Yu Man Fung Alice v. Chiau Sing Chi Stephen

HCA 1584/2012

[2020] HKCFI 2923

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1584 OF 2012

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AND

HCA 1243/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1243 OF 2017

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J U D G M E N T

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A. Introduction

1.An oral agreement is not worth the paper it is written on.  So goes an old adage, as it happens often attributed to a former Titan of the film industry.

2.Though that adage may seem flippant, to me it encapsulates at least two main points.  First, it identifies the difficulty inherent in assessing what was meant by spoken words, where there may even be a dispute as to what was actually said and in what context, and where there is no subsequent written record.  Secondly, it means that even where other ingredients are present, the parties may not have intended to create a legally enforceable agreement.  Both points will often trigger the need for a close consideration not just of the words spoken, but of the full surrounding context, including what the parties to the alleged oral agreement did after the agreement is said to have been made.  This is such a case.

3.By way of introduction, it suffices to point out the following broad overview.

4.The plaintiff (“Ms Yu”) and the defendant (“Mr Chiau”) began a romantic relationship in around 1997 or 1998.  From that time, though gradually at first, Ms Yu became involved in almost every aspect of Mr Chiau’s finances, both business and personal.  Ms Yu says that, in parallel with the romantic relationship, she and Mr Chiau therefore enjoyed a commercial relationship.  In that context, Ms Yu says that, in a telephone conversation at around Christmas 2002, Mr Chiau agreed to pay her a 10% share of net profits made on all successful investments recommended by her to him (“Oral Agreement”).  Ms Yu says that the investments covered by the Oral Agreement included both property investments and investments in stocks or securities.  On her behalf, it is also argued that as a matter of its true construction or as implied terms, there were various other aspects to the Oral Agreement.

5.Ms Yu’s main claim – the subject of HCA 1584/2012 (“2012 Action”) – is for 10% of the profits in respect of the property known as 12 Pollock’s Path, The Peak, Hong Kong (“House 12”).  Her further claims – the subject of HCA 1243/2017 (“2017 Action”) – are for 10% of the profits in respect of three houses of a development in Tai Po known as The Beverley Hills (“BH Properties”) and an investment in a private equity fund known as the Peregrine Greater China Capital Appreciation Fund LP (“Fund”).

6.For his part, Mr Chiau says that, in the context of their romantic relationship at the time, all he did was verbally to promise to make gifts to Ms Yu of 10% of the profits of his property investments.  He says that conversation took place one evening after dinner, on the balcony of where he was then living, at 7 Pollock’s Path (“House 7”).  But, he says it is clear that there was no intention to create legal relations, and his promise was not legally binding.  On his behalf, it is also argued that there are various insurmountable technical legal hurdles in the face of Ms Yu’s claims.

7.It is common ground that from 2007 to 2011 Ms Yu was actually paid various sums reflecting (at least, approximately) 10% of profits made by Mr Chiau on certain property investments, and on some investment in shares.  Those payments totalled in the order of $19.5 million.  But there is a dispute as to whether those payments were made in accordance with a legally binding agreement, or pursuant to the promise of gifts.  He also later paid her a further $10 million.  But there is a dispute as to whether that last payment was made on account of the legally binding agreement relating to profit share, or as a ‘break-up fee’ in acknowledgement of friendship and support over the years.

8.The payments now pursued by Ms Yu are for sums which dwarf those previously received, as her claims are for sums in the order of $80 million, mostly by reference to the claim based on House 12.  But it might be said that is simply the arithmetic result of a much higher profit figure.

9.At the trial, both Ms Yu and Mr Chiau gave evidence and were subject to detailed cross-examination.  Each of them also called other witnesses said to support their respective cases.

10.Ms Yu called evidence from her brother Mr Johnny Yu, and Mr Raymond Hu (both of whom gave oral evidence, and were cross-examined), as well as Mr Frank Yik and Mr Gilbert Wong (both of whose witness statements were admitted as evidence, without the need for any cross-examination).  Mr Chiau called evidence from his sister Ms May Chow, and Ms Brenda Cheung (both of whom gave oral evidence, and were cross-examined).  Witness statements previously filed from other potential witnesses, who were not actually called or their statements deployed, can be ignored as not having become part of the evidence at trial.  Where the persons not actually called as witnesses had, in my view, little to add by way of evidence, and where the usual basis for doing so is absent, I do not think there is any adverse inference to be drawn from not tendering them as a witness.

11.It will be necessary for me to assess the adduced witness statements and oral evidence, each part of it being considered against the totality of the evidential materials (oral and documentary).  It is not, however, necessary – nor even practically possible – for me to rehearse in this Judgment all of the evidential materials.  But, in addition to the fact that the evidence has only recently concluded, I have had the benefit of a full (and live) transcript of the proceedings, to which I have been able to have recourse in the preparation of this Judgment.

12.Ms Yu was represented at trial by Mr Rimsky Yuen SC, leading Mr Victor Dawes SC and Mr Thomas Wong.  Mr Chiau was represented at trial by Mr Bernard Man SC, leading Mr Keith Lam.

13.This is my Judgment after trial.

B.     The Issues

14.Mr Yuen and Mr Man identified in their opening submissions what the issues appeared to be at that stage.  As is not unusual at the end of a trial, some of the issues previously identified have largely fallen away.  As clarified with the help of the closing submissions after the conclusion of evidence, the key issues to be decided seem to me to be as follows:

(1)     Did the parties reach an agreement, said to be the Oral Agreement, in the factual manner put forward by Ms Yu (or was there the promise of a gift as put forward by Mr Chiau)?

(2)     If the parties reached the Oral Agreement, did they intend to create legal relations for it to be legally binding?

(3)     If so, what were the terms of the Oral Agreement? This involves a consideration of potential implied terms.  In particular:

(a)     whether Ms Yu was entitled to be paid the agreed profit share if and when Mr Chiau decided to retain the investment for his own use?

(b)     whether Ms Yu was entitled to be paid a further profit share if Mr Chiau decided to retain the investment for his own use, but later sold it at a (further) profit?

(c)     whether Ms Yu’s recommendation must have been an ‘effective cause’ of Mr Chiau’s decision to acquire the property?

(d)     whether the Oral Agreement only covered landed property investments, but not securities investments?

(4)     Whether Ms Yu in fact “recommended” to Mr Chiau the acquisitions of (a) the property (“Skyhigh Property”) on which House 12 was subsequently built; (b) the BH Properties; and (c) the Fund?

(5)     If Ms Yu did “recommend” to Mr Chiau the acquisition of any of the Skyhigh Property or the BH Properties or the Fund, was it necessary that the recommendation was an ‘effective cause’ – and, if so, was it an ‘effective cause’ – of Mr Chiau’s decision to acquire them?

(6)     Whether Mr Chiau decided to retain House 12 for his own use in 2004 (as he claims) or 2011 (as Ms Yu claims)?

(7)     Has Ms Yu’s claim in respect of House 12 been waived or is it time-barred?

(8)     If liability is established:

(a)     what is the amount of profit share in respect of House 12 to which Ms Yu is entitled (which will depend on the expert evidence)?

(b)     what is the amount of profit share in respect of the BH Properties to which Ms Yu is entitled?

(c)     what is the relief in respect of the Fund to which Ms Yu is entitled?

15.Though set out as separate issues, some of them may be overlapping.  For example, a consideration of what terms might be implied into the Oral Agreement – and the vagueness or certainty of them, as well as the commerciality or otherwise – may be relevant to the consideration as to whether there was an intention to create legal relations.  Though broadly dealt with in separate sections of this judgment, I keep the potential overlap in mind.

C.     Applicable Legal Principles

16.Before dealing with more of the facts, it may help to identify the legal framework into which they must fit, by reference to the applicable legal principles.

C.1    Requirements for a Contract

17.The basic requirements for a contract are trite. Those requirements are that: (1) the parties have reached an agreement, which (2) is intended to be legally binding, (3) is supported by consideration, and (4) is sufficiently certain and complete to be enforceable.

18.There is, of course, no legal requirement that a contract must be concluded in writing, or be evidenced in some form of written record.  It is in general possible and permissible in Hong Kong law to make a contract without any formality, and to do so simply orally.

19.But it is obvious that the absence of a written record may make the existence and terms of a contract harder to prove.  Anyone with business experience will understand the value of a written record. Therefore, the absence of any written record may – depending on the circumstances – tend to suggest that no contract was in fact, concluded.

20.Hong Kong law applies an ‘objective’ test in determining whether an agreement has been made, what its terms are and whether it is intended to be legally binding.  It is settled that for questions of meaning in the law of contract, the ‘touchstone’ is how the words used, in their context, would be understood by a reasonable person.  For these purposes, the context includes all relevant matters of background fact known to both parties.  It may also be important to recall that the relevant intentions are, in most cases, those at the time of the alleged agreement/contract, and not any subsequent intention.

21.Though perhaps particularly relevant in the case of a written agreement, all the terms of an agreement should be read or considered together and construed with the overall context in mind. Construction is a unitary exercise involving an iterative process.  The court should have regard to the implications of any competing constructions, at least by way of a cross-check, where business common sense should be engaged in the iterative process.

22.As to reaching an agreement, all law students know that an agreement is reached when one party makes an offer which the other accepts.  An offer is a person’s expression, by words or conduct, of a willingness to be bound by specified terms if and as soon as there is acceptance by the person to whom the offer is made.  It may, however, be necessary to look closely at the words actually used, as in some circumstances they may be such that it is unlikely that anyone could reasonably have thought that the words were meant seriously.

23.Acceptance may also be by words (whether written or oral) or by conduct.  Likewise, it may be necessary to look closely at the words actually used, as in some circumstances they may be such that it is unlikely that anyone could reasonably have thought the words were meant as a serious acceptance of the offer.

24.There is a separate and independent requirement of a contract that there be certainty and completeness of terms.  So even in cases where the Court concludes that the parties have made an agreement which is intended to be legally binding, the court may nevertheless also conclude that the agreement is too uncertain or incomplete to be enforceable.  A typical example is because the agreement lacks an essential term which the court cannot supply for the parties.  But the court will only hold that the contract, or some part of it, is void for uncertainty if it is legally or practically impossible to give the agreement, or that part of it, any sensible content.

25.Vagueness in what is said or omission of important terms may also be a ground for concluding either that no agreement has been reached at all or that, although an agreement has been reached, it is not intended to be legally binding.

C.2    Intention to Create Legal Relations

26.Even when a person makes a real offer which is really accepted, it does not necessarily follow that a legally enforceable contract is created.  There is the further requirement that the offer, and the agreement resulting from its acceptance, must be intended to create legal rights and obligations which are enforceable in the courts.  Merely moral obligations do not suffice.

27.I think it obvious that in most cases where there is a dispute about whether parties have entered into an agreement intending to create legal relations, one or both parties would have performed some of the matters contemplated under the agreement.  Therefore, it is important to keep sight of the distinct requirements of a concluded contract, and not to lose sight of the separate requirement of an intention to create legal relations.

28.This is precisely because, even if there is an agreement supported by consideration, the agreement would not be binding if the parties did not intend to create any legally binding obligations.  To put it another way, an agreement that would otherwise be a contract may not be binding if it was made without any intention of creating legal relations.

29.This is sometimes found to be the case for agreements between members of a family, or those in similar close relationships. For example, in Jones v Padavatton [1969] 1 WLR 328 at 332H, Salmon LJ said:

… as a rule when arrangements are made between close relations, for example, between husband and wife, parent and child or uncle and nephew in relation to an allowance, there is a presumption against an intention of creating any legal relationship.  This is not a presumption of law, but of fact.  It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection.

30.As was recently pointed out by the Court of Appeal in Ho Lai King v Kwok Fung Ying [2020] 5 HKC 271 at §§45-48, the presumption of fact referred to by Salmon LJ is of course rebuttable.  Like many such presumptions found in the law, it is based on generalised notions of human behaviour viewed in the prevailing social mores and conditions, and provides no substitute for examination of the circumstances of the individual case.  The subject matter of agreements between close relations may vary infinitely, as do the situations of individual families. Ultimately, the question of intention is a question of fact that must be determined on the basis of the facts of each case.  Therefore, it is rarely profitable to consider the strength of any presumption, and the better view is that the presumption simply means (in contrast to agreements between commercial parties) that the onus is reversed.  The onus lies on the party who contends that there was an intention to create legal relations to establish such intention.

31.For myself, I am not sure that there is much value to rely on general presumptions, even if they are based on – and perhaps because they are based on – generalised notions of human behaviour.  Indeed, I accept that such a reference to a ‘presumption’ should only ever be used with caution.  As the Court of Appeal stated, the situations in individual relationships and the agreements made between individuals vary infinitely.  Nor will considering who bears the onus of proof be generally determinative, or even very helpful.  Rather, it seems to me that the intention of the parties is simply a question of fact, to be inferred from the terms of the agreement and the surrounding facts and circumstances.

32.What will satisfy the court in a particular case must depend on the circumstances.  Those circumstances will include, but are not limited to, the relationship between the parties, whether they are “in amity or estranged”, the subject matter of the agreement, the language used in the agreement, and the manner in which the agreement has been made.

33.Hence, the question is to be resolved by considering what was communicated between the parties in all the circumstances and deciding whether, as understood by a reasonable person, the true inference is that they intended to create legal relations.

34.That is an objective test, making it unnecessary to prove any positive subjective intention to contract – so that the objective test may be satisfied even though neither party had any actual subjective intention that there be a contract, in the sense that neither party gave any thought to the matter: see, for example, Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 330.

35.For the purpose of determining the parties’ intention at the material time, evidence of their subsequent conduct is admissible: see Blue v Ashley [2017] EWHC 1928 (Comm) at §64.  As it was put in Jones at 336H, the subsequent history may give the “best guide” to the parties’ intention at the material time. Sometimes, the fact that the transaction was performed on both sides may point to an intention to enter into legal relations, and the same might apply to partly executed transactions: see Euro Search (Hong Kong) Ltd v Snow Lake Capital (HK) Ltd [2018] HKCFI 402 at §§33-36.

36.However, that is but one factor in the consideration of the question, the answer to which will, of course, very much depend on all the other circumstances (including, for example, whether there was a commercial context).  Each case depends upon its own facts.  It does not follow from the fact that some performance occurred that the parties must have entered into a contract.  On the other hand, it is plainly a very relevant factor pointing in that direction.  It must be emphasised that whether the court will hold that a binding contract was made depends on upon all the circumstances of the case: see RTS Ltd v Molkerei Alois Muller GmbH & Co KG [2010] 1 WLR 753 at §54 (considering G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 and British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, both of which were factually very different from the current case).

37.Evidence of the subjective understanding of the parties is also admissible, in so far as it tends to show whether, objectively, the agreement was intended to be legally binding.  In the case of an oral agreement, where no recording was made, the court cannot know the exact words spoken nor the tone in which they were spoken, nor the facial expressions and body language of those involved.  In those circumstances, the parties’ subjective understanding may be a good guide as to how, in their context, the words used would reasonably have been understood: see Blue v Ashley at §64; also Carmichael v National Power plc [1999] 1 WLR 2042 at 2050H-2051B.

38.The court will also bear in mind, in an appropriate case, that the absence of express terms may be the result of reaching an oral agreement between non-legally trained people, perhaps over a telephone conversation: see Ho Lai King at §63.  The closeness of a personal relationship between those said to have made the agreement also needs to be considered carefully and not be overplayed.

39.In the Blue v Ashley case, Leggatt J identified various factors and considerations that might be taken into account in determining whether there was an intention for an agreement to be legally binding.  He referred (at §56) to the typical examples of facts which may tend to show an agreement was not intended to be legally binding as including that it was made in a social context, that it was expressed in vague language and that the promissory statement was made in anger or jest.  In the particular case, Leggatt J looked at eight particular factors in reaching his conclusion that there was no intention to create a legally binding agreement: (1) the setting; (2) the purpose of the occasion; (3) the nature and tone of the conversation; (4) the lack of commercial sense; (5) the incongruity of Mr Blue’s role; (6) the vagueness of the “offer”; (7) the perceptions of other witnesses who took part in the relevant conversation; (8) Mr Blue’s own perception, viewed objectively.

40.Though each case will depend on its own circumstances, these particular factors (or some of them, or variations of them) may well be a useful guide to the kinds of factors which the court will take into account.

C.3    Contract Inferred from Conduct or Course of Dealing

41.Though this aspect of Ms Yu’s claim was not really pursued at trial, I can briefly traverse the applicable principles.

42.It is well-established that for a contract implied by conduct the burden of establishing that contract rests on the person asserting its existence.  The court will not lightly imply such a contract. The conduct relied on must be unequivocally referable to the contract sought to be inferred: see Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §§38-39.  For this reason, it will be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract.  To put it another way, what the parties do must be consistent only with there being a contract implied, and inconsistent with there being no such contract.

43.The ‘unequivocal’ requirement also applies to the intention to create legal or contractual relations.  The conduct must unequivocally show that the parties had that intention.

C.4    Implication of Terms

44.The general principles relating to implied terms are also well-established.  For a term to be implied into a contract: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; and (5) it must not contradict any express term of the contract: see Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at §§ 23 and 59.

45.It has been said subsequently that condition (1) may not really add anything to the other conditions, and that conditions (2) and (3) are alternatives: see Marks & Spencer plc v BNP Paribas Securities Services [2016] AC 742 at § 21, followed in Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2019] HKCA 261 at §31.  It has also been clarified that condition (2) does not require absolute necessity, but that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.

46.On the other hand, a term should not be implied into a contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them.  Whilst that is a necessary condition, it is not a sufficient condition.  In this respect, subsequent conduct is not admissible to determine whether a term should be implied.

47.In the context of cases where an agent is promised a commission only if he brings about the sale which he is endeavouring to effect, there is ordinarily no room for an implied term that the principal will not dispose of the property himself or through other channels or otherwise act so as to prevent the agent earning his commission: see Luxor (Eastbourne) Ltd v Cooper [1941] AC 108.  In that case, the House of Lords rejected the implication of a term that the property owner would do nothing to prevent the satisfactory completion of the transaction so as to deprive the agent of the agreed commission.  Part of the rationale was that the owner of property is the person entitled to decide whether or not to sell the property, and on what terms.  It was also found impossible to formulate with adequate precision the tests which would determine whether or not a just excuse existed for disregarding the alleged implied term.  In other words, it could not be said that the term necessarily followed, and it was too complicated and artificial.  It was held that there was no lack of business efficacy in the agency contract, without the implied term, even though the principal was free to refuse to sell to the agent’s client.  To have effected the result put forward by the agent, there would have to have been clear express words.

C.5    Agents and ‘Effective Cause’

48.A question arises in this case as to what is meant by an investment “recommended” by Ms Yu to Mr Chiau under the terms of the Oral Agreement.

49.It is a well-established principle that, unless there are any special terms or other indications in the contract, where the remuneration of an agent is a commission on a transaction to be brought about, he is not entitled to such commission unless his services were the effective cause of the transaction being brought about: see ‘Bowstead & Reynolds on Agency’ (21^st Ed, 2018) at §7-027.  The ‘effective cause’ requirement may arise by way of construction of the terms of the agreement, or by way of implying such a term into the agreement.

50.‘Effective cause’ means more than simply ‘cause’.  The factual enquiry is as to whether the transaction was really brought about by the act of the agent or adviser, and it is seldom conclusive that there were other events which could each be described as a cause of the ensuing sale or purchase: see LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52 at 58.  It is the phrase “really brought about by” which I think best encompasses the necessary link between the agency or advice and the relevant transaction.

51.It does not matter whether the party claiming the fee is an “agent” or an “adviser”, because the relevant point is that they both concern situations where parties make claims for fees on the basis of transactions allegedly brought about by their work, whether by way of advice or introduction or otherwise: see Eminent Investments (Asia Pacific) Ltd v DIO Corp (unreported, HCA 1292/2011, 23 September 2016, Recorder Shieh SC) at §212(3).

52.The Eminent Investments case has since been on appeal to the Court of Appeal and the Court of Final Appeal.  The latter agreed – see [2020] HKCFA 38 – with the Court of Appeal that the express terms of the agreement in question were clear enough, and that there was no need to consider the issue of construction or implication of the ‘effective cause’ requirement.  Though the CFA reviewed the cases on effective cause, it emphasised (at §§70-92) that everything depends on the contract’s construction and the context.

D.     Evidence Based on Memory

53.This case depends in large part on the parties’ evidence based on what was said in relevant conversations, indeed primarily only one conversation (wherever or in whatever form it took place), which occurred as long as 18 years ago.  But evidence based on recollection of what was said in an undocumented conversation which occurred so long ago is inherently problematic.  It is, however, perhaps only in the last decade or so that courts have consistently properly recognised the fallibility and potential unreliability of human memory.

54.In Gestmin SGPA SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at §§16-20, Leggatt J made certain observations on the point, to which he also returned in the Blue v Ashley case.  Those observations have commended themselves to a number of other judges, including judges in Hong Kong: see, for example, Sarah Sally Chan-Kent v Chim Sau Ching [2019] HKCFI 3066 at §45.

55.In the Blue v Ashley case at §68, Leggatt J also referred to a paper published by two academic psychologists, Howe and Knott ‘The fallibility of memory in judicial processes: Lessons from the past and their modern consequences’ (2015) Memory, 23, 633 at 651-3.  He also footnoted, but did not make any extensive reference to, the book by the psychologist Schacter ‘How the Mind Forgets and Remembers: The Seven Sins of Memory’ (2001).

56.The various judicial and academic observations would bear repetition at some length, but I shall attempt to restate them in more compressed form:

(1)     While everyone knows that memory is fallible, we are often unaware of the full extent to which our own and other people’s memories are unreliable.

(2)     Common and related errors include supposing that (a) the stronger or more vivid a recollection, the more likely it is to be accurate, and (b) the more confident a person is of their recollection, the more likely it is to be accurate.

(3)     But memory is not a mental record fixed at the time of the experience, then fading gradually over time.  So it is a misconception that memory operates like a camera or video device making a fixed and chronological record of an experience.

(4)     Rather, memories are fluid and malleable, being constantly rewritten whenever they are retrieved.

(5)     What gets encoded into memory in the first place is determined by what a person attends to, what they have already stored in memory, and their expectations, needs and emotional state.

(6)     This information is subsequently integrated or consolidated with other information already stored in a person’s long-term, autobiographical memory.

(7)     What is subsequently retrieved from that memory is determined by the same multitude of factors, and additionally by what drives the recollection of the event.

(8)     What is retold about an experience depends on the person to whom one is talking, and what the purpose is of remembering that particular event.

(9)     What gets remembered is reconstructed from the remnants of what was originally stored, taking account of whatever has already been forgotten or any interference from any new experiences across the interval between storing and retrieving a particular experience or event.

(10)     So the content of memory for experiences involves active manipulation, integration with pre-existing information, and reconstruction of that information.

(11)     Memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.

(12)     Therefore, and in addition, the process of civil litigation itself subjects the memories of witnesses to powerful biases.

(13)     First, such witnesses often have a stake in a particular version of events.  This is obvious where the witness is a party or has some type of loyalty to a party to the proceedings.

(14)     Secondly, other subtler influences come into play, perhaps from the process of preparing a witness statement and coming to court to give evidence for one side in the dispute.  The natural desire to assist, or not prejudice, the party calling the witness, and the desire to give a good impression in a public forum, can be significant (even if unconscious) motivating forces.

(15)     Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial.  A witness is asked to make a statement, often (as in this case) when a long time has already elapsed since the relevant events.  The statement is usually drafted for a witness by a lawyer who is inevitably conscious of the significance for the issues of the case of what the witness does or does not say.

(16)     The witness statement is made after the witness’s memory has been ‘refreshed’ by reading documents.  Yet those documents themselves often include statements of case and other argumentative material, as well as documents not previously seen by the witness, or documents which came into existence after the events which the witness is being asked to recall.

(17)     The witness statement may go through several iterations before it is finalised.

(18)     Months or even years later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court.

(19)     The effect of the process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be in fact true or false, and to cause the witness’s memory of events to be based increasingly on this material and later interpretations of it, rather than on the original experience of the events.

(20)     There is also a powerful tendency for people to remember past events concerning themselves in a self-enhancing light.

(21)     It is also not uncommon for witnesses to deceive themselves in what are essentially honest but nonetheless false recollections.

57.These matters do not mean that human memory is simply unreliable.  Often, memory is reliable.  However, it is also fallible, and so when assessing reliability, it is important to have in mind what causes that fallibility.

58.Therefore, in a case such as the present case, it seems to me that a sensible approach may be to limit (or at least be cautious about) the reliance placed on the witnesses’ individual recollections of what was said in conversations, and to give more weight and make factual findings on inferences drawn from any documentary evidence as well as known or probable facts, in particular objective facts.

59.Documents which are likely to be helpful are those contemporaneous documents which may describe not only what was going on, but also the motivation and state of mind of those concerned.  Documents passing between the parties themselves can be important, but in some cases ‘internal’ documentation may also greatly assist.

60.In most cases, the credit of a witness on matters not germane to the litigation is unlikely to be helpful, and the demeanour of witnesses is not a reliable pointer to honesty or accuracy.  Witness evidence, written and oral, is obviously not without purpose; but, its principal uses are to allow scrutiny of any documentary record and to evaluate the witness’s motivations, personality and working practices.

61.Evaluation of a witness’s evidence may, depending on the particular circumstances, also include having regard to factors such as: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleadings, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure: see Painter v Hutchison [2007] EWHC 758 (Ch) at §3.  There may be other factors in any particular case, but this list gives important and helpful guidance.  As will be seen, some of them are rather pertinent to this case.

62.An examination of the consistency of conduct and documents and motives will, therefore, likely be helpful.  As long as it is recognised that there is also a risk of potential (perhaps unconscious) bias in the identification of them, it is the inherent probabilities and likelihoods which will be of greater assistance in deciding what, on the balance of probabilities, actually happened.

63.Before moving to more factual matters, and to the limited extent to which it might be relevant without looking at the specific details of particular aspects of the evidence, I can give some brief and general assessment of the witnesses and the way they gave evidence:

(1)     I accept that Ms Yu was composed and mainly gave straightforward answers, and in general was doing her best to tell the truth as she remembers it.  But, there was significant additional factual material added by her orally to the material contained in her witness statements (even though she had filed five such statements), and that additional material was variable in its apparent accuracy or reliability – though I do not accept Mr Man’s general suggestion that Ms Yu’s oral evidence was made up, or given dishonestly because she knew it was not true.

(2)     Her brother Johnny Yu also mainly gave straightforward answers, but his evidence was in my view not central to the resolution of the main disputes, and the main challenge to his evidence was that it was unreliable because of the passage of time.

(3)     As to Raymond Hu, he was and is a mutual friend of Ms Yu and Mr Chiau, and it seemed to me that he was seeking to give honest and independent evidence of the sort on which a court might place significant reliance.

(4)     Mr Chiau has been criticised by Mr Yuen as being “evasive”, because on many occasions he answered questions by saying that he could not remember or could not be sure of matters put to him.  However, I think his statements were generally honestly made, and that he genuinely did have so did not purport to have as much specific recollection, which is perfectly credible after the passage of time since the main material events.  Also, he may not be a “details man”, except perhaps when focusing on certain aspects of his own particular film business.

(5)     Brenda Cheung seemed to me to be rather direct and frank, to the extent that she had clear and independent recollection of events many years ago, and I do not accept Mr Yuen’s suggestion that she was simply trying to do as much as she could to protect Mr Chiau.

(6)     May Chow is likely naturally more protective of her brother, but the essence of her evidence as found in her witness statement was not significantly shaken in cross-examination.

E.     Further Background Facts

64.I have set out the broad shape of the dispute in my ‘Introduction’ above.  The following further facts are either not in dispute, or are the result of my findings of fact.

65.As I have already indicated, it is necessary to consider the evidence in its totality.  Therefore, I agree with Mr Yuen’s submission that all aspects of the evidence need to be seen in a proper context.  As is frequently said, in law context is crucial.  I specifically remind myself that it is necessary both to focus on the detail and at the same time to keep in mind the ‘big picture’.

66.Ms Yu is the daughter of a late well-known and successful businessman in Hong Kong’s construction industry.  She attended Diocesan Girls’ School before studying Business Administration at a university in the United States.  Her English is of a high standard, and she gave evidence in English.  After a brief stint of a few months at a financial PR firm, her job from 1994 to 1997 was in the Listing Division of the Stock Exchange of Hong Kong Ltd.  From 1997 to 2002, she worked at Koffman Securities Ltd and Koffman Properties (HK) Ltd, companies in which her brother Johnny Yu was a partner, and which involved both securities investments and some property development.  At that time, Ms Yu held relevant licences to permit her to engage in and advise on trading in securities.  It seems that those licences were allowed to lapse in about 2002, after Ms Yu left employment with Koffman.  The inference I draw is that, from that time, Ms Yu did not consider that she was continuing, or going to continue, the kind of activity which required such a licence.

67.Mr Chiau is a well-known film actor, producer and director (mainly in the field of comedies).  His main film production company is called The Star Overseas Ltd (“Star Overseas”).  But he also operates business and personal affairs through two trust vehicles of which Treasure Offshore Holdings Ltd (“TOHL”) and the GZ Trust Corporation (“GZ”) are the trustees.

68.In the context of the disputes in this case, it is necessary to consider the way in which Mr Chiau’s personal and business matters are arranged and handled.  There is no dispute that he does not like to deal with details or administrative matters.  Nor does he get closely involved in the daily operation or administrative affairs of his companies, nor of his personal and financial matters.  He does not even have a personal bank account.

69.Rather, the daily management and administrative affairs were left to his elder sister May Chow (“May”) and other company employees, including Brenda Cheung (“Brenda”).  Both May and Brenda provided witness statements and were called to give oral evidence, and be cross-examined, at the trial.  Whilst Mr Chiau made management decisions, he was not a director or shareholder of Star Overseas, but May was the sole director and shareholder.  Because he did not have a personal bank account, all personal payments would be made through May’s personal account (or, occasionally, a relevant company account).

70.The various properties the subject matter of, or referred to in, this action were generally held by property holding companies, themselves held by TOHL or by May as shareholder.  May would be the director of all these companies.

71.In 1997 or 1998, Ms Yu and Mr Chiau began a romantic relationship.  It seems to be common ground that the romantic relationship ended in around March 2010, so that it lasted between 12 and 14 years.  It also seems to be common ground that it was Ms Yu who ended their romantic relationship, though perhaps not entirely clearly until around July 2010 when Mr Chiau learned that she had a new boyfriend.  I accept Mr Chiau’s evidence that, at the time, he was happy for Ms Yu that she had found a new relationship.  Indeed, Ms Yu and Mr Chiau appeared to have remained on relatively good terms until around mid-2011.  But, at least by the end of 2011, Ms Yu and Mr Chiau were no longer on such good terms, and in effect had adopted the stance towards their dispute that they have since then maintained.

72.At the time of the commencement of their relationship, Ms Yu was working for Koffman. Nevertheless, it is broadly common ground that Ms Yu would visit the office of Star Overseas regularly in the evenings to assist with Mr Chiau’s business and personal investments.  I accept Mr Chiau’s evidence that Ms Yu did so because she wanted to, as a consequence of their relationship, and that he was similarly happy to let her do so.  Ms Yu was not paid for the assistance she gave, and that seems to me to have been exactly because she and Mr Chiau were boyfriend and girlfriend.  Though there is some dispute as to the nature and extent of Ms Yu’s general involvement in Mr Chiau’s business and personal finances, I also accept that he gradually came to trust her both as a result of their relationship and as a result of his view of her general competence.

73.Nevertheless, I think it can fairly be said that at the time the relationship commenced that it was Mr Chiau who had the greater business and property investment experience.  Indeed, outside of his own involvement in the film business, one of his only real hobbies was in looking at properties.  Whilst another hobby for a while involved cycling, he would frequently combine hobbies by cycling around Hong Kong and looking at properties.  Over the years, as I accept, Mr Chiau developed various connections to and friendships with property agents and others in the property development business.  Even prior to meeting Ms Yu, Mr Chiau had made various investments in real property.  He was not very interested in investments in securities, and that remained the case.

74.Though less experienced, I accept that Ms Yu would have gained some knowledge and experience from her own family background, and from working for Koffman.  She would also have gained some knowledge about securities from earlier working at the Stock Exchange, and as evidenced by her regulatory licence.  I think it fair that she would also have gained knowledge and experience from her assistance provided to Mr Chiau over the years.

75.In 1996, Mr Chiau had purchased House 7, and he lived there from shortly thereafter until around 2003.  He was already living at House 7 when he met and began his romantic relationship with Ms Yu.  The next-door plot on Pollock’s Path, namely the Skyhigh Property, was the plot on which Mr Chiau later successfully bid at auction, and on which he (in a partnership, see below) developed four houses (respectively “House 10”, “House 12”, “House 16” and “House 18”).

76.There can be no doubt that Mr Chiau was well acquainted with the Skyhigh Property even before he met and commenced the romantic relationship with Ms Yu.  The Skyhigh Property was previously owned by a businessman, a Mr Wong, who had invited Mr Chiau to the property.  I accept that Mr Chiau kept an eye on the property, both out of his general interest in property and because he viewed its location as being able to provide him with his “dream home”.  It was an even better location than House 7, and a location which offered significant privacy, and also a panoramic view of Victoria Harbour.

77.When Mr Wong started to renovate or develop the Skyhigh Property, the passage of trucks past House 7 caused a nuisance to Mr Chiau, resulting in litigation between them.  It was in part the result of that litigation that Mr Chiau later thought he would be in the good personal position of developing the Skyhigh Property if he were to own it, as he would be able to relax the weight restrictions on construction materials.  As it happened, as a result of the financial difficulties later faced by Mr Wong, the rights in the Skyhigh Property were acquired by Citibank, and were subsequently put up for auction in March 2004 (see below).

78.In the meantime, Ms Yu ceased employment with Koffman in early 2002.  There is a dispute as to whether (as she says) Mr Chiau asked her to work for him full-time, or whether (as he says) Ms Yu said she wanted to work for him full-time and he was content for that to happen.  I do not think that dispute matters for the resolution of the ultimate dispute in this case, and in any event the move to working full-time was clearly consensual.  But the move was clearly one consequence of their continuing romantic relationship.  Indeed, as I have said, that Ms Yu had until that point already been involved in assisting Mr Chiau in his personal and business financial affairs, without remuneration, also is an obvious consequence of their being in a romantic relationship.

79.At this point in the chronology, it is convenient to address the wider context of the matters within which the crux of the current dispute must be seen.  In Ms Yu’s evidence and the opening submissions made on her behalf at trial, the focus appeared to be on the existence of two ‘parallel’ relationships or ‘tracks’, one romantic and one business or commercial.  However, in closing submissions, the point was put with more finesse.  Mr Yuen submitted that another way of looking at matters was that Ms Yu and Mr Chiau had a relationship which covered a spectrum of matters, at one end of which might be the romantic relationship and at the other the commercial relationship.  Therefore, how they dealt with each other on any particular aspect might depend on the point of the spectrum on which that aspect fell. But it would be wrong to focus just on either the romantic side or the commercial side, as necessarily the two aspects were inter-linked and to some extent variable. 

80.I think this is the correct way to look at the context.  Therefore, though at times I might refer more specifically to the romantic or the commercial sides of the relationship between Ms Yu and Mr Chiau, I do not treat them as being ‘black or white’.  Rather, I treat them as being different and perhaps fluid aspects of their relationship, where the ‘balance’ between them may have fluctuated.

81.As is common ground, the working arrangement was formalised in a written consultancy agreement dated 1 April 2002 (“Loncham Agreement”).  In her oral evidence, Ms Yu expressly acknowledged that part of the purpose of the formal agreement was to enable the appropriate tax benefits.  In other words, Ms Yu recognised at the time of the making of the Loncham Agreement that the remuneration provided under it would be taxable income for her/Loncham, and would give rise to tax deductions as expenses incurred by Star Overseas.  Mr Yuen’s submission that there was an “obvious incentive” to treat monthly payments made as deductible expenses when reporting for tax would logically apply to any expense paid to Ms Yu/Loncham for which a deduction might be claimed when reporting for tax.

82.The Loncham Agreement was made between Star Overseas and Loncham Ltd (“Loncham”), a company owned by Ms Yu and her mother and previously used for an investment but brought back into operation for the purposes of this arrangement.

83.The Loncham Agreement had, inter alia, the following express terms:

(1)     Clause 1.1 defining the “Commencement Date” of 1 April 2002 and the “Services” as meaning the services to be provided by the Consultant (ie. Loncham) to the Company (ie. Star Overseas) as more particularly described in Clause 2.

(2)     Clause 2 provided in its introductory part (italics added) that:

The Company appoints and engages the Consultant, and the Consultant agrees to act as financial consultant.  The Consultant will be responsible to provide corporate finance advisory and strategic planning services to the Company and to advise on all financial affairs of the Company.  If deemed necessary by the Company the Consultant shall procure its director(s) to render to the Company the following services for the purposes of promoting and developing the business of the Company and/or its subsidiaries during the Term: …

(3)     The remaining part of Clause 2 set out certain business activities, focusing on film and entertainment business.

(4)     Clause 3 provided for ‘Remuneration’ stating:

The Company shall pay the Consultant remuneration on a monthly basis and in the amount of HK$20,000.00.

(5)     Clause 9.1 provided that the Consultant was to be an independent contractor, and that the agreement created no agency nor employment.

(6)     Clause 9.4 was an entire agreement clause which provided that:

This written Agreement is the entire agreement of the parties with respect to subject matter hereof and may only be amended by further written agreement signed by all parties.

(7)     Clause 9.5 was a law and jurisdiction clause providing for the agreement be governed by and construed in accordance with Hong Kong law, and for the parties to submit to the non-exclusive jurisdiction of the Hong Kong Courts.

84.The agreement was signed by May on behalf of Star Overseas and by Ms Yu on behalf of Loncham.

85.There is no dispute that the second part of Clause 2, as with most of the agreement, came from a precedent form of agreement provided by Brenda.  Though there was some dispute as to who drafted the first part of Clause 2, I accept on the evidence that it was likely Ms Yu who drafted that part, and that even if she did not actually type the wording (shown by my use of italics above) she nevertheless described her own role and activities to be performed under this formalised agreement, which description was taken into the agreement.  Of course, she also signed her agreement to it.  That wording was also specifically referenced when the current claim was first made (see below).

86.For the moment it suffices to note that the first part of Clause 2 fully describes the role which Ms Yu says she later performed, and that the remuneration provided for in Clause 3 seems to be the agreed remuneration for carrying out that role. There is no suggestion that the agreed remuneration is merely to cover travel or other basic expenses, and that a potentially significantly greater amount of payment is also to be paid and received.

87.Mr Yuen submits that the Loncham Agreement is evidence of the working commercial relationship running alongside the romantic relationship between Ms Yu and Mr Chiau.  To an extent, that is obviously correct, and I accept that the Loncham Agreement also lasted for a while beyond the end of the romantic relationship.  Indeed, Mr Yuen also accepts that Ms Yu’s assistance sometimes went beyond the scope of the Loncham Agreement (or even the alleged Oral Agreement), simply reflecting that the parties were also a loving couple.  But his further submission that the document means what it says, namely that it was a legally-binding consultancy contract for the provision of corporate finance advisory and strategic planning services by Ms Yu, for which she was to be paid the stated monthly sum, may not actually assist Ms Yu.  The working relationship (or the ‘work aspect’ of their wider relationship) was expressly governed by, and was on the terms of, the Loncham Agreement.

88.Also, and consistent with the ‘entire agreement clause’, the parties to the Loncham Agreement took the trouble to record in writing various agreed amendments.  Though it slightly interrupts the chronology, it is convenient to identify those agreed written amendments now. Each amendment was signed by May on behalf of Star Overseas and by Ms Yu on behalf of Loncham:

(1)     an agreement (in Chinese, with the date left blank) providing for the remuneration to change to HK$43,000 per month from 1 March 2004 (incidentally, the month of the auction for the Skyhigh Property, see below);

(2)     an agreement (in Chinese) dated 1 January 2008 providing for the remuneration to change to from HK$43,000 to HK$54,000 per month from 1 January 2008;

(3)     but that was apparently superseded by another agreement (in Chinese) also dated 1 January 2008 providing for the remuneration to change from HK$43,000 to HK$59,000 per month from 1 January 2008;

(4)     an agreement (in Chinese) dated 1 April 2008 providing that by amicable agreement Loncham would cease to provide services to Star Overseas on 1 April 2008, and the service fee of HK$59,000 per month would cease, but the service period would be determined after further negotiation;

(5)     an agreement (in Chinese) dated 1 April 2009 providing that Loncham would recommence the provision of services to Star Overseas on 1 April 2009, at the service fee of $59,000 per month;

(6)     an agreement (in Chinese) dated 1 May 2010 providing for the monthly payment to be reduced from HK$59,000 to HK$35,000 from 1 May 2010;

(7)     an agreement (in Chinese) dated 30 September 2011 recording that Loncham had not provided services to Star Overseas “for a long time”, stating that Star Overseas saw no need to continue the performance of the contract, and giving notice according to Clause 7.1 by giving the 90-day notification period for termination, becoming effective on 28 December 2011.

89.The period of interruption between 1 April 2008 and 31 March 2009 was dealt with by a new and separate agreement dated 1 April 2008 (“All Gems Agreement”), made between All Gems Ltd (“All Gems”) and Loncham.  May signed on behalf of All Gems and Ms Yu signed on behalf of Loncham.  The All Gems Agreement describes the appointment of Loncham as a ‘Property Consultant’ to “[p]rovide Consulting services to [All Gems] for property investment and provide the driver and motor vehicle for transportation purposes”.  The remuneration is described as a “Flat fee” of HK$59,000 per month, which was stated to be inclusive of HK$16,000 car rental expenses.

90.I can return in the chronology to the genesis of the All Gems Agreement, but it can be noted that the ‘flat fee’ remuneration was plainly to include but was also rather in excess of mere travelling/car and driver expenses.  Because it related to personal property investment, not the film business, and because All Gems was not involved in the film production business I reject the submission that the All Gems Agreement was somehow to remunerate Ms Yu for her services in relation to the film production business. That is also not what it says.

91.All of the amendments to the Loncham Agreement, and the All Gems Agreement, were made after the date of the alleged Oral Agreement.  Yet none of them identify any other element of remuneration based upon a suggestion of either a profit share or any commission.  Indeed, the description of a ‘flat fee’ seems to me to be wholly inconsistent with any further element of remuneration based on profit or commission.  No explanation was offered in evidence as to why the monthly remuneration was subject to increase or fluctuation (save that the later reduction might have been in recognition of less work by then being performed by Ms Yu, at the time after her romantic relationship with Mr Chiau had waned or ceased).

92.In August 2002, Mr Chiau acquired commercial property on the ground floor of Sincere House, 83 Argyle Street, Kowloon (“Sincere House property”).  It was subsequently sold in March 2004.  Though it generated a profit of around HK$13 million, Ms Yu did not request any profit share under the alleged Oral Agreement, and Mr Chiau did not offer to pay her anything pursuant to his alleged verbal gift.  According to Ms Yu, she did not ask for any profit sharing in respect of the Sincere House property because it was an investment made before the Oral Agreement.  According to Mr Chiau, he did not make any gift probably because Ms Yu did not request it (it being unchallenged that all payments which were subsequently made were first requested by Ms Yu).  Mr Yuen submits that Ms Yu’s explanation makes perfect sense, whereas Mr Chiau’s explanation is incoherent or unsatisfactory.  I think both explanations are about equally plausible, and the Sincere House property transaction is effectively a neutral event to which I accord little or no weight (and to which I shall not return).

93.In early 2004, Mr Chiau and Ms Yu became aware that the Skyhigh Property was being demolished.  I do not think it particularly matters whether Mr Chiau or Ms Yu first became aware of that; from living in, or visiting, House 7, both of them were bound to become aware of the demolition in progress.  But I accept that the way in which Ms Yu’s case was put in her pleading and witness statements was an exaggeration, which was intended to leave the impression that her involvement was rather greater than it was.  For example, at §12 of the RASOC, Ms Yu pleaded that it was she who “came to know from a source” that the Skyhigh Property was put up for auction and advised Mr Chiau to bid on it.  In her Amended Reply, she claimed to have “introduced” the Skyhigh Property to him, which is clearly not true.

94.Rather, in circumstances where Mr Chiau had always kept an eye on the Skyhigh Property next door to where he lived and had always had an interest in buying it, subsequent enquiries were made by him with a well-known property agent, Johnson Lam, and led to the information that the Skyhigh Property was to be auctioned as a distressed asset by Citibank.  The auction was managed by a Desmond Chum (“Desmond”) of Citibank, and a property agent called Raymond Ho.  That Ms Yu may also have been present in discussions with Johnson Lam or Desmond does not make her the person who discovered the auction, or introduced the property.

95.In Ms Yu’s oral evidence, this was accepted. Indeed, in her oral evidence, she accepted that none of the relevant properties were “introduced” by her to Mr Chiau.  The introductions all came from estate agents, and Ms Yu’s real case is based upon the idea of her subsequent follow-up on and filtering of those introductions, leading to her “recommendations”.

96.Ms Yu’s case is, and her evidence was, that she then conducted extensive research and analysis.  This was in discussions with Desmond and Raymond Ho, as well as research on the price and redevelopment potential of the Skyhigh Property.  She says that pursuant to that analysis, she recommended to Mr Chiau that he should bid for the Skyhigh Property. Although in her witness statement she said “we should try to bid” (my emphasis), clearly it was only Mr Chiau who had the funds and/or borrowing ability, so it was Mr Chiau who would – and did – bid.  Ms Yu also says she analysed Mr Chiau’s ability to raise capital, and the prospects of securing a development partner.  She had already approached HSBC about financing, and supplied certain documents for the bank’s initial assessment.  She says she did the groundwork so as to ensure that there could be financing in place with a few days’ notice.

97.Mr Chiau accepts that Ms Yu probably conducted various enquiries and analysis, though he was not aware of the detail at the time.  But, he says she did so because of their relationship, and not because of any contractual promise that she would benefit from a 10% share of profits. He also says, and I accept, that he himself met Desmond several times, and became friendly with him.  I also accept there was significant information publicly available about the bidding process, and various persons’ assessment of appropriate value.

98.Ms Yu says that Mr Chiau originally showed no keen interest in putting in a bid, although he several times changed his mind.  But, two days before the bid, Mr Chiau told Ms Yu that he had again changed his mind, and accepted her recommendation to bid for and redevelop the Skyhigh Property.  However, though I think it probable that there was some discussion between Mr Chiau and Ms Yu about the potential bid, I do not accept that Mr Chiau showed little interest in putting in a bid.  Though he might have preferred a private sale, the auction was his opportunity to acquire the location on which he could develop his “dream home”.  I find that whatever discussions there were revolved around price and process, rather than any equivocation as to whether or not to bid at all.  Mr Chiau chose to bid, and he did not do so simply because of Ms Yu’s “recommendation”, which he did not need.  That Ms Yu might have shared, and I accept did share, the view in favour of or in support of bidding for the Skyhigh Property does not make her someone who really brought about the bid.

99.Mr Chiau was at first of the view that a bid of HK$260 million would be sufficient.  But Ms Yu said in her first witness statement that, on the morning of the auction, her estimations and valuation from comparable properties, and the potential redevelopment value, and because she knew of a number of other bidders, led her to recommend to Mr Chiau a higher bid of over HK$300 million.  A different version was offered in oral evidence, which revealed the exaggeration.  Orally, she said that the idea of offering over HK$300 million arose because Raymond Ho apparently told her that a bid below that figure was unlikely to succeed.  It is, of course, obvious that what she was told by Raymond Ho was information intended to be passed (as it was) to Mr Chiau.

100.In the end, Mr Chiau decided to increase the bid to HK$320 million.  It seems obvious that he did so because he had learned from Raymond Ho, albeit via Ms Yu, that his previous bid would not suffice.  I also accept that he increased the bid because of his own view as to its value and the price necessary to bid to acquire the Skyhigh Property.  Ms Yu personally handed the cheque for around 10% of that sum to Raymond Ho on the day of the auction.  The cheque was immediately cashed, and Mr Chiau therefore had one month to pay the remaining balance of the bid price.

101.As to events after auction, Ms Yu says that Mr Chiau became concerned that he had overpaid, in part because some of his friends or connections in the property business told him that.  Therefore, says Ms Yu, she arranged a meeting at the Fringe Club with her brother, Johnny Yu, because of his good experience and connections in the property investment sector.  During the meeting, Johnny Yu told Mr Chiau that the bid was at an appropriate level, and it would be a good investment for Mr Chiau if he had the ‘holding power’ and if the property were to be redeveloped into multiple houses.  He also said that he would help to find a suitable business partner, to assist with the financial burden of completing the sale and redeveloping the property.

102.Johnny Yu gave evidence, via videoconferencing facilities from Taiwan.  He adopted his witness statement as his evidence in chief.  There is a dispute as to whether the meeting at the Fringe Club was the first time Johnny Yu met Mr Chiau, or (as Mr Chiau says) they had previously met briefly on social occasions.  That dispute does not seem to me to matter. More important is what Johnny Yu said happened at the meeting.

103.He says he was told that Mr Chiau had only paid around HK$30 million as a deposit, and needed to gather the remaining balance within a very short time so as to complete the sale.  He says Ms Yu told him at the meeting that Mr Chiau’s financial resources were tight, and that he had difficulties in raising sufficient funds within the requisite timeframe unless he could offload some of his properties in Hong Kong and Singapore quickly.  That evidence does not match – but rather is in tension with – the version of events given by Ms Yu, part of her case being based upon what she says was her prior financial analysis to ensure both that Mr Chiau could afford the bid and that there were sufficient financial resources which could be triggered within a few days.  It is also clear that Johnny Yu had been asked to recollect the meeting only many years, perhaps 15 years, after it had taken place.  In any event, I prefer Mr Chiau’s evidence that he was always confident that he would be able to raise sufficient funds, and he was also always confident that he would be able to find an appropriate business partner.

104.As to the purchase price of HK$320 million, the evidence – including the accounts of The Star Royale Ltd (“Star Royale”), the company which held the property – identifies that Mr Chiau came up with HK$110 million, and a further HK$224 million came from an HSBC loan.  There can be no doubt, and Ms Yu accepted in her oral evidence, that the loan was made available because of assets held by Mr Chiau under his family trusts, and were made available to him because of his financial strength.

105.Anyway, Johnny Yu also says that he told Mr Chiau that he would leverage his connections to help find a suitable business partner, and later called Michael Chan, who was a friend of his and a very well-connected real estate agent.  Michael Chan later informed Johnny Yu that he had contacted Raymond Hu (“Mr Hu”) of Ryoden Property Development Co Ltd (“Ryoden”), who expressed an interest in working with Mr Chiau to develop the Skyhigh Property.  I accept that Mr Chiau was also a friend of Michael Chan, and might well have been put in touch with Mr Hu in any event.  But, that does not really matter, where Ms Yu’s claim does not and cannot depend upon whether or not the bid already made and accepted was followed by Johnny Yu’s assistance in identifying a development partner.  I accept the point that, if Mr Chiau had sufficient concerns that he might seriously have considered forfeiting the deposit and not pursuing the acquisition or development, then the meeting with Johnny Yu arranged by Ms Yu might be seen as the continuation of her various actions said to constitute the “recommendation”, ultimately leading to the profit of which she claims a share.  But, I accept Mr Chiau’s evidence that whilst he received differing views after the auction – some saying he had paid too much, others saying he had paid a good price – Mr Chiau was not so concerned that he might have pulled out of the acquisition.  It was, after all, the acquisition of the location for his “dream house”, which indicated he was in it for the long term.  After the meeting at the Fringe Club, Johnny Yu had no further involvement.

106.Mr Chiau met Mr Hu.  They got on, and they quickly agreed to partner through a joint venture for the redevelopment of the Skyhigh Property.  I accept that the agreement was based upon Mr Chiau’s and Mr Hu’s shared vision for the development, and the fact that the terms of cooperation proposed by Mr Hu were fair and Mr Chiau’s opinions would be respected.  In the context of any suggested previous concerns about the price paid, I note that it is common ground that Mr Hu commented that Mr Chiau acted very fairly in not asking for a premium on top of the amount paid for the Skyhigh Property in the auction.

107.In due course, Mr Hu became a close friend of both Mr Chiau and Ms Yu.

108.Mr Chiau and Mr Hu discussed and agreed on a 50-50 joint venture to redevelop the property into four independent houses.  Mr Chiau and Mr Hu both say, and I accept, that the agreement was that two of the houses would be sold and two would be retained for “self-use”.  Mr Chiau was fairly given first choice as to which house he would keep for “self-use”, because he was the winning bidder for the property.  I will return (see below) to what was meant by the agreement that each of Mr Chiau and Mr Hu would retain one house for “self-use”.  Mr Chiau chose House 12.

109.The development of the Skyhigh Property was held by Star Royale, which company was indirectly held as to 50% each by Whiskey Investments Holdings Ltd (“Whiskey”) and Allied Top Development Ltd (“Allied Top”).  Whiskey was the corporate vehicle to hold Mr Chiau’s share in the development.  Whiskey is a BVI company of which May is a director.  It is held as to 100% (one share) by The Treasure Unit Trust (“TTUT”), which is itself held as to 100% by The Sino Star Trust (of which Mr Chiau and his family are the beneficiaries).  Allied Top was the corporate vehicle to hold Ryoden’s/Mr Hu’s share in the development.

110.Funding/financing for the project was provided by HSBC.  I accept that the main administrative and document matters were handled by Ms Yu.  But, obviously, the final decision-makers on the detailed financing proposal were Mr Chiau and Mr Hu.

111.Ryoden acted as the project manager, overseeing the construction, development, accounting, and book-keeping for the development project.  It also acted as the company secretary for Star Royale.  After the initial meetings between Mr Chiau, Mr Hu and Ms Yu about architectural designs, most of the technical and routine matters of the development were left by Mr Hu to Mr Charles Mung, a Senior Manager in the Projects Department of Ryoden, and Mr Frank Yik, the Assistant General Manager of the Central Management Division of Ryoden.  Most of their dealings with Mr Chiau’s side of the venture were through Ms Yu.  Mr Yik’s witness statement confirmed the same matters.  As Ms Yu described it, all important matters would have to go through her.  In his evidence, Mr Hu described Ms Yu’s role as mainly to oversee the decoration of House 12 in particular.

112.The interior design and decoration of House 12 was contracted by Mr Chiau (or his corporate vehicle, Whiskey – including in its previous name) to a Mr Vittorio Locatelli.  Mr Locatelli’s involvement began within a relatively short time after the successful bid, and the commencement of the development project.  He first visited Hong Kong in relation to House 12 as early as December 2004.

113.It is, of course, unnecessary to go through any particular detail of the development process, which continued at least until around 2008 or 2009.  The formal occupation permit was previously issued in May 2007.

114.Shortly before that, in 2006, Mr Chiau (or the company which held it) sold House 7.

115.Shortly before the trial began, Ms Yu gave disclosure of an email dated 5 December 2007, for which an application was made to adduce it as evidence at the trial. In her affidavit leading the application, Ms Yu said that she had recently remembered using an old laptop, and having searched its contents she found the email, which is relevant to the subject matter of the dispute in the 2012 Action.  She said she found no other relevant document.  Originally, I disallowed that application, as it seemed to me to be prejudicial to Mr Chiau’s position, in that it deprived him of a proper opportunity to make investigation about the content of and contextual circumstances surrounding the email.  I was also concerned that the disclosure process was apparently made by Ms Yu alone, without significant input from those advising her (who do not seem to have had the opportunity to review the content of the laptop themselves).  Further, from the content of the email alone, it did not seem to me to be likely to have much probative value.

116.However, when Ms Yu mentioned the 5 December 2007 email during her oral evidence at trial as evidencing Mr Chiau’s intention to sell, Mr Man chose not to ignore it, but instead actually asked her questions about it.  He also put questions to Mr Hu about the email as well.  In those circumstances, I canvassed with the parties that it seemed that, irrespective of my earlier ruling, the email had become part of the evidence and so should be added to the bundle.  The parties agreed, and it was.

117.The 5 December 2007 email was sent by Mr Hu to Mr Raymond Ho, the property agent, copied to Ms Yu.  It reads as follows:

raymond, since you will be giving the approved plans and area calculation to henderson, might as well give them our calculation of the saleable area and gross floor area.

the attached saleable area will be inserted in the schedule of saleable area in the sale and purchase agreement of each house and therefore is official.  you may also want to disclose this information to potential purchasers.

118.The attachment was a summary of floor areas, saleable and gross.  Ms Yu relied on the email in support of her case that the original intention on the part of Mr Chiau was to have sold House 12 on its completion, and that he only later changed his mind to keep it for his self-use and own residence.  That intention is said to be evident from the provision to Henderson of the saleable and gross floor areas of all four houses, including House 12.

119.I do not think the email and the attachment actually go any way to support Ms Yu’s case in this regard.  On its face, it seems at least a little tentative, and there is no involvement of Mr Chiau.  Further, it is not unusual for someone to ‘test the waters’ or assess the market as regards a development, and typically there might be a description of the whole of the development, even if only part of it were actually to be marketed.

120.But in any event, the author of the 5 December 2007 email, Mr Hu, made clear in his oral evidence that the email did not evidence any real desire to sell House 12.  When asked by Mr Man whether there was a plan involving Mr Chiau to sell House 12, among other houses, to Henderson in 2007, Mr Hu said there had been no discussion with Mr Chiau, let alone agreement with him, to sell House 12 at the time.  He explained the email as Ryoden taking the lead, when some property agents were soliciting for business and there was a suggestion that some big developers would like to purchase land for self-occupation.  Mr Hu said that as he was in the trade, it does no harm to him to listen to people’s requests and to find out what prices they would offer.

121.That seems to me to be consistent with what later happened.  Whilst Mr Hu had originally intended to keep House 10 for the use of himself and his family (as he put it, as a sort of clubhouse), he later sold it in 2011.  Looking at the sale price, it seems to me he would have thought that he had been made an offer he could not or should not refuse.  It seems to be perfectly clear on the evidence that until that point Mr Hu had throughout intended to keep House 10 for the “self-use” of himself and his family (see further below).

122.Starting in 2007, Ms Yu began to ask for and received various payments variously described as a ‘profit share’ or ‘commission’, or both.  I will identify the circumstances of those payments in a separate section of this Judgment (see below).  For the moment, I would merely point out that by far the largest payment was the sum of HK$14,942,001 paid on 3 December 2009, relating to House 16 and House 18.

123.House 18 was sold in July 2009 for HK$300 million.  The completion of the sale was in September 2009.  House 16 was sold in October 2009 for HK$350 million.  The completion of that sale was in October 2009.

124.There is a table in the evidence, with a print date of 13 October 2009, dealing with costs of the development of the Skyhigh Property, broken down house by house.  Each of various costs are set out by reference to the ‘estimated final cost’ and the cost attributed to each house.  Many of the costs for each house are similar, particularly when taking account of the slight differences in gross floor area.  House 10 and House 12 are bigger than House 16 and House 18 (GFA of 8302, 8196, 7229 and 7261 respectively).  However, some of the costs vary significantly between the houses.  They can be shown in the following, abridged table (all figures in HK$, ignoring the cents):

Cost	Total	House 10	House 12	House 16	House 18
Building sub-total	482,576,045	129,043,310	127,972,750	112,499,805	113,060,179
Interior design consultancy	4,784,582	1,200,000	2,584,582	1,000,000	-
Interior design decoration	46,163,283	10,684,841	27,490,185	7,109,887	878,369
Loose furniture and lighting	17,572,787	2,876,286	11,481,386	3,207,058	8,056
Interior design and decoration Subtotal	68,520,653	14,761,128	41,556,153	11,316,945	886,425
Total costs	551,096,699	143,804,438	169,528,904	123,816,750	113,946,605
Costs borne by Ryoden		14,761,128
Costs borne by Whiskey			41,556,153

125.From that table, it can be seen that the basic cost of building the houses was not dissimilar (though the original table also points out that the cost of kitchen cabinets and appliances for House 12 was almost $1.225 million, more than double that of any other house).  House 16 was the ‘show house’, yet the decoration and furnishing cost for House 12 was vastly in excess of (almost 4 times) that spent on House 16.

126.An email dated 1 February 2011 was sent from Charles Mung of Ryoden to Ms Yu (on behalf of Mr Chiau) (“the 1 February 2011 email”) under the subject heading ‘Cost adjustment for House B (12 Pollock’s Path) account under Main Contract’.  The email does not refer to Mr Chiau and was not sent to Mr Chiau, nor was it copied to him. Ms Yu nevertheless relies on the 1 February 2011 email as the document supporting her primary case, saying it identifies the point in time when Mr Chiau changed his original intention that House 12 should be an investment, to an intention for self-use.

127.The 1 February 2011 email encloses a cost summary, and a letter from the quantity surveyor, providing a summary of additional costs for Houses A and B (that is House 10 and House 12 respectively).  The tables make clear this is based on the Main Contract Final Account, and leads to Mr Mung’s recommendation that the owner of House 10 reimburse Star Royale the cost difference.  Ms Yu says this was the first occasion on which it was possible to do the accurate calculation of the respective costs and accounting between Ryoden/Mr Hu and Whiskey/Mr Chiau as regards House 10 and House 12.

128.House 10 was sold in June 2011 for HK$800 million.  In accordance with the prior agreement, all of the proceeds were paid to Ryoden, and none were shared with Mr Chiau or any of his corporate vehicles.

129.In April 2011, at her request, Ms Yu was permitted by Mr Chiau to move temporarily into House 12. She stayed there until September 2011.  In what seemed to me to be a telling piece of evidence, she said that she was permitted to live there temporarily in part because it had always been envisaged that she and Mr Chiau would live there after House 12 was finished.  Though Ms Yu later suggested that was only going to be for a temporary period until House 12 was sold, I think that unlikely – not least against the other evidence, see below.

130.When Ms Yu made her demand for payment of the sum for commission in respect of House 12, she herself provided a handwritten calculation to Brenda, which Brenda re-typed. The re-typed note read as follows (underlining as in original):

Commission for Ms YU Re: Pollock Road 12
The Star Royale Limited Income Statement	Ms YU’s Calculation Pollock 12 HK$
Revenue	800,000,000
Direct Cost	(169,528,904)
Gross Profit	630,471,096
Acc Loss	(13,186,641)
Profit after Taxation	617,284,455
	=========
Commission for Ms YU
Commission 10%	61,728,446
	========

131.The reference to “Acc Loss” was a reference to the accumulated loss, as of 30 April 2011, on various investments in shares and bonds held by TTUT.  Ms Yu has since described that as an offer of discount, which she has since withdrawn.

132.The document then appears to have been re-typed to take account of a counter-calculation, apparently proposed by May.  The re-calculation has a date chop of 30 May 2011.  It reads as follows (leaving out the right-hand bracket dealing with “supporting” information):

Commission for Ms YU Re: Pollock Road 12
The Star Royale Limited Income Statement	Ms YU’s Calculation Pollock 12 HK$	MAY’s Version Pollock 12 HK$
Revenue	800,000,000	800,000,000
Direct Cost	(169,528,904)	169,528,904
Gross Profit	630,471,096	630,471,096
Other Revenue	-	-
Running Expenses	-	(1,839,059)
Administrative Expenses	-	(11,655,960)
Finance Costs	-	-
Estimated Legal Fee	-	(1,000,000)
Estimated Agency Fee	-	(2,000,000)
Profit before Taxation	630,471,096	613,976,078
Taxation	-	(101,306,053)
Acc Loss	(13,186,641)	(13,186,641)
Profit after Taxation	617,284,455	499,483,384
	=========	=========
Commission for Ms YU
Commission 10%	61,728,446	49,948,338
	=========	=========
	Overpaid for last tim[e]	(3,217,066)
Commission		46,731,272
		========

133.I do not think the suggestion that Ms Yu had been “overpaid for last time” was explained in the evidence, except by a document which includes certain “adjustments”.  The use of the phrase “overpaid for last time” may be neutral, but it may also not be indicative of a gift.  In any event, the proposed recalculation seems to me to be an attempt to reach more of what might be regarded as a “net” figure, through the deduction of the kinds of expenses deducted in any true calculation of profit.

134.On 7 June 2011, Ms Yu sent Brenda an email asking “Can u give me a spreadsheet of payments to me so far?  My 10% share on profit.  Thanx.”  The response was a table setting out the description of Payments 2, 3, 4, 5, 6 and 7 (as defined below).  That was apparently later corrected to include Payment 1 (as defined below).  Both documents make reference to what became Payment 8 (as defined below) and the claim to the unpaid “10% commission” on House 12.  Apparently at the request of Ms Yu made by email on 7 June 2011, the title of the table was later changed from “statement from ms may chow paid money to ms yu” to “Profit Sharing for Ms Yu” (though reference in the document to a “10% commission” also remained).

135.That is consistent with Brenda’s evidence that she generally carried out the instructions of Ms Yu in relation to these various payments (but see below), and that the descriptions of the payments were those provided by Ms Yu and simply adopted by Brenda.  Brenda also said she tended to treat Ms Yu as though she was the “boss’s wife”, and so did as asked.

136.By July 2011, Ms Yu and Mr Chiau had in effect adopted the stances maintained by them since that time.  There are various exchanges of WhatsApp messages, which it seems to me are unnecessary to be set out at any length in this Judgment.  Those messages having been sent after the parties had joined issue, they add little to the analysis.  The tone was not always pleasant from Ms Yu, and Mr Chiau understandably regarded some of it as “threatening”.  But nor do I think the tone particularly assists with the resolution of the relevant disputes.  Clearly Ms Yu thought she was entitled to, and deserving of, her “portion”.  On the other hand, Mr Chiau was asserting that there could be negotiation based on their relationship, that he would help out and do what he promised if they could negotiate sensibly.  The messages were also exchanged during Ms Yu’s ‘overstaying’ at House 12, and might be seen in that context.

137.Without going into any unnecessary detail, it is fair to say that she outstayed her welcome, changed the locks and invited certain outsiders in, apparently in part to bring unfair pressure on Mr Chiau to cave in to her demand for what she regarded as her entitlement to the profit share on House 12.  Clearly certain actions by Ms Yu are now recognised by her to have been inappropriate, and though she says otherwise I accept the evidence that she was probably ‘put up’ to those actions by her new boss and/or her new boyfriend.  That is what she told Mr Hu.

138.Ultimately, Ms Yu vacated House 12 in about September 2011.  At around the same time, on 30 September 2011, Star Overseas gave notice to terminate the Loncham Agreement, effective on 28 December 2011.  May gave unchallenged evidence that it was only realised some time after the event that Ms Yu and Mr Chiau had broken up, and still later remembered that Ms Yu was still on the payroll.  Hence, the ending of the Loncham Agreement.

139.At some point during 2011, Mr Hu was drawn into the dispute which had brewed between Ms Yu and Mr Chiau.  In July 2011, Ms Yu told Mr Hu that Mr Chiau had promised to give her 10% of the profits arising from investments introduced to him by her, and that she was now owed money by Mr Chiau in respect of House 12.  Mr Chiau told Mr Hu that if there were a profit made through the help of Ms Yu on any project, then a 10% “bonus” would be given to her.  Mr Chiau told Mr Hu that the 10% bonus was because Ms Yu was his girlfriend.  In the circumstances, Mr Hu advised Mr Chiau that because Ms Yu had assisted him for so long and given the best 10 years of her youth to him as a partner, then Mr Chiau should take care of her by at least honouring part of the payment.  Mr Hu recalled using the term “separation fee” (as opposed to “break-up fee”, though, other than the difference in the level of colloquialism in the relevant Cantonese phrases, the broad meaning is the same, and neither reflect a binding contractual entitlement).

140.Mr Chiau himself moved into House 12 towards the end of 2011, together with other members of his family (though they may not all live there all the time).  Other than a period when the property was vacated for a renovation in recent years, Mr Chiau has remained in residence at House 12.  He lives there now.  He has not sold it.  There is no evidence that he is about to, or even intends to, sell it.

141.Ms Yu instructed her then solicitors to write a pre-action letter dated 9 December 2011 (for the detail of which, see below).

142.The writ in the 2012 Action was issued on 3 September 2012.  The claim in the 2012 Action has been the subject of various amendments and re-formulations (for the detail of which, also see below).

143.Though there was an apparent reluctance for Ms Yu to meet directly with Mr Chiau during 2011, the two did meet directly in the presence of Carol Gaw on occasions in February 2012. One meeting took place at the FCC on 27 February 2012.

144.In fact, there had been some earlier involvement by Carol Gaw, who appears to have drafted a ‘Deed of Indebtedness’, suggesting that Ms Yu wished to borrow HK$25 million from Mr Chiau.  Though I do not think it matters for the purposes of resolving the current proceedings, I think that was probably the result of a misunderstanding of what Ms Yu might have been saying to Carol Gaw about the Whiskey mortgage loan of HK$250 million and its link to the 10% arrangement.  Clearly, Ms Yu did not want to borrow any money.  Ms Yu’s reaction to receiving that draft was to write an email to Brenda (for onward transmission to Mr Chiau) dated 26 January 2012, copied to Carol Gaw and May.  It referred to a meeting on 18 December 2011.  Ms Yu said that she did not want be put off aimlessly, and in fact only wanted Mr Chiau to admit the 10% matter in writing and to set a deadline for repaying the money.

145.Carol Gaw also drafted at least one further document, being a draft ‘Deed of Gift’.  Ms Yu wondered why it had been drafted as a deed, and why it referred to a gift.

146.Following the FCC meeting on 27 February 2012, Mr Chiau provided a cheque for HK$10 million payable to Ms Yu, drawn on the personal account of May.  It was provided under cover of a note stating that the enclosed cheque was an “appreciation for your friendship and support over the years”.  Ms Yu responded that the HK$10 million was an advance payment of the 10% net profit sharing on the last unsold house, ie. House 12, as promised by Mr Chiau, and that it was not a gift.  Mr Chiau in turn responded on 30 March 2012, emphasising the payment was made in appreciation of friendship and support over the years, without legal obligation on his part, after taking into account his then current financial situation.  Ms Yu responded on 20 April 2012, reiterating that the payment was in fact part of the commission to which she was entitled and not a gift, and stressing that she was still entitled to 10% on the proceeds of sale of House 12, but for which she would give credit for the HK$10 million.

147.There is also a draft ‘Deed of Covenant’, though it is not clear who drafted it.  I do not think it helpful in resolving the dispute in these proceedings.

148.Shortly before the trial, Mr Chiau made an application to adduce in evidence various notes taken by Carol Gaw at the meetings, and as a result of the meetings and conversations, held with Ms Yu and Mr Chiau.  I granted the application, on the basis that I did not think there was unfair prejudice to Ms Yu, as she was present at the meetings and would be able to cross-examine Carol Gaw on the content of those notes, which had been affirmed as having been made (at least in part) contemporaneously with the meetings and discussions.  It seemed to me, in circumstances where Carol Gaw appeared to have had regard to her own notes when she made her witness statement, that reference to the notes was bound to come up in the oral evidence, so that excluding the notes was likely to be a practical impossibility.  However, in the end, Mr Chiau (or Mr Man on his behalf) did not call Carol Gaw to give evidence.  The witness statement previously provided by her has therefore not become evidence, and I do not think I can take any fair assistance from the contents of the notes.  So I have ignored the notes, and given them no weight.

149.In any event, as I have already stated, by the time of Carol Gaw’s involvement, whatever it was, Ms Yu and Mr Chiau appear to have adopted their respective stance as maintained through to the trial.  What they did or did not say in negotiation and discussion, in circumstances where there may have been a genuine attempt to seek to resolve matters without recourse to litigation (and where I accept that both Ms Yu and Mr Chiau would very much have preferred to have avoided a trial), is not likely to assist me to resolve the dispute.  Further, whilst what was said by Mr Chiau in February 2012 might have been relevant to a limitation point, I doubt I could have ever placed much reliance on the material even in relation to that point.  As it happens, that point has now essentially fallen away.

150.The writ in the 2017 Action was issued on 25 May 2017.  There can be little doubt that it was issued as a reaction to the point made by Mr Chiau in his witness statement dated 10 March 2017, that there had been other investments which he made yet for which Ms Yu had made no claim.  Particular reference had been made to the BH Properties.  The 2017 Action makes a claim in relation to the BH Properties, as well as in relation to the Fund.

151.The BH Properties are three houses in a development by Henderson Land Investment.  It was still under development in October 2007 when Mr Chiau (through various corporate entities held by May as shareholder and director) acquired the three houses.  House 19 was purchased for HK$15,071,180 and sold in June 2011 for HK$16,580,000.  House 78 was purchased for HK$17,960,620 and sold in May 2012 for HK$19,500,000.  House 80 was purchased for HK$18,428,020 and sold in March 2013 at HK$21,100,000.  Each of the houses was sold by Mr Chiau following completion of the development.

152.It is now common ground that the BH Properties were introduced to Mr Chiau by Dicky Tsoi, and that Mr Chiau was specifically targeted as a possible purchaser because of a so-called “star investor” programme.  Ms Yu says that, nevertheless, it was she who performed various research and analysis and site visits before making the recommendation to Mr Chiau that he should invest.  She says she recommended that he should not buy more than three houses, though he originally chose to purchase seven, but later reduced the number of purchases completed to three.  Mr Chiau says he personally visited the site and was taken, amongst other things, with the smoke-free policy, and made his own investment decision.

153.In April 2008, TOHL subscribed for the Fund, with a capital commitment of US$2 million.  It is clear that the investment in the Fund was made on the recommendation of Ms Yu.

154.The various records relating to the Fund show that from time to time (a) it would make capital calls from its subscribers requiring the subscriber to make contribution, and (b) it would also make distributions to its subscribers.  Though there are slight variations on the figures presented in the evidence, it seems that up to June 2020, the total capital contributions made by TOHL were US$1,541,122, and the total distributions received by TOHL were US$8,297,004.

155.The Fund has not yet been liquidated.  In her witness statement filed in the 2017 Action, Ms Yu refers to the investment and distribution figures as at March 2017.  She states that though the Fund has performed positively, and that Mr Chiau has received substantial distributions, she has not been paid any share of the profits.

156.Nevertheless, her pleaded claim in the 2017 Action is simply to a declaration that Mr Chiau should pay her the 10% share in profits made in respect of the Fund (alternatively, damages to be assessed). In his closing submissions Mr Yuen made clear that it is Ms Yu’s case that Mr Chiau has not yet breached the Oral Agreement as regards the Fund.  Therefore, she does not seek any immediate monetary relief, but seeks the declaration – expecting a 10% profit share upon the liquidation of the Fund, or alternatively when Mr Chiau realises the Fund, whichever is earlier.  As I understand it, part of the rationale for this approach is that it is not yet possible to identify what profit will ultimately have been made, until either liquidation or realisation.

F.     The Payments to Ms Yu

F.1     The Various Payments

157.The following table sets out the payments made to Ms Yu, starting in 2007, which Ms Yu says evidence the Oral Agreement (or, on her alternate case, comprise the conduct which itself made an agreement by conduct in the same terms as the Oral Agreement):

Payment	Nature of investment	Investment vehicle	Amount paid (HK $)	Date paid
“Payment 1”	100 Queen’s Road East (“100 QRE”)	Quiet Voice Investments Ltd (“Quiet Voice”)	$386,250	11 May 2007
“Payment 2”	Stocks	TOHL	$170,000	31 August 2007
“Payment 3”	Stocks	TOHL	$71,916	26 October 2007
“Payment 4”	9/F Silver Fortune (“Silver Fortune Property”)	Pilotvision Ltd (“Pilotvision”)	$1,267,194	26 October 2007
“Payment 5”	Carolina Garden	All Gems	$361,364.40	11 December 2008
“Payment 6”	Silver Fortune Property	Pilotvision	$546,905.14	21 October 2009
“Payment 7”	House 16 and House 18	Star Royale	$14,942,001	3 December 2009
“Payment 8”	GI Mall	Power Alliance Inv Ltd	$1,779,470.90 (at par value of shares)	2011, in the form of 17,800,000 shares in 8220
Total				$19,525,101.44

158.The circumstances surrounding each payment can be considered, each in turn.

159.But, it seems to be common ground that Ms Yu would be the one to approach Brenda and request Brenda for payments to be made.  Ms Yu would always tell Brenda that Mr Chiau already knew about the payment, being a 10% net profit or commission, but Brenda would always ask Mr Chiau for approval.  Brenda did not herself know the exact reason for the payment or the calculations, which she regarded as a private matter between Ms Yu and Mr Chiau. I accept Brenda’s evidence that she simply took what Ms Yu told her to be the case and adopted Ms Yu’s description (“consultancy fee”, “profit-sharing”, “commission” etc), and that if Mr Chiau agreed to make the payment, it would not matter in the least to her (Brenda) what the payment was for.  Mr Chiau would sometimes give the asked-for approval on the spot, but sometimes he would ask Brenda to wait.  He would ask her to wait with the payments of the larger amounts, before responding perhaps a few days later to say that she could pay her.

160.I take into account that Brenda told Mr Chiau the basis of the request, for example that it was a request for “10% commission”, and that Mr Chiau never queried with Brenda a request for such a thing.  I also take into account that the use of such words was clearly before there was any contemplation of litigation brought by Ms Yu, so that they might reflect her then honest subjective understanding.  But, for those occasions on which the word was used, it seems to me that the use of the word “commission” was either loose or simply inaccurate.  Without being overly technical, it is not Ms Yu’s case that in the Oral Agreement she asked for and Mr Chiau agreed to pay her a “commission” as such.

161.After hearing from Mr Chiau, Brenda would then report to May, who would be responsible for signing the cheques.

162.Ms Yu says she requested each payment, because she was the person responsible for recommending the investments to Mr Chiau, who took and acted on her recommendation.  She also says that her recommendations were based upon a significant amount of analysis and research.

163.Mr Chiau says that all of the property investments were recommended to him by various estate agents with whom he was familiar, and he made his own decisions to purchase the relevant properties.  As stated elsewhere, Ms Yu accepted at trial that the introductions were all in fact made by estate agents, not by her.  Mr Chiau accepts that Ms Yu did provide assistance, but says it was only administrative assistance offered by her and accepted by him because of their romantic relationship (rather than the result of any commercial arrangements).

F.2     Payment 1 – Quiet Voice / 100 QRE

164.The property at 100 QRE was acquired by Quiet Voice in October 2006 and sold in September 2007.  Quiet Voice was a corporate vehicle held by TOHL.

165.On 23 April 2007, Brenda received an email from Ms Yu requesting payment of her “fee” from Quiet Voice.  That was a few days after the provisional agreement for the sale of the property had been signed on 17 April 2007.  Brenda asked on 25 April 2007 whether the cheque should be made payable to Loncham or to Ms Yu.  Ms Yu said it should be payable to Loncham.

166.There is an invoice from Loncham dated 25 April 2007, signed by Ms Yu, addressed to the Accounts Department of Quiet Voice.  It invoices a “Consultancy fee” in the amount of HK$386,250. Whilst there is no reference to “profit share” or “commission”, the amount appears to have been intended to be 10% of the profit made by Quiet Voice.  The particular figure claimed as the “fee” came from Ms Yu.

167.There is a document, however, with a filename identifying it as created by Brenda, which makes a calculation of the profit made by Quiet Voice on the transaction, taking account of various loan and professional expenses, and a commission paid to Dicky Tsoi (the introducing estate agent).  The profit figure shown on the document is HK$3,594,735, not HK$3,862,500 (the figure on which the 10% paid to Ms Yu was apparently based).  Therefore, the money paid to Ms Yu (whilst approximately 10%) was not strictly the correct amount by reference to the actual net profit.  This fact is consistent with Brenda’s evidence that she would not query the amount asked for by Ms Yu, and would simply follow the instruction to make the payment.

168.There is also a payment voucher of Quiet Voice dated 11 May 2007 referring to the payment of the “consultancy fee” to Loncham in the invoiced sum.  In the boxes at the bottom of the payment voucher, Brenda initialled as “marker”, Ms Yu initialled as “reviewer”, two accounting staff (Janet and Benny) initialled as “post by”, and May initialled against “approved by”.

169.Quiet Voice included the payment of the fee as an expense in its accounts.  Though the accounting document is not clear, it also seems that Loncham included the fee as part of its income in the relevant accounting period.

170.I expressly acknowledge the force in the argument as regards Payment 1 at least, that if the Oral Agreement were not meant to be legally binding, the parties would not have taken the trouble to create and execute the documents relating to that payment, in particular to label the payments as “consultancy fee”.

F.3     Payment 2 – TOHL / Stocks

171.On 25 August 2007, Ms Yu sent an email to Brenda requesting payment in the sum of HK$170,000.  The request was made in the following simple terms: “pls pay me $170k, May Chow knows”.  It appears that Brenda then asked May, who suggested a deduction of THB250,000 (Thai baht, equivalent to HK$66,900), to leave a balance of HK$103,100.  I accept that the deduction was in relation to a previous purchase or advance made on Ms Yu’s account.

172.In passing, I would mention that Mr Yuen described that deduction as inconsistent with Mr Chiau’s case. I do not accept that submission.  The deduction seems to me to be at least equally consistent with either a private payment or a contractual entitlement.  It might also be thought that making deduction for a private purchase or advance shows the payment arrangement was also a private (not business) matter.

173.The sum was actually paid by May drawing a cheque on her own personal account in the sum of HK$103,100.  The cheque is dated 29 August 2007, and was paid into Ms Yu’s bank account on 31 August 2007.

174.I accept Brenda’s evidence that she was not aware of the reason for the payment, or the deduction.  May’s evidence provided no further assistance as to the reason for the payment.  Brenda was only concerned to ensure that there was appropriate approval.  I also accept Brenda’s evidence that Ms Yu never informed her (or, apparently May) as to any specific shares in relation to which the payment might have been made.  Brenda has cross-checked the payment with a spreadsheet of various share investments, and has not been able to identify the transaction to which the payment would have been related.

175.Indeed, the request for Payment 2 does not actually reference any sale of stocks at a profit, or refer to any asset or profit at all; it simply says “May Chow knows”.  Taken on its own, it is little if any evidence of payment of a 10% profit share.

176.No tax deduction was claimed in relation to the sum paid to Ms Yu.  Nor did Ms Yu declare the sum to the Inland Revenue as part of her income.

F.4     Payment 3 – TOHL / Stocks

177.On 17 October 2007, Ms Yu sent May an email asking: “can you issue a cheque for me for $71,916? sold some stocks for Stephen, he made $719,164”.  Though there is no other explanation, this obviously looks like a 10% calculation on a profit made on sale of stocks.

178.The email was forwarded by May to Brenda.  But May was the one who arranged payment, and Brenda was not involved.  Payment was made by May’s personal cheque dated 18 October 2007.

179.Brenda has not been able to identify from any spreadsheet relating to stocks and shares to which transaction this request and payment might be related.

180.No tax deduction was claimed in relation to the sum paid to Ms Yu.  Nor did Ms Yu declare the sum to the Inland Revenue as part of her income.

F.5     Payments 4 and 6 – Silver Fortune

181.The Silver Fortune Property was acquired by Pilotvision in December 2004, and sold in October 2009.  Pilotvision was a corporate vehicle held by TOHL.

182.On 17 October 2007 – the same date Ms Yu requested Payment 3 (see above) – Ms Yu also sent an email to May in the following terms:

i also need $1,267,194 from you, its the profit sharing for the office. i know we havent sold, but i need money, so i have talked to stephen, we shall based on the existing market price, which is $37,500,000 (8/F record sold last week) and he said its ok to pay me first.

this is after deducting all stamp duty, interests and bank arrangement costs.

($37,500,000 - $23,073,821 - $1,755,239) x 0.10% = $1,267,194

183.In her oral evidence, Ms Yu said she did not really need money, but was just using a loose Cantonese phrase.  But, the Cantonese phrase she identified simply translates as the same thing, and anyway the email was written in English.  The fact that she requested both Payment 3 and Payment 4 on the same day is consistent with a need for money at that time.

184.May told Brenda about this request, and Brenda followed the calculation in the email.  She did not ask Mr Chiau for approval for this payment, as May told her she would asked Mr Chiau herself.

185.The payment was made by bank transfer on 26 October 2007, from May’s personal bank account.

186.Payment 4 is the payment on which Ms Yu places significant reliance in support of her alleged implied Notional Sale Term (see below).

187.Nevertheless, Ms Yu requested further payment at around the time when the Silver Fortune Property was actually sold.  The completion of sale took place on 30 October 2009.  Shortly before that, on 14 October 2009, Ms Yu sent an email to Brenda stating:

according to janet, the net profit of this is 24,792,257, so deducting the 1,267194 that you paid me before, pls arrange to pay me the difference based on 10% of the net profit.

188.Brenda recalls that this was one of the few occasions when Mr Chiau asked her to wait, though she subsequently received a call from May approving the payment.  That approval is recorded by a handwritten note made by Brenda on the document mentioned in the next paragraph.  The payment of HK$546,905.14 was made by bank deposit on 21 October 2009.

189.There is what appears to be a completion statement and commission calculation document, with a date chop of 15 October 2009.  It is that document which identifies the sum of HK$546,905.14 described as “due to ms yu commission balance”, following the calculated deduction of the previous 10% commission paid from the total of 10% commission.  Brenda says, and I accept, that she adopted that terminology as instructed by Ms Yu.

190.Payment 6 is relied upon by Ms Yu in support of the alleged implied Additional Payment Term (see below).

191.Neither Payment 4 nor Payment 6 is reflected in the accounts of Pilotvision.  No tax deduction was claimed in relation to either sum paid to Ms Yu.  Ms Yu did not declare either sum to the Inland Revenue as part of her income.

F.6     Payment 5 - All Gems / Carolina Garden

192.The Property at Flat D32, Carolina Garden (or, as sometimes referred to in the evidence, Carolina Mansions) was acquired by All Gems in April 2007 and sold in November 2008. All Gems was a corporate vehicle held by TOHL.

193.Ms Yu requested this payment at around the time the Carolina Garden property was sold.  Apparently at Ms Yu’s request, Brenda sent Ms Yu some brief information about the sale price for her reference.  In response, by email dated 31 October 2008, Ms Yu requested Brenda (copying in May) to ask Janet to give her the management accounts including all expenses, when available.

194.It then seems that Ms Yu did the calculation, which she passed to Brenda, and on which some Brenda sought the approval of Mr Chiau.  The sum $361,364.40 was eventually paid by a cheque dated 6 December 2008 drawn by May on her personal account, which was paid into Ms Yu’s personal account on 11 December 2008.

195.On 10 December 2008, Ms Yu asked Brenda in an email whether she had paid May from All Gems yet.  In response, Brenda replied that All Gems paid an agency fee to Prosperous Arts Ltd, not to May.  She also asked if it was okay to pay the money into her bank account, to which Ms Yu said “ok”.

196.In Brenda’s oral evidence, which I accept, she made clear that May was not reimbursed by All Gems, because the sum of money given to Ms Yu was given by May personally.  As she explained, each time Ms Yu asked for payment, Brenda would ask whether it was for the company or personally, and on that occasion she said personally, so she would be and was paid personally.

197.Nevertheless, it seems that the All Gems Agreement might have been made in order to permit a claim to a tax deduction in relation to this expense.  It is, however, not clear as to whether any such deduction was claimed by All Gems, but where there was no reimbursement of May from All Gems that seems unlikely.  Ms Yu did not declare the sum to the Inland Revenue as part of her income.

F.7     Payment 7 – House 16 and House 18

198.As I have indicated above, the completions of the sale of House 16 and House 18 were in September and October 2009.

199.By an email dated 29 September 2009, Ms Yu asked Mr Yik for the approximate cost of “our project at the peak”, and the net profits so far.  Mr Yik replied the following day that: “The total cost of the project (4 houses) was about HKD548.5m.  The net profit (2 houses sold) would be about HKD287.8m after tax deduction”.

200.Ultimately, Ms Yu was paid HK$14,942,001 on 3 December 2009.  By the end of the oral evidence, it was common ground between the parties that that amount was paid by a cheque dated 1 December 2009 and drawn by May on her personal account.  It is fair to point out that there is in the trial bundle a copy of another cheque of the same date, in the same amount signed by May, but drawn on an account of Whiskey.  However, in light of the oral evidence, I am satisfied and find as a fact that the payment was made not by Whiskey but by May, from her personal account.  The photocopy of May’s cheque is to be found on the same page as a photocopy of the deposit form, evidencing the payment of that amount into Ms Yu’s HSBC account on 3 December 2009.

201.On that basis, the payment was made by cheque which was not drawn on any company, and is in any event apparently not be found reflected in the accounts of any company.  Nor was any tax deduction claimed in relation to this payment, by any person or by any company.

202.There is a document relating to this payment on which Ms Yu places significant reliance.  It has a chopped date of 3 December 2009, and is signed by Mr Chiau and May against the words “Approved by”, and signed by Ms Yu against the words “Received by”.  The body of the document reads as follows (underlining in original):

Re: Sale of Pollock Path No. 16 & 18

As per the instruction of Mr. Chiau Sing Chi and Ms. Chiau Man Ki, we paid the commission to Ms. Alice Yu as follows:

Half share of profit of Star Royale Limited from Y.E 2002 to Y.E. 2009 (HK$298,840,022/2) is HK$149,420,011.00

Thus, 10% commission paid to Ms. Alice Yu is HK$14,942,001

203.Obviously, Ms Yu’s reliance on the document now focuses on the use of the word “commission”, which appears twice, once being just above the words “Approved by” and Mr Chiau’s signature.

204.As to the provenance of this document, and the reasons for it, I accept the evidence of Brenda that she prepared it, or asked for it to be prepared by her colleagues.  The thrust of her evidence seemed to me, and she confirmed it in answer to my question, that a significant motivation for her preparing the document and obtaining the various signatures on it was to protect herself from any subsequent potential criticism.  As Brenda explained, it was dealing with a sum of a very different order from that previously paid to Ms Yu.  Brenda also had misgivings or concerns about the calculation, and in particular the starting ‘profit’ figure.  Indeed, it is clear where that figure of HK$298,840,022 comes from.  It comes from the profit and loss account document of Star Royale for the years from 2002 to 2009, and the stated accumulated profit figure for December 2009. For that reason, Brenda’s misgivings are understandable; the accumulated profit of the company as at December 2009 is not the obvious (or, I would suggest, correct) way of calculating the specific profit made on House 16 and House 18 upon their respective sales completing in September/October 2009.  But I also accept Brenda’s evidence that the figure was provided by Ms Yu.

205.Though in their evidence Brenda and May, and Mr Chiau himself, identified that the document was created for “accounting” purposes, I do not think that means it was produced for any particular set of accounts. Indeed, the payment is not shown as a cost in Star Royale’s accounts to 31 December 2009, nor was any tax deduction claimed by Star Royale when it filed its profits tax return for the year of assessment 2009/10.

206.Nor did Ms Yu (or Loncham) declare the sum as part of her (or its) income in the relevant tax year.  Her oral evidence that she did not think it was necessary to declare it for tax when the payment came from a personal account to her personal account is difficult to reconcile with the whole foundation of her claim that she was engaged in a legally binding commercial arrangement.

207.In passing, it seems to me that all of the documents generated in relation to each of the Payments were primarily of the sort which Brenda would have wished to have, in her role as being responsible for accounting for the movement of funds (using the phrase “accounting for” in its general sense).  I accept Brenda’s evidence that she developed the practice of drawing up a simple and uncomplicated statement for individual transactions in the form of a simple income and expenditure statement, though it would not necessarily include all heads of expenses which should actually be incurred.  Most of the documents were not then reflected in any formal accounts – of either the payor or recipient.  So I do not accept the submission made for Ms Yu that there would have been no need for such formal documentation absent the existence of the Oral Agreement.  It was part of Brenda’s job – and, I think, her nature – to document and account for money movements.

208.In his evidence, Mr Chiau said that Ms Yu asked him directly for payment following the sale of House 16 and House 18, but because the amount was “rather large” he did not immediately accede to the request.  He says, and I accept, that he and Ms Yu struggled over the matter for a few days, before he eventually relented and agreed to the payment.  That there was a delay of payment until early December 2009 supports that evidence.  As to signing a document which specifically referred to the payment as 10% commission, Mr Chiau says he cannot remember why he signed it (except that it was presumably to provide some accounting record), and it did not matter to him what Ms Yu chose to describe the payment as.  On balance, I accept that evidence, and I consider that it is important that the document was created by Brenda and not requested to be signed by Ms Yu, nor was it a settlement of any disagreement over the amount of the payment to be made.

209.As an aside, I also accept that the various other documents which might have described other payments made to Ms Yu as being “commission” or something similar were unlikely seen by Mr Chiau himself at the time.

F.8     Payment 8 – GI Mall

210.This was not really a payment, as such.  Rather, Ms Yu received certain shares.

211.Ms Yu relies on this payment in part because it was effected after she and Mr Chiau had broken up (so that there was no need for Mr Chiau to continue to honour any promise to make gifts out of love and affection).  But, as I have already noted, even at April 2011, Mr Chiau remained in a good relationship with Ms Yu, most clearly illustrated by his permitting her to move into House 12 that very month.

212.The GI Mall (comprising shops and offices on the ground, upper ground, first and second floors of Lising House, 34 and 36 Granville Road) was acquired by Power Alliance in July 2005.  The sole member of Power Alliance was Harvest Yield Investments Ltd (“Harvest Yields”), of which the shareholders were Beglobal Investments Ltd (“Beglobal”) – held by TOHL – and Ryoden.

213.Beglobal and Ryoden sold their shares in Harvest Yield to Emcom International Ltd (“Emcom”), a Hong Kong listed company, in return for an allotment of shares in that company.  Emcom was later renamed Bingo Group Holdings Ltd (“Bingo”), of which Mr Chiau has since become a substantial shareholder.

214.As the prior shareholdings identify, GI Mall was originally a joint investment between Mr Chiau’s company Beglobal and Ryoden. But, as Brenda explained in her evidence, Beglobal was itself sub-divided to reflect the two different interests of Mr Chiau and Dicky Tsoi, the property agent.  I accept that it was Dicky Tsoi who had introduced the property investment to Mr Chiau, and it was agreed that he would have an interest in the property.  Though Ms Yu says she “found” the property through an agent, I accept it was the agent who actually introduced it.

215.It seems to me to be material that, in the subsequent calculations about 10%, no reference was made to of account taken of the fact that Dicky Tsoi had a share of ownership (yet Dicky Tsoi clearly had no obligation to Ms Yu, and Mr Chiau had no obligation, or even power, to share profit which was Dicky Tsoi’s).

216.The underlying calculation as to the number of shares (comprising part of those allotted on the injection of the GI Mall into Emcom), which were later given to Ms Yu, was based on the amount of $17,794,709. There is a document calculating this sum and describing it as “10% on Net Profit”, bearing an “Approved” chop apparently initialled by Mr Chiau himself, and referred to in an email approved by Ms Yu.  The calculation is dated as at 28 April 2010, with an added ‘received’ chop of 17 May 2010.

217.I accept that it was Ms Yu who told Brenda that she should be given shares, as 10% of the profit for the transaction.  Brenda did some calculations, and by email dated 7 April 2011 offered Ms Yu two options as to the number of shares to be taken.  The calculation document just mentioned appears to have been the attachment to that email – and again, I note it (and the description of 10% profit share) was signed as approved by Mr Chiau.  One option put forward in the email was to round the number up to 18 million shares, the other was to round up to 17,800,000 shares.  Whilst the allotment was apparently at par of HK$0.10 per share, the then market price was HK$0.217 per share.  The calculations required an amount to be paid back by Ms Yu upon rounding up.  Ms Yu chose the option for 17,800,000 shares, and paid back the small sum of HK$1,148.  The then market price/value of the shares taken by Ms Yu appears to have been HK$3,862,600 (more than double the par value).  The $1,148 was paid to May, as Brenda requested, and was paid by a cheque drawn on Loncham’s account.

218.No tax deduction was claimed by any person or company in relation to this payment.  Nor did Ms Yu or Loncham declare this payment/allocation of shares to the Inland Revenue as part of her or its income.

F.9     Taxation and Personal Payment and Receipt

219.From the above, it can be seen that only the Payment 1 was treated by the receiver as being taxable as income, and treated by the payer as available for a tax deduction against its income/profit.

220.None of the other payments were declared as taxable income, or treated as available tax deductions.

221.All of the payments, except the Quiet Voice Payment 1, were made by May personally from her personal bank account.  They were all, again except Payment 1, paid to Ms Yu personally.

222.None of the payments – except Payment 7, based on the incorrect starting profit figure – seem to have taken any account of profits tax as might be payable by the company making the profit, so as to have arrived at a “net profit” figure of which to take a percentage (where Ms Yu’s case is – and, indeed, notwithstanding that her case is – that “net profit” meant, simply, “profit after tax”).

G.     The Oral Agreement

223.I agree with Mr Yuen’s submission that the “crux of the dispute” is whether there was the Oral Agreement as Ms Yu contends, or only a verbal gift as Mr Chiau contends.  Mr Yuen describes this as the “crux” because once this fundamental issue has been decided in Ms Yu’s favour, he says the Court should readily enforce the Oral Agreement and should have no difficulty in rejecting the rest of the defences. He further submits that the existence of the Oral Agreement is reflected by the parties’ conduct and supported by the contemporaneous documents, whereas the idea of the verbal gift is contrary to documents and inconsistent with the parties’ conduct, if not defying common sense.

224.Before looking at more of the detail, I might address the question of burden of proof.  Mr Yuen rightly accepts that, if Ms Yu is to succeed in her claim, she bears the burden of proving the existence of the Oral Agreement and that it was intended to be legally binding.  Therefore, if I am not satisfied of that proof, the claim will fail.  But, part of the argument raised against the claim is that the relevant conversation actually created only a verbal promise of a gift.  So, to some extent, the assessment of whether the Oral Agreement has been proved will involve an assessment of whether the verbal gift has been proved.  But I do not think I have to accept simply one version or the other, and I might accept neither or perhaps aspects of both.

225.Mr Yuen and Mr Man agreed with my proposition posed during submissions, that I do not have to find either one or the other in its entirety.  For example, though the circumstances of the conversation may provide important context and may impact other aspects of credibility or reliability, it may not be determinative whether the relevant conversation took place over the telephone or face-to-face.

226.It is necessary to look later at the various iterations of Ms Yu’s pleaded claim.  But it is convenient to note here that Ms Yu accepted during her oral evidence that the pleadings were serious documents which she would have looked at with care, and in respect of which she signed a series of statements verifying their truth.  I therefore reject the submission made on her behalf that Ms Yu did not scrutinize the pleadings.  That is relevant when looking at Ms Yu’s attempt to pass blame for her pleadings to her lawyers.

227.But, on the other hand, I accept Mr Yuen’s submission that when determining the impact of shortcomings in a party’s pleadings on his or her credibility, the court should (amongst other things) consider whether such shortcomings or inconsistencies might be caused by a misunderstanding between the party and his or her solicitors and/or Counsel, and whether the party had anything to gain from the shortcomings or inconsistencies.

228.The version of the claim pursued at trial is to be found in §§3-7 of the Re-Amended Statement of Claim dated 21 October 2019 (“RASOC”).  Those paragraphs read as follows:

3.     Shortly before or after Christmas 2002, during a telephone conversation between the Plaintiff and the Defendant, the Defendant agreed to pay the plaintiff a ten percent (10%) share of net profits (“the Agreed Profit Share”) made on all successful investments recommended to the Defendant by the Plaintiff (“the Agreement”).  Immediately thereafter, the Agreement was confirmed in an exchange of SMS messages between the Plaintiff and the Defendant, in which the Plaintiff sent the Defendant and SMS setting out the terms of the Agreement and requesting the Defendant to confirm his agreement, and the Defendant responded confirming his agreement.  The Plaintiff can no longer access these SMS messages.

4.     On a true construction of the Agreement (alternatively as a matter of necessary implication therein):

(a)     the Agreed Profit Share was to be paid by the Defendant on the occurrence of one or other of the following events:

(i)     where the Defendant (or any corporate vehicle through which the investment was held) sold an investment recommended by the Plaintiff, upon the sale of that investment; or

(ii)     where the Defendant decided not to sell an investment recommended by the Plaintiff, instead deciding to retain for his own use (or to cause it to be retained by any corporate vehicle through which it was held), upon the making of that decision by the Defendant OR, in the alternative, upon the taking by the Defendant of any step consistent only with a decision to retain rather than to sell the investment.

(b)     In the case of a sale in accordance with paragraph 4(a)(i) above, the Agreed Profit Share was to be calculated by reference to the profit made on the sale.  In the case of a decision to retain the investment in accordance with paragraph 4(a)(ii) above, the Agreed Profit Share was to be calculated by reference to a notional sale (i.e. on the assumption that the Defendant had chosen to sell the investment in question to a third party rather than retaining it for his own use) at the time when the profit share became payable.

(ba)     Where the Defendant had paid the Plaintiff the Agreed Profit Share pursuant to paragraph 4(a)(ii) above and subsequently sold the investment, the Defendant was to pay the Plaintiff the Profit made on the sale after deducting the Agreed Profit Share that the Plaintiff had already received in respect of that investment.

(c)     The reference to “net profits” was a reference to profits after tax.  Where no tax was in fact paid (for instance because the Defendant chose to retain an investment rather than selling it), there was no need to allow for tax in calculating the Agreed Profit Share payable.

5.     The construction (alternatively the implied term) pleaded at paragraph 4(a)(ii) above is necessary because, absent such a construction or implication, it would have been open to the Defendant to avoid paying the Agreed Profit Share (and thereby thwart the purpose of the Agreement) merely by declining to sell any investment recommended to him by the Plaintiff.

6.     Further or alternatively, it was an implied term of the Agreement that the Defendant was not entitled to avoid paying the Agreed Profit Share by declining to sell any investment recommended to him by the Plaintiff.

7.     Alternatively to paragraphs 3-6 above, an agreement on the same terms (i.e. those pleaded at paragraph 3, 4 and 6 above) was made by conduct, by reason of the parties’ course of dealing pleaded at paragraphs 8 to 11 below. Except where the context requires otherwise, references to “the Agreement” should be taken to include, in this alternative, this agreement made by conduct.

229.That pleading pins the date of the Oral Agreement to around Christmas 2002, albeit either “before or after” Christmas 2002.  The Oral Agreement is specifically alleged (in the “black” version for the first time, see below) to have been made in a telephone conversation, confirmed by SMS messages immediately after.  The Oral Agreement related to a 10% share of the “net profits” made on all (and, apparently, only) “successful investments”.  It also identifies (also in the “black” version for the first time, see below) that Ms Yu had to “recommend” the investment to Mr Chiau in order for her to be entitled to any share of profits made from that investment.

230.The pleading also asserts that there were terms of the Oral Agreement, either as a matter of construction or by way of implied terms that:

(1)     the 10% share was to be paid on the occurrence of either of the following events:

(a)     where Mr Chiau sold an investment recommended by Ms Yu, upon the sale of that investment – the calculation being made by reference to the profit on the sale (“Actual Sale Term”); or

(b)     where Mr Chiau decided not to sell the investment but instead to retain it for his own use, upon the making of that decision or upon taking any step consistent only with a decision to retain rather than sell – the calculation being made by reference to a notional sale to a third party (“Notional Sale Term”);

(2)     where Mr Chiau paid the 10% share in respect of an investment pursuant to the Notional Sale Term, but the investment was subsequently sold, Mr Chiau was to pay Ms Yu any profit made on the sale after deducting the first payment already made (“Additional Payment Term”);

(3)     “net profits” means profits after tax, but where no tax was paid (for example under the Notional Sale Term), there was no need to allow for tax;

(4)     Mr Chiau was not entitled to avoid paying the 10% share by declining to sell any investment recommended by Ms Yu (“No Avoidance Term”).

231.Though not specifically pleaded, Ms Yu’s case has proceeded on the basis that she is entitled to a profit share on any investment which was “successful”, but did not have to net off or give credit for any investment recommended by her but which was not successful.  Indeed, the case has also proceeded on the basis that if a profit share has been made pursuant to the Notional Sale Term, no part of it need be returned even if there was a subsequent actual sale at a loss or reduced profit.  In other words, the Notional Sale Term does not provide simply for an advance or a payment on account, subject to later readjustment.

232.To put it bluntly, Ms Yu’s case has proceeded on the basis that she is fully entitled to share in the ‘upside’ (or even a notional, and potentially temporary, ‘upside’) without ever having to bear any responsibility or any ‘price’ if there is a ‘downside’.  Her case is that she is also entitled to any ‘upside’ even after a notional sale, if there is a subsequent actual sale at a higher price, and any downward price movement is irrelevant.  Whilst it is, of course, possible that parties might expressly agree such an arrangement, it hardly strikes me as objectively being the most likely commercial arrangement.

233.As to the triggering of liability to pay the claimed profit share on House 12, the RASOC makes reference to the 1 February 2011 email (§18), which is the primary case as to when Mr Chiau decided to retain House 12 for his own use, rather than it being an investment or selling it.  The alternate case (§19) is that Mr Chiau made that decision later at around the time of any of (1) when Ryoden sold House 10 in June 2011, keeping all the proceeds, or (2) when Whiskey obtained a loan from HSBC in May 2011, secured by mortgage on House 12, or (3) when Mr Chiau allowed Ms Yu to take up residence in House 12 in April 2011 until September 2011, or when he himself took up residence around the end of 2011.

234.Before leaving the RASOC, it is fair to point out that the alternative case pleaded (§7) that an agreement in the same terms as the Oral Agreement was made by conduct was not really pursued at trial (even if not formally abandoned).  It seems to me that alternative was always at best a very difficult case to make out, and focus was understandably on the Oral Agreement.  I would formally reject it, and I shall not consider the alternate case any further.

235.When assessing Ms Yu’s case on the Oral Agreement, it is relevant to take into account that her case has gone through many different versions.  The RASOC is the sixth iteration of the pleading, the first of which followed a pre-action letter from her then solicitors dated 9 December 2011.  In that letter, addressed directly to Mr Chiau, the Agreement between the parties was described in the following terms:

In or around 2002, at your invitation, Ms Yu became your personal financial consultant, providing an overall strategic planning and corporate financial advisory services to you.  Ms Yu accepted your invitation and you, through the company Star Overseas Ltd you owned, started paying a monthly remuneration of HK$20,000.00 to Ms Yu’s company called Loncham Limited.  There had been some adjustments on the payments in the subsequent years to the highest of HK$59,000 per month in 2009 but in 2010 Ms Yu voluntarily accepted a reduced rate of HK$35,000 per month.  It was also agreed by you since 2007 that, on top of the monthly remuneration, you would pay Ms Yu 10% after-tax net profits as commission for all the successful investments.

236.It can be noted that the agreement relating to “profits as commission” is said in the letter to have been made in 2007.  Mr Man places weight on that date, in particular relying on the fluency of Ms Yu’s English and her previous job at the Stock Exchange vetting public announcements.  However, I accept Ms Yu’s oral evidence that this was a mistake by her then solicitors, apparently because 2007 was when the first payment was received by her, which mistake she probably simply missed when approving the letter before it was sent.

237.In the letter, however, there is no pleaded detail of any oral agreement.  There is no reference to any alleged implied terms.  Nor is there any clear identification of what Ms Yu had to do to be entitled to the “profits as commission”; for example, there is no specific reference to “recommendation” of investments.

238.Before looking at the first pleaded version of the alleged agreement, it might be noted that there is some apparent tension between the ideas of a payment of a share of profit and a payment of a commission.  To me, and on its usual definition, a ‘commission’ is a sum payable to an agent based upon a percentage of the relevant transaction price or value; but a ‘profit share’ is rather different, being calculated by reference to the difference between a prior purchase price and the later sales price, after deduction of various relevant expenses.  A commission is usually payable because of the transaction having occurred, whether the transaction later turns out to have been profitable or not.  This tension seems to me to come into play when looking at how various subsequent payments made to Ms Yu were described, by her and/or by others.

239.The original statement of claim (“2012 SOC”) was endorsed on the Writ.  There were two defendants, one being Mr Chiau, and the other being Star Royale.  In that pleading, Ms Yu’s case was pleaded as being that Mr Chiau’s promise to pay 10% profit was a term of the Loncham Agreement, but made verbally.  The pleading was as follows:

2.     In or around year 2002, at the invitation of the 1^st Defendant [Mr Chiau], and by a written agreement (“the Agreement”) dated 1^st April 2002 entered into between the 1^st Defendant’s company, The Star Overseas Limited, and the Plaintiff’s company, Loncham Limited, the Plaintiff became the personal financial consultant of the 1^st Defendant, providing an overall strategic planning and corporate financial advisory services to the 1^st Defendant.  Although the Agreement was made between the 1^st Defendant’s company and the Plaintiff’s company, it was for all intent and purpose a contractual relationship between the 1^st Defendant and the Plaintiff for the Plaintiff to provide personal service to the 1^st Defendant.

3.     It was a term in the Agreement that the 1^st Defendant would pay the Plaintiff monthly remuneration of HK$20,000.00.  There were adjustments on the monthly remuneration in the subsequent years to the highest of HK$59,000 but later in 2010 the plaintiff voluntarily accepted a reduced rate of HK$35,000 per month until 30 September, 2011 when the 1^st Defendant through this said company, The Star Overseas Limited, gave notice to the Plaintiff to terminate her service as the 1^st Defendant’s personal consultant.  It was also a term as part of the Agreement which was made verbally between 1^st Defendant and the Plaintiff that on top of the monthly remuneration, the 1^st Defendant would pay the Plaintiff commission in terms of profit sharing at ten per cent (10%) after-tax profits on the successful investments (“the Agreed Commission”).

240.Whilst this claim is similar to the pre-action letter, the alleged agreement is said to be part of the Loncham Agreement, and at least suggests that any verbal element was made at the same time in April 2002 (and, therefore, not late 2002 or early 2003).  Ms Yu accepts this was wrong, but says she was advised the pleading was right and she overlooked the discrepancy.  I find that more difficult to accept as the date of the agreement is surely a fundamental aspect of it (particularly if it is alleged to have been made verbally, so that the verbal discussion and its context would need to be described).  There is also no feature of any necessary “recommendation”, nor any suggestion that payment might become due prior to the sale of the relevant investment, nor reference to any implied terms such as the Notional Sale Term or the No Avoidance Term.

241.The 2012 SOC was amended on 4 October 2012 (“2012 ASOC”).  The 2012 ASOC was signed by leading counsel, though neither Mr Yuen nor Mr Dawes.  The amended pleading of the alleged agreement (ignoring deletions and underlining) read as follows:

2.     In or around year 2002, at the invitation of the 1^st Defendant, and by a written agreement (“the Agreement”) dated 1^st April 2002 entered into between the 1^st Defendant’s company, The Star Overseas Limited (“Star Overseas”), and the Plaintiff’s company, Loncham Limited, the Plaintiff became the personal financial consultant of the 1^st Defendant, providing overall strategic planning and corporate financial advisory services to the 1^st Defendant.  Although the Agreement was made between the 1^st Defendant’s company Star Overseas and the Plaintiff’s company Loncham, it was to all intents and purposes a contractual relationship between the 1^st Defendant and the Plaintiff for the Plaintiff to provide personal investment advisory service to the 1^st Defendant.

3.     It was a term in the Agreement that the 1^st Defendant would pay the Plaintiff via Loncham monthly remuneration of HK$20,000.00.  There were adjustments on the monthly remuneration in the subsequent years to the highest of HK$59,000 but later in 2010 the plaintiff voluntarily accepted a reduced rate of HK$35,000 per month until 30 September, 2011 when the 1^st Defendant through his said company, Star Overseas Limited, gave notice to Loncham and the Plaintiff to terminate her services as the 1^st Defendant’s personal consultant.  It was also a term as part of an agreement which was made verbally between 1^st Defendant and the Plaintiff on a date unknown in about 2002 or early 2003 (“the verbal Agreement”) that on top of the monthly remuneration, the 1^st Defendant would pay the Plaintiff commission in terms of profit sharing at ten per cent (10%) after-tax profits on the successful investments (“the Agreed Commission”).

242.Hence, in the 2012 ASOC the promise to pay 10% of the profits became a separate agreement from the Loncham Agreement, and was one made on an “unknown” date in “about 2002 or early 2003”.  There is no reference to Christmas 2002 (nor any reason why it might be remembered that the agreement was made at around Christmas-time).  There is still no reference to “recommendation” or the Notional Sale Term or the No Avoidance Term.

243.In her oral evidence, Ms Yu said that her instructions to her (then) lawyer had not changed.  She also suggested that the 2012 SOC and the 2012 ASOC were in part the result of her lawyer “insisting” that he got it right, although she later somewhat backtracked from that suggestion whilst maintaining that the error was the lawyer’s.  Again, Ms Yu said that she was advised to plead that the Oral Agreement was made “in or about 2002 or early 2003”, but that suggests to me that (when giving instructions to her legal team) she cannot likely have tied her description of the agreement to a particular event arising in the context of matters pre-Christmas (but see below).

244.The 2012 ASOC also added a plea (at §10) as follows:

10.     On or about a date unknown but in about the end of 2011, the 1^st Defendant commenced occupation of House No 12, which occupation constituted an act of proprietary ownership equivalent to sale of the property or realisation of its monetary worth thereby crystallizing the 1^st Defendant’s obligation to pay the Agreed Commission to the Plaintiff.

245.The 2012 ASOC was proposed to be re-amended (“2014 RASOC”) by a summons issued on 5 May 2014.  The 2014 RASOC was also signed by leading counsel, though a different leading counsel and again neither Mr Yuen nor Mr Dawes.  The 2^nd Defendant was deleted as a party to the action.  There was no re-amendment to the paragraphs alleging the material agreement, and therefore still no use of the word “recommend”.  But the above §10 from the 2012 ASOC was deleted and replaced by the following:

10.     The Plaintiff avers that her cause of action against the Defendant for the unpaid House Commission arose on 1^st February 2011 or immediately thereafter by virtue of the following facts and matters:

(i)     by email dated 1^st February 2011 from Charles Mung of Ryoden Property Development Limited to the Plaintiff (on behalf of the Defendant) Mr Mung set out the cost adjustments in respect of House 10 and House 12 and identified the amounts that should be borne by “the owner of House A” and “the owner of House B”, being Houses 10 and 12 respectively;

(ii)     the amounts to be borne by the respective owners were agreed between the respective owners and/or their representatives, and all accounts between themselves and/or Star Royale were settled;

(iii)     thereupon the Defendant’s profit arising from his beneficial ownership in House No. 12 crystallized;

(iv)     thereupon the Defendant treated House No. 12 as his own, as evidenced by his allowing the Plaintiff to take up residence therein in April 2011; by his managing of House No. 12 in May 2011, and by his taking up residence there himself at the end of 2011;

(v)     the Ryoden Group treated House No. 10 as their own subsequent to 1^st February 2011, as evidenced into alia by their entering into a sale and purchase agreement in respect of House No. 10 in June 2011;

(vi)     in the premises the split of the ownership of Houses 10 and 12 between the Ryoden Group and the Defendant, as referred to in paragraph 8 above, was complete on or immediately after 1^st February 2011.

246.Though that pleading made specific reference to a date on or immediately after 1 February 2011 as the date when the profit on House 12 crystallised, there was still no plea of the Notional Sale Term or the No Avoidance Term.

247.As it happened, the application for leave to file and serve the 2014 RASOC was dismissed by DHCJ Sakhrani on 24 November 2014.  That decision was taken on appeal.  At a first hearing on 17 March 2015, the Court of Appeal canvassed with leading counsel then appearing for Ms Yu “certain unsatisfactory aspects of the proposed re-amended Statement of Claim”.  Therefore, the Court of Appeal gave another opportunity to Ms Yu to reformulate her case properly, and to put forward a claim which was sustainable as a matter of law.  In its Reasons for Judgment dated 20 January 2016, following a further hearing on that day, the Court of Appeal granted leave to Ms Yu to file and serve a fresh “black” statement of claim.

248.In doing so, the Court of Appeal rejected a submission that the then draft claim was a significant departure from the previous versions verified by affirmation, stating that it seemed from the history of the matter that most of the changes were attributable to different legal formulations of the cause of action.  Whilst accepting that Counsel for Mr Chiau might at trial challenge the credibility of Ms Yu by reference to the changes made, the Court of Appeal did not regard the case is one where the plaintiff had fundamentally changed her story and the amendments were made to support a hopeless case.  It did not accept that the pleas relating to the quantification of profit by reference to a notional sale were wholly devoid of merit.  Rather, much was said to depend on the circumstances surrounding the making of the agreement and such details would have to be resolved at the trial.  Clearly, the Court of Appeal was making its comments in the context of a strike out application, and there was not (and cannot have been) any intention of tying the hands of the trial judge.

249.As a result of the leave granted, Ms Yu filed the “black” version of her statement of claim in January 2016 (“2016 SOC”).  Save for sub-paragraph 4(ba), the 2016 SOC pleaded the alleged Oral Agreement in the terms maintained through to the RASOC (set out above).  By that sub-paragraph 4(ba), the red amendments made on 30 January 2018 (“2018 ASOC”) added the Additional Payment Term to the alleged Oral Agreement.

250.It is in the 2016 SOC that the claim introduced the idea of connecting the share of profits to “recommendations” made by Ms Yu.  As I have already set out above, the agreement alleged is that Mr Chiau would pay Ms Yu “a ten percent (10%) share of net profits … made on all successful investments recommended” to Mr Chiau by Ms Yu.  Clearly, there is a difference between an “introduction” and a “recommendation”.  As Mr Man submitted, it is perhaps usually an “introduction” that might be reflected in a “commission”, but some entitlement to a share of profit would clearly require another layer of effort or involvement.  Hence, the inclusion of the idea of “recommendation”.

251.By the time of the 2018 ASOC, Ms Yu had changed solicitors and the pleading was signed for the first time by leading counsel Mr Dawes.  His signature is also on the RASOC which embodies the current (and final) version of the claim.

252.In her oral evidence, Ms Yu adopted as her evidence in chief the content of her various witness statements.  Ms Yu’s first witness statement was dated 6 January 2017, though it was only filed and exchanged on 10 March 2017. Though she filed three supplemental witness statements in the 2012 Action and a witness statement in the 2017 Action, they do not add significantly to the evidence in the first witness statement regarding the Oral Agreement.

253.Because of its importance, and because of the amount of additional material given by Ms Yu in her oral evidence at trial (see below), I set out below the totality of that part of her witness statement (§§17-24) dealing with the Oral Agreement under the heading ‘2002: The Agreement’.  She said (italics in original):

17.     I eventually left Koffman in about early 2002 and began to assist Mr Chiau on a full-time basis as his advisor and administrator of his personal finances and affairs.

18.     My assistance of Mr Chiau was formalised by way of a consultancy agreement dated 1 April 2002 signed between Star Overseas and my personal corporate vehicle, Loncham Limited (“Loncham”).

19.     The original HK$20,000 per month agreed in the 1 April 2002 agreement was a minimal level granted to me for travelling and basic expenses as it was always understood that there would be a form of profit share on the investments that I would recommend to Mr Chiau.

20.     During the months leading up to the Christmas period of 2002, I had previously casually discussed the issue of profit share on investments that I have recommended to Mr Chiau.  I recall that we had discussed the specific concept of a profit-sharing agreement because, as Mr Chiau had always had a profit-sharing agreement with his partners when he made movies, that a similar arrangement would be suitable as between Mr Chiau and myself.

21.     Although I am generally a confident person as regards social and business affairs, I am shy when it comes to discussing financial matters directly face-to-face with my then boyfriend, Mr Chiau at the time.  Therefore, the conversation that led to the Agreed Profit Share and the Agreement (as defined in the Statement of Claim) which was confirmed by SMS messages was done over the phone.

22.     Shortly before Christmas 2002 as I remember, in the telephone conversation when the Agreement was entered into, as discussed above, it did not naturally come to me to directly discuss financial matters.  However, eventually we did directly speak on the issue of the Agreed Profit Share and over the course of the telephone conversation, I asked Mr Chiau to agree to pay a 10% share of net profits made on all successful investments that I recommended to Mr Chiau. Mr Chiau agreed to this arrangement over the course of the same telephone call and thus the Agreement was entered into.

23.     Shortly after the telephone call as set out in paragraph 22, I further confirmed the terms of the Agreement by exchanging SMS messages with Mr Chiau which unfortunately I do not have access to as it was 2002 and with the older style of mobile phones at the time and the lack of ability to back-up messages through the Internet as one can do nowadays, if you lose your phone you will lose the messages contained within it.

24.     I however have a clear recollection of the SMS messages we exchanged as follows:

Me: “10% on profit-sharing”

Mr Chiau: “ok”

254.I think a fair reading of that evidence identifies the following:

(1)     from early 2002, Ms Yu assisted Mr Chiau on a full-time basis;

(2)     the assistance was formalised by the Loncham Agreement;

(3)     at the time of the Loncham Agreement, or sometime prior to it, an understanding had already been reached between Ms Yu and Mr Chiau that she would have a form of profit share on investments she would recommend;

(4)     however, no evidence was included in the witness statement to identify when or how that understanding was or might have been reached;

(5)     likewise, no explanation was offered as to why a written agreement intended to “formalise” Ms Yu’s assistance to Mr Chiau (a) did not state that the monthly payment was only for travelling and basic expenses, and (b) did not make any reference to an alleged prior understanding that there would also be further remuneration in the form of a profit share;

(6)     there were further casual discussions running up to the Christmas period of 2002 on the specific concept of a profit-sharing agreement;

(7)     however, no explanation was offered as to why there needed to be further casual discussions if there had already been reached a prior understanding on the concept of a profit-sharing agreement;

(8)     the Oral Agreement was actually made before Christmas 2002 (and not before or after);

(9)     the Oral Agreement was made in a telephone conversation, and the impression left is that it was the only subject of that conversation;

(10)     it occurred during a telephone conversation, because Ms Yu was shy about discussing financial matters with her then boyfriend ‘face-to-face’;

(11)     the Oral Agreement was struck when Mr Chiau agreed to Ms Yu’s proposal that he should pay a 10% share of net profits made on all successful investments that she recommended to him;

(12)     there was no discussion as to what was meant by “net profits”;

(13)     there was no discussion as to what was meant by “successful” investments;

(14)     there was no discussion about whether the Oral Agreement related only to “successful” investments as opposed to what might happen if investments were not “successful”;

(15)     the Oral Agreement was confirmed by the exchange of SMS messages;

(16)     though the SMS messages no longer exist, Ms Yu’s clear recollection is that they said simply “10% on profit-sharing” and “ok” (and nothing more).

255.However, during her oral evidence, Ms Yu added significant detail – new and/or shifting evidence – relating to the conversation in which she alleges the Oral Agreement was made, including:

(1)     the telephone conversation was at least in part just normal day-to-day chat between romantic partners;

(2)     the telephone conversation in part included a discussion as to a potential Christmas gift which Mr Chiau might give Ms Yu;

(3)     that is why Ms Yu can recall that the conversation took place before Christmas 2002;

(4)     Mr Chiau offered to give her a bike as a gift for Christmas;

(5)     Ms Yu responded that she did not want a bike, but she wanted the 10% profit share;

(6)     Mr Chiau agreed to that, simply by saying “ok”;

(7)     the conversation – or at least that part of it said to constitute the Oral Agreement – took place in English (not Chinese);

(8)     therefore, Ms Yu did in fact use the actual English words “10% share of net profits made on all successful investments recommended” by her – though that evidence was itself a further addition to the earlier description of the conversation, as set out in sub-paragraphs (4)-(6);

(9)     the ‘trigger’ for the conversation and request for a profit share was because of a prior conversation between Ms Yu and her elder brother (not Johnny Yu) who had asked what she was doing with Mr Chiau;

(10)     the conversation took place on the telephone because Mr Chiau was not then physically present in Hong Kong;

(11)     Ms Yu cannot now recall whether her SMS had a question mark at the end, so that it might have read “10% on profit-sharing?”.

256.Before going on, it might be pointed out that neither the witness statement nor the additional oral evidence seem to me to have made good the pleaded case that Ms Yu sent Mr Chiau an SMS “setting out the terms of the Agreement and requesting [him] to confirm his agreement, and [he] responded confirming his agreement”.  Indeed, it seems to me that the SMS messages – even if sent and received precisely as Ms Yu recollects – are so sparse as to be neutral, as depending for their meaning entirely on the previous discussion or agreement, and its context.

257.But there is also some force in Mr Man’s submission that it seems unlikely (he says “wholly unbelievable”) that Ms Yu would now be able to remember verbatim the exact words of SMS messages exchanged in late 2002, and after which date (as she accepted in cross-examination) she had no reason to re-visit/re-read those messages before changing her phone which prevented her from doing so.  Ms Yu’s insistence that she does remember exactly, though probably put forward honestly, raises questions as to the reliability of her evidence.  I also note that the terms of the SMS messages were not put to Mr Chiau in cross-examination.

258.Ms Yu also added significantly to the prior “understanding” that she said had been reached about a profit share, though she seemed keen in oral evidence to describe it as an “indication” rather than an actual “understanding”. To me, it seemed that Ms Yu was trying to describe something which might perhaps ordinarily be referred to as an “agreement in principle”.  In essence she said that in 2001, or at least before April 2002, Mr Chiau asked her to work for him on a project basis.  Therefore, Ms Yu raised being paid by reference to the particular project, but he asked her to “jump on board first”.

259.On that point, I think it inherently unlikely that Mr Chiau would have said (as Ms Yu suggested) both “yes, I agree to give you a profit share” and “jump on board first”.  Even assuming that Ms Yu had asked for a profit share at that point, the latter phrase seems to me to be much more likely consistent with the absence of an understanding or agreement to give a profit share, but rather the invitation to start to work and see what happens.  Further, as Ms Yu herself recognised in cross-examination, what the percentage might be would be material in a commercial relationship.  So I reject her evidence that “it did not matter at the moment we talked about it, but it mattered in Christmas 2002 when I brought it up [ie. the 10%]”.

260.Her oral evidence on this topic overall was rather vague, which may reflect the passage of time.  But she herself said that she did not remember any of the particular circumstances as she and Mr Chiau were in a love relationship, so that it was not normal to mention it.  She only remembered the December 2002 detail.  As she put it, she was not negotiating as if negotiating an employment or partnership agreement (though that evidence is, of course, somewhat contrary to her case that she was engaged in parallel romantic and commercial relationships with Mr Chiau, and that the Loncham Agreement was to formalise the working or commercial relationship, or the commercial aspects of it).  None of that evidence struck me as really or reliably identifying any prior agreement or true understanding.

261.Therefore, I do not accept Ms Yu’s evidence that, by the time the Loncham Agreement was signed in April 2002, it was already understood that the monthly payment under that agreement would not be her total remuneration going forward and was only meant to cover her travelling and basic expenses.  Where the Loncham Agreement was, as is common ground, intended to “formalise” Ms Yu’s working for Mr Chiau, there is no reason why that suggested understanding would not have been made express in the Loncham Agreement.  Nor there is any reason why at least it would not have been made express that the remuneration set out in the Loncham Agreement was for basic or travelling expenses only.  Such an understanding, and the later alleged agreement, are notably absent from the written variations to the Loncham Agreement, notwithstanding that the variations specifically related to remuneration.

262.Rather, I find that Ms Yu wanted to work for Mr Chiau because of her romantic relationship with him, and that she was happy to accept the level of remuneration provided for in the Loncham Agreement (and its subsequent variations) because of that relationship.  I also take into account that Ms Yu left me the impression from her evidence that she had sufficient private means not to have to worry greatly over her income generated by employment.

263.Ms Yu gave additional oral evidence that the conversation about profit share before Christmas 2002 was triggered by Ms Yu’s conversation with her elder brother (not Johnny Yu), in which her brother asked whether Mr Chiau was going to marry her, and she responded to the effect of “I don’t think so”.  So her brother asked what she was getting in return for devoting all her time and effort, to which Ms Yu responded that she would have a profit sharing arrangement with Mr Chiau.  But I think that evidence is somewhat contradicted by Ms Yu’s own earlier evidence that she never thought Mr Chiau believes in marriage.  On that basis, the mere question about possible marriage, which was never understood as likely, seems unlikely to have provoked a request for something to get instead or ‘in return’. As Mr Man submitted, it is perfectly natural for the parties in a relationship to contribute to the welfare of the other without seeking any specific ‘return’, and without a legally binding contract.

264.Against the level of additional information brought out from, or deployed by, Ms Yu only during cross-examination at trial, Mr Man has understandably criticised it as being a ‘late invention’, making it either untrue or unreliable.  At least to some extent, I disagree.

265.First, I have already referred to the way in which it is now understood that memory works.  Simply because a piece of information is first given only at trial does not necessarily mean that it is a late invention.  Rather, it might genuinely have been only just recalled.  There is also the possibility that the information was previously provided in some form to Ms Yu’s (then) solicitors, but somehow it failed to make it into the witness statement.  This may be undesirable, but it does not automatically render the additional material untrue or unreliable.  Secondly, some aspects of the additional information seem to me to have the ‘ring of truth’ about them – or to be, to use the litotes, not inherently unlikely.

266.Though I shall return to whether or not it actually helps Ms Yu’s case, the evidence that the discussion took place as part of a longer conversation and in response to Mr Chiau raising the topic of a Christmas gift struck me as likely to be true.  That does at least give a credible explanation for the use of the word ‘Christmas’ in the pleaded case (acknowledging that ‘Christmas’ was not part of the originally identified date of the alleged agreement, and that even when first identified in the 2016 SOC the timing was either before or after Christmas, which casts significant doubt on Ms Yu’s evidence that she always told her lawyers “the same story”).

267.Indeed, though Mr Chiau could not specifically recall having offered to buy Ms Yu a bike for Christmas, he accepted in his own oral evidence (answering questions from the Court) that he might well have done so, because at the time he was a keen cyclist and he and Ms Yu occasionally went out cycling together.  So these parts of the evidence seem to me to ‘gel’.

268.However, the ideas that the part of the conversation leading to the Oral Agreement took place entirely in English, and that it was a telephone conversation because Mr Chiau was then not in Hong Kong, seem to me to be rather less reliable.  Indeed, as to the idea of the conversation being in English, it does not seem to me to fit well with what Ms Yu knew about Mr Chiau at the time.  First, she knew that the detail of any commercial arrangements made by him were put in place by others (and not by him).  Secondly, she knew that he was significantly less comfortable using the English language, which ironically is the reason why she said she used English at his request to help him improve his English language abilities.  The idea that Ms Yu used the precise English words that she now recollects, including the references to “net” profits and “recommended” seems to me to be inherently unlikely.  I reject that evidence.  In doing so, I have not lost sight of the fact that the Loncham Agreement was written in English, but that form of agreement seems to me to be a rather different thing than a short exchange during part of a longer conversation (whether over the telephone or not) covering a range of casual day-to-day topics.

269.As to the latter idea that Mr Chiau was not in Hong Kong at the time, it seems to me an inconsistent change from the reason previously given by Ms Yu for the conversation taking place by telephone, namely because of a suggested shyness in discussing financial matters with her then boyfriend face-to-face.  This type of change adversely impacts the reliability of both explanations.  I also note that the alleged element of shyness was missing from the new evidence, given orally, that there had been prior discussions leading to an understanding in or before April 2002 that Ms Yu would be paid a profit share; there was no suggestion that those conversations took place only over the telephone.

270.In his written and oral evidence (as combined), Mr Chiau recollected the relevant conversation as having been one evening, after dinner, in around 2002 (likely in 2002, not 2001).  Mr Chiau says that he and Ms Yu were on the balcony outside the dining room at House 7, when they had a discussion about the property market in Hong Kong.  Mr Chiau says he told Ms Yu that there were many properties in Hong Kong, some of which they could see below, and that she should pay attention to low property prices and seize the opportunity to purchase at a low price.  Because Ms Yu believed in and shared his investment vision and opinion, and because he was happy to have Ms Yu’s trust and support, so he offered that if he made profit from property investments he would make a gift to her of 10% of the profits.

271.When asked why he suggested 10%, Mr Chiau said that his verbal promise of a gift was made out of his love for Ms Yu as they were then a couple in an intimate relationship, and the 10% figure was simply the number which occurred to him at the time in the convivial surroundings and shared ideas.  The spontaneity of the offer of such a gift in the circumstances does not seem to me to be unlikely; rather, it makes sense.

272.It does not seem to me to be less likely, simply because Mr Chiau at the time welcomed someone to assist him with his investments, and Ms Yu was the “ideal person” (to use Mr Yuen’s phrase).  She may have been “ideal”, in the sense that she had some property and investment background and was likely to keep Mr Chiau’s confidence and maintain his desired privacy, and be loyal.  But, by late 2002, she had been in a romantic relationship with Mr Chiau for around five years, and it is objectively natural that she would have wanted to protect his privacy and that she wanted loyally to assist him in any way she thought she might, and with the time to do so, without necessarily seeking to secure a direct economic return.

273.Nor do I think it assists Ms Yu’s case (though she seeks to rely on the fact) that Mr Chiau, in the entirely different context of his film business, was familiar with profit-sharing arrangements.  Further, by 2002, Mr Chiau was also familiar with property investment, and he must have known that those who assist with such investments do not typically share profit without also sharing capital requirements and potential losses.  Even if Ms Yu was not in the same position as other friends of Mr Chiau in the property business, which friends I accept would not know Mr Chiau’s private or business financial affairs, I do not think that makes it likely that Ms Yu and Mr Chiau entered into a commercial profit-sharing arrangement.

274.There is also the oddity in the 10% figure on Ms Yu’s case.  Though Ms Yu described a very different conversation as the occasion on which the Oral Agreement was made, she also said in evidence that there had been no prior discussion of any particular percentage figure until she brought up the figure of 10% in response to the offer of a bike for a Christmas gift.  In answer to a question from the Court, she said that her reference to “the 10% profit sharing” was not a reference to any previous conversation of that profit sharing.  Rather, Ms Yu said that she simply came up with the figure, out of the blue, thinking it was a fair amount, but with no explanation given to Mr Chiau as to any rationale behind the figure.

275.It seems, therefore, it is common ground that there was no evolving or prior discussion of any particular percentage.  There was no negotiation, no calculation, no justification of the sort as normally to be expected in a commercial setting, and it seems unlikely that Mr Chiau would simply have agreed to a commercial arrangement merely by saying “ok”. 

276.That there was no prior discussion of any particular percentage also seems to me to make it significantly less likely that there was any prior discussion of any profit share at all.  I find it unrealistic to think that there might have been a discussion of profit share without any reference at all as to what that share might comprise.  It is even less realistic if, as Ms Yu would have it, the discussion was first in the context of her giving up her then employment to move to work full-time for Mr Chiau.  Much more likely, as I find to be the case, was that the move to work for and assist Mr Chiau was prompted by their continuing romantic relationship (which had started some four or five years beforehand).  As was perfectly natural, she wanted to help and, as was also perfectly natural, he was happy for her to do so.

277.On the other hand, an offer of 10% as a gift (as Mr Chiau says the 10% figure came spontaneously from him) is much more likely, not requiring any negotiation or discussion and depending entirely on the person offering or promising the gift at that particular moment.

278.In saying this, I place no reliance on any suggestion that a 10% profit share is “too high”, as I agree that any particular profit share would be a matter of agreement between the relevant parties (if an agreement is actually made).  But it does seem to me that if, as is clear, the 10% figure was in effect plucked from the air in that moment and was never discussed nor justified, that figure is more consistent with a spontaneous offer of a gift rather than a (more) commercial arrangement.

279.It might also be noted that Ms Yu does not say that a discussion on the balcony, similar to that described by Mr Chiau, took place but on a different or earlier occasion, perhaps as part of the ‘casual’ discussions she says provided the context for the later making of the Oral Agreement.  Rather, she says such a conversation simply did not happen at all – at least, not any such conversation with her.

280.Mr Chiau also said that his intention was to make a monetary gift as an expression of love, not as remuneration for any job or services, let alone any contract or agreement in law.  He said he was not expecting Ms Yu to do any jobs in exchange for these gifts.  He specifically denied the alleged telephone conversation and text messages.  The monies later paid to Ms Yu were his gifts, and the payment arrangements were made casually. They were the result of Ms Yu’s requests each time, and Mr Chiau did not refuse to pay merely because the request did not meet, for example, the exact 10% profit figure promised.  It all depended on whether, at the time Ms Yu made the request, Mr Chiau was willing to make the gift.

281.There was an answer given by Mr Chiau (in answer to a question from the Court) which is capable of giving a different picture, and which I take into account.  When asked why he would mention a percentage at all, and not just offer a ‘gift’, Mr Chiau said that to him the nature was more or less the same, but also “it would encourage Ms Yu to work harder”.  The idea of ‘incentivising’ her is perhaps more consistent with a commercial arrangement than a gifting arrangement, but Mr Chiau also immediately said that encouragement was not the focus or the main point.  More important was “some sort of satisfaction”, and he was prepared to use and adopt a certain percentage of his success as a gift.  This was not really followed up further in cross-examination, other than it was put to him that if he thought that at the time, he did not tell Ms Yu.  Indeed, in closing submissions, Mr Yuen submitted that the idea of encouragement was “made up on the spot” because Mr Chiau had no convincing explanation to answer the Court’s question.

282.In a conversation about Christmas gifts, an offer of a gift (a bike) met by a different suggestion (a profit share) would seem objectively to be throughout simply a conversation throughout about gifts.  Therefore, though I tend to accept the additional evidence given by Ms Yu about the conversation and the context showing it took place before Christmas 2002, I do not think it helps her case.  Rather, it supports Mr Chiau’s case.  That the conversation was part of a longer conversation involving day-to-day chat between romantic partners also tends to support Mr Chiau’s case.

283.I take the point that it was Ms Yu who from time to time asked for payment, which conduct could be explained by the existence of the Oral Agreement.  I see the argument that, if it were a gift as alleged by Mr Chiau, it might have been expected to be the other way round, that is Mr Chiau taking the initiative to make a payment as a gift to Ms Yu to show his love and affection.  But, the relevant discussion was in 2002, and the first occasion that payment was requested and made was in 2007.  To me, the likely casual nature of the discussion explains both the delay and the need for Ms Yu to have prompted Mr Chiau to make the gifts.  It also explains why no one thought it necessary to reduce the discussion into writing.  It might also be pointed out that it seems to be common ground that Mr Chiau was not otherwise terribly forthcoming with gifts of the sort frequently given in other romantic relationships, except perhaps when prompted by requests made by Ms Yu in various notes and festival cards left at his work.

284.I also accept that the Payments 2 and 3 appear – or, at least, Payment 3 appears – to be related to stock investment, not property investment, payment for which it might be said is consistent with Ms Yu’s case, but inconsistent with Mr Chiau’s.  But, if accepted, Mr Chiau’s case is that he met Ms Yu’s requests for some payment without really considering whether they were properly “due” in some way.  His case is that she was his girlfriend, after all.

285.I think Mr Chiau remained grateful for the assistance and support (not just administrative, of course) provided by Ms Yu. He was generally willing to meet her requests, and the fact that he delayed giving approval when the sums requested were larger seems to me at least consistent with considering whether to make that gift, rather than compliance with a binding legal agreement.

286.Mr Yuen’s submission based on the two payments made in respect of the Silver Fortune Property – Payments 4 and 6 – seem to me to be misplaced.  I reject the point that if Ms Yu had only been promised gifts, she did not need to have linked any request for payment with the Silver Fortune Property.  That is because the promised gifts were themselves tied to property.  There is more force in the point that, from Ms Yu’s perspective, such a payment was akin to some form of advance payment of a profit share based on the Oral Agreement.  On the other hand, on the actual terms of the alleged Oral Agreement, no payment was due, yet Mr Chiau nevertheless met the request.  I also note that, whilst the request did make reference to “profit-sharing”, it can be noted that it did not specifically reference any (binding) agreement, and the gift which Mr Chiau says he promised was also a gift of some “profit-sharing”.  I deal elsewhere with whether Payments 4 and 6 make commercial sense in the context of the alleged terms of the Oral Agreement for which Ms Yu contends.

287.As to Payment 8, relating to the GI Mall, one of the points which can be made is by reference to the timing in around April 2011, perhaps a little over a year after the parties ended their romantic relationship.  But the relevant calculation was performed a year earlier in April 2010, and the parties remained on good friendly terms beyond April 2011. Nevertheless, I also accept the force in the submission that Payment 8 was unlikely to have been made at that time as an expression of continuing love for Ms Yu, and on Mr Chiau’s case the GI Mall was not recommended to him by Ms Yu.  These are matters properly to be taken into account.

288.I have also taken into account that, in his evidence, Mr Hu said that when Mr Chiau was telling him about the arrangement with Ms Yu, though he did not use the word “gift”, Mr Chiau did say he had promised and paid Ms Yu because she was his girlfriend.  He used language which strikes me as being more indicative of a casual arrangement between boyfriend and girlfriend, rather than a binding legal agreement.  I have already referred to the comment about the “separation fee”.

289.Though I do not accept that the discussion which led to the Oral Agreement, as contended for by Ms Yu, took place exactly as Ms Yu says, I do not think that of itself is necessarily fatal to her claim.  From the above, it will be seen that I accept what might be described as something of a ‘hybrid’ of the two factual versions put forward.

290.Ultimately, I do not think that it is determinative whether the discussion took place over the telephone or on the balcony, but it is convenient to deal next with the overlapping question as to whether or not, whatever was said, and wherever it was said, identifies objectively the intention on the part of both parties to have created legal relations.

H.     Intention to Create Legal Relations

291.I will consider the various facts which may tend to show that there was or was not an agreement, with the promissory statement intended to be legally binding.

292.First, the setting of the conversation was the social context of a conversation between romantic partners.  This is so whether the conversation took place over the telephone, or on the balcony at House 7.  Nothing about the setting, or either setting, is suggestive of the making of any kind of binding commercial arrangement.

293.Indeed, the apparent primary purpose of the occasion of the telephone conversation on which Ms Yu relies as the occasion when the Oral Agreement was made was simply day-to-day chat between persons in a romantic relationship.  The primary purpose of the occasion on which Mr Chiau relies for his version was simply an after dinner chat between romantic partners, fresh from the food and wine at the table, and whilst surveying Hong Kong from the vantage point afforded by ownership of House 7.  Neither is suggestive of an occasion likely to be thought objectively to give rise to the making of any kind of binding commercial arrangement.

294.Indeed, the nature and tone of the conversation points the same way.  On her expanded description of the conversation, parts of which I have accepted above, the relevant exchange was part of the normal flow of a casual day-to-day chat between persons in a romantic relationship, taking place in the approach to Christmas 2002.  Hence, it seems to me quite natural that the question of Christmas gifts arose.  Mr Chiau made one suggestion, and Ms Yu made another.  It does not seem to me to matter whether that discussion took place over the phone or face-to-face.  The key point is that it was a discussion about gifts, and it is extremely unlikely (when looked at objectively) that a response to an offer of one gift would instead have been understood as the opening gambit in making a binding commercial agreement.

295.Overall, whether a telephone call or a balcony discussion, neither is a likely setting in which the parties would have discussed, negotiated or agreed on a profit-sharing arrangement with a genuine commercial underpinning, and to binding effect.  Pointing to a ‘parallel’ commercial relationship is a rather unreal view of the facts.  Even acknowledging a more nuanced approach, based upon the spectrum of one relationship with different aspects, neither conversation described by the parties seems to me objectively to point to the making of an intended binding commercial arrangement.

296.There is also the lack of commercial sense in the terms.  The first point to note is that the majority of the terms on which Ms Yu places reliance simply formed no part at all of whatever was the discussion at the time.  That is why there is so much reliance on the alleged implied terms.

297.Further, I accept the general submission made by Mr Man that the Oral Agreement simply lacks commercial sense.  Even taking the work performed by Ms Yu at its highest, it does not seem to make commercial sense that that would somehow entitle her to an agreed 10% profit share.  Only Mr Chiau invested any capital, so only he ran the investment risks, and all of them.  The idea that Ms Yu could share any profit, but not bear any loss – and not even set off any losses against other profits – is also devoid of ordinary commercial sense.  I do not think it becomes something making commercial sense to suggest that it was a “relatively stringent” (Mr Yuen’s phrase) condition of the Oral Agreement that the investment recommended by Ms Yu must be “successful”.

298.Nor does Mr Yuen’s submission that there was a substantial risk that Ms Yu’s time and effort would go completely unrewarded somehow cloak the agreement with commercial sense.  Rather, I think that merely reflects the fact that Ms Yu and Mr Chiau were in a romantic relationship, and she naturally wanted to help him, without any necessary thought of economic reward for doing so.  Indeed she had been doing so for a few years already, even before 2002.

299.This point about lacking commercial sense is particularly evident in relation to investments in securities.  Ms Yu’s role appears to have been something akin to acting as a discretionary portfolio manager.  The lack of commerciality is writ large in the idea that Ms Yu had a binding legal entitlement to a profit share of at best HK$2.4 million as a result of two successful stock investments in 2007 (assuming both Payments 2 and 3 actually related to such stock investments, which for Payment 2 is far from clear) but bore no cost for having made a loss (on other stock investments) of some HK$13 million by April 2011.

300.This is only emphasised when one considers that the Skyhigh Property was acquired and developed because Mr Chiau had the financial resources (including the ability to borrow), the financial ‘staying power’ to service those borrowings, and the ability to form a partnership with another developer.  I find it at best difficult to conceive that the “profit” made on House 12 can properly be regarded as somehow flowing in any significant way from whatever it is that Ms Yu did as part of the process of acquisition and development.

301.This point also seems to me to lead to the real practical difficulty in identifying when a profit is made.  With an asset such as House 12, any profit might potentially flow from at least two constituent elements.  One is the acquisition of the land, the value of which might go up; the other is the development through construction of the House.  Of course, the development might affect the land value, so there is a link which may be difficult to unravel.  But if the “recommendation” went only to the acquisition, and notwithstanding that it might have been knowingly acquired for redevelopment, does there have to have been a “recommendation” for the particular development which was then pursued? What if the recommendation is for one development, but the property owner chooses to develop a different way, bigger or smaller, higher or lower quality?  On which version of the development, that recommended or that actually pursued, is it said the profit is to be calculated?  On one view, it might be said that it ought to be possible to calculate an anticipated profit at the time of acquisition for development, if one knows the acquisition price the proposed development costs and the anticipated sale price of the developed property.  Or is it the development cost which creates the real value and profit?  Why does one only take into account ‘passive’ movement in the property market generally if that movement is upwards, and not downwards?

302.Further, on Ms Yu’s case significant questions arise as to how the timing works.  Leaving aside ordinary difficulties in identifying in at least some circumstances when a profit is made (see above), on her case Ms Yu is entitled to an additional profit share when an asset is sold after she has obtained a profit share on an earlier notional sale.  It might be asked for how long that is supposed to continue.  Looking at House 12, what if Mr Chiau never sells?  What if he leaves the property by will to someone else?  What if it is left to his estate, and the estate sells?  It seems to me to be commercial nonsense to suggest that Ms Yu (or her estate) somehow has a continuing entitlement which might ultimately be met in any of those, or other, potential circumstances however far into the future they may be.

303.In any event, I also accept that the involvement of Ms Yu was essentially the result of and heavily influenced by the relationship between the parties.  The vagueness of the language used is also probably the consequence of the nature of the relationship.  There was no real discussion or negotiation as to percentage of the profit share, what Ms Yu was required to do to earn the profit, or how the profit was really to be calculated in the multiple varying forms of investment that she says are covered by the Oral Agreement.  These factors seem to me to point strongly, on an objective basis, against any genuine intention to have created binding legal obligations.

304.I have already discussed that, on Ms Yu’s case, the material discussion was part of a wider casual conversation, and appeared to be focusing on Christmas gifts.  I do not think the language of Mr Chiau’s supposed consent to or acceptance of Ms Yu’s proposal in response to his offer of a gift – merely by the single word “ok”, whether spoken or by SMS or both – objectively identifies a genuine contractual agreement, or one which objectively the parties would have understood as was intended to create legal relations.

305.The difficulty is also identified in the various attempts at formulating Ms Yu’s case on the pleadings.  The necessity to rely on the array of rather convoluted implied terms only emphasises the problem.

306.There is also the point in the use of certain phrases which do not automatically have one particular meaning.  In other words, they lack certainty.  For example, it is common ground that there was no discussion of what “net profit” might mean.  Therefore, Ms Yu has had to seek to define it after the event, as meaning “net of tax”.  But it seems to me that it might have other logical meanings, such as (in particular as regards investments in stocks) “net of losses made”.

307.Further, the fact that the parties executed the Loncham Agreement, and the various express written amendments to it, points against an intention to create legal relations by the Oral Agreement.  Clearly, the parties were well able to enter an agreement which was intended to be binding in circumstances where they actually intended it to be binding.  Ms Yu’s emphasis of her prior commercial experience or expertise counts against her.  She would have known the importance of any written agreement, or at least of reducing any oral agreement into writing after the event.  Indeed, she says the point of the Loncham Agreement was to “formalise” the arrangements.  There is no reason why a formal written agreement was not executed at any time after 2002, except the strong suggestion that the Oral Agreement was objectively understood as one not intended to create legal relations.

308.The exchange of SMS messages described by Ms Yu does not assist her case.  As I have already indicated, if they were actually sent in precisely the terms she now recollects (as to which the must be at least significant doubt), they are at best neutral.  Certainly, they do not record the terms of the Oral Agreement now put forward, nor do they confirm the original case that the SMS messages included a request for confirmation of the terms of the Oral Agreement which was given.  It seems to me that the SMS messages, if sent in those terms, are at least equally consistent – but, in reality, more consistent – with Mr Chiau’s case of the promise of a gift.

309.Mr Yuen emphasises what he says is the consistency in the conduct subsequent to the making of the Oral Agreement.  He submits that apart from the existence of the Oral Agreement, nothing else can explain this pattern of consistent conduct.  He points to the facts that: (a) Ms Yu assisted Mr Chiau between 1997 or 1998 and 2002 without remuneration; (b) the Loncham Agreement was entered into in April 2002; (c) the Oral Agreement was made in December 2002; (d) no profit share was claimed and no gift was made in respect of the Sincere House property; (e) the Payments began in 2007 and took place in similar format over a period of four years until 2011; (f) the Payments continued into the period after the end of the romantic relationship, so that they would not have been based on an expression of love and affection; (f) Ms Yu apparently told Mr Hu in 2010 about her contractual entitlement to profit share (before any breach on the part of Mr Chiau).

310.As to the subsequent Payments, they are of course capable of providing some objective evidence of a prior intention to create legal relations.  I accept that evidence of Ms Yu’s subjective understanding – which might be said to be apparent from her later conduct – might be a pointer to what, objectively, at least she intended about the Oral Agreement existing and being legally binding.  But, the same point might be made in relation to Mr Chiau’s apparent subjective understanding, which is certainly not as clear.  An agreement is only legally binding if it can be said, looking at the position objectively, that both parties intended to create legal relations.

311.Further, the Payments were frequently not made in real accord with what is said to be the terms of the Oral Agreement. Calculations as to the 10% were “loose”.  Calling for payment before it was conceivably due under the terms of the Oral Agreement – such as led to Payment 4 – also point away from a genuine commercial arrangement on legally binding terms.  Even the explanation for Payment 4 and then Payment 6 makes little sense, not least little commercial sense.  In part, the explanation depends upon some suggestion that Ms Yu was able to dictate when Mr Chiau had to sell an investment so as to crystallise the profit, or pay her even if he did not.  That is simply unlikely.

312.These various matters point much more to a loose arrangement between boyfriend and girlfriend, as befitting a gift or series of gifts

313.Particularly telling, in my view, is the tax treatment of the various Payments, both by the payor and the payee.  Other than the Payment 1 made by Quiet Voice to Loncham, none of the payments were declared by Ms Yu or Loncham as taxable income, and none of the payments were used as tax deductions by the owner of the relevant property.  Ms Yu’s explanations offered in cross-examination as to why she did not think she needed to pay tax were not convincing.  First, she said it was a verbal contract.  Secondly, she said that she was not doing a trade, but merely acting as an adviser.  Those points fly in the face of her primary stance that she was engaged in a parallel commercial consultancy relationship to provide advice and recommendations in return for a share of profits made on projects recommended by her.  Further, the suggestion that she did not think she had to pay tax because she considered that she was making profits by herself from investing in stocks and properties is nonsensical, as she obviously was not herself investing in stocks and properties.  Further still, it is inconsistent for Ms Yu to say, or Mr Yuen to submit, that the absence of any claim for tax deduction by the payor is explained by May or Whiskey not being privy to the Oral Agreement, at the same time as relying on internal documents which are put forward to say that May and Brenda (for Whiskey and other companies) knew of the terms of the Oral Agreement.  Rather, the tax treatment on both sides of the transactions is strongly indicative, on an objective basis, that nobody involved in these arrangements considered them to be truly commercial or in any way binding.

314.There is also the point that the payments were all, except one, made from May’s personal account to Ms Yu’s personal account.  The payments were not reflected in the accounts of the property holding companies.  These matters also point strongly, on an objective basis, to the making and receipt of personal payments, consistent with the provision of gifts, rather than payment of consultancy fees calculated as a profit share due under and arising from a legally binding consultancy contract.  I do not think it is an ‘answer’ to that point to identify that the Oral Agreement was made between two individual persons (rather than corporate vehicles) a point on which Ms Yu’s pleaded case appears to have fluctuated.

315.Although of less importance, it also seems to me that the use of imprecise and varying language to describe the money requested and paid – “profit share” as against “commission” – are objective pointers against the parties having intended to create legal relations, which they then intended to follow and strictly enforce.

316.I conclude that, irrespective of whether the conversation giving rise to the alleged Oral Agreement took place over the telephone or on the balcony at House 7, there was no intention to create legal relations.

I.     Implied Terms

317.As already indicated, a key plank of Ms Yu’s case is in the various implied terms pleaded, in particular the Notional Sale Term.

318.Mr Yuen submits that the terms of the Oral Agreement, as contended for by Ms Yu, can clearly be identified by the process of construction or implication.  However, the real submissions related to implied terms (rather than the construction of express terms).  Indeed, it seems obvious that, for example, the Notional Sale Term cannot be reached through any process of construction.

319.Mr Yuen highlighted that if Mr Chiau decided to retain an investment for his own use, it must be treated as though he has sold the investment.  This is because Ms Yu had already assisted and recommended the acquisition of that asset, and such assistance and recommendation were rendered upon the understanding that the asset would later be resold.  If Mr Chiau was allowed to change his mind and keep the asset for his own use (especially at a time when the asset had already increased in value), he would be altering the foundation of the parties’ bargain and depriving Ms Yu of substantial payments for which she had already worked.

320.Mr Yuen also submitted that it is highly unlikely that the Oral Agreement was intended by the parties to cover only property investments, but not securities investments.  This is because (he submitted) Mr Chiau did pay Ms Yu twice a profit share in respect of securities investments (Payments 2 and 3), and there is no dispute that Ms Yu had knowledge and experience in trading stocks and shares.  However, I do not think it appropriate to look at matters after the event of the making of the alleged agreement in order to consider what terms should be implied into that agreement.

321.Though potentially admissible in construing objectively whether an agreement has been made, what are its terms, and whether there was an intention to create legal relations, references to subjective intention and subsequent conduct are less helpful in the circumstances that Ms Yu has not suggested that she subjectively understood the Oral Agreement contained the Notional Sale Term, the Additional Payment Term, or the No Avoidance Term.

322.Further, it is not just a forensic flourish when Mr Man submits that if an implied term is necessary and obvious, it might be asked why various (previous) Senior Counsel were not able to come up with a clear and precise formulation of it.

323.I also agree with Mr Man that the Notional Sale Term is artificial, and convoluted, and that it does not meet the necessary test for being implied.  Though I will shorten that test to being “necessary and obvious”, I keep in mind the full principles which I have outlined above. If the Oral Agreement was made, it was to provide for the person recommending the investment to receive a share of the profits made on the investment, if a profit was made.  If no profit was made, it can hardly be said to be necessary or obvious that the person recommending the investment should nevertheless still receive payment (and no calculation would be possible by reference to a percentage of profit if no profit was made).

324.It is not necessary as a matter of business efficacy to imply the Notional Sale Term, and the Oral Agreement (if made) would be perfectly coherent even without the term.  As the authorities identify, it is entirely possible in a commercial arrangement for an agent to take the risk that no commission or profit share would be payable.  Nor is there the necessity or obviousness of implying a term which would deprive the principal of his or her freedom to dispose of his or her own property – or to decide when to do so, or on what terms – simply because that decision might deprive the agent of a fee.

325.Further, requiring payment of a profit share when no profit has actually been made, which might place significant financial strain on the investor, does not appear to me to be necessarily implied. Indeed, the facts of this case make that plain, where the claim is to some HK$80 million (and where Ms Yu’s evidence in part suggests that one of the reasons to take out the HK$250 million mortgage loan against House 12 was to enable her profit share to be paid).

326.The fact that Mr Yuen is now constrained to submit that the Notional Sale Term does not apply to securities investments, because one cannot retain shares or bonds “for his own use”, so that Ms Yu would only be entitled to a profit share if and when the investment was sold at a profit, means that the Notional Sale Term cannot apply by necessary implication to the Oral Agreement as a whole.

327.Indeed, it seems to me that the Notional Sale Term is obviously inapplicable to the case of a securities investment means that the term is obviously inapplicable in general.  The problem of its application between (a) property investments and (b) securities investments shows that it is not appropriate to imply the term into the Oral Agreement.  I reject the idea that one simply implies it into part of the Oral Agreement (because it is belatedly recognised that it makes no sense as regards another part of it).

328.I reject the submission that the Notional Sale Term is entirely consistent with the express provisions of the Oral Agreement, serving to spell out the meaning of “successful investment” and the manner of calculating the profit share.  The whole point of seeking to imply the term is actually to depart from the ordinary meaning of what is a successful investment, so as to create a profit when none has actually occurred, and by reference to a notional date.  To my mind, the Notional Sale Term hinders the approach to what is “successful”, raising all sorts of uncertainties as regards timings and so forth.  It does not seem to matter to me that the Actual Sale Term (as defined by Mr Man and adopted by me above) is said to be not an express term of the Oral Agreement.

329.The real reason to put forward the proposed Notional Sale Term seems to me simply the attempt to deal with the fact (as Mr Man puts it) that Ms Yu is asking Mr Chiau to pay her a considerable sum of money for living in the property which he owns, and which he has not sold, and in the absence of any evidence that he actually intends to sell it.

330.The further suggestion that there should be no deduction of tax liability where there is a notional sale is also problematic. It is illogical to assume a notional sale to oneself, crystallising alleged notional “profit”, without including the tax that would be payable upon an actual sale on the same date.  The arbitrariness and lack of commercial sense is demonstrated by assuming the possible facts that the notional sale is in 2011 at the price of HK$800 million, but an actual sale occurs in 2012 at the same price.  On Ms Yu’s case, and her argument as to the effect of the proposed implied term, she would be entitled to a share of notional profit without deduction of tax, and without the need to make any reimbursement if an actual sale occurs even at the same price, when tax is payable.

331.There also seems to me to be some inconsistency between the proposed Notional Sale Term and the proposed No Avoidance Term.  I think Mr Man is correct when he identifies that the alternative is less stringent in not imposing a notional sale.  That of itself identifies that the more stringent term is not necessary and not obvious, because if the less stringent implied term could give business efficacy to the contract, then clearly the more stringent term is unnecessary.

332.There is also the problem that the No Avoidance Term presupposes that Ms Yu has somehow already earned a share in profits, notwithstanding that the property has not been sold and that there has been no profit made in any real sense.  That seems to fly against the suggested express terms of the Oral Agreement, providing for a share of actual profit.  The proposed term is also imprecise and in practice unworkable.  To suggest that Mr Chiau cannot “decline to sell” raises the assumption that someone asks him to sell, and in the face of that request he cannot refuse.  But that raises the question as to who the person making the request should be, and on what terms the request should be made, or on what terms the sale requested is required. These problems point against necessity and obviousness.

333.Similarly, I do not think there is any other way to view the Additional Payment Term except as attempting to give Ms Yu a ‘second bite of the cherry’.  The logic behind any Notional Sale Term is that the profit crystallises upon the notional sale, so that Ms Yu is entitled to her share of that crystallised profit at that time.  Once a property has been ‘notionally sold’, that is the event which would crystallise any profit calculation.  The whole point of the Notional Sale Term is to treat the property as sold, so as to trigger the obligation to pay the profit share.  It is simply wrong to think that the Notional Sale Term is merely to trigger a payment on account; it is not.

334.It also seems to me to make no commercial sense at all to suggest that the commercial risk borne by the ‘notional’ seller (ie. Mr Chiau) somehow permits Ms Yu to obtain further profit share if he happens actually to sell it later at a price higher than the ‘notional’ price.  That is particularly so where there is no suggestion in the evidence that Ms Yu would have to pay back any profit share if it turns out that the later actual sale is at a lower price, or even a loss.  Logically, upon any notional sale, Mr Chiau would be taken to have chosen to bear the commercial consequences of a decision not to effect an actual sale – and to bear those consequences whether they are beneficial or detrimental.  The Additional Payment Term, which is premised on the Notional Sale Term, is in my view clearly neither necessary nor obvious.

335.In conclusion, I reject each of the proposed implied terms.  None of them to my mind meet the test for the implication of terms, which I have described in shorthand as being “necessary and obvious”.

J.     Mr Chiau’s Intentions for House 12

336.It is a necessary consequence of Ms Yu’s pleaded case, and in particular the Notional Sale Term, that it is necessary to consider whether Mr Chiau intended House 12 to be an investment or intended it for his own residential use, and when that intention might have changed.  It is Ms Yu’s case that Mr Chiau originally intended House 12 to be an investment, but that he subsequently changed his mind and decided to retain it for his own use and to live in it.  At that point in time, it is said, the Notional Sale Term was triggered so as to give rise to the obligation to pay the 10% profits.

337.As an aside, I would point out that it flows from the way in which Ms Yu’s case is pleaded that there is a sharp distinction drawn by her and those representing her between (a) an investment property and (b) a property for self-use.  In Hong Kong in particular, that sharp distinction may not always arise; such is the high value of real property in Hong Kong that many people regard residential properties which they themselves use (or even commercial properties that they themselves use) as also constituting investments.  But that is not how Ms Yu puts her case.

338.Therefore, it is also a necessary consequence of the way in which Ms Yu’s case is pleaded that if I were to accept that Mr Chiau always intended House 12 for his own self-use, then the Oral Agreement (even if binding) would not apply to it.

339.It might also be added that the fact that on many ordinary occasions no sharp distinction is drawn between (a) an investment property and (b) a property for self-use, may mean that the Notional Sale Term which requires that distinction is not necessary or obvious, leading to the rejection of the implication of that term (see above).

340.Ms Yu’s pleaded case is that Mr Chiau only ever intended for House 12 to be an investment until either 1 February 2011 (a reference to the Charles Mung email of that date) or one of the three offered alternative events which occurred in 2011 (the sale of House 10 in June 2011, the raising of funds by mortgage against House 12 in May 2011, or permitting Ms Yu to take up temporary residence in April 2011 or Mr Chiau himself taking up residence at the end of 2011).

341.However, other than the evidence from Ms Yu herself, the remainder of the evidence seems to me to point all one way, namely that it was always Mr Chiau’s intention to live in House 12 once it had been finished and furnished.

342.First, Mr Chiau clearly liked living on Pollock’s Path.  He previously owned House 7.  He was familiar with the next-door plot (on which House 12 was later built) and kept an eye on it. I accept that he regarded that plot as even better, and as somewhere where he could build his “dream house”.

343.Secondly, the original agreement between Mr Chiau and Mr Hu specifically envisaged building four houses, two of which would be sold and the other two of which would be retained.  Each of Mr Chiau and Mr Hu would retain one house for their “self-use”.

344.From a very early stage of the development, Mr Chiau’s personal interior designer Mr Locatelli started to fly out to Hong Kong from Italy for the interior design and decoration process.  Mr Locatelli was involved only with the interior design of House 12, and none of the other three houses being developed.  Ultimately, Mr Locatelli made 19 trips to Hong Kong, starting from December 2004.  The design and decoration provided was specifically to cater for Mr Chiau’s own personal taste. Insofar as it may matter at all, I also accept that Mr Chiau at least took soundings from his mother and May about his decorative scheme, on the basis that they might live there with him.  Plainly, Ms Yu herself was also involved, not just in the administrative ‘nitty-gritty’ arrangements.  In her evidence, she even said that it had been anticipated that she and Mr Chiau would live there (though she later said she meant only temporarily).  The effort that was put into the particular interior design and decoration of House 12 is strongly indicative that it was always intended for Mr Chiau’s own use.

345.I have also set out above a table which identifies the great disparity in expenditure on House 12, as compared to the other houses, even the ‘show house’ House 16.  I reject Ms Yu’s evidence that Mr Chiau was prepared to make such large expenditure on House 12 on the basis that he thought it would be easier to sell.  I instead accept Mr Chiau’s evidence that it probably would have narrowed the pool of people who might purchase the house (even assuming it were on the market) to those who shared his particular taste, unless they were prepared to spend significant money ripping out his decoration and replacing it with their own.

346.As well as confirming the position in relation to the 5 December 2007 email relating to Henderson (see above), Mr Hu also gave the following evidence in relation to Mr Chiau’s intentions as regards House 12.  First, after originally thinking about House 10, Mr Chiau eventually chose House 12, apparently because it was at the end of the road and would offer the most privacy, and because it had the biggest courtyard which would accommodate the most cars.  The privacy point in particular supports Mr Chiau’s case.

347.When asked about what he (Mr Hu) meant when he said that he and Mr Chiau had agreed to sell two houses and keep two for “self-use”, Mr Hu said that Mr Chiau used the term “self-use”, and he also adopted that terminology.  But that did not mean that he would go in himself and occupy and live in it, but that the house would belong to his family and also maybe his extended family, and be used as a vacation house or clubhouse. Even impliedly, that evidence indicated that Mr Chiau (by contrast) actually intended to live in House 12.  However, when specifically asked about Mr Chiau’s intention in respect of House 12 at the initial stages of the development around 2004, Mr Hu stated that Mr Chiau told him that he intended to live there himself.  He also specifically identified that between 2004, when the joint venture started, and late 2011 when Mr Chiau moved in to House 12, there was no indication from Mr Chiau that he was not going to live in House 12.

348.Mr Hu also said that his personal feeling was that the decoration of House 12 was not a general type of decoration, not the sort of decoration for a show home, and not the type of decoration for people generally.  As he put it, the “style was rather individualistic”.

349.When asked about dinner parties which Ms Yu had described as having been held by Mr Hu and Mr Chiau in their respective houses, Mr Hu said he had several parties to show his friends around House 10, and indeed holding parties was one of the reasons why he kept the house.  Mr Hu also intended to introduce some friends to Mr Chiau, and so parties were held in House 12 as well.  Mr Hu frankly acknowledged that as a result of such a high profile project, he gained fame and profit, so wished to show off in front of his friends.

350.Mr Hu also confirmed that Mr Chiau is a very private person.  Basically, Mr Chiau did not want other people to view his house, but Mr Hu kept trying to persuade him to let people view his house.  Mr Hu asked Mr Chiau just to let people see the house, as there was nothing wrong about that, and if they were to offer a price that he could not refuse, then it may not be a bad thing.  (As I have indicated above, it seems Mr Hu was himself later made an offer he could not refuse in relation to House 10.)  But, I accept that this was clearly not some sales initiative for House 12.  Eventually Mr Chiau did allow people to view his house, once or twice.  Mr Chiau, in his own evidence, accepted this description of events was broadly correct.

351.But, in my view, none of that evidence goes anywhere in support of Ms Yu’s case.  Permitting one or two viewings, under pressure from a friend and co-developer, in case it might produce the kind of offer that no one could refuse, does not seem to me to be any evidence that Mr Chiau ever harboured the intention not to live in House 12. Rather, the total picture painted by the evidence is precisely the opposite.

352.I also note that the sale of House 7 by Mr Chiau in 2006 is at least consistent with the desire to move into and live in the new property being built next door (though there had also been water leakage problems with House 7, leading to a decision to move out whilst it was renovated, in around 2003 or 2004).

353.Ms Yu also relies on the obtaining of the mortgage finance against House 12, and the correspondence about necessary income to support the mortgage repayments, as well as the security documentation which required the assignment of any rental income.  As regards the use of the funds obtained by the loan, I accept they demonstrate that Mr Chiau is the ultimate beneficial owner of House 12.  This is in part because the mortgage facility was granted, with the loan proceeds specifically to be applied only to investments by Mr Chiau or his related company through HSBC Private Bank and/or in marketable securities and/or in property (and, incidentally, not to meet any profit share on the house).  But his ultimate beneficial ownership of House 12 is not a matter of dispute and may be neutral to his intentions as to its use.

354.But Ms Yu also relies on the 22 February 2011 email to Carol Gaw in which she stated that there was a plan to let out the property at $550,000 per month.  However, there is no evidence that Mr Chiau ever knew about that email, and whilst he accepted that it would have been possible to have rented out the property, I think the reference to rental amount was specifically to seek to support the application for the mortgage loan.  I do not think it actually identifies any real intention, whether in February 2011 or otherwise, to rent out the property.  Indeed, Ms Yu herself moved into House 12 within six weeks or so after that email, and did so following her own request to which Mr Chiau acceded.  Similarly, the assignment of any rental income was merely part of the security documentation for the loan.

355.If, as is Ms Yu’s case, House 12 was ready for occupation in 2010, that is somewhat earlier than 2011, that tends to show that it was not intended to be rented out.  Instead, Mr Chiau was content to leave it empty until he was satisfied with its finishing and furniture and then move in (albeit he permitted Ms Yu to reside there temporarily in the interim). Indeed, that he was prepared to allow Ms Yu to live there also tends to show that the property was not intended for being rented out.  I reject Ms Yu’s evidence that there had been an intention for one or both of her and Mr Chiau to reside only temporarily in House 12 before it was rented out.  That seems to me to be inherently unlikely.

356.I also reject the submission – whilst noting that the point was not even put to Mr Chiau in cross-examination – that it was not until House 16 and House 18 were sold that Mr Chiau was likely to feel confident that the proceeds from those sales alone would be sufficient to cover the entire cost of the project, so that before 2009 he could not have “ruled out the possibility of selling House 12” (Mr Yuen’s words). There is simply nothing in this point, as it does not seem to me to be even logically connected with the real decision about living in House 12.

357.Further, none of the points, pleaded in the alternative in §§18-20 of the RASOC are sustainable (and I note that, other than the 1 February 2011 email, none of them were actually put directly to Mr Chiau in cross-examination).  As to the 1 February 2011 email, Ms Yu accepted (as is obviously right) that the contents of the email do not deal with any decision being made by Mr Chiau to reside in House 12, and that Mr Chiau had in fact already decided to live there before that.  Further, the sale of House 10 by Ryoden in June 2011 is plainly irrelevant to Mr Chiau’s intentions as regards House 12.  The mortgage loan in May 2011 is also irrelevant, as most people take mortgage loans over property which are discharged using the proceeds of sale.  Allowing Ms Yu to reside temporarily, or later moving in himself, could not be the timing of any decision by Mr Chiau that he would take up residence (and so no longer treat House 12 as ‘just’ some investment).

358.There is some force in Mr Man’s submission that the inability of Ms Yu to prove any of the specified dates as pleaded by her is relevant to deciding whether Mr Chiau did in fact change his mind, or whether he had always intended to take up residence as his self-use of House 12. Mr Yuen’s submission that, even if it is not possible to identify a specific date when somebody else made a decision, it might be possible to identify a date by which it can be seen that he must have made that decision, does not assist in this case on the evidence.

359.Indeed, I agree with Mr Man that the evidence is “overwhelming”.  The evidence shows that, from 2004 onwards, it was always Mr Chiau’s intention to live in House 12.  Hence, on Ms Yu’s own case, her claim to any share of profit on House 12 is bound to fail.

K.     Recommendation and Effective Cause

360.Ms Yu’s primary stance is that, under the Oral Agreement, her entitlement to the profit share does not depend on her recommendation being an ‘effective cause’ of Mr Chiau’s acquisition of the subject asset.  This is said to be because there is no suggestion that the parties expressly agreed to such a requirement whether in 2004 or any time thereafter, and that the requirement cannot be implied as it is neither obvious nor necessary.

361.I reject that submission, as it would give no natural meaning to the need for a “recommendation” (if that word was expressly used, as Ms Yu says it was), stripping away any logical or causal connection between the contractual effort required for a contractual reward and that reward.

362.It may be that part of the reason for the primary case, that there was no need for a “recommendation”, arises from the fact that the first few iterations of her claim did not include that element. Where it is clearly an important element to the Oral Agreement, and Ms Yu now says she specifically recalls using the word “recommendation” in English during the telephone conversation when the Oral Agreement was made, significant doubt must be cast on whether she has in fact always told her lawyers “the same story”.  I think she did not.

363.In the alternative, and assuming the recommendation must be an effective cause of the acquisition, Mr Yuen submitted that by reference to the authorities already canvassed (see above) the facts show that Ms Yu’s recommendation was plainly the effective cause of Mr Chiau’s acquisitions of the Skyhigh Property, the BH Properties and the Fund.  As he put it, Ms Yu’s recommendations were clearly the ‘but-for’ cause.

364.Mr Yuen submitted that for making a “recommendation”, it may be necessary to take into account many different considerations.  It is not sufficient to know of the property and to want to acquire it.  He submitted that the core of the “recommendation” was in Ms Yu’s informing Mr Chiau that he could make the acquisition, could afford it, and (in relation to the Skyhigh Property) that he could find a suitable developer to assist.

365.In particular in relation to the Skyhigh Property, Mr Yuen submits that Ms Yu’s role included (a) advising Mr Chiau to put in a bid when he had yet to make up his mind; (b) keeping on persuading Mr Chiau to buy the property in the days leading up to the auction; (c) on the morning of the auction, after speaking to Raymond Ho, advising Mr Chiau to increase his bid to over HK$300 million; and (d) after winning the bid, setting up the meeting with Johnny Yu to assuage Mr Chiau’s concern, and to tell him to proceed with the transaction rather than forfeiting the deposit.

366.Mr Chiau gave some evidence during cross-examination when asked (by the Court) about how he would describe his approach to his financial position.  Speaking about investments generally (“the normal way, that is I was interested in this project or property”), he said he would make it clear that he would like to purchase the property and then would let his colleagues, for example Ms Yu, do some work, do some preparation, check his finances and tell him about them and also the estimate of the value of the project.  I agree that evidence is an acknowledgement of the kind of activity performed by Ms Yu, relevant to working out the viability of acquisitions and prices which might be offered.

367.But, in light of the various materials which I have already traversed in the factual section above, I do not think it can be said that Ms Yu “recommended” investment in the Skyhigh Property to Mr Chiau.  That she and Mr Chiau agreed as to the acquisition is, in my view, not enough.  Put another way, I do not think the purchase of the Skyhigh Property was “really brought about by” Ms Yu.  This is another way of saying that, whatever her involvement, it did not really have any causal impact on Mr Chiau’s decision to acquire the property for redevelopment.  There was no ‘but for’ cause.  He always had it in mind to purchase the property if he had the opportunity.  When he had that opportunity, he did purchase it.  Mr Chiau purchased it because he had the money and the financial resources, not because he found out (with the assistance of Ms Yu) that he had the money and resources.

368.In the case of the acquisition of the BH Properties, Mr Yuen submits that Ms Yu’s role was (a) learning of the investment opportunity from Dicky Tsoi; (b) conducting research on the development; (c) analysing Mr Chiau’s financial situation; (d) reaching out to valuers and surveyors to ascertain the market value of nearby properties; (e) attending the development site with Dicky Tsoi and the brother of Dr Colin Lam to inspect the location and neighbourhood, and to visit the showhouse; (f) advising Mr Chiau by phone to make the investment in view of (in particular) the “star investors” programme.  Mr Yuen’s oral summary was that Ms Yu “did all the homework and made the recommendations”.

369.So, Mr Yuen submitted, given that activity and Mr Chiau’s devotion to moviemaking, and the fact that he trusted and needed Ms Yu’s ability and loyalty, it is inherently likely that he valued and relied on her recommendation when deciding to acquire the BH Properties. Though the “star investors” programme was no doubt an important factor in the acquisition, it was only one of the reasons for the acquisition, and there can be more than one effective cause.

370.I think the situation with the BH Properties is less clear than with the Skyhigh Property.

371.But, on the evidence I have already canvassed, I do not think it can be said that Ms Yu was the person who really brought about the investments in the BH Properties.  Those facts point to Mr Chiau being himself interested in the BH Properties, as a result of an introduction directly to him which depended upon discounts based upon him being a film star.  He visited the development itself, and like the concept.  He formed his own independent view of the properties, and actually rejected Ms Yu’s suggestion to buy only three houses; he bought seven, albeit that he subsequently completed the transaction on only three.

372.I have also taken into account that Ms Yu made no claim relating to the BH Properties until this very point was made by Mr Chiau in his witness statement given in 2017.  This is despite the fact that she was sent the provisional sale and purchase agreement for one of the properties in May 2011, at the same time as she was asserting a claim for House 12 on the basis of the same Oral Agreement.

373.In the case of the Fund, it is the unchallenged evidence of Ms Yu that Mr Chiau made the investment on her recommendation. It was her idea, and Mr Chiau was anyway uninterested in investments in stocks or funds which were usually handed over to Ms Yu for her management.  Ms Yu really did bring about the investment in the Fund.

L.     Waiver and Limitation

374.On the evidence, no question of waiver by Ms Yu was actually pursued by Mr Chiau.

375.Though Mr Man pursued the submission that Ms Yu’s claim was time-barred, in light of my other findings, leading to the failure of the claim at a number of different points on the ‘decision tree’, I do not think I need to address that point.

M.     Quantum

376.Though the question of quantum is now irrelevant on my findings on liability, I can deal with quantum for the sake of completeness.

377.As regards House 12, despite filing his own expert valuation, Mr Chiau in the end chose not to challenge the figures put forward in the valuation of Mr Ian Cullen on behalf of Ms Yu.  Its valuations relate only to various alternate dates in 2011 as follows:

Date of Valuation	Mr Cullen’s valuation
1 February 2011	HK$855 million
15 April 2011	HK$897 million
15 May 2011	HK$907 million
15 June 2011	HK$944 million
15 December 2011	HK$911 million

378.Though, on my findings, none of those dates is exactly relevant for the calculation of quantum, had it been necessary to do so I would have chosen the first figure on the basis that it is closest in time to when (on some earlier date) Mr Chiau decided to live in House 12 as his means of “self-use”.  Of course, I am actually wholly satisfied that he always intended to live in House 12, so even picking the earliest date and consequential dollar sum from the above offered alternatives is entirely artificial.

379.Ms Yu accepts that the acquisition and development costs associated with House 12 should be deducted when calculating the amount of profit share payable in respect of House 12.  It is said that the correct amount to deduct is shown in the table prepared by Ryoden in 2011, namely HK$170,616,895.  Had it been necessary, I would have accepted that some as an appropriate deduction.  It would also have been necessary to give credit for the HK$10 million which Mr Chiau paid in March 2012.

380.As to the BH Properties, Ms Yu accepts that the expenses given by Brenda in her witness statement should be taken into account when calculating net profit.  Had liability been established by Ms Yu on this investment, I would have ordered the net profit figure for Houses 19, 78 and 80 respectively in the sums of HK$68,395, HK$56,351 and HK$131,174. (For the avoidance of doubt, I do not think it necessary or appropriate to include any figure of cents, which I would have excluded).

381.No necessary quantum figure arises in relation to the Fund, on the basis that it is accepted by Ms Yu that Mr Chiau has not yet breached the Oral Agreement in that regard.

N.     Conclusion on the Claim in the 2012 Action

382.I agree with Mr Man’s submissions that Ms Yu’s claims on House 12 fail for any number (or any combination) of reasons. Those reasons include that:

(1)     There was no making of the Oral Agreement as alleged by Ms Yu, and the discussion about profit share was in relation to a gift.

(2)     There was no binding agreement made with any intention to create legal relations.

(3)     Mr Chiau had intended to retain House 12 for his self-use from the very moment he acquired the Skyhigh Property, and indeed acquired it precisely to develop a house in which he would choose to live.

(4)     Therefore, even under the alleged Notional Sale Term, the value of the Skyhigh Property was the same as the auction price and there could have been no “profit”.

(5)     Even that ignores the cost of development, and the rather torturous (perhaps impossible) analysis that that might involve.

(6)     On the same basis, House 12 was not an “investment” which would fall within Ms Yu’s alleged Oral Agreement.

(7)     Ms Yu has also failed to prove any of the pleaded dates on which Mr Chiau became liable to pay her a share of the “profits”.

(8)     But those dates are dependent upon the implication of the Notional Sale Term, which is rejected.

(9)     Ms Yu was not the person who really brought about the acquisition of the Skyhigh Property in any event.

383.For a host of reasons, I find the claim in the 2012 Action fails.

O.     Conclusion on the Claim in the 2017 Action

384.As to the claims in the 2017 Action, they are also dependent on the existence of the Oral Agreement and that it is a legally binding agreement.  For the same reasons I have indicated above, those claims must fail.

385.But I also accept that, on the evidence, it cannot be said that Ms Yu was the person who really brought about the investments in the BH Properties.

386.As to the Fund, in addition to the claim failing because of the non-legally binding nature of whatever was agreed between the parties in late 2002, the fundamental and fatal problem for the claim is that the investment is in a fund which is not complete.  There is no sensible date on which any obligation to pay any profit can be said to have accrued, and none is pleaded.  Indeed, prior to the commencement of the 2017 Action there was never even a demand.  It is now accepted there is no breach, at least not yet.

P.     Result

387.The claims in both actions are dismissed.

388.I will make an order nisi that costs follow the event, so that Ms Yu must pay Mr Chiau’s costs of both actions, to be taxed if not agreed.  The order will become absolute unless either party seeks a variation of it within 14 days.  If a variation application is made, I will give directions as to how to deal with that application.

Mr Rimsky Yuen SC, Mr Victor Dawes SC and Mr Thomas Wong, instructed by Gibson, Dunn & Crutcher, for the plaintiff

Mr Bernard Man SC and Mr Keith Lam, instructed by Anthony Siu & Co, for the defendant