Integrity Financial Advice Network Co Ltd v. Chu Yau Shun

HCA 623/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 623 OF 2012

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JUDGMENT

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Introduction

1.Integrity Financial Advice Network Company Limited (“Integrity”) brought this action to recover from Mr Chu a sum of HK$3,688,455.35 (“the Sum”) being 80% of the total amount of HK$4,610,569.19 (“the Total Sum”) previously advanced to him as transition bonus (“TB”) and monthly transition allowance (“MTA”) under a contract known as Network Owners Contract dated 1 June 2010 (“the Contract”) and an agreement entitled Financing Agreement of the same date (“the FA”). Pursuant to certain clawback provisions of the Contract and the FA, Mr Chu is allegedly liable to repay the Sum upon the termination of the Contract on 10 November 2011.

2.Mr Chu contends that he relied on certain oral assurances and/or representations given on behalf of Integrity that such clawback provisions would not be enforced against him in any event. Such oral assurances and/or representations have now turned out to be intentional/fraudulent or negligent misrepresentations to induce him into executing the Contract and the FA. Alternatively, he contends that he did not fail to meet the performance requirements so as to entitle Integrity to terminate the Contract and hence trigger off the application of such clawback provisions and hence Integrity’s termination of the Contract was wrongful. Mr Chu thus makes a counterclaim for damages for misrepresentation and/or rescission and/or wrongful termination of the Contract.

3.Integrity denies having made the alleged misrepresentations and contends that in any event Mr Chu had affirmed the Contract and should be barred from rescission.

4.Broadly speaking, the two major factual issues are therefore whether any misrepresentation was made by Integrity to Mr Chu which induced him to enter into the Contract (“the misrepresentation issue”) and, if not, whether Integrity can rely on such clawback provisions by reason of Mr Chu’s alleged failure to meet the performance requirements imposed on him under the Contract (“the clawback issue”). On the other hand, if there was such misrepresentation, whether Mr Chu can now rescind the Contract and whether he should be entitled to damages. 

5.By way of background, Integrity commenced another action against Mr Lau Kong Kei (“KK Lau”) who is the father-in-law of Mr Chu under HCA 2165/2011 to enforce similar clawback provisions. This court heard the trial in which Mr Chu also testified for the defence in late 2014. This court has delivered the judgment already. It should be made beyond doubt that though having heard the same witnesses of Integrity and Mr Chu in that trial on similar issues, this court shall resolve the issues in the present action solely on the basis of the evidence (both oral and documentary) in this action only and shall exclude from consideration any evidence adduced in the previous action.

Background facts

6.The undisputed facts leading to the signing of the Contract and the FA can be outlined as follows. They can mostly be discerned from non-controversial documents.

7.AXA China Region Insurance Company Limited (“AXA”) hardly needs introduction and Integrity was its corporate agent. It was wholly owned by Integrity Partnership Limited (“IPL”) and IPL was jointly owned by AXA (51%) and Integrity Financial Group Limited (“49%”) (“IFGL”).

8.In or about mid 2009, AXA came up with an idea to set up a new business model (“the new model”) in the insurance profession. It intended to create a new agency system to improve the existing practice in the management of insurance agents via the use of network of companies. The idea was that Integrity together with AXA touched base with some network companies to form a corporate network. Integrity would be the distribution entity and the network companies would be appointed as the agents of AXA to conduct sales pursuant to their respective network company contract with Integrity.

9.AXA intended to recruit established insurance practitioners to join the new model through network companies to be founded by them. It would provide such practitioners a chance to run their own insurance business under the auspice of Integrity assisted by AXA. Under the new model, network companies were to be given more autonomy and their owners could devise their own incentive plans to motivate their agents. Their owners would be responsible for the profit and loss of their own network companies. If their network companies performed well, their owners might be invited to take part in the administration of IPL. This presented a new opportunity for established insurance practitioners to have a taste of entrepreneurship instead of being a mere agent throughout their career notwithstanding their success.

10.AXA first targeted at the insurance elite and four of them were approached. They were KK Lau, Robert Chau, Jacky Leung and Mr Chu (collectively “the Targets”). Ultimately, only KK Lau and Mr Chu formed their respective network companies and joined the new model.

11.Mr Chu had worked for AIA, another giant in the insurance industry, since 1985 and he was in the down line of Robert Chau. When he left AIA to join the new model in 2010, his last designation was Senior District Director. His annual commission income alone was from HK$3 million to HK$5 million. There is no doubt about his success in the insurance career.   

12.On behalf of AXA, Denny Chan, Chris Chan and Kevin Lee undertook the recruitment exercise prior to the incorporation of Integrity on 19 November 2009 and approached the Targets. The defence refers to them collectively as the trio and I conveniently adopt this reference here. Denny Chan had been in the insurance industry for more than two decades and became the Chief Executive Officer of IPL on 1 December 2009. Chris Chan and Kevin Lee joined AXA in mid 2009 and both of their employments were transferred to Integrity on 1 April 2010. Chris Chan was appointed as the Head of Network Management whereas Kevin Lee was appointed as the Chief Executive Officer.

13.I shall explain the dealings between the trio and Mr Chu mostly evidenced by documents before the signing of the Contract and the FA.

14.In or around mid 2009, the trio had many meetings with the Targets, mostly at the coffee shop of the New World Hotel called “Patio”. In such meetings, the trio explained to the Targets the new model. Eventually, the Trio managed to get all of them to sign a letter of intent individually.

15.The letter of intent (“LOI”) signed by Mr Chu and Chris Chan on behalf of AXA contained provisions about TB and MTA. Mr Chu was to receive a total sum of HK$7,376,910.67 (“TA”) by way of advance including a sign-on advance of HK$1,844,227,67 as TB and a MTA of HK$230,528.46 for the following 24 months. It further contained clawback provisions under which Mr Chu was to repay different percentages of the TA he would have received upon termination of any of the specified contracts to be entered into by him and his network company for any reasons within different periods of the 60 months from their effective dates.

16.The LOI also provided a share option scheme to be established under which all of the Targets would be entitled to equal amount of shares in Integrity.

17.In early 2010, AXA prepared and revised such contracts required to be signed by Mr Chu. Emails were exchanged between Ms Candy Tsui of the legal department of AXA and the trio concerning such revisions in different drafts (“the Internal Emails”). One of the significant revisions apparent from such drafts was the removal of the clawback entitlement of Integrity in the event of the termination of the network owner contract without reason. Another revision of note was the increase of Mr Chu’s TA validation requirement to 50% of the “Maximum Monthly Scheme Amount”.

18.On 7 April 2010, Mr Chu signed the Interim Financing Agreement (“IFA”) as network owner though the identity of his network company was not specified. In IFA, the TA, TB and MTA were the same as those appeared in the LOI.

19.On 1 June 2010, Mr Chu further signed the Contract and the FA both as the network owner and the authorized signatory of Integrity People’s Group Limited (“IPG”). Mr Chu founded IPG on 30 March 2010 and he transferred all the shares of IPG to Integrity Financial Power House Limited on 1 April 2010.

20.It is not in dispute that Mr Chu received on 7 April 2010 the TB in the sum of HK$1,844,227.67 and thereafter has received a total of HK$2,766,341.52 from Integrity as MTA pursuant to the IFA and the Financing Agreement. In addition to these payments, Integrity also paid Mr Chu a total sum of HK$510,000 as fixed allowance and IPG a total sum of HK$2,501,292.64 as marketing allowance.

The misrepresentation issue

21.Against this backdrop, I can now turn to the two issues. First, I examine how the alleged oral assurances and/or representations were pleaded by Mr Chu.   

22.The pleaded case is that the trio made the following misrepresentations (adopting the abbreviations herein) to Mr Chu during their negotiations after the signing of the LOI. Such oral assurances and/or representations were made when Mr Chu complained to the trio that the terms in the draft Contract and the draft Financing Agreement did not reflect what that they had agreed under the LOI and hence he insisted that the true intentions and agreements embodied in the LOI be reinstated in the Contract and the FA.

23.Mr Chu alleged that the drafts only referred him as an agent of Integrity instead of being the president of Integrity and the network owner to run the business independently and owned the share of the joint venture company of Integrity.

24.In addition, Mr Chu alleged that clauses 3.4, 17, 18.1 and 18.2 of the draft Contract and clauses 5 and 7 of the draft Financing Agreement (collectively “the Offending Terms”) were unfair and harsh and, more importantly, had never been agreed to by him. The Offending Terms in mostly relate to the entitlement of Integrity to claw back the TA upon termination of the Contract and the FA.

25.The alleged oral assurances and/or representations consisted of:

(1) AXA and/or Integrity would not claim back any TB and MTA obtained by Mr Chu; The joint venture would be without risk for Mr Chu whereas the risk of AXA would be higher than anyone else (“No clawback misrepresentation”);

(2) Shares would be assigned to Mr Chu under the share option scheme as stated in the LOI (“Share option misrepresentation”);

(3) The responsibility would only be on AXA as a company and its investor and not on Mr Chu personally (“No personal risk misrepresentation”); and

(4) Mr Chu or KK Lau or Robert Chau would be made a director of Integrity (“Director appointment misrepresentation”); and

(5) the terms objected to by Mr Chu would be deleted from the Contract and the FA in due course (“Deletion misrepresentation”).

26.It was further pleaded that before Mr Chu signed the Contract and the FA, Chris Chan reiterated to him the oral assurances and/or representations and that due to urgency, he had to sign them first and they would be amended in future.

27.Mr Chu then alleged that the oral assurances and/or representations were false and the trio intentionally and fraudulently or negligently made them to induce him to sign the Contract and the FA. His primary position is that he was entitled to and did rescind the Contract and FA.

28.On this issue, each of the trio and Mr Chu filed their respective witness statements and testified in court. Robert Chau also filed his witness statement and testified in support of Mr Chu’s allegations. Bearing in mind that Mr Chu has the burden of proof in respect of the alleged oral assurances and/or representations, I scrutinize their evidence (both documentary and oral) relating to this issue.

29.Based on the following analysis and considerations, I am of the firm view that as a matter of fact, the trio did not ever make the oral assurances and/or representations as alleged by Mr Chu:

(1) I find all of the No clawback misrepresentation, No personal liability misrepresentation and Deletion misrepresentation to be inherently improbable.

(2) First, the pleaded case is that Mr Chu complained to the trio that the Offending Terms had never been agreed and were in conflict with those agreed terms under the LOI[1] and so he asked for deletion of such Offending terms and reinstatement of such agreed terms in the Contract and the FA[2]. I note that in his witness statement Mr Chu did not repeat the allegation and made no mention about the LOI. Instead he said that after legal advice given to him by his friend Mr Adolf Cheung, who was a solicitor, he merely requested the trio to delete the Offending Terms due to their harshness and unfairness.

(3) Indeed the LOI did contain such clawback provisions meaning that right from the beginning Mr Chu had agreed that he was liable to repay his TA upon the application of the relevant clawback provisions. This poses an intractable problem to his case of the No clawback misrepresentation and the Deletion misrepresentation. I have no hesitation in my rejection of Mr Chu’s explanation under cross-examination that he did not read the LOI in such detail. The LOI is only a 3-page document and the clawback provision featured prominently in the first page. More importantly, the basis of his pleaded complaint is that the provisions of the Contract and the FA differed from those of the LOI.

(4) I accept the truth in the unchallenged documentary evidence of Integrity in the form of the Internal Emails generated from February to March 2010. They clearly show that upon requests made on behalf of the Targets, Integrity only agreed to amend those clawback provisions in the LOI so as to limit the scope of its operation. The amended draft agreements attached to the Internal Emails provide cogent evidence as to how the clawback provisions had been revised. Mr Chu was no longer liable to clawback when the Contract was termination for whatever reason. The resultant amendments were fully reflected in the Interim Financing Agreement signed by Mr Chu upon which he received his substantial TB.

(5) For example, clause 5 of the draft FA was amended so that the circumstances under which the Contract was terminated was confined to clauses 18.1 and 18.2 of the Contract for the purpose of engaging the clawback provisions. Similarly, clause 6 of the draft FA was amended.

(6) All this supports the evidence of the trio. Mr Chu could not really be heard to say that he in fact never accepted clawback provisions. In addition, it can be seen that contrary to Mr Chu’s allegations in his pleaded case, Integrity did consider the concerns of the Targets and revise/alter the draft contracts accordingly.

(7) On the other hand, Mr Chu was also alive to those amendments that Integrity made to the clawback provisions so as to increase his liability in terms of time frame and percentage of refund. Given these amendments, it is hard to believe that Integrity in fact had no intention to enforce the clawback provisions and Mr Chu could believe that they would be deleted altogether at an unspecified time. 

(8) I note that there is a further significant difference between his pleaded case and his evidence. Whilst his pleaded case is that there would be no clawback in any event, Mr Chu’s evidence (both written and oral) is that he would not be liable to repay any of the TA so long as he remained to be a network owner of Integrity for 5 years. This deviation cannot be dismissed as minor or insignificant and, in my judgment, seriously undermines the credibility of the No clawback misrepresentation.

(9) This is particularly so in light of another contention of Mr Chu. He insisted that clause 18.2 of the Contract was unfair when in fact it merely provided the circumstances under which the Contract could be terminated with or without notice by either party. Mr Chu even went so far as to assert in his oral testimony that when he died, the Contract could still be continued by way of succession. Of course this is unacceptable. Absurdity aside, if the Contract could never be terminated, there is no reason why he would be required to work for 5 years for Integrity to earn his immunity to clawback.

(10) In my view, the clawback provisions were of critical importance to protect the financial interests of Integrity and AXA as investors of the new model. As pointed out above, Integrity paid sizable sums of TA, fixed allowances and marketing allowances to Mr Chu and IPG. Further, the undisputed evidence is that Integrity provided office accommodation, training and recruitment support to IPG. The new model presented a good business opportunity but admittedly it carried commercial risks to all the parties involved.

(11) In the circumstances, the underperformance or even non-performance of its network companies must cause loss to Integrity. Integrity must need some safeguards and have a recourse to cut its loss. The clawback provisions were hence essential to ensure that at least Integrity could recover from the network owners the TA already paid to them upon premature termination of their contracts. Of course, under what conditions and to what extents there should be clawback were something to be agreed by the parties in the form of express terms and this court is reluctant to express any view on their fairness. However, I am of the firm view that given their importance, Integrity would never agree to abandon them completely upon Mr Chu’s objections.

(12) The allegation of abandonment is also made against all the contemporaneous documents of Integrity including the Internal Emails. Such documents only show how serious Integrity was about the clawback provisions from start to finish. At the very outset when AXA conducted a presentation of the new model in a 2-day workshop about the new model in Shenzhen, clawback provisions were mentioned as liability on the part of the participating insurance practitioners. Mr Chu attended the workshop but he alleged that he was told orally that clawback provisions did not apply to network owners. If he had been so told there is no reason why he accepted the clawback provisions in the LOI less than two months later.

(13) In the premises, I cannot accept Integrity would allow the trio to make the No clawback misrepresentation, No personal liability misrepresentation and the Deletion misrepresentation on its behalf to Mr Chu.

(14) All of the trio testified and were subject to the skillful cross-examination of Mr Shum, appearing for Mr Chu with his junior counsel Ms Yue. I found them to be impressive and reliable witnesses. I have little difficulties in accepting their denial of the allegations of oral assurances and/or representations. All of them were successful professionals in the insurance industry in their own right. They were tasked with the duty to develop the new model on behalf of AXA. I cannot believe that they would without the authority of AXA and/or Integrity conspired with each other and take such a serious risk personally (in the event that there should be clawback) to make the alleged assurances and/or representations to Mr Chu so as to induce him to entering into the Contract and the FA. This would be an audacious act in the extreme and I cannot believe any of the trio, let alone all of them collectively, did so individually.

(15) On the other hand, Mr Chu was demonstrably serious about the written terms of the draft agreements to be signed with Integrity. He made an effort to seek legal advice from Adolf Cheung about the express terms of the drafts. I cannot believe Mr Chu would accept any of the alleged oral assurances and/or representations notwithstanding the clear wording of the Contract and the FA. I see no reason why he did not first seek legal advice from Adolf Cheung about the enforceability and legal effect of the alleged oral assurances and/or representations. I cannot believe he would accept the alleged urgency to have the Contract and the FA signed to kick start the new model.

(16) Indeed there is scant evidence that Mr Chu had ever taken any follow-up actions to ensure that the Offending Terms should be deleted pursuant to the alleged oral assurances and/or representations. He only mentioned in his supplemental witness statement for the first time that he had requested the trio to delete the Offending Terms. There is no documentary evidence of his alleged request. I could not believe he would unquestioningly accept the trio’s suspect refusal to honour their assurances to delete the clawback provisions and allow the sword of Democles to hang over his head over a year.

(17) Furthermore, in fact not all the terms included the Offending Terms were unfavourable to Mr Chu. For example, clause 18.1 actually gave Mr Chu a right to terminate the Contract with 1 month’s notice. I fail to understand why Mr Chu found it to be offensive and ever insisted on its deletion. He could not expect that he was never able to get out of the new model.

(18) Nor can I understand why Mr Chu found clause 3.4 objectionable whilst he did not raise any complaint about clause 3.3, which was very much similar in its effect. Indeed he agreed to pay Integrity clawback on behalf of Paul Wong who was his agent in the sum of HK$508,000 pursuant to clause 3.3. I believe he was just too causal in making up the Deletion misrepresentation. In passing, his agreement to pay clawback to Integrity on behalf of his agents shows that he actually accepted the business risk as a network owner.  

(19) Lastly, Mr Chu had long worked with commercial documents in his insurance practice for so many years. He accepted that he knew very well the importance of written terms, defining one’s legal entitlements and liabilities. I cannot believe that given his work experience he would accept the alleged oral assurances and/or representations to override the legal effect of the express terms of the Contract and the FA. This is simply incredible.  

(20) I give the Share option misrepresentation my separate consideration and I reach the same conclusion. This plea must be rejected.

(21) The core complaint is that Integrity did not honour its promises to launch the share option scheme as stated in the LOI. The relevant provision in the LOI was in the following terms:

“Participation in the share option scheme(s) to be established under which you together Chau Tze On, Lau Kong Kei and Leung Kau Fai Jacky will be entitled to a (sic) upfront allocation of a total of 10.20% of the total issued share capital of the JV Partner (which translates to approximately 5% indirect holding of the total issued share capital of the JV) without performance binding/validation and a further of a total of 10.20% of the total issued share capital of the JV Partner (which translates to approximately 5% indirect holding of the total issued share capital of the JV) with performance binding/validation agreements, and subject to the terms and conditions of such share option scheme(s). The split of the share option among you, Chau Tze On, Lau Kong Kei and Leung Kau Fai Jacky will be agreed among you. If you, Chau Tze On, Lau Kong Kei and Leung Kau Fai Jacky fail to agree on the split of the share options, AXA shall have the discretion to designate such portion of share options to each of them as it thinks fit.”

(22) It can be readily seen that the share option scheme in the LOI was made in contemplation of all 4 of the Targets joined the new model. Jacky did not even sign a similar LOI at all. The share option scheme could not be reproduced in the Contract without amendments after further negotiations about the entitlements of the remaining Targets.

(23) The non-participation of Robert Chau at the end further complicated the situation. If the share option scheme were still to be offered to KK Lau and Mr Chu, there must be further negotiations between the parties so as to vary the terms to cater for the changed circumstances. It cannot be the case which Mr Chu now wishes this court to accept that the same share option scheme without any modifications was meant to be included in the Contract but was just omitted.

(24) There is some evidence to the effect that in mid 2010 Chris Chan did receive requests from KK Lau and Mr Chu that they wanted to be allotted some shares but Integrity was mindful of their unsatisfactory performance. The unchallenged evidence of the trio is that the Board of IPL did not agree to their request and decided to defer discussion. I accept their evidence.

(25) There is no documentary evidence that Mr Chu had ever made any serious demand to Integrity to honour its assurances to allot to him shares, let alone confronting it with the Share option misrepresentation. This is wholly inconsistent with the existence of the Share Option misrepresentation.

(26) In the premises, factually I do not accept that the trio ever made the Share option misrepresentation at all. I should add that as a matter of law, this plea is fraught with difficulties too. I am not satisfied that it can be an actionable misrepresentation absent evidence of dishonesty when it was made. However, in light of the fact finding I have made, I do not think I need to be academic here.

(27) I now deal with the last misrepresentation, i.e., Director appointment misrepresentation. The allegation is that the trio once assured that either one of KK Lau, Robert Chau or him would be made a director of Integrity. I note that Mr Shum did not address me on this allegation at all in his closing submissions. He was quite right. It has no evidential basis at all.

(28) In his witness statement, Mr Chu maintained that Integrity intended to appoint either Robert Chau, KK Lau or him, among other persons, to be a director of Integrity. At best it was an indication of its intention. It cannot be taken to be an unconditional promise of a guaranteed appointment. 

(29) Denny Chan in his evidence accepted that Integrity did have such an intention but an appointment could only be made if a network owner’s performance met the approval of Integrity. This makes perfect commercial sense. His evidence was not challenged too. I accept his evidence.

(30) On the other hand, Mr Chu did not give any evidence of his demand for his appointment to the board. This effectively negatives the existence of the Director appointment misrepresentation.      

(31) In the circumstances, I have no hesitation in concluding that there is no merit in the Director appointment misrepresentation. Indeed I find no substances in any one of the alleged misrepresentations at all, let alone fraudulent misrepresentations.

30.I should add that I have too considered the evidence of Robert Chau in support of Mr Chu’s allegation of oral assurances and representations. By reason of the foregoing analysis, I reject his evidence despite his apparent independency.

31.In all fairness to Mr Shum, he did not press very hard on the alleged oral assurances and/or representations and he dealt with this plea with admirable constraint. The trio was not seriously cross-examined on this issue and no allegation of fraud was suggested to the trio in the witness box. Mr Shum made a sharp point nevertheless.

32.Mr Shum rightly pointed out that the witness statements of the trio were near identical including their denial of the oral assurances and representations and contained the same mistakes. The identification was fully illustrated by a table annexed to his closing submissions. He submitted that I should attach no weight on their witness statements and this renders Mr Chu’s case of misrepresentations very strong.

33.Mr Suen, appearing for Integrity, in reply also pointed out that the same criticism could be made about the witness statements of Mr Chu and Robert Chau. Mr Shum’s retort is that the identification of the two witness statements merely related to those undisputed matters supported by documentary evidence.

34.I cannot agree with Mr Shum. It is clear to me that the formats and, more importantly, the contents of the two witness statements are to a large extent very similar. The relevant part of the witness statement of Robert Chau[3]which performed its central function, namely, setting out the alleged oral assurances and representations is near identical to the counterpart in the witness statement of Mr Chu[4].

35.My decision on the issue of misrepresentation is mainly based on inherently probability taking into account contemporaneous documents and my observations of the witnesses’ oral evidence. The identification in the witness statements of both parties did not feature much in my deliberation and I was not really troubled by such identification.

36.That does not mean I should simply keep quiet about this malpractice, which is regrettably not uncommon. It appears to me that the identification is attributable to the sloppiness of the parties’ respective legal advisors rather than the concerted effort of the witnesses themselves. I believe it was the former rather than the latter who wanted to cut corners in the preparation of the witness statements. Mr Shum drew my attention to the following pertinent criticisms of DHCJ Saunders in Ho Sing Yin v Chan Yiu Ling, unreported, HCA 90/2010, 13.7.2012:

“61. The fact that our system now requires full disclosure of a party’s case, in part by the exchange of witness statements prior to the trial, is not a license to solicitors to tailor or engineer witness statements in order that they may corroborate each other. If they do so, it will be transparent, as it is in this case, and it is likely that the court will reject the evidence of the witnesses.

65. The preparation of the witness statement for a trial is a matter which is not to be undertaken lightly, or handed down to the most junior solicitor.  It is an important and delicate task, requiring a proper understanding of the case, particularly the jurisdictional basis upon which any application might be made or relief might be sought.  It is a task which must be undertaken by solicitors responsibly, ensuring that words are not put in a witnesses mouth, and that the witness should express himself in his own words, words which he will understand when he is cross-examined on that statement.” 

37.I fully endorse what the deputy judge said about identification of contents in witness statements and I need say no more. Expungement of such identical parts in their entirety may appear to be extreme but it may be an effective sanction in appropriate cases.

38.Before I proceed to resolve the clawback issue, I should point out that upon rejection of the allegations of Mr Chu concerning misrepresentations, I agree with Mr Suen that Mr Chu’s credibility is seriously dented. His plea of misrepresentation bears all the hallmarks of an afterthought. I find it disturbing that Mr Chu has seen fit to make up such baseless accusations against the trio impeaching their professional integrity even by alleging fraud so as to avoid his clawback obligations. Overall speaking, he impressed me as an unreliable witness and his oral testimony was very often contradicted by contemporaneous documents. The trio was in the opposite. They appeared to be trustworthy and honest witnesses to me. I find their evidence to be preferable.

The clawback issue

39.The claim of Integrity is based on the alleged breach of the clauses 2.1(a), (e) and (k) and 4.1(c) of the Contract on the part of Mr Chu. Thus, Integrity contends that it was entitled to terminate the Contract pursuant to clause 18.2(h) of the Contract and Mr Chu should claw back his TA by reason of clause 5(b) of the FA.

40.Whilst I have upheld the validity of clause 5(b) of the FA, Integrity has to prove its entitlement to terminate the Contract under clause 18.2(h) of the Contract.  

41.I should first set out the foregoing provisions in the Contract. For easy reference, in the Contract, the Network Owner referred to Mr Chu, the Network Company referred to IPG and the Company referred to AXA. The relevant provisions are as follows:

“2.1 During the term of this Agreement, the Network Owner shall as an agency manager (if applicable):

(a) meet the key performance indicators specified by the Network Company, Integrity and the Company where applicable including production, recruitment and persistency;

…

(e) train, supervise and develop agents and agency managers who are under his supervision as determined by the Company and Integrity;

…

(k) maintain performance and production equal to or greater than the minimum standards which the Network Company, Integrity and/or the Company will establish annually and make known to the Network Owner in writing;

…

4.1 During the term of this Agreement, the Network Owner shall:

…

(c) meet the key performance indicators specified by the Network Company, Integrity and/or the Company including production and persistency;

…

18.2 Each of the Network Company, Integrity and the Company may

terminate this Agreement immediately with notice (but in the case of 18.2(i) and 18.2(j) without notice) to the Network Owner if:

…

(h) the Network Owner does not meet training, production, persistency, recruitment or other requirements in respect of the Network Owner’s appointment in this Agreement which may be set by the Network Company, Integrity or the Company or may be required under laws, legislation, statutory rules, regulations, codes and guidelines of government authorities from time to time;”

42.On a true construction of the Contract, the requirements set out in clause 18.2(h) to be met by Mr Chu should include the key performance indicators (“KPIs”) referred to in the clauses 2.1.

43.The relevant provisions in the FA are as follows:

“(5) If the Network Owner’s Contract is terminated (i) by the Network Owner pursuant to clause 18.1 of the Network Owner’s Contract, or (ii) pursuant to clause 18.2 of the Network Owner’s Contract within 60 months from its effective date, a portion of the amount of TB and MTA that has been advanced to the Network Owner under this Financing Agreement will be immediately repayable by the Network Owner to the Company. The Network Owner shall:

…

(b) repay 80% of the amount of TB and MTA advanced if the Network Owner’s Contract is terminated within the 13^th month to the 24^th month from its effective date;

…

The Company would waive its right to seek recovery of all advances made under this Financing Agreement so long as the Network Owner’s Contract remains in effect for a period of more than 60 months from its effective date.

(8) In the event of the Network Owner failing to repay when due all or any part of the debt repayable to the Company pursuant to the terms of this Financing Agreement, and/or the Network Company failing to pay all or any part of the Network Company Debt to the Company pursuant to the terms herein, the Network Owner and/or the Network Company shall pay the Company annual simple interest on such amount(s) remaining unpaid at the rate of 3% over the Best Lending Rate from time to time quoted by The Hongkong and Shanghai Banking Corporation Limited.”

44.Mr Chu’s pleaded defence relating to the clawback issue consists of three averments only[5]. First, Mr Chu averred that Integrity failed to give any particulars of its pleaded allegation of Mr Chu’s failure to meet the performance requirements despite his repeated requests including his lawyers’ letter dated 6 January 2012. Next, he made a bare denial of his alleged failure to meet the performance requirements under the Contract and lastly he averred that the pleaded allegation was devoid of or insufficient in particulars and is liable to be stuck out.

45.After Mr Chu issued a summons for his application for further and better particulars on 15 August 2012, Integrity through its solicitors by their letter dated 28 August 2012 gave particulars about its allegation of Mr Chu’s failure to meet the performance requirements (“the Particulars”) as follows:

“Mr Chu is required to maintain the performance and production of his Network Company, IPG, himself and all agents under his supervision at a level equal to or greater than the minimum standards established by Integrity.

These standards included the planned monthly New Business Index and the planned New Business Index Productivity. Mr Chu failed to meet the New Business Index for every month (except October 2010) since he joined and the planned New Business Index Productivity for every month since he joined (except October to December 2010) by significant margins.

The particulars of the planned monthly New Business Index and the planned New Business Index Productivity verses the actual monthly New Business Index and the actual New Business Index Productivity produced by Mr Chu produced by Mr Chu and his Network Company are set out in Annex 1 attached.

In addition to the above, Mr Chu failed to recruit sufficient sub-agents to meet targets set by him together with Integrity and committed to by him. The particulars of which are set out in Annex 2 attached.”

46.By the same letter, Integrity offered to provide the Particulars as voluntary particulars and invite Mr Chu to withdraw his summons for request for further and better particulars. I can see no reply by Mr Chu and Mr Shum confirmed that Mr Chu did not proceed with his application.

47.Against this background, Mr Chu should be taken to have accepted the Particulars without insisting on its being formally introduced as voluntary particulars or being incorporated in the pleadings.

48.I should mention Mr Shum’s objection in respect of the Annexures to the Particulars. He was astute to point out the non-provision of actual performance figures for the months of September and October 2011. He then submitted that Integrity could only rely on the period from January to August 2011.

49.I cannot accept this submission. As a matter of particulars to the pleadings, I do not agree that the actual figures have to be spelled out. They are merely evidence that need not be pleaded. So long as the averment of underperformance and its evidential basis are clear, it should suffice for the purposes of the pleading.

50.The crux of the defence is that no KPIs had ever been set for Mr Chu under the Contract and nor did Mr Chu agree to any of such KPIs. Hence there is no question of his failure to meet such requirements. It follows that the Contract could not be terminated pursuant to clause 18.2(h) and so Mr Chu was wrongly dismissed.

51.I pause to note that it is not really the pleaded case of Mr Chu that Integrity did not set any KPIs for him under the Contract at all. He merely denies that he failed to satisfy such requirements. On the other hand, it is not the pleaded case of Mr Chu that his consent to the KPIs was required before they could be binding on him and/or that the KPIs were invalid for want of his consent. Bearing this in mind, I shall first resolve the factual issue as to whether any KPIs had been set for Mr Chu.

52.On this issue, the starting point is that, as I have observed above, the clawback provisions were of key importance to Integrity to protect its financial interest. Clause 18.2(h) of the Contract entitled Integrity to terminate the Contract immediately and claw back under clause 5(b) of the FA on the ground of Mr Chu’s failure to meet his KPIs.

53.In addition, the performance of the network companies and their owners was critical to the success of Integrity. Integrity could not survive at all if they did not perform. This is so even when the new model was looked upon to have a long-term future. This is the reason why performance requirements were mentioned more than once in the Contract.

54.Lastly, there is unchallenged documentary evidence of Integrity including summaries/minutes of internal management meetings which shows grave concern at all levels (including AXA) about the underperformance of Mr Chu and his IPG in terms of both production and manpower ever since October 2010. Under those circumstances, it is more likely than not that Integrity had set certain KPIs for Mr Chu and IPG to meet so as to monitor the situation.

55.Thus, first and foremost, in terms of inherent probability, I am of the view that I find it inherently improbable that Integrity did not set any KPIs pursuant to the Contract for Mr Chu during the currency of the Contract.

56.I then turn to assess the evidence of the parties, taking into account my observations about their credibility on the misrepresentation issue at the same time. I am aware of the principal objection of Mr Chu to the allegation of KPIs that there was nothing in writing to inform Mr Chu of and/or warn Mr Chu against such KPIs. Integrity did not say there was.

57.On this issue, Integrity relies heavily on the evidence of Mr Benny Yip (“Benny”), Senior Manager of Integrity. He left Integrity in July 2012 upon its cessation of business and thereafter he has worked for his own broker firm. He now mainly works in Singapore. As such, he is an independent witness.

58.Benny and Denny Chan dealt with Mr Chu on behalf of Integrity in the main. Benny explained his dealings with Mr Chu in detail and his evidence can be summarized as follows:

(1) In or around August 2010, Kevin Lee asked Benny to create a spreadsheet tool to assist Mr Chu to calculate the “realistic” and “minimum” figures in respect of the productivity and manpower of IPG (“the Tool”);

(2) The Tool was a spreadsheet matrix which allowed Mr Chu to insert different variables such as productivity and manpower based on his own knowledge and business projection of IPG. Upon Mr Chu’s entry of all such data, a business plan with projected figures would be produced.

(3) Benny discussed the Tool with Mr Chu in August and September 2010 about the creation of the business plan containing “realistic figures” and “minimum figures” during their meetings. He also explained how the Tool worked with Mr Chu. Such discussions and meetings were evidenced by an email sent to Mr Chu’s Gmail account dated 30 August 2010 and this evidence was not challenged.

(4) There came a controversial email dated 20 January 2011 (“the January Email”). From a purported printout of the January Email (“the Printout”), it can be seen that the subject matter was “IPG 2011-13 Business Plan”. It was sent by Benny to Mr Chu’s Gmail account and Denny Chan was also a recipient of the email. There were only two sentences in its content and it read,

“Please find the IPG 2011-13 business plan discussed today. As agreed, we shall use the “realistic case” for monthly review.”

(5) From the Printout, it cannot be seen that an attachment was sent together with the January 2011. Benny’s evidence is that he sent the captioned business plan with the email to both Mr Chu and Denny Chan. I should now put down a marker that Mr Chu denies having received the January Email and also doubts if the business plan was actually attached to it.

(6) Benny further explained that the business plan was agreed by Mr Chu after discussion with Denny Chan and the figures for the realistic case stated therein were adopted to be the monthly minimum targets which Mr Chu and IPG were committed to achieve. Some time later, Mr Chu indicated to Benny that he did not like the description of “the minimum case” and rather would prefer “the aggressive case”. Benny agreed to change the description in the business plans accordingly as it made no significant difference. 

(7) However, in early February 2011, Integrity purportedly agreed with Mr Chu that the aggressive figures instead of the realistic figures should be adopted as the monthly minimum targets. This change could be evidenced by the internal email circulated among Integrity. With this agreement, Benny prepared a table containing information of Mr Chu’s actual performance and the aggressive figures (the Performance Table”). Denny Chan was provided the Performance Table with its updates for his monthly performance review meetings (“MPRMs”) with Mr Chu since February 2011.  

(8) With the assistance of the Performance Table, the underperformance of Mr Chu and IPG was conspicuously shown to Mr Chu during the MPRMs. Benny attended some of these meetings.

59.Denny Chan’s evidence largely dovetailed those of Benny. He repeatedly stated that the aggressive figures in the business plans were committed targets and during the MPRMs he pointed out to Mr Chu the shortfalls and gave him more motiviation.

60.Moreover, Denny Chan found the realistic figures compiled in January 2011 to be unacceptably low and demanded Mr Chu to revise the same. Eventually, Mr Chu agreed with him at one of the MPGMs in early 2011 that the aggressive case should be adopted as minimum performance requirements instead.

61.Apart from the Performance Table, Integrity internally used Validation Progress Tracking Table to monitor the performance of IPG and Mr Chu.

62.Denny Chan complained about the poor performance of Mr Chu and pointed out that IPG merely reached 42% of the planned New Business Index (NBIs). The truth of the Particulars is apparently borne out by documentary evidence by way of the Performance Tables. The defence did not challenge the veracity of the data contained therein either by way of contrary evidence or cross-examination on those figures. I have no reason to doubt their accuracy and I do not find it necessary to set them out in the Judgment to show the shortfalls.

63.It is accepted by Integrity that Integrity did not issue Mr Chu any written warnings or ultimatum before the termination of the Contract. It is not a pre-requisite of termination under the Contract though.

64.It is noteworthy that Denny Chan in his witness statement said that since mid-2011, he had expressly told Mr Chu that IPG performed so badly that the Contract would be terminated in the absence of improvement. He was not cross-examined on this assertion.  

65.On the other hand, Mr Chu’s evidence is simple. In addition to his allegation that the entire clause 18.2 was agreed to be deleted in due course, he insisted that he was not required to meet any contractual requirements relating to performance, i.e. KPIs as repeatedly assured by the trio.

66.He disclaimed any involvement in the production of the business plans. He even denied having received any of the business plans. He said he had never heard about the minimum, realistic and aggressive cases altogether. His grievance empathetically voiced through his counsel is that he was merely made a scapegoat of the short-term failure of the new model and the termination was unfair to him.

67.I have no difficulty in concluding that the evidence of Integrity relating to this issue should be preferred. The trio and Benny were impressive witnesses testifying with confidence and common sense. More importantly their evidence is supported by contemporaneous documents such as minutes and emails. I cannot begin to doubt that they conspired to falsify all these business plans, which I must say are quite complicated in their presentations, and all other emails and minutes in order to fabricate a case of Mr Chu’s failure to meet KPIs. A few false simple documents would serve the same purpose better. In any event, I am fully convinced of their honesty and integrity and I believe they have tried their best to tell me the truth.

68.Accordingly, I find as a matter of fact that KPIs in the Contract were set by Integrity for Mr Chu to meet by way of aggressive cases in the business plans. The aggressive cases were prepared with the input of Mr Chu and agreed by him ultimately. Denny Chan assisted by the Performance Tables did impress Mr Chu the importance of his satisfaction of such KPIs during the regular monthly meetings. The Particulars of underperformance are borne out by the evidence. For ease of reference, they are summarized by the following table prepared by Mr Suen:

	4.2011	5.2011	6.2011	7.2011	8.2011	9.2011	10.2011
Production	34%	14%	15%	14%	24%	2%	16%
Manpower	45%	38%	38%	33%	31%	28%	27%

69.In stark contrast, I find Mr Chu an incredible and unreliable witness. Inconsistencies abound in his evidence. He took up the daunting task to argue against all the documents and he failed miserably. He struck me to have made a desperate effort to evade his contractual obligations to refund. I reject his evidence whenever it is in conflict with those of Integrity.

70.I need only specifically deal with the following evidence of Mr Chu to illustrate his untrustworthiness:     

(1) I first deal with his alleged non-receipt of the January Email. Mr Shum complained about the dubious appearance of the Printout and made forceful submission that it was not a genuine email without its full information set out in its usual format. I find no substance in this complaint. Neither the missing information nor the unusual format of the January Email causes me any concern at all. It seems plain to me an email can look differently in different computers and in any event the Printout was only produced for the purpose of showing the content of the January Email sent.

(2) I am positive that Benny did send the January Email out as shown in the Printout. As observed, I do not find him to be a forger and I believe his oral testimony. It is clear to me from the emails exchanged between Ms Candy Tsui and Benny in 2012 that Ms Candy Tsui tried to retrieve the January Email from the database of AXA for use in this action after Integrity had ceased business and Benny had left. It is undoubtedly a genuine document. Mr Chu did not give adequate notice of his challenge to its authenticity too.

(3) Mr Shum got Denny Chan to agree with him under cross-examination that he had no independent recollection of receiving the January Email and he submitted that this reinforced Mr Chu’s case of non-receipt. Whilst Denny Chan’s fairness in this regard is commendable, at the end of the day I am unable to believe Mr Chu.

(4) First, Mr Chu never said he had not received the January Email in his witness statements. He should know very well that Integrity relies on this document to show that the business plan attached thereto was agreed by him and that he then agreed that the realistic case was applicable. After the discovery of the January Email, which was on the face of it sent to him, he should be alarmed if he had not received it. There was no reason why he did not even mention his alleged non-receipt of this document in his witness statements.

(5) I appreciate that it may not be easy to adduce evidence to prove non-receipt of a mail. But here we are dealing with an email. Everyday experience tells us that it is not an utter impossibility that a specified recipient of an email may not receive the email though it has been actually sent by the sender. However, in light of prima facie evidence of receipt, Mr Chu, even without legal advice, should have checked thoroughly his folders in his Gmail account including the junk folder to check whether he had received the January Email.

(6) In answer to this court’s query, Mr Chu said for the first time he had done this exercise. He actually went much further than that. He even went up to the Google office at Times Square, Causeway Bay to make enquires. I do not know whether or not and how a Gmail user can make queries with the Google office personally to confirm the non-receipt of a particular mail. Anyway, his effort did not end there. He made phone enquiries with the US Google office and confirmed that his email inbox was overloaded.

(7) Nevertheless, if Mr Chu had done all that, his conclusion would have been much more convincing. It is only inexplicable why he did not say a word about this in his witness statements and/or his evidence in chief. Had this matter not been raised with him in the witness box, all his effort to confirm his non-receipt of the January Email would go down the drain unnoticed. I have no doubt that he did not tell this court the truth. I am driven to the conclusion that he did receive the January Email.

(8) Given this conclusion, I also accept Benny’s evidence that the business plan supposedly attaching to the January Email indeed reached Mr Chu. It is not uncommon for a sender to omit to attach his intended attachment to his email inadvertently but if Mr Chu received the January Email without any attachment, he should have made enquires with Benny particularly in light of the intended use of the business plan.

(9) I agree to the truth stated in the January Email. Otherwise, Mr Chu would have raised objection thereto. By the same token, Mr Chu’s denial of any knowledge of the realistic case is nothing more than a blatant lie.

(10) I further agree with Mr Suen that Mr Chu’s contrived effort to avoid the January Email and the business plan should seriously damage the credibility in his denial of any KPIs in the business plan.

(11) Another glaring example of Mr Chu’s untruthfulness is his attempt to deny any receipt of the business plans at all other than the one attaching to the January Email. This allegation does not sit comfortably with his another major contention put to Benny that the business plans containing projected figures were prepared by Integrity to assist network companies including IPG to monitor and manage their advisors. I should make it clear that this should not be taken to be the sole function of such business plans. Anyhow, if Mr Chu agreed that these business plan had a function germane to the interest of IPG to perform, there was no reason why he had never chased after Integrity for these business plans over so many months.

(12) Further, he tried to rid himself of any involvement in the preparation of the business plans. He categorically denied any input of the data shown in the business plans in order to reinforce his case of unilateral imposition of the KPIs.  He even went so far as to claim that he did not know how to use Excel.

(13) He might or might not know how to use Excel but this is beside the point. The crux of the evidence of Benny is that the data to be input for the purpose of preparation of the business plans was provided by him knowing that a particular case would contain performance requirements for him to meet. In this regard, I prefer Benny’s evidence, which is supported by an email from him to Chris Chan dated 17 August 2010. I see no reason why Benny should lie to his colleague in this email.

71.I believe I have said enough about the unreliability of the evidence of Mr Chu. I am very much unimpressed by him as a witness. Unless it is supported by documentary evidence, I am unable to prefer his evidence in face of any contrary evidence of Integrity. 

72.Having accepted the evidence of Integrity relating to the KPIs in the business plans, the discussions between Denny Chan and Mr Chu in the MPRMs and the underperformance of Mr Chu, I am certain that Integrity should be entitled to demand clawback of the Sum from Mr Chu.

73.Mr Shum does not place a lot of reliance on Mr Chu’s evidence, in my view, not without good reasons. Rather, he left no stone unturned in his criticisms of the evidence of Integrity in his detailed written submissions. I have considered all of them and come to the conclusion that none of them can cause me any concern about the well-documented case of Integrity supported by credible oral evidence. In deterrence to his industry, however, this court should deal with his major complaints as follows.

74.Mr Shum pointed out that Integrity never expressly indicated to Mr Chu in writing that the figures in the business plans were contractual performance requirements under the Contract in either the business plans themselves or the Performance Tables. He submitted that it should follow that they had no contractual force and Mr Chu was not obliged to perform with any reference to such figures. He highlighted to this court that the provision of the Contract to the effect that there could be no verbal alteration of the terms and that both Denny Chan and Benny agreed that it was their practice to reduce important matters into writing.

75.I cannot agree to this submission. Despite my rejection of Mr Chu’s case of oral assurances and/or representations, I am not applying double standard here. I too agree contractual binding provisions must be contained in the Contract itself. The performance requirements and/or KPIs were adequately provided in clauses 2.1(a), (e) and (k) and 4.1(c) of the Contract. They were valid and binding on Mr Chu. In particular, the performance requirements in clause 2.1(k) were to be established by Integrity annually and made known to Mr Chu in writing.

76.Once the printed figures in the business plans were made available to Mr Chu and Mr Chu was duly notified by Benny and Denny Chan that those figures were meant to be performance requirements which Integrity expected Mr Chu to meet, such printed figures should qualify as performance requirements under the Contract. There is no additional requirement that there should be written reference to those provisions in the Contract.

77.I find it perfectly understandable and acceptable that neither Benny nor Denny Chan referred to the specific provisions in the Contract when working with Mr Chu with the business tables and the Performance Tables. It should be noted that they were meant to be working together to make the new model a commercial success and in their daily dealings they only need to be concerned about the commercial side of the new model. They should be entitled to expect Mr Chu to be mindful of his own contractual obligations and take care of the legal consequences flowing from any breach thereof without express reference to the terms of the Contract.

78.This also explains why I am not impressed by Mr Shum’s submission that there was no written reminder, warning or ultimatum issued to Mr Chu before termination of the Contract. I cannot expect Benny and Denny Chan to resort to administer threats of termination of the Contract with specific references to the Contract to Mr Chu by reason of his underperformance in the course of their motivation. The performance requirements were already there and the shortfall was drawn to his attention on a regular basis. Mr Chu should know very well the consequences of his failure to comply and needed no written reminders and warnings. Certainly I do not find it obligatory for Integrity to issue the same.

79.Next, Mr Shum drew my attention to the fact that the performance requirements in the business plans were even higher than those validation requirements for TA. He submitted that Mr Chu had no reason to accept them in the circumstances. I cannot agree.

80.First of all, validation requirements applied to the MTA payment only and not TB and they covered production only. KPIs covered TA and other aspects of performances. Further, as rightly pointed out by Mr Suen, the failure to fulfill validation requirements only affected the eligibility for MTA whereas the failure to fulfill KPIs could entitle Integrity to terminate the Contract and ask for clawback. These are two separate mechanisms and cannot be amendable to comparison. There is no logic in saying that the acceptance of the lower requirements for the MTA should necessarily follow the rejection of the higher performance requirements.

81.Mr Shum pointed out that Integrity needed to prove that Mr Chu agreed to the performance requirements before they could be binding. I cannot agree with him.

82.As observed above, there is nothing in the Contract which suggested however remotely such a consent requirement. All Integrity needed to do was to make known to Mr Chu those performance requirements in writing. Mr Shum was right to refer to the oral evidence of Denny Chan to the effect that the performance requirements by way of the aggressive case in the business plans were set with the prior agreement of Mr Chu. Indeed, that was the case of Integrity and it would be advisable in the context of commercial co-operation. However, it is still a far cry from a contractual obligation to seek Mr Chu’s consent to any performance requirements or KPIs set under the Contract.

83.Lastly, Mr Shum submitted that it was unreasonable to set performance requirements relating to manpower given the fact that Integrity had the right to veto any intended employment of the advisors of IPG.

84.Further, he relied on the evidence of the trio to the effect that they were more concerned about the production of IPG than its manpower. He submitted that it is inherently improbable that Mr Chu had ever agreed to the manpower requirement.

85.I am not convinced by this submission. Firstly recruitment (manpower) had all along been one of the important aspects of the business of IPG as with other insurance companies as shown by the promotional materials of the new model. Further, as accepted by Mr Chu , he was well aware of the specific amendment to clause 18.2 of the Contract by way of adding recruitment as one of the performance requirements. It merely underlines the importance of recruitment to the new model and there is no basis to assert that Integrity would arbitrarily hinder the recruitment of IPG against its own commercial interest.

86.The cited evidence of the trio does not really advance Mr Chu’s case. It was plainly a matter of priority that Integrity might pay more attention to the production shortfall of IPG and it could not mean that the manpower requirement had been rendered obsolete.

87.I understand that Mr Chu may feel hard done by and is disappointed at the premature demise of the new model, which was expected to have a long-term future. However, Integrity as an investor should of course be entitled to make such commercial decisions permissible under the Contract to take care of its financial interest. Mr Chu should have ensured that his legal interest was sufficiently protected by the provisions of the Contract before his acceptance rather than by raising groundless allegations in this action. 

Conclusion and orders

88.By reason of the foregoing analysis, I have come to the following conclusions:

(1) None of the misrepresentations alleged by Mr Chu can be made out;

(2) Integrity did set such KPIs and/or performance requirements in writing under the Contract by way of the aggressive case in the business plans made known to Mr Chu at least from April 2011 onwards;

(3) Mr Chu and IPG failed to meet such KPIs and/or performance requirements within the meaning of section 18.2(h) of the Contract in particular from April 2011 onwards;

(4) Integrity was entitled to terminate the Contract with immediate effect by its letter dated 10 November 2011;

(5) Integrity is entitled to demand Mr Chu to claw back pursuant to clause 5(b) with interest; and 

89.In the premises, I enter judgment against Mr Chu and he should forthwith pay the Sum to Integrity. His counterclaim should be dismissed accordingly.

90.I exercise my discretion to allow interest to run on the Sum at the rate of the Best Lending Rate from time to time quoted by the Hongkong and Shanghai Banking Limited until the date of this Judgment, thereafter at the judgment rate until full payment.

91.I see no reason why costs should not follow the event. I make a costs order nisi that Mr Chu should pay Integrity its costs of the action including all costs previously reserved, to be taxed if not agreed.

92.Lastly, I must thank counsel on both sides for their tremendous efforts made in the course of the trial and in their written closing submissions. They have provided considerable assistance to this court. 

Mr Jenkin Suen, instructed by Kennedys, for the plaintiff

Mr Erik Shum and Ms Percy Yue, instructed by Stephen Lo & P.Y. Tse, for the defendant