Kong Fung Rmb Remittance Exchange Ltd v. Chan Kam Hoi t/a Bao Hang Rmb Money Exchange and Others

HCA 276/2016

[2022] HKCFI 736

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 276 OF 2016

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J U D G M E N T

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Background

1.This is an unusual case to have advanced to trial, bearing in mind the amount of the residual disputed claim, and the discussions and correspondence before and even during trial.

2.Proceedings were commenced in January 2016 by the Plaintiff (“KF”) against the 3 Defendants, and all parties were at the material time in the money exchange business.  The 3^rd Defendant is the beneficial owner of the business of the 1^st Defendant (“BH”) and the 2^nd Defendant (“BY”).  KF, BH and BY were all licensed under the Anti-Money Laundering and Counter‑Terrorist Financing (Financing Execution) Ordinance to carry on the business of money exchange.

3.KF’s claims against the Defendants in these proceedings were made on the basis of an agreement adopted by them in the course of their trade (“Agreement”) since 2009 (paragraphs 3 and 4 of the Re-Amended Statement of Claim (“SOC”)).  Essentially, BH and BY agreed to order Renminbi (“RMB”) from KF at the exchange rate quoted by KF, and to pay for same in Hong Kong dollars to be remitted to KF’s designated account or accounts in Hong Kong.  If KF should require cash, BH and/or BY may also provide Hong Kong dollars or RMB in cash to KF.  It does not appear to be in dispute at least that at the end of each day, the parties would check their respective accounts and agree on the amount due to each other for the exchange transactions conducted during the day, and that a final account was agreed each day.

4.Although it was pleaded in the SOC that the relevant terms of the Agreement which are relied upon by KF were “express and/or implied” (paragraph 5 of the SOC), by the time of trial, Counsel for KF only argued the case on the basis of implied terms.

5.The terms claimed by KF to have been implied in the Agreement are that:

(1)    all sums transferred to KF’s bank account for the purpose of doing RMB remittance must not be proceeds of crime or otherwise of an illegal nature, and the sums must be transferred from BH and BY’s own bank accounts; and

(2)    BH and BY shall not cause or allow their customers to use KF’s bank account, or provide them with KF’s bank account number, for the purpose of depositing money or remittance without the prior permission of KF, and that in the event of breach, BH and BY would be fully responsible for all consequences caused as a result.

The SOC refers to the above implied terms as the “Term”.

6.According to KF’s further and better particulars of the SOC, the Term had been incorporated into the Agreement through the course of dealings between KF, BH and BY, for a period of over 7 years from 2009.  The Term is claimed to be implied for business efficacy, and it is said that by custom of the money exchange trade, the party which allowed any customer to use KF’s bank account without prior permission should be fully responsible for all consequences caused as a result, including having to provide funds equivalent to the amount of the funds frozen as a result, and to indemnify KF for such loss.

7.According to KF, BH and BY were in breach of the Term, by causing or permitting a sum of HK$1.9 million to be transferred directly from BY’s customer (“Ma”) to an HSBC bank account (“Account”) operated by KF, without KF’s permission or consent on 29 June 2015.  The Account was in fact registered under the name of New Rich Legend Limited (“New Rich”), which KF was authorized to use for its money exchange and remittance business.

8.KF further relies on a notice in writing dated 1 November 2014 which was issued by KF to other companies which had money exchange business dealings with KF (“Notice”).  The Notice states:

“(KF) has decided that from now on all sums transferred to (KF) for the purpose of doing remittance must be transferred from your company’s own bank account. If, without the permission of (KF), (KF’s) account was provided to the customers, your company shall be responsible for all consequences caused; including if (KF’s) account was frozen as a result, your company shall be responsible for all sums contained in the frozen account…” (Emphases added)

9.By the time of Closing submissions, Counsel confirmed that the Notice was only “an incarnation” of the implied terms of the Agreement.  By that, it is understood that the Notice simply embodied the Agreement and its implied terms.  Nevertheless, the issue raised for determination by the Court at trial was whether the Notice had been issued by KF, and whether the Defendants were bound by the Notice.

10.In June 2015, KF was informed by the holder of the Account, New Rich, that the Account had been suspended by HSBC.  Different notifications had been received by HSBC and by New Rich on different occasions. On 30 June 2015, HSBC was notified by the Hong Kong Police that a sum of approximately HK$18,230,000 in the Account was believed to be the proceeds of crime (“1^st Notification”).  The Account was accordingly suspended by HSBC.  Then, on 12 March 2018, HSBC was notified by the Police that a sum of HK$1.9 million in the Account was believed to be crime proceeds. KF was in turn informed by the Police in writing on 12 July 2018 and 16 July 2018, of their notification to HSBC with regard to the sums of HK$18,230,000 and HK$1.9 million being proceeds of crime.

11.It is not disputed that as a result of the Account having been suspended by HSBC, KF on its own accord “seized” and detained in its bank account a total sum of approximately HK$5,361,371.50 which had been paid by BH and BY into KF’s account.  According to paragraph 14 of the SOC, the sum had been seized by KF in partial satisfaction of the liability of the Defendants which resulted from their breach of the Term.

12.The Defendants had counterclaimed in these proceedings for the return of the amounts which KF had deducted from the sums paid by the Defendants, and when proceedings were first commenced, the amount in dispute between the parties had been over HK$15 million. On 16 January 2018, Judgment was in fact entered against KF on the Counterclaim, but a sum of HK$1.9 million remains in dispute, as the amount which the Defendants claim remains due and should be paid by KF to them.

13.In addition to its reliance on the implied terms of the Agreement, KF refers in its pleading to an acknowledgment or admission made by the 3^rd Defendant on 30 June 2015 (“Admission”), that the Defendants would be responsible for the money frozen in the Account.  Again, Counsel contended in closing that KF’s case was not, and had not been, mounted on the Admission itself, that its case is based on the implied terms of the Agreement, and that the Admission simply reflected the existence of the implied terms relied upon.

14.KF admits that it had retained the HK$1.9 million from the Defendants’ money, but claims that as it had suffered loss and damage as a result of HSBC’s suspension of the Account, it was entitled to be indemnified by the Defendants of its loss “should the Police confiscate HK$1.9 million or any part thereof” (paragraph 23 of the SOC).

15.The issues framed by KF for determination by the Court at trial include: what the implied terms of the Agreement are, and whether the Defendants were in breach of such implied terms; whether the Notice had been issued to BH and BY, and whether the Defendants were bound by the Notice; and whether the scope of the Admission covered the situation in which the HK$1.9 million in the Account was suspended by HSBC, instead of being “frozen”.

The Agreement

16.On behalf of the Defendants, Counsel highlighted the fact that the Agreement contended by KF, and the Term relied upon as contained therein, is one which was said to have arisen simply by custom, as a result of the course of dealings between KF and the Defendants since 2009.  There was no agreement or term said to have been agreed orally at any time.  The Notice is alleged to have been issued and was sent by KF to BH and BY, and KF’s case is that it evidences the Term.

17.The Defendants deny that the Notice had ever been received by them.  They also deny that there was any trade custom as alleged by KF and as pleaded in paragraph 5 of the SOC.

18.The determination of the key issues in dispute in this case depends entirely on whether the Court accepts or rejects the testimony and evidence of the witnesses called on behalf of KF on the one hand, and the Defendants on the other hand.  The only relevant contemporaneous record between the parties is the Notice.  The issue with regard to the Notice is whether it was faxed by KF to BH and BY, and received by BH and BY.  KF claims that the Notice had been faxed to all its business counterparts.  BH and BY claim that they had never received the Notice from KF.

19.This is not the first case in which the Court has to explain that it cannot aim for perfect justice, as it can only attempt to achieve practical justice within the constraints of time and circumstances as they exist (see, for example, paragraph 25 of the judgment of Litton JA (as he then was) in Nagata v New Japan Securities International (Hong Kong) Ltd (No 1) CACV 136/1993).  The Court cannot ascertain the absolute truth.  It can only decide on what appears to be the truth, on a balance of probabilities, and on the materials as presented to the Court in the manner presented by the parties.

20.When assessing the credibility of a party’s case on a particular issue, the Court takes into consideration matters such as whether the party’s case is inherently plausible or implausible; whether the party’s case is contradicted by the evidence (documentary or otherwise) which is undisputed or indisputable; whether it is shown that a witness has been discredited over one or more matters to which he has given evidence; and of course, the demeanour of the witnesses.  Demeanour has been explained to be mostly concerned with whether a witness appears to be telling the truth as he now believes it to be, and is accordingly unreliable as the sole determining factor.

21.As to the credibility of a witness, the Courts have issued many reminders, that the question of whether a witness is truthful or untruthful has to be approached with caution, with particular regard being given to the fallibility and potential unreliability of human memory.  A witness’s recollection of events as recounted is often affected and altered by unconscious bias.  One recent reminder is contained in the decision of Coleman J in Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923.  In summary, His Lordship pointed out that “memories are fluid and malleable, being constantly rewritten whenever they are retrieved”, and that what is subsequently retrieved from a witness’s memory is determined by a multitude of factors and by what drives the recollection of the event.  Litigation is recognized as being a strong factor either in the active or subconscious manipulation or reconstruction of any information retained in memory.  As emphasized in Yu v Chiau and in other cases, the inherent probabilities and likelihoods of an event or account may often be of greater assistance in deciding what actually happened, on a balance of probabilities.

The Term implied

22.The legal principles concerning the implication of terms are not disputed.  From the authorities, it is clear that for any term to be implied, it must be reasonable and equitable; necessary to give business efficacy to the contract, such that no term will be implied if the contract is effective without it; so obvious that “it goes without saying”; is capable of clear expression; and must not contradict any express term of the contract (Kensland Realty v Whale View Investment Ltd (2001) 4 HKCFAR 381.

23.On behalf of KF, Counsel contended that as operators in the field of money exchange, BH and BY must have been aware of the risks associated with the money exchange business, in that the money received from a customer may be “tainted” with the proceeds of crime.  It was argued that the Term was necessary and must have been understood, since KF, BH and BY were required under their business licences to conduct due diligence on their money exchange transactions, and KF could not practically have conducted due diligence on each and every single transaction involving deposit by BH and BY into KF’s designated accounts for the money exchange, particularly if BH and BY were to allow their customers to make direct deposits into KF’s accounts.  KF would have to rely on the due diligence carried out by BH and BY on their own customers, and the Agreement and the Term were to reflect the understanding that the deposit into KF’s bank account must come from BH or BY’s own bank accounts, that BH and BY would only allow their own customers to use KF’s accounts for direct deposits with KF’s prior permission, and further, that BH and BY must be fully responsible for all losses and damages caused by their breach of the Term agreed.

24.The Defendants do not dispute that it was understood, from trade practice, that money transferred to KF by the Defendants should not be the proceeds of crime, and that BH and BY had the duty under the law and was required under their licences to conduct due diligence of their customers, to ascertain the identity of the customer purchasing RMB with Hong Kong dollars and to ascertain the use of the currency being purchased.  They deny that there was any agreement, whether expressed or implied by custom, not to cause or allow their customers to deposit money into KF’s account directly, or to guarantee that the money deposited into KF’s account would not be subject to any forfeiture, such as to be an insurer for KF’s loss.  Counsel for the Defendants argued that no one in the trade would sensibly or reasonably agree to act as an insurer for another trader’s loss, which is effectively the purport or effect of the Term relied upon by KF.

25.For a term to be implied by custom and trade, the usage must be notorious, certain and reasonable (para 14-033, Chitty on Contracts, 33^rd ed).

26.Apart from KF’s own witnesses, the 3^rd Defendant and the 2^nd Defendant’s own witness, no other independent witness was called to give evidence on the alleged trade custom.

27.The 3^rd Defendant who gave evidence for the Defendants, although inarticulate, was consistent that although there were risks in the trade, of money transferred being frozen as a result of their being linked to money laundering, the Defendants could only do what was required by law, to conduct due diligence of their customers, and that such due diligence only involved keeping records of the identity cards and address proof of the person seeking to make the remittance and of the recipient of the remittance, and to obtain the consent and agreement of KF before making any deposit and transfer to KF, into the account specified by KF for the transaction in question.  The 3^rd Defendant was adamant that there was no way for BH and BY, or anyone in the trade, to guarantee that the money deposited into KF’s account in the course of the business was not related to any proceeds of crime, or to agree to indemnify the other trader of losses sustained as a result of a deposit made which was subsequently found to be related to the proceeds of a customer’s crime, despite the trader having conducted the usual due diligence.

28.Both the 3^rd Defendant and Madam Choi Suet Yu (“CS”), who helped the 3^rd Defendant in the management of the money exchange business, were adamant that the agreement and business pattern between KF and the Defendants was only to the effect that BH and BY must ascertain from KF the particular bank account into which a deposit of Hong Kong dollars was to be made for the transactions to be conducted between them, and to obtain from KF its agreement and prior consent before concluding any deal on a transaction for the deposit to be made into KF’s designated account.  They maintain that there was never any agreement, by trade custom, or implied through their course of dealings, that BH and BY had to seek and obtain KF’s agreement and consent before they could arrange for their customers’ direct deposit into KF’s designated account.  The ascertainment of approval was only in respect of the amount of the transaction to be deposited, and the particular bank account of KF into which the money was to be deposited.

29.According to the evidence of CS, the ascertainment of KF’s bank account was usually made when business commenced each day, at around 9 am, and there would usually be a further confirmation of the particulars of KF’s bank account at around 11 am.  Telephone calls would be exchanged between CS (or the person in charge at the particular branch of the Defendants’ business) and the person in charge at KF, to obtain and confirm the details of KF’s bank account into which deposits may be made.  CS explained that KF had different bank accounts which were used for the business, and she further explained that these accounts may be changed, and often were. She pointed out that changes in the accounts to be used had, on occasions, been due to the fact that KF’s bank account had been frozen by the bank or the authorities.  On CS’s evidence, there were also occasions when she would telephone the person in charge at KF, before a transaction involving a large amount was concluded with a customer, to ask KF which bank account should be used for the particular deposit in question.  CS claimed, however, that this was not an invariable practice of hers, nor one required by KF.  She was also adamant that KF had never required the Defendants to seek KF’s agreement before a direct deposit could be made by a customer of BH or BY.  According to CS, the business mode and practice between KF and the Defendants was for the Defendants only to seek KF’s confirmation of the particular bank account into which the deposit was to be made, whether by BH, BY, or their clients direct.  This was to facilitate the account taking exercise at the end of each day, and also to facilitate the customer who may have an account at a specified bank from which a transfer was contemplated to be made into KF’s account with the same bank (which would speed up the process).

30.According to the 3^rd Defendant, it had in fact been a consistent practice for the Defendants’ customers to make direct deposits or transfers into KF’s bank accounts, and that this was apparent to KF from the bank statements which the parties agree had been exchanged as part of their business dealings.  KF had known at all times that there had been direct deposits made into their accounts by parties other than BH and BY, and there had been no questions raised in the past, as to whether KY’s prior consent had been sought, or why such prior consent had not been obained.

31.To the extent that the Agreement pleaded to have been made between the parties in the course of their dealings is that (according to paragraph 4 of the SOC) KF would give a quote on the exchange rate on the morning of each business day; that BH and BY agreed to give KF an equivalent amount of Hong Kong dollars by remittance to KF’s designated account; that KF would remit RMB to the designated accounts of BH and BY; and that they would send statements to each other to check the figures transferred; there is no serious dispute from the Defendants’ evidence.

32.The Term said to have been implied into the Agreement is denied.  The Defendants do not appear to dispute that the sums to be transferred to KF for the RMB remittance should not be known by them to be proceeds of crime or of an illegal nature. Their case is that they can only ensure this to the reasonable extent possible, which is by conducting due diligence, but they cannot guarantee to KF that the sums transferred would not be found to be tainted with proceeds of crime, or be illegal.

33.On the evidence, I am not satisfied on the balance of probabilities that from the course of dealings between KF and the Defendants, there is any express or implied term that the money transferred must only be from the bank accounts of BH and BY (as pleaded in paragraph 5 (1) of the SOC), or that BH and BY must not allow their customers to use KF’s bank account, or to deposit money into KF’s account, without KF’s prior consent (as pleaded in paragraph 5 (2) of the SOC).  I am not satisfied that such a term has to be implied to give business efficacy to the dealings between KF and the Defendants, or that the term goes without saying.

34.First and foremost, the dealings and exchange in currency can be carried out and conducted without the Term.  KF can carry out due diligence against BH and BY, and of the source of the money to be transferred into KF’s account.

35.The restrictions which are sought to be imposed cannot be justified or explained as necessary or required because (on KF’s contention) as KF could not conduct due diligence in respect of the transfer, the requirement of a deposit from BH and BY (and not their customer) was necessary to protect KF from the illegality of the customer’s dealings.  I agree with Mr Chain, that even if a deposit is made into KF’s designated account by BH or BY, and not by the customer directly, if the source of the funds is illegal and the funds are the proceeds of the crime of the customer (in this case Ma), the deposit made by BH/BY into KF’s account would still be traced to Ma, and KF’s account would still be the subject of any act of suspension by HSBC, or forfeiture by the authorities.  There is hardly any substantial or practical difference in result, with or without the implication of the Term.

36.On the evidence of CS, the Defendants would constantly seek confirmation from KF as to the bank account into which transfers were to be made for the relevant transactions, and KF would give instructions on the bank accounts for the transfers.  The main object of the exercise was to ensure that there would be a functionable bank account into which the deposit of the relevant amount, and in particular the more substantial amounts, could be made, sometimes at the specific request and for the convenience of the customer making the payment of the Hong Kong dollar equivalent amount.  Objectively, it would be reasonably considered to be superfluous for the Defendants to have to specify whether the deposit was to be made by themselves, or by their customers.  It certainly does not go without saying that the Defendants would have to state that the deposit was to be made by a particular client directly.

37.In terms of the due diligence required to be conducted by KF, KF could and obviously did conduct due diligence against BH and BY, and was entitled (as they maintain) to rely on BH and BY to conduct their necessary due diligence of their own customer, and to ask BH and BY for the particulars of such due diligence.  In the event of a transfer from the customer of BH and BY to KF, it would have been open to KF to explain and rely on the fact that it had on its own part conducted due diligence on BH and BY, and that the transfer was made by a customer of BH and BY, at the request of such customer or of BH/BY, directly into KF’s bank account.

38.I agree that it is improbable and hence unlikely for the Defendants to have agreed to give an indemnity to KF, carte blanche, in respect of “all consequences” caused by a direct transfer made without KF’s prior consent.  As the 3^rd Defendant pointed out, he would not be in a position to give such a guarantee to any party that the transfer made by or through the Defendants would not be tainted with any illegality of the customer. His Counsel contended that it would be inequitable to imply such a term into the Agreement.

39.To conclude, even if it can be said in this case that it goes without saying that the Defendants should not deal with monies which are proceeds of crime, it is not necessary for the business dealings between KF and the Defendants, that deposits into KF’s bank account can only be made by BH or BY, and not by their clients without KF’s prior consent.  I reject such an implied term.

The Notice

40.To the extent that KF relies on the Notice as evidence of the Term and of the existence of the Agreement, KF has not adduced the necessary evidence in this case to prove that the Notice had been sent to and received by BH and BY, for them to be informed of and be bound by the contents.

41.It is pertinent that from the time of the filing of the Defence and Counterclaim in May 2016, the Defendants had denied their receipt of the Notice.

42.Witness statements were filed for KF by Pan Bixiang (“Pan”), and by Chan Shui Ling (“Chan”), on 13 February 2019.  Pan was the manager of KF, and Chan was described by Pan as the person who was head of KF’s main shop/business outlet.  According to Pan’s witness statement, the Notice had been faxed to BH and BY on 1 November 2014.  However, Pan confirmed in court that she had not personally done this, but had only instructed the heads of KF’s shops to send the Notice to all their customers.

43.Pan’s testimony in court was inconsistent as to the despatch of the Notice.  She first sought to justify the claim she had made in her witness statement, that the Notice had been faxed to BH and BY, by claiming that KF had records of the despatch.  When asked what these records were, Pan first stated that the heads of the business outlets would keep records of their despatch, but then changed her evidence to say that there should be records of meetings at which she had instructed her staff to despatch the Notice.  Pan had to accept however that she could not recall if she had checked or looked at any of these alleged records of despatch before she signed her witness statement.  In the end, Pan claimed that the Notice was in fact despatched by Chan to BH and BY, and that she had instructed the heads of the business outlets to send the Notice to their counterparties in the trade.

44.On the other hand, whilst Chan claimed in her testimony in court that she had faxed the Notice to BH and BY, she had never mentioned this in her witness statement, and she could not give any convincing or satisfactory explanation as to why this had not been put in her statement which was made at the same time as of Pan’s.  It is incredible that the identity of the person who had faxed the Notice could have been confused and dealt with mistakenly in the witness statements which were prepared by the lawyers and signed by Pan and Chan on the same day.  If the Notice had indeed been faxed by Chan herself, it is natural and it would be expected that Chan would deal with this and so state in her own witness statement.  It is more probable that at the time when the witness statements were prepared, KF had randomly arranged, without the availability of any solid evidence, for this fact to be stated in the witness statement of Pan, for her to deal with the essential point of the despatch of the Notice – which was the only documentary evidence at trial of the Term alleged.

45.Even if the Notice had indeed been sent to and received by BH and BY, I am not satisfied that the transfer made by Ma into the Account constituted a breach either of the terms of the Notice, or of the Term of the Agreement.

46.The Notice states that all sums transferred to KF must be transferred from BH/BY’s own bank account, and that if, without KF’s permission, KF’s account was provided to other customers, BH/BY were responsible for all consequences caused, and if KF’s account was “frozen as a result”, BH/BY would be responsible for all sums contained in “the frozen account”.  In reliance on the Notice, the SOC pleads that the effect of the Term is that BH/BY had to “provide funds equivalent to the funds frozen”, until the funds were released by the relevant authorities, and further, that if the funds in KF’s bank account should be confiscated by the relevant authorities as a result of the breach of the Term, BH and BY would indemnify KF for such loss.

47.I accept the submissions made for the Defendants, that the Account was not in fact “frozen” by any relevant authority. On the evidence, including that of the police officer who gave evidence on subpoena issued by the Defendants, the Account had all along been “suspended” by HSBC on its own accord, allegedly as a result of notifications issued by the Police.  On KF’s own pleaded case (paragraph 7 of the SOC), BH and BY were obliged by virtue of the Notice to provide funds equivalent to “the funds frozen” until the funds were released by the relevant authorities, and to indemnify KF for its loss if the funds in KF’s bank account should be “confiscated by the relevant authorities”.  Up to the date of the trial, no Restraint Order had been issued by any relevant authority, and no forfeiture action had been taken by any authority.  As explained by the Court in Interush Ltd v Commissioner of Police [2015] 4 HKLRD 706 at 716, and at paragraph 6.49 in the judgment of the Court of Appeal in that case, a “no consent letter” of the Police does not have any effect on the civil rights of parties, and is totally distinct from a Restraint Order.  The Police were apparently relying on a “no consent letter” in respect of the sum of HK$1.9 million in the Account.

48.There is no independent evidence as to why the Account was suspended by HSBC. It is pertinent that the Account was in the name of New Rich, and not KF. There is no evidence of the operations and business of New Rich. The suspension of New Rich’s Account could have been caused by reasons other than Ma’s deposit of HK$1.9 million. Further doubt has been created as to the connection between Ma’s deposit of HK$1.9 million and HSBC’s suspension of the Account by the fact that according to the 1^st Notification from the Police of 30 June 2015, the suspected proceeds of crime were stated to be the amount of HK$18,230,000 in the Account of New Rich.  Ma had at some stage been charged in connection with some telephone fraud, but for some reason, the charge against Ma has not been pursued. Nor has there been any charge against either KF, or any of the Defendants. The evidence from the Police is that the “no consent letter” would in fact lapse from 1 May 2021, although investigations against New Rich were continuing.

49.It may be that as laymen, KF and the Defendants would not have made the clear, legal distinction between a suspension of an account by the bank and the effect of a Restraint Order. However, any term implied must, in law, be capable of clear expression. The term implied must therefore be clear, and precise, and its scope has been identified in the pleadings. It cannot extend to anything wider.

50.On the available evidence, I am not satisfied, on the balance of probabilities, that HSBC’s suspension of the Account was caused by the deposit of HK$1.9 million made by Ma, the customer of BH/BY. On the limited evidence adduced at trial, it is just as probable that HSBC’s suspension of New Rich’s Account was caused by the activities in New Rich’s Account other than Ma’s deposit. Further, I am not satisfied that HSBC’s suspension of the Account constituted an event of KF’s bank account being “frozen” or “confiscated” by the authorities, to trigger any indemnity from the Defendants under the Agreement or as evidenced by the Notice.

The Admission

51.The Admission is again contended to be simply an affirmation of and hence a reflection and evidence of the Term implied in the Agreement.

52.Having found that the Account was not frozen, that it has not been established that any suspension or freezing of the Account was as a result of the deposit of HK$1.9 million made by Ma, and further, that the HK$1.9 million has not been proved to have been forfeited by any relevant authority, it does not fall within the ambit of the Admission, even if any was made by the 3^rd Defendant.

Disposition

53.It follows from my findings on the Agreement, the Term and the Admission that KF’s claims in the action are dismissed.  There is simply no basis for them to have detained and refused to repay the HK$1.9 million to the Defendants, and judgment is entered against KF on the Counterclaim for the residual sum of HK$1.9 million due, with interest.

54.Submissions on the rate and period of interest should be filed by the parties within 14 days of the handing down of this Judgment.  Submissions of each party should be confined to not more than 2 A4 pages, of font size 14 and double line spacing.

55.The order nisi is that the costs of the action including the Counterclaim are to be paid by KF to the Defendants, with certificate for counsel.

Mr Man Hon Chiu, instructed by Peter Cheung & Co, for the plaintiff (by original action) & for the defendant (by counterclaim)

Mr Benjamin Chain, instructed by Kitty So & Tong, Solicitors, for the 1^st to 3^rd Defendants (by original action) & for the 1^st and 2^nd plaintiffs (by counterclaim)