HAIFA INTERNATIONAL FINANCE COMPANY LTD v. CONCORD STRATEGIC INVESTMENTS LTD

HCA 4442/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 4442 OF 2003

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J U D G M E N T

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1.  The plaintiff seeks recovery of a loan from the defendant. The defendant puts forth a bare denial.

The facts

2.  The plaintiff is a corporation set up by the Hainan Development Bank (“the HDB”).  The HDB is under liquidation in the Mainland.

3.  The defendant is a Hong Kong company.  It has undergone changes of names.  There is another company called Concord Strategic Investments Limited BVI (“Concord BVI”) which had also changed its name several times, twice being the same as the defendant’s.  Concord BVI was struck out in 2002. The changes in names of these 2 companies are summarized in Table 1 as follows:

Table 1

Adoption of different names by the defendant
20/1/97	Fine Honest Development Limited (精誠發展有限公司)
14/5/97	Concord International Group Limited (協和國際控股有限公司)
10/9/97	Concord Strategic Investments Limited (協和策略投資有限公司)
Adoption of different names by Concord BVI
12/9/96	Union Systems Limited
22/5/97	Concord International Group Limited (協和國際控股有限公司)
29/8/97	Concord Strategic Investments Limited (協和策略投資有限公司)

4.  Despite the changes in names, the defendant company has all along been registered at the Companies Registry with the number CR.0591846 (“the company number”); and at the Business Registry of the Inland Revenue Department (“IRD”) with the number BR.20877275(“the BR number”).

5.  Concord BVI has been registered under the serial number 198920. It had no registered Chinese name.

6.  This action was brought on the basis of what the parties label as “the 9^th loan”, ie a written loan agreement between the plaintiff and one Concord Strategic Investments Limited on 27 February 1988 for the amount of HK$30,281,806.33. 

7.  No money was actually advanced for the 9^th loan.  That loan was for the total sum due under 8 previous loans entered into between 5 June 1997 and 20 October 1997. 

8.  The common features of all the 9 loans were, amongst others:

(i) The plaintiff was the lender, with Liu Yu 劉渝signing on its behalf.

(ii) The plaintiff and the borrower(s) always had the same address.  Up till the 8^th loan agreement, the address was at 2109 Shun Tak Centre; for the 9^th loan, it was 粵海投資大廈7樓A 座.

(iii) The borrower(s) have placed its/their chop(s) on the loan agreement with Keung Chak  姜策signing on its/their behalf.

(iv) The loans were of large amounts, yet there was no security. 

(v) The first 8 loans were not repaid at all (except for some interest) and yet the plaintiff kept lending.

9.  During the period when the 9 loans were granted, the plaintiff had had shareholding in the defendant, whether directly or indirectly.  I will come to this in paragraphs 32-33 below.  However, those who had direct knowledge of the loans were not the same as those now in charge of or own the plaintiff and the defendant.

10.  The loan monies were deposited into bank accounts which, as shall be demonstrated in paragraphs 19-27 below, were apparently owned by the defendant.

11.  The particulars and the apparent recipients of the loans are summarized in Table 2 as follows.

Table 2

1st-8th Loan Agreements
				alleged payees	chop
1.	5/6/97	HK$12,000,000	協和國際控股有限公司	Concord International Group Limited	1st chop#
2.	28/7/97	HK$2,000,000	Concord Strategic Investments Limited*	allegedly resulted from Fine Honest's loan	2nd chop#
3.	14/8/97	HK$1,100,000	協和國際控股有限公司	Concord International Group Limited	1st chop
4.	3/9/97	HK$1,126,000	Concord Strategic Investments Limited*	China Everbright Finance Ltd**	2nd chop
5.	4/9/97	HK$1,641,250	Concord Strategic Investments Limited*	ABN Amro Hoake Govett Asia Ltd **	2nd chop
6.	8/9/97	HK$4,000,000	Concord Strategic Investments Limited*	Concord International Group Ltd (HSBC 001 account)	2nd chop
7.	10/9/97	HK$2,300,000	Concord Strategic Investments Limited	Concord International Group Limited (HSBC 838 account)	2nd chop
8.	20/9/97	HK$59,660,670	協和策略投資有限公司	China Everbright Finance Ltd **	2nd chop
9th Loan Agreement
9.	27/2/98	HK$30,281,806.33	協和策略投資有限公司		2nd chop

* The Defendant had not yet adopted such company name.

**  With written instruction from Concord BVI to transfer and to debit Concord BVI’s account with the Plaintiff

# The 1^st and 2^nd chops are defined in paras 50 and 58 below

12.  Preceding all of the 9 loans was a short term loan entered into between the plaintiff and one 精誠發展有限公司 on 29 April 1997 for the amount of $50,000,000 (“the short term loan”). 

13.  The above facts are largely not in dispute or are indisputable as being supported by documents.  The single issue is who the borrower(s) of all 9 loans was/were.  According to the plaintiff, it was the defendant.  According to the defendant, it might have been Concord BVI.

14.  Whilst reading this judgment, it is useful to make reference to the 2 tables above.  The factual matrix did not just consist of the 9 sets of loan documentation.  It is noteworthy that the context in which the loans were provided was not given, for the obvious reason that the persons directly involved, Liu Yu and Keung Chak, were not traceable.

15.  Before analyzing the 9 loans, there are 4 classes of evidence that are worthy of mention:

A. The oral evidence;

B. The bank accounts into which loan proceeds were deposited;

C. A letter known as “the Henry Wan & Yeung letter”; and

D. The close relationship between the plaintiff and the defendant.

A.  The oral evidence

16.  Each party has called one witness – Madam Cheng Xiaoling (程小玲, member of the winding-up team) for the plaintiff and Madam Zhao Ping（趙萍, Deputy Manager）for the defendant.  They had no personal knowledge of the loans, except that a 協議書(“the 2000 Agreement”) dated 17 October 200 was entered into between Concord BVI and the plaintiff (with Madam Cheng signing on its behalf).

17.  Both ladies were honest witnesses.  Save where otherwise specified, I accept their evidence.  However, not being first hand evidence, much of their evidence was in fact of little assistance to the resolution of this dispute. 

18.  In a case such as this, the court will certainly place great weight on contemporaneous documents. 

B. The bank accounts into which loan proceeds were deposited

19.  The relevant bank accounts were as follows:

Table 3

Bank	Account Number
Bank of East Asia (“BEA 10 account”)	015-514-10-91923-2
Bank of East Asia (“BEA 40 account”)	015-514-40-48529-2
Hong Kong and Shanghai Banking Corpn (“HSBC 838 account”) and (“HSBC 001 account”)	598-074995-838 058-074995-001
ABN Amro Hoare Govett (now the Royal Bank of Scotland) (“ABN Amro account”)	Unknown

20.  In respect of the 2 BEA accounts, the defendant’s solicitors (Messrs Dominic YK Lai & Co) have, by letter dated 21 March 2014, attached an “authorization letter of our client of even date, authorizing [BEA] to release to [Messrs Dominic Y K Lai & Co] copy bank statements of its [BEA 10 and BEA 40 accounts] for the period of June 1997 to June 1998.”  The defendant had signed on the authorization letter.  BEA replied stating that they were unable to provide statements records beyond 7 years.

21.  Although Mr Wong SC invites me to treat the letter from Messrs Dominic Y K Lai & Co and the authorization letter as admission by the defendant that the 2 BEA accounts belonged to the defendant, I decline that invitation. I accept Madam Zhao Ping’s evidence that it was based on the plaintiff’s version that the defendant was the owner of the accounts that the defendant tried its best to find any useful information they could from BEA.

22.  I place more weight on a letter dated 18 March 2011 in which BEA confirmed that the defendant (citing the BR number) was the holder of the BEA 10 account and BEA 40 account.  The defendant was unable to refute this piece of evidence.  The 1^st chop also appeared on a cheque dated 25 July 1997 drawn on the BEA 40 account.  I find the 2 BEA accounts to belong to the defendant.

23.  In respect of the HSBC account, Messrs Dominic Y K Lai & Co sent a similar letter to HSBC as the one to BEA.  In the authorization letter dated 21 March 2014, Madam Zhao Ping, as Deputy Manger specifically cited the BR Number and company number of the defendant.  She expressly stated that the defendant, “formerly known as CONCORD INTERNATIONAL GROUP LTD., are the holder of the HSBC 838 account with you.”

24.  Once again I accept Madam Zhao Ping’s evidence as stated in paragraph 21 above.  However, the fact is that HSBC did give a reply, apparently satisfied that the right customer was asking for information from it, although HSBC did not have it available.  I draw the inference that the HSBC 838 account belonged to the defendant.

25.  As for the HSBC 001 account, it bore the same fore numbers as the HSBC 838 account.  I take judicial notice that HSBC did allow a customer to hold consolidated accounts, with “001” denoting a current account.  I draw the inference that the HSBC 838 account and HSBC 001 account belonged to the same consolidated account.

26.  In respect of the ABN Amro account, the ABN Amro Bank informed the plaintiff that:

(i) The defendant was “formerly known as Concord International Group Ltd, and before then Fine Honest Development Limited” with the BR number and company number;

(ii) The defendant had opened an account with HG Asia Limited (which later changed its name to ABN AMRO Hoare Govett) in 1997. 

(iii) The ABN Amro Bank had no relevant records to provide in relation to Concord BVI with IBC 198920.

(iv) There was a set of instructions issued by Concord International Group Ltd to ABN Amro Bank, referring to the repayment of the short term loan.  The chop at the bottom contained both the Chinese and English names of the bank account holder.  It bore resemblance to the 1^st chop.

27.  I find it probable that the ABN Amro account belonged to the defendant.

C. The Henry Wan & Yeung letter

28.  The Henry Wan & Yeung letter was exhibited to the defendant’s affirmation in opposition to the plaintiff’s application under Order 14, RHC:

“After the Plaintiff took out the present Summons, the Defendant’s Solicitors had made enquiries with Concord BVI. By a letter from its solicitors Messrs Henry Wan & Yeung dated 24th April, 2006, Concord BVI admitted its liability in the debt which the Plaintiff claims.”

29.  The Henry Wan & Yeung letter did not state on whose behalf the firm acted although it purported to set out observations to assist the defendant to resist the plaintiff’s application.  It subsequently was disclosed by Messrs Henry Wan & Yeung themselves that Concord BVI had been struck off on 1 May 2002, ie 4 years before the Henry Wan & Yeung letter.  That begged the question of who gave instructions to that firm to write the letter in the first place.

30.  Mr Wong SC also queries how the defendant could have relied on the Henry Wan & Yeung letter when there was the stamp with the words “CONTENTS NOT VERIFITED” on it.  With respect to Mr Wong SC, I place little weight on those words, which one commonly finds when a solicitor firm acknowledges receipt of a document from someone without the opportunity of even reading the contents. 

31.  Having regard to the matters in paragraph 29, I cannot place any weight on the assertion that Concord BVI admitted liability in the Henry Wan & Yeung letter.  I can only rely on the documents attached to that letter for what they were worth.

D. The close relationship between the plaintiff and the defendant

32.  Just before the current shareholders acquired it on 10 September 2001, Concord Group (B.V.I.) Limited wholly owned 3 limited companies (including the defendant) in Hong Kong. 

33.  The close relationship between the plaintiff and defendant aroused query as to what was going on behind the scene. As part of the then Concord Group (B.V.I.) Limited, the plaintiff could not have failed to notice that the Group had various subsidiaries that bore the name “Concord”.  It appeared that the defendant/Concord BVI deliberately left the identity of the borrower(s) of the 9 loans vague.  The plaintiff, to say the least, condoned it. 

34.  There is not enough for the court to find out the purpose behind the companies’ structure.  There is not even a plea to lift the corporate veil.  Given the change in personnel in the plaintiff and the defendant, it is the objective evidence that counts in this case. 

35.  I now analyze the loans one by one, starting from the short term loan and the 2^nd loan.

The short term loan on 29 April 1997 for the sum of HK$50,000,000

36.  The borrower of the short term loan was 精誠發展有限公司.  Its stamp on the loan agreement contained both the Chinese name and English name (Fine Honest Development Limited).  Those were names which Concord BVI never had.

37.  The loan agreement was signed by Keung Chak who had become a director of the defendant the day before, ie 28 April 1997.

38.  The address of the borrower at 2109 Shun Tak Centre matched the defendant’s registered address at the Companies Registry and the Business Registry.

39.  A total amount of HK$49,500,000 was advanced:

(i) On 7 May 1997, a sum of HK$34,650,000 was remitted into the defendant’s BEA 10 account;

(ii) On 8 May 1997, a sum of HK$14,850,000 was remitted into the defendant’s BEA 40 account.

40.  The customer receipts named Fine Honest Development Ltd as the beneficiary.

41.  It cannot be disputed and there was no serious dispute that the short term loan was entered into between the plaintiff and the defendant and I so find.

42.  The short term loan was for a term of 3 months, expiring on 28 July 1997.

43.  On 24 July 1997, Concord International Group Limited 協和國際控股有限公司 gave written instructions to ABN Amro Bank to make a transfer of HK$40,000,000 to one China Life Insurance Co Ltd and another HK$800,000 to the plaintiff’s Union Bank account no. 013-1113725.

44.  Those instructions were carried out on 24 to 25 July 1997:

(i) HK$40,000,000 were paid from an account in ABN Amro Bank into the account of one China Life Insurance Co Ltd;

(ii) HK$800,000 were paid from an account in ABN Amro Bank into the plaintiff’s Union Bank account;

(iii) HK$8,000,000 were paid by way of cheque issued from the defendant’s BEA 40 account payable to China Life Insurance Co Ltd; and

(iv) HK$143,150.68 were paid by way of cheque made payable to the plaintiff, as evidenced by a deposit slip.

45.  On 28 July 1997, 2 receiptswere issued by the plaintiff to 協和國際控股有限公司.  They acknowledged receipt of HK$50,000,000 as repayment of a loan and HK$943,150.68 as interest for the period from 7 May 1997 to 28 July 1997.

46.  All the events in respect of the short term loan were documented.  Their effect was that the principal sum of HK$48,000,000 had been repaid, together with interest of HK$943,150.68.  (Madam Cheng described $800,000 in §31 of her witness statement as “relevant expenses”.  I find that to be an error.) That left a principal of HK$2,000,000 unpaid.

47.  The next question is why a receipt for HK$50,000,000 should be issued with HK$2,000,000 unpaid.  The plaintiff suggests that the answer lies in the 2^nd loan.

The 2^nd loan agreement dated 28 July 1997 for HK$2,000,000

48.  On the same day when the 2 receipts for the short term loan were issued, the 2^nd loan agreement was entered into.  The loan amount was HK$2,000,000.

49.  The borrower was Concord Strategic Investments Limited, whose address remained 2109 Shun Tak Centre.  This address remained the registered address of the defendant as of 28 July 1997.  Concord BVI had no registered address in Hong Kong.

50.  The borrower’s chop (“the 2^nd chop”) was placed on the loan agreement with Keung Chak signing on behalf of the borrower. 

51.  As of the date of the 2^nd loan agreement, neither Concord BVI nor the defendant had changed their names to Concord Strategic Investments Limited.  Madam Cheng suggested in her witness statement that she believed that the defendant was anticipating using the name of Concord Strategic Investments Limited to make payment of the 1^st instalment of interest on 1 October 1997.  I do not consider that to be a compelling inference.  As the evidence stands, there is nothing to explain why the defendant or any other company had wanted to use a company name that had not yet been registered. 

52.  Considering the background to the short term loan and the timing of the 2^nd loan following immediately on the expiry of the short term loan, the compelling inference is that the 2^nd loan was an extension of the defendant’s obligation to repay HK$2,000,000 under the short term loan.  That was why there was no evidence of new cash advance or receipt for the 2^nd loan.

53.  The defendant relies on the Henry Wan & Yeung letter to suggest that a sum of HK$48,800,000 had been repaid to the plaintiff under the short term loan, such that any extension agreement (if at all) ought to be for HK$1,200,000 only.  There was no reason for the 2^nd loan.

54.  The defendant’s suggestion (i) simply overlooked the fact that HK$800,000 out of the HK$48,800,000 had been paid as interest; and (ii) could not explain why there was a receipt for HK$50,000,000 either.  I reject it.

55.  I find that the 2^nd loan was an extension of the defendant’s obligation to repay the balance of HK$2,000,000 under the short term loan.  It follows that the defendant was the borrower of the 2^nd loan.

The 1^st loan agreement dated 5 June 1997 for the sum of $12,000,000

56.  The loan was to be paid out in 2 tranches of HK$10,000,000 and HK$2,000,000 on 6 and 12 June 1997, respectively.  The loan was for a term of 180 days.

57.  The borrower was Concord International Group Limited 協和國際控股有限公司, a name which, at this point in time, both the defendant and Concord BVI had.  The defendant changed to these Chinese and English names on 14 May 1997, but it only changed its business names at the IRD on 11 June 1997.  There was no apparent reason for the delayed change at the IRD.  Concord BVI changed its English name and adopted the Chinese trade name on 22 May 1997.

58.  The chop of the borrower (“the 1^st chop”) is worthy of attention. 

(i) The 1^st chop was different from the chop of Concord BVI.  The latter also bore the words “(Incorporated in the British Virgin Islands)” as could be seen on the defendant’s resolution dated 12 August 1997, at a time when Concord BVI was one of its shareholders.  The defendant’s resolution was a public document filed with the Companies Registry.  There was no reason to suspect that the chop of Concord BVI was not genuine.

(ii) The defendant relied on a written loan agreement (“the purported agreement”) between Concord International Group Ltd (BVI) as lender and 協和國際控股有限公司 as borrower attached to the Henry Wan & Yeung letter.  According to §3.1 of the Henry Wan & Yeung letter, Concord BVI borrowed the loan of HK$12,000,000 from the plaintiff and lent it to the defendant.  Concord BVI allegedly asked the plaintiff to remit the loan proceeds directly to the defendant.  The plaintiff, rightly in my view, disputed the genuineness of the purported agreement in view of the dubious origin of the Henry Wan & Yeung letter.  However, note that the chop of the borrower 協和國際控股有限公司 on the purported agreement was the same as the 1^st chop.

59.  The beneficiary was stated on the 1^st loan agreement as “Concord International Group Limited” and beneficiary bank “BEA 40”.

60.  There were 2 cheques issued by the plaintiff in relation to the 1^st loan agreement:

(i) One cheque was issued to Concord International Group Limited in the sum of HK$10,000,000 on 6 June 1997.  There was a chop in the middle of the cheque bearing the words “THE BANK OF EAST ASIA LTD 015 (illegible).  The BEA 10 account number and the name “Concord International Group Limited” appeared on what seemed to be the back of the cheque.

(ii) One cheque for HK$2,000,000 was issued to “…CORD INTERNATIONAL GROUP LTD”.  There was a “BANK OF EAST ASIA LTD 015” stamp across the cheque.

Both cheques bore stamps showing that they had been cleared. In fact, the money was paid into the BEA10 account on 6 and 13 June 1997 respectively.

61.  Consistent with the defendant’s reliance on the purported agreement, there was no challenge to the fact that $12,000,000 had been deposited into the defendant’s bank account(s).

62.  The inference to be drawn from all these facts is that the borrower of the 1^st loan was likely to be the defendant.

63.  Pausing here, it is important to note that the 1^st chop was the same as that appearing on the 3^rd loan agreement.  The 2^nd chop was the same as that appearing on the 4^th to 8^th loan agreements.  (See Table 2.)

The 3^rd loan agreement dated 14 August 1997 for HK$1,100,000

64.  The borrower was 協和國際控股有限公司. The 1^st chop was used. The loan proceeds were to be deposited into the HSBC 838 account of Concord International Group Limited.  The customer receipt of the same date stated the plaintiff to have withdrawn HK$1,100,060 (including $60 bank charge) and deposited the loan amount into the HSBC 838 account.

65.  The Henry Wan & Yeung letter stated, “We understand that this was not your client’s [the defendant’s] bank account.”  This statement was clearly contradicted by the letter from HSBC.

66.  I find that the borrower of the 3^rd loan was likely to be the defendant.

The 4^th loan agreement dated 3 September 1997 for HK$1,126,000

67.  The borrower was stated to be Concord Strategic Investments Limited. The 2^nd chop was used.

68.  At this point in time, Concord BVI had changed its name.  The defendant had not yet registered its change of name with the Companies Registry, but there was already a shareholders’ resolution dated 29 August 1997 to effect the change.

69.  An attachment to the Henry Wan & Yeung letter showed aletter of instructions of “Concord Strategic Investment Ltd (BVI)” (“the BVI entity”) to the plaintiff, asking for remittance of the loan proceeds into the account of China Everbright Bank on 3 September 1997.

70.  I do not accept the defendant’s suggestion that the borrower was Concord BVI for the following reasons. 

71.  Firstly, it was strange that the BVI entity, not being the stated borrower, was able to give the letter of instructions to the plaintiff to release the loan proceeds to China Everbright.

72.  Secondly, the loan proceeds actually went to中國光大銀行深圳証券業務部, not China Everbright Bank as stated in the written instructions.

73.  Thirdly, the letter of instructions did not contain a company chop.  The name of the BVI entity was typed out above the signature of Keung Chak.

74.  Fourthly, the name of the BVI entity was different from Concord BVI in 3 aspects:

(i) The BVI entity’s name spelt “Investment” in the singular form.

(ii) The BVI entity’s name spelt “Ltd.” in abbreviated form.

(iii) The alphabets “BVI” never appeared in any of the names of Concord BVI registered with the BVI Commercial Registry.  See Table 1 above.

These 3 aspects never appeared in any of the witness statements of the defendant whenever Concord BVI was referred to.  The defendant did not even say that these 3 aspects were “mistakes” or “abbreviations”.

75.  According to Madam Cheng, she only became aware of the written instructions at the stage of application for summary judgment.  She had not been able to recover the written instructions from the plaintiff’s side.  I accept her evidence.

76.  I am not satisfied as to the origin of the letter of instructions. Given the use of the 2^nd chop, and the shareholders’ resolution of the defendant on change of name, I find the defendant to be likely the borrower.

The 5^th loan agreement dated 4 September 1997 for HK$1,641,250

77.  The borrower was Concord Strategic Investments Limited.  The 2^nd chop was used.

78.  An attachment to the Henry Wan & Yeung letter showed a letter of instructions dated 4 September 1997 from the BVI entity (similar to the 4^th loan agreement) to the plaintiff, signed by Keung Chak as director.  The BVI entity asked the plaintiff to remit the loan amount to the ABN Amro account and “debit our A/C accordingly”.  Again, according to Madam Cheng, whose evidence I accept, this document was never in the plaintiff’s possession and she only became aware of it in the Order 14 proceedings.

79.  The loan proceeds were actually paid into the ABN Amro account. 

80.  The reasoning in paragraphs 71, 73-76 equally apply.  Moreover, it has never been suggested that either the defendant or Concord BVI had an “account” with the plaintiff.  Given that the remittance sum matched exactly the loan amount, any instructions, if ever existed, could only be interpreted as asking the plaintiff to release the loan proceeds instead of debiting Concord BVI’s account.  I find that it is likely for the borrower to be the defendant.

The 6^th loan agreement dated 8 September 1997 for HK$4,000,000

The 7^th loan agreement dated 10 September 1997 HK$2,300,000

81.  The borrower under both loan agreements was Concord Strategic Investments Limited.  The 2^nd chop was used.

82.  The loan amount was deposited into the HSBC 001 and 838 accounts respectively.  It is more likely than not that the defendant was the borrower.

The 8^th loan agreement dated 20 September 1997 for HK$5,966,670

83.  For the first time, the borrower was 協和策略投資有限公司.  Despite the change in name, the 2^nd chop was used.

84.  The defendant had, on 10 September 1997, changed its name to Concord Strategic Investments Limited and協和策略投資有限公司 at the Companies Registry; and on 29 September 1997 at the IRD.

85.  Concord BVI had also resolved to change its name to Concord Strategic Investments Limited on 29 August 1997 and has adopted the Chinese name of 協和策略投資有限公司.

86.  There was a letter of instructions from the BVI entity to the plaintiff asking the latter to remit the loan amount to China Everbright Finance Ltd and debit the BVI entity’s account. 

87.  The loan proceeds were paid by a cheque dated 20 October 1997 to China Everbright Finance Ltd, receipt of which was acknowledged by someone whose identity was unknown.

88.  Apart from the difference in name of recipient of the loan amount, paragraphs 71, 73-76 and 80 apply here.  I find that it was likely that the borrower was the defendant.

The 9^th loan dated 27 February 1998 for HK$30,281,806.33

89.  The borrower was 協和策略投資有限公司. Again the 2^nd chop was used.

90.  The address of the borrower was a different one at 香港干諾道中148號粵海投資大廈7樓A座.  The defendant had changed to that address just 6 days ago on the 21^st.

91.  The “loan amount” was in fact a consolidation of the 8 previous loans with their corresponding interest due (“協和所有貸款金額、利息”).   There was some deduction of principal and interest.  The term of the loan was 3 years.

92.  Having regard to the fact that the borrower of the 8 previous loans was likely to have been the defendant and the 2^nd chop was used for the 9^th loan, it is likely that the defendant was the borrower of the 9^th loan.

93.  Mr Siu, counsel for the defendant, submits that regardless of who borrowed the 8 previous loans, it was possible that Concord BVI, as parent company, had taken up responsibility over the 9^th loan. I agree that was theoretically possible.  However, one can see from the terms of the 9^th loan agreement that it was not intended to be in full and final settlement and in full discharge of the responsibility of the borrower(s) of the 8 previous loans.  Those borrowers were not even made a party to the 9^th loan agreement to bar the plaintiff from pursuing against them. 

94.  Furthermore, Concord BVI had its own chop which always bore the words “Incorporated in the British Virgin Islands”.  See its indisputable corporate documents produced through the Henry Wan & Yeung letter:

(i) When it was known as Concord International Group Limited – resolutions dated 22 May 1997 and 12 August 1997.

(ii) When it was known as Concord Strategic Investments Limited – share transfer form dated 6 August 1997, and the common seal adopted on 29 August 1997.

The chop of Concord BVI was not used on the 9^th loan agreement.

95.  In summary, the short term loan and 2^nd loan indisputably pointed to the defendant as the borrower.  The rest of the loans used the defendant’s 1^st or 2^nd chop instead of that of Concord BVI’s. The loan amounts were deposited into bank accounts that belonged to the defendant.  The purported letter of instructions of the BVI entity did not use the proper name or chop of Concord BVI.  All of these reinforce my view that no weight could be attached to the Henry Wan & Yeung letter and that the defendant was the borrower of the 3^rd to 9^th loans as well.

Other defences

96.  Apart from what was stated in the Henry Wan & Yeung letter, the defendant puts forth 2 heads of defence to persuade this court that the borrower might have been Concord BVI.

(1) That the plaintiff has acknowledged that it was Concord BVI which owed the money (“the plaintiff’s acknowledgement);

(2) The financial statements did not show the defendant but BVI Concord to have owed the 9^th loan.

Plaintiff’s acknowledgement

97.  Mr Siu points out that between the dates of the demand letter and the 2000 Agreement, the plaintiff had consistently acknowledged the identity of the real borrower of the 9^th loan to be Concord BVI.  This was done by the 2000 Agreement.

98.  The plaintiff’s demand letters dated 15 April and 18 July 1999 was addressed to協和策略投資有限公司. Madam Cheng said that she had gone to the defendant’s premises in relation to the demand letter.  She verified with the defendant the amount of the loan agreement and Keung Chak signed in her presence.  She claimed to have harboured the belief that the defendant actually owed the sum to the plaintiff since.

99.  The demand letter triggered a without prejudice letter dated 29 September 2000, from Yuen Sung & Co. purportedly on behalf of Concord BVI (then still in existence):

“本律師行受Concord Strategic Investments Ltd (B.V.I.) 之委託對貴司的意向協議書提出以下之意見：

1. Concord Strategic Investments Ltd (B.V.I.) 並非所有貸款之借貸方。 有部分貸款之借貸方為Gold Coin Offshore Ltd (B.V.I.)

...

4. 協和策略投資有限公司，協和證券有限公司及協和財務有限公司為Concord Group (BVI) Ltd. 的子公司。”

100.  Madam Cheng had the audacity to describe it as just a “piece of paper” when apparently the plaintiff had issued a“意向協議書”to which Concord BVI had responded.

101.  The2000 Agreement was made 1½ years since the demand letter.  The contracting parties were the plaintiff and在英屬維爾京群島注冊的協和策略投資有限公司 (with Keung Chak signing on its behalf and the 2^nd chop applied).

102.  The preamble to the 2000 Agreement contained what I regard as an admission by the plaintiff that, amongst others, the HK$30 million loan was owed by BVI Concord; and that the plaintiff acknowledged it.

103.  The plaintiff sought to withdraw the admission.  The applicable principles are as follows:

(1) The court has to balance the interests of both parties.

“… in determining whether it is fair to allow a party to resile from an admission, it is not sufficient for the Court to presume prejudice to the opposing party but it is necessary to balance the prejudice suffered by the admitting party if deprived of his right to resile against any prejudice which the relying party has specifically established he will suffer if the admission is withdrawn.” Re Chung Wong Kit (A Bankrupt) [1999] 1 HKLRD 410, at 414 B-C, Rogers JA (as he then was)

(2) The party withdrawing the admission has to show good reasons. 

“The court allows a party to withdraw an admission deliberately made or to resile from a conscious choice for good reason, and if good reason is shown. In particular it expects the party to put before it a convincing credible explanation of the circumstances in which the admission was in fact made, which is sought to be said to have been made under a mistake. A typical sort of case is where the party is able to say ‘yes, when I said this, or when I admitted this, I believed that to be the case I have now got some totally fresh evidence in my possession which if true suggests that it was not the case, and I want to advance that proposition’.

In those circumstances the court, can readily give leave to withdraw the admission and does so.”

Tse Yuk-tin v Chee Cheung Ring & Co. Ltd [1984] HKLR 391 at 395 E-G; Re Chung Wong Kit (A Bankrupt) [1999] 1 HKLRD 410, at 414A, Rogers JA

(3) Whether or not new evidence has come to light which was not available at the time an admission was made, is but one of the factors to be taken into account, and it does not follow that the court cannot permit withdrawal where there is no such evidence: Woodland v Stopford & ors [2011] 1 All E.R. (D) 185.

(4) An example as to when an admission can be withdrawn is where it was based on a mistake: Hollis v Burton [1892] 3 Ch 226 (mistaken admission of receipt of money when there was no such).

104.  According to Madam Cheng, Keung Chak was amicable and misled her into believing that the defendant and Concord BVI were the same companies.  He paid HK$100,000 as part payment of the interests.  Madam Cheng gave him a receipt which he returned with another receipt from “協和策略投資有限公司 (BVI) dated 7/5/1999”.  She asked for the meaning of “BVI” and Keung Chak told her that “all Hong Kong companies were like that, for the purpose of saving tax”.  She believed that the defendant and Concord BVI were one and the same company.  Mr Siu draws to my attention that the fact that Keung Chak gave her another receipt was not mentioned in Madam Cheng’s affirmation in support of the Order 14 proceedings.

105.  The 2000 Agreement was allegedly drafted by Keung Chak. Several days after the 2000 Agreement was entered into, Madam Cheung received a copy of the purported financial statements of the defendant and Concord BVI.  She was of the view that those financial statements were not accurate so she and a colleague went to the auditor’s office.  They missed the auditor who appeared without their knowing but Keung Chak came to the scene and persuaded Madam Cheng to leave the auditor’s office.  Allegedly, Keung Chak agreed that the financial statements were useless.  Madam regarded the Agreement as void.

106.  I find Madam Cheng’s narrative to be most astonishing.  She has been an accountant for over 20 years.  Whilst working for the HDB, she had been head of the accounting division of the International Affairs Department leading hundreds of officers. She was charged with the responsibility to recover the loans as a member of the winding up committee.  Even under Mainland law, she knew that each company was a separate legal entity. The Agreement itself mentioned several companies with the name 協和. It was naïve of her to have accepted the word of Keung Chak without documents in proof or verification with the auditor.  She even tried to make the court believe that she did not know who the shareholders of the defendant were in 1997/98 until litigation started.  Apparently, she was trying to distance the plaintiff from Concord BVI.

107.  I decline to grant leave to withdraw the admission as it would be tantamount to re-writing the 2000 Agreement, which had been performed by Concord BVI by the production of financial statements.  Rather, I read the admission as part of the factual matrix. 

108.  The use of the 2^nd chop and not Concord BVI’s chop on the 2000 Agreement represented the continued effort by Keung Chak to continue to mislead as to the true identity of the party liable.

109.  The admission was in the context of the plaintiff’s attempt to obtain accounts of Concord BVI.  The 2000 Agreement was for the purpose of solving the issue of the loans “爲了解決其借款事宜”. It was not a source of liability for repayment.  It did not prescribe eg a repayment schedule or settlement terms which would have exempted the liability of the original borrower.  In fact Clause 7 of the 2000 Agreement expressly provided that “雙方再協商乙方償還借款的方式和方法”.

110.  New evidence had came to light since, from the Henry Wan & Yeung letter in 2006 and the financial statements.  As demonstrated in the next section, the latter raised more doubts than they answered. 

111.  Overall, the admission merely represented the plaintiff’s then state of belief and was not conclusive evidence as to the true borrower.

The financial statements did not show the defendant but Concord BVI to have owed HK$30 million

112.  There were 2 sets of purportedly audited financial statements: one for the defendant and the other for Concord BVI.  The 9^th loan appeared in the latter only.

113.  The defendant’s set was the first of its kind which covered the period from the date of incorporation on 20 January 1997 to 31 March 1998, ie well after the 9^th loan.  The Report of Directors dated 9 September 1998 attached to those financial statements was signed by Keung Chak.  By then, the plaintiff was no longer a shareholder or director who could have contributed the contents of those documents. 

114.  Mr Siu submits that the plaintiff had sold its shares on 18 June 1998 in Concord Group (B.V.I.) Limited to Gold Coin Offshore Limited (its subsidiary).  The debt of HK$30 million, if owed by the defendant, would have affected the value of the shares of Concord Group (B.V.I.) Limited.  With respect to Mr Siu, this observation could not help the defendant as it was not known at what price and on what terms the shares in Concord Group (B.V.I.) Limited was sold to the current shareholders of the defendant.

115.  Further, there were inherent problems with the defendant’s financial statements which made them unreliable:

(a) According to the Henry Wan & Yeung Letter, there were 2 loans whereby Concord BVI borrowed from the plaintiff (loan A) and in turn lent to the defendant (loan B). Whilst it might be fair enough for loan A not to be reflected in the defendant’s financial statements, what about loan B?

(c) The defendant might refer to the “Amount due to Holding Company” (ie Concord Group (B.V.I.) Limited) in its financial statements [A/117 and 119] as being representative of the 9^th loan.  But this suffered from an obvious problem.  The Henry Wan & Yeung Letter clearly referred “Concord BVI” to a company sharing the same name as the defendant.  There was never any overlap in name between Concord Group (B.V.I.) Limited and the defendant.

(d) There seems to be no dispute that the short term loan was entered into with Fine Honest (unequivocally the defendant). Why was this not reflected in the defendant’s financial statements either?

116.  As to Concord BVI’s audited financial statements, there were inherent problems making them unreliable:

(a) These financial statements contained many references to its Chinese trade name.  Contrast this with the defendant’s financial statements, in which there was minimal reference to its official Chinese name, including in obvious places where one would expect reference to have been made, eg in the section on the “Change of Company’s name”.  There was a clear intention to try and associate Concord BVI with the Chinese names on the loan agreements.

(c) Although the financial statements contained a reference to a loan payable of HK$30,281,806, the auditors provided a qualified opinion by expressly stating:

“We have been requested not to send direct confirmation in respect of accounts payable and loan payable in the amount of HK$10,780,000 and HK$30,281,806 respectively”. (emphasis added)

There was no reason why, if the 9^th loan was genuinely owed by Concord BVI, such a request was made to the auditors. 

117.  It was Ms. Cheng’s own evidence that:  

“We had already started to become suspicious at that moment in the accounting firm. Keung Chak told us that the audited statements was made for the purpose of giving us only and that is the reason why they were produced in the first place. There was no particular purpose to it. That’s what he said at the time.

…

Keung Chak already said that those were not true, he had the accountant doing it just for the sake of providing it to us.”

118.  There was a ring of truth in it.  All the financial statements in this case were inherently unreliable and I place no weight on them in deciding who the real borrower(s) was/were.

Findings

119.  I find that the defendant was the borrower of all 9 loans.  Considering the whole factual matrix, the 2000 Agreement did not preclude this court from finding who the real borrower was when more facts were discovered since its making.  The financial statements and the Henry Wan & Yeung letter were unreliable.  None of the suggestions put forth by the defendant can persuade me that Concord BVI might have been the real borrower.

120.  I therefore give judgment to the plaintiff as follows:

(1) That the defendant do pay the sum of HK$30,281,806.33 to the plaintiff.

(2) On a nisi basis, there be interest on the sum at the contractual rate of 12% from 27 February 1998 for 3 years to 26 February 2001 and thereafter at judgment rate until payment;

(3) On a nisi basis, there be costs to the plaintiff with certificate for Mr Wong SC to be borne by the defendant.

121.  I thank counsel for their assistance.

(Queeny Au-Yeung) Judge of the Court of First Instance High Court