M.A (HK) Ltd and Another v. Yeung Yuk Sing and Others
Read the full judgment text of HCA 1641/2010 on BabelCite. This High Court CFI judgment was delivered on 31 October 2017.
1. Claim and counterclaim The original claim by the 1 st plaintiff (“ MA-HK ”) and the 2 nd plaintiff (“ Au ”) (collectively, “ Plfs ”) against the 1 st defendant (“ Yeung ”), the 2 nd defendant (“ Ng ”) and 3 rd defendant (“ Moon ”) (collectively, “ Defts ”) on nuisance, harassment and/or intentional infliction of psychological harm (“ Claim ”), and the counterclaim by Yeung against Au for accounts and enquiries (“ Counterclaim ”) were distinct claims although they arose out of interrelated bac
Cited by 5 cases · Cites 10 cases
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HCA 1641/2010 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1641 OF 2010 ________________________
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________________ JUDGMENT ________________ I. INTRODUCTION 1.Claim and counterclaim The original claim by the 1st plaintiff (“MA-HK”) and the 2nd plaintiff (“Au”) (collectively, “Plfs”) against the 1st defendant (“Yeung”), the 2nd defendant (“Ng”) and 3rd defendant (“Moon”) (collectively, “Defts”) on nuisance, harassment and/or intentional infliction of psychological harm (“Claim”), and the counterclaim by Yeung against Au for accounts and enquiries (“Counterclaim”) were distinct claims although they arose out of interrelated background facts. On 6 May 2015, MA-HK discontinued its claims against the Defts. 2.Au Au, a retired businessman who used to be in the garment business and familiar with the English language, emigrated to the United Kingdom (“UK”) in 1985 and returned to work in Hong Kong (“HK”) in early 1990s. Au used to live in a unit at Tolo Ridge (“Tolo Ridge”), Tai Po, New Territories (“Au Home”), but had ceased to live there. Au was married to Wan Lai Miu Paula (“Paula”), and they had a son Eric (“Eric”) and a daughter Erica (“Erica”). Au suffered from cancer and had an operation in December 2009. In 2010 he stayed in HK to recuperate, but in/about June to September 2010 he sought treatment in UK (which lasted 2-3 months). 3.MA-HK Au and Jason Charles Marchant (a Briton engaged in the garment trade in UK, “Marchant”) were beneficial shareholders of MA-HK (formerly called M.A.Y. Trading Limited, “MAY Trading”) with offices in a unit at Nanyang Plaza (“Nanyang Plaza”), Kwun Tong, Kowloon (“MA-HK Office”). On 28 February 2005, 8,999 and 1,000 shares were allotted to Newlink Investments Limited (“Newlink”) and Chan Fung Ping (“Chan”)[1] respectively, and 1 subscriber share was transferred to Newlink. Anthonina Ignacio (“Ignacio”) and Chan were the first directors. On 20 March 2005 Newlink transferred its shares to Chan, and on 5 July 2005 Chan transferred her shares to Amanda Kim Ball (“Ball”) as sole registered shareholder. Ball/Ignacio became the only directors. On 7 July 2005, MAY Trading changed its name to MA-HK. 4.M.A Trading (HK) Limited Chan held shares in M.A Trading (HK) Limited for Marchant as beneficial owner, and Chan/Paula were its directors. Marchant said this company had no trading for over 3 years, and was being liquidated or closed down. 5.Yeung Yeung was born/raised in Shantou, Mainland China (“Shantou”) and came to HK in/about 1981. He spoke Cantonese, Teochow and putonghua, but did not know any English. He had little education, but could read/write simple Chinese. He owned garment manufacturing interests in Shantou, eg Fu Shing Garment Manufacturing Limited (“Fu Shing”). Yeung’s wife was Lee Wing Yee (“Lee”). His younger brother was Yeung Yuk Ho (“Yuk Ho”), and his youngest brother was Moon. Yuk Ho and his family emigrated to Canada in/about 2006. Moon had a Hong Kong identity card (“HKID Card”), but resided in Shantou (where he had a seafood farm) with his wife and children. 6.Garment Business Since about 1993 Yeung, Au and Marchant (collectively, “Three”) were partners/co-owners of a garment export business (“Garment Business”) for which M.A.Y. Trading (HK) Limited (“MAY-HK”) and M.A.Y. Trading (UK) Limited (“MAY- UK”) were set up in HK and UK. Yeung provided capital/funds whilst Au/Marchant took care of operations and solicitation of orders. 7.MAY-HK On 5 February 1994, Yeung/Lee became the company’s directors, Lee became the secretary, 2 existing shares were transferred to Yeung and Lee respectively, and 1 share was allotted to each of TMK Limited (Marchant’s company) and Au Wan May (Au’s younger sister). On 3 March 1994, the company changed its name to MAY-HK, and it mortgaged its offices (“MAY-HK Office”) in a unit at Tsun Yip Centre, Kwun Tong, Kowloon to secure general banking facilities. 8.In 1998, 252,499 shares were allotted to each of the 4 registered shareholders, so each held 252,500 shares.[2] Amended 2002-2004 annual returns (“ARs”) lodged with the Companies Registry on 10 December 2004 were said to correct the original ARs (see footnote 2 above): (a) amended 2002 AR (folio C23) on its face showed TMK Limited and Au Wan May transferred their shares to Yeung on 17 June 2002, and (b) amended 2003-2004 ARs (folios C24-C25) on their face showed Yeung/Lee respectively held 757,500 and 252,500 shares. MAY-HK’s financial status was as follows:
9.MAY-UK On 1 February 1994, Marchant/Yeung became the company’s directors and registered shareholders (each holding 1 share), and Paula became the secretary.[3] In 1995, 332, 332 and 333 shares were allotted to Marchant, Yeung and Au respectively, and 1 share was allotted to the Three jointly.[4] By 1999 Maher Malek (MAY-UK’s accounting officer, “Maher”) had become the secretary. MAY-UK’s audited accounts (“AAs”) prepared by Richard Anthony & Company (“Richard Anthony”) (but not signed by Yeung) stated each of the Three held 333 shares. MAY-UK’s financial status was as follows:
10.2 matters were of note in respect of MAY-UK’s AAs:
11.MAY Partnership MAY Partnership’s annual accounts for years ended 31/1/03 until 31/1/06 and its unsigned management accounts from 1 February to 7 July 2006 prepared by Richard Anthony appropriated net profit/loss equally to the Three. 1-2 Lorenzo Street was a commercial property. In 2003 MAY-UK’s offices (“MAY-UK Office”) moved to 1 Lorenzo Street, and 2 Lorenzo Street was probably let for rental income.[5] Yeung eventually sold his interests in 1-2 Lorenzo Street to Au/Marchant in 2006 whereupon, according to Au, MAY Partnership was dissolved. 12.UK legal proceedings Yeung was legally advised to seek accounts/enquiries of the Property Investment and Lloyds Account referred to in paragraphs 14 and 20 below in HK and to pursue claims concerning inter alia MAY-UK[6] in UK. In/about 2013, Yeung commenced legal action in UK against Au, Marchant and MAY-UK (“UK Action”). Au/Marchant defended such claim, but MAY-UK was placed under voluntary winding up on the ground that it was insolvent and no longer a going concern. 13.Damen Wong / Ng As time went by Yeung became troubled by his dealings with Au/Marchant but needed help with the English language in order to look into the matter, so he employed Damen Wong (“Damen”) as an assistant at MAY-HK from March 2005 until September 2006. Since March/April 2008 Yeung employed Ng as sales representative at MAY-HK, but Ng also assisted Yeung in some of his affairs, eg communicating with Plfs’ former solicitors Ho, Wong & Wong (“HWW”). Ng could read/write ordinary English, but confessed “其實有少少認叻”. (a) Counterclaim 14.Property Investment Agreement In/about 1999/2000, the Three agreed to jointly invest in properties in UK (“UK Properties”) on the following terms: (a) they would hold equal shares in such investment, (b) Yeung would provide initial capital for acquiring UK Properties, (c) Au/Marchant would identify suitable UK Properties for investment, decide on the terms of acquisition/sale and handle the purchase/sale thereof, (d) the Three would share equally the net profit/loss from purchase/sale of UK Properties acquired for such investment (“PIA Properties”), and (e) Au would keep accounts of such investment and pay the Three their entitlements (“Property Investment Agreement”). Au and Yeung adopted different monikers for such property investment. [7] In this Judgment, “Property Investment” refers to investment in 1-2 Lorenzo Street and/or in PIA Properties acquired under the Property Investment Agreement, whichever was appropriate in the relevant context. 15.There was dispute over certain terms of the Property Investment Agreement, eg Yeung claimed (but Au denied) he alone would receive rental income (“Rental Income”) and pay miscellaneous outgoings (“PIA Outgoings”)[8] between purchase and sale of PIA Properties. There was also dispute as to the number/identity of PIA Properties, which at least included the 10 Properties referred to in paragraph 19 below held either in the names of M.A.Y. Property Investment Limited (“MAY Property”) and/or Yeung. 16.UK/HK remittances Yeung, MAY-HK and Yeung/Lee remitted monies to UK on various occasions (“Remittances”) pursuant to the Property Investment Agreement, but the scheme/purpose of such Remittances was in dispute. Yeung claimed as far as he could discover he/ MAY-HK remitted at least £2,053,241.21 and €25,793.86 to the clients account of Messrs Howse Percival (UK solicitors who handled the conveyancing procedures, “Howse Percival”) and/or other destinations as Au directed, but Au claimed only £1,175,499.97 was remitted (although he conceded at Trial it should be £1,375,486). 17.Mr Lau (and Ms Chan with him), counsel for Defts, prepared a table of 36 items of Remittances (“Items”) which Mr Chan, counsel for Au, updated (“Chan RTable”) and Mr Lau separately updated (“Lau RTable”), now annexed to this Judgment as Tables 1A and 1B.[9] Columns A-C, E-F and J of Chan/Lau RTables came from Amended Annexure 1 of Defts’ pleadings (“Annexure 1”). Yeung no longer relied on Items 1, 3, 6-7, 30 and 36 (crossed-out in green in Chan RTable, “Crossed-Out Items”) for the purpose of seeking the reliefs under the Counterclaim, but said Items 2, 4-5, 8-29 and 31-35 were for the Property Investment. Au conceded Items 13-14, 19-21, 23-29 and 32-35 in the total sum of £1,375,486 (coloured yellow in the Chan RTable, “Admitted Items”) were for the Property Investment, so the disputed Items were Items 2, 4-5, 8-12, 15-18, 22, 25 and 31 (“Disputed Items”). 18.The following columns of Chan RTable (and corresponding columns in Lau RTable) contained cross-references to documents in sections A, B, C1-6 and CB of the trial bundle:
19.PIA Properties There was dispute over the number of PIA Properties for the Property Investment. Au claimed there were only 10 residential PIA Properties (“10 Properties”):
There were 2 other abortive transactions: (a) 11 Glebe House London W1 (“11 Glebe House”) and (b) Hollinset Farm Barn, Hollin Lane, Higher Sutton, Macclesfield, SE11 ONL (“Hollinset Farm Barn”) (collectively, “Abortive Properties”). But Yeung claimed there must have been more PIA Properties including those acquired by Au/Marchant by using Remittances from Yeung/MAY-HK. 20.Power of attorney / Lloyds Account Yeung also (a) executed an enduring power of attorney dated 10 December 2001 in favour of Au (“PoA”) for dealing with administrative aspects of the Property Investment, and (b) opened a bank account with Lloyds TSB Bank in UK in his sole name and as sole signatory (“Lloyds Account”). For (b) above, Yeung gave Au 2 chequebooks of signed blank cheques (“Signed Cheques”). Au used up most of the Signed Cheques, and also made various transfers from the Lloyds Account. He applied for and used a Debit Card (akin to HK’s EPS card) and Cash Point Card (akin to HK’s ATM card) in Yeung’s name (“D/Card” / “CP/Card”) for withdrawals. 21.Mr Lau updated Annexure 2 into an itemised table of Cheques (annexed to this Judgment as Table 2, “Cheques Table”) some of which appeared to have been used for purposes unrelated to the Property Investment. The Cheques Table contained cross-references to documents in C5 (copy Cheques and bank statements) and C4 (copy Property Investment documents) with summary of Au’s evidence in relation thereto. Au and Yeung disagreed over the scheme/purpose of the Cheques. 22.Mr Lau prepared an updated table (“Transfers Table”) that identified transfers (not cash withdrawals by D/Card or CP/Card) out of the Lloyds Account (“Transfers”) that (according to Yeung) appeared to have been made for purposes other than the Property Investment. The Transfers Table included a summary of Au’s evidence on the Transfers and is now annexed to this Judgment as Table 3. 23.Contra-account arrangement Au claimed a contra-account arrangement for the Garment Business enabled him/Marchant to make interim drawings on their contra-accounts and to use monies in the Lloyds Account for personal purposes. But Yeung claimed the Garment Business and the Property Investment / Lloyds Account were separate ventures, and the contra-account arrangement concerned the former and not to the latter. 24.Alleged settlement Au’s/Yeung’s mutual dealings over the Garment Business had been resolved. By Au’s letter dated 18 January 2005 to Yeung (“2005 Account”) and his email to Damen dated 18 August 2006 (“2006 Account”), Au alleged he had provided to Yeung accounts of their dealings over the Property Investment and Lloyds Account, which were settled upon Au’s payment of the net balance of £121,058.90. Yeung disagreed the Property Investment and Lloyds Account had been accounted for and settled by the 2005/2006 Accounts such that Au had no further duty to account to him. There was also dispute over the accuracy of the 2005/2006 Accounts as to inter alia (a) total amount of Remittances, (b) total number of PIA Properties, (c) Yeung’s entitlements under the Property Investment, and (d) use of monies in the Lloyds Account. Yeung claimed the 2005/2006 Accounts were inadequate, so Au was in breach of his duty to account. 25.In summary, the Counterclaim raised the following issues over the nature of the Property Investment and use of the Lloyds Account:
26.On 14 May 2015, leave was granted for Yeung to withdraw his counterclaim for damages against Au. The remaining Counterclaim essentially sought inter alia orders for accounts/enquiries of the Property Investment and Lloyds Account with consequential reliefs. I will turn to the matter of reliefs in Part XVIII below. (b) Claim 27.Au claimed Defts committed private nuisance by (i) Yeung, Ng and/or their agents making repeated attempts to trespass or gain access to Au Home at Tolo Ridge, and (ii) Yeung and/or Ng repeatedly posting up and displaying or causing to be displayed “wanted” posters depicting Au (“Wanted Posters”) at the entrance of Tolo Ridge causing Au to have suffered embarrassment, distress and social disgrace. Au further claimed Defts committed harassment and/or intentional infliction of psychological harm by:
28.4 matters were of note in relation to the Claim. First, on 12 November 2010, Defts gave undertakings that until further order they whether by themselves or their agents/servants (save for their solicitors’ representatives) shall not visit/enter or attempt to visit/enter (a) 17th floor of Nanyang Plaza, (b) within 30m of Au Home at Tolo Ridge and (c) 25th floor of Lippo Centre, and shall not harass/molest MA-HK, Au and/or HWW (“Undertakings”). Secondly, from March to October 2010, Ng on behalf of Yeung sent a series of letters to Au/HWW (“Ng Letters”). Yeung did not regard the Ng Letters as acts of nuisance/harassment on their own, but said their timing in relation to the Harassing Acts referred to in the paragraph below suggested those acts were part of a campaign to apply pressure on Au. Thirdly, Mr Chan no longer relied on the acts in paragraph 27(c) above as Harassing Acts as evident from paragraphs 9-10 and 18 of his written closing submissions. Fourthly, the claim for intentional infliction of psychological harm no longer featured in Mr Chan’s closing submissions. 29.In the end, Au limited his reliance on the following harassing acts which he claimed were performed at the instigation and/or on behalf of Yeung (either with his prior authority or subsequent ratification) with the assistance/participation of Ng and Moon: (a) repeated nuisance telephone calls to the MAY-UK, MA-HK and HWW Offices, (b) Wanted Posters (in paper or on styrofoam boards) put up in the vicinity of Tolo Ridge / Nanyang Plaza and faxed to MAY-UK Office, (c) vandalism by spray-painted words on the roadway in the vicinity of Tolo Ridge, and (d) physical visits to Au Home, MA-HK Office and Chan’s home in Hunghom (“Chan Home”) (collectively, “Harassing Acts”). There was no direct evidence to show Yeung/Ng personally performed certain Harassing Acts, but Mr Chan submitted the objective evidence would lend itself to powerful inference. However, Defts claimed that apart from a few physical visits for legitimate reasons the Claim was a fabrication. 30.Au made clear he would not claim for loss/damages suffered by Eric, MA-HK, MAY-UK, HWW and Chan, but contended the nuisance/ harassment to them formed part of the factual matrix of wrongful acts to person/entities related to or associated with Au that would indicate a concerted scheme/effort to get at Au through his associates. Au claimed as a result of the Harassing Acts he suffered loss and damages including (a) embarrassment, inconvenience, psychological harm and alarm, (b) damage to his health caused by continuing stress and embarrassment to which he had been subjected, and (c) direct financial loss being legal fees HWW charged him for dealing with Defts’ torts on his behalf. However, (c) above no longer featured in Mr Chan’s closing submissions that only sought on behalf of Au compensatory damages of HK$600,000 for the tort of harassment and HK$400,000 for the tort of nuisance. Au also sought injunctive relief on the basis that unless restrained Defts threatened to continue such tortious acts against him. Au abandoned his claim for alternative accommodation in the sum of HK$47,850. II. WITNESSES 31.Au, Marchant, Wong, Chan, Yeung, Ng and Moon gave evidence. In assessing witnesses’ credibility, I bear in mind not only their demeanour in court but also the intrinsic value of their evidence upon considering the totality of their evidence against the chronology of events, the available documentary evidence and the inferences based on inherent probabilities and/or undisputed facts.[12] Further, because an individual is not credible in relation to one issue that does not mean his / her evidence will be rejected in relation to other issues in the case. It is all a matter of assessment and degree. For allegations of misappropriation/fraud,[13] they must be plainly established and the cogency of the basis relied upon must be assessed by examining the particular factual matrix and by applying the standard of balance of probabilities taking into account that the more serious the allegation the less likely it is that the event occurred and hence the stronger should be the evidence before the court would conclude that the allegation is established.[14] 32.Yeung Yeung was not a “details man”. Rather he was a rough-around-the-edges factory man whom Wong considered to be rather “粗魯”. Yeung had little experience of or appetite for corporate formalities, English documents and accounting records. His business relationships were built on spoken word and mutual trust. To those who earned his trust he would give implicit and unfailing trust, but to those who broke his trust he would inflict vengeful and dogged retribution. 33.Yeung was acutely aware of his lack of English skill and commercial sophistication, so when Au opened the door for him to enter the world of international trade he gratefully placed his wholehearted trust in Au and others whom Au recommended/recruited. Yeung poured significant capital/Remittances into the Garment Business and Property Investment at Au’s persuasion/directions without any demur, and he gave the PoA and Signed Cheques to Au for him to operate the Property Investment and Lloyds Account. Yeung had such faith in Au that he simply accepted and did not cross-check what Au told him about the Garment Business and Property Investment whether directly or via MAY-HK’s accounting staff. 34.Yeung was not as articulate as Au and did not display complete forensic command of the materials about the Property Investment and Lloyds Account he had unearthed so far and attempted to piece together (albeit without much success), but he struck me as generally reliable on matters concerning the Counterclaim. His sometimes rambling answers were more from perplexity or grievance than from evasiveness or unreliability. Careful deliberation of witnesses’ motives and overall probabilities showed the available documents did not really undermine his evidence. 35.I find Yeung was genuinely outraged by his discovery of what he perceived to be Au’s abuse of his trust, and he found such betrayal especially aggravating given his wholehearted faith in Au. Yeung’s anger/ frustration (further stirred by Au’s evasiveness to his demands for information/accounts) was obvious and palpable, and I had no doubt Yeung and those close to him committed the Harassing Acts (except those upon which I would not place reliance in the analysis below) as a pressure tactic to persuade Au to face up to his complaints (which were not groundless) about the Property Investment and Lloyds Account. Driven by his fulminating frustration at Au’s unresponsiveness, Yeung and his agents overstepped what was permissible under law. In my view, there was a degree of unpersuasive reconstruction in Yeung’s evidence in relation to the Claim that led to his denial of Au’s case. Further, Yeung’s readiness to call as witnesses Ng and Moon who, he knew, in his support would give evidence to perpetuate his denial of the Claim meant I cannot rely on their evidence in relation to the Claim. 36.Ng and Moon The evidence of Ng and Moon (called to corroborate Yeung’s case on the Claim) were unsatisfactory, and although they gave some candid responses much of their evidence on the Claim sought to put an unrealistic spin on the situation that essentially argued Yeung’s case. Such assertions lacked credibility, and I am driven to conclude there were unreliable shortcomings in their evidence. They obviously had persuaded themselves that loyalty to Yeung required them to take steps to force a response from Au (whom they knew was reluctant to face up to Yeung’s demands for information/accounts) in relation to the Property Investment and Lloyds Bank. 37.Au Au was a “details man”. He was familiar with the English language, and astute in corporate operations. He shifted effortlessly between UK and HK business worlds, and comfortably bridged customer-facing MAY-UK/Marchant and factory-facing MAY-HK/Yeung. Au felt secure in his unique role that earned him Yeung’s ready/complete trust, and he was very aware of such advantage in his relationship with Yeung. 38.Yeung’s faithful trust beckoned Au’s greed. After all, Au knew Yeung’s/MAY-HK’s unquestioning and ready Remittances were just a mere request away, and Au (who saw himself as the “poorest” of the Three) was quite unable to resist helping himself to such funds to feather his property portfolio and to ease his tight cashflow, which steps Au facilitated by telling Yeung directly or via MAY-HK’s then accounting clerk Pat Lai Wai Ling (a trusted colleague recruited by Au, “Pat”) that the required Remittances were for property purchase in UK (which Yeung logically understood to mean the Property Investment being the only venture he knew that involved purchase of UK Properties). Unbeknownst to Yeung, Au (presumably with the PoA) also deftly arranged the deposit of net sale proceeds of certain PIA Properties (“Net Proceeds”) into the Lloyds Account, thus creating a pool of ready funds to which he also helped himself. 39.In my view, even though Au knew Yeung did not sanction extraneous use of such Remittances or such monies in the Lloyds Account, Au was fairly confident he could keep such use under wraps given Yeung’s trust in him. But I accept Au had some vague/unformed notion of hoping to repay Yeung someday when somehow his investments prospered and his finances improved, so Au (who played on Yeung’s trust in him and Yeung’s disinterest in accounts/documents, but who, in my view, did not have enough pluck/nerve to perpetrate a bold/outright swindle) left bookkeeping entries to his current account with MAY-HK. Unfortunately, the Three parted ways before Au achieved sufficient financial maturity to put matter to rights. So when things started to unravel and Yeung began to look at the Property Investment and Lloyds Account with more hawkish eyes, Au did not find it easy to justify his use of Yeung’s monies. Indeed, he confessed under cross-examination he never expected to come under intense forensic scrutiny. So Au resorted to fobbing off Yeung’s requests for information/ account by the startlingly sparse 2005/2006 Accounts, and when they did not satisfy Yeung, he became evasive as he had no good answer to spending Yeung’s monies. 40.In my view, Au did not present himself as straightforward and open in his dealings with Yeung, and some of his evidence on the Counterclaim was rather unfocused, vague or even confused. A story different in several material respects from his affirmation/statement evidence emerged that did not bode well for his veracity on the Counterclaim. I find Au downplayed the significance of matters perceived to be harmful to his position, and was garrulous on other matters he thought would be helpful. In the end, Au acknowledged that notwithstanding the 2005/2006 Accounts he should provide Yeung with proper, complete and accurate accounts for the Property Investment and Lloyds Account. 41.It therefore came as no surprise that Au was non‑responsive to Yeung’s continued demands for explanation/accounts. But the more Yeung pressed, the more elusive Au became, which only served to fuel Yeung’s vexation and exasperation that eventually led to the Harassing Acts in 2010. In my view, Au’s evidence on matters in relation to the Claim, which was corroborated by Chan, Wong and Marchant and by disclosed documents that told the contemporaneous truth, was more convincing and reliable. 42.Marchant Marchant had no direct dealings with Yeung due to the language barrier. After a few years of business cooperation, Marchant’s relationship with Yeung deteriorated not least from conflict over the FAL Dispute referred to in paragraph 83 below and separation over MAY-HK. Given such conflict/breakup, Marchant (and Au) made strategic decisions with respect of MAY-HK/MAY-UK with a view to preserve MAY-UK and 1-2 Lorenzo Street in his/Au’s hands, and to offload MAY-HK’s debts/ losses onto Yeung. I am unconvinced Marchant gave honest corroboration when he aligned himself with Au’s stance on matters in relation to the Counterclaim. Whilst his evidence took on greater credibility when it touched on matters in relation to the Claim, apart from the Harassing Acts in UK his evidence was essentially hearsay from Au/Wong. 43.Chan Chan worked in the garment trade since late 1970s / early 1980, and had known Au for 35 years. Au used to be in sales and Chan was in merchandising at Fashion Control Trading Limited. In 1993/1994, Au recruited Chan to join MAY-HK as merchandiser. In early 2002 Chan was tasked to help set up samples/merchandising departments in Mainland China, and from February 2002 to December 2003 she worked 4-5 days/ week in Shantou. After the Three separated over MAY-HK in 2004, Chan and other co-workers recruited by Au resigned on/about 28 February 2005. She joined MAY Trading on 1 March 2005 until it (as MA-HK) closed down, and she was amongst the last to leave in/about September 2014. Since January 2015, Chan worked as clerk for a building management company. 44.I give Chan full allowance for the fact that giving evidence might be a stressful experience. Whilst I felt no unease her loyalty to Au would adversely affect the reliability of her evidence in relation to certain Harassing Acts she experienced, her closed manner in answering questions on corporate/business matters gave an impression of wary caution that a wrong word from her might derail Au’s case, which raised doubt as to the veracity of her evidence and provided insight into her partisan values on these matters. In my view, her testimony on these matters required careful assessment. 45.Wong There were reasons to be careful with his evidence,[15] but I am satisfied Wong gave open/helpful evidence with evident desire to assist the court, and I am able to accept his evidence which in any case was borne out by what appeared to be reliable documents. I do not think Wong’s evidence on the Harassing Acts against him/HWW was influenced by the present hostility between Yeung and Au/Marchant. 46.Summary Apart from Wong, the overall evidence of each witness on the Counterclaim/Claim was a tangled web of mixed truths (and in certain cases inconsistencies/dissembling as well) which made assessment of the evidence an unenviable task. As a result, some anomalies remained as it was not possible to make all findings of fact fit together, but I have made necessary findings on the evidence considered as a whole. But given the conclusion in relation to the Counterclaim below, some factual findings would be best left to the taking of accounts/enquiries. III. LEGAL PRINCIPLES FOR COUNTERCLAIM (a) Accounts 47.Equitable accounting Snell’s Equity explained the nature of equitable accounting as follows:[16]
Meagher, Gummow and Lehane’s Equity Doctrines and Remedies says:[17]
In Libertarian Investments Ltd v Hall, Lord Millett NPJ went on to explain that[18] (a) in making the order for account (which is discretionary) against an accounting party the court is not granting a remedy for wrong but enforcing performance of an obligation, and (b) an order for account is merely the first step to enable the plaintiff to identify/quantify any deficit and to seek the appropriate means by which it may be made good. 48.Duty to account Equity Doctrines and Remedies says:[19]
Likewise, Snell’s Equity explains the right to account as follows:[20]
49.Hollingworth v Juson concerned a defendant who assisted the plaintiff to manage her financial affairs, and who was made signatory to the plaintiff’s bank account. The defendant claimed he was merely an agent for the plaintiff and he had acted within his authority. Chu J (as she then was) said as follows:[21]
50.Nevertheless, the court enjoys a discretion whether to order a general accounting even when the requisite relationship is proved, and will not do so where, eg an account is unnecessary or unlikely to be fruitful.[22] 51.Settled accounts It is a good defence to a claim for an account for the defendant to prove he has been released from his duty to account by a settlement. [23] Settled accounts are accounts which have been agreed between the parties. The theory of settled accounts is probably applicable to cases of mutual debts and credits only, and not to cases where one party has to do all the accounting. This is because a plea of settled accounts means the parties have agreed for valuable consideration what is owing by one to the other, and where an account is merely rendered by one party, there is no consideration and it is not conclusive between the parties.[24] 52.A mere statement by one party to the other of how an account stands cannot amount to a settled account; the other party must agree that it is right.[25] Further, mere acquiescence in an account does not convert that account into a settled account.[26] A settled account must deal with all accounts then outstanding between the parties, not some only. But it does not have to take any particular form – an oral agreement will suffice, much less is it necessary that the document relied upon as a settled account be signed or evidenced by the delivery of vouchers.[27] 53.Re-opening settled accounts A beneficiary can re-open settled accounts by showing the settlement was obtained by fraud or imposition, or it contains sufficient errors of sufficient magnitude to warrant setting it aside and taking the accounts from the beginning.[28] 54.Proof that settled accounts are initiated by fraud (even in respect of a single fraudulent item)[29] almost invariably gives the plaintiff the right to reopen the whole account. “The only occasion where a plaintiff is able to prove fraud is not entitled to reopen settled accounts is where exceptional delay would make such a course inequitable”,[30] but the court may order reopening even “after the account has been closed a considerable time in the case of persons occupying the position of principal and agent or trustee and beneficiary”.[31] 55.In the absence of fraud, a settled account will be reopened if (a) serious errors or errors to a considerable extent in amount and in the number of items are shown, or (b) if the account is erroneous, even if in respect of one item only, and from the relative situations of the parties, or the manner in which the settlement took place, or the nature of the error proved, it appears that the settlement ought not to be taken advantage of by the accounting party.[32] It is easier to reopen the account “where the defendant stands in a fiduciary relation towards the plaintiff and is an accounting party than where the defendant does not stand in that position towards the plaintiff. Indeed, absent fraud, the plaintiff in such a case is entitled prima facie to an order re-opening the accounts, unless in all the circumstances the court is of the view that it would be unjust to permit more than surcharging and falsification. ……”[33] (b) Fiduciary duty to account 56.Fiduciary relationship A fiduciary is “someone who has undertaken to act on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence”.[34] “The fiduciary relationship has trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged. The freedom of the fiduciary is diminished by the nature of the obligation he or she has undertaken – an obligation which “betokens loyalty, good faith and avoidance of a conflict of duty and self-interest ……”[35] Thus, a fiduciary relationship exists where:[36]
It is possible for fiduciary duties to arise in commercial settings.[39] Agency provides an example: the primary source of duty between principal and agent is a matter of contract law, often applied in a commercial setting, and yet fiduciary duties will be owed by the agent unless they have been excluded.[40] 57.Fiduciary duties “A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal”.[41] 58.The prohibition against a fiduciary from acting in a situation where there is a conflict between the fiduciary’s duty and his/her interest is relaxed if proper authorisation is obtained, but the principal’s consent must be fully informed, and the fiduciary must disclose the nature of his interest in the transaction. The burden of establishing informed consent lies on the fiduciary. There must be clear evidence that the principal’s consent was given after the fiduciary made full/frank disclosure of all material facts, and this is watched with “infinite and the most guarded jealousy” by the court.[42] 59.The prohibition against a fiduciary from making a profit out of his/her fiduciary position is to preclude the fiduciary from misusing his position for his/her personal advantage. Thus, a fiduciary is required to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position. The principal’s right to such account of profits made in breach of fiduciary duty is virtually as of right, and the fiduciary’s honesty and his principal’s non-loss were irrelevant. It is also no answer that the principal could not himself have taken up the profitable opportunity or that the fiduciary would have made the profit if he/she had acted properly. [43] IV. LEGAL PRINCIPLES FOR CLAIM 60.Under the law of torts, a person is liable not only for torts committed personally but also torts which he authorised (by instigating or procuring another to do so) or subsequently ratified.[44] 61.Nuisance “The tort of nuisance is an invasion of the plaintiff’s interest in the possession and enjoyment of land. It is closely linked to the law of property and is often regarded as part of the law of neighbourhood” (my emphasis).[45] As explained in Leung Tsang Hung v Incorporated Owners of Kwok Wing House, Ribeiro PJ citing Hunter & ors v Canary Wharf Ltd[46] said “[private] nuisance is a tort protecting property rights. It is concerned with the activities of the owner or occupier of property within the boundaries of his own land which may harm the interests of the owner or occupier of other land” (my emphasis).[47] Lord Hoffmann at pp 702-703 in Hunter & ors traced the history of the tort of nuisance, and referred to Sedleigh-Denfield v O’Callaghan in which Lord Wright explained that action on the case for nuisance was derived from its prototype the assize of nuisance, and the former was less limited in scope than the latter for it not only applied to a freeholder against freeholder it also “lay between possessors or occupiers of land. With possibly certain anomalous exceptions …… possession or occupation is still the test”.[48] The emphasis on neighbourhood is also what distinguished nuisance from negligence. Lord Hope of Craighead at pp 723-724 in Hunter & ors reminded that the former tort “is concerned with only with the mutual duties of adjoining or neighbouring landowners ……” Lord Lloyd of Berwick at p 695 in Hunter & ors again emphasised the law of property and neighbourhood as follows:[49]
62.Thus, in Pong Seong Teresa & ors v Chan Norman,[50] loud thumping noises emanating from the defendant’s premises amounted to nuisance. Lord Lloyd of Berwick at pp 695-696 in Hunter & ors referred to “smoke from a neighbouring factory”. Dicta at p 685 in Hunter & ors suggests that nuisance “will generally arise from something emanating from the defendant’s land”, and whilst Clerk & Lindsell on Torts suggested the need for “emanation” was far from clear,[51] there was not even a hint that interference from a neighbour was not required. But DHCJ Eugene Fung SC in Shen Xing v Li Jun[52]found repeated banging on door of the plaintiff’s home on multiple occasions by a defendant who was not a neighbour to be a nuisance. Such decision is not binding on this court, and I respectfully decline to follow it. After all, private nuisance rests on the principle that no man is allowed to use his property to injure another, and as pointed out at pp 691-692 in Hunter & ors,[53] it was inapt where the gravaman of the complaint in truth lies in harassment. 63.Here, it was common ground Defts were not “neighbours” of Au in the sense of being owners/occupiers of neighbouring land to the Au Home / Tolo Ridge. Indeed, they were not even “neighbours” of MA-HK / Nanyang Plaza, Chan / Chan Home and/or HWW / HWW Office. All Au alleged was visits to Tolo Ridge, Chan Home and HWW Office, and activities at or in the vicinity of those premises. In my view, there was no basis for Au to sue Defts in nuisance, and this cause of action necessarily falls to be dismissed. 64.Harassment There has been some previous controversy over the tort of harassment in view of divergent/conflicting local authorities. Lok J in Lin Man Yuan v Kin Ming Holdings International Limited & anor[54] summarised the conflicting authorities and agreed with A Chan J in Lau Tat Wai v Yip Lai Kuen Joey[55] that the tort of harassment exists in HK. In Lam Yuk Wing v Yu Lai Wa, I respectfully agreed with A Chan and Lok JJ.[56] The elements of the tort of harassment explained by A Chan J in Lau Tat Wai and summarised by Lok J in paragraph 222 in Lin Man Yuan are as follows:
65.Three Yeung set up Fu Shing in 1985, and it became a well-established factory of some scale. By late 1980s / early 1990s, Fu Shing was thriving and Yeung was financially sound. In/about 1991, Yeung and Au came to know each other. Yeung was impressed by Au’s command of the English language and his familiarity with the UK clothing market, and felt he could trust Au. According to the Defence filed in the UK Action (“UK Defence”), Au/Marchant left the UK garment company where they worked when it fell into financial difficulty. Au said that was in/about 1993. 66.Garment Business Au persuaded Yeung to start a new garment export business with him, and Yeung agreed. Au suggested taking on Marchant, and Yeung also agreed. The Three formed the Garment Business. Due to the language barrier, most business discussions were between Yeung and Au (for himself/Marchant). Au/Marchant also gave instructions to and liaised with MAY-HK’s staff including Chan and Pat. 67.Distribution of work I find the Three agreed (a) Au (in HK/UK) would handle company administrative work as well as contract negotiation, marketing, customer liaison and production,[57] (b) Marchant (in UK but would visit HK about every 6 weeks) would handle solicitation of business from UK customers, and (c) Yeung (in Shantou/HK) would provide financial support and Fu Shing would provide manufacturing support. 68.Yeung’s support Au/Marchant relied upon Yeung’s financial support (and manufacturing support) as they had no funds for the new venture. Yeung spent most of his time in Shantou overseeing factory production, and he focused on raising capital when in HK.[58] Further, to obviate the expense of making samples in HK, Yeung proposed and the Three agreed to set up a samples department in Shantou. Yeung injected funds and purchased equipment for such purpose, and free samples were made for MAY-UK’s existing/potential customers. 69.At that time Yeung trusted Au implicitly, and acceded without demur to Au’s/Maher’s requests for Remittances to UK, which requests were sometimes made to Yeung but mostly to Pat for her to fill out bank telegraphic transfer application forms (“TT Forms”) for Yeung to sign for himself or as authorised signatory for MAY-HK. Yeung/Lee[59] as directors of MAY-HK were authorised signatories, but Au/Marchant were neither. It appeared they did not wish to be seen to be directly involved in MAY-HK.[60] I do not speculate whether it was due to UK tax issue, but they admittedly did not declare all receipts from their contra-accounts for the Garment Business to the UK tax authority until a rather late stage. Anyway, Au (who set up MAY-HK – see paragraph 71 below) never asked to be director/signatory of MAY-HK, and likewise Yeung never asked to be a signatory for MAY-UK even though Au/Marchant arranged for him to be named as director. But Yeung’s status as director/signatory of MAY-HK did not mean such company was in his sole control. 70.Corporate vehicles The Garment Business was carried on through MAY-UK and MAY-HK. Au’s allegation that the Three were equal partners and hence equal shareholders in MAY-UK and MAY-HK (“⅓ Ratio”) did not sit well with paragraph 5.5 of the UK Defence that averred Au/Marchant agreed to Yeung’s demand (given his financial support) to hold 50% of MAY-HK’s shares on the basis that profits were to be shared equally. I prefer Yeung’s case that he and Au (for himself/ Marchant) agreed Au/Marchant would each be 25% shareholder and he would be 50% shareholder (“½ Ratio”) for all corporate vehicles in recognition of his financial/production support. Consequently, Yeung/Lee, Au and Marchant were 50%, 25% and 25% shareholders of MAY-HK in line with ½ Ratio (and MAY-HK’s ARs also showed such shareholding ratio), but drawings from and subsequent adjustment of the contra-accounts under the Garment Business were based on business turnover and/or commission entitlements to be shared equally (see paragraphs 101-102 below). Yeung (unfamiliar with UK/HK company law) was comforted by the perceived security of being the majority shareholder. 71.MAY-HK I find it was Au (not Yeung) who set up MAY-HK as formal documents in 1990s were mostly in English and Au was more commercially sophisticated. Au handled corporate, administrative and operational matters of the new company, and he would ask Yeung to sign or tell Pat to ask Yeung to sign business documents (with cross-marks to show where he should sign), and Yeung invariably did so. This was how Yeung/ Lee came to sign the English (except for Chinese names) documents for setting up MAY-HK, and to be named as directors in such documents. In my view, Au soon came to realise (a) Yeung trusted and relied on him on these matters, (b) Yeung’s trust/confidence in him extended to Marchant and staff he recommended/recruited, and (c) Yeung would not read or find out for himself beyond what Au or Pat (on Au’s instructions) told him. In my view, Yeung similarly relied on what Au told him or more often on filtered information from Pat when signing TT Forms placed before him. Yeung/Lee also signed MAY-HK’s ARs and other business documents[61] that Au/Pat asked them to sign in the same manner. I refer to Yeung’s aforesaid modus operendi as “Yeung’s MO” below. As seen below, Yeung’s MO, which reflected Yeung’s firm trust in Au, provided convenient opportunity for Au to dip into Yeung’s monies. 72.MAY-UK MAY-UK was set up by Au/Marchant. During the 1st year from 1 February 1994 to 31 January 1995, Yeung was 50% shareholder holding 1 share (consistent with ½ Ratio), and Marchant was registered shareholder of the other 1 share (but Au did not say how this share was split between him and Marchant).[62] Yeung had not seen the Return of Allotment of Shares dated 31 January 1995 (see paragraph 9 above), and even if he had seen the Share Certificate and Dividend Vouchers (see footnote 4 above), they only gave the number of shares and he would not have understood he had ⅓ registered shareholding. Although the 13/9/12 RA Letter stated all shareholders received copies of MAY-UK’s AAs (and MAY-UK’s 1996-2005 AAs showed Yeung had 33.33% registered shareholding), it was unknown to where Richard Anthony sent Yeung’s copies (eg the MAY-UK Office or Yeung’s HK office/residential address). I prefer Yeung’s evidence that Au told him and he believed he had 50% shareholding in MAY-UK, that he was not required to sign MAY-UK’s AAs, and that even if he might have some but not all MAY-UK’s English AAs he did not ask anyone else to review them for him as he trusted Au. 73.Mr Chan submitted Au did not try to hide Yeung’s ⅓ registered shareholding in MAY-UK. But I note Au was keenly aware of Yeung’s MO, and he also knew Yeung (a) did not know any English, (b) left it to Au to handle MAY-UK/formal business matters, (c) fully trusted Au and his explanations, and (d) had no interest in studying, cross-checking or finding out these matters for himself. In my view, Au was fairly confident Yeung would not have picked up his ⅓ registered shareholding in MAY-UK from the English documents. I do not speculate why Au/Marchant changed from ½ Ratio to ⅓ Ratio for MAY-UK’s shareholdings in 1995. But I note MAY-UK was profitable from the start with expectation of declaring dividends soon (and indeed dividends were declared in 1997, 1998 and 2000). Dividends had to be distributed according to the shareholding ratio (see the Dividend Vouchers that Maher prepared), but 50% dividends for Yeung would have been anomalous to the Three’s agreement for their entitlements to be calculated/distributed on equal-sharing basis. 74.Au’s role I find Au at first spent time in HK to set up MAY-HK, to locate the MAY-HK Office, to recommend/recruit former co-workers/acquaintances to join MAY-HK,[63] and to handle administrative/ operational matters, and he later shuttled between HK and UK (but when in UK he still gave instructions to and liaised with trusted MAY-HK’s staff such as Pat and Chan). 75.MAY-HK’s increase in share capital In/about February 1998, 1,000,000 new shares were issued/allotted on pro rata basis, and Yeung injected HK$1,000,000 as paid up capital as Au/Marchant had no funds. 76.Au’s/Marchant’s salaries Au/Marchant (but not Yeung) drew their principal monthly salaries from MAY-UK, and they also drew additional monthly salary of HK$15,000 each from MAY-HK.[64] 77.Direct/indirect orders I find that for direct orders MAY-UK would refer UK customers to place orders with and pay price to MAY-HK, and MAY-HK would place orders with garment factories (mainly Fu Shing). For indirect orders, after receiving orders from UK customers MAY-UK would issue orders to MAY-HK, and UK customers would pay the price to MAY-UK which would in turn pay MAY-HK. MAY-HK would pay commission at 5% (later 7%) to MAY-UK on orders received. In/about 2002, due to UK tax implications and customer needs, the Garment Business changed from direct orders on “free on board” (“FOB”) model to indirect orders on “landed duty paid” (“LDP”) model. Yeung raised no query at the time as Au said it was necessary for the Garment Business to remain competitive. 78.Au’s case on transfer pricing / contra-account arrangement Au claimed he could not dictate how much profit MAY-HK would make on individual orders received because (a) another factory would be used only if Fu Shing was unable to manufacture a particular commodity or its price was far higher than quoted by the other factory (but Yeung would have final say on whether or not an order should go to the other factory), and (b) even though Au would “suggest” a buying price for MAY-HK it was for MAY-HK / Fu Shing to source raw materials and accessories. 79.Au claimed the Garment Business did reasonably well until it began a downward trend in 2000, so MAY-HK’s 1996-2000 accumulated loss position was inexplicable given its small size, low overhead and high turnover. Au said it was only in/about 2004 when the garment market turned competitive that Au/Marchant cross-checked Fu Shing’s prices and discovered Fu Shing had been overpaid for many years. But in/after 2005 (ie after the Three separated over MAY-HK) MAY-UK’s profits increased as more competitively priced manufacturing sources were used. Au/Marchant claimed to be unhappy with how Yeung ran MAY-HK and with the fact Yeung rarely produced accounts for MAY-HK since about 2000. 80.Au claimed Yeung knew MAY-HK suffered loss as he had assistants / accounting staff to help him understand MAY-HK’s and MAY-UK’s AAs, and it was unimaginable Yeung would not have read MAY-UK’s AAs, would not have wanted to know MAY-UK’s profit/loss position and/or would have allowed Au to manipulate/engineer MAY-HK’s continued loss position (which was in fact due to Yeung’s own business decisions and the Transfer Pricing referred to in the paragraph below). 81.Au claimed Yeung maintained a persistent loss position for MAY-HK by appropriately raising the price for orders between MAY-UK and MAY-HK and between MAY-HK and Fu Shing so that (a) profits at MAY-UK were kept at a minimal level if at all, (b) the Garment Business’ overall profits would be channelled to Fu Shing as the profit-making entity but retained as payables by MAY-HK, and (c) from such payables to Fu Shing that were parked with MAY-HK Yeung would by some means distribute to Au/Marchant (on equal-sharing basis among the Three) their entitlements (“Transfer Pricing”). The purpose of such Transfer Pricing was to minimise UK and HK tax liability, especially the former due to higher tax rate. Au claimed such Transfer Pricing gave rise to a contra-account arrangement for the Garment Business whereby the Three agreed in principle that (i) each of them could make drawings on his own contra‑account during the year subject to end-of-year adjustment/settlement against his entitlements for that year on equal-sharing basis, and (ii) Yeung would arrange to make payments to Au/Marchant if there was any surplus after such set-off.[65] Au also complained against Yeung’s failure to disclose Fu Shing’s accounts. 82.Au’s case on leaving MAY-HK Au claimed that in 2002 Marchant wanted a clearer separation between MAY-HK and MAY-UK since the manufacturing contacts were Yeung’s and the business contacts Marchant’s, so the Three agreed as follows:
Au claimed that notwithstanding (a)(ii) above Yeung had final say on the commission payable, eg CB/35 showed extra commission for 2002/2003 was 3% rather than 4% (after deducting PRC tax). 83.Marchant claimed that dispute arose over Flexibility Apparel Limited (“FAL”) in which the Three, Kenny Ng and Derek Purvis (“Purvis”) had interests (“FAL Dispute”). Mr Chan and Mr Lau confirmed it was unnecessary for this court to delve into the FAL Dispute, but I note Marchant alleged under cross-examination it was his irreconcilable difference with and loss of trust in Yeung over the FAL Dispute that led to his/Au’s decision to leave MAY-HK in 2002 and to the transfer of their MAY-HK shares to Yeung for free in mid- 2002,[67] but as Fu Shing was still the only source of supply MAY-UK still bought garments from MAY-HK. Marchant said such production-type relationship continued with Yeung paying the 4% Commission in 2003/2004 but refusing to do so in 2005, which led to the final breakup with Yeung and cessation of cooperation with Fu Shing. 84.But Au’s timeline of events was somewhat different. He said in 2002 the Three, Kenny Ng and Purvis became shareholders in FAL being a new start-up company in HK, and it was the downturn in business for Fu Shing and the FAL Dispute in 2003/2004 led to deterioration of relationship between Yeung and Marchant (who sided with Kenny Ng and Purvis). Au thought that by staying out of such feud he would maintain a fairly good relationship with Yeung, but he later realised his/Marchant’s withdrawal from MAY-HK in 2002 and Yeung’s/Marchant’s poor relationship in 2003/2004 had hurt his own relation with Yeung. Au claimed that given (a) Yeung’s behavior over the FAL Dispute, (b) the drop in manufacturing cooperation between MAY-UK and Fu Shing due to the latter’s non-competitive pricing, and (c) Yeung would no longer fund MAY‑UK due to their separation, he/Marchant decided in November 2004 to terminate their joint business with Yeung and to start MAY Trading in March 2005 as their new business in HK. 85.Findings on Au’s/Marchant’s departure from MAY-HK I find Au’s case on the alleged agreement in paragraph 82 above was quite implausible. Yeung borrowed heftily to fund the Garment Business and to enhance Fu Shing’s production capacity for such business, and he paid for the purchase of 1-2 Lorenzo Street. Given Yeung’s financial commitments and MAY- HK’s accumulated loss position, it was commercially unrealistic for Yeung to have MAY-HK pay the extra 4% Commission on top of the existing 7% commission and to have him take up MAY-HK’s accumulated loss and any loss on future orders, especially when (according to Au) Yeung by the alleged Transfer Pricing held/controlled the overall profits and (according to Marchant) Yeung/Marchant feuded over the FAL Dispute but MAY-UK nevertheless depended on Fu Shing as its sole source of supply. Given my rejection of the alleged Transfer Pricing (see paragraphs 98-100 below), Au’s contentions had even less appeal. 86.I prefer Yeung’s case that in/about 2002 Au told him the Three should share the 4% Commission on indirect orders from UK customers who previously placed direct orders with MAY-HK[68] since most orders by then were indirect orders following transition from FOB to LDP model. But I find Yeung (who trusted Au implicitly) did not realise at that time this would enhance MAY-UK’s status (with assured commission/revenue from more orders under LDP model) and diminish MAY-HK’s status (with less revenue from fewer direct orders and with the 4% Commission payable by MAY-HK on more indirect orders), which would consequently exacerbate MAY-HK’s accumulated loss position. 87.This was borne out by MAY-HK’s AAs. For years ended 31/1/97 until 31/1/01 MAY-HK enjoyed steady increase in turnover, but years ended 31/1/02 and 31/1/03 saw turnover slump. MAY-HK started to incur loss for the year for years ended 31/1/01 and 31/1/02 which exacerbated its accumulated loss position. Increased and extra commission payables also had their impact although turnover steadied in the following years. MAY-HK was in serious financial deficit, and Yeung’s cost-reducing measures[69] were to no avail. He even tried to negotiate the 4% Commission down to 2%, but was accused of refusing Au/Marchant their entitlements, which disagreements led to their eventual breakup over MAY-HK in 2004. 88.MAY-HK’s AAs were prepared on annual basis, and I disagree MAY-HK rarely produced accounts since about 2000 or Au/Marchant were KEPT IN THE DARK ABOUT MAY-HK’S FINANCIAL STATUS. AU LIAISED DIRECTLY WITH MAY-HK’S ACCOUNTS DEPARTMENT AS EVIDENT FROM HIS COMMUNICATIONS WITH PAT FOR SEEKING REMITTANCES TO UK, AND HE WAS QUITE ABLE TO EXTRACT FINANCIAL INFORMATION FROM MAY-HK’S ACCOUNTS DEPARTMENT TO PREPARE CB/19-20, CB/21 AND CB/36 IN 2004 DESPITE HAVING ALLEGEDLY LEFT MAY-HK IN 2002. 89.Au relied on Marchant’s notarised letter dated 18 July 2002 to his HK solicitors that authorised transfer of his MAY-HK shares held by TMK Limited to support Au’s/Marchant’s alleged withdrawal from MAY- HK in 2002, but I find Yeung was unaware of such letter. Au/Marchant did not explain why (a) such letter also authorised transfer of his shares in “MAY Property Investments” (but there was no evidence this transfer took place at all), (b) there were no signed instruments of transfer, (c) Au/ Marchant did not chase for such instruments in the following 1-2 years, and (d) MAY-HK’s original 2002-2004 ARs did not reflect such alleged transfers. Further, MAY-HK’s staff were not informed of Au’s/Marchant’s alleged departure in 2002, and Au got Pat to help prepare CB/19-20, CB/21 and CB/36 even in 2004. I need not speculate why Marchant did not implement his intention to withdraw from MAY-HK in 2002, but it was unsurprising that he let the matter drag on when MAY-UK still (i) earned substantial commission from MAY-HK, and (ii) relied on Fu Shing for samples/ production support. 90.The overall evidence also contradicted Au’s/Marchant’s stance that they had withdrawn from MAY-HK in 2002:
I doubt Yeung would have made the substantial financial commitments in (d)-(e) above if Au/Marchant had withdrawn from MAY-HK in 2002 and left Yeung in the lurch with MAY-HK’s increased loss position and heavy commission commitments. 91.I find on balance Au/Marchant and Yeung separated over MAY-HK only in 2004. At that time, Marchant feuded with Yeung over the FAL Dispute, and their relationship became increasingly tense. Au sensed his relationship with Yeung was strained by the FAL Dispute, and Yeung started to query the Property Investment. Au began to realise that although Yeung still trusted him he no longer did so as wholeheartedly as before, so Au became concerned Yeung might question his use of the monies in the Lloyds Account for his own purpose (if such matter came to light). 92.Consequently, on the one hand, Au (without telling Yeung) proceeded to liquidate the Property Investment by selling the remainder of the 10 Properties to recoup monies for refund of Yeung’s capital outlay for the Property Investment (“Yeung’s Refund”) to Yeung. Au also claimed that by then he ceased to use monies in the Lloyds Account for his own purpose, but it transpired he just could not help himself and continued to do so up to 2005.[70] On the other hand, Au/Marchant looked to consolidate/preserve their interests in MAY-UK (which was profitable) and 1-2 Lorenzo Street (which was partly used as MAY-UK Office and partly let to earn rental income), and to put strategic distance between themselves and MAY-HK that was in serious financial deficit. 93.I find it was in such context that Au told Yeung in April/ May 2004 that he/Marchant would withdraw from MAY-HK by mid-2004, and Yeung would have to take up their shares and MAY-HK’s debts/losses. Yeung fell into a low mood as he had placed faithful trust in Au. At first Yeung even resisted Au’s/Marchant’s departure. When he pressed Au on the sudden decision, Au claimed Marchant had already withdrawn from MAY- HK in 2002. Yeung strongly disagreed, but sensed Au was trying to shift the blame to Marchant with whom Yeung could not directly communicate. I also find Au hinted to Yeung that if he continued to object to the separation and/or not resolve the FAL Dispute, there would be rumour that MAY-HK / Fu Shing were in financial trouble and Yeung would “火燒後欄” (fire at rear fence). The possibility of such rumour worried Yeung because it could cause suppliers (who gave Fu Shing 1-2 months’ credit) to call on outstanding bills, but at that time Fu Shing had insufficient cashflow to pay such bills[71] all at once, which might cause financial collapse of his businesses. So Yeung had to let Au/Marchant withdraw from MAY-HK to obviate such risk. 94.The breakup over MAY-HK in 2004 was also consistent with (a) what Au told the police in his statement dated 29 October 2010, (b) Au’s timeline for the FAL Dispute (see paragraph 83 above), and (c) CB/15 written by Yeung on 16 November 2004 which was taken into account in resolving the Garment Business’ contra-accounts in CB/36 that itemised certain Remittances up to 2004. This practically spelled the end of the Garment Business (save for resolution of the Three’s interests in MAY-UK), so the Three proceeded to resolve their contra-accounts in/about November 2004. 95.In paragraph 29 of the UK Defence, Au/Marchant averred the Three entered into discussions regarding sale of Yeung’s MAY-UK shares to Marchant. Au claimed that in/about November 2004 the Three agreed to terminate the Garment Business and MAY Partnership on the following broad terms:
96.I have no doubt Au/Marchant wished for final separation from Yeung, but it was no easy task since MAY-UK and 1-2 Lorenzo Street were not yet resolved. I disagree the Three came to the agreement in the above paragraph in November 2004. Yeung had just visited MAY-UK on 24-25 October 2004 during which visit he again requested for an account of the Property Investment, and the parties had just resolved the contra- accounts for the Garment Business. In any event, the Three were still negotiating over MAY-UK and 1-2 Lorenzo Street as at April 2005 (see paragraph 295 below). 97.Even though I have found there was no agreement, paragraph 95(c) above suggested that by November 2004 Au/Marchant were contemplating formalising a retrospective transfer of their MAY-HK shares to Yeung in 2002. In my view, such thinking (bolstered by Au’s awareness of Yeung’s MO) led Au to prepare or to cause Pat to prepare the amended 2002-2004 ARs for Yeung’s signature, and Au got away with it when Pat told Yeung the amendments were required for transfer of Au’s/Marchant’s MAY-HK shares to him (which was consistent with what Yeung then understood following their separation over MAY-HK), and Yeung as usual signed without reading the documents or querying what Pat told him. I find Yeung did not know the amended 2002-2004 ARs stated the share transfers took place in 2002. The fact such amendments came about years after the alleged transfer in 2002 and after the 2002-2004 ARs had been submitted to the Companies Registry on regular annual basis lent weight to the view that Au/ Marchant only left MAY-HK in 2004 and not in 2002. The amendment exercise was nothing more than a barefaced attempt to put a 2-year gulf between Au/Marchant and MAY-HK’s significant loss position in 2004. 98.Findings on alleged Transfer Pricing I reject the alleged Transfer Pricing. First, I find Yeung and Au (for himself and Marchant) agreed that with Yeung’s significant financial/production support the Garment Business would place orders with Fu Shing unless its offered price was 5% above/below that quoted by other factories (“5% Arrangement”), which was echoed in paragraph 5.4 of the UK Defence that MAY-HK would place orders with Fu Shing “unless the price quoted by Fu Shing was over 5% above the prices of other manufacturers”. Secondly, I have found Au set up MAY-HK, took care of its administrative/operational matters, and liaised closely with trusted colleagues whom he recruited/recommended even when he was not in HK, so more likely than not it was Au who decided the terms of contract (and not just “suggested” a buying price) for UK customers / MAY-HK and for MAY-UK / MAY-HK whilst Yeung worked out the terms of contract between MAY-HK and the manufacturers (including Fu Shing). In my view, these 2 factors combined to render Fu Shing’s pricing competitive, thus leaving little room to overprice by Transfer Pricing. In any event, there was little objective evidence that MAY-UK (controlled by Au/ Marchant) overpaid Fu Shing on individual orders, or that the post-2005 prices of other factories were more competitive. 99.I prefer Yeung’s evidence that although MAY-UK still used Fu Shing as manufacturer after 2000, Au/Marchant began to violate the 5% Arrangement by using other factories and placing less orders with Fu Shing, which shift was facilitated by transition from FOB to LDP model in/about 2002 that resulted in more orders for MAY-UK and gave MAY-UK (and hence Au/Marchant) greater control over the Garment Business. 100.I disagree Yeung’s alleged efforts to lard up Fu Shing through Transfer Pricing was reflected by the ease with which Yeung was able to spare HK$20,000,000 for the purchase of 1-2 Lorenzo Street. Actually, (a) Fu Shing was a thriving factory even before the Garment Business came into the picture, and (b) any increase in business turnover/profits could simply be due to orders placed by the Garment Business (but such orders diminished in later years). I also disagree Transfer Pricing was the dominant/sole reason for MAY-HK’s continued loss position:
Fu Shing (being Yeung’s own well-established factory business in which Au/Marchant had no interest) was not part of the Garment Business, and it also served customers other than the Garment Business, so its accounts were neither here nor there. 101.Findings on the contra-account arrangement In my view, the contra-account arrangement came about because Yeung (not Au/Marchant) provided capital for the Garment Business. I find that in 1999 (a) Au told Yeung Marchant had made a lot of effort for the Garment Business, (b) Au coaxed Yeung into letting him/Marchant make drawings during the year to be set-off against their entitlements for that year at year-end, and (c) in the absence of overall profits in the initial years[72] the year-end distribution of entitlements on equal-sharing basis[73] was based on revenue/turnover (“Contra-Account Arrangement”). In my view, the Contra-Account Arrangement only concerned the Garment Business (not the Property Investment and/or Lloyds Account),[74] and it continued until Au’s/ Marchant’s withdrawal from MAY-HK in 2004 whereupon the Three resolved their contra-accounts. 102.2 matters were of note. First, the Contra-Account Arrangement was not a true contra-account mechanism but a rough computation of drawings versus entitlements. Marchant knew MAY-HK’s accumulated loss meant the contra-accounts were not adjusted against profit shares.[75] Entitlements based on revenue/turnover were borne out by Au’s treatment of the 4% Commission in CB/35 that set out some contra-account calculations for the Garment Business. Au wrote the top section of CB/35 in dark ink, and Yeung made annotations in light ink (marked in red in Exhibit D5 and in italics below):
At the time, Au told Yeung business turnover for “2002/2003” was HK$87,000,000, and the Three would equally share the 4% Commission (HK$3,480,000) at HK$1,160,000[77] each to be set-off against HK$500,000 in drawings (Yeung corrected that to be HK$550,000). Plainly, Au’s calculations on CB/35 was based on revenue/turnover and not on profits. 103.Secondly, the Three’s understanding in principle was to set-off their drawings for the year against their entitlements for that year at year- end. Some earlier end-of-year contra-account calculations[78] could be seen in CB/14[79] and CB/12-13[80] (retrieved for working out the net balance of the contra-accounts when Au/Marchant withdrew from MAY-HK in 2004), and some newer contra-account calculations could be seen in Yeung’s notes in CB/9,[81] CB/10-11 (see footnotes 64 above and 86 below) and CB/15[82] and also in Au’s/Yeung’s notes in CB/35 (see the above paragraph) that were eventually brought together in CB/36.[83] But Au admitted in fact this year- end adjustment/settlement was not done every year. Indeed, in late 2004 Au put forward CB/36 which listed itemised Remittances for 1999-2004 (not just for current year), and Au/Yeung worked out the cumulative entitlements and net deficit for 1999-2004 to be HK$5,127,037.43 and HK$644,298.86 respectively (see paragraph 105 below). It was readily evident that the contra-accounts were not settled every year in the sense of working out and paying/collecting the annual surplus/shortfall. 104.But Au agreed that even without regular annual adjustment/ settlement he knew all along for every year up to 2004 he received more than he was entitled under the Contra-Account Arrangement. Given such awareness on Au’s part, there was little incentive for him to carry out annual year-end adjustment/settlement as deferral of such exercise meant he would not have to clear the annual deficit. When pressed on why he continued to make drawings when he knew his contra-account was in continuous deficit, all Au could say was “I had no money”. This became Au’s mantra for helping himself to monies in the Lloyds Account and to Remittances sent to UK pursuant to his directions, which he used for purchase of UK Properties[84] or for easing his tight cashflow. Even though (a) the genesis of the Contra- Account Arrangement was to afford Au/Marchant financial convenience before annual distribution of entitlements and (b) Yeung was coaxed into a generous approach by setting-off against revenue rather than profit, I find Au knew from his persistent contra-account deficit he was not entitled to ask Yeung for further Remittances (dressed as his drawings) or to use monies in the Lloyds Account which were mostly Net Proceeds from some if not all of the 10 Properties (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) for his own purpose without (i) ascertaining and/or settling his deficit under his contra-account and/or (ii) having Yeung’s informed authorisation. In my view, Au knew he maintained investments/lifestyle he could ill-afford but for his dipping into Yeung’s monies. 105.The contra-accounts were resolved in late 2004 after Au/ Marchant and Yeung parted ways over MAY-HK. After Au/Yeung had discussions based on the information Au gave Yeung about the Garment Business and on the calculations in CB/9-15, they worked out the Three’s provisional (部份) entitlements up to 2004 from MAY-UK[85] and MAY-HK were HK$15,516,112.30,[86] so Yeung marked down “每人可分$5,172,037.43”. I find Pat helped Au draw up the typed part of CB/36 titled “經美宜或楊生戶口出數” (ie itemised Remittances from 1999 to 2004 in the total sum of HK$5,816,336.38), so Au told Yeung there was a shortfall of HK$644,298.95 and Yeung wrote “多付歐[illegible] $644,298.95” on CB/36. 106.Mr Chan suggested only Transfer Pricing could have generated the entitlement share of HK$5,172,037.43, and an experienced/successful businessman like Yeung would not have allowed “final” entitlements to be calculated on revenue/turnover if the Garment Business overall was unprofitable. But it was Au’s case that when he/Marchant withdrew from MAY-HK they still insisted on their entitlements (calculated on revenue) and Marchant even claimed it was Yeung’s refusal to pay 4% Commission in 2005 that led to the final breakup (see paragraph 83 above). At that time Yeung was in a low mood and was anxious to wrap up the separation over MAY-HK so as to obviate the threat to his businesses (see paragraph 93 above). There was no merit to the complaint. 107.Much play was made of the fact that some itemised Remittances in CB/36 were for Au’s acquisition of certain UK Properties (eg No 9 Onedin Point and 312 The Listed Building, Free Trade Wharf) that were paid for by drawings on his account with MAY-HK (as recorded in the Journal Entries and bank remittance documents), so it was said these UK Properties were not PIA Properties. This will be discussed in greater detail below, but suffice to state here I find (a) Yeung did not know about and did not agree to finance Au’s purchase of UK Properties even though (i) Au did use some such Remittances for such purpose and (ii) some such Remittances were itemised in CB/36 for set-off under the Contra-Account Arrangement, and (b) Yeung under Yeung’s MO made Remittances when told (by Au or via Pat) funds were needed for property purchase in UK, and he did so without demur or appreciation that Au would use such Remittances for Au’s own acquisitions of UK Properties. 108.As a general observation, I find Au only briefly showed CB/36 to Yeung during negotiations for resolving the contra-accounts before whisking it away, so Yeung was unable to study let alone investigate the itemised Remittances therein in any great detail. Plainly, Au/Yeung adopted a rough and ready approach with Yeung relying on what Au told him rather than chasing the nicest details. As illustrated below, CB/9-15 and CB/35 did not give the full picture, but they formed the basis for discussion:
But CB/36 did not refer to any RMB drawing for 2002/2003 that corresponded to “¥350,000 = HK33萬” in CB/35. 109.Thus, more likely than not, Yeung’s attention during discussions with Au was drawn to RMB sums and he considered the drawings recorded in his handwritten notes (eg CB/10-11 which Yeung had to hand), but he took Au’s word on other Remittances in CB/36 that was shown to him briefly without opportunity for detailed review. The above analysis also raised query as to the accuracy of CB/36. I also note Yeung did not know English, and I find Au did not draw his particular attention to “區生 No 9 Onedin Point” and “區生 312 the Listed Bldg., Free Trade Wharf” (which did not mention any “purchase”). Given Yeung at that time was anxious to quickly wrap up the matter (see paragraph 93 above), I believe he was not in a mood to question the Remittances itemised in CB/36. This nicely brings me to the Property Investment Agreement. VI. PROPERTY INVESTMENT AND LLOYDS ACCOUNT: OVERVIEW 110.Property Investment Agreement At the end of 1999 and early 2000, Yeung’s other businesses in Mainland China were doing well. During his visit to UK he told Au to consider moving closer to London to save travelling time. Au/Marchant told Yeung he should consider investing in UK Properties, and after making some calculations Yeung agreed. The Three entered into the Property Investment Agreement on terms set out in paragraph 14 above subject to present disagreement over whether Rental Income / PIA Outgoings were for Yeung alone (as Yeung alleged) or for the Three (as Au alleged). I find Yeung left decisions on selection, purchase, mortgage, letting and sale of the PIA Properties to Au/Marchant, and Yeung was not told about (a) the descriptions of PIA Properties, (b) the names of buying/holding parties, and (c) the sale of PIA Properties until quite some time after they were sold. 111.Rental Income / PIA Outgoings Au/Marchant claimed returns from the Property Investment were split three-ways, so the Three should enjoy/bear Rental Income and PIA Outgoings in equal shares, and such sums should be included in the overall account upon sale of each PIA Property to ascertain the net profit/loss. Marchant said most PIA Outgoings were paid from the Lloyds Account, but he probably paid some that were netted off in the overall account. Au said he paid £20,000-£30,000 for PIA Outgoings, but there were no supporting records/evidence for such assertion. Au did not say he/Marchant paid which item of expenses in his handwritten statement for each of the 10 Properties in CB/39-49 and CB/51-53 (“Au’s Statements”). 112.I find Au told Yeung that Yeung alone was entitled to Rental Income and responsible for PIA Outgoings for which purpose Au asked Yeung to open the Lloyds Account. This made sense even on Au’s claim that the investment strategy for the Property Investment was to make capital gain on turnaround purchase/sale[87] in which case profit/loss for each PIA Property could be neatly worked out (from solicitors’ completion statements and other invoices/receipts related to purchase/sale) without the clutter of Rental Income and PIA Outgoings, which might partly explain why Au did not keep diligent accounts of income/expenses for the 10 Properties even though he was tasked to do so. Further, as Au would not enjoy the Rental Income from the PIA Properties, there was little incentive for him take the trouble to let such properties. This was in contrast to Au’s Properties referred to in paragraph 165 below that Au claimed were his personal UK Properties that (apart from his own residence) were let to earn rental income. 113.Capital outlay/refund At that time Yeung was the only one of the Three who was able to finance the Property Investment. Au told Yeung they could mortgage the PIA Properties, so actual capital outlay would be about 5% of total investments. It transpired 11-13 Liberty Place (C4/844), 10 Manchester Road (C4/847) and 1-2 Lorenzo Street[88] were mortgaged. Between 1999 and 2004 Au asked Yeung to remit (and Yeung/ MAY-HK did remit) monies to UK for the Property Investment. MAY-HK was merely a remitting intermediary, and Remittances by MAY-HK were debited to Yeung’s current account or Fu Shing’s inter-company account with MAY-HK. The references to Remittances below are references to Yeung’s Remittances whether by Yeung himself and/or via MAY-HK or Yeung/Lee. 114.Au’s evidence focused on Remittances, but shied away from Yeung’s Refund. Mr Chan submitted the Net Proceeds were joint venture funds, but in reality (and I find Au knew)[89] the bulk of the Net Proceeds was Yeung’s Refund being Yeung’s personal monies to which Au/Marchant had no interest. It was on Au’s such understanding that he arranged the Transfer of £200,000 from the Lloyds Account to Yeung in HK on 9 November 2004 as partial return of Yeung’s Refund. Indeed, Marchant gave evidence that the agreed arrangement was as follows: (a) Howse Percival would receive/hold the Net Proceeds of each of the 10 Properties to the order of the vendor, and (b) Au would prepare the overall account upon sale of such property and give directions to Howse Percival to remit Yeung’s Refund back to Yeung in HK. This was consistent with Yeung’s understanding that the Lloyds Account was for Rental Income and not Net Proceeds. 115.But in reality (a) Au did not tell Yeung about sale of the 10 Properties until quite sometime later, (b) unbeknownst to Yeung Au arranged for some if not all of the Net Proceeds of the 10 Properties (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) to be deposited into the Lloyds Account to which only Au (and not even Yeung) had access (see paragraph 118 below), (c) Au did not prepare overall account for each of the 10 Properties upon individual sale or give account to Yeung as to the status of the Net Proceeds (and hence Yeung’s Refund) and the transformations they had undergone, (d) Au did not remit Yeung’s Refund back to Yeung in HK save for the Transfer of £200,000 on 9 November 2004 (but without explanation of how such sum was attributable to which PIA Property(ies)).[90] Plainly, Au had custodial control of Yeung’s Refund being Yeung’s personal monies as fiduciary or constructive trustee, so (i) except for PIA Outgoings Au could not use or arrange to use such monies (especially for personal purposes) without Yeung’s informed authorisation, and (ii) upon sale of each PIA Property he should have prepared an overall account, returned Yeung’s Refund to Yeung in HK, and distributed/collected the Three’s respective share of profit/loss. This will be discussed in greater detail below, but suffice to state here Au used the Net Proceeds / Yeung’s Refund for his own purposes without Yeung’s informed authorisation. 116.PoA In/about 2001, Au asked Yeung to sign the PoA dated 10 December 2001 for him to handle administrative aspects of the Property Investment, eg signing tenancy agreements or conveyancing documents, receiving Rental Income and paying PIA Outgoings. These administrative matters were one-way in that Au was to act for on and on behalf of Yeung, so the PoA was not for any mutual business dealings. Yeung (who trusted Au implicitly) signed the PoA at the cross marks in Pat’s presence. It was in simple/straightforward English, and provided inter alia that:
Plainly, Yeung (who was told the Lloyds Account was for Rental Income / PIA Outgoings) did not authorise Au to use any Net Proceeds / Yeung’s Refund in the Lloyds Account for his/Marchant’s own personal purposes. I disagree Au mistakenly thought he was generally authorised under the PoA to use monies in the Lloyds Account without having to seek Yeung’s item-by-item authorisation because he overlooked the express limitation therein. It defied common sense for a principal to take the trouble to grant a power of attorney for an attorney to benefit himself from the principal’s assets, especially when Au knew he had no entitlements in his deficit contra-account for set-off against his use of such monies.[91] In my view, Au’s allegation was no more than a unconvincing attempt to excuse his mishandling/misuse of monies in the Lloyds Account. 117.Opening of Lloyds Account I find that in the latter part of 2001 Au told Yeung he had to open a UK bank account for receiving Rental Income and paying PIA Outgoings. I disagree the Lloyds Account was opened “in connection with [the Three’s] business dealings and to facilitate the monies paid out between the partners by way of the [Contra-Account Arrangement] and the landed property investments” or because some PIA Properties were in Yeung’s name. In/about 2002 Au mailed Lloyds TSB Bank’s account opening forms to HK for Yeung to sign and return. Au’s UK home address at 226 St Davids Square, Poplar, London E14 2WE (“226 St Davids Square”) and later MAY-UK Office at 1 Lorenzo Street were used for receiving bank statements/correspondence. Since Rental Income and PIA Outgoings were solely for Yeung, I accept Yeung thought all monies in the Lloyds Account were his. 118.Operation of Lloyds Account Yeung was the sole signatory of the Lloyds Account, but Au operated such account for him. Yeung (who trusted Au implicitly) gave 2 chequebooks of blank Signed Cheques for Au’s use. Yeung was comforted by the fact (a) he was the sole signatory, (b) the Signed Cheques were crossed cheques with traceable payees, and (c) the Lloyds Account was for minor PIA Outgoings. Plainly, Yeung maintained a high level of trust in Au until 2004 when their relationship began to unravel. But unbeknownst to Yeung Au applied for and used D/Card and CP/Card to withdraw monies from the Lloyds Account. 119.Yeung’s use of Lloyds Account Yeung used the Lloyds Account only once in/about November 2004 for purchasing an airticket for his friend’s child, and for such purpose Au issued Cheque 00041 for £615. 120.Au’s use of Lloyds Account Yeung did not make any direct Remittance into the Lloyds Account, which was unsurprising as such account was for Rental Income and PIA Outgoings. I accept Yeung’s evidence that he expected Au to ask him for Remittances for the Lloyds Account (and he would have acceded to such request) if the Rental Income was insufficient to meet the PIA Outgoings. 121.But the fact was (apart from a few deposits from MAY-UK and some deposits from unknown sources (see paragraphs 216-218 below)) Au arranged for some if not all Net Proceeds of the 10 Properties to be deposited into the Lloyds Account (see paragraph 206 below) even though Au knew the Lloyds Account was intended for Rental Income. Further, other than PIA Outgoings which were the only permitted use for the Lloyds Account, Au did not seek Yeung’s informed authorisation for use of Yeung’s Refund (being the bulk of the Net Proceeds and hence Yeung’s personal monies) in the Lloyds Account for inter alia (a) services on behalf of MAY-UK, (b) property-related services on behalf of MAY Partnership, (c) expenses related to purchase/sale of the 10 Properties, (d) Au’s/Marchant’s personal uses, and (e) what appeared to be mortgage instalment payments. 122.For (a)-(b) above, although such payments should logically be paid by MAY-UK[92] or MAY Partnership, [93] Au claimed certain cash payments could not be booked in the formal accounts, so Au (i) drew monies from the Lloyds Account for deposit into his personal bank account to pay (a) above for which he received reimbursement from MAY-UK as part of his following month’s salary, and (ii) drew cash from the Lloyds Account to pay (b) above for which he received reimbursement by some means from MAY Partnership (which had its own bank account). But Au claimed he did not return such reimbursements to the Lloyds Account because he sometimes paid certain PIA Outgoings. 123.In my view, Au[94] should not have paid (a)-(b) above out of the Lloyds Account in the first place, and in any event he should have returned earmarked reimbursements from MAY-UK and/or MAY Partnership to the Lloyds Account. Further, apart from Au’s bare assertion that he had paid £20,000- £30,000 being 20%-25% of the PIA Outgoings, he did not identify any particular PIA Outgoings that were settled/repaid by the aforesaid reimbursements. Au also did not explain why he did not return Yeung’s Refund to Yeung in full for his capital outlay for the Property Investment when he recovered for himself minor PIA Outgoings that he had defrayed. In my view, this was a poor attempt to excuse mishandling/misuse of monies in the Lloyds Account, and gave weight to the view that Au merely wished to maintain a ready pool of funds in the Lloyds Account for him to dip into as he wished/needed. 124.In my view, Au should not have paid (c) above out of the Lloyds Account without Yeung’s informed authorisation as they were not actually ongoing PIA Outgoings but part of the expenses for purchase/sale of the 10 Properties which Au agreed should have been settled by Remittances from HK. But Au did not ask for Yeung’s informed authorisation or for Yeung’s further Remittance (which he easily could have sought) in relation to such expenses. 125.For (e) above, the Lloyds Account sported mortgage instalment payments for 2 banks.[95] Au did not explain which mortgage instalment payment was for which PIA Property. But it appeared the following properties out of the 10 Properties were subject to mortgage:
Even if the mortgage payments were treated as PIA Outgoings rather than capital payment that went to value/price of such properties, Au still had to ask for Yeung’s informed authorisation for use of Yeung’s Refund (being Yeung’s personal monies that should have been returned to him but which Au arranged for deposit into the Lloyds Account) which was not Rental Income. 126.Au claimed the debits in (d) above were his drawings “if he had a need” on his contra-account under the Contra-Account Arrangement. Au said Marchant could make similar drawings from his contra-account, but Marchant did not make any withdrawal from the Lloyds Account. As several Signed Cheques issued out of the Lloyds Account were for payment of school fees for Marchant’s children (see paragraph 244 below), I assume Au treated those drawings vis-à-vis Yeung as his. 127.Au confessed Yeung was not informed of such debits from the Lloyds Account on ad hoc or item-by-item basis, but claimed Yeung knew about such debits “generally” and he approved large-sum debits “specifically” (but Au alone would decide what a large-sum debit was). So even on Au’s case, Yeung had no idea of debits from the Lloyds Account unless Au chose to mention to him any “large-sum” debits. But Au was shy about what he meant by “large-sum” and which debit would be so categorised. On any view, the Transfer of £200,000 from the Lloyds Account on 21 November 2002 must have been a “large-sum” debit, but Au sidestepped the question by saying it depended on whether there was sufficient balance in the account for the Transfer. Here, the Transfer of £200,000 on 21 November 2002 reduced the account balance to just £32,255.25 (C5/1146), and Au eventually admitted it was a “large-sum” Transfer. Au denied such Transfer was for him/Paula even though he initially thought it was for purchase of 429 St Davids Square. I find Au did not seek and Yeung did not give any specific authorisation for such “large-sum” Transfer the purpose of which Au could not articulate. 128.I find Au’s explanations in the above paragraph unconvincing, especially when Yeung had no access to bank statements of the Lloyds Account (see paragraphs 250 and 267 below), and the Contra-Account Arrangement only applied to the Garment Business and not to the Lloyds Account (see paragraph 101 above). I find Yeung was not told and he did not approve Au’s debits from the Lloyds Account for Au’s/Marchant’s personal purposes, and Au kept quiet about them because he knew such use was in breach of the agreed understanding that the Lloyds Account was for Rental Income and PIA Outgoings. VII. DUTY TO ACCOUNT 129.Duty to account for Property Investment Au accepted he was responsible for keeping accounts for the Property Investment, ie to keep accounts for investments in PIA Properties and to oversee MAY Partnership accounts prepared by “foki” Maher. 130.Mr Chan submitted that when the Property Investment venture began, the Three conducted their affairs in a trusting/informal manner with Yeung getting together with Au/Marchant to explore property investment opportunities in UK and agreeing to deploy capital to invest in UK Properties when the opportunity arose. It was said the informality in Au’s accounts for and report on profits earned from the Property Investment was understandable/reasonable as (a) there was no written agreement, and (b) Yeung’s/Au’s notes in CB/9-15 and CB/35-38 for the Contra-Account Arrangement were also informal/rudimentary. So even if liability to account was established in that the 2005/2006 Accounts were not settled accounts or it was appropriate to re-open settled accounts, such account should be restricted to the Admitted Items but not Crossed-Out Items, and the Disputed Items should also be put aside unless Yeung could establish any/all of them were for the Property Investment (hence specific finding on whether each Disputed Item was for the Property Investment was required). It was said Yeung should not simply identify UK Properties and then call upon Au to explain the source of funds used as this was the result rather than the starting point of the account to be rendered. 131.But Mr Lau submitted that apart from Au’s admitted contractual duty to account for the Property Investment, he also had a fiduciary duty to account because (a) Au requested Yeung to make Remittances in the sums and at the times Au specified, (b) such Remittances were entrusted unto Au’s management/control (even though some were deposited into Howse Percival’s clients account) and Yeung had no further knowledge or participation in relation to the use of those monies, and (c) Au gave directions or arranged for Yeung to sign English directions to Howse Percival for disposal of the Net Proceeds. On such premise, it was said the fact Au agreed the Admitted Items were for the Property Investment did not remove his liability to keep/give accounts for the Property Investment, which included not just working out the net profit/loss for each PIA Property, but also giving account of the status of the relevant investment monies and the acts/dealings thereto, the fund-flows of such monies, and the transformations they had undergone (“Status/Transformations”). Mr Lau submitted that given Au’s obvious duty to account, if no conclusive finding could be made at this stage as to precise amount of the Remittances for the Property Investment, the starting point was to include all Items with proper breakdown of their Status/Transformations and with supporting documents, and leave it to Au to demonstrate any particular Remittance was unrelated to the Property Investment. It was further said that following such accounts/ inquiries, an order for payment of sums found due and of profits would naturally follow. 132.In my view, the admitted contractual duty to keep/give accounts for the Property Investment came about because the capital outlay for the Property Investment came under Au’s control/management after the relevant Remittances left HK shores (even though some were sent to Howse Percival’s clients account) and Au/Marchant took charge of the purchase, letting and sale of relevant PIA Properties, so Au had a duty to (a) keep/give accounts of the Status/Transformations of (i) Remittances / capital outlay given (eg payment of price and associated expenses for acquisition of each PIA Property) and (ii) Net Proceeds received (eg disposal of Yeung’s Refund, distribution of profit shares and payment of associated expenses for sale of each PIA Property), (b) give overall account upon sale of each PIA Property to work out Yeung’s Refund and the net profit/loss, and (c) give overall account of Rental Income and PIA Outgoings for each PIA Property that was tenanted (since such income/expenses were for Yeung alone).[96] Whilst (a)-(b) above might overlap (but this would merely be a matter of how to present the requisite accounts), they set out the matters essential for giving proper, complete and accurate account of the Property Investment (which was not merely account of Yeung’s Remittances). 133.This was recognised by Marchant who said Au had to keep accounts of any/all income and expenses for each PIA Property beyond those set out in Howse Percival’s completion statements for purchase/sale of the PIA Properties. Marchant expected (a) Au to have regularly liaised with and updated Yeung on the status of the Property Investment since Yeung made a number of Remittances for such purpose, (b) upon sale of each PIA Property Howse Percival should have prepared a completion statement and on instructions should have remitted Yeung’s Refund to HK, and (c) Au should then split the net profit (if any) three ways among the Three. I agree with Marchant that the very time for Au to prepare the overall account was upon sale of each PIA Property. After all, (i) Yeung’s Refund and the net profit/loss could be ascertained at that point by netting off the relevant Remittances against purchase/sale expenses, and (ii) it defied commercial/ common sense for Yeung’s Refund to moulder uselessly and indefinitely after sale of the relevant PIA Property, especially when Au claimed the purpose of the Property Investment was to make turnaround capital gain, and the investment strategy adopted was to avoid locking up a lot of capital. 134.But contrary to the above, (a) Au caused most if not all of the Net Proceeds of the 10 Properties to be deposited in the Lloyds Account out of which only about £200,000 was refunded to Yeung by Transfer on 9 November 2004, and (b) apart from some Property Investment calculations in CB/37-38 made when Au visited UK in/about 2003 Au did not give any further account of the Property Investment to Yeung before the 2005/2006 Accounts. In my view, Au’s Statements (CB/39-49 and CB/51-53) and also the typed statement that set out the net profit/loss of each of the 10 Properties extracted from Au’s Statements together with the overall net profit of £47,309.71 (“Au’s P/L Statement”, CB/22) were not records/accounts contemporaneously kept by Au as part of his duty to keep accounts for the Property Investment, but were probably prepared in 2004/2005 when Yeung pressed for information/accounts of the Property Investment and when the 2005 Account was prepared. 135.Au claimed the Three trusted one another and settled the Contra-Account Arrangement by rough handwritten calculations, so the accounts for the Property Investment should be similarly informal and rudimentary. I disagree. One could not draw analogy with the contra-account calculations for the Garment Business which concerned mutual debits/ credits that required Au/Yeung to bilaterally work out the two-way drawings and entitlements and then the net surplus/deficit. Here, Au was the sole accounting party for the Property Investment, and once the relevant Remittances left HK shores they fell under his control/management and outside Yeung’s knowledge/command, so Yeung was dependent on Au’s proper, complete and accurate account with the essential features explained above in order to have intelligent understanding of the Property Investment. 136.Mr Chan complained that Yeung’s allusion to Au’s fiduciary duties was a red herring as (a) it was unclear how such duties were said to arise, and (b) there did not appear to be any basis for duties beyond what was contractually agreed, and the live issue remained whether Au had satisfied/ discharged his duty to keep accounts for the Property Investment. I disagree. Although the Property Investment was a business venture, I have no difficulty in finding Au owed fiduciary duties in relation to Yeung’s funds for the Property Investment. A relationship of trust and confidence arose when Au asked Yeung for Remittances for the Property Investment, and Yeung followed Au’s instructions to make Remittances to destinations Au dictated for investment in PIA Properties selected by Au/Marchant who made all purchase/letting/sale decisions. Au (armed with the PoA) was also responsible for collecting the Rental Income and handling the Net Proceeds, and it was Au who caused some if not all of the Net Proceeds of the 10 Properties (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) to be deposited into the Lloyds Account that he controlled/ operated on behalf of Yeung. These matters were not disputed, and Au by his own conduct had clearly placed himself in a fiduciary position and come under a fiduciary duty to account. Thus, the fiduciary duties discussed in paragraphs 57-59 above were applicable, which was also evident in Yeung’s allegation that Au had a duty to not to use the Remittances for his personal purpose, and that Au could not make profit or act for his own or another’s benefit out of Yeung’s Refund without Yeung’s informed authorisation. 137.So Au owed both contractual duty (which he admitted) and fiduciary duty (which I have found) to keep accounts for the Property Investment in the manner described above. But as Chu J (as she then was) said in Hollingworth, if a party is under a duty to account, “then he is obliged to give a proper, complete and accurate account of all his dealings and acts in respect of the funds in question, no matter how the duty arises” (my emphasis). 138.2 things were of note. First, Au was the accounting party, and Yeung as principal was entitled to a proper, complete and accurate account as of right (which right arose immediately upon receipt of property in an accountable capacity) without need to prove breach of contract or breach of fiduciary duty. I find that under the Property Investment Agreement and/or as a fiduciary Au had duty to keep/give accounts of the Property Investment in the manner as described above, which was not limited to stating where Yeung’s Remittances for the Property Investment went and where the Net Proceeds went, but also their Status/Transformations, ie “all his dealings and acts in respect of the funds in question”. The 2005/2006 Accounts did not meet such requirements, so but for the defence of settled accounts, Au was in breach of his duty to account for the Property Investment. 139.Secondly, if the defence of settled accounts was rejected or it was appropriate to re-open settled accounts, the scope of Au’s duty to account would be as explained above, and I see no basis for restricting such account to the Admitted Items, and excluding the Crossed-Out and Disputed Items. The duty to account was in respect of the Property Investment and not in relation to particular Items. Once it was shown Au had undertaken to become an accounting party (which Yeung had done), and Yeung was entitled to some sum from Au (even though the quantum might be uncertain), then Au would be obliged to give proper, complete and accurate account of the Property Investment and Yeung’s monies in relation thereto in the manner described above. Pending provision of such account, this court might make (but it was not necessary to make) findings as to the propriety or otherwise of Au’s acts/dealings. It followed that this court was not bound to ignore the Crossed-Out Items or make specific findings in relation to each of the Disputed Items. At this stage, analysis of the Disputed Items would be pertinent to the issue of whether or not the defence of settled accounts was viable. Likewise, Yeung’s non-reliance of the Crossed-Out Items to establish liability for accounts/inquiries sought under the Counterclaim did not mean that if liability to account was established then Au would not have to deal with such Items at all. It was for Au as accounting party to provide a proper, complete and accurate account of the Property Investment in the manner explained above and in light of the findings herein (if any), and such Disputed/Crossed-Out Items would have to be included if they were properly part and parcel of such account. 140.But I go further and note that Au confirmed Yeung would not make Remittances on own initiative, and Au (whether directly or via Pat) was the one who instructed Yeung to make Remittances that could be broadly categorised as for (a) the Garment Business, (b) the drawings under the Contra-Account Arrangement and (c) the Property Investment. So if the Disputed Items on present evidence were not shown to be for (a)-(b) above, question would immediately arise as to whether they were for (c) above or alternatively whether they were mishandled/misused, and it would not be appropriate on either case to exclude such Items (as Mr Chan would have me do) from the account to be ordered if liability to account was established. But, of course, if there was sufficiently cogent evidence before this court that clearly established any Disputed or Crossed-Out Item was plainly irrelevant, then this court could make appropriate findings, and on such findings exclude such Item from the scope of the account (“Caveat”). 141.Mr Chan also complained Yeung did not disclose the amount of Yeung’s Refund he received in addition to the payment he received for his share of 1-2 Lorenzo Street. There was no merit to this complaint for Yeung was not any accounting party in respect of the Property Investment and had no accountable duty/capacity. Rather, such duty fell squarely on Au to render a proper, complete and accurate account of the Property Investment (including disposal of the Net Proceeds the bulk of which was Yeung’s Refund and hence Yeung’s personal monies). 142.Duty to account for Lloyds Account As for the Lloyds Account, Mr Chan suggested there was no misuse of Yeung’s monies therein because (a) Yeung never remitted/transferred monies into the Lloyds Account and (b) the Net Proceeds deposited in the Lloyds Account were joint venture funds, so it made no difference whether the Net Proceeds were deposited into the Lloyds Account or into a separate account under Au’s name, and all Au needed to do was to make good and account for Yeung’s Remittances for the Property Investment (which Au claimed he had done by the 2005/2006 Accounts) with no independent duty to account for use of funds held in the Lloyds Account. So even if the court were minded to order account/inquiries in respect of the Remittances, it would be superfluous to separately order an account of dealings with the Lloyds Account as the former would have covered the latter. 143.I disagree. In my view, subject to the defence of settled accounts to be discussed below, Au had to give account of the Lloyds Account to Yeung. Quite simply, Yeung entrusted the control/operation of his own Lloyds Account to Au: (a) Yeung gave Au the Signed Cheques (for cheque payments) and PoA (presumably used for withdrawals/transfers), (b) Au received all bank statements with no copies to Yeung, (c) Au applied for D/Card and CP/Card to make withdrawals without telling Yeung, (d) Yeung had to ask Au before he could use monies in the Lloyds Account once (see paragraph 119 above), and (e) Au effectively controlled/made all debits/ credits of the Lloyds Account. I have no doubt these undisputed facts meant Au stood as agent/fiduciary to Yeung with custodial control of (i) the Lloyds Account which was Yeung’s own bank account and (ii) Yeung’s Refund out of the Net Proceeds that Au caused to be deposited into the Lloyds Account, and as such Au owed the fiduciary duties set out in paragraph 57-59 above, including a duty to account for the Status/Transformations of the Lloyds Account and monies therein until Au handed back control of such account to Yeung. 144.Au was a fiduciary and/or constructive trustee of Yeung’s Refund which he could not use without Yeung’s informed authorisation. Au knew the bulk of the deposits in the Lloyds Account was the Net Proceeds, and he also knew the bulk of the Net Proceeds was Yeung’s Refund which were Yeung’s personal monies of which he/Marchant had no interest. After all, Au as the person handling the Property Investment and the accounting party thereto knew the profits for the 10 Properties were meagre (and some of them actually suffered loss) and he only paid PIA Outgoings of £20,000-£30,000. But Au made payments out of the Lloyds Account to various recipients (including himself, Marchant and others) for purposes that were extraneous to the agreed arrangement of receiving Rental Income and paying PIA Outgoings or even extraneous to the purpose of the Property Investment generally. As recipient in control of the Net Proceeds, and by allowing co-mingling of Yeung’s Refund with other monies which might not belong to Yeung (eg deposits from MAY-UK / unknown sources) and by causing monies to be paid out of the Lloyds Account for extraneous purposes, Au clearly had a duty to account for the Status/Transformations of monies in the Lloyds Account which was Yeung’s own bank account, and this would be the first step to enable Yeung to identify/quantify any deficit and to seek appropriate remedy/relief. For all the above reasons, if liability to account was established, it would be wrong and insufficient for Au to only give account of Yeung’s Remittances and to ignore the Lloyds Account. 145.Duty to account: summary It is useful to conclude the discussion on duty to account by noting that despite the 2005/2006 Accounts, Au conceded under cross-examination they were insufficient and fairness to Yeung required him as accounting party to give proper account of acts/dealings in respect of the Property Investment and Lloyds Account. I now turn to more detailed discussion of Yeung’s Remittances, UK Properties and Lloyds Account which would aid deliberation on whether or not the 2005/2006 Accounts were settled accounts, and to make appropriate findings (where possible) so that the accounts/inquiries (if ordered) would be taken in light of such findings. VIII. UK PROPERTIES 146.1-2 Lorenzo Street An opportunity arose for MAY-UK to acquire a commercial property 1-2 Lorenzo Street, which was a huge investment with development potential that cost about HK$20,000,000. 1-2 Lorenzo Street was intended partly to be used as MAY-UK Office and partly to be let for rental income. Au claimed Yeung was told of such property investment when he visited UK in/about 2001 (ie before purchase of the 10 Properties). In/about 2002, Au informed Yeung MAY Partnership was set up with the Three being equal partners, but Yeung was unclear about its legal status except it acquired/held 1-2 Lorenzo Street. Items 13, 26-28, 29 and 33-34 of the Chan/Lau RTables showed Yeung, MAY-HK and Yeung/ Lee made Remittances in 2001-2003 for purchase, development and renovation of 1-2 Lorenzo Street, and Au described most of these Remittances as “loan”. In/about 2003, MAY-UK Office moved to 1 Lorenzo Street, and 2 Lorenzo Street was probably let. MAY Partnership had a bank account with HSBC Bank Plc, but Au did not produce the bank statements. 147.Au agreed proper account of all incomings/outgoings for 1-2 Lorenzo Street had to be kept for taxation purpose, and even though Maher was instructed to prepare/keep relevant accounting records, Au accepted he was responsible for MAY Partnership accounts. In the circumstances, Au had duty to keep accounts for 1-2 Lorenzo Street (being part of the Property Investment) including the Status/Transformations of the capital outlay, rental income, expenses for acquisition/development/renovation, and ongoing expenses/disbursements. 148.Au orally gave Yeung some information. CB/37-38 was a “mixed record” in which Yeung made contemporaneous notes at a meeting with Au at MAY-UK Office possibly in 2003 or early 2004 (but Au was unsure of the exact time) when 1-2 Lorenzo Street was undergoing renovation. Such meeting was mainly about the Property Investment.[97] Whilst Au updated Yeung on 1-2 Lorenzo Street, Yeung wrote at the top of CB/37 “地產項目 三人共分以付股本 歐生£100,748 J神£101,841 城£697,807 共£900,396”. 1-2 Lorenzo Street was said to be “寫字樓 約12,000 呎(實用9,000呎) 花園2,200呎” FOR “樓價1,275,000” AND “總價連裝修£2,392,459以包括加建, 厘印手續費, 律師費等, 還[ILLEGIBLE]部份, 但在£2,500,000”, AND THE MORTGAGE WAS “借款£945,000, £500,000” AND “每月供預約£10,000 X 20年, 到現在欠銀行£1,400,000”. CB/37 ALSO RECORDED AU’S INFORMATION ON RENTAL RETURN THAT “可以收租, 樓上£80,700元一年 X 6年約, 加建£38,073元 X 6年約每年加6%由18.5呎計, 自己樓下£58,080元一年 X --, 共£176,853一年, 多出部份要交稅約30%, 公司開始有現金存, 以包括供款息連本, 到現在有£12,000.-” AU ALSO TOLD YEUNG ABOUT BANK VALUATION OF 1-2 LORENZO STREET WITH POTENTIAL INCREASE IN VALUE. YEUNG RECORDED THE AFORESAID INFORMATION ABOVE THE HORIZONTAL LINE ON CB/37 (SINCE AU TOLD HIM TO SEPARATE CALCULATIONS FOR 1-2 LORENZO STREET FROM THOSE FOR OTHER PIA PROPERTIES). ON CB/38, YEUNG RECORDED “地產投資寫字樓有500,000回報 …… 私人有115,000回報” AND “在未來2年應存在2,000,000回報”. YEUNG FURTHER RECORDED ON CB/38 THAT “在2年前到歐生有同阿PAT對數OK後可匯約300萬港幣回英國”. 149.In my view, CB/37-38 showed Au gave Yeung some broad and general information for 1-2 Lorenzo Street, but not the full and complete picture. Significantly, it did not provide any account of the Status/ Transformations of Yeung’s Remittances for the Three’s capital in MAY Partnership and of the purchase price and associated expenses for the acquisition, development and renovation of 1-2 Lorenzo Street. Thus, CB/37-38 fell short of a proper, complete and accurate account. and it was not updated to give a full and complete picture as at 2005/2006. 150.At Trial, Au produced the half-page Maher Record (CB/18) and MAY Partnership’s annual accounts prepared by Richard Anthony. As seen in paragraph 254 below, neither the Maher Record nor MAY Partnership’s annual accounts were given to Yeung when Au gave the 2005/2006 Accounts, so they were not part of the alleged settled accounts. Anyway, Au did not cross-check the entries in the Maher Record (but simply adopted the total amount therein for the 2005 Account) or retrieve MAY Partnership’s accounting records that had been submitted to the UK tax authority. I will discuss CB/37-38, Annexure 1 and Maher Record in greater detail when I deal with the 2005 Account, but suffice to state here that reading them together raised more questions than answers. 151.Au claimed the Three settled accounts in respect of 1-2 Lorenzo Street and MAY Partnership when Yeung sold his interest in the former and retired from the latter in 2006. Au further alleged that in agreeing to such sale/retirement Yeung must have been satisfied with the information/data received, and it was unreasonable for Yeung to raise belated queries 3-4 years afterwards. I will deal with this contention in Part XV below. 152.Holders of PIA Properties Yeung discovered much later there appeared to be another company called MAY Property [98] that appeared to be involved in the Property Investment, but he was uncertain about its status. Au clarified at Trial that MAY Property acquired/held certain residential PIA Properties (eg 127 Red Square and 323 & 366 Canary Central – see paragraphs 156A and 156E below), but he/Marchant later arranged for certain PIA Properties to be purchased in Yeung’s name because a foreign investor would not attract UK capital gains tax (eg 11-13 Liberty Place, G1.6 & J1.7 Deptford and 7 & 10 Manchester Road – see paragraphs 156B-D below). 153.The acquisition of PIA Properties was entrusted to Au/ Marchant, and the English conveyancing documents were signed by Au on Yeung’s behalf under the PoA orby Yeung at Au’s directions (see paragraph 156D(1) below). I find Au did not tell Yeung who did not know which person/entity held which PIA Property and did not know Yeung’s name was used for UK tax avoidance. Yeung left such matters to Au/Marchant, and he was unconcerned who acquired/held the UK Properties purchased with the Remittances so long as they were recognised as PIA Properties. In my view, Yeung was led to believe UK Properties acquired with the Remittances were PIA Properties in which the Three had equal shares as (a) he never financed/ sponsored Au/Marchant to acquire their own UK Properties, and (b) Au/Pat told him such Remittances were for property purchase in UK (and the only property purchase in UK that Yeung knew was the Property Investment). In my view, it mattered not who held the PIA Properties, and this would not have precluded such acquired UK Properties from being either PIA Properties or alternatively unauthorised profits due to mishandling/misuse of Yeung’s funds of which Au had control/management. 154.10 Properties Au had frequent telephone conversations with Yeung, but Au could not say he told Yeung the dates/details of the investment activities under the Property Investment. Even the profit/loss statement of the 10/Abortive Properties (CB/32-34) that Au updated with cross-references to documents in the present action (CB/29-31) did not give any dates. There were no dates on almost all Howse Percival’s completion statements. At Trial Au had no clear idea when the 10 Properties were bought/sold, and he even asked Yeung to figure out for himself the relevant time periods from solicitors’ and other bills, correspondence and documents (which would not have helped Yeung at the time as he did not receive any such documents sent to Au/Marchant in UK). The lack of such basic information lent weight to the contention Au had not kept proper accounts of the Property Investment. 155.Even if Au did not maintain any item-by-time running account, he should have, as explained in paragraph 132 above, kept accounts of the Status/Transformations of incoming Remittances and outgoing payments for the Property Investment in a proper, complete and accurate manner. But Au did not prepare overall account upon sale of each of the 10 Properties, and he only produced (a) Au’s Statements (CB/39-49 and CB/51-53) that set out broad items of price (some not even the sale price), rent, disbursements and profit/loss for each such property, and (b) Au’s P/L Statement (CB/22) that set out the net profit/loss for each such property and the overall profit of £47,309.71. But Au did not even provide (a)-(b) above to Yeung when he tendered the 2005/2006 Accounts, so they did not form part of the alleged settled accounts. 156.I summarise the presently available information and concerns in respect of the 10 Properties as follows:
157.Au’s Statements and Au’s P/L Statement focused on working out the net profit/loss for the 10 Properties, but they did not clearly identify the corresponding Remittances, Net Proceeds and Yeung’s Refund for each PIA Property and their Status/Transformations that were crucial for a proper account of the Property Investment. It appeared Au merely adopted the bare net balance for the 10 Properties in Au’s Statements to come up with Au’s P/L Statement and he tallied up such net balances into the total profit sum of £47,309.71, which bare figure was adopted in the 2005 Account allegedly as part of the settled accounts. I am unconvinced Au’s Statements and Au’s P/L Statement (let alone the bare figure of £47,309.71 in the 2005 Account) amounted to any proper, complete and accurate account of the Property Investment. In any event, they contained fundamental inherent problems:
In my view, a proper, complete and accurate account in the manner explained above was essential for Yeung to have a clear picture of Property Investment, and to know whether Au having custodial control of relevant funds had acted within or without his duty. 158.I turn to 10 Manchester Road being the only property out of the 10 Properties that was let to earn Rental Income. Au’s Statement (CB/46) stated “To add rental payment Rec’d (Yeung) £1,543.32” and “To add rental payment Rec’d (JM) £6,870.00”, which on their face suggested rent was received by Yeung and Marchant. Au explained Marchant let the tiny apartment to a female tenant on an oral short-term lease, so there was no written tenancy agreement. But there were no other supporting documents (eg rent deposit receipt, rent receipt, etc) nor information as to the rental period except Marchant’s brief handwritten note at CB/53. In fact, Au himself had no clue about such Rental Income and had to ask Marchant when he came around to prepare Au’s Statement for 10 Manchester Road in 2004/2005. Indeed, Au confessed he knew nothing more than what was written on CB/53. I have found the Rental Income belonged to Yeung and should have been deposited in the Lloyds Account, but Au did not even say he received the Rental Income collected by Marchant and/or he deposited such Rental Income into Lloyds Account. He never said where the collected Rental Income went, and did not point to any deposit in the Lloyds Account that was such Rental Income. This of itself cried out for proper, complete and accurate accounts. 159.More than 10 PIA Properties? Apart from 1-2 Lorenzo Street, Au claimed the Property Investment was limited to the 10 Properties, and further claimed Yeung’s doubt over the number of PIA Properties came from his mistaken/misconceived premise that Au purchased No 9 Onedin Point and 312 The Listed Building, Free Trade Wharf in his own name. I will deal with these 2 UK Properties below. On the other hand, Yeung claimed it was much later when he tallied up the Remittances for the Property Investment that he found out his capital outlay would be at least £2,053,241.21 and €25,793.86 (see Lau RTable) and not £1,175,500 as set out in the 2005 Account or the Admitted Items totalling £1,375,486 (see Chan RTable). Yeung also claimed the PIA Properties should be more than the 10 Properties even though he was not told and did not know their full particulars such that Au had either hidden PIA Properties from him or mishandled/ misused Remittances intended for the Property Investment to acquire UK Properties for himself, which meant Au had to give account on either case. 160.Putting aside 1-2 Lorenzo Street for the moment, the starting point for the Property Investment was this: (a) Yeung did not know what PIA Properties were purchased/sold and/or details of such transactions, but (b) Au who was in an accountable capacity had a duty to keep/give proper, complete and accurate accounts of the Property Investment (including outlay /return for each PIA Property transaction). 161.Based on information provided by Au, Yeung recorded below the horizontal line on CB/37 “私人投資 存貨”: (a) “2間未收樓但以付樓價£32,000”, and (b) “2間以賣未收款約£40,000 + £160,000 合共£232,000 銀行存款£110,000 合共£342,000 (其中約£115,000是利錢)”. On CB/38, Yeung recorded “地產投資…… 私人有£115,000回報”. Such contemporaneous notes made in/about 2003/2004 when the parties’ relationship was still cordial suggested there were profits of £115,000 from the sale of 2 PIA properties. Upon cross-reference to Au’s Statements (and putting aside for the moment the loss of (£340.93) suffered for 11-13 Liberty Place (CB/40) and (£5,253.23) for 7 & 10 Manchester Road (CB/46)), but bearing in mind the remainder of the 10 Properties was profitable, the overall profit for the Property Investment (other than 1-2 Lorenzo Street) should have been at least £115,000 – £340.93 – £5,253.23 = £109,405.84, which was more than double the overall profit of £47,309.71 in Au’s P/L Statement prepared in 2004/2005 (ie after the parties fell out with one another and Yeung had pressed Au for an account of the Property Investment). 162.Such analysis suggested there should have been more than the 10 Properties for the Property Investment, and it lent objective weight to Yeung’s evidence that when he visited MAY-UK Office on/about 24-25 October 2004 Au told Yeung in the presence of Yeung’s business friends there were about 20 PIA Properties (even though Yeung was not told the particulars thereof). Mr Lau submitted such evidence sat well with Au’s confession that he bought 8 UK Properties with the Remittances (see paragraph 176 below) and Marchant bought 1 UK Property (presumably 120 Manchester Road) at a time when the Property Investment venture was active and ongoing (which 9 UK Properties, 1-2 Lorenzo Place and the 10 Properties nicely added up to 20 properties). 163.Mr Lau also drew my attention to CB/47 (“Au’s Income Statement”) that was tucked away amongst Au’s Statements all of which were handwritten by Au. CB/47’s heading was “INCOME”, and it set out total monthly income of £12,235 that comprised (a) “Earning (after taxed) £6,285” and (b) “Rent 9 Onedin Point £1,300, No 30 Shackleton £1,177, 72 Capital [Wharf] £1,993, and 226 [St Davids Square] £1,480” (ie 4 UK Properties in the names of Au/Paula). Au’s evidence on CB/47 was an unconvincing metamorphosis: (i) it was part of the final accounts of the Property Investment, (ii) it was not about the Property Investment so he erroneously included it amongst Au’s Statements, (iii) it might be related to a tax issue, and (iv) he might have set out his potential monthly income from such properties (not his actual income which was less) for a mortgage application. There was no evidence as to whether or not these 4 properties were let, and if let what was the period of letting and the monthly rent thereof, or which property was subject of the alleged mortgage application. It seemed to me Au was making up his answer as he went along, but he left unanswered the question as to why he would mix Au’s Properties referred to in paragraph 165 below with the 10 Properties. 164.In my view, all of the above matters raised doubt as whether the PIA Properties were limited to the 10 Properties as Au alleged, and (subject to the defence of settled accounts discussed below) pointed to a need for Au to give proper, complete and accurate account of the Property Investment in the manner explained above, which scope would be wider than the Admitted Items. I now turn to the UK Properties Au alleged (but Yeung disagreed) were his personal properties outside the Property Investment. 165.Au’s UK Properties Au claimed that in 1999 Yeung encouraged him to buy UK Properties and Yeung advanced loans to him for such purpose. Such allegation of loans was quite strange as Au in the same breath contended they were his drawings under the Contra-Account Arrangement to be set-off against his own entitlements under the Garment Business. When pressed, Au said he requested Yeung for advances as he did not have substantial entitlements in 1999/2000, but such advances were settled upon resolution of the Contra-Account Arrangement in 2004. This explanation must be considered against Au’s constant mantra that he was the “poorest” of the Three, and he could not afford to buy any of the UK Properties that had been bought/held in the names of Au and/or his associates (“Au’s Properties”). I find that apart from mortgage loans, Au’s Properties were paid for by (a) Remittances which Yeung was led to believe were for the Property Investment but which Au knew were not legitimate drawings from his contra-account, and (b) unauthorised drawings from the Lloyds Account the bulk of which was Yeung’s Refund being Yeung’s personal monies. 166.First, in/about 1999 the Three made the Property Investment Agreement to jointly invest in UK Properties with capital provided by Yeung. I see no reason for Yeung, who had to (a) financially support the Garment Business by providing working capital for MAY-UK/MAY-HK and for expansion of Fu Shing’s production capacity/services to take on orders from the Garment Business, (b) fund the Property Investment venture in UK, and (c) mortgage his properties in HK and Mainland China and service bank loans/facilities for such purposes, to at the same time sponsor or lend monies for Au’s acquisition of Au’s Properties on interest-free and no fixed-repayment basis. 167.Secondly, it did not accord with commercial/common sense for Yeung to entrust Au/Marchant to acquire UK Properties for capital gain and Rental Income under the Property Investment, and at the same time agree to sponsor Au to compete with the Property Investment by acquiring Au’s Properties in the same market for his own personal investment/profit. Such conflict was borne out by Au’s investment strategy for longer-term capital appreciation and stable rental income for Au’s Properties and for quick turnaround purchase/sale with minor capital gain (or even loss) for the Property Investment. Au (who as I have found had no right to share in the Rental Income of PIA Properties) even claimed sitting tenants might depress the market value of PIA Properties, but gave no sensible explanation why Au’s Properties were treated differently. 168.Au alleged the investment strategy for the Property Investment was “according to the prevailing circumstances”, but did not elaborate except to say this would obviate the need for holding up large amount of capital. But PIA/Au Properties were in the same UK residential property market and were both funded by the Remittances, and not holding up capital could not be a true reason when Au actually arranged for most if not all Net Proceeds of the 10 Properties to be deposited into the Lloyds Account without re-use to acquire other PIA Property(ies) (except for Cheques 00008 and 00009 as deposits for 323 & 366 Canary Wharf – see paragraph 233 below – but I accept Yeung knew nothing about this) or return to Yeung. I am driven to conclude (a) Au adopted a personal investment strategy that landed him with choicer UK Properties and better returns, (b) he was not really concerned about the success or otherwise of the Property Investment (but it gave him a reason for asking Yeung to make Remittances for property purchase in UK), and (c) the quick turnaround purchase/sale strategy for the Property Investment had the effect of generating Net Proceeds which Au conveniently deposited into the Lloyds Account to form a ready fund for him (as the only person controlling such account) to dip into for his personal purpose. 169.Thirdly, Au admitted he was the “poorest” of the Three, but he knew his entitlements in the early years were not substantial and he had overdrawn his entitlements from the Garment Business every year. I do not believe Yeung would have granted loans for Au to purchase Au’s Properties given the real risk of non-repayment as Au’s contra-account was in constant deficit. Yeung did suggest to Au to live closer to London, but it was a far cry from saying Yeung agreed to sponsor Au’s purchase of a new home (with subsequent upgrade and further home purchases for his children) with loans. 170.In 1999/2000, both Au/Marchant saw opportunities in investing in the favourable UK property market. Having worked with Yeung for a few years, Au was also quite confident Yeung had absolute trust in him, and he learned he could get Yeung (who operated on Yeung’s MO) to make Remittances without any demur at times/sums he dictated. I find that once Au/Marchant got Yeung to agree to the Contra-Account Arrangement and Property Investment, Au saw making property investments in UK with Remittances from Yeung as a convenient way to liberate himself from his “poverty” despite awareness that (a) the Contra-Account Arrangement was merely bridging convenience pending year-end entitlements rather than financing for substantial capital investments, (b) his entitlements before year-end adjustment/set-off in the early years were meagre, and (c) he could not make drawings (at least for capital investments) on his contra-account that was in constant deficit. 171.In my view, Au took the Remittances as felicitous opportunities to make UK Property investments, to ease his cashflow and to upgrade his family’s lifestyle,[99] which Au knew he could not have afforded otherwise. Au admitted he was the one who dictated the amount, timing and destination of each Remittance for the Property Investment, and his requests were often communicated to Yeung through his trusted colleague Pat. But Pat was not involved in the operations of the Property Investment (being a business venture extraneous to the Garment Business, MAY-HK and MAY-UK), and was only tasked to handle remittance formalities. On balance, I find it unlikely that she knew much more than every now and then Yeung would on Au’s requests make Remittances for property purchase in UK. Indeed, after each such Remittance Pat would give to Yeung copy TT Form and bank customer’s advice that confirmed such Remittance had been effected (“Bank Advices”) for record. 172.I also accept each time when Yeung was told to make Remittance for property purchase in UK he would do so without demur because he believed they were for the Property Investment being the only venture he knew that involved property purchase in UK. Yeung was unaware of the particulars of the PIA Property to be purchased nor details of the application of such Remittance, and following Yeung’s MO he simply signed the TT Form (completed by MAY-HK’s accounts department in English) given to him by Pat. Au himself admitted he did not tell Yeung (presumably directly or through others) the descriptions/addresses of the PIA Properties purchased or to be purchased, and it was pointless for Pat to tell Yeung the English addresses Au mentioned to her as Yeung did not know English and had no idea of London locations. She also had no reason to (and I find she did not) show Yeung the Old Records referred to in paragraph 181 below which were bookkeeping entries and English email/fax communications with Au/Marchant on remittance technicalities kept by MAY-HK’s accounts department. As explained in paragraph 182 below, subject to the possibility of inadvertent errors, Yeung treated the Remittances for which Pat returned copy TT Forms / Bank Advices to him for custody/record to be for the Property Investment, and he left MAY-HK’s accounts department to handle records for Remittances for the Garment Business. 173.I find Au capitalised on Yeung’s MO and Yeung’s unquestioning trust in him to seize such beguiling opportunities to use monies meant for the Property Investment for overcoming his “poverty” by making property investments and earning capital/rental returns in UK far away from Yeung’s attention, and he successfully kept such manoeuvres under wraps because (despite initial understanding otherwise) the contra-accounts under the Contra-Account Arrangement were not adjusted/settled every year. This spoke loudly of Yeung’s then trust in Au and Au’s then knowing opportunism. 174.Mr Lau branded such conduct as theft, but I find Au had no stomach for such outright audacity. He admitted to some vague optimistic hope that somehow his finances would eventually improve and somehow his investments would eventually prosper, and he would somehow be able to put matters right by repaying Yeung. In my view, such bullish hope that things would eventually work out did not alter the reality that the relevant Remittances were meant for the Property Investment, but it might explain why Au did not bother to mask certain bookkeeping Journal Entries that described such Remittances as his “股東往來” (see paragraphs 176(c)-(d) and 196 below). Further, as explained in paragraphs 184 and 187-189 below in relation to Item 14, one could not place too much faith in the accounting treatment in the Journal Entries which was necessarily influenced by Au with his self-beneficial perspective and which on occasion was shown to be obviously wrong. In my view, this was how Au ended up in the happy position of purchasing 8 Au’s Properties between 1999 and 2005 (enjoying rental/capital returns and holding 2-3 Au’s Properties at any one time), and how Yeung ended up with the belief that he made more Remittances than the total purchase price of the 10 Properties and that there were more PIA Properties than the 10 Properties. 175.I will further discuss the Remittances in Part IX below. In my view, subject to the defence of settled accounts discussed below, Au had to give account of (a) the Remittances that Yeung was led to believe were for the Property Investment but which Au applied for Au’s Properties, and (b) the Status/Transformations of such Remittances, all under the umbrella of his duty to keep/give accounts of the Property Investment, and the fact some such Remittances might not be in the Chan/Lau RTables would not lessen Au’s duty to give proper, complete and accurate account of his dealings/ profits in relation to the Remittances for the Property Investment that he so utilised. 176.Au did not produce the completion statements for Au’s Properties (although they were in his possession), so only piecemeal information was elicited under cross-examination. Even so, it was starkly evident from Au’s testimony that he could not have afforded any of Au’s Properties without utilising the Remittances that Yeung was told were for property purchase in UK (thus causing Yeung to believe they were for the Property Investment):
177.126 Red Square deserved a bit more attention. 120, 126, 127 and 128 Red Square were purchased at about the same time. Marchant purchased 120 Red Square, and Au bought 126 Red Square for Eric. 127-128 Red Square were intended for the Property Investment, but Marchant was hesitant over the Property Investment holding 2 properties adjacent to each other, so Au/Marchant asked a friend to take over 128 Red Square (and no payment was made for this property). Au claimed (but I reject) he told Yeung about the purchase of 127 Red Square because this estate development was so popular they had to queue up for the purchase. 178.Au admitted he used (and allowed Marchant to use) Yeung’s funds to purchase these properties. The completion statement for “Purchase and Sale of [7 Manchester Road]” (a PIA Property) gave income of £70,291.25 (ie £36,000 from “MAY Trading” (should be MAY-HK) and sale price of £34,291.25) with deductions that included inter alia “Deposit on [120] Red Square 3,757.00”. Au could not explain why Yeung’s Remittance and sale proceeds of a PIA Property were used to pay for Marchant’s alleged personal purchase of 120 Red Square. Au agreed he would have realised this anomaly upon reading the completion statement at the material time in/about mid-2002,[101] but he could not recall what he had done. This, of course, immediately raised concern whether 120 Red Square was in fact a PIA Property and part of the Property Investment, which would have justified proper, complete and accurate accounts to be rendered. But even co-mingling of monies of various sources/purposes would of itself have required proper account. IX. REMITTANCES 179.Yeung/Au disagreed over the amount of Remittances for the Property Investment:
180.Au’s contentions were undermined by the analysis in Part VIII above, and I prefer Yeung’s case that (a) Au/Marchant were responsible for identifying suitable UK Properties for the Property Investment, (b) he was responsible for remitting monies to various destinations as per Au’s instructions to provide capital for the Property Investment, and (c) he never agreed to let Au/others use (and he did not know they actually used) his/ MAY-HK’s Remittances intended for the Property Investment for their own personal purposes. 181.For each Item in Annexure 1, Yeung produced (a) copies of TT Forms and Bank Advices (where available), and (b) other supporting documents extracted from MAY-HK’s old records, eg MAY-HK’s Journal Entries, emails etc (where available) (collectively, “Old Records”). 182.For documents in (a) above, Yeung signed the TT Forms for himself or for MAY-HK, but he did not sign the Bank Advices issued by banks. The TT Forms / Bank Advices were bilingual forms, but they were completed in English which Au could not read/understand. I accept it was Pat who prepared the relevant TT Forms for Yeung’s signature, and he left it to her to fill out the forms in good order. As explained in paragraph 171-174 above, he signed the TT Forms under Yeung’s MO without demur when told they were for property purchase in UK. After such Remittances were effected, Pat would debit Yeung’s current account or Fu Shing’s inter- company account with MAY-HK, and give Yeung copy TT Forms / Bank Advices which Yeung would put together in a pile and then place them in a plastic folder he kept in a drawer in his room (“Plastic Folder”). Yeung explained (and I accept) that Remittances for the Garment Business were two-way due to inter-company accounts between MAY-HK and MAY-UK, and quite different from one-way Remittances for the Property Investment. Yeung would let MAY-HK’s accounts department handle/keep documents for Remittances in respect of the Garment Business but he kept those for Remittances in respect of the Property Investment (as told to him). But Yeung fairly accepted the possibility of inadvertent mix-up. After all, he did not understand the English particulars on the TT Forms / Bank Advices, and Pat did not know the sale/purchase niceties of the Property Investment. Moreover, Au did not tell Yeung the addresses of PIA Properties acquired for the Property Investment (except for 1-2 Lorenzo Street). 183.Yeung said he prepared Annexure 1 from documents in the Plastic Folder. Mr Chan complained Yeung mentioned the Plastic Folder for the 1st time when he gave evidence, and suggested that more likely than not Yeung indiscriminately included all TT Forms / Bank Advices he could muster in Annexure 1 leaving it to Au to establish otherwise. I disagree, and find the Plastic Folder to be nothing more than details elicited under cross- examination that did not give rise to concern. After all, Yeung properly discovered/produced the TT Forms / Bank Advices, and following legal advice searched for and produced the Old Records. Yeung also took care to review and cull the Crossed-Out Items from Annexure 1. None of these matters spoke of the irresponsible approach to evidence that Mr Chan suggested. 184.Admitted Items Au admitted Items 13-14, 19-21, 23-29 and 32-35 in the total sum of £1,375,486.42 concerned the Property Investment:
185.I make 2 observations in respect of Items 10 and 12 which were Disputed Items. First, the 13/9/12 RA Letter stated Items 10 and 12 were Remittances related to the purchase of a UK Property but incorrectly transferred to MAY-UK, so MAY-UK passed them over to Howse Percival (C4/829). Au denied the UK Property in question was 226 St Davids Square (which Au/Paula bought on 30 July 2001 for £349,950 – see paragraph 176(e) above) even though he was quite “poor” then. Bearing in mind Howse Percival generally handled conveyancing procedures for purchase/ sale of PIA Properties under the Property Investment, Au believed Items 10 and 12 were for purchase of 1-2 Lorenzo Street. If that was correct, Au could not explain why Items 10 and 12 were not Admitted Items in the Chan RTable or Ticked Items in CB/19-21, and why they were not part of the Maher Record, which served to raise question about the accuracy of 2005/ 2006 Accounts. But if Items 10 and 12 were not for 1-2 Lorenzo Street, Au did not explain what UK Property was purchased as referred to in the 13/9/12 RA Letter, which served to raise the spectre that there might be more PIA Properties than the 10 Properties and 1-2 Lorenzo Street. 186.Secondly, on the basis of the 13/9/12 RA Letter that Items 10 and 12 were for the purchase of a UK Property (irrespective whether it was for the Property Investment or otherwise) and not inter-company transfers from MAY-HK to MAY-UK, the accounting treatment for the Journal Entries in respect of Item 10 (“暫借款 [MAY-UK] GBP100,000.00 ……”) and Item 12 (“暫借款 [MAY-UK] GBP10,000.00 ……”) were plainly wrong (which served to show the accounting treatment in contemporaneous Journal Entries did not necessarily inspire confidence), and Yeung was vindicated in saying he was told by Au/Pat that such Remittances were for property purchase in UK. 187.I have 3 observations for Item 14. First, Au said this Admitted Item was for purchase of 7 & 10 Manchester Road, so naturally it should be debited to either Yeung’s “股東往來” with MAY-UK or Fu Shing’s inter-company account with MAY-UK. But the accounting treatment in the corresponding Journal Entry was “股東往來 – [Au] ……”, and Au never offered any explanation why his account with MAY-HK was debited when such Remittance was for acquiring PIA Properties. The Journal Entry “AS ROBERT REQUESTED, TT AS BELOW FRANKLYN JAMES – GBP2,000 ……” (my emphasis) was telling, and demonstrated (a) it was Au and not Pat (who knew little except for remittance formalities) who influenced the bookkeeping exercise for the Remittances for property purchase in UK, and (b) Au’s contemporaneous directions in this respect were not necessarily accurate. This (and Au’s absorption in self-interest over such Remittances some of which he used for personal purposes) showed that Journal Entries so guided by Au did not inspire confidence in the reliability/ accuracy of their accounting treatment, especially when the same for Item 14 was demonstrably wrong. 188.Secondly, the Journal Entry and Bank Advice for Item 14 showed bookkeeping records and remittance documents did not have to expressly refer to any PIA Property before a Remittance would be recognised as for the Property Investment. For Item 14, the Journal Entry stated it was for Franklyn James and the message in the Bank Advice was just a name “SANDY”. This also showed Remittances for the Property Investment did not have to be remitted to Howse Percival’s clients account. Ultimately, it was the purpose of the Remittance rather than its destination/ label that mattered. 189.Thirdly, Au’s email to Pat dated 18 June 2001 with caption “may property” stated the Remittance was “for deposit we paid to the following 3 properties” (C6/1382). But according to the completion statement for sale of 7 Manchester Road and purchase of 10 Manchester Road (C4/847), the initial deposit (not deposit on exchange) for purchase of 10 Manchester Road itself was already £2,000, so how could Item 14 (£2,000) be deposit payment for 2 other properties as well? Au suggested such Remittance was for payment of commission. Be that as it may, even if Item 14 was to pay the deposit or commission for 7 & 10 Manchester Road, what was the 3rd property and was it a PIA Property? This raised question as to whether there were more PIA Properties than disclosed. 190.Au admitted the Remittance of £200,000 from Yeung/Lee to May Partnership on 18 April 2002 (Item 27) was loan capital for purchase of 1-2 Lorenzo Street. The 2005 Account asserted only £1,175,500 was remitted for the Property Investment (presumably the sum total of all Ticked Items in CB/19-21 being £1,175,499.97), but such total amount in the 2005 Account must have been short by at least £200,000 since Item 27 (not a Ticked Item) had not been taken into account. Au tried to shift focus by (a) saying Item 27 was reflected as credit item 3 of the Maher Record for £199,998 (19 April 2002) and suggesting the difference was UK bank charges, and (b) further saying Item 27 had been taken into account upon transfer of Yeung’s interests in 1-2 Lorenzo Street to Au/Marchant and cessation of MAY Partnership in 2006. I will deal with (b) above in Part XV below, but the fact remained that the 2005 Account (said to be part of the settled accounts) were understated by at least £200,000. 191.Out of the Admitted Items, Items 13, 24, 26-28, 29 and 33-34 were for 1-2 Lorenzo Street. Item 24 was a Remittance of £10,000 from MAY-HK to MAY Partnership on 14 March 2002. Au claimed this was Yeung’s/Au’s initial capital share to form MAY Partnership. The 13/9/12 RA Letter stated this Remittance was split equally between Yeung and Au and credited to their current accounts with MAY Partnership, and the amount credited to Yeung formed part of the balance that was settled when MAY Partnership ceased (C4/829). On such premise, £5,000 should have been credited to Au’s account with MAY Partnership as his capital share/ contribution. But Yeung recorded in CB/37 that Au told him “地產項目三人共分以付股本 歐生£100,748 J神£101,841 城£697,807 共£900,396”, so Au’s capital share/contribution appeared to be more than £5,000. But there were no further Remittances for Au’s capital share/contribution in MAY Partnership[102] among the Admitted Items. Au did not clarify this anomaly, which raised question as to whether there were more Remittances for the Property Investment than the Admitted Items. 192.Thus, subject to the defence of settled accounts discussed below, all these matters about the Admitted Items raised more questions than answers, and cried out for a proper, complete and accurate account of the Property Investment. 193.Disputed Items Au claimed (and Yeung disagreed) that (a) Items 2, 4-5, 11 and 22 and Items 8-9, 25 and 31 out of the Disputed Items were respectively Au’s and Marchant’s drawings on their contra-account under the Contra-Account Arrangement that had been settled pursuant to the 2006 Account, and (b) Items 10, 12 and 15-18 out of the Disputed Items concerned other matters. 194.Item 2 was a Remittance of £100,000 from MAY-HK to MAY-UK on 20 September 1999. I refer to the discussion in paragraph 176(b) above in which (a) Au initially thought (but later said he was not sure) it was for the purchase of No 30 Shackleton, (b) the 13/9/12 RA Letter claimed it was an inter-company transaction between MAY-HK and MAY- UK, and (c) Yeung had the impression it was for the purchase of 11-13 Liberty Place. In my view, (c) above was unlikely since 11-13 Liberty Place was bought in February 2002 (C4/937). Since this Remittance was made in 1999, in the absence of supporting documents, there remained a question whether it was for No 30 Shackleton. Consequently, subject to the defence of settled accounts discussed below, I see no basis to exclude Item 2 from the scope of accounts to be ordered for the Property Investment (which as explained in paragraphs 129-141 above would encompass Remittances for Au’s Properties), and it was for Au to give account and explain. 195.I shall deal with Items 4, 5, 11 and 22 together. Mr Chan relied heavily on the accounting treatment in the corresponding Journal Entries for “股東往來” to suggest they had nothing to do with the Property Investment, which he said showed Au did not seek to hide from Yeung the true purpose of those Remittances. Mr Chan also emphasised the difference in accounting treatment between these Items and the Admitted Items, which he submitted showed the former to be Au’s drawings on his contra-account under the Contra-Account Arrangement. But I have found that at the material time Yeung did not sight the Old Records (see paragraph 172 above), and I have explained (a) how Remittances for property purchase in UK, Au’s mishandling/misuse of some such Remittances and the Journal Entries came about, (b) why the accounting treatment in the Journal Entries, TT Forms, Bank Advices and Old Records could be errant, and (c) why these matters would not detract from the veracity of Yeung’s evidence that he was told these Items were for property purchase in UK (see paragraphs 170-175 above). 196.For the above reasons and also for the discussion below, even if liability to account was established, I am of the view that Items 4, 5, 11 and 22 should not be excluded from the ambit of a proper, complete and accurate account of the Property Investment:
197.I next turn to Items 10 and 12, which were respectively Remittances of £100,000 and £10,000 from MAY-HK to MAY-UK on 16 and 29 May 2001. I have dealt with the Journal Entries for these 2 Items (C6/1367 and C6/1374), and the Bank Advices that confirmed such transfers had been effected (C6/1368 and C6/1375) in paragraphs 185-186 above, which I rely but will not repeat here. 198.I turn to Items 15-17 which I summarise below:
199.Au explained such Remittances were for acquiring a mature garment business called Finest Brands International Limited (“FBI”) which owned several fashion brand names that excited Au’s/Marchant’s interest, but the transaction was eventually abortive and Devonshires refunded the Remittances with interest but less amounts invoiced by them. In their letter dated 14 September 2012 to Marchant, Devonshires confirmed as follows:
Yeung agreed the above 2 bank accounts were MAY-HK’s bank accounts. He claimed MAY-HK received refund of £339,366.73 (C6/1395-1396, see also Item 18 being £339,245.21 which was off by £121.52), but not the alleged refund of £250,000 which he could not locate. But Yeung did not check or cause a search to be made for the 2001 bank statements of MAY-HK’s HSBC bank account, and did not ascertain whether those statements had been retained amongst the Old Records or whether they could be retrieved from the bank. All Yeung said was that such bank account had not been used for a long time. In my view, it was quite clear irrespective whether Items 15-17 had been fully refunded, such Remittances were not for the Property Investment. Further, since Yeung had not checked whether the balance of the refund had been received in MAY-HK’s HSBC account, I am not convinced there was any misuse, misappropriation or misunderstanding as Yeung alleged. Rather, I am persuaded the TT Forms / Bank Advices for Items 15-17 were inadvertent errors in the Plastic Folder as alluded to in paragraph 182 above (which possibility Yeung fairly accepted he could not exclude), and such Items should be excluded from any account to be ordered even if liability to account was established. 200.I now turn to Items 8, 9, 25 and 31 which were Remittances to Marchant that was said to be his drawings on his contra-account under the Contra-Account Arrangement similar to Items 6, 7 and 36 of the Crossed- Out Items (see paragraphs 204-205 below):
201.There was also a fax from Marchant to Au dated 10 February 2001 captioned “Transfer Deposit to Spain” in which Marchant asked for Remittances of £20,000 and £40,000 2 weeks apart to his Spanish bank account but acknowledged they could be sent in 1 lot (C6/1366). The fax ended with “[you’ve] now got somewhere to go on holiday + you better learn to play golf”, which suggested that such Remittances were for property purchase in Spain. According to the 13/9/12 RA Letter, these Items were “all transfers to Bank La Caixa (Jason Marchant)” which had been duly declared personally by Marchant to the UK tax authority as income and tax was paid accordingly. In my view, such Remittances were obviously not for property purchase in UK, and I do not think Au/Pat would have told Yeung they were for such purpose. But it was not impossible for either Yeung or Pat to have made inadvertent error in putting away the TT Form and Bank Advice when these Remittances were routed through UK intermediary bank and were probably for property purchase (albeit in Spain). Further, there was no evidence before me as to the status of Marchant’s contra-account and his drawings therefrom in 2001-2003 even though Yeung claimed Marchant had a similar overall deficit of HK$600,000-HK$700,000 at the time when the contra-accounts were resolved in late 2004 (see footnote 65 above). In the circumstances, I consider Items 8, 9, 25 and 31 ought to be excluded from the account to be ordered even if liability to account was established. 202.In respect of the 4 unnumbered items that corresponded to credit items 13-16 in the Maher Record being £15,000, £55,000, £30,000 and £11,000 dated 19 March, 1 June, 30 July and 3 September 2004, Au initially thought they were Remittances for MAY Partnership / 1-2 Lorenzo Street (and thus for the Property Investment) since Maher only did bookkeeping for MAY-UK and MAY Partnership and not for Au personally. Subsequently, Au said these 4 credit items in the Maher Record corresponded to Cheques 00031, 00033, 00037 and 00038, so their source was not Remittances from Yeung/MAY-HK but from the Lloyds Account. I will deal with these Cheques in paragraphs 233 and 260 below. 203.In light of the above, Au agreed under cross-examination the sum of £1,175,500 in the 2005 Account was incorrect, and recognising the inadequacies of the 2005/2006 Accounts, Au agreed he owed Yeung a fresh and proper account of the Property Investment (and the Lloyds Account), and even urged Yeung to help him retrieve bank and other primary information to facilitate his preparation of such fresh and proper account. 204.Crossed-Out Items Mr Chan submitted the Crossed-Out Items being Items 1, 3, 6, 7, 30 and 36 were shown to be irrelevant to the Property Investment, and the inclusion of these unrelated Items demonstrated the inaccuracy of documentation in the Plastic Folder. But Yeung claimed that without any proper, complete and accurate account from Au, he found Au’s numerous requests for Remittances to UK confusing, which was why he raised the Counterclaim to seek proper account/enquiries. But to err on the side of caution so as to avoid unnecessary litigation distraction, he was legally advised to cross-check the Items in the Lau RTable against available information. Since the purpose of the present litigation was to establish liability to account rather than to critique an account that had already been rendered, Yeung took a conservative approach to cull Items when similar amounts were found in documents pertaining to the Garment Business (eg CB/9-15, CB/35-38, CB/36 etc) even though he had reservations whether such Crossed-Out Items were legitimate drawings on Au’s/Marchant’s contra-accounts or whether they were MAY-HK’s loans to them. I have no problem with such approach as Yeung did not have any accountable duty vis-à-vis the Property Investment, and all he had to do was to establish Au’s duty to account (which he had done) and the 2005/2006 Accounts were not settled/adequate. The Crossed-Out Items are summarised as follows:
205.Mr Chan distinguished between accounting treatment allegedly for Remittances in respect of drawings on Au’s/Marchant’s contra-accounts and that for Remittances in respect of the Property Investment. Mr Chan suggested that as a result of Yeung’s reservations over the Crossed-Out Items and similarity in the accounting treatment for the Crossed-Out Items (especially Items 3, 6 and 7) and for the Disputed Items, it had not been clearly shown the Disputed Items were for the Property Investment. Save for Items 30 and 36 discussed above, I disagree and repeat my observations in paragraphs 185-189 and 204 above on the matter of accounting treatment. In my view, Items 1, 3, 6 and 7 should not be excluded from any account to be ordered if liability to account was established. Given the rudimentary nature of CB/12-13, there was no certainty these Items necessarily concerned the Garment Business. I also take note Au did not canvass these matters in his affirmation/statement evidence, and Mr Chan did not cross-examine Yeung on such notations in CB/12-13 (which documents were in Au’s possession all along), so there was no direct evidence to justify exclusion. In my view, if liability to account was established, it was for Au when giving a proper, complete and accurate account of the Property Investment to make clear whether these Items were pertinent. X. LLOYDS ACCOUNT 206.Net Proceeds As explained in paragraph 120 above, Yeung did not make any direct remittance into the Lloyds Account. But, as alluded to above, the bank statements of the Lloyds Account showed that over the years there were various deposits into the Lloyds Account. Apart from saying some were Net Proceeds of some PIA Properties, Au was shy about such deposits. But a forensic review of available documents suggested (albeit with some uncertainties given Au’s reticence) the Net Proceeds of the 10 Properties comprised the majority of the deposits in the Lloyds Account:
207.More Remittances/Profit? But Mr Lau was right in saying it was not for Mr Chan or this court to undertake the forensic exercise of figuring out what the source of the deposits in the Lloyds Account was or what their Status/Transformations were. Rather, it was for Au as accounting party to give account on those matters. Anyway, the above forensic exercise was incomplete as (a) the purpose of the deposit of £7,049.38 on 27 February 2004 was unknown, and (b) the purpose of the deposits of £99,215.25, £16,800 and £18,993.87 from Howse Percival on 29 August 2002, 29 August 2002 and 12 May 2004 respectively were not derived from objective contemporaneous document or Au’s accounting record but from a table of UK Properties made by an unknown author at an unknown time. 208.More importantly, based on the above, Yeung’s Refund would be £945,283.62 being £994,001.16 (ie Net Proceeds of the 10 Properties deposited in the Lloyds Account – see paragraph 206 above) less £47,309.71 (ie overall net profit of the 10 Properties – see Au’s P/L Statement in CB/22 in paragraph 134 above) and less £252.75 and £1,155.08 (ie costs and expenses of the Abortive Properties – see paragraph 156 above). Even if I were to err on the side of caution and deduct a further sum of £60,000 (ie PIA Outgoings paid by Au (£20,000-£30,000) and paid by Marchant (less than £20,000-£30,000) that had been netted off to arrive at the net profit of £47,309.71 – see paragraphs 111, 123 and 144 above), Yeung’s Refund would still be £885,283.62, which was about £200,000 more than the total amount of Items 14, 19-21, 23, 32 and 35 being Admitted Items for the 10 Properties of £684,563.63. Au did not offer any explanation for this substantial difference, which raised immediate and serious question as to whether the 10 Properties made more profit than set out in Au’s Statements and Au’s P/L Statement and/or whether Au made more Remittances for the Property Investment Agreement than the Admitted Items. This seriously undermined the accuracy of the 2005/2006 Accounts, and cried out for proper, complete and accurate account of the Property Investment and Lloyds Account by Au as accounting party. 209.Disposal of Yeung’s Refund According to Au, he transferred two sums of £200,000 each out of the Lloyds Account on 21 November 2002 (C5/1121) and 9 November 2004 (C4/832 and C5/1114). Au at first said the Transfer of £200,000 on 21 November 2002 was for his purchase of 429 St Davids Square, but later claimed he was not sure and he even went on to disagree it was for him/Paula. Nevertheless, he was sure it was for the purchase of a UK Property (with no suggestion that it was any remittance back to Yeung in HK),[103] and he had a vague impression he was in HK when he gave instructions to effect such Transfer. I reiterate my observations in paragraphs 127 and 176(f) above. This unexplained large-sum Transfer out of the Lloyds Account for the purchase of a UK Property (which, according to Au, was not one of the 10 Properties or Au’s Properties) raised question as to whether there were more PIA Properties than met the eye, and cried out for proper account to be given. 210.And there was more. It appeared 127 Red Square was bought for £189,950 (CB/51), and it might have been sold for £220,000 (see C4/841 but subject to the caveat marked by * in paragraph 156 above). The Net Proceeds deposited in the Lloyds Account on 18 January 2002 were £210,407.36, and according to Au’s Statement the net profit was £16,407.48 (CB/51). According to the Chan R/Table, Items 19-20 (£169,463.63) were Remittances for the purchase of 127 Red Square. Au did not explain why between mid-January and November 2002 Yeung’s Refund (£169,463.63) together with his profit share (£16,407.48 ÷ 3 = £5,469.16) in the total sum of £174,932.79 were not remitted back to Yeung in HK, but instead was transferred out for some uncertain purpose (see paragraph above). 211.11-13 Liberty Place was bought for £359,500, £329,500 and £337,500 (CB/39) with mortgage loan,[104] and were sold for £399,995, £360,000 and £365,000 (see C4/931-933, C4/980, C4/985 and C4/841 subject to the caveat marked by * in paragraph 156 above). The Net Proceeds deposited into the Lloyds Account were £323,226.57 (£274.12 + £103,159.83 + £99,215.25 + £16,800 + £103,777.37), and according to Au’s Statement the net loss on such investment was (£340) (CB/39-40). According to the Chan R/Table, Item 23 (£200,000) was the Remittance for the purchase of 11-13 Liberty Place. Au did not explain why between July and November 2002 he did not transfer Yeung’s Refund (£200,000) less his share of the loss (£340 ÷ 3 = £113.33) in the total sum of £199,886.67 back to Yeung in HK, and instead let over £370,000 (see paragraph 210 above) idle in the Lloyds Account to which Yeung had no access (which contradicted Au’s alleged investment strategy for the Property Investment of aiming for quick turnaround purchase/sale so as to avoid locking up capital). 212.It was of particular concern that notwithstanding Yeung’s Refund of over £370,000 upon sale of 127 Red Square and 11-13 Liberty Place (which were either transferred away for some uncertain purpose or left languishing in the Lloyds Account in UK), Au continued to ask Yeung for Remittances from HK as capital outlay for acquiring further PIA Properties. Actually, the available Yeung’s Refund would have sufficiently covered Item 32 (£150,800) that Yeung remitted on 7 August 2003 at Au’s request for completion of the purchase of J1.7 Deptford (C4/966-970 and C4/965) and also Item 35 (£146,000) that Yeung remitted on 28 November 2003 at Au’s request for completion of the purchase of G1.6 Deptford (C4/959-961), and if so applied would have obviated any need Yeung’s Remittances from HK for such purpose. When pressed on this, Au could only weakly say it was not their agreement to so utilise Yeung’s Refund, which I find to be inherently implausible given that Au’s alleged investment strategy for the Property Investment was not to hold up large amount of capital. 213.I find, as explained in paragraph 123 above, Au kept a substantial balance in the Lloyds Account being inter alia Net Proceeds of 127 Red Square and 11-13 Liberty Place because he intended to maintain a ready pool of funds which he could and did dip into for extraneous purposes, including the Transfer of £200,000 on 21 November 2002 for a purpose that was, according to Au, unrelated to the Property Investment, and other payments to benefit himself and others in breach of his duties as agent/ fiduciary (as explained in further detail below) and in breach of the agreed understanding that the Lloyds Account was merely for Rental Income / PIA Outgoings. This also exploded Au’s allegations that (a) he would not allow a large balance to accumulate in the Lloyds Account, and (b) when the balance exceeded, say, £200,000 he would remit such funds back to HK if upon enquiry Yeung had use for such monies in HK. 214.I also find Yeung was not told about the deposit of the Net Proceeds of the 10 Properties into the Lloyds Account or Yeung’s Refund that was available for return to him or for his use in lieu of further Remittances to acquire other PIA Properties, which in my view necessarily called for proper account of Au’s acts/dealings with the Lloyds Account. In coming to this view, I took into account the following matters:
215.Similar observations could be made mutatis mutandis in respect of the sale of the other 10 Properties. As explained in paragraph 92 above, in 2004 Au began to liquidate the Property Investment by selling the remainder of the 10 Properties to recoup monies for partial return of Yeung’s Refund. This came about because of the fallout between Au/Marchant and Yeung over MAY-HK in 2004 that led Yeung to query the Property Investment and Lloyds Account. Eventually Au transferred £200,000 to Yeung in HK on 9 November 2004, but it was far less than the sum of £433,927.10 being the Net Proceeds deposited in the Lloyds Account in 2004 alone before that date (see paragraph 206 above), and the only discernible reason for such reduced return to Yeung was Au’s disbursements of such Net Proceeds from the Lloyds Account for extraneous purposes (including Au’s personal purposes) (as explained in further detail below). This again cried out for a proper, complete and accurate account of Au’s acts/dealings in relation to the Lloyds Account. 216.Other deposits There were some deposits in the Lloyds Account from MAY-UK:
Au did not explain why MAY-UK (related to the Garment Business) would deposit monies in the Lloyds Account (related to the Property Investment) when they were separate/independent ventures by the Three. Indeed, the co-mingling of funds from different sources of itself required proper explanation and account of the Lloyds Account that was Yeung’s own bank account managed/controlled by Au as his agent/fiduciary. 217.There were still other unexplained deposits (made at various spots in London) and transfers into the Lloyds Account from unknown sources:
In the absence of explanation/account by Au, it would be useful to note what these deposits/transfers were not. Au claimed 15 months of Rental Income from 10 Manchester Road (see paragraph 158 above) had been taken into account in Au’s Statement for 7 & 10 Manchester Road (CB/45-46), but he offered no explanation why they were not deposited in the Lloyds Account. This suggested both Au/Marchant retained Yeung’s monies (since the Rental Income was for him alone) for their own use without Yeung’s informed authorisation, and only owned up when pressed by Yeung at a much later stage. 218.There were 2 other deposits. First, a sum of £38.43 was deposited by The United Bank of Kuwait Plc on 16 September 2002 (see paragraph 156B(4) above), which was bank refund for overpayment of interest on partial redemption of the mortgage loan upon sale of 13 Liberty Place (C4/955). Secondly, a sum of £51,000 was deposited at Islington on 14 February 2003, which was Au’s repayment of withdrawal of £51,000 by Cheque 00005 on 27 July 2002 for his personal purchase of a car. Au did not offer any explanation why he would repay this sum and not other sums he similarly took for personal use, which immediately raised doubt over his allegation that his Cheque payments, withdrawals and/or Transfers from the Lloyds Account were to be settled not by reimbursement but by adjustment against his entitlements under the Contra-Account Agreement or the Lloyds Contra-Arrangement referred to in paragraph 225 below. 219.In my view, Yeung clearly established Au’s duty to account in respect of his acts/dealings concerning the Lloyds Account that were outside Yeung’s knowledge and within Au’s control. It was for Au to give a proper, complete and accurate account of the Status/Transformations of monies in the Lloyds Account under his custodial control, and to account for sums he paid out to himself or others. 220.Contra-account for Lloyds Account Au at first claimed the Contra-Account Arrangement also applied to the Lloyds Account, and suggested Yeung had not been frank with MAY-HK’s accounting staff about this because Yeung feared running afoul of the UK tax authority or he was worried about possible UK tax investigation against him. I disagree and hold that the Contra-Account Arrangement concerned the Garment Business and not the Lloyds Account:
221.The absurdity of Au’s stance was epitomised by his suggestion that whenever he was personally in need of money (be it to buy a UK Property, buy a car, pay a debt or have some petty cash), he would first check his own bank account to see if he had sufficient money, and if not he would draw monies from the Lloyds Account or call upon Yeung for Remittance to UK (ostensibly as drawing on his own contra-account that was perpetually in deficit) because he could not as director of MAY-UK resort to more than £5,000 of MAY-UK’s funds. This showed that whilst Au was careful on self-protection he had no qualms about spending Yeung’s monies. 222.Au claimed he thought his share of the 4% Commission for 2003/2004 would be substantial enough to support his drawings from the Lloyds Account. I cannot imagine why he would think so when he knew his contra-account was in constant deficit and he also knew his debits from the Lloyds Account over the years for own personal use were quite substantial. When pressed, Au claimed he thought Yeung would not object to his use of monies in the Lloyd’s Account because he was not embroiled in the feud between Yeung and Marchant in 2003/2004 and he still maintained a fairly good relationship with Yeung, and it was only when the fallout between Yeung and Marchant started to jeopardise his relationship with Yeung (such that Yeung started to raise query about the Property Investment in 2004) that Au began to fear Yeung might disagree with his use of monies in the Lloyds Account. But I cannot see how a friendly relationship as between business partners would translate into licence for one partner to unilaterally use another partner’s personal funds. Au’s explanation was nothing but a hollow attempt to support his wrongful acts/dealings in relation to the Lloyds Account. 223.But there was more. Au claimed he ceased to use monies in the Lloyds Account when in 2004 he sensed Yeung might disagree with such use. But it transpired that even after the Transfer of £200,000 back to Yeung on 9 November 2004, he still made 3 Transfers from the Lloyds Account to himself/Paula on 7, 9 and 10 February 2005 and issued Cheque 00042 for his own personal purposes. When faced with such hard facts, Au changed tack to say his relationship with Yeung in 2005 was not so bad and he felt he still had Yeung’s blessing to use such monies (which were not in large-sums) in the Lloyds Account. In my view, such testimony only served to underline its weakness and unreliability. 224.In my view, Au’s reliance on the Contra-Account Arrangement had no merits. Even if such arrangement applied to the Lloyds Account (which I disagree), Au was constrained to say he used monies in the Lloyds Account in the belief that he would be entitled to have some distribution upon year-end adjustment/settlement of his contra-account. But Au actually confessed he knew he had overdrawn his own contra-account with no net entitlements to speak of at year-end, which showed the Contra-Account Agreement was irrelevant to the Lloyds Account. Anyway, the Contra- Account Arrangement between Au and Yeung was settled/resolved in late 2004, so it could not explain Au’s continued withdrawals from Lloyds’ Account thereafter. 225.So Au changed to say under cross-examination that his debits from the Lloyds Account were premised on another contra-account arrangement (ie separate/distinct from the Contra-Account Arrangement) under which he could freely make debits at any time for his own purpose (except he would have to seek Yeung’s prior approval for large-sum withdrawals) until final accounting/settlement at a time of Au’s own choosing (which happened to be the 2005/2006 Accounts) (“Lloyds Contra-Arrangement”). In my view, this was nothing but a spurious attempt by Au to tailor his evidence in a desperate ploy to explain away his self-help to monies in the Lloyds Account (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) without Yeung’s informed authorisation. It was telling that Au was unable to articulate what amounted to a large-sum withdrawal (see paragraph 127 above) or to identify which debit from the Lloyds Account had Yeung’s specific blessing. 226.I also reject Au’s claim that when he debited the Lloyds Account he did not know he had overdrawn his entitlements because the Lloyds Contra-Arrangement was not resolved until the 2005/2006 Accounts. The Lloyds Contra-Arrangement was not a true contra-account mechanism because Au had no entitlements to speak of (save for his minor profit share of £47,309.71 ÷ 3 = £15,769.90 and the refund due to him for his alleged payment of 20%-25% of the PIA Outgoings being £20,000-£30,000 out of the Net Proceeds) to support his significant debits from the Lloyds Account, and he also knew his contra-account under the Contra-Account Arrangement was always in deficit. Even worse, Au conceded he did not even know whether Yeung was aware of the Lloyds Contra-Arrangement. Au’s insistence that Yeung knew he was the “poorest” of the Three would not have allowed him to use Yeung’s monies in the Lloyds Account without Yeung’s informed authorisation. But I do not accept Au was “poor”; he simply lacked funds to live beyond his means, eg moving to more expensive homes, gifting his children with UK Properties, buying cars etc. In my view, Au was in breach of his duties as agent/fiduciary. Whilst I accept Au had some vague optimistic hope that someday his finances would improve and his investments would prosper and that somehow he would repay Yeung, this would not change the fact that his use of the Net Proceeds (the bulk of which was to Au’s knowledge Yeung’s Refund being Yeung’s personal monies) in the first place without Yeung’s informed authorisation amounted to breach his duties as agent/fiduciary, and on such basis he would have to give account of his acts/dealings and his profits in relation to the Lloyds Account. 227.It was true Au transferred 226 St Davids Square (to the value of £210,000) to Yeung when Yeung strongly pressed Au for proper accounts of the Property Investment and Lloyds Account in 2006. I will deal with the 2006 Account in Part XIII below, but suffice to note here that even in 2006 Au was still suppressing information about his misdeeds in relation to the Lloyds Account, and the transfer was made before a fuller picture of Au’s acts/dealings in relation to the Lloyds Account emerged. In my view, it was understandable for Yeung who had limited information at the time to take whatever Au offered whilst (as Au knew) he continued to press for proper accounts of the Property Investment and Lloyds Account. In the end, Au had no answer to the simple underlying truth that being “poor” did not give him as agent/fiduciary any right to meddle in Yeung’s personal bank account and spend Yeung’s monies without his informed authorisation. 228.When pressed further, Au claimed that under the PoA he was entitled to draw monies from the Lloyds Account for his own or MAY-UK’s purposes pending final settlement. But when the terms of the PoA was brought to Au’s attention, he claimed to have misread the PoA and mistakenly thought it allowed him to benefit himself. I reject such assertion and repeat my observations in paragraph 116 above. 229.In the end, Au simply abandoned any pretence that his debits from the Lloyds Account were justified, and accepted that as he was the one who managed/operated the Lloyds Account he should be responsible for any shortfall upon netting-off debits from the Lloyds Account (other than for PIA Outgoings) against whatever entitlements he might have when he settled accounts with Yeung by the 2005/2006 Accounts. But this was an insufficient answer because Au as agent/fiduciary had to give full account of the Status/Transformations of Yeung’s bank account that was under Au’s custodial control, and this was merely the first step to enable Yeung as principal to identify/quantify any deficit and to seek the appropriate relief/ remedy. 230.Despite such duty, Au never gave Yeung any accounts of the Lloyds Account and his debits therefrom, and he even baulked at returning bank statements to Yeung upon demand. Au conceded, as he had to, Yeung could have asked him for the Status/Transformations of monies in the Lloyds Account under his custodial control, but he tried to brush this aside by saying he/Yeung trusted each other at the material time so Yeung would not have asked for proper account/breakdown and instead would have accepted informal/rudimentary accounts in the shape of the 2005/2006 Accounts upon final settlement. But it transpired under cross-examination that Au kept some “primitive records” of payments for the Property Investment in a book/ Filofax, which was a partial running account that recorded the times/amounts of payments made by each of the Three for the Property Investment,[105] and Au referred to such “primitive records” in arriving at some of the expenses set out in Au’s Statements.[106] Au claimed he also made records of the Transfers probably in a book/Filofax, and he made printouts of bank confirmations for electronic Transfers that were effected. Au went on to say he lost/misplaced some of these materials as he had moved house several times and moved from UK back to HK, but he did not discover/ produce the remaining available records even when he knew Yeung was pressing for proper accounts of the Property Investment and Lloyds Account, and when he himself had to refer to such “primitive records” to come up with Au’s Statements which merely gave broad items without any detailed breakdown. The 2005/2006 Accounts were even more sparse. Leaving aside for the moment the defence of settled accounts, the above matters went a long way to show the 2005/2006 Accounts were not the proper, complete and accurate accounts that Au was under duty to keep/give. 231.In summary, I find the Contra-Account Arrangement did not apply to the Lloyds Account, and the PoA did not justify use of the Lloyds Account in the way Au did. I also reject the notion of any alleged Lloyds Contra- Arrangement. Thus, Au’s debits from the Lloyds Account (other than for PIA Outgoings and partial refund of Yeung’s Refund) made without Yeung’s informed authorisation (whether for his own purpose or for the benefit of others) were in breach of Au’s duties as agent/fiduciary notwithstanding any vague optimism of possible repayment in future. 232.Cheques For reasons explained above, I reject Au’s statement evidence that Cheques Nos 00001 to 00042 made pursuant to the Contra-Account Arrangement had been duly settled by the 2006 Account. Many Cheques were not for PIA Outgoings, and other than Cheque 00041 for £615 (see paragraph 119 above) Yeung did not know about or authorise use of the Cheques for purposes other than for PIA Outgoings. In the course of discovery, Yeung disclosed a document titled “Cheques Issued Records” that listed Cheques in the Cheques Table with corresponding dates, amounts and descriptions (CB/59-60, “Cheques Records”). Apart from Cheques 00006, 00010 and 00014-00016 that had been cancelled, Cheques 00001-00042 in the Cheques Records/Table could be divided into several broad categories set out in the following paragraphs. 233.First, there was little dispute the following Cheques were for purchase/sale of 1-2 Lorenzo Street and PIA Properties:
234.Secondly, Au claimed the following Cheques were for payments of PIA Outgoings:
235.Thirdly, Au claimed the following Cheques were drawings for Au’s personal purpose allegedly under the Contra-Account Arrangement or Lloyds Contra-Arrangement (which I have rejected):
236.For Cheque 00005 (£51,000), Au said he used monies in the Lloyds Account to buy a car because he did not have sufficient monies himself. I reject Au’s allegations that (a) he told Yeung about such use 7 months later just before he repaid such sum into the Lloyds Account on 14 February 2003 (C5/1147), and/or (b) he made such reimbursement because Yeung was in need of money. Yeung (even if he were in need of money which I doubt) could hardly have used such repaid sum since Au (and not Yeung) controlled use of the Lloyds Account, and less than a week later on 20 February 2003 Au issued Cheque 00013 (£50,000) to buy another car for himself that he never told Yeung about even up to the time of the 2006 Account. Further, Au’s repayment undermined his claim that his debits from the Lloyds Account were for eventual adjustment/settlement under the Contra-Account Arrangement or Lloyds Contra-Arrangement. 237.I also disagree with Column O of the Chan RTable that cross-referenced Cheque 00013 to credit item 6 dated 18 February 2003 in the Maher Record for “RCVD FROM MR YEUNG – O/A LOAN …… 50,000” (CB/18). I could not see how Au using monies in the Lloyds Account to buy a car for himself would turn into Yeung’s loan to MAY Partnership. But if such cross-reference was correct (which I disagree), Au did not explain why he arranged for the Lloyds Account to “lend” monies to MAY Partnership presumably for purchase of 1-2 Lorenzo Street when (a) Yeung was not told about monies in the Lloyds Account, and (b) other payments for 1-2 Lorenzo Street were by Remittances (see Items 13, 26-29 and 33-34). Au did not say whether the deposit of £50,000 into the Lloyds Account on 7 March 2003 (C5/1148) was to reimburse payment by Cheque 00013, but if it were, it would further suggest debits from the Lloyds Account were to be reimbursed and not set-off under the Contra-Account Arrangement or Lloyds Contra-Arrangement. 238.I am unconvinced by Au’s attempt to justify Cheque 00013 (and Cheques 00007, 00025, 00034, 00040, 00036 and 00042) on the basis of the Contra-Account Arrangement or Lloyds Contra-Arrangement (which I have rejected) that were allegedly adjusted/settled by the 2006 Account and upon Au’s payment of the shortfall (see Part XIII below). 239.For Cheque 00007 (£4,000), Au thought MAY-UK was probably short of cash at the time. But if MAY-UK were short of funds, Au should have asked Yeung for Remittance to MAY-UK or asked MAY-HK for an inter-company transfer instead of using monies from the Lloyds Account that concerned the Property Investment. Au then said Cheque 00007 was for cheaper services by plumber/electrician (who took cash) without entry of such payment into MAY-UK’s books/accounts. As explained in paragraphs 122-123 above, MAY-UK would reimburse Au by way of his salary in the following month, but he did not refund such sum to the Lloyds Account. Putting aside whether or not MAY-UK or Au (as its director) should have aided UK tax avoidance, there was no reason not to return such earmarked reimbursement back to the Lloyds Account. Au’s confession that he (as agent/fiduciary) would not keep record of such withdrawal from the Lloyds Account raised additional concern. Subject to the defence of settled accounts, this cried out for proper account of Au’s acts/dealings over monies that were simply not his. 240.For Cheque 00025 (£50,000), Au agreed it was probably for his own personal purpose but Yeung was not told and did not authorise the same. It was startling for Au to assert he issued such cheque because he did not expect any need to pay out sums from the Lloyds Account in the near future. This could not be any acceptable reason for dipping into the Lloyds Account (especially when the bulk of the monies therein was Yeung’s Refund being Yeung’s personal monies of which Au/Marchant had no interest), and it was a brazen misuse in breach of fiduciary duty. But in fact there were debits from the Lloyds Account in the short-term. Cheques 31, 33, 37 and 38 were issued to MAY Partnership on 18 March (£15,000), 1 June (£55,000), 30 July (£30,000) and 1 September (£11,000) in 2004 (see also Maher Record at CB/18). 241.For Cheque 00017 (£90,000), it was for Au’s purchase of a mortgage-free home in Exeter as gift for Erica (then a junior architect who was not eligible to apply for mortgage loan because of her limited income). Au did not tell Yeung about this because he decided £90,000 was not a large-sum in light of the net balance in the Lloyds Account and the potential use of monies in such bank account in the near future. But in my view these considerations did not give Au (as mere agent/stranger) any right to use Yeung’s monies (ie Yeung’s Refund which constituted the bulk of the Net Proceeds deposited into the Lloyds Account) without Yeung’s informed authorisation. I find Au did not tell Yeung because he knew Yeung would not have agreed. 242.In any event, Au’s poor explanation was exploded by the relevant bank statements. The balance of £101,351.45 in the Lloyds Account was reduced to £7,786.45 after Cheque 00017 was cashed on 16 June 2003, and such meagre balance had to be supplemented by further deposit (£24,345) from MAY-UK on 26 June 2003 to support subsequent debits.[107] Au did not explain why MAY-UK (that concerned the Garment Business) would deposit monies in the Lloyds Account (that concerned the Property Investment). In my view, this was how Au got around the restriction against him (as director of MAY-UK) from touching MAY-UK’s funds in excess of £5,000 (see paragraph 221 above). MAY-UK could freely pay monies to Yeung (who was not a director), and once deposited in the Lloyds Account Au could use such monies for his own purpose without telling Yeung. Au also had no answer to Mr Lau’s suggestion that had he not issued Cheque 00017 dated 11 June 2003 Yeung/MAY-UK would not have to remit the full amounts of £110,000 and £150,800 to May Partnership on 17 March and 7 August 2003 (ie Items 29 and 32) for 1-2 Lorenzo Street and J1.7 Deptford. In my view, Cheque 00017 was on any view a large-sum withdrawal given its amount (actually sufficient to buy a mortgage-free UK residence) and its impact on the remaining balance in the Lloyds Account, and even on Au’s case he should have sought Yeung’s specific authorisation. The fact he did not was because he knew it was a misuse and did not wish to tell Yeung. 243.For Cheques 0019-00021 (£925, £925 and £550), Au said they were cash bonuses for Maher that were not entered in the books/accounts of MAY-UK and MAY-Partnership, so cash was taken from the Lloyds Account for such purpose. MAY Partnership would somehow reimburse Au, but he did not return such reimbursement to the Lloyds Account leaving it to be settled in the final accounting. This was inappropriate, and I repeat my observations in paragraphs 122-123 and 239 above mutatis mutandis. 244.Fourthly, Au claimed the following Cheques issued out of the Lloyds Account were his drawings for Marchant’s use to be set-off under the Contra-Account Arrangement or Lloyds Contra-Arrangement (which I have rejected):
Au claimed (but I do not accept) he told Yeung about the payment for Cheque 00023 but not for the other 3 Cheques. In my view, the Ng Letters that time and again raised query about these 4 Cheque payments suggested Yeung had not been told. Further, Yeung/Marchant were feuding over the FAL Dispute at the time, so Au must have known Yeung would not have agreed even if he were told. Au eventually conceded Yeung did not specifically authorise the use of such monies for Marchant. I have found Au told Yeung in/about April/May 2004 he/Marchant would withdraw from MAY-HK, and they withdrew from MAY-HK in mid-2004 with their contra-accounts settled later in 2004. It was quite implausible for Au to have thought he was entitled to contra-account set-off when he issued Cheques 00032 and 00039. 245.In my view, the evidence clearly showed Au used monies in the Lloyds Account (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) for his own benefit or for the benefit of others (and not for the Property Investment) without Yeung’s informed authorisation when Au knew that at the same time Yeung had to make Remittances for the Property Investment (which might have been wholly/partially obviated if he were aware of the availability of Yeung’s Refund). In my view, subject to the defence of settled accounts, all of the above matters cried out for proper accounts of the Lloyds Account. 246.Transfers The 1st Transfer on the Transfers Table was made on 21 November 2002 for £200,000 (C5/1121). I refer to the discussion in paragraphs 127-128, 176(f) and 209 above. 247.On 13 June 2003, 30 June 2003, 7 July 2003, 15 April 2004 and 15 April 2004, Au transferred £3,565, £5,000, £5,400, £10,000 and £10,000 out of the Lloyds Account. The bank statements did not reveal and Au could not recall the purpose of these 5 Transfers. On balance, given Au’s drawings from the Lloyds Account, I reject his bare surmise that they were probably for the Property Investment. In the end, Au conceded Yeung was unaware of and did not authorise such “Funds Transfer”. 248.There were also 5 Transfers of £3,000 (22 July 2004), £3,000 (12 August 2004), £5,700 (7 February 2005), £5,000 (9 February 2005) and £615 (10 February 2005) to “R & P Au” being Au’s/Paula’s joint bank account. Au said quite probably he/Paula needed money at the time but he did not have sufficient funds, and he conceded Yeung did not expressly authorise such Transfers. I reject his attempt to explain away such Transfers (made around the time of or after Au’s/Marchant’s withdrawal from MAY- HK) by the Contra-Account Arrangement or Lloyds Contra-Arrangement. Indeed, the 3 Transfers in 2005 were made after Au/Yeung had resolved the contra-accounts in late 2004. There was no plausible excuse for such misuse of funds in the Lloyds Account. 249.A sum of £200,000 was remitted from the Lloyds Account to MAY-HK on 9 November 2004 (C4/832) described as “FOREIGN PAYMENT 54” in the relevant bank statement (C5/1169). I accept this was partial return of Yeung’s Refund to Yeung in HK. I refer to my observations in paragraphs 114-115 and 215 above. 250.Withdrawals from Lloyds Account All along Yeung did not know Au had applied for D/Card and CP/Card as he had no access to the bank statements/correspondence sent to 226 St Davids Square and later to MAY-UK Office. Au did not deny he made withdrawals with the CP/Card as and when he wished (often at the maximum withdrawal limit of £400/day) in the total sum of £14,650.[108] Au said such withdrawals were mostly for cash bonuses to “fokis” which for UK tax reasons were not made from MAY-UK’s bank account or entered in its books/accounts. MAY-UK subsequently reimbursed Au who did not return such earmarked reimbursement to the Lloyds Account. Au could not offer any sensible explanation except to say he never expected his use of monies from the Lloyds Account to come under forensic scrutiny in a court of law, which I accept was a poor but possibly true reason. 251.Au used the D/Card to withdraw the following sums:
The payments to Chase de Vere and Lamberts were for the purchase/sale of 10 Manchester Road (C4/983-984) and J1.7 & G1.6 Deptford (C4/987). Au said the withdrawal of £5,700 was to purchase a flat screen TV (which was very expensive at that time) as a housewarming gift for a MAY-UK customer, but it was inconvenient to enter such large expenditure in MAY- UK’s books/accounts. Au did not say whether MAY-UK reimbursed him and if so whether he returned such reimbursement to the Lloyds Account, but he agreed Yeung knew nothing about this (and it was his oversight in not telling Yeung at that time or later). Au did not explain the withdrawal of £100. In my view, subject to the defence of settled accounts, Au’s unauthorised use of monies in the Lloyds Account (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) again cried out for proper accounts of the Lloyds Account. 252.Summary I find at the material time Au did not tell Yeung who did not know about the operation of the Lloyds Account. I further find Au had some vague hope he would somehow repay Yeung someday, but it was an unformed thought for Au still made Transfers to himself/Paula as late as in February 2005, ie 3 weeks after he gave the 2005 Account to Yeung. More likely than not, Au simply did not expect his relationship with Yeung to unravel and his acts/dealings with the Lloyds Account to come under forensic scrutiny. It was not apparent Au’s misuse of monies in the Lloyds Account was accounted for in the 2005/2006 Accounts (which gave no breakdown), but even it was so accounted for (which I disagree) it did not alter the fact that Au as agent/fiduciary misused monies in the Lloyd’s Account (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) in the first place, and subject to the defence of settled accounts, he necessarily came under a duty to account for the Status/ Transformations of those monies (including profits therefrom). XI. 2005 ACCOUNT 253.Yeung claimed that on/about 18 January 2005 he met Au at the MAY-UK Office mainly to discuss and make calculations about the FAL Dispute. Au/Marchant were asking Yeung for sale of his interests in MAY-UK to them. Yeung was in a bad mood. Au showed the 2-page 2005 Account to him, he cast a quick eye over it, and they moved on to talk about the FAL Dispute which was the purpose of the meeting, so Yeung did not there and then ask for breakdown of the figures in the 2005 Account. I reject Au’s claim that the 2005 Account was sent to Yeung by email or courier. 254.I accept Yeung’s evidence that Au did not show him any supporting documents for the 2-page 2005 Account. I disagree with Au’s allegation in his 2nd affirmation filed on 21 March 2011 that 4 documents were attached to the 2005 Account, ie (a) the Maher Record, (b) CB/19-20 (see paragraph 18(e) above), (c) CB/21 (see paragraph 18(e) above), and (d) Au’s P/L Statement (CB/22). Actually, Au conceded under cross- examination it was highly probable he did not give such attachments to Yeung, which meant there was no breakdown/support to aid understanding let alone acceptance of the 2005 Account. The 2005 Account was just a bald statement which required Yeung to simply take Au’s word, and Au eventually conceded (i) he failed to consider the matter from Yeung’s perspective, (ii) such impudent approach was unfair to Yeung, and (iii) he would give proper account to Yeung afresh. In my view, such concession was rightly made. 255.In such context, I disagree the 2005 Account was any final or settled account. At best, it was a mere statement Au gave to Yeung in response to Yeung’s demands for accounts and supporting documents. This was borne out by the last sentence in the 2005 Account in which Au stated “希望以上提供的資料可以讓你清楚地調整你在香港的帳目”, and there was no hint of settlement/agreement between Au and Yeung. In my view, Au’s mere statement was insufficient, and Yeung did not agree to it. Further, the fact Au had to give the 2006 Account later on showed the 2005 Account was not a settled account. What was more, the 2005 Account contained significant errors. 256.With this in mind, I turn to the 2005 Account that made the following assertions:
257.The Ticked Items in CB/19-21 (prepared by MAY-HK’s accounting staff at Au’s request) corresponded to Items 13-14, 19-21, 23-24, 26, 28-29 and 32-35 (but not Item 27), so the sum of £1,175,499.97 (in CB/19-21) or £1,175,500 (in the 2005 Account) covered both 1-2 Lorenzo Street and 10 Properties. Indeed, Au in the 2005 Account described such sum as “一路以來, [Au]投進來的” for the Property Investment. Au all along maintained £1,175,499.97 or £1,175,500 was the sum total of Yeung’s Remittances for the Property Investment,[109] but he conceded under cross- examination he failed to take into account the Remittance of £200,000 by Yeung/Lee to May Partnership on 18 April 2002 for purchase of 1-2 Lorenzo Street (Item 27). Hence, Au accepted at Trial Item 27 should be an Admitted Item, and he claimed the sum total of Yeung’s Remittances for the Property Investment should be increased to £1,375,486. 258.Mr Chan submitted (a) Item 27 (18 April 2002) was not amongst the Ticked Items because it was a Remittance from Yeung/Lee and not from Yeung or MAY-HK, but (b) it corresponded to credit item 3 “RCVD FROM MR YEUNG 199988” (19 April 2002) in the Maher Record despite the date being off by 1 day and the amount being off by £12 (which Au claimed was due to UK bank charges), and (c) it was taken into account in the overall settlement when MAY Partnership was dissolved upon transfer of Yeung’s interests in 1-2 Lorenzo Street to Au/Marchant in mid-2006. I will deal with (c) above in Part XV below, but (c) above happened after the 2005/2006 Accounts. Thus, the 2005 Account (and the Maher Record was not part of such account) was necessarily inaccurate when it was given to Yeung purportedly as part of the final/settled accounts. 259.Au’s descriptions in the 2005 Account were misleading. To any reasonable reader, the 2005 Account suggested Yeung’s total investment for the whole period (“一路以來”) (without drawing distinction on the mode of investment whether by Remittance or any other means) of £1,175,500 was deposited in MAY Partnership’s account and was reduced to the sum of £960,932 recorded in the Maher Record after transfer of £200,000 back to HK in December 2004 (“上月”). But the Maher Record (print date of 13 January 2005 with handwritten amendment to 30 November 2004) did not show any transfer to HK in December 2004, and Au/Maher did not provide any bank statements in respect of MAY Partnership’s bank account. The only known transfer in 2004 to Yeung in HK was the Transfer of £200,000 from the Lloyds Account on 9 November 2004 being partial refund of Yeung’s Refund for the 10 Properties (and not any payment by MAY Partnership). This gave pause for concern as Au did not give Yeung CB/19-21 or any breakdown of the sum of £1,175,500 in the 2005 Account, so Yeung had no way to know Item 27 (£200,000), which on any view must be a large-sum Remittance, had been omitted. 260.Au’s reliance on the Maher Record for the 2005 Accounts had other inherent problems. The 2005 Account asserted that Yeung’s total Remittances of £1,175,500 for the Property Investment (ie £1,175,499.97 being Ticked Items for both 1-2 Lorenzo Street and 10 Properties) “已全部撥入May Partnership的戶口”. This was incorrect as the Remittances for the 10 Properties were sent to Howse Percival’s clients account and not to MAY Partnership, and MAY Partnership acquired/held 1-2 Lorenzo Street and not the 10 Properties. Au did not explain why the 2005 Account stated that Remittances for the 10 Properties went to the account of MAY Partnership formed for the purchase of 1-2 Lorenzo Street, especially when even a cursory study of the Maher Record showed it did not appear to refer to Remittances for the 10 Properties. It was said credit items 1, 2, 3, 7, 9 and 10 in the Maher Record corresponded to Items 24, 26, 27, 29, 33 and 34 in the Chan RTable (which were all for 1-2 Lorenzo Street and not the 10 Properties), and credit items 8, 13, 14, 15 and 16 in the Maher Record corresponded to Cheques 00018, 00031, 00033, 00037 and 00038 (which were for purchase of 1-2 Lorenzo Street – see paragraph 233 above) even though the dates/amounts were slightly off. None of the aforesaid credit items in the Maher Record concerned Remittances for the 10 Properties (eg Items 14, 19-21, 23, 32 and 35 of the Admitted Items). 261.There were other credit items in the Maher Record as follows:
Au did not explain credit item 4 at all. Credit item 6 (£50,000) was not any Item (let alone any Admitted Item) in the Chan RTable, and it was not any Cheque, Transfer or withdrawal from the Lloyds Account. I note Au said Cheque 00013 dated 20 February 2003 was for his purchase of a car, and I repeat my observations in paragraphs 236-237 above. This showed the Admitted Items in the total sum of £1,375,486 (let alone the sum of £1,175,500 in the 2005 Account) did not reflect the entirety of Yeung’s capital outlay for the Property Investment. But at the same time, the Maher Record did not feature Items 13 (£50,000) and 28 (£45,922.79) which were Admitted Items said to be for 1-2 Lorenzo Street. 262.The above discrepancies were not explained. Further, Au believed Items 10 and 12 were Remittances for the purchase of 1-2 Lorenzo Street (see paragraphs 185-186 and 197 above). If that was correct, he did not explain why they were not included as credit items in the Maher Record or as part of the Admitted Items. All this undermined the accuracy of the 2005 Account as well as the Admitted Items, and in view of the absence of proper account of the Status/Transformations of funds for the Property Investment, question arose as to whether there were other Remittances that had not been included in the “final”/“settled” accounts. In my view, the sum of £1,175,500 in the 2005 Account and/or the sum of £960,932 in the Maher Record (adopted in the 2005 Account) plus partial return of £200,000 to Yeung were clearly understated. As for the deductions in paragraph 256(b) above, Au also did not explain why £10,000 from MAY Partnership being credit item 11 in the Maher Record was deposited in the Lloyds Account (C5/1155) to pay mortgage instalments for the 10 Properties and not for 1-2 Lorenzo Street (see paragraph 256(b)(iii) above). In the circumstances, the conclusion in the 2005 Account that “[Yeung’s]名下的投入的資金在帳上為£808,807.99” must also be incorrect. In my view, Yeung’s belief that there were fundamental inaccuracies in the 2005 Account was sustained. 263.As regards the mere statement of a net profit of £47,309.71 for the Property Investment Agreement (other than the Abortive Properties) in the 2005 Account, this could not amount to any proper accounts as it just a bald assertion without giving any inkling how it was derived. Even Au’s P/L Statement would not be proper accounts as it was again a bald assertion of profit/loss for each of the 10 Properties without explaining how they were derived. Au said he referred to some primary documents (eg invoices, letters, solicitors’ invoices etc), solicitors’ completion statements and his book of “primitive records” to come up with Au’s Statements, but these documents were not shown to Yeung. 264.Mr Chan submitted the information in the 2005 Account was supplemented by the profit and loss statement in CB/29-31. In fact, Au produced a profit/loss statement of the 10/Abortive Properties (CB/32-34), which appeared to be based on Au’s Statements (not shown to Yeung at the material time) which was updated with cross-references to documents for the present action (CB/29-31). Plainly, CB/29-31 was prepared after commencement of the present action, and neither CB/32-34 nor CB/29-31 were part of the 2005 Account. Anyway, the information therein was different from that in Au’s P/L Statement, which again raised doubt as to the accuracy of the 2005 Account in relation to the overall profit of the Property Investment:
265.In my view, even if the 2005 Account were settled accounts (which I disagree), there were errors of sufficient magnitude to warrant re-opening. The whole underlying premise of the 2005 Account was called into the question, and no explanation was forthcoming for a raft of significant discrepancies. In my view, subject to the 2006 Account which I shall consider below, it warranted taking accounts from the beginning. I should also add Au confessed that by the 2005 Account he did not tell Yeung about his debits from the Lloyds Account whether by Signed Cheques, Transfers and D/Card / CP/Card. He allegedly kept Yeung in the dark because he felt he would be financially able to repay Yeung fairly soon in 2006. In my view, Au as agent/fiduciary was plainly in breach of his duty to account in respect of his acts/dealings in relation to Yeung’s bank account (Lloyds Account) and Yeung’s monies therein (Yeung’s Refund deposited into the Lloyds Account), and he should not have kept quiet in face of demands to account by his principal Yeung. This added weight to the need to re-open the 2005 Account that completely ignored the Lloyds Account. XII. REQUEST FOR INFORMATION/ACCOUNTS 266.The fact accounts had not been settled by the 2005 Account was also borne out by Yeung’s continued demands for accounts, information and documents throughout 2005-2006. After Au/Marchant withdrew from MAY-HK, a number of colleagues recommended/recruited by Au (including Chan and Pat) left MAY-HK. Chan resigned and left on 28 February 2005. On 1 March 2005, Au/Marchant formed MAY Trading to carry on similar order sourcing business carried on by MAY-HK. Chan became its director and registered shareholder. 267.In/about March 2005, MAY-HK employed Damen as an assistant, and he was tasked to help Yeung press Au for accounts. In June 2005, Yeung, Damen and Mak Wai Ling (MAY-HK’s accounting clerk) flew to UK to ask for inter alia bank statements of the Lloyds Account. Au admitted he did not supply such bank statements to Yeung and even told Damen the statements were misleading as they did not just reflect the Property Investment but also drawings under the Contra-Account Arrangement. I find such explanation, as Yeung put it, absurd. The Contra- Account Arrangement had been resolved in late 2004, and in any event it did not apply to the Lloyds Account. More importantly, the Lloyds Account was Yeung’s personal bank account, and I could not see how Au as Yeung’s agent/attorney could deny Yeung his bank statements. Even if Au thought Yeung would not understand the entries, Au as the accounting party had the duty to give proper accounts of the Property Investment and Lloyds Account to facilitate clear understanding of the Status/Transformations of the funds in the Lloyds Account. In my view, it was nothing more than a deliberate stalling tactic because Au feared the bank statements would lay bare his use of monies in the Lloyds Account (the bulk of which was Yeung’s Refund and hence Yeung’s personal monies) to benefit himself and others without Yeung’s informed authorisation. 268.Yeung also said (and I accept) that during the visit in June 2005 he asked Au for accounts of the Property Investment, MAY-UK and Yeung’s/MAY-HK’s Remittances. Au/Marchant directed such queries to Maher, but Maher told them (a) a full account could not be given as all accounting records had been sent to the auditor and (b) MAY Partnership (which only held 1-2 Lorenzo Street) was the only company established to hold UK Properties for the Property Investment. Maher refused to give over bank or property-related documents of MAY Partnership, and in the end Damen was only able to make a copy of Au’s P/L Statement. The visit to UK was not fruitful and Yeung left without much information. 269.Mr Chan (a) submitted Maher’s representation was of tangential interest, (b) complained neither Maher nor Damen were called to give evidence, (c) noted MAY Partnership’s annual accounts had been disclosed in the present action, and (d) reminded that Yeung sold his interest in 1-2 Lorenzo Street held by MAY Partnership in final settlement. 270.I will deal with (d) above in Part XV below. But notwithstanding (a)-(c) above, it was quite obvious as at mid-2005 Au/ Maher were stalling Yeung’s demands for accounts/information possibly in the misguided belief the less Yeung knew the less he would query. I also find Au’s/Maher’s stance in paragraph 268 above less than convincing. I could not see why MAY Partnership’s accounting records (and I am sure Maher did more bookkeeping for MAY Partnership than just the Maher Record) could not be shown to Yeung (as equal partner of the MAY Partnership) or Richard Anthony could not be directed to give Yeung due access/assistance. Further, MAY Partnership was not the only entity that held investment properties, but it was much later that Yeung through his own forensic efforts found out MAY Property also held PIA Properties for the Property Investment. 271.During such visit in mid-2005, Au also returned the few remaining Signed Cheques, D/Card and CP/Card to Au. Yeung was surprised by the 2 cards. He took steps to cancel such cards, and later found out Au had withdrawn monies from the Lloyds Account with them. In/about November 2005 Yeung’s UK solicitors obtained copy bank statements of the Lloyds Account, and Yeung got copy Cheques issued out of the Lloyds Account shortly thereafter. It was only then that Yeung found out Au deposited sums into the Lloyds Account some of which Yeung believed to be Net Proceeds of the Property Investment, but Au never confirmed whether all Net Proceeds had been deposited in the Lloyds Account. 272.Yeung’s UK solicitors also obtained documents from Howse Percival, but Yeung was confused by different monikers of MAY Property and by bills issued variously to Marchant, MAY-UK, Yeung etc. Yeung also found out matters not disclosed by Au. For example, (a) the completion statement for sale of 7 Manchester Road showed a sum was deducted from the sale proceeds to pay the deposit for 120 Red Square (see paragraphs 156D(2) and 177-178 above), and (b) there were unexplained discrepancies in relation to 11-13 Liberty Place (see paragraph 156B(2) and (4) above) that raised the spectre of possible inflation of purchase price and deflation of sale price with consequent error over the alleged loss position. 273.Damen began the unenviable forensic exercise of trying to piece together information from the collected materials with no help from Au as the accounting party. It was also not helped by the UK land title registration system which made it difficult to find out from public land search who owned which UK Property at what time. But Damen/Yeung picked up from the collated documents that Au purchased some UK Properties (ie Au Properties) in his own name or in the names of himself/ Paula around the same time as the Property Investment even though Au always told Yeung he was short of funds. All these matters led Yeung to believe more PIA Properties were purchased than the 10 Properties. 274.But there were still gaps that Damen/Yeung could not fill without proper accounts by Au, so they continued to press for accounts/ information about the Property Investment and Lloyds Account. Au confessed Yeung came to his office for a discussion in 2006. Au alleged Yeung talked an a loud/rude manner. Be that as it may, Au admitted he offered to work out an account for Yeung’s consideration, and he subsequently gave the same to Damen, which nicely brings me to the 2006 Account. XIII. 2006 ACCOUNT 275.In/about 18 August 2006, Au sent Yeung the 2006 Account by an email to Damen:
About 3 months later on 14 September 2006, Yeung received the sum of £121,058.90. 276.Settled accounts? Mr Chan submitted the 2006 Account constituted the final reckoning of Au’s/Yeung’s financial dealings. Mr Chan said Yeung first alleged to Chan in September/October 2008 that Au cheated him (see paragraph 315 below), but there was no document to show Yeung/ Damen disputed the settled amounts until Au was harassed by Yeung and his associates. Mr Chan reminded that an uncommunicated thought of not wanting to accept the settlement figure was irrelevant to the question whether objectively a settlement had been reached, that settled accounts did not have to be in any particular form, and that failure to object in time might imply a settled account. On such basis, it was said the Au/Yeung accounts were finally settled after Yeung accepted payment pursuant to the 2006 Account. On the other hand, Mr Lau submitted Yeung did not agree with the 2006 Account which he considered inaccurate, and he claimed he merely took the sum of £121,058.90 as Au’s part payment pending Damen’s continued efforts to cross-check documents and to press Au for proper accounts. 277.I find on balance the 2006 Account was a unilateral statement by Au to Yeung of how the account allegedly stood, and Yeung/Damen did not agree it was right. Au by the 2006 Account merely stated he had “worked out the statement for the money [he] owe Mr Yeung” and asked Yeung to “confirm if the above account meets with Mr Yeung’s record”, and he did not say when and how Yeung ever gave any “confirmation”. Au also did not say there were further communications with Damen/Yeung as to whether payment could be made in HK$ (as queried in the 2006 Account). This clearly showed the 2006 Account was a unilateral statement by Au pursuant to his offer at the meeting with Yeung to render an account (see paragraph 274 above). I also find that upon receipt of the 2006 Account Yeung/Damen continued to chase Au for proper accounts of the Property Investment and Lloyds Account, and at the same time they conducted their own forensic review of the collated documents, which in my view explained why they never intimated agreement to the 2006 Account. As for the sum of £121,058.90, I find it was no more than a unilateral transfer by Au in a one-sided hope to close the matter. But Au knew there were no agreed/settled accounts from Yeung’s/Damen’s continued demands for accounts/documents of the Property Investment and Lloyds Account, and I find Yeung merely received Au’s unilateral payment of £121,058.90 as interim/part payment of monies due to him pending proper, complete and accurate accounts from Au. 278.But after Damen left MAY-HK in September 2006 (at about the time when Au made the unilateral transfer of £121,058.90 to Yeung), Yeung no longer had staff with sufficient proficiency in English to continue with the forensic exercise began by Damen. I accept even after Damen’s departure from MAY-HK Yeung continued to occasionally telephone and chase Au for proper, complete and accurate accounts, but it was to no avail as Au put up excuses to stall and delay. Yeung did not think of putting his demands in writing because that was not how he did business, and at that stage he felt it would not serve him to fallout completely with Au when he was still waiting for Au’s proper accounts. On balance I find Au knew Yeung did not accept the 2006 Account to be final/settled accounts, and did not regard Au’s unilateral payment of £121,058.90 as final settlement. After all, the 2006 Account was even less informative than the 2005 Account with just a few broad and unexplained items/figures, and they were inconsistent with the figures in the 2005 Account. In my view, Yeung would hardly have accepted the 2006 Account without any demur when he had spent so much time/effort to seek proper accounts, but he was not going to scoff at any offered interim payment in the meantime. 279.Serious errors But even if the 2006 Account was final/settled (which I disagree), I am of the view it must be re-opened due to fundamental errors. First, it was unclear what “Mr Yeung’s Credit a/c” meant. Au said the sum of £1,541,723.90 was the sum total of all Yeung’s Remittances for the Property Investment over the years, ie Yeung’s capital outlay for 1-2 Lorenzo Street and the 10 Properties. If that were so, Au did not explain how he came up with the sum of £1,541,723.90 which was different from £1,175,500 in the 2005 Account, £960,932 in the Maher Record (November 2004) plus return of £200,000 back to Yeung as referred to in the 2005 Account, or £1,375,486 being the Admitted Items in the Chan RTable. I have explained why these figures were all inherently problematic, and another sum of £1,541,723.90 would only muddy the waters. In any event, the increase of about £400,000 from the sum of £1,175,500 in the 2005 Account was inexplicable as there was no further Remittance for the Property Investment between January 2005 and August 2006. Even more importantly, the increased sum of £1,541,723.90 suggested there were more Remittances for the Property Investment, and consequently more PIA Properties than the 10 Properties. In my view, this compounded what was already a significant error in the 2005 Account. 280.Secondly, the 2006 Account next referred to “MAY Partnership loan account” of £854,637 which Au said represented Au’s capital share/ contribution in MAY Partnership (which held 1-2 Lorenzo Street) that Yeung paid on his behalf. According to item 4 of the notes to MAY Partnership’s annual accounts for year ended 31/1/03, Au’s current account was £100,748. This matched what Yeung recorded in CB/37 based on what Au told him: “三人共分已付股本歐生£100,748” (see paragraph 148 above). MAY Partnership’s annual accounts for years ended 31/1/04, 31/1/05 and 31/1/06 showed Au’s current account was respectively £93,576, £82,075 and £89,951. The fluctuations were due to Au’s annual profit/loss share and drawings (which had nothing to do with initial payment of capital share/ contribution). In MAY Partnership’s management accounts for the period ended 7/7/06 (ie made shortly before the 2006 Account), Au’s “capital account” was £288,386 being £89,951 (Au’s current account as at 31 January 2006) less £1,518 (Au’s share of losses) and £2,632 (Au’s drawings) but plus £202,585 (Au’s share of revaluation of land and buildings freehold). There was nothing in MAY Partnership’s accounts to support Au’s capital share/contribution of £854,637, and the deductions of £1,518, £2,632 and addition of £202,585 were irrelevant as it was the initial payment Yeung made on Au’s behalf that mattered for the purpose of the 2006 Account. 281.As seen in the Chan RTable, Items 13, 24, 26-29 and 33-34 concerned 1-2 Lorenzo Street. According to the 13/9/12 RA Letter, Items 26-29 and 33-34 were credited to the current account of Yeung as partner of MAY Partnership, Item 24 (£10,000) was split equally between Au and Yeung and credited to their respective current account within MAY Partnership (so £5,000 should be credited to Au’s capital share/contribution in MAY Partnership), but there was no reference to Item 13 (£50,000). Even assuming the entirety of Item 13 was credited to Au’s capital account (which I disagree), Au’s capital share/contribution paid by Yeung on his behalf would be £55,000, which was significantly less than the sum of £100,748 in CB/37 (that corresponded to Au’s current account in item 4 of the notes to MAY Partnership’s annual accounts for year ended 31/1/03) (see paragraph 191 above) or the sum of £854,637 in the 2006 Account. 282.Thirdly, £200,000 was transferred back to Yeung on 9 November 2004 from the Lloyds Account, and I have found it was partial return of Yeung’s Refund. As for the alleged repayment of HK$2,200,000 (equivalent to £156,028) in February 2005, Yeung denied such amount was returned in full, and unlike the sums of £200,000 and £121,058.90 transferred to Yeung on 9 November 2004 and 14 September 2006, Au never provided any document to support such allegation. Certainly it was not sent by Transfer to Yeung from the Lloyds Account, which balance as at February 2005 was less than £30,000 (C5/1171). I also note the 2005 Account (dated about 2 weeks before such alleged refund) asked the following of Yeung: “四萬柒磅扣除了以上兩項報廢的費用, 每人大概可以分一萬伍仟磅左右, 你需要我帶現金回來或是電匯回港?” It was rather unlikely that after proposing to repay about £15,000 to Yeung, Au would suddenly “pay back” £150,000 to Yeung in 2 weeks’ time. 283.Fourthly, it was Au’s case that the 10 Properties generated an overall profit of £47,309.71, and the profit share for each of the Three was £15,769.90. Au did not explain why this sum (less ⅓ share of the expenses for the Abortive Properties) was not included in the 2006 Account as an amount payable to Yeung, especially when Au claimed capital gain was the whole purpose of the Property Investment. 284.Fifthly, I find I am unable to accept Au’s alleged rationale for the sparsity of the 2006 Account. As explained in paragraph 130 above, I reject Au’s contention that since Yeung adopted an informal approach for settling the contra-accounts under the Contra-Account Arrangement, he did not expect he would need to give any detailed account. I note Au was the sole accounting party for the Property Investment and Lloyds Account which was quite unlike the mutual debits and credits under the Contra-Account Arrangement. 285.In my view, the above errors were serious and of such magnitude as to warrant reopening of the 2006 Account from the beginning (even if it were settled accounts). Au’s suggestion that Yeung could figure out for himself the status of the Property Investment by summing up his Remittances over the years and cross-referencing to the information in the 2006 Account had to be stated for it to be dismissed, and it reflected Au’s failure to appreciate that he (and not Yeung) was the accounting party with a duty to account. After all, it was Au who had control/management of the Remittances upon their arrival at UK shores even though some of them were deposited in Howse Percival’s clients account. 286.Furthermore, Au confessed he never dealt with the Lloyds Account (including withdrawals by Signed Cheques, Transfers and D/Card / CP/Card) in the 2006 Account. His explanation was that the atmosphere was tense when Yeung came to see him in 2006, so instead of telling Yeung about his acts/dealings with the Lloyds Account, he tried to speed up repayment to Yeung. I am unable to see how this would excuse his admitted failure to deal with the Lloyds Account in the 2006 Account when, as I have found, he had a duty to account in respect of the same. As explained in paragraph 52 above, a settled account must deal with all accounts then outstanding between the parties, not some only, so this afforded another reason why the 2006 Account was not settled/final accounts. 287.I make 2 further observations. First, it was quite clear that even though Au was an agent/fiduciary he never intended to be frank/open with his principal Yeung about his acts/dealings in relation to the Lloyds Account, and I find it was because he knew he had mishandled/misused monies in the Lloyds Account (the bulk of which was Yeung’s Refund being Yeung’s personal monies) for his own purpose or for the benefit of others without Yeung’s informed authorisation. Secondly, he was anxious to put forward a barebones 2006 Account and some repayment to Yeung in the hope of alleviating Yeung’s pressure/demands for proper accounts, which explained why the 2006 Account was sparse and which supported my view that the payment of £121,058.90 was Au’s unilateral effort to deflect pressure rather than any agreed settlement payment. 288.Mr Chan argued the 2006 Account was remittance-based[110] and not withdrawal-based, but its accuracy still depended on the correctness of the Remittances and specified deductions, and I have found there was no settled accounts but significant errors. Further, such approach ignored the duty of Au as agent/fiduciary having custodial control of Yeung’s bank account and Yeung’s Refund deposited therein (being Yeung’s personal monies) to give account of the Status/Transformations of those monies rather than to just simply to work out the net balance. It is only via such proper, complete and accurate accounts that Yeung as principal would understand whether there was any breach/deficit and to seek appropriate relief/remedy. And this was why proper accounts of the Lloyds Account was essential. In any event, given the mishandling/misuse of monies in the Lloyds Account (mainly Yeung’s Refund being Yeung’s personal monies) by Au as agent/fiduciary that I have found, Yeung was prima facie entitled to an order for reopening the 2006 Account (even if it were settled accounts). XIV. DISCRETION 289.I have found the 2005/2006 Accounts were not settled accounts, and if I am wrong on this, I have found they were not adequately rendered. Mr Chan submitted the discretion to order accounts must still be exercised, and given the long lapse of time, the nature of the relationship between the parties, and the manner in which their affairs were habitually and routinely managed, it would be oppressive and fruitless to make such order. Mr Chan submitted there was no practical purpose by re-opening accounts in relation to the Property Investment as there was no prospect of consequential order for payment being made in Yeung’s favour. It was said the Admitted Items amounted to £1,375,486, but Yeung had recouped about £1,500,000 from the Property Investment. Mr Chan submitted Yeung’s complaints stemmed from his inflated but mistaken impression that the Disputed Items were also for the Property Investment. 290.However, Yeung complained that without proper, complete and accurate accounts for the Property Investment and Lloyds Account, he could not clearly know how much money he received was from the Property Investment, so all he could do on a preliminary basis was to point to the 2006 Account which suggested he had remitted and was said to have been repaid about £1,500,000, but subsequent forensic checking revealed his investments were more extensive and he had not received full refund.[111] 291.I am unconvinced by the suggestion that re-opening accounts would be fruitless as such contention was premised on the assumption that Remittances for the Property Investment were limited to the Admitted Items. But the above analysis pulled that carpet under Au’s feet, and showed Yeung’s investments in the Property Investment might involve more than the Admitted Items and more than the 10 Properties. It also raised question of possible accounting for profits in relation to Au’s mishandling/misuse of monies in the Lloyds Account. I am unconvinced re-opening accounts would be necessarily fruitless. 292.Long lapse of time would not necessarily justify refusing re-opening of accounts. Yeung had been chasing for proper accounts since 2004, and the present state of affairs was brought about by Au who tried to avoid giving proper, complete and accurate accounts at every turn. In any event, a court may order re-opening even after an account had closed for a long time in case of persons occupying positions of principal and agent or trustee and beneficiary, which was the relationship between Yeung and Au. I find the parties’ historical relationship and Au’s conduct cried out for re-opening of accounts, especially when Au was in breach of his fiduciary duty by mishandling/misusing funds in the Lloyds Account, and when the Property Investment and Lloyds Account were left in Au’s control/ management and outside Yeung’s knowledge/command. I am also unable to perceive any oppression in ordering re-opening of accounts given the available documentation, Au’s personal knowledge and his “primitive records”. 293.The 2005/2006 Accounts were not accurate, settled or binding on Yeung, and Au failed to discharge his duty to account to Yeung. In my view, the deliberate sparsity of the 2005/2006 Accounts, their unexplained discrepancies, the lack of contra-account arrangement for the Property Investment and Lloyds Account, Au’s abuse of Yeung’s trust/confidence in seeking Remittances for his own use whilst at the same time using monies in the Lloyds Account, and Au’s concession under cross-examination that he ought to give proper re-account to Yeung in respect of the Property Investment and Lloyds Account all led inexorably to the conclusion that subject to Part XV below and except for the particular matters I have excluded, Au must give to Yeung proper, complete and accurate accounts of the Property Investment and Lloyds Account in the manner as explained above. XV. 1-2 LORENZO STREET AND MAY-UK 294.Mr Chan submitted Yeung ultimately agreed to sell his interest in 1-2 Lorenzo Street (held by MAY Partnership) and received £1,031,294.02 for his share, hence the investment in 1-2 Lorenzo Street had been fully settled and could not be re-opened. 295.Shortly after Damen was employed by MAY-HK in March 2005, Yeung found out he only had ⅓ registered shareholding in MAY-UK. He asked Damen to help negotiate a full separation from Au/Marchant in relation to MAY-UK and 1-2 Lorenzo Street. In the course of negotiations in which HWW acted for Au/Marchant and Ford, Kwan & Co acted for Yeung, Au/Marchant proposed by way of a draft agreement in April 2005 inter alia that Yeung would withdraw from MAY Partnership and transfer 1-2 Lorenzo Street to Au/Marchant against payment of £821,420.82 from the partners account. The draft agreement also contained proposal for sale of Yeung’s MAY-UK shares, resolution of MAY-UK’s/MAY-HK’s inter- company debts, and permission for Marchant to incorporate a competing garment trading business (ie MAY Trading) in HK, to take free samples for MAY Trading’s showroom and to have Fu Shing continue to make samples for Marchant / MAY Trading. But such draft agreement was never signed. 296.Other proposals and counter-proposals for sale/purchase of Yeung’s MAY-UK shares were canvassed. At one stage Yeung through Damen offered to purchase 1-2 Lorenzo Street for £2,800,000, and he paid 10% deposit to his UK solicitors who prepared and sent over draft agreement for sale and purchase. Au/Marchant claimed there were errors in the draft, but they did not send though their proposed amendments. Yeung had doubts whether Au/Marchant intended to sell 1-2 Lorenzo Street to him, so he withdrew his purchase offer in the summer of 2005. Negotiations then broke off after a while. 297.On 24 February 2006 Devonshires (solicitors for Au/Marchant, “Devonshires”) wrote to James Tsang & Co (Yeung’s former UK solicitors, “James Tsang”) requiring exchange of contracts for the sale and purchase of 1-2 Lorenzo Street for £2,800,000 within 10 days and payment of 10% deposit. About a month later, Devonshires complained about lack of progress. On 5 April 2006, Devonshires wrote to James Tsang querying whether Yeung wanted to proceed with the sale and purchase, and gave Yeung a final opportunity to exchange contracts. Yeung had reservations, and the deal did not proceed. On/about 27 May 2006, Au/Marchant proposed to purchase 1-2 Lorenzo Street for £2,900,000. Marchant said he made such offer in a rising market, and suggested Yeung would also benefit from such rise in market. 298.There was also a flurry of negotiations for proposed sale of Yeung’s shareholding in MAY-UK to Au/Marchant. Au/Marchant put forward an offer of £300,000 which Marchant said was generous as it took into account goodwill valued at £200,000 and their accountant’s valuation of Yeung’s shares at £100,000.[112] Then an offer of £500,000 was floated which (a) Yeung claimed was an increased offer by Au/Marchant during a meeting between Yeung/Damen and Au to resolve outstanding matters, but (b) Au said it was Yeung’s offer for selling his stake in MAY-UK. On 5 June 2006, Damen wrote to Marchant reminding that (i) Yeung had agreed to increase commission payable by MAY-HK to MAY-UK from 5% to 7% when he had to shoulder MAY-HK’s accumulated loss and high interest for banking facilities and (ii) Yeung (unlike Au/Marchant) never drew salary from the Garment Business, and counter-proposing a sale of Yeung’s interests in MAY-UK to Marchant for £500,000 for quick resolution of their disputes, but if such proposal was not accepted, Yeung would agree to let Au/ Marchant buy 1-2 Lorenzo Street for £2,900,000 with exchange of contract and payment of 10% deposit within a week and completion of the sale and purchase within 17 days thereafter. 299.Yeung later considered £500,000 was too low and made another offer of HK$10,000,000 for his stake in MAY-UK, but in the end no agreement was reached. Au/Marchant said Yeung’s refusal to honour the earlier offer of £500,000 further strained their relationship, and as time went by Au/Marchant considered it was not right even to pay £500,000. Yeung complained it was Au/Marchant who were prepared to go back on their word which caused him to feel he would not be able to buy 1-2 Lorenzo Street at any price. In the end, Yeung allowed Au/Marchant to purchase 1-2 Lorenzo Place to put an end to the matter (C4/1031-1034). However, completion of the purchase only took place in July 2007 (see C4/1041), and Yeung eventually received £1,031,294.02 out of the sale proceeds. 300.The aforesaid negotiations over the disposal of Yeung’s stake in MAY-UK was not a disputed issue in the present action. There was also statement/affirmation evidence before this court (not subject to cross-examination) as to (a) subsequent negotiations over the Three’s final separation over MAY-UK, (b) failure by Au/Marchant to declare receipts under the Contra-Account Arrangement to the UK tax authority and their subsequent remedial action, (c) a rights issue by MAY-UK in 2007 that resulted in dilution of Yeung’s shareholding, (d) an offer in 2008 by Weekendesk International SA (a Luxembourg company established by Au/Marchant, “Weekendesk”) for purchase of inter alia all shares in MAY-UK allegedly for onward sale to a third party purchaser[113] with share purchase agreements entered into in April 2008, (d) acquisition of MAY-UK’s 90% shareholding by Weekendesk in May/June 2008, (e) compulsory purchase of Yeung’s stake in MAY-UK for £2,527.47 by Weekendesk in July 2008 pursuant to the “squeeze out” provisions in the Companies Act (C5/1217-1218), and (f) alleged rescission of contracts between Weekendesk and the third party purchaser that resulted in Au/Marchant acquiring the shares formerly held by Yeung in MAY-UK from Weekendesk. 301.None of the matters concerning the disposal of Yeung’s shares in MAY-UK was relevant to the issues to the present action, and I make no finding in relation to the same. I gave the brief account of these matters to give contextual background to how Yeung came to sell his interests in 1-2 Lorenzo Street. By 2006, Yeung knew there were still outstanding issues despite the 2005/2006 Accounts, and he was still pressing for proper, complete and accurate accounts. But unlike the 2005/2006 Accounts that concerned the Property Investment Agreement generally, Au/Marchant and Yeung in dealing with 1-2 Lorenzo Street were both legally represented by HK/UK solicitors and had the benefit of legal advice. It was evident from the above history that the eventual sale of Yeung’s interests in 1-2 Lorenzo Street and the agreed sale price was the result of negotiations under legal advice that spanned 2005-2006 with offers made to and fro, and the factors that influenced the parties in such negotiations (that was tied with negotiations over the disposal of Yeung’s stake in MAY-UK) were more complex and nuanced that a mere matter of accounts over the Property Investment Agreement. In my view, even though I have highlighted some uncertainties in relation to the investments in 1-2 Lorenzo Street, the financial status and scope of business of MAY Partnership, the present lack of information as to MAY Partnership’s bank account etc, and I have found the 2005/2006 Accounts contained fundamental errors and were not settled accounts, Mr Chan must be right in saying the investments in 1-2 Lorenzo Street had been closed/settled by arms-length negotiated sale under legal advice and awareness of outstanding issues, and could not therefore be re-opened. 302.It is true the fact Yeung ultimately agreed to sell his interests in 1-2 Lorenzo Street and received £1,031,294.02 for his share was not pleaded and it was not part of the 2005/2006 Accounts (since such sale happened afterwards). But an order for accounts/enquiries is a discretionary remedy, and such unfettered discretion must be exercised by taking into account all circumstances. In my view, the discretion must be exercised against ordering accounts in respect of the investments in 1-2 Lorenzo Street subject to the following caveat: if in the course of giving proper accounts of the Property Investment (other than 1-2 Lorenzo Street) and Lloyds Account explanations as to investments, fund-flows, operations and acts/dealings concerning 1-2 Lorenzo Street (which was formerly part of the Property Investment) were necessary to give intelligent explanation and meaningful understanding to such proper accounts to be given by Au, then Au cannot shelter behind the above conclusion to circumvent disclosure/account of necessary matters in respect of 1-2 Lorenzo Street in order to give proper accounts. XVI. CLAIM 303.I have found Au had no cause of action against Defts for the tort of nuisance. As for the tort of harassment, Mr Chan invited the court to conclude that until Defts gave the Undertakings on 12 November 2010 Au was subjected to repeated harassment by Defts (whether by themselves or through their agents) in/about 2010 at Tolo Ridge and in attempts to pressurise him into yielding to Yeung’s demands in relation to their business dealings, that the Harassing Acts (if proven) were plainly unreasonable, and that Yeung’s allegations under the Counterclaim (as accepted by this court) would not operate as any recognised defence. 304.But Mr Lau submitted there was no overt threat or violence apart from a few physical visits asking for meeting with Au to discuss accounts in relation to the Property Investment and Lloyds Account (which were legitimate requests given the inadequacies of the 2005/2006 Accounts) and a few friendly visits by Moon to see Chan, and no useful weight could be given to the telephone nuisance to MAY-UK Office, MA-HK Office, Chan and HWW, the posting up and facsimile of Wanted Posters / signboards or the graffiti vandalism at Tolo Ridge as there was no connection with Defts and the relevant witness testimony was unreliable. 305.The essential issues for the Claim were (a) whether the Harassing Acts originated from Defts, and (b) to what extent each Deft could be attributed to such conduct. (a) Background 306.Chan and Au Chan had a long-time and close working relationship with Au, and she was his loyal colleague and supporter. 307.Chan and Yeungs Chan knew Yeung, Yuk Ho, his wife Ah Yuk and Moon from her days at MAY-HK when all Yeungs were engaged in Yeung’s garment production business,[114] and Moon knew Chan worked as merchandiser for MAY-HK until her resignation in 2005. 308.Moon claimed Chan spent so much time at Yeung’s factory that she practically half-lived in Shantou, but I prefer Chan’s evidence that she would stay overnight at Yuk Ho’s place when work took her to Shantou several times a years during the period from 1994 until 2002/2003 (so she mainly liaised with Yuk Ho’s family and was not close to Moon), and that Yeung arranged for her to live at staff quarters when she worked 4-5 days/week in Shantou from February 2002 to December 2003 (so she had a bit more work liaison with Moon). I disagree Chan (a) was very familiar with Moon, (b) often joined family gatherings/dinners at his parents’ (“Yeung Srs’”) home, (c) often had morning tea with Yeung Srs, (d) hanged out with Moon, Yuk Ho and co-workers 鳳仙 and her sister 寶玲 in her spare time, (e) was close family friend to the Yeungs, (f) invited the Yeungs (including Moon) to visit her in HK, and (g) offered to show Moon around HK just as Moon showed her around Shantou. The platitudes in (f)-(g) above were quite unnecessary as Moon, who had a HKID Card, had come to HK before, and Yeung had home and family in HK. In my view, Moon inflated the closeness of his relationship with Chan in a poor attempt to justify his unwelcome liaison in 2010. 309.Nevertheless, there was a cordial working relationship between Chan and Yeungs with some ordinary after-work social interaction. Chan would have this court believed she only had dinner at Yeung Srs’ home once in 2004, and she rarely went out socially with the Yeungs. But Chan was admittedly familiar with Ah Yuk, and in her 10 years as merchandiser for MAY-HK she spent some time in Shantou, especially when she worked there for longer periods in 2002/2003.[115] A photograph showing Chan at a karaoke gathering at Yuk Ho’s place where she stayed overnight demonstrated a relaxed/comfortable social relationship with Yuk Ho / Ah Yuk. But such social interaction borne out of a working relationship ceased (except for liaison with Ah Yuk) when Chan resigned in 2005 to join MAY Trading after Au/Marchant had fallen out with Yeung. 310.MAY Trading / MA-HK On/about 28 February 2005 Chan and others recruited by Au resigned from MAY-HK, and on 1 March 2005 Chan joined MAY Trading as merchandising manager. Shares in MAY Trading were allotted to Chan/Newlink, and Chan was appointed as director/ secretary. Au/Marchant confirmed they were beneficial owners of MAY Trading, and Chan was a nominee shareholder for Au. I do not accept Chan’s allegation that Marchant gifted her 10% shareholding. Chan’s reluctance to openly acknowledge Au’s status as “boss” in MAY Trading / MA-HK and the evolution of her testimony in this respect must be viewed with caution. In fact, Au admitted he was the general manager of MAY Trading / MA-HK, and Chan was eventually constrained to admit Au was her “boss”, which was what she told the police at the time of her police reports on 4 and 16 March 2010 (see paragraphs 342, 362 and 371 below). In July 2005, Yeung protested over the confusing similarity of the names of MAY-HK and MAY Trading, and the latter changed its name to MA-HK. At about the same time, Ball who worked for FAL replaced Chan as director and acquired Chan’s shares. I disagree it was Chan’s own decision to sell her shares to Ball for a nominal sum, which proposition made no commercial sense in a private company like MA-HK. In fact, Au admitted that Ball was his nominee for holding his MA-HK shares, and I find Chan transferred her shares to Ball at Au’s direction. 311.Mr Lau suggested Chan’s reticence reflected an attempt to water down perception of her loyalty to Au. But to be fair Chan did accept she had known and worked with Au for a long time, and she never put forward herself as a completely independent witness. I am unable to discern the aforesaid weaknesses had any impact on the veracity of her evidence on matters relating to the Claim, which was more confident and reliable. 312.Chan’s cheques/emails First, Chan used to be authorised signatory for MAY-HK’s cheques below HK$15,000 to pay for accessories, samples and minor expenses when Yeung was not in HK. Much later Yeung discovered Chan drew 5 cheques of HK$15,000 each on 15 June 2001 (“Five Cheques”). Yeung said this was outside her mandate, but Chan claimed she was usually asked to sign MAY-HK cheques in advance before MAY-HK’s accounting clerk filled out the names of the payees and booked the payments. Secondly, Yeung claimed there were occasions after Chan’s departure from MAY-HK when she still used her email address at MAY-HK and had samples/invoices delivered to MAY-HK Office for her attention. Yeung claimed these were commercially dishonest attempts to ride on MAY-HK’s reputation and goodwill. In my view, these matters were only of tangential interest. Nothing turned on the Five Cheques, and they would hardly inform on Chan’s veracity in respect of matters that happened 10 years later in 2010. Also, I am not quite sure how getting samples sent to a competitor’s office will aid Chan/MA-HK. (b) September 2008 313.Chan/Yeung meeting Yeung said his Shantou staff 雲妮 told him Chan asked her through internet social media how he was faring, so in September 2008 he telephoned to invite Chan out for tea. She happily agreed, and they chatted easily with Yeung showing her his recent photographs including one of him at the Olympic Opening Ceremony. When he found out they both used the same model of mobile telephone, he showed her other photographs stored in his mobile telephone. 314.I find it quite improbable that 3½ years after Chan resigned and left MAY-HK she suddenly asked after Yeung (and not Yuk Ho / Ah Yuk with whom she had a closer relationship) through a former colleague. It was quite strange as Yeung admitted his brothers were more familiar with Chan than he was. I prefer Chan’s evidence that she was taken aback when Yeung telephoned her on 22 September 2008, which reaction was more realistic as there was virtually no contact after Chan left MAY-HK. Chan said (and I accept) Yeung sounded anxious and wanted to talk. 315.Chan said on 25 September 2008 when she returned call to Yeung (after missing his earlier call), Yeung told her he wanted to discuss something that concerned her directly and something that was related to Au/ Marchant. Yeung called again at about 11:00am – 12:00 noon to suggest meeting at a nearby restaurant. Chan said Yeung was very heated at the restaurant meeting, and alleged Au/Marchant cheated him and treated him unfairly. He complained inter alia about Au’s/Marchant’s “improper handling” that “robbed” his interests in MAY-UK (and he suspected Chan was involved), their sale of MAY-UK to a third party for £3,800,000 odd, and conspiracy by Au/Chan over the Five Cheques, but he told Chan not to be afraid as he would give notice before he would do anything. Chan said such veiled threat was bolstered by photographs shown to her of Yeung with PRC government officials and HK legislators that implied his change in social status/power. Chan said Yeung insisted she should tell Au all he told her, which Chan did after the meeting. 316.In my view, Chan’s account had a ring of truth. In 2007/2008 Au/Marchant were in difficult negotiations with Yeung in respect of their final separation over MAY-UK, and (irrespective of merits) Yeung felt aggrieved by the rights issue that diluted his MAY-UK shareholdings, by action taken to force him out of MAY-UK’s board of directors, and by forced sale of his MAY-UK shares to Weekendesk pursuant to “squeeze out” provisions under the Companies Act (see paragraph 300 above). It was no wonder that Yeung felt “robbed”. At the same time, Yeung believed Au failed to give proper accounts of the Property Investment and Lloyds Account, so he got Ng to look again into the documents collated by Damen (see paragraph 317 below). I believe these matters gave rise to a roiling sense of grievance (which was at least partly justified), so Yeung (not being a sophisticated man and was even, as Wong said, “比較粗魯”) decided that a face to face debate with Au was necessary for resolving the matter, but he was thwarted by Au’s elusiveness and corporate manoeuvres. In my view, Yeung’s frustration erupted into the displeasure he displayed at the meeting with Chan. I find Yeung’s allusion to the Five Cheques and the display of his photographs to Chan were to underline his determination to pursue his complaint, and his expectation that his message would be conveyed to Au. In my view, although Yeung’s meeting with Chan in September 2008 was not part of the Harassing Acts, it amply showed Yeung was not shy about pushing for meeting with Au and approaching others in order to get at Au. Chan had no further contact with the Defts until the beginning of 2010. 317.Ng and MAY-HK Ng joined MAY-HK in March/April 2008. At that time, only Ng and a part-time accounting clerk called Victoria Lam (“Lam”) worked at MAY-HK Office. Lam did not attend MAY-HK Office regularly, and eventually left in 2011/2012. By September/October 2008, Yeung was frustrated by what he perceived to be unfair treatment at the hands of Au/Marchant over MAY-UK and by Au’s evasiveness over accounts/documents in respect of the Property Investment and Lloyds Account. This led to Yeung’s meeting with Chan in September 2008 (see paragraphs 313-316 above). When nothing much resulted from that meeting, Yeung told Ng (whom Yeung discovered to have some English skills) in/about September/October 2008 he suspected Au to have cheated him and/or misappropriated his monies, and he gave Ng a bundle of documents with instructions to look into (a) MAY-UK’s AAs, (b) bank statements of the Lloyds Account, (c) email printouts with duplicates kept in a box, and (d) remittance records (eg TT Forms and Bank Advices), to trace the status/ transformations of his funds/Remittances, and to check the documents/ figures in relation to the Property Investment and Lloyds Account. 318.This took time as Ng was working full-time at MAY-HK and was unaware of the historical dealings (so he had to double-check with Yeung every now and then), and he was handicapped by the limited availability of documents. It was almost at the end of 2009 that Ng finished studying the papers given to him. Ng prepared an English handwritten table of UK Properties (C4/1041-1042, “Ng Table”), but in the absence of proper, complete and accurate accounts by Au and/or a full set of the primary documents to cross-check Au’s assertions, Ng feared the Ng Table might be incomplete, so Yeung insisted that Au as accounting party should give proper accounts of the Property Investment and Lloyds Account, which led to inter alia the Ng Letters. In my view, these developments after the 2006 Account corroborated Yeung’s stance that the 2006 Account were not final/ settled accounts. (c) MAY-UK 319.It was MAY-UK that last caused Yeung much grievance, so it was unsurprising the Harassing Acts first occurred there. I accept since about mid-January 2010 MAY-UK began to receive repeated/numerous (30- 50/day) nuisance telephone calls consisting of Chinese pre-recorded messages and of a Chinesespeaking man who shouted abusive Chinese words or at times used abusive language in poor English to whoever answered such calls. The ID caller showed different numbers (sometimes part of the code for an overseas number). Calls were ignored if MAY-UK staff recognised the number from previous nuisance calls. The telephone company tried but failed to block certain numbers. Such telephone nuisance continued until MAY-UK changed its telephone numbers/system in/about March/April 2010. 320.I accept Marchant told Au about such nuisance calls shortly after receiving them. At first Marchant claimed Au replied that MA-HK and HWW were suffering in the same way, but he later said he was unsure whether MAY-UK or MA-HK/HWW got the nuisance calls first. I find Marchant misremembered the timing. After all, Marchant in UK did not really know what happened in HK, and the telephone nuisance to MAY-UK went on for several months, so Au/Marchant discussed about nuisance calls in UK/HK and the problems they caused over a period of time and over various telephone conversations. 321.In my view, it would be too much of a coincidence (which I find improbable) that the telephone nuisance to MAY-UK were from somebody other than Yeung or his agents/associates:
The above matters together with the other Harassing Acts throughout 2010 gave rise to strong inference that the telephone nuisance to MAY-UK was a campaign instigated by Yeung to get at Au/Marchant. (d) Moon’s 1st visit to MA-HK 322.Before the visit Moon claimed he briefly heard from Yeung that Yeung suspected he was cheated by his long-time business partner Au, but Moon said he had no idea Au owed Yeung money until Ng told him so on his 3rd visit in February 2010 to HK.[116] Moon claimed that in early February 2010 Yuk Ho and his family returned to Shantou, and Ah Yuk told him Chan had visited them in Vancouver, Canada. It was said that knowing Moon would soon go to HK for renewal of his HKID Card, Ah Yuk told him Chan worked at MA-HK, gave him Chan’s address and telephone number, and asked him to pay her a visit. Moon added that Yeung Srs mentioned over a family dinner that Au/Yeung had some misunderstanding and since 2003/2004 Au did not place as many orders with Fu Shing as before, so even though Yeung did not ask Moon to look up Chan to find Au, Moon planned to pay a visit to Chan to discuss with her how to mediate between Au and Yeung. 323.I accept Yuk Ho and Ah Yuk met up with Chan when they were in HK and Ah Yuk invited Chan to visit them if she went to Canada, so when Chan went to Vancouver to stay with her elder sister for a family occasion, she met up with Yuk Ho and his family. Save as aforesaid, I reject Moon’s account, especially his assertion that he had no knowledge of the details of the Au/Yeung dispute. Yeung’s frustration with Au/Marchant was obvious and unabated, and in my view he would not have kept such matters to himself when his family members were engaged in his garment production business and the drying up of orders from MAY-UK would not have been a secret. If Yeung Srs raised this over a family dinner, it was most improbable for Yeung to have kept silent and/or for the family not to ask questions about it. I think Moon knew Yeung complained that he was “robbed”/cheated by Au/Marchant, and that Au owed him money. I further find Moon knew Yeung was frustrated by Au’s evasiveness and failure to provide accounts (which in my view were justified grievances). 324.I also do not believe Ah Yuk asked Moon to make a surrogate friendly visit on her behalf. Chan only had a cordial but not close relationship with Moon in the past, and I do not think Moon thought of visiting Chan because there was some mention years ago about their visiting each other. Indeed, Moon visited HK about 3-6 times a year (each time staying for a few days to a few months). Moon’s Statement of Travel Records showed he came to HK 6 times (16 days) in 2009 and 7 times (29 days) in 2010, and yet he never contacted Chan for the past 4-5 years. I find Moon intended to help Yeung by approaching Chan to get at Au (who had been unwilling to meet with Yeung or to face up to Yeung’s complaints), and Moon sought her contact details from Ah Yuk. This explained why, even when common courtesy would have called for a prior telephone call to Chan (and Yeung did call Chan first when he asked for a meeting with her in September 2008), Moon turned up at MA-HK Office unannounced. In my view, Moon wished to keep Chan off balance by his sudden appearance when he made his demands. 325.3 February 2010 morning Moon arrived in HK on 3 February 2010, [117] and went to MA-HK Office. He claimed Chan appeared happy to see him. She invited him in, gave him some water, asked 鳳仙 (who also worked for Au) to see how much weight he had gained, and they chatted away like old friends. Moon told Chan he wanted to clarify whether Au owed Yeung or Yeung’s businesses any money, and suggested Au could state his stance to clear up any misunderstanding. He asked Chan for her help to resolve the Au/Yeung dispute. Chan agreed to convey the message to Au (who seldom returned to MA-HK Office). Moon claimed Chan offered to set up a meeting with Marchant (who would be in HK in a few weeks), but Moon declined as he did not know English or much about the Au/Yeung dispute. Moon said when he left, Chan asked him to see her again if he had time. 326.In my view, Moon’s account had an aura of implausibility. Apart from Ah Yuk, I doubt Chan would be very happy to see any of the Yeungs given (a) her departure from MAY-HK to work for Au/Marchant who had fallen out with Yeung, and (b) her strained meeting in 2008 with Yeung who raised veiled threat about the Five Cheques and allegation about her conspiracy with Au to “rob” him. Further, despite Moon’s emphasis that he did not know Au owed Yeung money until Ng told him in late February 2010 (see paragraph 322 above), this was the very subject he raised with Chan on 3 February 2010 in relation to the Au/Yeung dispute. This showed that even on Defts’ case Moon knew more about the Au/Yeung dispute than he would have let this court believe, and I find his agenda for paying Chan a visit was to press Au (through Chan) to give proper accounts to Yeung and to pay what was owed to Yeung due to Au’s “cheating”/“robbery”. Still further, I could not see Chan offering to set up a meeting with Marchant when (i) she knew Moon did not know English, (ii) she must have known from her interaction with Marchant/Ball that Au/Marchant had fallen out with Yeung over the FAL Dispute, and (iii) she knew from the September 2008 meeting that Yeung felt aggrieved over MAY-UK that was operated by Marchant in UK. As Chan said, she knew Marchant would not speak with Moon regarding any matter concerning Yeung. 327.I prefer Chan’s evidence that when Moon came uninvited to MA-HK Office they had a cordial chat as between ex-colleagues who had not seen each other for a while. Moon then told her he had approached Yeung for some financial help, but Yeung replied he had no money until Au repaid him, and he asked Moon to find Au to “talk to him about the situation” (which Chan understood to mean Moon was to look for Au to see if Au owed Yeung money). I find Moon made this up (because Yeung was financially sound) as an excuse for raising the subject with Chan and for underlining Moon’s/Yeung’s insistence on finding Au and getting him to pay Yeung. I find Moon’s demeanour was not friendly, and he aggressively demanded to know Au’s whereabouts, to have Au give proper accounts to Yeung, and to meet with Au to discuss the monies owed to Yeung (which demands were consistent with Yeung’s stance all along). I accept Chan refused to discuss these matters with Moon, but agreed to pass on Moon’s message to Au and also to consult Marchant. But Moon would not leave MA-HK Office, tenaciously insisting that Chan had to tell Au about his demands, and it was some time later that he was persuaded to go. I accept Chan reported to Au who said Moon’s claims were false, and Au suggested it would be best for Chan not to see Moon. In my view, this was an unwelcome visit by Moon, who on behalf of Yeung actively sought out Chan to get at Au. 328.3 February 2010 evening Moon claimed he tried to invite Chan and 鳳仙 for dinner that day, so he went to MA-HK Office at 5:00pm to catch Chan before she left for work. Moon said Chan appeared happy to see him and gave him some water. He left when Chan declined dinner with him as she had work to do, saying they could have dinner when she was less busy. I reject Moon’s account. He had Chan’s mobile telephone number, and could easily have called to invite her and 鳳仙 to dinner (as Yeung did when he invited Chan to the restaurant in September 2008). Moon’s awkward social gaffe in turning up unannounced at MA-HK Office for the 2nd time within a day only to have his invitation to dinner turned down was, in my view, quite implausible. 329.I prefer Chan’s evidence that Moon did telephone to invite her to dinner but she declined, but Moon nevertheless returned uninvited to MA-HK Office at/about 5:00pm looking for Au. I find Moon to be quite insistent on finding Au and getting Chan to give him Au’s telephone number, and when he was asked to leave he sat at MA-HK Office for about an hour ostensibly waiting for Au before being persuaded him to go when MA-HK Office closed for the day. Chan did not offer to see Moon again, but she told Au of this visit. In my view, Moon’s visit to MA-HK Office despite being told by Chan she could not have dinner with him showed he was not on a friendly visit, but was there to put pressure on Chan/MA-HK to get at Au. Even though I accept Au had been evasive and there was genuine basis to Yeung’s demands for accounts, it was nonetheless an unwelcome visit for Chan/MA-HK. In my view, it must have been instigated by Yeung as Moon was quite ready to meet with Au to talk about Yeung’s affairs. (e) Moon’s 2nd visit to MA-HK 330.Moon came to HK again on 22 February 2010 (ie 9th day of the Chinese New Year) bearing gift of Teochow delicacies for Chan. He claimed he telephoned to tell Chan about such gift, and she thanked him. But I find (as did Chan) Moon’s sudden barrage of attention on Chan after a hiatus of several years insincere. I prefer Chan’s evidence that Moon telephoned her one evening to say he wished to go to Chan Home “to bring some food”, which in my view was an attempt to bring pressure to new front, ie Chan Home. I accept Chan was suspicious of Moon’s approach and refused his offer. 331.There was no dispute that a few days later Moon again went to MA-HK Office uninvited. Moon claimed he did so because Chan told him last time she would tell Au in 1-2 days and she would tell him if there was any news, and when he was at MA-HK Office Chan told him she had already spoken to but had not heard further from Au, and she would inform him upon receipt of Au’s reply. 332.In my view, as Chan had not called Moon with news from Au, there was no reason for Moon to turn up at MA-HK Office as he did without telephoning ahead to see if there was any news. Moon’s unwillingness to use the telephone when a simple call would have sufficed spoke loudly of his use of sudden/uninvited physical presence to pressurise Chan to get at Au. I prefer Chan’s evidence that Moon went to MA-HK Office asking to see Au, but Chan told him (a) she had passed on his request but Au did not wish to see him, and (b) if he wished to contact Au he should do so through lawyers. Such evidence sat well with Au’s consistent stance (as borne out by HWW’s letters discussed below) of not wishing to meet Yeung unless in the presence of lawyers. In my view, this was not a friendly visit, but one focused on the Au/Yeung dispute, which visit must have had Yeung’s blessing. (f) Moon’s 3rd visit to MA-HK 333.Chan was not at MA-HK Office when Moon went there a few days later on 24 February 2010, and he called her mobile telephone. Moon claimed he could not hear what Chan said to him, so he redialed a number of times but gave up when he still could not hear her. He tried again about half an hour later but the line appeared to have been disconnected. I reject Moon’s account. He gave no reason for his visit to MA-HK, and Chan had not called him about any news from Au. I prefer Chan’s evidence that Moon called her mobile telephone to tell her he was at MA-HK Office, and she told him she was at work outside the office. I find Moon kept on calling Chan until she finally took his call and reiterated she had relayed his request to Au who did not agree to meet him, and if he wished to communicate with Au he should do so in writing. I accept she also warned Moon she would report to the police if he continued to behave in this way. Chan’s account was consistent with Moon’s insistent behavior, and in my view his disruptive calls whilst knowing Chan was at work were clearly a pressure tactic for seeking accounts from Au and demanding a meeting with him. (g) Moon’s 4th visit to MA-HK Office 334.Ng After Ng finished his review of the papers collated by Damen at/about the end of 2009 (see paragraph 318 above), Yeung told him in/about early 2010 to approach/ask Au (whom Yeung felt had cheated him) for a full account of the Property Investment and Lloyds Account, and for a meeting to discuss these matters. In my view, both Yeung/Ng knew some drastic steps were needed as Au had been evasive/resistant to Yeung’s previous overtures. I find Yeung gave Ng a carte blanche to do what was necessary to overcome past failures and get results. 335.Ng/Moon Ng claimed Yeung asked him to keep Moon company when Moon came to HK in February 2010 to renew his HKID Card. Ng/Moon claimed that on 26 February 2010 when Ng expressed frustration at the task Yeung assigned him (a) Moon mentioned about Chan who worked for Au at MA-HK, (b) Ng asked Moon to introduce him to Chan so he could seek her help to contact Au, and (c) Moon promised to take Ng along when he next paid Chan a visit. I do not accept such account which I find improbable. Even if Ng had expressed a wish to locate Au, there was little point to be excited about Chan because (according to Moon) his efforts to reach Au through Chan had not been successful so far and it was rather surprising he did not mention this to Ng. It was even more incredible as I have found Chan actually told Moon Au was unwilling to meet Yeung and even suggested that Yeung should write to Au. 336.Ng’s/Moon’s visit Au put forward a case that (a) Moon brought Ng to MA-HK Office the same afternoon and introduced him to Chan, (b) they offered to leave as there were a few westerners there who appeared to be Chan’s customers, (c) Chan asked them to stay but only offered tea to Moon (and not Ng) which Moon found strange and out of character for Chan, (d) Ng explained Yeung wanted to check some accounts with Au but Chan suddenly looked stern and said it was not her concern, and (e) Ng then asked her to convey such message to Au and exchanged telephone numbers with her. Moon claimed he did not expect Chan, who was warm/friendly towards him, to react poorly to Ng’s request, and felt bad to have upset her. 337.But I do not accept the above account. I find it improbable that Ng/Moon would have offered to leave MA-HK Office merely because of the presence of a few customers when they went there for the serious business of trying to contact Au. I also do not accept Chan reacted poorly to Ng and was friendly to Moon. Even on Au’s case, Moon was there to vouch for Ng, and earlier on Moon himself made the same request to Chan to help contact Au. And if, as Moon claimed, Chan still appeared friendly with Moon, there was no reason for Moon not to have asked Chan whether she had heard further from Au. 338.I prefer Chan’s evidence that Moon/Ng came uninvited to MA-HK Office with Ng wishing to discuss matters concerning Au and Yeung and to go through some account figures with her, but she refused and asked them to leave. I find Chan did not offer any drink or exchange any telephone number, and they left after a while. Chan later told Au about this visit. In my view, Moon in bringing Ng with him to see Chan when she had already told him Au would not meet him/Yeung and had asked Yeung to communicate in writing clearly showed this visit was meant to put pressure on Chan to get at Au by involving 2 persons and by ignoring Chan’s repeated replies as to Au’s stance. (h) Ng’s visits to MA-HK Office 339.1 March 2010 Ng claimed a few days later he telephoned MA-HK, and left his office telephone number for Chan who was out of the office. Ng further claimed Chan returned call by midday to tell him Au would not meet Yeung. Ng replied he would tell Yeung, but asked Chan to again tell Au that Yeung wanted to resolve the matter by face to face meeting. I am not persuaded by such account and prefer Chan’s evidence that on 1 March 2010 she received a “missed call” message on her mobile telephone, and her return call was automatically forwarded to another number answered by Ng who rudely/aggressively demanded whether she had “found” Au, and insisted she must have been in contact with Au recently, and Chan replied Au would not meet him, and he should communicate with Au through lawyers. 340.In my view, even on Au’s case, Ng (and hence Yeung) knew by 1 March 2010 Au was unwilling to meet them, which was his consistent stance all along. But Yeung and his associates ignored Au’s clear stance and stepped up pressure against Chan to force Au to provide accounts and to attend a meeting. Ng claimed he continued to visit/contact Chan because he did not feel Au did not want to meet with them. But if Ng actually thought so, he did not explain why he did not directly telephone Au or visit him at Tolo Ridge but continued to pester Chan/MA-HK who had not been helpful. I find Ng knew Au was all along unwilling to meet Yeung, and Chan also made this clear to Moon. This was reinforced to by HWW’s letter dated 10 March 2010 to Yeung referred to below. There was simply no basis for Ng to think otherwise. In my view, Ng’s/Moon’s persistence in pestering Chan/MA-HK reflected Defts’ refusal to take Au’s no as an answer, and such behavior was fueled by Yeung’s sense of grievance over Au’s evasion and failure to provide accounts (which had some legitimate basis), by Ng’s cocky derision of Au as the party in the wrong and by Ng’s confidence that he had Yeung’s support for whatever steps needed to be taken to get the results they wanted. But in my view there was no call for Yueng/Ng to harass Au by pestering his associates. 341.3-5 March 2010 Ng claimed that on 3 March 2010 he went to MA-HK Office to see if he could find Au or Chan, but was told by staff there through the intercom that both of them were not at the office that day, so he left. About 2 days later (ie 5 March 2010), Ng again went to MA-HK Office. Chan told him Au had retired and she could not find him. Ng did not believe Chan as she was able to convey his message to Au who was able to reply, but he left without pressing her. Ng denied telephoning Chan on 3-5 March 2010. I am unconvinced by Ng’s above account. Even on Au’s case, there was no point in going to MA-HK Office to look for Au who through Chan had made clear he would not meet Yeung. In my view, the repeated visits to MA-HK/Chan over such a brief period were to pester/harass them and in turn to pressurise Au to accede to Yeung’s demands. 342.I prefer Chan’s testimony that on 3-4 March 2010 Ng repeatedly called her mobile telephone, and in answering 1 such call on 3 March 2010 she told Ng she had conveyed his request to Au and knew nothing else. But Ng called her continuously and blocked her mobile telephone. By 4 March 2010, Chan could not stand it any longer, and made report no 1000-6408 to Kwun Tong Police Station. On 5 March 2010, Ng called again to ask if Chan had passed his message to Au. Chan again confirmed she had done so, and told Ng not to call again. In my view, the police report corroborated Au’s case of persistent calls by Ng to Chan despite having been told he did not wish to meet Yeung/Ng. (i) Fast Express visit to MA-HK Office 343.Chan claimed someone apparently from a courier company named “Fast Express (快捷)” snooped around MA-HK Office for mail/ documents with instructions to call Moon’s/Ng’s telephone numbers written on a note. But this happened during 8-11 March 2010 when Chan was out of Hong Kong so she had to rely on indirect hearsay evidence from unnamed MA-HK colleague(s). For this reason and also for the fact this was not relied on as a Harassing Act, I do not place weight on such incident. (j) Moon’s 1st visit to Chan Home 344.There was no dispute Moon went to Chan Home in the evening on 9 March 2010. Moon claimed he brought some Teochow tea for Chan to apologise for taking Ng to see her, and he wished to give it to her outside an office setting as he did not want the Au/Yeung dispute to affect their friendship. Moon claimed (a) Chan’s son opened the door, (b) he told Chan’s son he was a friend from Shantou with gift for Chan, (c) he passed the gift to Chan’s son, and (d) he then left without entering or asking to enter Chan Home. As I have rejected Moon’s account of his/Ng’s visit to MA-HK Office in February 2010 and his suggestion that Chan reacted poorly to Ng’s request whilst being nice to Moon, I also do not accept Moon’s account for his visit to Chan Home that was premised on Moon’s account of his/Ng’s visit to MA-HK Office which I have rejected. I also note Moon left HK on 26 February 2010, but returned to HK on 2-6 March 2010 before coming to HK again on 8 March 2010. If Chan’s attitude towards Ng troubled Moon, he did not explain why he did not approach Chan with gift and apology during his visit on 2-6 March 2010. In my view, there was no action by Moon during such period because Ng was in active liaison with Chan to get at Au (see paragraphs 339-342 above), and it was only when such liaison did not produce results that prompted Moon to visit Chan Home. This also reflected a degree of coordination between Ng and Moon which must have been at Yeung’s instigation. I prefer Chan’s evidence that Moon went to Chan Home to leave some tea for her (which I believe was an excuse made up for paying the visit). I accept Moon gained access to the building, rang her front doorbell of Chan Home, and Chan’s son answered but did not let him in. (k) Ng’s/Moon’s visit to Ball 345.Ng claimed that upon review of MA-HK’s company search records, he thought Ball could help find Au as she was MA-HK’s director/ shareholder but Au was the actual boss. So when Moon asked Ng to dine with him on 10 March 2010, Ng suggested (and Moon agreed) they should first visit this western lady at Pokfulam who might help in finding Au. Ball lived on a steep hill, so Ng walked down to her unit whilst Moon stayed at the staircase landing. Ng talked briefly with Ball who claimed not to know any Au Kin Kee or Robert Au. Ng did not believe her, but denied he caused any nuisance. Whilst I agree Au adopted an evasive stance and had those close to him (eg Chan and Ball) stall efforts to reach him, this would not give rise to any licence for Defts to pester/harass others to get at Au and/or to pressure Au into doing what he was all along unwilling to do, ie meet with and provide accounts for Yeung. But I note this was not a Harassing Act that Au relied. (l) Telephone nuisance to MA-HK and Ng Letters 346.Au (then in ill health) was told by MA-HK colleagues that since the beginning of March 2010 there were continuous nuisance telephone calls to MA-HK Office that insisted on speaking to Au or seeing Au in connection with money Au owed Yeung (which was similar to the telephone nuisance MA-UK Office experienced until it changed its telephone system in/about March 2010). I have no doubt that such unwelcome telephone nuisance was instigated by Yeung or carried out with his blessing as a pressure tactic to get at Au. 347.Au instructed HWW to write to Yeung to stop this nuisance, so on 10 March 2010 HWW sent an English letter to Yeung denying Au owed Yeung money, warning of legal action if the telephone nuisance in the past weeks caused by Yeung through agents would persist, and urging Yeung to put his claim against Au in writing to HWW who had instructions to handle such claim for Au. Ng basically understood its contents and gave a brief explanation to Yeung including Au’s stance of preferring written communications instead of any meeting. With this confirmation of Au’s stance, I find Yeung/Ng was left in no doubt that Au, rightly or wrongly, was not prepared to engage with them, and any further steps taken to this end would be against Au’s known wishes. 348.Yeung gave general instructions to Ng to reply to HWW’s letter to deny any nuisance and to ask for Chinese translation (as he feared HWW’s English letter was a trap despite Ng’s explanation). So on 16 March 2010, Ng sent a Ng Letter to HWW (which Yeung had read) denying nuisance to Au, accusing Au of having cheated Yeung, asking for a meeting with Au, and complaining about lack of Chinese translation. But Ng confessed the request for Chinese translation of HWW’s letter was for convenience only as he understood and translated to Yeung the contents of such letter. 349.HWW passed the Ng Letter to Au. As regards the request for Chinese translation of HWW’s letter, Au at first said HWW did not seek his instructions but later clarified he could not recall. But Wong said Au did give him instructions, so he refused Ng’s request. On 18 March 2010, HWW replied by letter to Yeung stating HWW would/could not communicate with him on the alleged nuisance/disturbance to MA-HK because there was no written authority from Yeung that Ng acted on his behalf, Au would not agree to Yeung’s request for a meeting due to past unreasonable behaviour of Yeung, Ng and Yeung’s agents, and Au would only communicate with Yeung through lawyers acting in a professional manner for proper conduct of any discussion and binding result on the parties. Wong said these conditions were appropriate as Au/Wong did not believe Yeung/Ng would liaise with them rationally, and Ng’s subsequent liaison showed he simply repeated previous demands which HWW had already answered. Indeed, Ng agreed he basically understood the contents of HWW’s reply which were consistent with Au’s stance all along and which he explained to Yeung, but Yeung nevertheless wanted a Chinese translation at Au’s cost. 350.Mr Chan confirmed Au would not rely on the Ng Letters on their own as Harassing Acts, but suggested it would be relevant to consider the timing of the Harassing Acts in tandem with the uncontroverted flurry of Ng Letters between March and October 2010 and the physical visits (some of which have been discussed above). I agree the substantial volume, repetitive contents and piecemeal queries in the Ng Letters were designed to cause inconvenience for Au who at that time suffered from ill health, and the insistent attitude displayed in such letters (reinforced by derisive remarks) echoed the other pressure tactics and harassing conduct adopted by Yeung/Ng which lent weight to the inference that Yeung (and probably Ng too) were behind the Harassing Acts. It would be too much of a coincidence for any third party unrelated to Defts to carry out such dedicated campaign of harassment against Au (and others to get at him), and then suddenly to desist all such activity upon Defts giving the Undertakings in November 2010. This nicely brings me to the 2 permeating issues canvassed in the Ng Letters, ie Yeung’s demand to meet with Au and his request for Chinese letter/translation. (m) Communications via lawyers 351.Yeung/Ng must have known from HWW’s letters dated 10 and 18 March 2010 (if not earlier) that (a) Au was unwilling to communicate or meet with them without lawyers and (b) Au had authorised HWW to deal with any claims against him. Ng confirmed he was able to and did translate the gist of HWW’s letters to Yeung despite Yeung’s reluctance to accept this and his wish for Chinese translation. Ng also confirmed Yeung endorsed the Ng Letters before or shortly after they were sent, and although Yeung sometimes chided Ng for the rude language Ng used, he never disagreed with the gist of the contents of those letters or stopped Ng from continuing with such efforts to seek out and press Au for accounts/meeting. Yeung did not accept Au’s condition for communications via or in the presence of lawyers. That was, of course, his right, but likewise it was for Au to decide on what basis to communicate with Yeung. Even if the dispute was not serious enough to merit involvement of lawyers, and Yeung thought his demands were meritorious and Au was shifty/evasive, there was still no call to employ the Harassing Acts to pressurise Au. 352.Yeung engaged UK solicitors for legal advice (probably in mid-2010 but he was not sure), and he met his UK lawyers to get ready to sue Au in UK. He did not engage lawyers in HK, but tasked Ng to pursue Au and deal with HWW. Yeung claimed there was no point for him to engage in harassment as he was still waiting for proper accounts from Au, but I find his grievance/frustration got the better of him. In my view, even though Yeung could well have afforded to engage lawyers in HK, he refrained from doing so until Au applied for an injunction against him in the present action so that he and his agents (including Moon and Ng) would have the freedom to deploy the Harassing Acts to pressurise Au. 353.Having read the Ng Letters, there were also repeated requests to compel Wong to personally meet Ng at HWW Office to deal with Yeung’s complaints, which were in line with Ng’s conduct in (a) going to HWW Office without appointment but telling Wong’s colleagues otherwise, (b) speaking impolitely to Wong’s colleagues and to Wong by telephone when Wong refused to see him, and (c) sending the Ng Letters to Wong asking for meeting when HWW had repeatedly told him Au would only liaise with Yeung’s lawyers but Yeung did not engage solicitors at that stage. In my view, such behavior in tandem with the other Harassing Acts painted a picture of deliberate coercion to force Au to fall in to Yeung’s/Ng’s demands. (n) Chinese letter/translation 354.Yeung claimed Au/Wong deliberately caused HWW to write to him in English to make it difficult for him to deal with them, and Ng’s protest and request for Chinese letters/translations became a common theme in the Ng Letters. But I find Ng was able to understand and he translated for Yeung who also understood the gist of HWW’s English letters, which was borne out by the responsive replies in the Ng Letters endorsed by Yeung. Further, Yeung gave HWW’s letters to his UK lawyer (fluent in English and Chinese/Cantonese) for consideration, but if he was uncertain as to any aspect of HWW’s letters he strangely did not ask his UK lawyer about it. All this showed Yeung/Ng understood HWW’s letters. In my view, Chinese letter/translation was a convenience and not a necessity for Yeung, and the mantra for same was another tactic to pressurise Au/HWW to cooperate with them. 355.But that said, Au was not entirely innocent either. Wong admitted HWW could have issued Chinese letter/translation, but Au/Wong refused to do so. I am not persuaded that any increased costs (for preparing English translation of any Chinese letter for Marchant) would be of material consideration as Marchant himself admitted Au was the main point of contact over the Harassing Acts in HK and Au tried to keep him out of it. In my view, Au refused to cooperate over Yeung’s request for Chinese letter/ translation because he wished to throw more hurdles in the way of Yeung’s/Ng’s demands (which he knew had a genuine underlying basis even though their approach was problematic). (o) Moon’s 2nd visit to Chan Home 356.Moon claimed that after dinner at Yeung’s home on/about 11 March 2010 he took a walk in the area around Chan Home which was not far away. He was about to return to Shantou, and thought he should tell Chan he would not mediate between Au and Yeung any more so as not to affect their friendship. So when he was on the ground floor near Chan Home, he called Chan’s mobile telephone but was told she would be back later as she was having dinner with her family nearby. Moon called again at about 10:00pm, but Chan said she was shopping with her family to which Moon said he would leave HK and see her another time. 357.I reject such account. In fact, Moon did not leave HK until 13 March 2010, and there was really no urgency to wait for Chan’s return home so late at night. Even on Yeung’s case, Moon could have arranged to meet up with Chan on 12-13 March 2010 or to tell Chan over the telephone that he would no longer involve himself in the Au/Yeung dispute anymore. Moon’s failure to take either step went a long way to show that his account was unreliable. I prefer Chan’s evidence that at/about 10:00pm Moon came with 2 men to press the doorbell of Chan Home, and when Chan did not answer they left after being asked to do so by the building security. I further accept that later in the evening Chan saw from the surveillance camera in her unit that at the ground floor entrance lobby Moon with 2 men pressed the intercom for Chan Home, but Chan refused them entry and they left when the building security checked on them. I am not persuaded this was a friendly visit by Moon. (p) Ng’s 1st visit to Tolo Ridge 358.Au gave evidence there was attempt to see him at Au Home / Tolo Ridge in January 2010 when he was recuperating from serious illness. I find he must have been confused over the timing of such event as there was no dispute Ng went to Tolo Ridge in the afternoon on 12 March 2010. Indeed, Au even produced a captured image of Ng on such visit from Tolo Ridge’s CCTV footage. 359.Ng claimed that since Chan told him Au had retired and would not go to MA-HK, he would visit him at Au Home being his last known address to personally deliver some documents related to Au’s outstanding monies owed to Yeung (ie 4 pages of the 2005/006 Accounts and Au’s P/L Statement) and to convey Yeung’s message of wishing for a face to face meeting to check accounts. But Yeung/Ng never explained why (when they all along knew about Au’s last known address) they did not directly approach him with such request in 2010 and chose to trouble Chan, MA-HK and Ball. In my view, this mode of operation was adopted to increase the pressure on Au by harassing those companies/persons close to him. Further, Ng knew from HWW’s letters that HWW acted for Au in relation to Yeung’s claim, and the fact he never thought of delivering documents to HWW or mailing documents to Au/HWW (when he knew Au would not meet them unless in the presence of lawyers) spoke strongly of Yeung’s/Ng’s insistence on their unilateral agenda which they knew was unwelcome and disturbing to Au. 360.The female security guard at Tolo Ridge denied Ng access and told him Au’s family had moved away. But I am unconvinced (as Au claimed) Ng tried to gain entry by claiming to be a “Mr Chan”. There was no point in such assertion as Ng would have to register his HKID Card particulars with the security guard if allowed entry. Au claimed (but Ng denied) Ng and 2 men returned to Tolo Ridge later on the same day to look around but left after security guards approached/questioned their purpose. Although Au said he was unable to produce any captured image of Ng and the 2 men because the female security guard declined to give it to him after she was told off by the manager of Tolo Ridge’s management office for her earlier disclosure of the captured image from Ng’s 1st visit to Au, I bear in mind Au’s information as to the 2nd visit was hearsay evidence not corroborated by the female security guard whose name was unknown or by any CCTV footage/image. I do not place weight on such alleged 2nd visit. (q) Further telephone nuisance for Chan and MA-HK Office 361.I accept that on 15-16 March 2010 MA-HK Office’s land line telephone was bombarded with continuous calls from an untraceable telephone number, and there were many similar calls to Chan’s mobile telephone over those 2 days. The calls only had unclear background noise, but Yeung’s voice was recognised in 1 message on MA-HK Office’s land line that was recorded (and Au heard the playback of such recording). There was no merit to Yeung’s complaint on lack of access to such recording. When Yeung’s former solicitors requested discovery of such recorded message on 28 November 2010, HWW on 3 and 7 December 2010 wrote to explain it was in computerised digital format and offered electronic production of the relevant digital files, but HWW did not hear further from Yeung’s solicitors. I have no doubt such telephone nuisance (similar to those suffered by MAY-UK and MA-HK previously) related to Yeung and had his blessing. 362.On 16 March 2010, Chan reported these events to Kwun Tong Police Station under Police Report no 1000-7623 which corroborated the existence of such telephone nuisance. Further, in the late night of 16 March 2010 and early hours of 17 March 2010, Chan again received numerous telephone calls on her mobile telephone from 3xxx-xxxx. After answering the first call or two, there was just some background sound. In the evening of 17 March 2010, there were endless calls again to MA-HK Office with unclear background noise, and the caller ID showed long distance calls.On 18 March 2010, there were long distance calls and numerous calls from 9xxx-xxxx to MA-HK all day long. Similar telephone nuisance to MA-HK continued on 22 March 2010. On 26 March 2010, MA-HK was forced to change its entire office telephone system/numbers. Given the nature of the telephone nuisance and its timing in light of the Harassing Acts, I find such telephone nuisance was part and parcel of Yeung’s efforts (whether by himself or his agents) to harass Au (whom Yeung could not reach) by getting at those close to him. (r) Communications between Ng and HWW 363.On 22 March 2010, Ng replied by a Ng Letter to HWW to ask for Chinese translation, to deny the alleged nuisance, to urge HWW to relay his message to Au, and to repeat his demand for a meeting with Au, which were a repetition of his old demands to which HWW had given Au’s response. Wong confirmed with Au there was no change to his instructions, so on 23 March 2010 HWW replied by English letter to refuse a meeting and to insist on communications through Yeung’s lawyers. Ng understood and explained to Yeung the contents of HWW’s letter. Although Yeung claimed he was willing to meet Au in the presence of Au’s solicitors/accountants, such stance was not mentioned in the Ng Letters dated 16, 22 and 26 March 2010. 364.Wong claimed that on 25 March 2010 Ng telephoned to ask him for Chinese translation of HWW’s letter dated 10 March 2010 as well as Au’s telephone number and other contact information. Wong referred Ng/Yeung to their own lawyers, and refused to pass on Au’s contact details. Wong (on Au’s instructions) told Ng he/Yeung should thenceforth only communicate with HWW in writing, but Ng became angry/abusive at which point Wong ended the call. Within a few minutes, Ng telephoned to ask to speak to Wong, and left a message with Wong’s secretary repeating the same demands and leaving a contact telephone number 2xxx-xxxx. 365.On 26 March 2010, Ng sent a Ng Letter to HWW (with copy to Yeung) demanding HWW to reply by Chinese letter, asking Au to arrange a meeting with them and “請[Au]不要做縮頭烏龜”, and denying any nuisance. Ng said he only showed this letter to Yeung after it was issued. Ng considered Au evasive, but Yeung chided him for calling Au “縮頭烏龜” and telling him not to do so anymore. Plainly, Yeung/Ng ignored Au’s stance (repeated many times) of not wanting to meet with them unless in the presence of lawyers and of not acceding to the request for Chinese letter/translation, and pursued their own agenda of making repeated demands in the same vein. Although the Ng Letters were not Harassing Acts on their own, such letters as well as their persistent/insistent tone lent weight to the view that the Harassing Acts were part and parcel of Yeung’s/Ng’s campaign to pester/disturb Au. But following the Ng Letter dated 26 March 2010, there was a hiatus of 3-4 months when Ng was busy at work and did not issue any Ng Letter. (s) Wanted Posters sent to MAY-UK Office 366.On/about 23 March 2010, MAY-UK received a facsimile of a Wanted Poster with Au’s English/Chinese name and a photograph of Au’s face that asserted Au was “wanted”, and Maher sent email to MA-HK/Wong about this. I accept Au was embarrassed by this. I have no doubt such faxed Wanted Poster came from Yeung (or his agent) being the only Chinese person who knew both Au and Marchant and who might be moved to send such material. Then on/about 8 April 2010, MAY-UK again received the same Wanted Poster by facsimile, and Maher reported to MA-HK/Wong by email. Marchant asked whether anything could be done or whether Wong “could get someone to call the number”. Mr Lau criticised Wong for deciding against calling the number which made it impossible to find out more about the alleged nuisance. But I accept at that time Wong believed it was not meaningful to (and all along Au did not want to) contact the persons who perpetrated such debt-collection style nuisance, which step they believed would encourage such conduct. But HWW did eventually pass on information to the police (eg HWW’s letter dated 12 October 2010 to the police enclosing inter alia copy Wanted Poster with telephone number so the police would be able to follow up on the number). I have no doubt Yeung was behind such facsimile nuisance, and reject the suggestion that Au made such elaborate fabrication to frame Defts. (t) Further visit to MA-HK Office 367.Chan claimed that between 12:00 noon and 12:30pm on 10 April 2010 (Saturday) a male stranger loitered at the lift lobby when her MA-HK colleague Francis Lau (“Lau”) went to the washroom. Chan claimed Lau was frightened and ran to the lift, but the stranger followed and asked if Chan/Au were in MA-HK Office. Lau pressed the alarm, got out of the lift at another floor and telephoned staff at MA-HK Office who reported to building management. The stranger was at the front door when Lau returned to MA-HK Office, and the security guard came to escort the stranger away.Yeung/Ng claimed they had no idea about this incident. I bear in mind this was Chan’s hearsay evidence, and Au did not call Lau, relevant MA-HK staff or relevant building management staff to give evidence. I am uncomfortable in placing any weight on such hearsay allegation. 368.Yeung/Ng said Ng reported to Yeung he had difficulty in arranging a meeting with Au, so when Yeung had some spare time on 10 April 2010 (Saturday) they went to MA-HK Office at/about 1:30pm to look for Chan to see if they could contact Au through her. No one answered when they pressed the intercom, and no one seemed to be there when they looked through the glass door. A male security guard who went by told them it was likely MA-HK staff had left for the weekend and suggested they should return on Monday, so they left. I reject Mr Lau’s suggestion that the visit was not directed at Au. Plainly, Yeung/Ng was frustrated by the lack of progress in getting Au to give accounts and to meet with Au, so they took it upon themselves to look for Chan to put pressure on her to get at Au. I prefer Chan’s account that at/about 2:00pm Yeung came with 2 men (presumably one of them was Ng) to MA-HK Office, so she called the building management office and the police. The visitors insisted MA-HK should answer the door, but left before arrival of the police when the security guard told them MA-HK was closed that day. 369.Yeung agreed at/about 3:30pm that day he drove to Nanyang Plaza’s carpark for afternoon tea at a restaurant opposite Nanyang Plaza that he often patronised. He claimed someone flashed car headlights at him to say hello, and saw it was Chan to whom he had not spoken after September 2008. He claimed that after he parked his car he went over for a short polite chat before she left. Yeung tried calling her mobile telephone once to ask her whether she could contact Au for him but there was no answer. I reject such account. First, Yeung would not have driven over to Nanyang Plaza just to the north opposite the restaurant when Tsun Yip Centre (where Yeung had his own carparking space) was just to the west opposite the restaurant. He did not say he drove over to Nanyang Plaza when he came to MA-HK Office just an hour or so earlier. Secondly, given the rather tense meeting in September 2008 and the events that happened to Chan in 2010 as I have found, I do not believe Chan would take the initiative to say hello to Yeung and wait for him to come over for a chat. Thirdly, given that Yeung came looking for Chan just an hour or so ago with a view to get Chan to contact Au, there was no reason for Yeung to have a casual chat with Chan and let her go without mention of his purpose. In my view, Yeung knew or suspected from the earlier visit that Chan was at MA-HK Office, and he deliberately waited for her to leave. So when Chan went down to Nanyang Plaza’s 1st floor carpark to get her car at/about 3:30 pm that day, she saw and tried to avoid Yeung who was there in his car, but Yeung caught up with her and spoke briefly to her before she drove away. I also accept Yeung then called her mobile telephone 3 times but she did not answer any of the calls. (u) Chan’s husband Chiu Kam Tong (“Chiu”) 370.Chan claimed that on 11 April 2010 Chiu received a threatening Chinese SMS message in Chinese[118] from a telephone number which Chan no longer had information because Chan’s telephone was subsequently stolen. Chan claimed the SMS message was forwarded to her mobile telephone, and she/Chiu were disturbed by the threat at the end of the message. Whilst I accept Yeung/MAY-HK had Chiu’s mobile telephone number which was recorded as contact details of Chan’s next-of-kin in her employee records with MAY-HK, I am not prepared to place weight on this SMS message. Chiu was not called to give evidence, and the original SMS message was lost with Chiu’s stolen mobile telephone which made it impossible to verify the source of the SMS message. Moreover, despite her allegation of feeling disturbed by the threat in the SMS message, her evidence about whether she made report about this to the police was unclear. She alleged to have told the police about the SMS message received on 11 April 2010 before the police issued its letter dated 12 April 2010 (see paragraph 372 below), but later said she could not remember whether she told the police, and later still she said she called the police after she received their letter dated 12 April 2010 and was told she had to make fresh complaint but she did not do so, and finally she said she did not report to the police as she thought it was just a nuisance call. This brings me to Chan’s reports to the police. (v) Chan’s reports to the police 371.Chan made 2 police reports on 4 March (police report no 1000-6408) and on 16 March 2010 (police report no 1000-7623), but the police treated them as casual telephone nuisance without taking any signed statement from her. She later gave the 2 police report numbers to Wong, and on 31 August 2010 HWW wrote to the police to request records of her police reports. The police’s reply letter dated 2 September 2010 to HWW was as follows:
As seen above, the police wrote to Chan on 12 April 2010 stating that since she had decided to withdraw her 2nd complaint of telephone nuisance on 16 March 2010, the police would take no further action at that time. Mr Lau submitted there was no satisfactory answer as to why Chan withdrew her complaint on telephone nuisance against MA-HK. 372.But I note that as early as on 24 May 2010, Chan sent email to Wong/Au about her 2 reports to the police. Chan explained in such email that when Ms Li of the police followed up with her about her complaint of telephone nuisance (presumably the telephone conversation between Chan and the police on 29 March 2010 in relation to Chan’s 2nd police report) the police noted MA-HK had changed their telephone numbers (ie the telephone system/numbers were changed on 26 March 2010), so the police “asked to withdraw the case at Police Station”, but Chan “refused as still lots of Telephone Nuisance at 2xxx xxxx”, but she nevertheless received the letter dated 12 April 2010 from the police. Under cross-examination, Chan clarified that when the police called they explained it was not easy to trace nuisance calls made with many telephone cards and constant change of telephone numbers, and their advice was to ignore calls made to the old numbers after new telephone numbers were installed. Although Chan raised objection, she claimed the police by appropriate questions skillfully led her to the persuasive view that this was the only realistic option, so she felt she had to accept the police’s viewpoint (which enabled the police to close their file). In my view, it was not Chan’s initiative to withdraw her complaint, but with the change of MA-HK’s telephone system/numbers she was persuaded to acknowledge further pursuit would be fruitless and in the end she did not disagree to close the matter, which therefore led to the police letter dated 12 April 2010. Be that as it may, the more significant point about the reports to the police was that they were contemporaneous confirmations that the harassments did occur. (w) Further visit to Chan Home 373.On 16 April 2010, a stranger came to the building and rang the intercom for Chan Home. Chan could see from her intercom screen that the stranger was a tall and large man of strong build. Chan believed he was 1 of the 2 men who came to her home with Moon on 11 March 2010. Chan did not answer, and he left shortly thereafter. I also do not place any weight on this incident. Not only did Chan not make report to the police, I am not fully confident of Chan’s recognition of such stranger viewed briefly through CCTV footage on just 2 occasions (at least 1 of which was at night). (x) Ng’s further visits to Tolo Ridge 374.Ng claimed he did not believe Au had moved out of Tolo Ridge, so on 12 May 2010 he went to Tolo Ridge again to look for Au and to deliver some documents to him because there was no reply to the Ng Letters sent to him. He went there at about 12:50pm and asked the security guard whether he could leave a letter for Au, but left when he was told it was inconvenient as Au had moved out. In my view, there was no persuasive answer as to why Ng would insist on attempting to approach Au when he knew Au did not wish to see him without lawyers and he could have written to HWW who had instructions to deal with the matter. The fact Yeung might have a legitimate grievance did not allow him/Ng to force Au to meet them against his wishes. The proper redress was to pursue legal action (as Yeung eventually did by the Counterclaim). Further, it was quite pointless for Ng to make the same attempt again when he was refused entry on the last occasion. I prefer Au’s evidence that Ng attempted to gain access to Au Home by telling the security guard he was sent by a lawfirm to ask for "Mr. Au of Flat 602A", but the security guard refused him entry as no one was at Au Home (Au was in London at that time). 375.Ng then went to Tai Po market for a meal. He claimed that by chance he came across an estate agent with a flat on sale at Tolo Ridge, but interestingly Au said this was the very estate agent whom he retained to market another flat at Tolo Ridge which he had since withdrawn from the market. Ng claimed he decided to try again to gain entry to Tolo Ridge with this estate agent on the pretext of flat-viewing in order to verify whether Au had moved away. Ng returned to Tolo Ridge at 3:21pm, but his attempt was unsuccessful because the security guard said he needed prior appointment with the owner before they would be let in for flat-viewing. This showed Ng’s determination to get at Au, and he was not above subterfuge to make Au face up to Yeung’s demands. (y) Nuisance against HWW 376.Since about 10 May 2010, HWW Office’s telephone lines were blocked by continuous, persistent and repeated auto-dial telephone calls (2-4 hours) some of which contained pre-recorded messages (initially consisting of requests to find HWW’s client Au which led Wong to think they were made by Yeung’s side given his dispute with Au) and some were silent with no messages/words at all. The nuisance calls were picked up by HWW’s receptionist who informed Wong. Au/Chan told Wong this might be connected with Yeung’s complaint about how Au/Marchant dealt with him in connection with the affairs of MAY-UK/MAY-HK. 377.On 17-18 May 2010, HWW’s telephone lines were jammed by continuous autodial calls with identical pre-recorded message consisting of requests to contact Au. This was corroborated by Wong’s email dated 19 May 2010 to Au/Chan with copy to Marchant stating “your old friend [Yeung] has continued his nuisance exercise” by blocking HWW Office’s telephone lines with auto-dialing and pre-recorded message of asking to find Au. So Wong asked for Au’s permission to report to the police (which Au gave in the hope of putting an end to such problem), and asked for Chan’s records of her police reports. So on 24 May 2010, HWW’s accountant Stella Yeung (“Stella”) made a report and gave her statement to the police about the telephone nuisance to HWW. Wong did not recall whether he told Stella the names of Au/Yeung as protagonists of the underlying dispute, but she and all other colleagues[119] knew the telephone nuisance was due to dispute between HWW’s client and related persons. 378.Stella’s statement to the police reported that the 1st nuisance call at 9:00am on 10 May 2010 was a silent call, and there were other nuisance calls (silent calls or occasional pre-recorded putonghua messages in female voice) every day from 9:00am until 5:30pm, which she suspected was client-related but could not give details. She stated “暫時無” further information to help locate the culprit. 379.Mr Lau queried why HWW did not give detailed information about the Au/Yeung dispute to the police, but I agree with Stella that this was best left to be dealt with by the case handler as it touched on client matters, and on 26 May 2010 HWW sent to the police Chan’s email and enclosures (and informed the police they could contact Chan directly) and HWW’s correspondence with Yeung. Mr Lau also queried why Stella referred to initial silent calls but Wong referred to initial pre-recorded messages, but such minor differences did not undermine the fact that telephone nuisance to HWW did occur. Further, the nuisance calls were made to the main telephone line and picked up by the receptionist who told Wong this happened repeatedly many times over. Initially HWW did not know they had to keep record of such nuisance calls, so the 1st call record for 10-23 May 2010 (ie before Stella went to police) prepared ex post facto might have small discrepancies. But after the police asked HWW to keep/provide written details, Wong’s partner Tony Chau (“Chau”) was tasked to collate information from colleagues, to organise/prepare the 5 call records (annexed to Au’s Statement of Claim) and to send letters to the police. The 2nd to 5th call records contained more details. I have no doubt the telephone nuisance suffered by HWW (similar to that suffered by MAY-UK and MA-HK) were pursuant to Yeung’s instigation or had his blessing. The contemporaneous report to the police and 5 call records showed it could not have been fabricated, and Wong confirmed HWW had no disputes with other clients or related persons during that time. (z) Telephone nuisance to TOPMAN 380.On/about 25 May 2010, a customer of MAY-UK TOPMAN sent an email to inform Marchant it had been receiving calls from somebody who seemed to have an issue with MAY-UK, which sounded like pre-recorded voice messages concerning money matters relating to MAY- UK.On the same day, Marchant reported this incident to Wong by email. In my view, the irresistible inference was that Yeung was behind this given the overall circumstances and timing. The frustration in not being able to get to Au was spilling over to a wider net of Au’s associates (eg TOPMAN and HWW) in order to step up the pressure. (aa) Continued telephone nuisance to HWW 381.Since late May 2010, HWW liaised with the service provider for its 6 hunting telephone lines to block the nuisance calls, but to no avail. I accept that eventually HWW could no longer tolerate the line blocking which significantly disrupted their day-to-day operation and business. In July 2010, a new telephone number and lines were added to their office telephone system. (ab) Letters to Ball 382.In/about late July 2010, Ball received 2 English letters from Ng demanding Au to pay money to Yeung, and the 2nd letter enclosed a photograph of Au and his ex-colleagues (“Au Photo”) which Au recognised was his own personal photograph kept in his personal diary that was somehow lost. But as Au did not rely on this as any Harassing Act, I do not propose to say more on this. (ac) Ng Letters 383.Ng claimed as he could not get to Au through others he started to send Ng Letters to Au asking for a meeting with Yeung and for an account of Yeung’s funds. He considered it unreasonable for Au to evade Yeung’s requests, and not to repay Yeung the monies he misappropriated from the Lloyds Account. Ng sent a Ng Letter dated 24 July 2010 in this vein (which Yeung had read/agreed) to Au at Au Home to check whether he had actually moved away (which Ng did not believe), but there was no reply from Au. Ng sent a Ng Letter on 27 July 2010 (which Au received and which Ng showed to Yeung a few days after issuance) chasing for a reply and admonishing Au “不要做縮頭烏龜, 過街老鼠, 你選擇做甚麼, 沒有人可以控制的”. Yeung again told Ng off for his rude language. > Au instructed HWW to write to Yeung again asking him to desist but agreeing to communicate with Au in writing through lawyers, which became HWW’s letter dated 28 July 2010 to Yeung that repeated what was said before. Ng (who understood that such letter stated Au/HWW would not liaise directly with Yeung and brought in other issues) explained such letter to Yeung, who again chided Ng for describing Au as “縮頭烏龜”. I do not accept Ng was only “一知半解” about the contents of HWW’s letter even though on 30 July 2010 he replied to HWW saying he did not understand its contents and asked for a Chinese translation for Yeung.385.In my view, Ng’s/Yeung’s insistence on Chinese letter/ translation and Au’s/HWW’s insistence on English letters were manifestations of both sides’ attempts to be difficult to each other, but the former demand was not really a Harassing Act (and indeed Mr Chan did not rely on the Ng Letters themselves as Harassing Acts). Whilst I appreciate the developments since January 2010 were bothersome, I find Au knew there was an underlying core of genuine grievance on Yeung’s part because he failed to provide proper, complete and accurate accounts of the Property Investment and Lloyds Account, and he knew he was evasive over that. So despite the efforts by Yeung and his agents to cause trouble by approaching Au’s companies/associates to get at him, I am unconvinced Au was worried about his own or his family’s personal safety and well-being whether at Au Home or elsewhere. In my view, he was more bothered, humiliated and embarrassed than truly worried about safety. (ad) Wanted Posters at Tolo Ridge 386.In the early morning on/about 29 July 2010, a Wanted Poster with a photograph of Au’s face with Au’s name, age, nationality and address in Chinese was stuck up on the entrance at Tolo Ridge. It was taken down, but it must have been embarrassing and awkward for Au and his family as neighbours, guards and visitors would have seen the Wanted Poster. On/about 13 August 2010, a 2nd Wanted Poster with a picture of Au’s face and Chinese characters was again posted at the entrance of Tolo Ridge. Au took it down but expected it had been seen. On the following day, yet another Wanted Poster with a picture of Au’s face and Chinese characters was posted at the entrance of Tolo Ridge. It stated “見字速與本公司聯絡 美宜” or “見字請速與本公司聯絡: 2xxxxxxx”. The estate management reported the matter to the police at Tai Po. 387.Ng denied any involvement, but his suggestion that “美宜” on the Wanted Poster was not necessarily MAY-HK was, quite simply, far-fetched. In light of the timing, the contents of the Wanted Poster and other Harassing Acts, Yeung must have instigated/authorised such act. But I agree with Ng the Wanted Poster would have caused embarrassment rather than to have instilled fear. After all, Au knew this would likely stop if he sincerely faced up to Yeung’s demands for proper accounts of the Property Investment and Lloyds Account, but he was reluctant to do so. (ae) Stalking 388.These stalking acts no longer featured as Harassing Acts in Mr Chan’s closing submissions, so I will be brief about it. Au claimed that at about 6:45pm on 30 July 2010 Eric was followed by Yeung in his own car FS 899 when he drove from MA-HK Office to visit his uncle (“Uncle”) in Siu Sai Wan, and both Eric and Uncle recognised Yeung. Yeung knew Uncle since the time when he was still friends with Au, and Au said it could not have been coincidence that Yeung was also in Siu Sai Wan that day. On the other hand, Yeung claimed he drove to Siu Sai Wan that day to buy vehicle accessories, but Au or his agent must have spotted his car (and Au knew its registration number) parked in the vicinity and then made up the story to frame him (for he would not have known when Eric would leave MA-HK Office). Yeung complained that Eric (let alone the few other witnesses alluded to in Au’s 2nd affirmation filed on 21 March 2011) was not called to give evidence, and no record was produced to show when Eric left the Nanyang Plaza carpark when Yeung fairly produced record of his exiting Tsun Yip Centre carpark at 6:50pm on 30 July 2010. Yeung disputed the opportune coincidence of Eric leaving the Nanyang Plaza carpark just when Yeung allegedly exited the Tsun Yip Centre carpark. 389.Au in his 2nd affirmation filed on 21 March 2011 claimed that at/about 9:45am on/about 3 August 2010 Eric was followed by a stranger in another car (but Eric could not remember its licence plate number) from Tai Po to Siu Sai Wan where Eric dropped off Au’s domestic helper at Island Resort where (to Yeung’s knowledge) Uncle lived, and the stranger followed Au’s domestic helper into the lobby foyer. However, Au’s contemporaneous email to Wong on 3 August 2010 stated inter alia:
Such email did not allude to any uncertainty as to the licence plate number, and I reject Au’s explanation that he decided Eric should say he was not sure and could not remember when Eric told him he could not clearly see the licence plate number from the rearview mirror. But even this could not explain why Au’s account changed from dropping off Paula to dropping off Au’s domestic helper. Eric was not called to give evidence. As it turned out, the licence plate number given by Eric belonged to a car that was owned by a company wholly unrelated to Yeung. 390.Yeung complained this was fictitious drama designed by Au to frame him up. In my view, Mr Chan was wise not to rely on the 2 incidents of stalking as the Harassing Acts. Au might see shadows in every corner, but given the aforesaid weaknesses and the failure to call Eric to give evidence, I am unable to place weight on such allegations. (af) Moving out of Au Home 391.Au claimed he/Paula could no longer stand the pressure/ embarrassment, so on 3 August 2010 they moved out of Au Home to a hotel and stayed there until 17 September 2010. In my view, it was more due to the embarrassment and humiliation (especially with the Wanted Posters at Tolo Ridge) and need for quiet recuperation from illness rather than any fear for personal safety. (ag) Further Ng Letters 392.There were a series of correspondence (ie Ng Letters to Au/HWW[120] and HWW’s letters[121] to Yeung) from 30 July to 4 September 2010. The Ng Letters repeatedly requested for Chinese letters/translations (although Ng could explain the contents of HWW’s letters to Yeung and could reply substantively to HWW’s letters), demanded explanations about particular Remittances/Cheques, accused Au of cheating, fraud and/or misappropriation, urged Au to face the music and render proper accounts to Yeung, and to deny any nuisance. In my view, the more Ng delved into the Remittances/Cheques, the more questions his review threw up and the more aggrieved Yeung became over unanswered queries in the absence of proper accounts from Au. Likewise, the tone of the Ng Letters also became more strident, belligerent and accusatory.[122] On the other hand, HWW’s letters reiterated Au would only communicate through lawyers and would not discuss with Yeung/Ng, claimed the parties’ dealings had been settled by the 2006 Account and payment of the sum of £121,058.90 to Yeung in September 2006 with no further debt due to Yeung (and Au instructed HWW not to deal with queries over individual Remittances/Cheques), and demanded Yeung/Ng to cease harassment to Au and those associated with him “by making non-stop telephone calls, stalking, putting up defamatory posters, sending letters and emails to them at their offices and home” (see HWW’s letter dated 9 August 2010). Au did not personally reply to the Ng Letters due to ill-health and his reliance on the 2006 Account. (ah) Visits to HWW Office and telephone nuisance 393.At/about 4:00pm on 2 September 2010, Ng went uninvited to the HWW Office. Ng told HWW’s receptionist he had an appointment to see Wong (which was not true), and Ng’s manner was reported to Wong as disgruntled. I reject Ng’s evidence that he went to HWW Office to seek help with Chinese translation, and that he quietly and voluntarily left when Wong was not there. In my view, Ng went to HWW Office to compel a meeting with Wong to get at Au to address Yeung’s demands. Mr Lau submitted the visit was for a legitimate purpose of seeking a meeting with and proper accounts from Au, and there was no intimidating/threatening act. Whilst I accept in principle that Yeung’s request for accounts was justified and Yeung was entitled not to engage lawyers, these matters would not give licence to Yeung to force a meeting with Au against his wishes. 394.Wong became concerned after such visit, and arranged to have a surveillance video camera installed at the reception area of HWW Office that very evening. He also asked Chau to talk to the police officer in charge of their telephone nuisance complaint, but the reply was the police could do nothing. On the following day, Ng telephoned HWW Office demanding why Wong had not called him and requested to speak to Wong. He was told Wong was not available to speak to him. I find Ng was impolite/angry during his call, and he did not call just for Chinese translation of HWW’s letters. 395.There was whole day telephone nuisance to HWW Office on 8 September 2010 similar to what was suffered on 17-18 May 2010 and by MA-HK in March 2010, which caused inconvenience for HWW’s business and operations for the entire day. Wong consulted counsel and advised Au who agreed to give Yeung and his associates a “last chance” to desist, failing which Au would take out legal proceedings. So on 2 October 2010, Au instructed HWW to send a “last warning” cease-and-desist letter to Yeung telling them to stop behaving in this manner, otherwise legal proceedings would be instituted and Au would seek an injunction against Defts. But HWW carelessly used its new letterhead for such letter which gave their newly installed telephone number. 396.On 5 October 2010, Ng visited HWW Office requesting to meet Wong who refused, and Ng left a note asking Wong to call Yeung at 2xxx-xxxx. HWW produced webcam photographs of Ng taken on that visit. Mr Lau submitted Ng behaved in a normal way, but it did not alter the fact Yeung/Ng knowingly and repeatedly pushed for meeting/accounts which he well knew Au was unwilling to give and which would cause annoyance to Au. On 7 October 2010, Ng accompanied Yeung to report Au’s alleged fraud to the police. Irrespective of the merits, there was ample evidence to show there was indeed harassment to Au, his family members, business partners, staff and his lawyers. In the afternoon of 8 October 2010, there were yet again non-stop calls to HWW Office seeking to speak to Wong about Au, which blocked HWW telephone lines and caused disruption and inconvenience. (ai) Signboards at Tolo Ridge 397.At about 4:30pm on 11 October 2010, a large styrofoam signboard was put up outside Tolo Ridge together about 40 A4 sized Wanted Posters, so report was made to the police. When the policeman came at 5:15pm, he took down details of another Wanted Poster at the same spot. The large signboard included Wanted Poster, copies of various Ng Letters to Au and Au Photo from his lost diary. The combination of these documents on the signboard made it quite clear it was the handiwork of Yeung and/or Ng and/or Yeung’s agents. Mr Lau said it defied common sense for Yeung/Ng to put up the signboard with materials that led inexorably to them after HWW accused them of nuisance. But then Yeung/Ng never listened to what HWW told them all along, eg that Au would not meet them without lawyers or he would not address their queries because of what he considered settled 2006 Account. I wholly reject the allegation that Au made up the signboard and Wanted Posters as self-inflicted acts to frame Yeung up. 398.On 12 October 2010, HWW wrote to the police reporting on their letter to Yeung dated 2 October 2010, Ng’s visit to HWW Office on 5 October 2010, telephone nuisance at HWW Office on 8 October 2010 (together with the 4th call record) and Yeung/Ng putting up Wanted Posters at Tolo Ridge, and urging for police action. In my view, such letter to the police, the Wanted Posters and the signboard were clear contemporaneous corroboration of such harassments to get at Au. (aj) Wanted Posters near Nanyang Plaza 399.On 14 October 2010, 25 A4 sized Wanted Posters (similar to those found outside Tolo Ridge) were posted in the vicinity of Nanyang Plaza. I agree this was done by or on behalf of Yeung because some of these Wanted Posters were printed on recycled paper that came from the MAY-HK Office (as evident from MAY-HK’s office fax number shown on the reverse page). Au gave copies of these Wanted Posters with such reverse pages to HWW. On 3 December 2010, HWW made discovery of 3 Wanted Posters with reverse pages showing recycled paper from MAY-HK Office. 400.Yeung claimed the Wanted Posters were part of Au’s plan to frame him up, and suggested it was inherently improbable that he or MAY-HK’s employees would be so foolish as to leave such damaging footprint. I find it was simply carelessness on their part, and the suggestion that Au would somehow get hold of recycled paper with MAY-HK’s fax number being advertisements faxed to MAY-HK Office and then used them to print Wanted Posters to frame up Yeung was far-fetched and improbable. There was no basis to think Au would have access to MAY-HK Office after he had left for 5 years or more. There was just Yeung, Ng and Lam at MAY-HK Office, and I agree with Mr Chan that the theory that someone would retrieve fax papers from the dumpster was fanciful. Ng then said MAY-HK would throw away advertisements faxed to MAY-HK Office, and the building’s cleaning lady would collect them for resale to the shop opposite the building. But I could not see how Au would be able to forage among the paper garbage and pick up these very pages with MAY-HK’s fax number. Such coincidence was quite incredible and unbelievable. (ak) Continued telephone nuisance to HWW 401.On 18 and 21 October 2010, HWW was again bombarded by non-stop nuisance calls that blocked the office lines. On 21 October 2010, HWW’s new office telephone number was blocked by these non-stop calls for the first time. In my view, this came about because Yeung/Ng discovered the new number from HWW’s new letterhead for their letter dated 2 October 2010 to Yeung. On 22 October 2010, HWW once again reported the telephone nuisance to the police by way of letter that enclosed the 5th call record, and urged for police action. (al) Visits to MA-HK and Chan Home 402.On 27 October 2010, a “Ar Hung” went to MA-HK Office to ask Chan to repay a debt, but Chan found the debt questionable and refused his demand. Then at around 12:30pm Ng came to MA-HK Office asking for Au. When told Au was not there, he asked Chan to give some papers (which Ng said were copies of 9 Ng Letters) to Au and left. At 9:30pm that night, “Ar Hung” looked for Chan (who was out for dinner) by pressing the intercom for Chan Home. Chiu and Chan’s son saw Ar Hung with 2 men on the CCTV camera and did not let them in, and they left after a few minutes. On 29 October 2010, according to Chan, Ng went to MA-HK Office to follow up on last visit. Chan/MA-HK refused to open the door and called the police, “Ar Hung” appeared shortly afterwards, and they continued to press the doorbell. Chan said they refused to leave even when the security guard came, and it was after the police came and spoke to them that they were persuaded them to leave. But Ng claimed a stranger came up and tried to talk to Chan (who was allegedly indebted to him) on the intercom, and when the police arrived Ng clearly told the police he did not know the stranger, and in fact he thought the police came because of the presence of the stranger who alleged to be Chan’s creditor. 403.Mr Lau queried whether visits by unknown men or telephone nuisance Chan suffered were due to Chan’s personal indebtedness. I do not propose to rely on the appearance of “Ar Hung” referred to in the above paragraph as after all they were not relied on as Harassing Acts. But it did not alter the fact that there were direct communications by Yeung, Moon and Ng with Chan and I have made findings in relation to the earlier incidents as against the wider picture of similar telephone nuisance and harassment in light of contemporaneous complaints to the police and to HWW. (am) Graffiti vandalism at Tolo Ridge 404.At/about 5:00pm on 29 October 2010, Tolo Ridge’s estate management office informed Au there were again notices similar to the Wanted Posters posted near Tolo Ridge. This time it was in “debt collector” style with Au’s name and address sprayed on the approach road leading to Tolo Ridge in white, black and red paint and on the power exchange fuse box for the estate in red paint. Au took photographs and made report to the police, and he gave a statement to the police too. I have no doubt the graffiti vandalism was instigated by Yeung, and I find Au felt uncomfortable, embarrassed and humiliated even though he knew Yeung was justified in seeking accounts of the Property Investment and Lloyds Account. (an) Letter before action and Claim 405.On Au’s instructions, HWW sent final pre-action letter dated 29 October 2010 to Yeung with (as advised by counsel) Chinese translation that (a) alleged the harassments were Yeung’s doing or that of Ng, Moon or other agents acting on Yeung’s/Ng’s order, (b) demanded undertakings to Au and (if necessary) to the court not to any cause nuisance, trespass and harassment, (c) relied on the 2006 Account and payment pursuant thereto as settled accounts, and (d) expressed willingness to carry out re-account by accountants if Yeung agreed to pay for his time and accountant’s fees and if Yeung agreed to re-open Au’s contra-account. 406.There were further telephone nuisances caused to HWW in the mornings of 1-2 November 2010. On 4 November 2010, Ng sent a final Ng Letter to HWW in the same vein, and Plfs commenced the present action and applied for an injunction to restrain Defts’ harassment. On 12 November 2010, Defts gave the Undertakings. The harassments to all involved parties ceased after the Undertakings were given. (ao) Summary 407.Save for certain aspects of the evidence that I am unable to place reliance on as explained above, I am satisfied Au established the Harassing Acts, and that the acts done by Ng/Moon were attributable to Yeung. There was no reason for Au/Wong to conjure up nuisance calls or repeated visits or Wanted Posters. The objective evidence, eg styrofoam signboard with Au Photo and Ng Letters, Wanted Posters on MAY-HK recycled paper, etc, showed that the Harassing Acts were necessarily connected with Yeung, and as Ng was the only staff at MAY-HK (apart from Lam) and was tasked to write the Ng Letters and to seek out Au for meeting/ accounts, I find it probable the Wanted Posters that were posted up in the street, sent by fax and fixed to styrofoam board originated from Ng with Yeung’s consent/connivance as part of the campaign against Au and his associates. These acts taken together with other Harassing Acts (eg unwelcome visits, graffiti vandalism etc) constituted a campaign of repetitive conduct by Ng/Moon on behalf of Yeung for the better part of 2010 that went beyond what was reasonable. In my view, they were done with the view to cause and it did cause annoyance and embarrassment. 408.There was some suggestion that the Harassing Acts were not sufficiently repetitive and some acts of themselves were not harassment. However, the activities must be considered as a whole, and there was no need for each act to be repetitive or each act to be a harassing act per se. Looking at the overall picture as a whole, I have no doubt the Harassing Acts amounted to a repetitive campaign of harassment practised by Yeung directly or through his agents Moon, Ng and/or others against Au and his associates. Even though I have found there was an underlying core of genuine grievance over Au’s evasiveness and failure to give proper accounts, the Harassing Acts were meant to pile up pressure against Au to create the sense that there was no escape for him. I find Defts liable to Au for the tort of harassment. XVII. RELIEFS FOR CLAIM 409.As against Yeung and Ng, Au sought general compensatory damages for embarrassment, distress and humiliation. Mr Chan referred me to Lau Tat Wai in which A Chan J awarded aggravated damages at HK$600,000 (without separate head of general compensatory damages) and exemplary damages at HK$200,000. Mr Chan also cited Sheck Gee Qun v Wong Wai Kuen & ors [123] in which a sum of HK$300,000 was awarded for mental disturbance, humiliation, damage to dignity and fear. Mr Lau referred to Shen Xing in which aggravated damages was awarded for harassment, trespass and private nuisance. I have carefully considered the awards in light of the facts of these authorities, but each case must turn on its own facts. 410.Here, although (a) the Harassing Acts against Au and his associates (which caused disturbance to Au at a time when he was ill) lasted over almost a year, (b) the Wanted Posters and styrofoam board were humiliating and embarrassing, and (c) Au had to move to a hotel temporarily, it must be remembered that apart from events at Tolo Ridge Au did not suffer at first hand Defts’ Harassing Acts, and Au knew Yeung did have a genuine grievance about inadequate accounts albeit inappropriately expressed and Au knew he had been evasive. It was also fortunate that Au did not suffer from any recognisable psychiatric condition as a result of the Harassing Acts. Taking all circumstances including the type, duration and scale of the Harassing Acts, I consider a fair and appropriate award against Yeung and Ng would be HK$400,000. 411.Mr Chan accepted the claim for damages against Moon largely fell away due to discontinuance of MA-HK’s claim. However, I agree that sufficient basis had been shown for permanent injunctive relief prohibiting acts of harassment vis-à-vis Au against all 3 Defts, especially when the matter had to go forth with account/inquiries under the Counterclaim. 412.I therefore grant judgment on the Claim in favour of Au as follows:
There is no reason why costs should not follow event. I also grant a costs order nisi that Defts do pay Au costs of the Claim (including all costs reserved if any) to be taxed if not agreed. XVIII. RELIEFS FOR COUNTERCLAIM 413.As for the Counterclaim, obviously as a matter of principle Yeung was entitled to an order for proper accounts of the Property Investment and Lloyds Account and an enquiry as to what is due to Yeung upon taking of such accounts, and an order for payment of the sum found due to Yeung (if any). Such account and inquiries would necessarily include an account of profits as a result of deployment of Yeung’s assets and properties, but such accounts and inquiries would be subject to the Caveats and would be taken in light of the findings above. I also order that the above accounts and inquiries be heard before a Master of the High Court. 414.Both Mr Chan and Mr Lau agreed that due to the complexity of the matter (eg certain matters to be carved out of the accounts and inquiries which are to be undertaken subject to certain Caveats), the parties would work out the final order for approval by the court after this Judgment is handed down. I hereby grant the following directions:
415.As for costs of the Counterclaim, there is no reason why costs should not follow event. I grant a costs order nisi that Au shall pay Defts costs of the Counterclaim (including all costs reserved if any) to be taxed if not agreed with certificate for two counsel. This case had much factual/ accounting complexity, and this court had been aided by helpful tables/ schedules prepared by Defts’ counsel that were subsequently updated by both sides. 416.I thank counsel for both sides for their helpful assistance.
Mr Bruce Lau and Ms Margaret Chan, instructed by Chong & Co, for the 1st, 2nd and 3rd defendants Table 1A – Chan RTable
Table 1B – Lau RTable
Table 2 – Cheques R/Table
Table 3 – Transfers Table
[1] M.A.Y. Trading (HK) Limited’s merchandiser / “跟單” until about 28 February 2005, MAY Trading’s registered shareholder until 5 July 2005, and MAY Trading’s / MA-HK’s merchandising manager until September 2014 [2] see MAY-HK’s 1998 annual return (also 2002-2004 annual returns lodged with the Companies Registry on 22 August 2002, 11 September 2003 and 19 September 2004 as folios C18, C21 and C22) [3] see MAY-UK’s AR dated 31 January 1995 retrieved by Yeung’s son from the internet [4] see Return of Allotment of Shares dated 31 January 1995 (also share certificate issued on 23 June 1995 stating 333 shares were allotted to Yeung (“Share Certificate”), and the Three’s dividend vouchers dated 22 January 1997 and signed by MAY-UK’s accounting officer Maher Malek stating the dividends were calculated on the basis that each had 333 shares (“Dividend Vouchers”)) [5] see CB/37-38 (see paragraph 148 below) which indicated 1-2 Lorenzo Street was to be let, and MAY Partnership’s annual accounts showed it earned rental income and service charges [6] eg Au’s/Marchant’s alleged dilution of Yeung’s shareholdings in MAY-UK, and the subsequent compulsory purchase of his shares [7] eg Au’s pleadings coined the term “MAY Partnership” to also describe the Property Investment Agreement [8] eg rates, utilities, council’s fees, service charge, etc [9] Items 25 and 31 were in Euros (€), but other Items were in GBP (£) [10] ie (a) no audited/proper accounts of the Property Investment Agreement had ever been produced, (b) MAY Partnership was the only company involved in the Property Investment, (c) only 1 UK Property was purchased in the name of MAY Partnership, (d) no bank statements of MAY Partnership were available for inspection, (e) no information on purchase/sale price or no completion statements for UK Properties were available as all documents had been forwarded to the auditors, and (f) all computer-stored ledgers of the Property Investment without any valid supporting document could be altered at will [11] ie (a) total Remittances received from Yeung in UK bank accounts for use under the Property Investment Agreement, (b) audited or any accounts of the Property Investment Agreement, (c) PIA Properties acquired or proposed to be acquired under the Property Investment Agreement, and (d) the purchase/sale prices, completion statements and date of disposal of each such PIA Property [12] see Star Glory Investment Ltd v Kai Tuo (H.K.) Technology Co Ltd & ors HCA3523/2002 (unreported, 13 August 2005) para 12, Esquire (Electronics) Ltd v The Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439, 494, Lam Rogerio Sou Fung v Tan Soon Gin George HCA2576/2005, Chu J (as she then was) (unreported, 5 May 2011) paras 39-40, Hua Tyan Development Ltd v Zurich Insurance Co Ltd (fka Zurich Insurance Co) & anor [2012] 4 HKLRD 827, 835, and Hui Cheung Fai & anor v Daiwa Development Limited & ors HCA1734/2009, DHCJ Eugene Fung SC (unreported, 8 April 2014) paras 77-83 (see also The Ocean Frost [1985] 1 Lloyd’s Rep 1, 57) [13] Defts averred (but Au denied) (a) Au under-accounted Yeung’s/MAY-HK’s Remittances for the Property Investment, (b) Au under-accounted profits made by the Property Investment, (c) the Transfer of £200,000 from the Lloyds Account on 9 November 2004 was wrongfully treated as repayment to Yeung, and (d) the Remittances to Devonshires (Items 15-17) had not been fully refunded [14] see In re H & ors (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563, 586 (and also HKSAR v Lee Ming Tee & anor [2004] 1 HKRD 513, 532-535, Nina Kung v Wang Din Shin (2005) 8 HKCFAR 387, 440-441, Solicitor (24/07) v Law Society of Hong Kong [2008] 2 HKLRD 576, 601-602, and News Cleaning Services Company Limited v Watson Environment Management Limited HCA2244/2009, G Lam J (unreported, 14 June 2013) paras 39-45) [15] eg Au was one of Wong’s clients, and Wong/HWW also acted for Kenny Ng (associated with Au/Marchant) in the FAL Dispute referred to in paragraph 83 below and for Au/Marchant in their negotiations for purchase of Yeung’s interests in 1-2 Lorenzo Street and in the early stages of the present action [16] 33rd ed paras 20-012 – 20-013 at p 545 [17] 5th ed para [26-035] at pp 910-911 [18] (2013) 16 HKCFAR 681, 733-734 [19] 5th ed para [26-085] at p 916 [20] 33rd ed para 20-015 at pp 545-546 [21] [2006] 3 HKLRD 381, 387-388 (see also Burdick v Garrick [1869-70] 5 LR Ch App 233, 239-240 and 243) [22] see Snell’s Equity 33rd ed para 20-015 at pp 545-546 (see Libertarian Investments Ltd at pp 733-734) [23] see Snell’s Equity 33rd ed para 20-016 at p 546 [24] see Halsbury’s Laws of Hong Kong Vol 26 para [165.045] at pp 202-203, Equity Doctrines and Remedies para 26-100 at p 918, and Anglo-American Asphalt Co Ltd v Crowley Russell & Co, Ltd [1945] Ch D 324 at 331 [25] see Halsbury’s Laws of Hong Kong Vol 26 para [165.045] at pp 202-203 [26] see Snell’s Equity 33rd ed para 26-100 at p 918 [27] “…… the plaintiff’s agreement to a settled account may be implied: …… if one merchant sends to a merchant in another country a current account on which a balance is made due to the former, and the latter keeps the account by for two years without objection, ‘the rule of this court, and of merchants’, is that it is a settled account” (see Snell’s Equity 33rd ed para 26-100 at p 918) [28] see Snell’s Equity 33rd ed para 20-016 at p 546 [29] see Halsbury’s Laws of Hong Kong Vol 26 para [165.046] at p 204 [30] see Equity Doctrines and Remedies para 26-120 at p 920 [31] see Halsbury’s Laws of Hong Kong Vol 26 para [165.046] at p 204 [32] see Halsbury’s Laws of Hong Kong Vol 26 para [165.046] at p 204 [33] see Equity Doctrines and Remedies para 26-120 at p 920 and In re Webb [1894] 1 Ch 73, 80 and 82 [34] see Bristol & West Building Society v Mothew [1998] Ch 1, 18 [35] see Libertarian Investments Ltd at pp 707 [36] see Underhill and Hayton, Law Relating to Trusts and Trustees 17th ed para 1.50 at pp 28-29 [37] see Libertarian Investments Ltd at pp 704-706 where Ribeiro PJ explained that an obvious example was the “agency” type of situation where a person receives money or other property for and on behalf of or as trustee of another person [38] see Libertarian Investments Ltd at p 706 [39] see Libertarian Investments Ltd at p 707 [40] see Snell’s Equity 33rd ed para 7-005 at p 142 and Libertarian Investments Ltd at pp 703-704 [41] see Bristol & West Building Society at p 18 [42] see Snell’s Equity 33rd ed para 7-015 at pp 149-151 [43] see Snell’s Equity 33rd ed paras 7-041, 7-054 and 20-042 at pp 171-173, 184-185 and 554 [44] see Kwan Yuen Mei v Lee See Ching & ors HCPI 570/2009, DHCJ Lok (as he then was) (unreported, 9 October 2012) para 33, Yung Tai Yin v Chan Yuen Tung & anor HCPI1225/2014 (unreported, 4 Nov 2015) at paras 46-47, and Clerk & Lindsell on Torts21st ed (2014) paras 6-01 – 6-02 at pp 379-380) [45] Hunter & ors v Canary Wharf Ltd [1997] AC 655, 723 [46] at p 723 [47] (2007) 10 HKCFAR 480, 491 [48] [1940] AC 880, 902-903 [49] see also Clerk & Lindsell on Torts para 20-06 at pp 1399-1400, Lau Tat Wai v Yip Lai Kuen Joey [2013] 2 HKLRD 1197, 1205, and Tort Law and Practice in Hong Kong 3rd ed (2014) para 12.011 at p 552 [50] [2014] 5 HKLRD 60, 84-86 (upheld on appeal in CACV186-187/2014 (unreported, 19 March 2015)) [51] para 20-09 at pp 1402-1403 [52] HCA1680/2013 (unreported, 9 April 2014) paras 12, 19 and 41-43 [53] [1997] AC, 687, 691-692 [54] HCA216/2008 (unreported, 3 June 2015) [55] [2013] 3 HKC 361, 367 [56] HCA4/2005 (unreported, 30 December 2015) para 18 [57] see paragraph 5.2 of the UK Defence [58] Yeung secured banking facilities for MAY-HK which increased to HK$13,000,000 in early 1998 for which he/Lee gave unlimited personal guarantees and mortgages over 3 HK properties, and Yeung mortgaged his properties to borrow about ¥20,000,000 to ¥30,000,000 in Mainland China to expand Fu Shing’s production capacity to take up orders from the Garment Business [59] Lee was just a nominee director / shareholder for Yeung [60] Au’s/Marchant’s beneficial shareholdings in MAY-HK were held via corporate vehicle / relative (see paragraph 7 above) [61] eg documents relating to the Property Investment and/or Lloyds Account [62] after disputes arose between Yeung and Au/Marchant, Yeung’s son ascertained from the internet Yeung was initially 50% shareholder of MAY-UK (see paragraph 9 above) [63] including Pat in the accounts department, Chan in the merchandising department, a manager surnamed Wong who worked in Shantou, and Au’s younger sister Au Wan May [64] Marchant said such salary payment continued until October 2004 (see Yeung’s handwritten notes at CB/10 that stated “另歐生及J神每月在公司所提取的工資為每人HK$15,000.00到現在約HK$15,000.00 x 120 個月 = $1,800,000.00”) [65] Au said this was evidenced by Yeung’s handwritten notes in CB/9-15 that showed some contra-account calculations for Yeung, “J 神” (Marchant) and “歐生” (Au), and by Au’s/Yeung’s handwritten notes in CB/35 that showed some contra-account calculations for 2002/2003, which came together in CB/36 (a list of Yeung’s/ MAY-HK’s Remittances to Au’s order with yearly sub-totals and a grand total) that Au claimed were his drawings on his own contra-account (and according to Yeung there was a document similar to CB/36 for Marchant with a similar shortfall of about HK$600,000-HK$700,000 that had been lost) [66] Au said the 4% Commission was to be held by Yeung on long-term accumulative rather than yearly distributive basis [67] see paragraph 26.1 of the UK Defence which referred to July 2002 (but MAY-HK’s amended 2002 AR gave the date as 17 June 2002) [68] which clearly showed distribution of the Three’s entitlements was based on revenue/ turnover [69] eg establishing samples department in Shantou, moving the merchandising and other departments to Mainland China, and shrinking MAY-HK’s office staff from 8-10 persons to even fewer staff (and Au’s younger sister Au Wan May left MAY-HK) [70] after 9 November 2004 Au still issued Cheques 00042 and made 3 Transfers to himself/Paula in 2005 (see Cheques and Transfers Tables) [71] these bills were significant as Fu Shing’s annual turnover was ¥400,000,000 to ¥500,000,000 [72] but expecting MAY-HK to soon earn profit for the year and such annual profit would gradually reduce the accumulated loss position and in due course enable MAY-HK to become truly profitable [73] in contra-distinction to ½ Ratio for the Three’s beneficial shares in the Garment Business [74] CB/9-15 and CB/35-36 only concerned the Garment Business, and the “mixed record” in CB/37-38 largely concerned the Property Investment and gave no indication of any contra-account arrangement [75] see footnote 80 below that referred to distribution of HK$1,000,000 among the Three when there was no overall profit in 1998/1999 [76] the turnover of HK$87,000,000 given by Au was somewhat different from the turnover for 2002 (HK$90,459,176) and 2003 (HK$81,251,450) in MAY-HK’s AAs [77] Yeung wrote on CB/35 “由2002年度加大4%[illegible]訂” and “印花稅 = 1,200 – 1.6 [illegible]1.5% 共計3.1%”, so the extra commission was agreed at 4%, but PRC taxes were at 1.6% + 1.5% = 3.1% (not 3% as Au alleged) [78] eg Yeung’s annotation of “歐生上年度多收$863,719.69” on CB/14 which reflected Au’s shortfall after end-of-year adjustment [79] Yeung claimed he/Au had discussion over money matters in respect of the Garment Business in/about 2000 or 2001, so Au wrote down some calculations and Yeung made some written annotations on CB/14 which Au eventually took away [80] Yeung said at a meeting in HK Yeung recorded on CB/12-13 the contra-account amounts for Marchant (“J神” or “馬田”) and Au (“歐生”), including, say, a sum of HK$1,000,000 to be distributed to the Three in 1998/1999 but Marchant insisted the exact amount (HK$333,333) for each be recorded [81] Yeung said he wrote CB/9 on 22 May 2004 (noting inter alia that £45,000 would be remitted from UK to Shantou and that Au/Marchant made some drawings) and showed it to Au as Au/Marchant were to withdraw from MAY-HK [82] Yeung said he wrote the contra-account calculations in CB/15 on 16 November 2004 upon Au’s/Marchant’s departure from MAY-HK [83] Yeung said once the Three worked out the contra-account calculations he gave the papers to Au (who produced them in the present action), but (a) he could not remember whether he gave CB/12-14 to Yeung, and (b) there might have been other calculation papers over the years which he had not kept [84] eg Au bought various UK Properties, upgraded his UK home from 72 Canary Wharf to 226 St Davids Square, Poplar, London E14 2WE and then to 426 St Davids Square, and gifted UK Properties to Eric and Erica [85] although the entitlements were described as “provisional”, Yeung had no intention to re-open the contra-accounts for the Garment Business [86] see Yeung’s notation of “香港公司及英國公司先分部份合共$15,516,112.30 分三人每人可得$5,172,037.43” on CB/10 (my emphasis) [87] of the 10 Properties, only 10 Manchester Road was tenanted (see paragraph 158 below), and some (eg 7 Manchester Road and 323 & 366 Canary Wharf) were sold as confirmor sales (see paragraphs 156D(2) and 156E(1) below) [88] see CB/37 in which Yeung recorded Au’s information that “每月供款約£10,000 x 20 年 到現在欠銀行£1,400,000” [89] Au knew the overall profits for the 10 Properties were just £47,309.71 – a paltry sum compared with the capital outlay [90] even Au himself confessed he only made 1-2 Remittances from the Lloyds Account back to Yeung/MAY-HK [91] ie the Contra-Account Arrangement only applied to the Garment Business and not the Property Investment and Lloyds Account, and Au’s contra-account under the Contra-Account Arrangement was in constant deficit [92] eg cash bonus payable to Maher – see paragraph 243 below [93] eg cash payment for cheaper plumbing services for 1-2 Lorenzo Street – see paragraph 239 below [94] Au knew the clear segregation between the Garment Business and Property Investment, and even told Yeung to treat 1-2 Lorenzo Street held by MAY Partnership with its own annual accounts separately from other PIA Properties (see paragraph 148 below) [95] being “UBK PLC MORT A/C AU & YEUNG” (eg C5/1143) and “UBK PLC MORT A/C YEUNG YS (eg C5/1146), and also “AUB PLC MORT A/C MNVMA05513790 01” (eg C5/1157) [96] Marchant agreed he was aware of rent and bills received, and he would tell Au about the same so that Au could keep track of such income/expenses [97] the Garment Business was only mentioned in passing during discussions, and in this respect Yeung recorded “MAY UK現存款245千以打稅” [98] referred to variously as “MAY Property Investment Company”, “MAY Property Investments Limited” or “MAY Property Investment Limited” [99] eg moving house to 72 Canary Wharf, then to 226 St Davids Square and further to 429 St Davids Square, and also gifting his children with UK Properties [100] remittance of £100,000 from MAY-HK to MAY-UK on 20 September 1999 – see bank’s customer advice at C6/1346 but no Journal Entry was available [101] Howse Percival’s letter and invoices for purchase and sale of 7 Manchester Road were dated 25 June 2002 [102] in contra-distinction to loans for purchase of 1-2 Lorenzo Street in Items 26-29 and 33-34 which, according to the 13/9/12 RA Letter, were credited to Yeung’s current account with MAY Partnership, and the balance of such account was settled when MAY Partnership ceased on 7 July 2006 [103] the description of “PAY” in the bank statement for the Transfer on 21 November 2002 (C5/1146) was different from the description “FOREIGN PAYMENT 54” for the Transfer back to Yeung in HK on 9 November 2004 (C5/1169) [104] see mortgage offer dated 30 January 2002 in the sum of £769,875 by The United Bank of Kuwait Plc to Yeung for the purchase of 11-13 Liberty Place (C4/951-954) [105] Au recalled Yeung paid the most, he was next and Marchant paid the least [106] Au relied on the bank statements as record of mortgage instalment payments debited from the Lloyds Account, yet he did not give Yeung the bank statements despite requests, and did not tell Yeung which mortgage debits were for which PIA Property [107] shortly afterwards on 27 July 2003 Au issued Cheque 00018 (£10,000) to MAY Partnership (see paragraph 233 above), and most other drawings by Au were by CP/Card and/or D/Card for up to a maximum of £400/day (C5/1151-1155). [108] from 16 March 2002 until 7 February 2005 Au made 4 cash withdrawals of £200 each, 1 cash withdrawal of £250 and 34 cash withdrawals of £400 each [109] see Au’s stance as stated in the Revised Scott Schedule of Agreed Issues in respect of the Counterclaim prepared shortly before the Trial [110] Au was liable to repay to Yeung the difference between (a) the sum total of the Remittances for the Property Investment over the years and (b) sums liable to be returned to Yeung in HK [111] even though Yeung did not dispute he received the sums of £121,058.90, Transfer of £200,000, transfer of 226 St Davids Square, some repayments but not the full sum of HK$2,200,000, and payment in respect of his interests in 1-2 Lorenzo Street [112] Richard Anthony’s letter to Marchant dated 13 January 2005 gave valuation of ⅓ shareholding in MAY-UK on “earnings” and “net assets” bases to be £88,790 and £102,666 respectively [113] see paragraph 44.1 of the UK Defence [114] at one stage Moon managed an embroidery/washing factory [115] which coincided with Yeung’s evidence that he set up a samples department in Shantou in 2002 (as Chan was tasked to look into this) and he eventually moved the merchandising department to Mainland China (see paragraph 43 and footnote 69 above) [116] Moon came to HK 3 times in February 2010, ie 3-9, 22-24 and 24-26 February 2010 [117] Moon stayed at Yeung’s home at Harbourfront Landmark for 1 day and thereafter slept at MAY-HK Office [118] “Mr. Chiu, every injustice has its perpetrator and every debt has its debtor. It is right and proper for one to repay if he owes other money. The assistance of your wife made her an accomplice and it gives added culpability! Understand the current situation, and repent and be saved! Help persuade Au to face the matter as soon as possible and to provide his phone number and company’s latest numbers, and it will then give an early return to quietness and happy life. Otherwise…” [119] at that time HWW had 15 persons including 3 partners and 3 consultants [120] dated 30 July, 4, 12, 23 and 25 August, 2 and 4 September, and 5 and 21 October 2010 [121] dated 9 August and 5 October 2010 [122] eg (a) “誰是不想解決問題, 你心裡明白, 過去你利用[Yeung]此弱點, 做出很多非法手段, 你必承擔一切後果的” in the Ng Letter dated 4 August 2010 which again referred to Au derisively as “縮頭烏龜” despite Yeung previous reminders to Ng to mind his words, (b) “要求討回從[Au] 不適當手段挪取的金錢 ……”, “[Au]私人挪用了此筆款項”, “私自侵吞錢, 自己獨享成果”, “很明顯[Au] 是監首自盜, 請問[Au]的誠信是否有問題?” in the Ng Letter dated 12 August 2010, (c) “你應清楚明白你已負上刑事責任而且要為你所做的一切承擔後果” in the Ng Letter dated 2 September 2010, and (d) alleging Au lied and “而是有計劃犯罪” and saying Au “龜縮” and “公道自在人心, 最終[Au] 必受到應得的懲罰” in HWW’s letter dated 21 October 2010. [123] HCA4455/2002, Chu J (as she then was) (unreported, 15 July 2005) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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