shareholder. Oxley was incorporated in BVI as a corporate vehicle for Tsang’s personal investments. Corporate Capital was incorporated in Hong Kong to provide company secretarial and capital markets advisory services.

18.  Hero was formerly known as Mullion Investments Limited. It was incorporated in the BVI in April 2011 by Tsang. Since then until 31 March 2015, Tsang was Hero’s sole director and shareholder.

19.  At the material times, Mr Xu Jianhua (“JH Xu”) was the Co-Chairman of Chun Wo Development Holdings Limited[1] (“Chun Wo”) which was a public listed architectural engineering and construction management company and Mr Xu Juncheng was the Vice-President of CCCG (“V-P Xu”). According to Hong, in 2015 V-P Xu worked in the headquarters of CCCG situated in Beijing.

Undisputed and indisputable facts

20.  The facts set out in this section are undisputed or indisputable.

21.  On 16 September 2014, Chun Wo announced that 46.7% of its issued shares were acquired by China New Way Investment Limited pursuant to a sale and purchase agreement entered into on even date.

22.  On 10 December 2014, Chun Wo announced that a joint venture formed between it and China City Construction (International) Company Limited (“CCCG HK”), a wholly-owned subsidiary of CCCG that was incorporated in Hong Kong, had been awarded a tender for developing a government land located at Yiu Sha Road, Ma On Shan, Sha Tin (“the MOS Project”).

23.  On 3 January 2015, JH Xu was appointed as an Executive Director and Co-Chairman of the Board of Chun Wo.

24.  On 13 March 2015, Chun Wo entered into a subscription agreement with CCCG HK. Under this subscription agreement, Chun Wo agreed to (a) issue for CCCG HK’s subscription 130,000,000 shares at the price of HK$1.427 per share (totalling HK$185,510,000); and (b) issue to CCCG HK convertible bonds in the amount of HK$60,500,000, which entitled CCCG HK’s future subscription of 60,500,000 Chun Wo shares at HK$1.569 per share (totalling HK$94,924,500) (together “the CCCG Subscription”). The total consideration to be received by Chun Wo under the CCCG Subscription was HK$280,434,500.

25.  On 30 March 2015, Hong together with V-P Xu met Tsang for the first time at the office of Tsang in Hong Kong (“the March 2015 Meeting”). Hong in cross-examination accepted that V-P Xu arrived at and left the March 2015 Meeting at the same time with him.

26.  On the next day, ie 31 March 2015, and pursuant to what was discussed in the March 2015 Meeting, Tsang transferred 1 ordinary share of Hero, representing its 100% shareholding, to Hong for the consideration of US$1, and Tsang resigned, and Hong was appointed, as the only director of Hero (“the 2015 Transfer”). At the time of the 2015 Transfer, Hero held with HSBC a savings account number 400-893XXX-XXX[2] and a current account number 400-893XXX-XXX (respectively “Hero’s Savings A/C” and “Hero’s Current A/C”, together “Hero’s HSBC A/Cs”) which had a total cash balance of HK$1,936.99.

27.  Despite the 2015 Transfer, Tsang remained as the sole authorized signatory of Hero’s HSBC A/Cs until some 3 years later on 12 June 2018. It is common ground that Hong had never asked for, nor did he receive any of the bank statements of Hero’s HSBC A/Cs[3].

28.  On 17 April 2015, Hero opened a new securities account at Upbest Securities Company Limited (respectively “Upbest” and “the Upbest Account”).

29.  On 11 May 2015, Hong (on behalf of Hero) opened a new bank account with the Bank of Communications (“Hero’s BComm A/C”). At all material times, Hero’s BComm A/C was and remained controlled by Hong.

30.  On 31 August 2015, HK$20,000,000 was deposited into the Upbest Account from Hero’s BComm A/C.

31.  On 4 September 2015, Hero started to use the Upbest Account to invest and trade.

32.  It is common ground that since the Upbest Account was opened in April 2015, (a) Hero (and Hong) gave Tsang the necessary credentials to enable Tsang to operate the Upbest Account through the online platform[4], and (b) Hong was receiving the statements of the Upbest Account (including monthly statements) by email[5].

33.  On 6 January 2016 and 29 April 2016, another HK$2,000,000 and HK$3,000,000 were respectively deposited into the Upbest Account from Hero’s BComm A/C. Hero therefore has deposited altogether HK$25,000,000 into the Upbest Account.

34.  From the time Hero began investing with the Upbest Account on 4 September 2015 until late February 2017 (for a period of about 18 months), Hero through the Upbest Account traded solely in Chun Wo shares (Stock code: 0711) [6], purchasing a total of about 18 million Chun Wo shares in 58 instances and only selling 758,000 Chun Wo share in 3 instances[7]. As on 28 February 2017, there were 16,648,000 Chun Wo shares in the Upbest Account with a market value of HK$17,979,840 and there was cash in the Upbest Account of HK$329,882. They totalled to HK$18,309,722.

35.  Therefore, up to 28 February 2017, Hero’s such investment fetched a loss of HK$6,690,278. There was no complaint from Hong or Hero that the investment incurred this loss.

36.  Starting from 9 March 2017, all Chun Wo shares in the Upbest Account were gradually sold. From 20 March 2017 to 27 March 2018, the Upbest Account was utilized to trade (buy and sell) in various stocks other than Chun Wo shares.

37.  On 7 June 2017 and pursuant to an authorization from the board of directors of Hero, Hong executed a power of attorney[8] authorizing Tsang to give any trading instructions using the Upbest Account (“the Upbest POA”).

38.  From 12 July 2017 to 29 March 2018, pursuant to instructions given to Upbest by Tsang, a total sum of HK$15,140,000 was withdrawn and transferred from the Upbest Account into Hero’s HSBC A/Cs, as follows :

Withdrawal	Date	Amount in HK$
1.	12 July 2017	$1,500,000
2.	31 July 2017	$1,900,000
3.	2 August 2017	$2,000,000
4.	21 August 2017	$1,100,000
5.	24 August 2017	$1,300,000
6.	6 March 2018	$2,300,000
7.	15 March 2018	$2,000,000
8.	23 March 2018	$2,900,000
9.	29 March 2018	$140,000
Total		$15,140,000

39.  Hitherto from the time when money was first deposited by Hero into the Upbest Account on 15 August 2015 (for a period of about 23 months), there was not a single instance of withdrawal of money from the Upbest Account until those mentioned above.

40.  From 28 July 2017 to 10 April 2018, Tsang as the sole signatory of Hero’s HSBC A/Cs issued instructions to HSBC causing 26 sums (“the 26 Withdrawals”) totalling HK$15,703,180 (being the Subject Sum) to be paid from Hero’s HSBC A/Cs to various recipients. In the same period, Tsang also caused 3 deposits totalling HK$651,000 to be made by Oxley into Hero’s Current A/C. The 26 Withdrawals and the 3 deposits were:

Withdrawal	Deposit	Date	Name of payee/recipent	Amount in HK$ (withdrawal) (deposit)
1.		28 Jul 2017	Tseyu International Trading Co Ltd	$1,000,000
2.		28 Jul 2017	CCAL	$500,000
3.		24 Aug 2017	Oxley	$2,000,000
4.		6 Sep 2017	Oxley	$2,500,000
5.		10 Oct 2017	Hui Siu Hung	$200,000
6.		10 Oct 2017	Lee Chi Kong	$150,000
7.		13 Oct 2017	Lee Chi Kong	$54,000
8.		31 Oct 2017	Estelle Jewellery Ltd	$200,000
9.		1 Nov 2017	Tang Kan Wai	$100,000
10.		9 Nov 2017	Unknown (cheque no 170814)	$18,500
11.		15 Nov 2017	Canton Technology Co Ltd	$63,500
12.		24 Nov 2017	Kin Lee Deco Co	$670,000
	1.	17 Dec 2017		$500,000
13.		12 Dec 2017	CDNIS	$24,500
14.		15 Dec 2017	Chest Apply (Asia) Ltd	$150,000
15.		15 Jan 2017	Home Procurement Ltd	$24,350
16.		19 Jan 2018	Right Century Ltd	$350,000
17.		7 Feb 2018	Le Cadre Gallery Ltd	$230,000
18.		7 Feb 2018	Lumen Arts Ltd	$175,000
	2.	7 Feb 2018		$110,000
19.		9 Feb 2018	Kelvin Electric Trading Co Ltd	$40,000
	3.	9 Feb 2018		$41,000
20.		16 Mar 2018	Oxley	$2,500,000
21.		20 Mar 2018	Canton Technology Co Ltd	$52,500
22.		21 Mar 2018	Lumen Arts Ltd	$174,530
23.		27 Mar 2018	Unknown (cheque no 170820)	$840,000
24.		28 Mar 2018	Oxley	$3,620,000
25.		10 Apr 2018	BC Bloodstock Ltd	$54,000
26.		10 Apr 2018	Unknown (cheque no 170821)	$12,300
Total				$15,703,180 HK$651,000

41.  Moreover, on 6 April 2018, Tsang issued a cheque from Hero’s Current A/C payable to “To & Ho Corporation Service Limited” to settle Hero’s annual corporate expenses.

42.  It is common ground that between 10 May 2018 to 15 May 2018, Tsang had a series of messages with Hong by WeChat[9] (“the May 2018 WeChat Messages”).

43.  On 12 June 2018, Tsang was removed as the authorized signatory of Hero’s HSBC A/Cs.

44.  On 6 July 2018, Hero obtained herein a Mareva Injunction against Tsang, Oxley and Corporate Capital.

45.  On 9 July 2018, Hero issued the Concurrent Writ of Summons herein endorsed with the Statement of Claim.

46.  On 23 July 2018, the 3 Defendants paid into court a sum of HK$15,703,180 and the Mareva Injunction was discharged.

47.  On 27 July 2018, Hero paid into Court HK$1,000,000 as fortification of its undertaking as to damages.

48.  On 20 November 2018, the 3 Defendants filed their Defence.

49.  On 15 August 2019, the Defence of the 3 Defendants was amended, and Tsang commenced his Counterclaim against Hero, Hong and CCCG. Upon and despite service of the Counterclaim on CCCG, it filed no Acknowledgment of Service with Intention to Defend or Defence.

50.  On 18 April 2023, default judgment was entered against CCCG by Tsang for the sum of HK$6,690,278 with interest accruing from 15 August 2019 and with costs (“the Default Judgment”).

C. THE PARTIES’ PLEADED CASE

The pleaded case of Hero in its Statement of Claim

51.  Hero’s pleaded case was surprisingly simple and bare-bone. In gist, It was pleaded that Hero was sold by Tsang to Hong for US$1 and was transferred to Hong on 31 March 2015, and despite the change of ownership Tsang remained the signatory of Hero’s HSBC A/Cs, and that wrongfully and in breach of trust Tsang misappropriated the Subject Sum between 28 July 2017 to 19 April 2018 by the 26 Withdrawals, and Oxley and Corporate Capital were unjustly enriched as the recipients of respectively HK$10,620,000 and HK$500,000 from the misappropriated funds.

52.  Hero’s Statement of Claim did not aver to the relationship between Tsang and Hong, to the circumstances relating to the 2015 Transfer, to the circumstances and reason as to why Tsang has remained the signatory of Hero’s HSBC A/Cs for over 2 years from the 2015 Transfer until the alleged misappropriation, or to what transpired in these 2 years.

The pleaded case of 3 Defendants in their Defence and Tsang’s Counterclaim

53.  The Defence of the 3 Defendants was filed on 20 November 2018. As mentioned, there was substantial amendment on 15 August 2019 and the Counterclaim was introduced and the pleading became Amended Defence of the 1^st to 3^rd Defendants and Counterclaim of the 1^st Defendant (“the AD&C”).

54.  In summary, the pleaded case of the 3 Defendants in the AD&C is as follows.

55.  In about late 2014, Tsang came to know that CCCG was looking for an opportunity to participate in the construction industry in Hong Kong through strategic partnership with a Hong Kong listed construction company. Tsang was asked to act as an introducer in identifying a suitable target company for such purpose.

56.  Tsang was then asked to attend a meeting with CCCG to discuss the introduction role he could assume. It was agreed in that meeting (“the Service Agreement”) that:

a. Tsang would be an introducer to identify a target company for possible strategic cooperation with CCCG;

b. Upon the identification and introduction of the target company to CCCG, CCCG would negotiate with the target company for strategic cooperation including the injection of funds and business into the target company in exchange for shares and equity;

c. CCCG agreed that Tsang would be paid a service fee equivalent to 6% of the value of the shares (including convertible bonds) of the target company to which CCCG would eventually acquire for the services that Tsang was to render (“the Service Fees”);

d. CCCG requested Tsang to conduct the whole process with extreme confidentiality and discreetness and the discussion should not be recorded in writing as CCCG was in a sensitive position;

e. CCCG further informed Tsang that the Service Fees would be paid through a third party to protect confidentiality and avoid unnecessary administrative burden on CCCG's part.

57.  Since Tsang duly performed his task under the Service Agreement and the CCCG Subscription took place on the 13 March 2015, CCCG was liable to pay the Service Fees of HK$16,800,000 being a round-up figure of 6% of the value of the shares subscribed in the CCCG Subscription.

58.  In March 2015, Tsang was approached by representatives of CCCG, namely V-P Xu and Hong, to discuss how the Service Fees were to be paid.

59.  V-P Xu and Hong unexpectedly informed Tsang that due to internal clearance issues regarding the Service Fees, the same could only be paid through CCCG’s investment funds which were originally earmarked for share investment in Hong Kong. The funds could not be released to Tsang immediately since they were required to be invested in shares of CCCG's choice for a period of one and half year. Thus, Tsang, CCCG and Hero (through Tsang) came to the following agreement and arrangement (“the Payment Agreement”):

a. CCCG was to inject funds equivalent to the Service Fees (“the Injected Funds”) into Hero for investment in shares (which turned out to be Chun Wo shares as designated by CCCG) to enable CCCG to get through its internal clearance and apply the Injected Funds. The Injected Funds and/or shares thereby invested would be held by Hero for 1.5 years from the date of the first investment made using the Injected Funds (“the Holding Period”);

b. Since the Holding Period delayed Tsang’s receipt of the Service Fees, the Service Fees would be increased from 6% of the value of the subscribe shares, namely HK$16,800,000, to HK$25,000,000 (approximately 8.9% of the value)(“the Revised Service Fees”);

c. At the end of the Holding Period, if the total value of the funds and/or shares held by Hero originating from the Injected Funds was less than the amount of the Revised Service Fees, then CCCG would make up the shortfall, and if the value exceeded the Revise Service Fees, the excess would be returned to CCCG;

d. Tsang would first transfer the directorship and the shareholding of Hero to Hong in order to effect the transfer of the Injected Funds into Hero. After the expiration of the Holding Period, the directorship and shareholding of Hero were to be re-transferred by Hong to Tsang;

e. Upon the transfer of the directorship and shareholding of Hero to Hong, Hong would apply for a separate bank account to be controlled by Hong on behalf of CCCG (turned out to be Hero’s BComm A/C), into which the Injected Funds would be transferred; Tsang in the interim would retain control of Hero’s HSBC A/Cs;

f. Hero would further apply for a new securities account such that the Injected Funds might be applied to purchase shares (at CCCG’s choice), CCCG would control the securities account and invest in shares using the Injected Funds during the Holding Period;

g. Upon the expiration of the Holding Period, the securities in the said securities account would be realized and the sale proceeds (up to the amount of the Revised Service Fees) would be released to Tsang through Hero’s HSBC A/Cs;

h. The keeping of two separately held bank accounts within Hero would make the transfer of funds from CCCG to Tsang (for payment of the Revised Service Fees) convenient and confidential by appearing to be simple internal transfers within the various accounts of Hero; and

i. During the period in which the directorship and the shareholding of Hero were transferred to Hong, Tsang would still retain control over Hero’s HSBC A/Cs and Hero’s company chop, and the correspondence address of Hero would also be retained so as to provide Tsang with some assurance for CCCG's compliance of its obligations.

60.  Thus, it was pleaded that Hero was transferred to Hong for this limited purpose and Hero was to be returned to Tsang upon the fulfilment of the aforesaid (“the Hero Trust”).

61.  Pursuant to the Payment Agreement, the Upbest Account was opened, funds were injected by CCCG into Hero’s BComm A/C and then to the Upbest Account, CCCG chose to invest in Chun Wo shares and the first batch of Chun Wo shares was acquired through the Upbest Account on 4 September 2015. The Holding Period thus would expire 1.5 years later on 3 March 2017.

62.  Upon the expiry of the Holding Period on 3 March 2017,

a. the total value of the Chun Wo shares and cash in the Upbest Account was HK$18,309,722; and there was thus a shortfall of HK$6,690,278 as compared to the amount of the Revised Service Fees at HK$25,000,000;

b. Pursuant to the Payment Agreement, the Chun Wo shares and cash in the Upbest Account would become beneficially owned by Tsang as part payment of the Revised Service Fee; and Tsang was entitled to sell the Chun Wo shares in the Upbest Account or otherwise deal freely with the shares and cash in the Upbest Account including to transfer proceeds therefrom into Hero’s HSBC A/Cs.

63.  Hero’s shareholding and the shares and cash in the Upbest Account were therefore never Hong’s and in fact belonged to Tsang beneficially.

64.  Thus, Tsang claims against CCCG the said balance of HK$6,690,278 and against Hong for a declaration of beneficial entitlement to, and an order for the transfer back to him of, the entire shareholding in Hero.

Hero’s pleaded case in its Reply to the AD&C

65.  Hero’s Reply and Defence to Counterclaim was filed on 11 October 2019.

66.  In §7, Hero made no admission to the averments relating to the Service Agreement and further pleaded that they were not privy to the Service Agreement which did not concern or involve Hero.

67.  In §8(1), Hero barely denied the Payment Agreement and further averred that Hong and Hero did not enter into or agree to be bound by any agreement with Tsang or CCCG.

68.  In §8(2), it was pleaded that Tsang was allowed to trade stock for Hero via the Upbest Account in his capacity as Hero and Hong’s “investment advisor”. It was not pleaded on what basis Hero and Hong claimed that Tsang was their “investment advisor”, whether it be pursuant to any written or oral agreement/engagement/arrangement.

69.  In §9, it was averred that the funds paid into the Upbest Account “were sourced by Hong”. No particulars whatsoever were given as to this “sourcing”.

70.  The remaining were non-admissions or bare denials.

Hong’s Defence to the Counterclaim of Tsang

71.  Hong’s Defence to Counterclaim was also filed on 11 October 2019.

72.  In §10, Hong specifically denied that he was a representative of CCCG in about March 2015. He denied the Payment Agreement generally and also denied having entered into it or that there had been discussion about the Service Fees involving him. He put Tsang to strict proof of all the terms of the Payment Agreement.

73.  Hong made the same averments as Hero that Tsang was his “investment advisor” and that the funds paid into the Upbest Account “were sourced by Hong”. Like Hero, Hong gave no particulars whatsoever to these 2 rather important averments.

74.  Like with Hero, the remaining were non-admissions and bare denials.

D. ISSUES IN DISPUTE

75.  In the Joint Statement of Agreed Issues in Dispute dated 11 July 2023, the parties set out the agreed issues, in gist:

a. Whether Tsang had acted in breach of trust and had misappropriated the Subject Sum by the 26 Withdrawals and is liable to Hero for the above mentioned sum ?

b. To decide issue (a) above, the following issues are to be determined :

i. Whether Hero, Tsang and CCCG represented by Hong had entered into the Payment Agreement ?

ii. If the said parties had entered into the alleged Payment Agreement, whether the Subject Sum was beneficially owned by Tsang through Hero, and whether Tsang was therefore entitled to make the 26 Withdrawals ?

c. If issues (a) and (b) above are decided against Tsang, whether Oxley and Corporate Capital were unjustly enriched by the part of the Subject Sum transferred to them and thus liable to Hero to account and to pay equitable compensation ?

d. If issues (a) and (b) above are decided in favour of Tsang, whether Hong had held and still holds the share in Hero on trust for Tsang.

76.  The agreed issues therefore centered on whether the Payment Agreement was entered into as alleged by Tsang, and that even if the Payment Agreement was entered into, whether the Subject Sum was the beneficial owned by Tsang through Hero; in other words, whether the Subject Sum originated from CCCG pursuant to the Payment Agreement or was “sourced” by Hong as he claimed.

77.  However, in cross-examination and closing submissions by Mr Chow, counsel for Hero and Hong, one of the main thrusts, if not actually the main one, in challenging Tsang’s case turned on specific issues regarding the Service Agreement, and not so much regarding the Payment Agreement. Such challenges included (a) that the Service Agreement was defectively pleaded, (b) the meaning of “introducing” in the pleaded terms of the Service Agreement as the role played by Tsang to earn the Service Fees, and (c) positively disputing that Tsang had duly performed the Service Agreement. Moreover, in cross-examination of Tsang having persistently elicited further details concerning such performance, Mr Chow in closing submissions complained that Tsang was “ambushing” Hero and Hong with new matters, with “stories inside stories”, “gave top-up evidence”, “ventured greatly beyond the pleadings”[10], “morphed greatly beyond what has been originally pleaded”[11] “his case as presented by the pleadings and witness statements are materially different”[12] and was changing his case (“the New Case Argument”). I will deal with these and related matters in due course.

78.  As I commented in paragraphs 9 and 10 above, as the 2 opposing camps advocated 2 completely different versions of events before and in the March 2015 Meeting, and of the reasons for and circumstances relating to largely undisputed events subsequent thereto until mid 2018, the key matter to be determined, in my view, is which version I would accept.

E. APPROCH TO EVALUATING EVIDENCE

79.  In the context of this case, it is helpful to be reminded of the pertinent considerations and approaches to evaluating evidence, which were conveniently summarized by DHCJ Eugene Fung SC in Hui Cheung Fai and another v Daiwa Development Limited (unreported, HCA 1734/2009, 8 April 2014) :

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce). It is right to point out, however, that some of the documents in this case are alleged by the Son to be shams and those documents obviously cannot be used to assess the credibility of the parties.

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

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

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

F. DISCUSSION

A preliminary point: the Service Agreement defectively pleaded and therefore the Service Agreement not proved ?

80.  Mr Chow submitted that the 3 Defendants’ pleading of the Service Agreement was “wholly defective” and “fatally deficient” in that (a) the date of the agreement, (b) whether it was an oral or written one, and (c) by whom of CCCG was the agreement made through were not pleaded, citing Hong Kong Civil Practice 2014 §18/12/4.

81.  Mr Chow then submitted particularly that as it was not pleaded that JH Xu was the person concluding the Service Agreement with Tsang on behalf of CCCG, Hero and Hong could not have investigated, sought discovery or otherwise dispute the authority of JH Xu purportedly acting on behalf of CCCG, and Hero and Hong were thus denied a fair chance to challenge the involvement of JH Xu. Mr Chow then effectively asked this Court to hold that the Service Agreement is not proved because of this “pleading defect”, and consequentially to hold that the Payment Agreement is also not proved.

82.  I must reject this pleading objection and Mr Chow’s said submissions, for these reasons :

a. It is beyond dispute that Tsang is now putting forth the Payment Agreement, and not the Service Agreement, by way of defence against Hero’s claim and enforcing it in his Counterclaim. The Service Agreement was pleaded as part of the background, albeit an important background, leading to the discussion and then conclusion of the Payment Agreement, but background the Service Agreement remains. In my view, the requirement for pleading those particulars is only engaged in relation to the agreement a party is enforcing, and not in relation to its background matters. In this connection, there is no complaint that the Payment Agreement has been properly and duly pleaded.

b. As mentioned, Hero and Hong in their respective Defence to Counterclaim merely pleaded a bare non-admission to the Service Agreement and its due performance (which were pleaded in §9 to §11 of the AD&C) thus :

“7. No admission is made to Paragraphs 8 to 12. In any event, Hero Investments was not privy to any of the matters stated therein which does not concern or involve Hero Investments.” (Hero’s Reply and Defence to Counterclaim)

“9. No admission is made to Paragraphs 9 to 11.” (Hong’s Defence to Counterclaim)

There was thus all along no real or serious dispute by Hero and Hong over Tsang’s case concerning the Service Agreement or its due performance beyond putting the 3 Defendants to proof.

c. If Hero and Hong were really minded to seriously dispute the existence of the Service Agreement and its performance, and the lack of those particulars did hamper Hero and Hong’s preparation of their challenge against Tsang’s case, then they were always entitled to seek particulars relating to the Service Agreement. However, no attempt whatsoever has ever been made by Hero and Hong to seek such particulars. The only matters Hero and Hong sought information on was whether Tsang had reported the Service Fees and the Revised Service Fees as income to the Inland Revenue Department (sought by way of their Interrogatories against Tsang dated 27 July 2020).

d. Moreover, at no point hitherto have Hero and Hong raised any complaint over this so-called pleading point. It was not raised in the Agreed Joint Statement of Agreed Issues in Dispute and it was not raised at the opening stage of the trial. However, it is now raised in their Closing Submissions as a “silver bullet” to effectively seek the dismissal of the 3 Defendants’ entire case.

e. With respect to Mr Chow, it is clearly a point with no merits or substance and made opportunistically.

Evidential value of the Default Judgment

83.  In the course of trial, Mr Chow and Mr Lung disputed over the evidential value and use of the Default Judgment.

84.  As I understand from the parties’ respective Closing Submissions, it is now common ground that Hero and Hong are not bound by the Default Judgment in the sense that the facts forming the basis of the claim in which the Default Judgment was obtained would not bind Hero and Hong by precluding them from running any defence or factual case inconsistent with those facts. That is in line with the obiter of Q Au-Yeung J in Kot See Kor v Kung Ho Yin & Others [2021] HKCFI 711 at §19 and the holding of Recorder Winnie Tam SC in the subsequent judgment of Clever Boy Ltd v Sum Kwok Hang [2023] HKCFI 959 at §51-§55.

85.  Mr Lung submitted that the fact that the Default Judgment does not have a binding effect against Hero and Hong is fundamentally different from and does not mean that the Default Judgment could not be admitted as a piece of evidence to be taken into account by this Court at this trial, with the appropriate probative value and weight to be placed thereon, if any, to be determined by the Court as a matter of common sense, logic and experience.

86.  While not expressly accepting this, Mr Chow in his Closing Submissions did not serious dispute it, and I accept that as a matter of general principle, there is no reason why the Default Judgment is inadmissible as a piece of evidence at this trial.

87.  Mr Chow submitted that the Default Judgment has “no value” [13] and “should not bear any relevance and weight” [14]. His contention boiled down to that the 3 Defendants’ case has now “morphed greatly beyond what has been originally pleaded”, and therefore CCCG could not be taken to have admitted to this new morphed case.

88.  Mr Lung did not dispute the logic of that contention but hotly disputed that the 3 Defendants have changed or “morphed” their case as complained.

89.  It seems to me that this contention before me involves a 2-stage analysis.

90.  As the first stage, and to begin with, it is not disputed that the basis upon which a default judgment can be obtained is that of implied admission (Hong Kong Civil procedure 2024 §19/2/1), that is, that the Court will assume that there is an implied admission on the claim itself (in the case of the classes of claims in respect of which no Statement of Claim is required to be served before the default judgment can be obtained) or there is an implied admission of the averments forming the basis of the claim and the claim itself (in the case of the classes of claims in respect of which the Statement of Claim is required to be duly served first and the judgment can only be obtained upon the default of filing and serving a Defense).

91.  Here, all relevant court documents including all the pleadings, particularly including the AD&C were successfully served on CCCG in Beijing on 19 September 2022 through the assistance of 北京市高级人民法院 as stated in its letter in (2022) 京港請送50号dated 20 September 2022.

92.  It follows, in my view, that this Court is entitled to assume, by reason of CCCG’s default, that CCCG has impliedly admitted to the averments forming the basis of Tsang’s Counterclaim and Tsang’s Counterclaim itself as stated in the AD&C, which I have summarized in §55 to §64 above.

93.  In this regard and in my view, since an implied admission is only assumed by the Court based on the default of CCCG, Hero and Hong have always been free to proffer evidence to seek to displace such assumption, including, proffering evidence showing that CCCG defaulted because it has some commercial or other reasons not related to the lack of merits for not acknowledging or contesting Tsang’s Counterclaim or that CCCG somehow was unable to so acknowledge or contest because of matters beyond its control.

94.  Hero and Hong did not proffer any such evidence. It has not been suggested by them that there would be difficulties in contacting V-P Xu or other personnel of CCCG to ask them to provide evidence to contest Tsang’s Counterclaim or to understand why CCCG defaulted. Indeed, as we will see from the May 2018 Wechat Messages, Hong remained in contact with V-P Xu in May 2018.

95.  I also take note that CCCG is a very sizable state-owned enterprise which in the normal course of events should not let such a serious claim slip by unattended and allow judgment to be entered. I also note that up to the date of trial there was no step taken by CCCG to seek to set aside the Default Judgment.

96.  As a second stage, this Court should examine closely and carefully as to whether the 3 Defendants’ case and evidence have indeed so “ventured greatly beyond the pleadings”, and if so, precisely in what respects and how. If the 3 Defendants indeed have, evidently, there is much force in the contention that CCCG’s implied admission over the originally pleaded averments and claim should and could not be given weight to help prove “the new case”.

97.  As I do not find that the 3 Defendants have changed their case as complained by Mr Chow, as will be explained when I set out and evaluate Tsang’s evidence below, I will accord due weight to CCCG’s implied admission. However, for the present purpose, I am prepared (without deciding) to only attach weight to such matters so impliedly admitted by CCCG which are, according to the pleaded averments of Hero and Hong, not within their knowledge, and would not attach any weight to CCCG’s implied admission over the remaining matters which are within Hero and Hong’s knowledge and are now contested by them. Thus, I will attach weight to :

a. Tsang’s pleaded case and averments concerning the Service Agreement, impliedly admitted by CCCG, to which, as mentioned, Hero and Hong pleaded that they have no knowledge; and

b. The fact that CCCG owed Tsang the claimed outstanding balance of the Revised Service Fees in the sum of HK$6,690,278, to which CCCG impliedly admitted.

Thus, I do not give any weight to whatever implied admission that can be said to have arisen from the Default Judgment as to the following contested matters which are within Hong and Hero’s knowledge : (a) as to what occurred in the March 2015 Meeting, (b) that the Payment Agreement was reached as Tsang alleged (which involved Hong and is contested by Hong), (c) the source of the funds deposited into the Upbest Account and (d) all other matters not mentioned in sub-paragraph (a) and (b) above.

Hong’s evidence and its evaluation

98.  Hong filed his witness statement on 17 March 2020 and his supplemental witness statement on 24 September 2020.

99.  Though I think it convenient to recount and evaluate separately Hong’s evidence and then Tsang’s evidence chronologically according to events or topics in this and the next section, in so doing and while dealing with one party’s evidence, I bear very much in mind the competing version of the other party, the totality of evidence and the respective criticisms of the evidence of the other party by counsel.

100.  In his 2 witness statements, Hong began his evidence by jumping directly to March 2015 and said

”委托曾廣釗處理香港股票投資

2. 在2015年3月，我當時的同事許軍成知悉我需要一名股票投資顧問，向我推薦了曾廣釗 (即管按原訴訟的第一被告人)。當時徐軍成告訴我曾廣釗為香港註冊會計師及金融財務專才，有多年香港股票投資的經驗。於是，我請徐軍成與曾廣釗聯繫，以商討有關投資香港股票的事宜，曾廣釗同意於2015年3月底跟我會面。

3. 於2015年3月底，我和徐軍城在增廣超位於中環香港中環的辦公室會面。在會面中，曾廣釗介紹自己為Oxley Investment奧盈投資的董事，並向我展示其名片。我向曾廣釗表示想以英屬處女群島或其他離岸公司名義投資香港股票。曾廣釗說近年香港銀行就認識客戶及反黑錢的手續嚴謹了許多，新成立的公司，尤其是離岸公司，一般很難或要辦很多手續才能於本地的銀行開戶，但他有家現成的空殼公司，為英屬處女群島公司 (後得知為Hero Investment Ltd，即本案原訴訟的原告人)，而且已經開設了銀行帳戶(後得知為香港上海匯豐銀行帳戶)。曾廣釗提出可以將這家公司的股權轉讓給我，減免我成立新公司再開戶的麻煩。

4. 於2015年3月31日，曾廣釗與我再次見面以處理轉讓曾廣釗在Hero Investments limited的股權事宜，並簽署有關文件。…”

101.  It is common ground that 徐軍成is V-P Xu. Hong’s such evidence suggests that he should know V-P Xu quite well, as according to Hong, V-P Xu not only helped by recommending Tsang to Hong, but also helped by arranging the March 2015 Meeting for Tsang, and then actually attending the meeting to introduce Tsang to Hong face to face, and then stayed for the entire meeting.

102.  However in cross examination, Hong said that V-P Xu was his previous supervisor, but in 2015 occupied a high up position in CCCG and was stationed in the headquarters in Beijing, while Hong himself was only a low rank staff working in a subsidiary of CCCG in Guizhou Province. In oral evidence, Hong only said that he sought V-P Xu advice for his personal investment in early 2015. When pressed, Hong was unable to give any plausible reason why V-P Xu would go so much out of his way to actually travel to Hong Kong to attend the March 2015 Meeting so as to introduce Tsang to Hong face to face and then even staying for the duration of the entire meeting, in which, according to Hong, V-P Xu was merely waiting idly without having participated at all in whatever Hong and Tsang was discussing. I find Hong’s such story and explanation for V-P Xu’s such involvement very inherently improbable.

103.  I would at this juncture divert a bit and particularly note that Hong has not proffered any evidence to rebut Tsang’s evidence and case that Tsang has never worked as a personal investment adviser, which seems to me a weighty matter in my consideration regarding which of the 2 competing versions to accept.

104.  In §11 of Tsang’s supplemental witness statement filed on 21 October 2020, he categorically stated that he has never worked as a personal investment advisor and directly stated that therefore Hong’s story about engaging him as a personal investment advisor was false. The dispute of this fact thus has been brought to attention. Yet, there has been no serious dispute by Hong in his witness statements, nor has any documentary evidence been proffered by him to rebut. Tsang was not challenged on this in cross-examination. However, Mr Chow boldly but blankly submitted that as no evidence was provided by Tsang on this matter, I should find against it. I must reject that submission. Evidently, what Tsang said in his witness statements is evidence. Indeed, as early as in his affirmation filed herein on 12 July 2018 (“Tsang’s Aff”), Tsang said that since 1995 he has been working in the finance industry providing capital market and transaction advisory services. Hero and Hong have had ample time and opportunity to investigate and to proffer evidence to rebut, such as from materials searched through the internet, advertisements Tsang might have posted holding out himself as provider of such services or qualifications / certifications that he might hold relating to personal investment advising, which as said, they were unable to. I thus accept Tsang’s evidence and find that he has never worked as a personal investment advisor. Therefore, I find it most extraordinary and highly improbable that Tsang would, according to Hong, so casually and instantly in the March 2015 Meeting, agree to be engaged as Hong’s personal investment adviser if he had never worked as one.

105.  Following from this, I find it inherently improbable that a person as high power as V-P Xu would mistake capital market advisory services with personal investment advising, and allegedly introduce Tsang to Hong as Hong’s personal investment advisor.

106.  I turn next to Hong’s evidence about the source of the money deposited from Hero’s BComm A/C into the Upbest Account, respectively HK$20,000,000, HK$2,000,000 and HK$3,000,000 so deposited on 31 August 2015, 6 January 2016 and 29 April 2016.

107.  It would be recalled that according to the pleadings of Hero and Hong made in October 2019, these sums were “sourced” by Hong. On the other hand, it is the 3 Defendants’ case that they were money injected by CCCG. Hero and Hong must have known since as early as 2019, if not earlier, that proving the source of the money is a vital element to Hero’s claim.

108.  That being the case, I find it completely surprising that in the 2 witness statements of Hong, nothing was said to support Hero’s and his pleaded case that the source of these sums was from him and that only one page of documentary evidence was proffered[15]. All that was said was this one-sentence bare assertion in §6 of Hong’s supplemental witness statement:

“有關 Hero Investments Ltd的資金來源及股權轉讓

6. Hero Investments Ltd 的股權轉讓也並非如第一被告人所述，為中城建控股的資金注入公司。該等資產及資金是純屬我的個人資產，與其他人並沒有關聯。…”

109.  However, when pressed in cross-examination, Hong mentioned for the first time a completely new story of a gift from the elder brother of Hong’s wife, one 余亮 (“Yu”), who he said has emigrated to the United States years ago. Hong said that per certain discussions with Yu several years prior to 2015, Hong and his wife were expecting a substantial payment from Yu by way of gift in the region of tens of millions (without mentioning the actual amount) in appreciation of Hong’s and his wife’s efforts in looking after family business of Hong’s wife in Shenzhen and in arranging for the funeral of Yu’s parents in his absence. Hong said that the 2 deposits into his MOP savings account held with Bank of China Macau number 01-01-10-25XXXX (“Hong’s Macau MOP A/C”) in the respective amounts of MOP10,300,000 on 8 May 2015 and MOP26,780,000 on 18 May 2015[16] were payments by Yu from Canada to him and his wife by way of the said gift.

110.  As these 2 sums were received in early to mid May 2015, which were much earlier than the 3 deposits into the Upbest Account (made on 31 August 2015, 6 January 2016 and 29 April 2016), Hong was cross-examined on the reasons for the time gap and the money flow. Hong then said that part of the said 2 sums were exchanged into Hong Kong dollars and paid into his Hong Kong dollars savings account with Bank of China Macau (“Hong’s Macau HK$ A/C”), and from there they were then transferred to Hero’s BComm A/C and then deposited into the Upbest Account.

111.  When further pressed in cross-examination as to why he did not arrange with Yu to remit the money in one tranche instead of 2, to convert them from Canadian dollars directly into Hong Kong dollars rather than from Canadian dollars to MOP and then to Hong Kong dollars, or to remit the 2^nd tranche, ie, MOP26,780,000, directly into Hero’s BComm A/C (which was set up on 18 May 2015), as any and all these measures would save bank charges and minimize loss due to the differences in exchange rates, Hong explained said that he only knew about the 2 remittances 1 or 2 days before each remittance.

112.  When asked about whether there were any documentations, such as emails, Whatsapp message, Wechat message, letters and such in the period of those years that showed that Yu was contemplating making the alleged gift or that the 2 remittances were from Yu in the circumstances as alleged, Hong was unable to name or provide any.

113.  When asked why Hong could only produce that one page of document to prove that the money was “sourced by him”, and none other whatsoever, such as the bank documents showing the alleged 2 deposits were indeed remittances from Yu from Canada into Hong’s Macau MOP A/C or the passbook pages of Hong’s Macau HK$ A/C, he merely explained that the passbook was lost and he did not receive the remittance documents. When asked why he did not request Bank of China Macau to re-issue the relevant bank statements or to provide the remittance records, he was hesitant and answered to the effect that he did not ask or did not think about it. I find these explanations completely incredible not only because Hong has been a qualified accountant for years, but as can be seen from his affirmation filed on 10 July 2018 in support of his application for a Mareva Injunction (“Hong’s Aff”), that he said he was “extremely worried” around May 2018 (at §33[17]), he then requested for bank statements of Hero’s HSBC A/Cs from HSBC, copies of cheques and payments out of Hero’s HSBC A/Cs and received them on 26 June 2018 (§39 to §41). Thus, Hong clearly knew at the very outset that bank statements and records were very important and that he could obtain them. I so find.

114.  Hong also could not give any credible explanation as to why he did not set out this story of gift in Hong’s Aff and his 2 witness statements. These and considering the demeanor in which Hong gave evidence concerning this story of gift and money flow and the various aspects of his evidence I find inherently improbable for the reasons stated, I am of the clear view that the gift story was an afterthought made up by Hong.

115.  I turn next to Hong’s evidence regarding the crucial event of the March 2015 Meeting, which was the first ever meeting between Hong and Tsang, and after which and on the next day, the 2015 Transfer was implemented. I have set out Hong’s evidence given in his witness statement regarding the March 2015 Meeting in §100 above. In his supplemental witness statement (§§4 and 5), Hong merely made some contentions against Tsang’s version without deposing to any new facts.

116.  As can be seen, save some discussions regarding the transfer of the shareholding of Hero, Hong in his witness statements said nothing more about what was discussed and agreed on that meeting concerning the engagement of Tsang as his personal investment adviser. In his oral evidence, I formed the distinct impression that Hong had difficulty giving a coherent account on what has occurred and was discussed during that meeting.

117.  Moreover and particularly :

a. It is Hong’s oral evidence that he had never sought to understand or check out the credentials of Tsang before engaging him as his personal investment advisor and entrusting him with his personal money in the tune of HK$25,000,000. Hong said he merely relied on the recommendation by V-P Xu. I find it inherently incredible that Hong as a qualified accountant would, as he said, entrust such a substantial amount of personal money to Tsang as his personal investment advisor without first verifying the credential, experience and expertise of Tsang, but simply relying on the recommendation of V-P Xu, and made his decision to engage Tsang immediately in the March 2015 Meeting when he and Tsang had barely acquainted with each other.

b. In his oral evidence, Hong did not say there was any discussion between Tsang and him concerning the risk involved, the pros and cons, and the respective potential for earnings in investing in different financial products. This is inherently improbable.

c. As we will see, it is Hong’s evidence that he was singularly focused in investing in stocks, and particularly shares in Chun Wo. Hong was cross-examined that, such being the case, there was no reason for Hong to seek out somebody like Tsang, he could simply have opened a trading account with any reputable stockbroker in Hong Kong and then traded in Chun Wo shares himself. Hong simply explained that he trusted Tsang. I do not find that explanation convincing at all.

d. I accept Mr Lung’s submission that when pressed in cross-examination, Hong had been changing his evidence over whether he and Tsang had in that meeting discussed about Tsang’s remuneration or commission. Initially, Hong said that there was no discussion as they had no idea as to how much the stock investment could eventually make; later, Hong said that there was definitely discussion about the remuneration in the meeting, but there was no agreement; yet later, he said there was an “agreement in principle” in that it was agreed that the more profit Hong earned, the more remuneration Tsang would receive; yet later, Hong accepted that there was no agreement reached between him and Tsang over Tsang’s remuneration. Not only do I find Hong’s such evidence incredible because he had been changing his evidence over it, I also find it most inherent improbable that if according to Hong, Tsang was being engaged as a profession personal investment advisor, that Tsang would not have discussed and come to a clear and definite agreement with Hong over his remuneration before implementing the engagement by executing the 2015 Transfer the next day.

e. I note that according to Hong’s case, there was no subsequent discussion or communication whatsoever, whether orally or by any form of messaging, between him and Tsang over Tsang’s remuneration since March 2015. I find such lack of discussion on the topic most inherently improbable.

f. From Hong’s account, there was no discussion between him and Tsang concerning the other terms of engagement, particularly there was no discussion over their respective rights, obligations and liabilities in case the investment suffered loss. I find the lack of such discussion very inherently improbable if Tsang was to be engaged as Hong’s personal investment advisor of such a significant amount of money.

g. It is Hong’s evidence that despite engaging Tsang as his personal investment adviser, Hong and Tsang had never signed any form of contract or written document for the engagement, whether before the 2015 Transfer or after. I find that very inherently improbable.

118.  Based on the matters already discussed up to this stage, and without comparing as yet Hong’s evidence with those of Tsang and considering the further matters, I find Hong’s whole account leading to, and concerning, the alleged engagement of Tsang as his personal investment advisor inherently improbable in many material respects and hard to believe.

119.  I also find Hong’s explanation of letting Tsang be the sole signatory of Hero’s HSBC A/Cs after the 2015 Transfer until mid-2018 inherently improbable and incredible. Hong said in oral evidence that he and Tsang went to HSBC to try to change the signatory to himself, but upon learning that there would be difficulty, he just let matters be. Evidently, had that been such difficulty, there was no reason why he did not ask Tsang to close Hero’s HSBC A/Cs when they were still in HSBC. It is simply improbable and unconvincing that as a qualified accountant for years that Hong would not have thought about closing the account and would let the matter remained as it was for years without any follow up action.

120.  Next, it would be recalled that I set out in §34 and §35 above the indisputable fact that from 4 September 2015 (the first day Hero started to use the Upbest Account to invest and trade) until 3 March 2017 (according to Tsang, the time when the Holding Period expired), Hero traded solely in Chun Wo shares, consisting of 58 instances of buying a total of 18 million shares in Chun Wo and only 3 instances of selling in minor quantities totalling 758,000 shares in Chun Wo, thereby suffering a loss of HK$6,690,278 in total.

121.  While Hong’s case is that Tsang was engaged as his personal investment advisor and HK$25,000,000 had been deposited into the Upbest Account, one conspicuously unusual feature in this case was this trading pattern in the Upbest Account and the complete lack of communications and discussions between Hong and Tsang on the investment.

122.  Mr Lung submitted and placed heavy emphasis that

a. Such a trading pattern and strategy by way of personal investment for gain was most unusual, inexplicable and in fact worked against the supposed objective of making profits;

b. Even more unusual, but is common ground, that over that period of 2 years there was (i) no complaint whatsoever by Hong to Tsang or against Tsang that his personal investment suffered such heavy loss and have been suffering such loss continuously, and (ii) no discussion whatsoever about making any change in investment strategy. This indifference would be most unusual and completely inexplicable if Hong’s case of personal investment were indeed true.

123.  Hong said nothing about this in his supplemental witness statement, he only said the following in his witness statement :

“股票操作

9. 自2015年9月Hero Investments Ltd的證券賬戶有股票交投美建會每月將相關帳戶的月結單電郵給我。

10. 至於Hero Investments Ltd的匯豐銀行賬戶月結單 …

11. 曾廣釗間中亦會就有關Hero Investments Ltd的事宜跟我聯系，主要是要求我簽署相關公司年度報表文件。其中，於2017年6月期間，曾廣釗曾聯絡我，指美建/香港證監會有見Hero Investments Ltd的網上買賣操作人/簽署人並不是該公司的股東 (即我本人)，要求我簽署有關授權曾廣釗操作美建證券賬戶的授權書以及Hero Investments Ltd的相關董事會決議。我同意一一照辦，並不定期在有需要時到香港與曾廣釗會面處理有關Hero Investments Ltd的事宜。

12. 自2016年底由於我媽媽及太太的健康出了問題，尤其是媽媽先後3次入住醫院並開刀手術，我返回內地老家，陪伴家人出入醫院。在那段期間，我心力交瘁，無法專注工作，更加無暇理會Hero Investments Ltd的投資，查閱有關月結單。我一直相信曾廣釗會繼續為我妥善故里管理Hero Investments Ltd的事宜。”

124.  However, I find Hong’s such broad and vague explanation that he did not pay attention to the investment in the Upbest Account since year end of 2016 totally unconvincing, for these reasons :

a. The monthly statements of the Upbest Account showed that a total of 13,338,000 Chun Wo shares had been purchased by 30 September 2015 at the total price of HK$19,704,385.79 at the average price of HK$1.4773 per share[18]. However, as shown in the monthly statements of the Upbest Account, which Hong had been receiving, the price of Chun Wo shares had since May 2016 been dropping sharply, to HK$1.25 on 31 May 2016[19], HK$1.1 on 30 June 2016[20], HK$0.93 on 29 July 2016[21], HK$0.94 on 31 August 2016[22], HK$0.99 on 30 September 2016[23], HK$0.93 on 31 October 2016, and HK$0.7 on 30 November 2016[24]. By 30 November 2016, the Upbest Account had shown a loss of about HK$13 million[25].

b. The sickness of Hong’s mother and wife since year end of 2016 simply could not explain Hong’s indifference, lack of communication, and lack of action to such sharp and consistent drop in the price of Chun Wo shares since May 2016. Moreover, I find it simply inherently very unlikely and incredible that even with the sickness of mother and wife, that Hong could not even have some time to look at the monthly statements of the Upbest Account in this period of 2 years.

c. Indeed, according to Hong’s story that he focused on investing in Chun Wo shares because of some insider information (alluded to later), one would expect Hong should be very alert as to the right time to sell the shares off for a quick profit and should be very concerned that there was no substantial rise in the price of Chun Wo shares within a short period (say, within several months) after he had invested so heavily and solely in them.

d. The en masse sale of the Chun Wo shares in the Upbest Account took place between 9 March 2017 to late May 2017, and at prices between around HK$0.8 and HK$0.9 per share, thus materializing the substantial loss. Hong’s evidence, (his supplemental witness statement §10) is that he had never instructed Tsang to sell the Chun Wo shares. Yet, according to Hong, he signed the board resolution and executed the Upbest POA to Tsang in June 2017 without taking a look at the monthly statements of the Upbest Account, without making enquiries whosoever with Tsang when Tsang told him that the reason for requiring the Upbest POA was due to the fact that a lot of online transactions were not made by Hong himself. The natural and immediate reaction of Hong when he was so told by Tsang should have been asking Tsang about what the transactions were. I do not at all accept Hong’s explanation that “he trusted Tsang”, who he got barely acquainted and with whom no contract or documents have been signed. Thus, I find this lack of checking and casually signing of the Upbest POA by Hong, a qualified accountant for years, most inherently improbable and incredible.

e. I also find this most inherently improbable on the part of Tsang, to a point of defying logic and common sense, that had these been Hong’s personal investment and Hong was not consulted and his prior consent not obtained before executing such en masse sale (therefore, secretly by Tsang and being unauthorized) that Tsang would take the initiative to inform Hong that Upbest took the view that there were many transactions not executed by Hong and asked for the Upbest POA (thereby prompting Hong to investigate and discover) evidently with a view to facilitate later and further transactions in the Upbest Account to be made by Tsang.

125.  I thus find much force in Mr Lung’s said submissions mentioned in §122 above and accept them.

126.  I also find very inherently improbable and incredible Hong’s explanation as to why the Upbest Account traded only in Chun Wo shares from September 2015 to late March 2018, which explanation he gave for the first time when he was cross-examined. Hong’s oral evidence was that during CCCG’s Annual Meeting held in early 2015, he learnt that CCCG would be making “significant investment” in a Hong Kong listed company, which sparked great interest within CCCG, with many of CCCG’s staff considered a “good investment opportunity”; and that around March 2015, news regarding the potential investment of CCCG into Chun Wo started to circulate within CCCG, and he decided to invest into Chun Wo shares and that was when V-P Xu recommended Tsang to him. I find such explanation inherently improbable and incredible because :

a. It defies good common and commercial sense that the top management of CCCG would let the news of its intended investment into Chun Wo be leaked and indeed, according to Hong, be circulated amount staff of Chun Wo, as it clearly would potentially push up the price of Chun Wo shares and might also potentially jeopardize whatever deal CCCG had in mind to make concerning Chun Wo.

b. If Hong decided to only purchase Chun Wo shares with HK$25,000,000 because there was such insider news, then when its price began to drop continuously and significantly since May 2016, Hong ought to have done something about his speculation into the Chun Wo shares. However, Hong did not at all. As we have seen, he did not even discuss the matter or raised any concern with Tsang.

c. Such trading pattern simply were not consistent with the approach of a speculator trading to make a quick and large profit based on insider news.

127.  I also do not accept Hong’s explanation over the May 2018 Wechat Messages. I will first set these messages out :

“5月10日中午12:27

Tsang: 你可找徐軍成下周一起見色嗎?

5月10日中午12:41

Hong: 我試試，你找他什么事

5月10日中午12:47

Tsang: 有關要求他們還股票款項給我

Hong: 晚点回你

5月11日下午15:55

Tsang: 我不是跟你講股票你們是需要還款給我的，星期三我給你們對數

5月15日下午16:04

Tsang: 明天與你及徐軍成三点見面?

5月15日下午16:08

Hong: 曾总，明天我們都有事，來不了，改天吧。

Tsang: 我們最終都要把帳對好，不要產生誤會”

128.  Tsang said that the May 2018 Wechat Messages showed that he chased after V-P Xu and Hong for the performance of the Payment Agreement. Hong on his part explained that when he received the May 2018 Wechat Messages, he did not know at all what Tsang was talking about (“我對此全無頭緒，也不明白他所指的”, at §10 of Hong’s supplemental witness statement) and he guessed that Tsang might have some dealings with V-P Xu that involved stock. As can be seen from the messages themselves, Hong never expressed any surprise or indicated he did not understand what Tsang was talking about, but instead, when being told by Tsang on 10 May 2018 “有關要求他們還股票款項給我”, Hong immediately replied “晚点回你”; and on 15 May 2018 when Tsang requested for a meeting with V-P Xu and Hong, Hong replied 4 minutes later that “明天我們都有事，來不了，改天吧” (my emphasis). I thus have no hesitation in rejecting Hong’s evidence that he did not at all know what Tsang was talking about. I find Hong less than truthful when he so said. I find that he did know.

129.  Lastly, I must note my observations as to the demeanor of Hong in giving evidence. I am singularly unimpressed with him as a witness. In many instances he did not answer questions promptly and directly. He was often hesitant. Though his evidence over different events and topics was summarized coherently above, in most instances they were given piece-meal over a number of answers. As noted, many of those were only given for the first time in oral evidence with no explanation as to why they were not set out in his witness statements. I formed the distinct impression that he was trying to patch his story along the way as he was giving evidence in the box. In sum, I do not find him a credible or reliable witness at all.

Tsang’s evidence and its evaluation

130.  Tsang filed his witness statement and supplemental witness statement respectively on 16 March 2020 and 21 October 2020.

131.  In Tsang’s witness statement, he set out the facts, as he has pleaded, regarding the Service Agreement and its performance and the discussion over and conclusion of the Payment Agreement in the March 2015 Meeting between him and V-P Xu and Hong acting on behalf of CCCG. I will therefore not recount that evidence here. Tsang further spoke about events that have occurred since late April 2016, in summary :

a. He had 2 meetings with V-P Xu and Hong in mid-June 2016 and early September 2016, in the latter of which he was informed by them that another state-owned enterprise would become the majority shareholder of CCCG such that the rumoured financial difficulties of CCCG since late April 2016 would be resolved;

b. In around December 2016 and in anticipation of the expiry of the Holding Period, he began to request V-P Xu and Hong to provide him with the balance in the Upbest Account to finalize whether there would be shortfall or surplus in the Upbest Account as compared with the amount of the Revised Service Fees;

c. At the expiry of the Holding Period (3 March 2017), the shares in the Upbest Account were worth HK$18,309,722 according to Upbest’s statement. The shortfall and thus the outstanding balance of the Revised Service Fees was HK$6,690,278;

d. Tsang requested for its settlement, but Hong refused to commit a date when CCCG would be able to settle it. Tsang began to harbour doubt over CCCG;

e. Tsang then was minded to sell the shares in the Upbest Account while awaiting settlement of the shortfall from CCCG. Given the distrust that he began to have, Tsang informed Hong to provide an approval from Hero’s board of directors for Tsang’s intended sale of the stocks in the Upbest Account, but Hong said he had no instruction from CCCG for the time being, but said that Tsang might sell them so long as the money was kept within Hero, and that he would inform Upbest;

f. Therefore and pursuant to the Payment Agreement, Tsang began selling the Chun Wo shares since around 9 March 2017 by giving instructions online, for which Tsang was given the password;

g. Around the same time, V-P Xu and Hong promised to re-transfer Hero’s shareholding to Tsang pursuant to the Payment Agreement no later than mid-2017 and by which time CCCG would also settle the shortfall;

h. Subsequently, Upbest informed Tsang that Hong was required to execute a power of attorney to authorize Tsang to continue to give trading instructions to Upbest. Tsang immediately asked Hong to do so. In or around April 2017, Hong informed Tsang that he was in Zhejiang and could not come to Hong Kong to execute it but agreed to execute it if Tsang posted it to him. Tsang accordingly couriered a power of attorney in Upbest’s standard form to Hong, but Hong did not send back the executed version.

i. It was only until 7 June 2017 that Hong came to Tsang’s office in Hong Kong and signed the Upbest POA. During the same meeting, Hong said that he was worried about CCCG’s financial situation and he would not be coming to Hong Kong as often. Tsang immediately requested Hong to report to CCCG to arrange the re-transfer of Hero’s shareholding to him, but Hong was reluctant to commit to a deadline;

j. In light of CCCG’s such attitude, Tsang made 5 transfers from Upbest Account to Hero’s HSBC A/Cs from 12 July 2017 to 24 August 2017 totalling HK$7,800,000 and started to use the money in Hero’s HSBC A/Cs as well as paying money in Hero’s HSBC A/Cs for certain expenses;

k. In around December 2017, Hong requested Tsang to stop transferring money out from the Upbest Account or else CCCG would not honour the payment of the shortfall and Hong said that CCCG would pay the shortfall latest by 15 February 2018 before the 2018 Lunar New Year. Tsang accordingly stopped;

l. CCCG did not pay the shortfall by 15 February 2018 and requested further extension of time. Tsang was unable to contact Hong since late February 2018. Tsang therefore between 6 March 2018 and 29 March 2018 made 4 withdrawals totalling HK$7,340,000 from the Upbest Account into Hero’s HSBC A/Cs; and

m. He repeatedly reminded Hong that there was still the shortfall owing, and the May 2018 Wechat Messages were exchanged with a view to arranging a meeting with V-P Xu and Hong to insist on the payment of the shortfall.

132.  I note at this juncture that the events and communications with Hong set out in the preceding sub-paragraphs have not been seriously challenged in Hong’s witness statements, or in the cross-examination of Tsang, or in Hong’s Closing Submissions save (a) the circumstances surrounding the signing of the Upbest POA, (b) that Hong did not know or did not agree to Tsang selling the Chun Wo shares in the Upbest Account, and (c) Hong disputed with Tsang over the meaning and reason for having the May 2018 Wechat Messages. Concerning the circumstances of signing the Upbest POA, Tsang in cross-examination pointed out that the Upbest POA[26] bore a fax mark at the top showing that it was faxed on 26 April 2017, which corroborated his version.

133.  In Tsang’s supplemental witness statement, he, among others, provided further details as to how the Service Agreement was concluded and performed on his part, in summary

a. In late 2014, it was through a friend of his who worked in Somerley Capital Holdings Limited that he came to know that CCCG was looking for opportunities to participate in the construction industry in Hong Kong through strategic partnership in a Hong Kong listed construction company;

b. This friend introduced him to JH Xu, who was then the representative of CCCG. Tsang then provided some financial information of several Hong Kong listed construction companies to JH Xu, including that of Chun Wo;

c. In October 2014, CCCG planned to submit a tender for a construction project in Ma On Shan. They proposed to invite Chun Wo to participate (for only around 10%) as a “tester project” to build relationship between CCCG and Chun Wo. Chun Wo accepted the invitation and their tender was successful;

d. Through this Tsang gained the trust of JH Xu and CCCG. JH Xu then suggested formalizing Tsang’s work as an intermediary and introducer for the suitable target. Though CCCG had not committed to investing in Chun Wo, Tsang sensed that both Chun Wo and CCCG were interested in forming a strategic partnership. In January 2015, Tsang helped JH Xu to get a seat in the board of Chun Wo and JH Xu was re-assigned by CCCG to join Chun Wo as its Co-Chairman;

e. In around February 2015, the meeting mentioned in §8 of his witness statement took place and the Service Agreement was reached. Tsang expressly said that the Service Agreement was “[JH Xu’s] return of my favour” in helping him become the Co-Chairman of Chun Wo.

f. Throughout late February to early March 2015, negotiations about CCCG’s equity participation in Chun Wo took place. Tsang helped relaying proposals between the 2 sides and narrowing down their differences, and a two-stage business tie-up was formulated as he detailed in §9 of his witness statement, which was then implemented in the CCCG Subscription.

134.  Mr Chow submitted that the Service Agreement and its alleged due performance and the Payment Agreement were not credible or not proved or not established :

a. Mr Chow cross-examined Tsang heavily on this and submitted that the alleged role for Tsang’s performance of the Service Agreement per its term as “the introducer” and that Tsang had rendered any services to CCCG was incredible because by February 2015 (the time the Service Agreement was concluded), CCCG and Chun Wo had already been cooperating in the Ma On Shan Project and JH Xu was already appointed as Co-Chairman of Chun Wo;

b. The above-mentioned details set out in Tsang’s supplemental witness statement and further details provided during Tsang’s cross-examination were not pleaded;

c. There was no credible, documentary or corroborative evidence supporting them;

d. Mr Chow made a number of contentions, from the perspective of CCCG, to the effect that CCCG should not have needed the service of Tsang, it had no motive or incentive to enter into the Service Agreement or it should not have agreed to the terms in the Service Agreement or that the scheme of using an investment fund for paying Tsang in the Payment Agreement was not inherently credible;

e. By reason of the New Case Argument, Tsang was not a generally credible witness; and

f. Adverse inference should be drawn against Tsang’s case because he failed to call JH Xu as his witness and Tsang has admitted having deleted certain material documentary evidence.

135.  I will consider these points in turn.

136.  Mr Chow’s cross examination and submission regarding the performance of the “introducer” role to earn the very substantial Service Fees and then the Revised Service Fees were entirely premised on Hero and Hong’s view on what that role was, namely just helping CCCG to be acquainted with Chun Wo, which they said would be preposterous and inherently improbable.

137.  However, since the first of that line of questions was put to Tsang, Tsang had clearly and equivocally answered that such was not his understanding or the term of the Service Agreement. When repeatedly pressed, Tsang maintained to the effect that his role as “introducer” was to act as the intermediary providing such services as the effective cause bringing about the transaction. Such understanding was obviously in line with the well-established common law principle that, unless there are any special terms or other indications in the contract, where the remuneration of an agent is a commission on a transaction to be brought about, he is not entitled to such commission unless his services were the effective cause of the transaction being brought about : Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 Coleman J at §49 and §50. Moreover, I find no basis for Hero and Hong, not being the contracting parties, to insist that their interpretation of the role of an “introducer” in the Service Agreement was correct or was the one intended by CCCG and Tsang. I have no hesitation in accepting Tsang’s evidence in this regard and I must reject Hero and Hong’s such submission.

138.  I must again reject as completely without substance Mr Chow’s pleading objection that matters said by Tsang on his due performance of the Service Agreement (whether in his supplemental witness statement or orally in evidence) were not pleaded. Quite clearly, what Tsang said in his witness statements and in oral evidence as to the due performance of the Service Agreement are evidence, and as such, and as a general rule of pleading, is not required to be pleaded, unlike essential averments. The averment that the Service Agreement has been duly performed has been pleaded in §11 of the AD&C.

139.  I turn next to consider Mr Chow’s complaint that Tsang has changed his evidence in the course of his oral testimony.

140.  In Mr Chow’s Closing Submissions, merely one such instance was identified, namely, that Tsang said in his witness statement that he mentioned about the bank statements of Hero’s HSBC A/Cs to Hong during the March 2015 Meeting while he said in oral evidence that he had handed such bank statements to Hong in that meeting[27]. It seems to me such a discrepancy is so minor as to be negligible. Indeed and in my view, the fact that despite Mr Chow’s pressing cross-examination and diligence, only one such minor instance was identified speaks for the overall consistency of Tsang’s evidence.

141.  I turn next to consider the New Case Argument. One of the main thrust was that there was a change in Tsang’s case as stated in Tsang’s Aff (which as said, was filed on 12 July 2018, which was 3 days after the Writ herein was issued, and was filed to oppose the Mareva Injunction herein obtained on 6 July 2018) and his present pleaded case and evidence.

142.  In Tsang’s Aff, the only paragraphs that dealt with the facts and the substance of Hero’s claim and Tsang’s case were §4 and §5:

“4. In the Affirmation given by the Plaintiff’s sole director and shareholder, Mr. Hong Zhaohui (洪朝輝)(“Hong”), Hong alleged that he and the Plaintiff had, in short, fallen victim to my intentional embezzlement of the Plaintiff’s funds. This, in fact, cannot be further from the truth. As I have only been served the Injunction Order on 10 July 2018, I do not have enough time to collate the requisite documents and information as regards the transaction between Hong and I, and may not be able to give the Court a detailed and complete picture of the matter before the inter parties hearing this Friday. However, I can say that Hong did not give full and frank disclosure to the Court. The transfer of funds from the Plaintiff’s bank and securities account was fully agreed by Hong himself on his own behalf and acting on behalf of the Plaintiff, and the said transfers represented his repayment of outstanding money payable to me by Hong. In fact, as the amount in the Plaintiff’s bank account was insufficient to cover the outstanding money payable from the Plaintiff to me, I had been actively requesting Hong to attend a meeting with me in order to discuss the further repayment after the transfer of funds from the Plaintiff was complete, but Hong had been unwilling to discuss the same and declined to meet with me. There is now shown to me and marked “KT-1” a copy of the WeChat conversation between Hong and I, in which it can be seen that instead of Hong making inquiries to me with regard to the transfer, it was in fact I who was chasing Hong for a meeting on 10, 11 and 15 May 2018 respectively.

5. It therefore came to me as a great surprise that not only had Hong failed to honour the agreement made between us, but he had further fabricated a tale of misrepresentation and embezzlement in a bid to oppress me and compromise my position in these proceedings.”

143.  When confronted in cross examination, Tsang readily accepted that the account given in Tsang’s Aff was different from his present pleaded case to the extent that the account in Tsang’s Aff was incomplete in that the role and involvement of CCCG (therefore the Service Agreement, the Payment Agreement, JH Xu and V-P Xu) was not mentioned. He explained that he understood the matter was sensitive to CCCG and JH Xu and V-P Xu, and at the time he did not have enough time to sort matters out with them and therefore he chose to respond in that limited way, but there he expressly mentioned that he was not able to give the Court “a detailed and complete picture of the matter”, though the reasons given was not the true one. I accept that the extent of the difference between his case as stated in Tsang’s Aff and his present pleaded case is as described by Tsang. As I find that Tsang was a reliable and credible witness (for reasons that I will explain in due course), I accept his such explanation.

144.  The other main thrust of the New Case Argument was that new matters were introduced ambushing Hong, Tsang’s case has morphed beyond its pleadings, “stories inside stories” and such. Despite the profuse use of labels by Mr Chow, there was no clear identification of what the actual “new matters” or different matters were.

145.  The only matter of substance identified by Mr Chow in his Closing Submissions was

“For one, the role and importance of Xu Jianhua has been increased exponentially after trial such that Xu Jianhua is now essentially an indispensable player in his case.” (§15 of his Closing Submissions)

146.  I do not agree that the role and importance of JH Xu has been increased exponentially, as submitted by Mr Chow. Rather, as can be seen from Tsang’s account given in his supplemental witness statement, JH Xu has always been an important figure in the Service Agreement stage of things. When comparing closely Tsang’s oral version with what he said in his supplemental witness statement, only the following matters were said for the first time by Tsang in his cross-examination :

a. That JH Xu was the person acting on behalf of CCCG who negotiated and reached the Service Agreement with Tsang; and

b. Tsang understood that at the time JH Xu had certain difficulty in being the person formally representing CCCG in its negotiation with Chun Wo, but Tsang gave JH Xu and CCCG this suggestion, which was accepted by them and which would overcome that difficulty, namely, appointing JH Xu as a member of the board of director of Chun Wo, thereby JH Xu could be involved and looped into the negotiation in his formal capacity as one of the representatives of Chun Wo, and that Tsang functioned effectively as the intermediary between the 2 companies by successfully facilitated the implementation of this strategy.

147.  I find there is no substance in the New Case Argument and I reject it for these reasons :

a. The starting position and context is, as I set out above, that Hero and Hong in their pleadings merely pleaded a bare non-admission to the Service Agreement and its due performance;

b. Viewed in that context and as the matter was not one, according to pleadings, that Hero and Hong would hotly contest in any respect of detail, Tsang’s supplemental witness statement has already set out in quite a detail manner Tsang’s evidence concerning due performance of the Service Agreement;

c. After hearing Tsang’s oral evidence, I accept that the difficulty to JH Xu as understood by Tsang and explained by him in oral evidence was indeed a matter which would cause such difficulty to JH Xu such that I accept the explanation given was a genuine reason for Tsang to be hesitant in divulging the difficulty;

d. Relevantly and importantly, the details mentioned in the preceding paragraph were further or additional details. They were merely supplemental. They were not in any way inconsistent with or contradictory to anything Tsang said hitherto or his pleaded case; and

e. These details were persistently elicited by Hero and Hong in cross-examination. They therefore were not “top-up” evidence (as characterized by Mr Chow) in the sense of top-up given in examination in chief, where leave is usually required.

148.  Though I have not here dealt with the New Case Argument by reference to all the labels used by Mr Chow characterizing it in different places in his Closing Submissions (because there were too many), I expressly find that the argument has no substance regardless of under which label it was expressed in.

149.  I also reject Mr Chow’s various contentions to the effect that it was inherently improbable or implausible or incredible or there was a lack of incentive or motivation on the part of CCCG such that CCCG would enter into the Service Agreement or the Payment Agreement, that CCCG would agree to pay Tsang for his service, that CCCG would agree to the payment scheme as embodied by the Payment Agreement, and such. Such submissions are clearly pure conjectures now put forth by Hero and Hong (who pleaded that they knew nothing about the Service Agreement, and the Payment Agreement so far as CCCG’s considerations are concerned) trying to persuade this Court in the context of this trial, and with the scanty evidence regarding the commercial context for CCCG to seek such strategic partnership or regarding the factual matrix behind the CCCG Subscription, to evaluate matters concerning their likelihood to CCCG, such as to use it as considerations to find against Tsang’s version. In my view, in the present context of this case, the degree of likelihood of those matters from the point of view of CCCG is not something this Court can properly evaluate or take into account.

150.  Moreover, by the Default Judgment, CCCG itself has impliedly admitted them to the extent indicated in §97 above.

151.  One matter that this Court considers weighty is this. Tsang had clearly set out in his witness statements the timing and reasons for various events (which are common ground or indisputable) : the timing and reason for the 2015 Transfer, why he remained as the sole signatory of Hero’s HSBC A/Cs, why HK$25,000,000 was injected into the Upbest Account, the timing of the Holding Period, the purchase in the Upbest Account of solely Chun Wo shares, the fact that and the implicit reason why there was no communication between Hong and Tsang about the investments in the Upbest Account and why there was no communications concerning switching to purchasing other shares, the indifference attitude of Hong towards the investments in the Upbest Account, the timing for the en masse sale of the Chun Wo shares in the Upbest Account, the existence of the time gap between the 2 rounds of withdrawals of money from the Upbest Account, the May 2018 Wechat Messages and such. In my view, Tsang’s version over these matters consistently, coherently and satisfactorily explained these events and their timing. The fact that Tsang’s version has so satisfactorily explained all these was not challenge by Hero and Hong at all.

152.  I will consider the matters relating to adverse inferences to be drawn in the next section.

153.  Lastly, I note my observation as to the demeanor of Tsang in giving evidence. This Court is positively impressed by Tsang as a witness. He was thoughtful, but direct, spontaneous and clear in answering questions. In multiple instances, he directly and spontaneous gave answers that are clearly detrimental to his case, such as admitting deleting certain documents (as will be alluded to), and having given an incomplete account in Tsang’s Aff. I find the accounts he gave over different aspects were coherent and consistent. His evidence was not at all shaken by cross-examination. I have no hesitation in concluding that he is a reliable and truthful witness.

Adverse inferences to be drawn

154.  Both sides submitted that certain adverse inferences should be drawn against the version put forth by the other side.

155.  Firstly, as Tsang readily and spontaneously admitted in cross-examination that there were some written notes or records of communications he had with JH Xu at and around the time of the Service Agreement and its performance which he possessed, but at the time (after this action was commenced) thinking that the Service Agreement was not hotly contested, he had deleted or destroyed per the request of JH Xu.

156.  In this connection, I accept Mr Chow’s submission to the effect that destroying relevant documentary evidence is unacceptable conduct and is a serious matter that the Court cannot condone unless there are good and compelling reason justifying.

157.  Tsang however also said in evidence that he was not supposed to have and to retain those records under the terms of the Service Agreement (which would make making and keeping them a breach) and he kept them secretly to safeguard his own interest; and therefore, upon JH Xu’s request, he destroyed or deleted them. As I find him a credible witness, I accept his such evidence and also accept that his further retention of those records amounted to a breach of the Service Agreement. I take the view, and I find, that Tsang destroyed those records not because he was afraid that their production would adversely affect the merits of his case, but because he was rectifying his breach of the Service Agreement and because, as I accept his evidence that, acting as an intermediary in the capital market his trustworthiness and discreetness were most important. I am therefore not prepared to draw such an adverse inference against him.

158.  Even if I were wrong and ought to have drawn such an adverse inference, I would have found that the adverse inference is of little probative value against the totality of evidence and it would not have swayed me to find different than what I conclude in the next section, for the reasons that :

a. It is Tsang’s case that JH Xu was only involved in the negotiation and conclusion of the Service Agreement and its due performance, and not at all involved with the Payment Agreement, which, according to Tsang’s case, V-P Xu and Hong were involved. It is therefore very clear to me that the destroyed documentary evidence only concerned the Service Agreement and its due performance.

b. The evidence and matters supporting the credibility of Tsang’s version and showing that Hong’s version is incredible are, as explained in this judgment, overwhelming.

c. As said, the Service Agreement and the fact that CCCG owed Tsang the outstanding balance of the Revised Service Fees had been impliedly admitted by CCCG.

159.  Mr Chow further asked that another adverse inference be drawn against Tsang’s case because the 3 Defendants failed to call JH Xu and one Dominic Pang, a key personnel in Chun Wo, as witnesses. Dominic Pang’s testimony would be relevant in proving Tsang’s due performance of the Service Agreement.

160.  I would not draw such an adverse inference. Firstly, I accept Tsang’s evidence that shortly after this action was commenced, he had requested JH Xu to come forth as a witness, and JH Xu refused and further asked Tsang to delete the records of their communication. I therefore take the view that reasonable effort has been made by Tsang in relation to calling JH Xu. Secondly and more importantly, and as explained above, I do find the matters concerning the Service Agreement and its performance, which was admitted by CCCG, amply proved.

161.  Mr Lung submitted that an adverse inference should be drawn against Hong’s case concerning the source of funds and that Tsang was engaged as Hong’s personal advisor in the March 2015 Meeting by reason of (a) Hong failure or unwillingness to produce the relevant bank documents substantiating his story of gift from Yu, (b) Hong’s failure to call Yu who would be a direct and crucial witness supporting Hong’s case on source of funds, (c) Hong’s failure to call V-P Xu who was present in the crucial March 2015 Meeting and who no doubt could say very simply and directly whether the funds were injected by CCCG as Tsang said or was Hong’s own money, and (d) indeed, any relevant personnel from the finance department of CCCG simply confirming that the funds were not injected by CCCG.

162.  It cannot be disputed that the above witnesses and documents, if proffered by Hong, would have been most relevant, and the evidence they provide would be simple and directly on points crucial to Hong’s case. There was no credible explanation given as to why they were not called and such documents not proffered. I accept Mr Lung’s submission that adverse inference should be drawn against Hong’s case.

CONCLUSION

163.  As explained above, I find that there are so many clear and evident inherent improbabilities and incredibilities in Hong’s evidence and account and that Hong is a unreliable and incredible witness, such that even without the said adverse inference being drawn against Hong, I am already of the clear view that his evidence and case would not be accepted when compared with Tsang’s evidence and case. The adverse inference to be drawn against Hong just makes my such view all the more clearer.

164.  Though there is no document evidencing the existence of the Service Agreement and the Payment Agreement, as Mr Chow emphasized, I accept Tsang’s evidence and his explanation that it was so because it was a term of the Service Agreement that Tsang promised CCCG to conduct the whole process with extreme confidentiality and discreteness and that there would be no records in writing.

165.  I find Tsang a credible and reliable witness and I have no difficulty at all preferring his testimony over that of Hong’s whenever they conflict. I find Tsang version consistent, coherent and credible and, as said, satisfactorily explain the events, their timing and various other matters, including particularly the rather unusual features of the trading pattern in the Upbest Account, of Tsang remaining as the sole signatory of the Hero’s HSBC A/Cs for over 2 years, and of the signing of the Upbest POA. I thus find as facts the facts contained in Tsang’s version. Particularly, I find as proved the Service Agreement, the Payment Agreement, and the Hero Trust, and that Hong acted as a representative of CCCG, that the Subject Sum belonged beneficially to Tsang, Tsang was entitled to make the 26 Withdrawals under the Payment Agreement, and Tsang was entitled to the return of the entire shareholding of Hero after the purpose of using Hero for effecting the payment under the Payment Agreement was fulfilled.

166.  I would also state that even without the limited evidentiary support offered by the Default Judgment, I would have found on balance of probabilities in favour of Tsang’s version over Hong’s version.

DISPOSAL

167.  In the premises, I dismiss Hero’s claim against the 3 Defendants. I will enter judgment in favour of Tsang’s Counterclaim against Hero and Hong and make the declaration and order in terms of paragraph (A) of the Counterclaim.

168.  I will make a costs order nisi that Hong do pay Tsang, Oxley and Corporate Capital their costs of the Original Action and Tsang’s costs of the Counterclaim, including all costs reserved, to be taxed if not agreed. This will become absolute within 14 days unless any party applies by summons to vary.

169.  The parties are to attempt to agree on the order/directions regarding the payment out or otherwise disposal of the amounts paid into Court by the 3 Defendants and Hero and to include the same in the engrossed judgment to be approved. Failing agreement, the parties may write jointly to this Court within 21 days with their respective proposed versions and succinct reasons.

170.  Lastly, I thank Mr Chow and Mr Lung for their assistance.