CHENG XURAN v. WONG WAI SZE

HCA 1713/2021

[2025] HKCFI 4809

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1713 OF 2021

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JUDGMENT

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Introduction

1.  Mr Cheng brought this action against Madam Wong to recover two loans extended to her in the aggregate amount of HK$20,000,000 (“the Two Loans”) with interest thereon.

2.  Mr Cheng alleges that he agreed to lend Madam Wong the Two Loans orally in or around late September 2018 (“the Oral Loan Agreement”) and the Two Loans were subsequently evidenced by a written loan agreement dated 16 October 2018 (“the Written Loan Agreement”), a repayment agreement dated 15 July 2019 (“the Repayment Agreement”) and a written acknowledgment of debt dated 15 January 2019 (“the IOU”).

3.  Madam Wong denies the existence of the Oral Loan Agreement. She denies having signed the Written Loan Agreement and the purported signature appearing therein is not hers. She contends that she signed the Repayment Agreement under duress and/or when she lacked the mental capacity to do so. She maintains that the IOU relates to another transaction and does not really represent any part of the Two Loans. In any event, Madam Wong says that the IOU has been settled and accounted for. Lastly, she alleges that Mr Cheng was at the material times a money lender within the meaning of the Money Lender Ordinance, Cap. 163 (“the MLO”) and the Repayment Agreement is illegal for want of compliance with the relevant provisions therein.

4.  Mr Chow, together with Mr Wu, appears for Mr Cheng and Mr Lau appears for Madam Wong at the trial.

Background facts

5.  There are some factual disputes calling for my determination. The parties have managed to lodge with this court a document entitled “Agreed Background Facts” signed by their legal representatives. Conveniently, I reproduce the contents of this document with some modifications below by way of an overview of the undisputed background facts.

6.  At the material times, Mr Cheng was a businessman residing in the Mainland and Madam Wong was, and still is, a Hong Kong resident.

7.  Madam Wong was the sole shareholder and director of a Hong Kong company known as Make It Happen International Limited.

8.  In or around 2017 or 2018, through the introduction of their common friend Madam Chen Xiangyi ("Madam Chen"), Mr Cheng and Madam Wong became acquainted.

9.  Subsequently, Mr Cheng and Madam Wong became co‑investors in a Hong Kong company known as Winroad Asia Limited ("Winroad"):-

(a)  As to Mr Cheng:-

(i)  On or about 9 February 2018, he acquired 300,000 shares in Winroad;

(ii)  On or about 9 February 2018, he was made a director of Winroad;

(iii)  On or about 11 February 2019, he was allotted 900,000 shares in Winroad; and

(iv)  As at 24 February 2019, he held 1,170,000 issued shares in Winroad, and was the majority shareholder thereof.

(b)  As to Madam Wong:-

(i)  Between 11 February 2019 and 10 December 2019, she was a minority shareholder of Winroad holding between 100,000 and 130,000 issues shares of Winroad; and

(ii)  Between 18 August 2017 and 8 February 2018 and 4 October 2018 and 8 January 2020, the Defendant was a director of Winroad.

10.  In or around July 2019, Mr Cheng visited Hong Kong. Around that time, Madam Wong was arrested by the Customs and Excise Department (“the C & E”) for a suspected contravention of the Trade Descriptions Ordinance, Cap. 362 (“TDO”). Eventually, Madam Wong was prosecuted and acquitted of all charges in 2021.

Agreed list of issues

11.  The primary case of Mr Cheng is one of debt recovery and he has an alternative claim in unjust enrichment.

12.  The following 9 issues are agreed by the parties:

(1)  Did Mr Cheng and Madam Wong enter into the Oral Loan Agreement respectively in the sum of HK$5,000,000 (“the 1^st Loan”) and that of HK$15,000,000 (“the 2^nd Loan”) in or around September 2018?

(2)  Did Mr Cheng and Madam Wong enter into the Written Loan Agreement on or around 16 October 2018 and, in particular, whether the purported signature of Madam Wong appearing therein is genuine?

(3)  Under what circumstances Mr Cheng and Madam Wong signed the Repayment Agreement?

(4)  Is the Repayment Agreement void or voidable at the election of Madam Wong and enforceable against Madam Wong on the grounds that Madam Wong signed the same under duress or without the necessary mental capacity?

(5)  Is the Repayment Agreement supported by consideration?

(6)  Is the Repayment Agreement illegal for want of compliance with the MLO?

(7)  Did Madam Wong sign the IOU for the balance of the interest on the 1^st Loan and the 2^nd Loan?

(8)  Has the liability under the IOU been fully settled in any event?

(9)  If the Loan Agreement and/or the Repayment Agreement and/or the IOU was held unenforceable void or ineffective, has Madam Wong been incontrovertibly benefited by the funds provided Mr Cheng in the sum of HK$20,977,000?

Witness and their evidence

13.  On the factual issues, apart from himself, Mr Cheng called Mr Wang and Mr Bei to testify. Mr Cheng has filed a witness statement of Madam Chen but on the second day of the trial, it was indicated that Madam Chen was unable to travel to Hong Kong to attend the trial due to the medical condition of her father. Mr Chow asks this court to admit her witness statement as hearsay evidence.

14.  On the other hand, Madam Wong alone testified to support her defence.

15.  The parties have instructed Dr Leung as their single joint handwriting report. At the request of Mr Chow, Dr Leung gave live evidence in addition to her expert report dated 30 October 2023 (“the Expert Report”).

16.  I shall first determine the admissibility of Madam Chen’s witness statement. Her evidence is highly controversial and touches upon the major disputes between the parties. The First Loan was allegedly given to Madam Wong through her. Madam Chen was a party to the Repayment Agreement and Madam Wong signed the same in her presence. Madam Wong alleges that she was one of the persons who exerted pressure on her and put her under duress. In the circumstances, it would be grossly unfair for her witness statement to be admitted as evidence without giving Madam Wong a chance to challenge her evidence by way of cross‑examination.

17.  Her explanation for not attending the trial is not reasonable too. It was said that there was an arrangement for her father to go through a gastrointestinal procedure. Mr Bei, her husband, in cross-examination, explained that Madam Chen’s father had to undergo an endoscopy and a colonoscopy. It does not appear to me to be an urgent or serious matter in the absence of relevant medical evidence.

18.  Therefore, I agree with Mr Lau that in the interests of justice, her witness statement should be excluded pursuant to section 47 of the Evidence Ordinance, Cap. 8.

19.  A summary of the evidence of each witness appears below and I shall start with the evidence of Mr Cheng and his witnesses.

Mr Cheng’s evidence

20.  Mr Cheng has filed a 5-page witness statement comprising 18 paragraphs only and it covers little more than the allegations in the Statement of Claim.

21.  In cross-examination, Mr Cheng provided a lot of background information. He was born and bred in the Mainland. He received junior secondary education. He once joined the military and later became a businessman. He characterises his business as focusing on mega transactions in the trade of petroleum, coal mines and minerals, etc. He says he has 3 to 7 offices and his business covers the Mainland, Hong Kong and Singapore. He now has approximately 300 to 400 employees.

22.  Mr Cheng came to know Madam Chen, also a Mainland resident, because of his acquaintance with her parents. They are well-educated and so Mr Cheng has high regard for their family including Madam Chen. To his understanding, Madam Chen was an insurance broker working for the AIA group.

23.  Madam Chen has earned a postgraduate degree course and acquired her permanent residency in Hong Kong.

24.  In early 2018, through the introduction of Madam Chen, Mr Cheng befriended Madam Wong. Before long, Madam Wong invited him to invest in Winroad. She was a director of Winroad and told Mr Cheng that she would soon become a shareholder. Mr Cheng agreed and became a shareholder and director of Winroad on 9 February 2018.

25.  In September 2018, Madam Wong orally asked Mr Cheng to extend to her the 1^st Loan and the 2^nd Loan. Madam Wong promised to repay them within three months together with a sum of HK$500,000 as interest on the 1^st Loan and another sum of HK$1,500,000 as interest on the 2^nd Loan.

26.  On or about 1 October 2018, Mr Cheng through Madam Chen paid a sum of equivalent to HK$5 million in Reminbi. He decided to make a record of the 1^st Loan and a confirmation of the 2^nd Loan. Thus, he asked his assistant to procure Madam Wong to sign a loan agreement for the Loans.

27.  Later, Mr Cheng received the Written Loan Agreement from his assistant. Madam Wong had signed the same apparently. Mr Cheng then signed the Written Loan Agreement.

28.  On 16 October 2018, Mr Cheng transferred a sum of HK$10,000,000 from his account with Standard Chartered Bank to the account of Madam Wong with the Bank of China (“the BOC Account”) as part of the 2^nd Loan.

29.  On or about 19 October 2018, Mr Cheng sent a cheque numbered 100029 in the amount of HK$5,000,000 to Madam Wong.

30.  On or about 2 January 2019, Madam Wong orally agreed to pay Mr Cheng a sum of HK$2 million as interest on the Loans pursuant to the Oral Loan Agreement.

31.  Eventually, Madam Wong only paid Mr Cheng by four separate sums in the aggregate amount of HK$1 million as interest in the following manner.

32.  First, on or about 2 January 2019, Madam Wong paid Mr Cheng a sum of HK$400,000 into his account with the Bank of China (“BOC”).

33.  On or about 17 January 2019, Madam Wong paid a sum of HK$200,000 into Mr Cheng’s BOC account.

34.  On the same day, Madam Wong transferred a sum of HK$300,000 and another sum of HK$100,000 into the account of Winroad to settle the debts of Mr Cheng on his behalf.

35.  Until 15 January 2019, Madam Wong still failed to repay the principals of the Loans and the balance of the interest payable in the sum of HK$1 million.

36.  In July 2019, Mr Cheng decided to come to Hong Kong and demanded Madam Wong to make repayment in person. Madam Chen also went with Mr Cheng because Madam Wong was indebted to her too.

37.  On or about 15 July 2019, all of them attended the office of Mr Cheng located on 16/F, 9 Walnut Street, Tai Kok Tsui, Kowloon (“the Office”). They had a discussion about the repayment plan and eventually came up with the Repayment Agreement. The Repayment Agreement is a tri-parte agreement among Mr Cheng, Madam Chen and Madam Wong and the principal express terms include:

(1)  Repayment amount: Mr Cheng HK$20 million, Madam Chen HK$2 million, totalling HK$22 million;

(2)  Repayment deadline and method: Starting from the date of the execution of the Repayment Agreement, Madam Wong should from 15 August 2019 to 15 May 2021 make monthly repayments of HK$1 million on the 15^th day of each calendar month;

(3)  Repayments should be made to Mr Cheng’s BOC account and Madam Chen’s BOC account;

(4)  Default liability: If Madam Wong fails to pay Mr Cheng the outstanding debt and interest in accordance with the requirements therein, Madam Wong shall be responsible for the breach. In case of such a breach, i.e. failing to make the stipulated repayments of the agreed amount, Madam Wong will unconditionally transfer her assets to Mr Cheng as security, Mr Cheng is entitled to manage such assets for the discharge of her outstanding liability.

38.  All Mr Cheng, Madam Chen and Madam Wong signed the Repayment Agreement at last.

39.  On the other hand, a shareholder meeting with of Winroad was held in the Office on 8 January 2020. Mr Cheng, Madam Chen, one Madam Shi and Madam Wong attended the meeting and there were handwritten minutes in the Chinese language signed by all the attendees including Madam Wong (“the Minutes”).

40.  In the Minutes, it was recorded, among other things, that regarding the Loans, Madam Wong agreed that before the Chinese new year, she would we pay HK$2 million in Reminbi. Immediately after this agreement, there was written two Chinese characters 「盡力」meaning “making the utmost effort”. Beside these two Chinese characters, Madam Wong signed.

41.  There being no repayment made by Madam Wong, Mr Cheng instructed his solicitors to issue a demand letter dated 26 February 2021 to Madam Wong (“the Demand Letter”). Madam Wong did not respond to the Demand Letter.

42.  Thereafter, Mr Cheng instructed his assistant Mr Wang to demand Madam Wong to make repayments by WeChat calls and messages.

43.  In regard to the IOU, Mr Cheng explained that on or about 15 January 2019, to settle the outstanding interest on the 1^st and 2^nd Loans, Madam Wong suggested to him that such outstanding interest should be converted into a loan to be settled by the dividends to be distributed to her before 31 December 2019. As a result, the IOU was created with Madam Wong’s Mainland Travel Permit and HKID card printed on the same paper bearing her signatures.

44.  In the end, Madam Wong failed to settle the outstanding interest save that she repaid Mr Cheng HK$10,000 on 18 January 2020, HK$10,000 on 23 January 2020 and HK$3,000 on 27 April 2020. Thus, for the amount in IOU, Madam Wong still owes Mr Cheng HK$977,000.

45.  In his evidence in chief, Mr Cheng did not deal with the allegation that he was a money lender. In the Defence, Madam Wong alleges that he has advanced a loan of about HK$50 million to one Mr Lau Siu Wa (“Mr Lau”). In the Reply, Mr Cheng denies he has ever lent any amount to Mr Lau and even if he did, he had not carried out business as a money lender in Hong Kong.

46.  In cross-examination, Mr Cheng explained that he came to know Mr Lau through the introduction of his friend. His friend bought a luxurious car from him and he paid a visit to Mr Lau’s boat. Mr Cheng knew that Mr Lau had once been an awardee of Ten Outstanding Young Persons Selection. Thus, Mr Cheng had a lot of respect for Mr Lau and was glad to have him as his friend.

47.  Despite his denial in the Defence, upon being shown a written loan agreement between Mr Lau and him dated 19 June 2018 (“Lau’s Loan Agreement”), Mr Cheng accepted that he made such a loan in the amount of HK$5 million advanced to Mr Lau and it was secured by 7 million shares in a public company (8422). Mr Cheng said the advancement was made on the basis of their friendship and he was such a generous person and philanthropist that he always gave financial assistance to his friends whom he respected. He said he subscribed to the Jewish theory that funds should not be left unused for half a year.

48.  However, on the second day of his cross-examination, he denied that it was a loan. He said the security in Lau’s Loan Agreement was a tactics to give Mr Lau some pressure. His explanation is incomprehensible.

Mr Wang’s evidence

49.  Mr Wang is a Mainlander working for Mr Cheng as his assistant. He is now in his early thirties and has received tertiary education. He studied international finance.

50.  On or about 16 October 2018, Mr Wang was instructed by Mr Cheng to prepare a written loan agreement with Madam Wong. Mr Cheng told him that he had already had an oral loan agreement with her. Mr Wang then discussed the terms of the written loan agreement with Madam Wong.

51.  In cross-examination, Mr Wang said for the first time that he had discussion with Madam Wong through WeChat video calls. After the terms had been finalised, Madam Wong printed a copy of the Written Loan Agreement and signed the same in front of the camera so that Mr Wang could be a witness. Mr Wang could observe that Madam Wong was in good mental state when signing the Written Loan Agreement.

52.  Subsequently, Madam Wong mailed to him a copy of the Written Loan Agreement bearing her signature.

53.  In July 2019, Mr Wang went to Hong Kong with Mr Cheng to demand Madam Wong for repayment. On 15 July 2019, invited by Mr Cheng, Madam Wong went to the Office and had a discussion with Mr Cheng about her outstanding liability. She appeared to him to be relaxed and emotionally stable.

54.  Mr Wang confirmed that no one ever put any pressure on Madam Wong to sign the Repayment Agreement and no threat or coercion was ever made to her.

55.  In May 2021, Mr Wang was instructed by Mr Cheng to demand Madam Wong to make repayment. He sent text messages to Madam Wong on 20 May 2021, 21 May 2021 and 30 June 2021 (“the Text Messages”). In all the Text Messages, Madam Wong did not ever deny her indebtedness in the amount of HK$20,977,000 and she kept saying that she was unable to repay because of her financial condition.

Mr Bei’s evidence

56.  Mr Bei is in his mid-thirties and is a Mainlander resident. He married Madam Chen in 2015. Before then, he took a postgraduate course in mechanical engineering in Hong Kong University.

57.  Mr Bei knew little about the dealings between Madam Wong and Mr Cheng.

58.  Mr Bei accompanied Ms Chen to take part in the signing of the Repayment Agreement in the Office on 15 July 2019. He confirmed that Madam Wong signed the Repayment Agreement voluntarily and in a mentally stable condition. He did not see anyone exert pressure on Madam Wong or force her to sign the Repayment Agreement by coercion or threats. No one detained Madam Wong against her will.

59.  Mr Bei was certain that the meeting took place in the Office and not a hotel room. He confirmed that Mr Cheng attended the meeting.

Madam Wong’s evidence

60.  Madam Wong has adopted the contents of her witness statement as her evidence in chief. Whilst the witness statement is well written, her oral evidence is not easily comprehensible and largely in disarray.

61.  She is a holder of an insurance broker license and a property agent licence. In 2017, Madam Wong worked as a responsible officer at Global Finance Limited (now known as Global Finance Broker Limited) (“Global Finance”), which was an insurance brokerage firm.

62.  There she came to know Madam Chen, who worked for the AIA Group. Madam Chen from time to time referred her clients to Madam Wong. Madam Wong claims that Madam Chen was her downline agent.

63.  Madam Chen introduced Mr Cheng to Madam Wong and she told Madam Wong that he was her rich uncle with considerable influence in the Mainland having some connections with the military. She said Mr Cheng had some interest in investment in Hong Kong.

64.  After some discussion, Mr Cheng agreed to be one of the owners of Winroad. He also purchased the Office for the use of Winroad.

65.  Madam Wong introduced Mr Lau to Mr Cheng. She understands that Mr Cheng provided a loan to Mr Lau.

66.  Mr Cheng gave Madam Wong an overall impression that he was a cash heavy, powerful and successful businessman with a great deal of useful connections.

67.  The business of Winroad was doing well and Mr Cheng trusted Madam Wong and gave her a free hand in its operation.

68.  Madam Wong denies the existence of the Loans and she never signed the Written Loan Agreement. She is positive that the purported signature in the Written Loan Agreement is a forgery. She only saw the Written Loan Agreement for the first time when she received the Demand Letter.

69.  Madam Wong denies having received the 2^nd Loan in particular. She did not have the BOC Account at all.

70.  Madam Wong explained that there were monetary transactions between Mr Cheng and her because Mr Cheng invested in her catering, music and tutoring businesses as well.

71.  All her businesses went downhill in 2019, however. Her medical clinic business carried on in the name of Grand Medical & Vaccine Centre Limited (“Grand Medical”). Grand Medical was beset with safety issues in early 2019. The C & E carried out an investigation and the assistance of Madam Wong was required. Bad publicity about Grand Medical was unstoppable and personal hate campaign was conducted against Madam Wong on Mainland social media. Mr Lau made a public protest with a banner beneath her flat. Madam Wong was under immense stress. In or around July 2019, Madam Wong was formally arrested by the C & E for an offence under the TDO. It was her first criminal prosecution.

72.  The criminal prosecution triggered her depression. She had suicidal thoughts and required medications. She did not dare to leave home and closed all the curtains at home to shut herself from the outside world.

73.  Madam Wong says that Mr Cheng at that time found out that Mr Lau default repayment of the loan advanced to him. Mr Cheng suspected that Mr Lau conspired with Madam Wong to cause him loss. Coupled with her business loss and her arrest by the C & E, Mr Cheng decided to cut his ties with her and demanded her to return to him his investments put into her businesses. It was against this background that she was forced to sign the Repayment Agreement.

74.  On 14 July 2019, despite all her problems, Madam Wong attended a dinner function in which an award was given to Winroad for its remarkable performance. There she came across Madam Chen, who invited her to her hotel room after the function. Madam Chen blamed her for a number of things and she drank a lot that night.

75.  She was distraught and was the verge of giving up her life. She was very weak and fragile.

76.  In the afternoon of the following day, she received a call from Madam Chen. Madam Chen told her that Mr Cheng required her to go to W Hotel to give an account. She knew she had no choice and so she picked up herself and walked to W Hotel, which is very near her home at Sorrento, West Kowloon.

77.  When she reached the hotel lobby, she saw Madam Chen and two males. She only knew Mr Bei being the husband of Madam Chen. She did not know the other male with a strong build. Mr Cheng was not present.

78.  Madam Chen then led all of them to a hotel room. Inside the room, she talked harshly and blamed Madam Wong for the failure of businesses causing loss to Mr Cheng. She asked Madam Wong to settle everything. She said if Madam Wong was willing to sign some documents for repayment, she would be able to further negotiate with Mr Cheng and settlement would be possible.

79.  Madam Wong was scared and feared for her own personal safety. She believed that if she did not comply with her demands, she might not be able to live any longer.

80.  Madam Chen continued to pressure her into signing the Repayment Agreement with hostile words and she even said that if Madam Wong wanted to leave the hotel, she must first sign the document.

81.  Madam Wong eventually yielded to her demand and followed them to the business centre. It took them some time to prepare the printed document for her to sign and it was the Repayment Agreement. She signed the document without having any chance to read it thoroughly and take legal advice. She was at long last allowed to leave the hotel but she was not provided a copy of the Repayment Agreement. She first read it when she received the Demand Letter.

82.  Madam Wong now says that due to her mental condition, she could not validly enter into the Repayment Agreement with the knowledge of its contents and the understanding of the effect of her signing the same. She maintains that she never has any intention to be bound by the terms of the Repayment Agreement despite her signing.

83.  Madam Wong says that the IOU was issued for the advancement made by Mr Cheng to her for the purpose of settling the outstanding claims of Global Finance against her when Mr Cheng first joined Winroad. She claims that the advancement was fully settled before her relationship with Mr Cheng turned sour.

84.  To prove her mental condition at the time of the signing of the Repayment Agreement, Madam Wong produced a letter of Dr Wong dated 22 May 2023 (“the Medical Certificate”) whereby Dr Wong certified that Madam Wong first attended her clinic in May 2016 for depression and had seen her for follow-up regularly until October 2019. She saw Dr Wong again once in December 2021.

85.  Dr Wong also showed the medical records in her computer relating to Madam Wong. Such records show that after Madam Wong saw Dr Wong on 3 July 2018, she only saw Dr Wong again on 13 August 2019.

86.  Regarding the Minutes, in cross-examination, Madam Wong said that she had forgotten about the meeting already. She accepted that the two Chinese characters 「盡力」 were possibly written by her but she said that she only meant to say that she would try her best to make Winroad a success with her business connections so that it could make a profit of HK$2 million before the Chinese new year.

87.  When asked about the Text Messages in cross-examination, Madam Wong pointed out that they might not be a complete record of the conversation between Mr Wang and her. She had not bothered to read the Text Messages because she found the claim of Mr Cheng to be ridiculous and a waste of public money. She could easily raise a sum of HK$20 million. Madam Wong also explained that her phone had been confiscated by the C & E and all her records in her phone disappeared as a result.

Dr Leung

88.  Dr Leung had examined 129 control signatures of Madam Wong and compared them microscopically with the one appearing in the Written Loan Agreement. A number of features such as tremors and hesitation were found in the signature in question and they are indicative of forgery.

89.  Dr Leung concluded that the signature appearing in the Written Loan Agreement was highly probably not written by Madam Wong. Dr Leung’s evidence was not significantly challenged in cross-examination.

Relevant legal principles

90.  Mr Cheng and Madam Wong have given two diametrically different accounts and basically this court is asked to decide whose account should be preferred. Credibility of the witnesses, particularly those of Mr Cheng and Madam Wong, is of key importance. In my assessment of the credibility of each of the witnesses, I bear in mind the following guideline for the assessment of the credibility of witnesses given by DHCJ Eugene Fung SC (as Eugene Fung J then was) in Hui Cheung Fai v Daiwa Development Ltd (unreported, HCA 1734/2009, 8.4.2014) at §§77-79,

(1)  Contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance (§77);

(2)  In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events (§78); and

(3)  Importance should be attached to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’s evidence (§79).

91.  Mr Lau helpfully draws my attention to the following dicta of Mimmie Chan J in Lo Ming Chi Charles & Anor. v Fullpower Investment Holdings Corp. [2021] HKCFI 3073 at §10:

“The Court is the finder of facts, but the finding of facts in any case cannot be equated with the ascertainment of the truth. The whole truth is seldom disclosed by witnesses. In a case such as the present, where the core issue in dispute is the existence or otherwise of an oral agreement, and where the evidence of the protagonists are polarized as to whether the Meeting took place at all, the task of the Court as the finder of facts is to decide these disputed facts on a balance of probabilities, on the basis of such evidence as is available and presented, weighing the inherent probabilities and improbabilities of the parties’ respective assertions, and checking such assertions against the parties’ conduct, such contemporaneous documents as are available, and the undisputed or undisputable facts. Demeanour of the witnesses can be taken into consideration, but the courts have recognized that demeanour is merely, and mostly concerned with, “whether the witness appears to be telling the truth as he now believes it to be” (per Lord Pearce in Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431). Often, the parties’ presentation of the evidence is not complete, the witnesses are not forthright on all aspects of the case and the Court is seldom given the entire picture.”

92.  Mr Lau further refers to Northampton BC v Cardoza [2019] BCC 582. There, HHJ Simon Barker QC said this about the characteristics of an incredible witness (at §37):

“…evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure.”

General observations of the witnesses

93.  Keeping the foregoing principles in mind, I shall at the outset state my general observations on the credibility of the witnesses before I provide my analysis of their evidence.

94.  Neither Mr Cheng nor Madam Wong was an impressive witness and I do not think that they made a genuine effort to give this court a full and frank account of their dealings. I am doubtful about their evidence unless it is consistent with or supported by contemporaneous documents. Their problems are different, however.

95.  No doubt Mr Cheng thinks that he is an important and influential person. He repeatedly said that he did huge businesses and at the same time was a philanthropist. He was always busy with his mega businesses and would delegate the relevant monetary matters to his assistants. He did not himself attend to the details. HK$20 million was not a big sum in his view and he always made sizable donations to charities. He merely felt frustrated that Madam Wong reneged on her promise to repay the Loans with false allegations against him.

96.  Alarmingly, when asked about his pleading, Mr Cheng simply said that he had paid no attention to its contents and he just left it to his assistants and his lawyers. He had paid no regard to the Statement of Truth signed by him. The prime example is that it is pleaded in his Reply that he had never lent any amount to Mr Lau. In cross-examination he first accepted that he had made a loan to Mr Lau when confronted with Lau’s Loan Agreement. He accepted that his averment in the Reply was incorrect but he explained that he had not paid attention to it at all.

97.  Mr Cheng did not strike me as an outright liar, nevertheless. In my view, he was not sufficiently serious about the accuracy of his evidence in some aspects.

98.  Mr Wang was a suspicious witness. His loyalty to Mr Cheng was evident and he had a lot of respect for him. In cross-examination, he awkwardly praised Mr Cheng whenever he found it convenient to do so.

99.  More importantly, he gave a curious account of how Madam Wong signed the Written Loan Agreement. Mr Wang should know perfectly that the authenticity of her signature was in hot dispute and it was the subject matter of the Expert Report. To make good the allegation that Madam Wong signed the Written Loan Agreement, he alleged that he had a video-call with Madam Wong. I could not believe that he found it necessary to witness Madam Wong appending her signature to the document by the same video-call in which they negotiated the terms of the Written Loan Agreement. His account sounded so unnatural.

100.  The authenticity of the signature had long been in dispute before Mr Wang made his witness statement. If the alleged video call had taken place, there is no reason why he did not say a word about this in his witness statement. He must be eager to rebut the allegation of forgery. He should have stated emphatically that he witness her signature and so it must be genuine.

101.  Mr Bei was the most credible factual witness in my view. I shall not conclude that he was an independent witness because I do not think I know enough about the dealings and relationship between Mr Cheng and Madam Chen. I merely found his evidence simple and straightforward. His account of the signing of the Repayment Agreement was clear and convincing.

102.  Now I turn to Madam Wong’s credibility. She was not forthcoming and could not give direct and relevant answers even to simple questions. She was obviously an untruthful and unreliable witness to me.

103.  As an example, for an introductory question about her education level in cross-examination, she gave the following bemusing answers. She first said “MBA” but she was basically a music specialist, having reached the diploma level when she was 16 years old. When asked whether she meant that she had a master degree course in Business Administration, she said it was only an oversea course for continuing education and she should be considered not having graduated from a tertiary college in Hong Kong. When asked where she took the MBA course, Madam Wong said it was an online course and she had forgotten the details. She just randomly sat for an examination in respect of one subject. For local studies, she said she had completed the 1^st year studies at the Open University. She wanted to give more details about her education but was stopped.

104.  Further examples of her incredibility will be given in the course of my analysis of her evidence.

105.  Lastly, I should point out the common problem of incomplete disclosure by the parties. Both Mr Chow and Mr Lau complain about the failure to make full discovery on the part of the other side.

106.  Indeed, it is reasonable to expect that there should be a great deal of documentary evidence including text messages, voice messages and emails shedding light on the true account. On the part of Mr Cheng, since he asked his assistants to deal with Madam Wong most of the time, there should be some written materials showing his instructions given to his assistants and the reports made by his assistants to him. For example, he should have given the details of the Oral Loan Agreement to his assistant for him to enable the production of the Written Loan Agreement and there should be some written messages exchanged between his assistant and him regarding the Written Loan Agreement including the receipt of the same from Madam Wong. Unfortunately, Mr Cheng could only produce the Minutes and the Text Messages to support his cases.

107.  On the part of Madam Wong, she should have produced some documentary evidence to show that the funds given to her were for other business purposes (such as renovation of the Office) as alleged and to show that she had settled her liability under the IOU.

108.  Regarding the 9 agreed issues, I shall dispose of those relating to the Repayment Agreement first.

109.  Even the location of the execution of the Repayment Agreement is in dispute. On this issue, I prefer the evidence of Mr Cheng, Mr Wang and Mr Bei and find as a fact that it was created in the Office. They were firm about this and their evidence was not shaken under cross-examination. I can see no reason why they would find it necessary to lie about the actual location.

110.  On the contrary, Madam Wong made a contrived effort to paint the picture that she was experiencing severe depression and staying at home shortly before Madam Chen asked to see her in the afternoon of 15 July 2019. This might help her allegation of duress and her mental incapacity.

111.  Madam Wong stressed that W Hotel was only a 3-minute walk away from her home and thus she managed to meet Madam Chen and other persons at the hotel despite her depression.

112.  I do not believe that Madam Wong went to meet Madam Chen due to her threats. No doubt Madam Wong felt displeased to be asked to discuss her liability but I do not think she only agreed to see Madam Chen because of any threats. She could have asked someone to accompany her. She could have asked for more time to make preparation for the meeting. She could have sought legal advice as she did at around the same time for the purpose of the criminal investigation and prosecution by the C & E.

113.  I cannot accept Madam Wong’s assertion that she had no choice because Madam Chen knew where she lived. Her residence is situated in a high class residential development and security should not be a concern.

114.  Remarkably, Madam Wong gave an interesting reason why she agreed to meet Madam Wong, which had nothing to do with threats and coercion. She said it was probably due to her nature as an artist and she had some kind of obsession with ensuring that there were closures in everything. Coupled with her pride, she managed to pick up herself to go to meet Madam Chen.

115.  I fail to see any correlation between an artist and the alleged obsession. In any event, on her own evidence, she went to meet Madam Chen voluntarily.

116.  If Madam Chen and Mr Cheng had intended to compel Madam Wong to sign the Repayment Agreement and detain her until she had done so, there is no reason why they would have first discussed the terms with her in a hotel room, then escorted her to the business centre of the hotel and gone back to the hotel room with her to have it executed by all three parties afterwards. Madam Wong could have easily broken away from them, or at least cried for help or alerted other people, in the process and there is no reason why Madam Chen and Mr Cheng would have taken such an obvious risk. It would be much easier to confine Madam Wong to the Office and force her to sign the Repayment Agreement from the printer in the Office.

117.  I accept the evidence of Mr Cheng, Mr Wang and Mr Bei that Mr Cheng was present in the Office throughout. Mr Wang was there and I do not think he could be said to have a big build.

118.  Madam Wong lost all her credibility about her account in W Hotel. I could not believe anything she said about what Madam Chen and other persons did to her in W Hotel. To begin with, they were not there at all.

119.  Mr Chow makes a valid submission that if Madam Chen and other persons had done to her what Madam Wong now alleges, they must have committed a serious offence of false imprisonment at least. Madam Wong should have reported the matter to the police once she regained her liberty so that she could avoid the Repayment Agreement. Madam Wong explained that her lawyers advised her not to do so due to the ongoing criminal prosecution against her.

120.  I cannot accept her explanation. I fail to understand how the criminal prosecution would be adversely affected by her report as a victim of another matter. In any event, it is unbelievable that her lawyers did not take any action at all to put on record that Madam Wong signed the Repayment Agreement under duress.

121.  Madam Wong further explained that she feared going to the police station. I cannot believe her. Her lawyers assisted her in the criminal matters throughout and there is no reason why they would not give their professional assistance to Madam Wong to make a simple report to the police.

122.  I also observe that Madam Wong did not seek help from Dr Wong until 13 August 2019. The alleged traumatising experience in W Hotel must have triggered or exacerbated her depression. She could hardly have waited to obtain help from Dr Wong until almost a monthly later. Dr Wong did not mention anything about the alleged duress suffered by Madam Wong in her record too.

123.  I accept the evidence of Mr Cheng, Mr Wang and Mr Bei regarding the circumstances under which the Repayment Agreement was signed in the Office. I come to the firm conclusion that Madam Wong signed the Repayment Agreement voluntarily. No undue pressure was exerted on her. Her plea of duress is not made out on the evidence.

124.  Madam Wong’s pleaded case regarding her lack of mental capacity is that in addition to the alleged duress, Madam Wong was troubled by the criminal proceedings against her by the C & E. Madam Wong then avers that she was unable to appreciate the nature and the quality of the act done at the time of signing the Repayment Agreement by reason of her mental impairment.

125.  To support this plea, Madam Wong relies on the medical records of Dr Wong and the Medical Certificate. All this evidence could at most show that she was having depression at the material time. Dr Wong did not say that the depression of Madam Wong was so severe that she was unable to comprehend her actions.

126.  I accept that Madam Wong from 2016 to 2019 struggled with depression and her mental and emotional condition could be volatile. I do not agree with Mr Chow’s submission on the lack of medical records covering the entire period. However, depression cannot be equated with a lack of mental capacity. On her own evidence, she managed to take an active role in her businesses throughout. She was able to attend a business dinner event in the evening of the previous day.

127.  Mr Chow validly pointed out that Madam Wong was able to sign the Collaboration Agreement dated 31 October 2019 and the Private Placement Subscription dated 19 June 2020. Madam Wong could transact business with the necessary mental capacity despite her depression.

128.  To conclude, on this evidence, I cannot accept that Madam Wong lacked the mental capacity to sign the Repayment Agreement.

129.  As an experienced businesswoman and an insurance broker, Madam Wong must know the contents of the Repayment Agreement and her legal obligations stipulated in the Repayment Agreement. Her agreement to repay Mr Cheng the amount of HK$20 million is solid evidence of the Oral Loan Agreement. Madam Wong did not suggest that Mr Cheng had made loans in the like amount to her other than the Loans.

130.  Indeed, other than the acknowledgment of the Loans in the Repayment Agreement, the Minutes and the Text Messages provide cogent evidence of the Oral Loan Agreement and the Loans.

131.  Mr Lau is right in his submission that it was recorded in the Minutes that Winroad was entitled to 20% of the profit out of the Loans and the meeting was a shareholders meeting. There is no evidence to explain the entitlement of Winroad to any share of Madam Wong’s repayment.

132.  However, it was recorded that the loan in the sum of HK$20 million was borrowed by Madam Wong from Mr Cheng. It was a personal loan and had nothing to do with Winroad. This is supportive of the existence of the Oral Loan Agreement and the Loans.

133.  Madam Wong did not challenge the authenticity of the Minutes and her signatures appended thereto. She did agree to try her best to make repayment to Mr Cheng. And her addition of the two Chinese words 「盡力」 near her repayment obligation is not amenable to other interpretation. Her explanation about the two Chinese words in cross-examination is far‑fetched and must be rejected.

134.  Madam Wong could not provide a plausible explanation for the Text Messages. I do not accept her evidence that the Text Messages were not complete. She did not begin to explain what the missing parts were and how they would alter the meaning of the Text Messages. Further, there is no reason why she did not ask for further discovery if she had really found out that the Text Messages were incomplete.

135.  Madam Wong now said that she merely responded to Mr Wang half-heartedly without being serious. She wanted to send him away. I could not accept this explanation, which does not appear in her witness statement. Madam Wong even told this court that she once knelt in front of him on Walnut Street and begged him to give her a chance to make good the business loss claiming that she was a very special talented pianist and equipped with professional knowledge and skills. This was consistent with her position in the Text Messages too.

136.  Mr Lau submits that by the Text Messages, Mr Wang merely chased after the payment of the indebtedness under the Repayment Agreement. Even if Madam Wong acknowledged her liability thereunder, it does not mean that she also acknowledged the existence of the underlying loan, i.e. the Loans.

137.  I do not accept this intelligent submission, which is not supported by the evidence of Madam Wong. When the Text Messages are read as a whole, it is clear that Madam Wong unequivocally accepted that she was indebted to Mr Cheng, among other things, in the amount of HK$20 million under the Repayment Agreement. The only reason for her acceptance must be that she agreed that Mr Cheng had advanced to her the Loans pursuant to the Oral Loan Agreements.

138.  Mr Lau’s argument that the Repayment Agreement is not supported by consideration is expressly made on the basis that there was no underlying loans thereunder. I do find that the Loans existed and remained unsettled, coupled with the extended deadlines given to Madam Wong to make repayment, I can conclude that the Repayment Agreement is well-supported by consideration and is legally enforceable.

139.  I am not satisfied on the evidence that Mr Cheng at the material time carried on a money lending business. Madam Wong relies on the Loans, the loan evidenced by the IOU (“the IOU Loan”) and the loan granted to Mr Lau to assert that Mr Cheng was a money lender.

140.  Mr Lau pertinently reminds this court of the test set out in Chow Wun Sing Winston v Yiu Chun Luk (unreported, CACV 295/2006, 6.3.2008) by Tang VP (as he then was) at §§15-16.

141.  It is indeed the case of Mr Cheng that he made the three advancements to Madam Wong and executed Lau’s Loan Agreement evidencing his extension of a loan of HK$5 million to Mr Lau. Madam Wong denies the former and says nothing about the latter. Madam Wong said in cross-examination that she herself also made a bridging loan to Mr Lau in the amount of HK$1 million evidenced by a written loan agreement dated 19 June 2018. However Mr Lau did not make any repayment to her and Madam Wong did not intend to take action to recover the debt.

142.  Madam Wong was unable to explain why in her pleaded case she alleges that the loan made to Mr Lau was in the amount of HK$50 million when Lau’s Loan Agreement shows that it was only HK$5 million.

143.  I am unable to understand Mr Cheng’s evidence relating to the loan made to Mr Lau. He finally agreed that he had made the loan to Mr Lau. He said that he asked Mr Lau to provide the security so as to give pressure to Mr Lau only. Mr Lau did not repay him and he decided not to chase after Mr Lau for repayment.

144.  In any event, on the evidence, it is common ground that Mr Cheng, Madam Wong and Mr Lau were friends. Mr Cheng was eager to please Mr Lau so as to secure his friendship. He was willing to give him financial assistance as his friend. He made the loan on this basis. I do not think Mr Cheng was actually carrying on a money lending business.

145.  The same can be said about the loans given to Madam Wong. She was the business partner of Mr Cheng and she asked Mr Cheng for loans to solve her financial problems.

146.  There is no allegation let alone evidence that Mr Cheng on his own volition offered to make loans to Madam Wong and Mr Lau or did anything to procure such loans. He merely acceded to their requests for financial assistance on the basis that they were friends. There is no security for the Oral Loan Agreement and there is no evidence that Mr Cheng has ever demanded Madam Wong to transfer her assets to him as security in accordance with the terms of the Repayment Agreement.

147.  I cannot agree with Mr Lau’s submission that there is a certain degree of system in Mr Cheng’s making loans to others. He relies on Mr Cheng’s answers in re-examination that he would consider his relationship with the borrowers and his own financial situation. I am of the view that this is actually more consistent with his granting loans to his friends. For a money lender, he should not be concerned about his personal relationship with the borrower and he would seek financial support from his own sources to make the loan if it seems profitable.

148.  Absent any evidence of other loans made by Mr Cheng, I am not convinced that Mr Cheng carried on a business of money lending.

149.  Now I turn to the Written Loan Agreement. Mr Cheng had no personal knowledge of its creation and why it bore a false signature of Madam Wong. There is a complete lack of evidence how he received the Written Loan Agreement. If he or Mr Wang received the same by electronic means or by post from Madam Wong, there should be some written records.

150.  I am unable to accept Mr Wang’s evidence that he asked Madam Wong to draft the Written Loan Agreement. It does not make any sense at all.

151.  Indeed I have explained why Mr Wang’s evidence relating to the creation of the Written Loan Agreement is wholly unacceptable. Mr Cheng has failed to prove the provenance of the Written Loan Agreement and, given the false signature of Madam Wong, the entire document looks very suspicious to me.

152.  In the circumstances, I refuse to accept that Madam Wong sent the Written Loan Agreement to Mr Cheng and it was made between Mr Cheng and Madam Wong.

153.  Madam Wong admits in her Defence that the IOU was given by her to Mr Cheng. The only point raised is that the IOU Loan had nothing to do with the Loans and it was settled and accounted for already.

154.  Madam Wong could not adduce any evidence as to how she settled or accounted for the IOU Loan.

155.  On the other hand, Mr Cheng’s evidence that the IOU Loan represents the outstanding interest on the Loans.

156.  The IOU was created before the Repayment Agreement and in the Repayment Agreement, the repayment sum does not include any interest on the Loans. The IOU appears to have taken care of such interest. This lends support to the contention of Mr Cheng.

157.  Mr Lau is right in his submission that by the time when the IOU Loan was made, Madam Wong had already paid Mr Cheng interest in the sum of HK$400,000 and so the balance should be HK$1,600,000 and not HK$1 million.

158.  I have no idea why the parties agreed to settle the outstanding interest on the Loans by a lesser amount. Still I prefer the evidence of Mr Cheng to those of Madam Wong. Madam Wong simply cannot provide any evidence as to how she allegedly settled the IOU Loan.

159.  Lastly, for the alternative claim in unjust enrichment, Mr Chow makes no submission on this. I do not think Mr Cheng has to rely on this claim in light of my finding that the Repayment Agreement and the IOU were validly made and legally enforceable.

160.  For completeness, I am convinced that the answers to the four questions to be asked for an unjust enrichment claim (see Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §67 per Ribeiro PJ) save the last question are plainly in the affirmative on the evidence despite the submissions of Mr Lau.[1]

161.  The payment of the Loans (except the sum of HK$5 million which was paid in cash) was evidenced by documentary evidence. The bank statement of Mr Cheng and a copy of his cheque payable to Madam Wong dated 19 October 2018 are produced as evidence. The IOU Loan was not in dispute. Mr Cheng did require Madam Wong to repay such loans. Madam Wong provided no consideration for these sums of money other than the Oral Loan Agreement, the Repayment Agreement and the IOU and she was unjustly enriched at the expense of Mr Cheng. Madam Wong is unable to put up any defence to avoid repayment.

Conclusion and dispositions

162.  For the reasons given above, I have come to the following conclusions on the agreed issues:

(1)  Mr Cheng and Madam Wong entered into the Oral Loan Agreement and the Loans were made pursuant thereto in September 2018.

(2)  Mr Cheng and Madam Wong did not enter into the Written Loan Agreement on or around 16 October 2018 and the purported signature of Madam Wong appearing therein is not genuine.

(3)  Madam Wong signed the Repayment Agreement voluntarily in the Office on 15 July 2019 in the presence of Mr Cheng, Madam Chen, Mr Wang and Mr Bei.

(4)  The Repayment Agreement is legally enforceable against Madam Wong and is not vitiated by any alleged duress or her purported lack of mental capacity. This court finds no duress and any mental incapacity of Madam Wong.

(5)  The Repayment Agreement is supported by consideration.

(6)  Mr Cheng was not a money lender within the meaning of the MLO and the MLO has no application to this action at all.

(7)  Madam Wong signed the IOU for the balance of the interest on the 1^st Loan and the 2^nd Loan.

(8)  Madam Wong has not fully settled or accounted for the IOU Loan.

(9)  Since the Repayment Agreement and the IOU are found to be enforceable, Madam Wong has been incontrovertibly benefited by the funds provided Mr Cheng in the sum of HK$20,977,000. She must make repayment.

163.  Mr Cheng has proved his primary claim on balance of probabilities and is entitled to judgment for the sum of HK$20,977,000. I so order and I allow pre-judgment interest on the sum of HK$5 million from 1 January 2019, the sum of 15,000,000 from 16 January 2019 and the sum of HK$977,000 from 1 January 2020 to the date of this Judgment at HSBC prime rate plus 1% and thereafter at judgment rate until full payment.

164.  Costs should normally follow the event. Considerable costs have been regrettably incurred as a result of the forged signature of Madam Wong. Mr Cheng must bear all the costs of and occasioned by the engagement of Dr Leung, to be taxed if not agreed on an indemnity basis.

165.  On the other hand, to mark this court’s strong disapproval of Mr Cheng’s production of and reliance on the dubious Written Loan Agreement, I shall order that Madam Wong do bear 70% of Mr Cheng’s costs of this action only, to be taxed if not agreed. These are orders nisi.

166.  Lastly, I thank Mr Chow, Mr Wu and Mr Lau for their helpful assistance rendered to this court-.