Holborn Rose Pte Ltd v. Jmj Trade Co., Ltd and Another

HCA 519/2019

[2022] HKCFI 1132

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 519 OF 2019

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Before:  Hon B Chu J in Court

Dates of Hearing:  10-12, 14 January 2022

Date of Judgment:  29 April 2022

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JUDGMENT

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INTRODUCTION

1.This case concerns an alleged email fraud perpetrated on the plaintiff (“P”). P has already obtained default judgment against the 1^st defendant (“D1”), the 1^st layer recipient of a sum of EUR 850,000, due to D1’s failure to file an acknowledgment of service. The present trial only relates to P’s claim for restitution, based on unjust enrichment against the 2^nd defendant (“D2”), being a second layer recipient of a sum of USD 100,000 (“Sum”) from D1.

P’S CASE

2.Allshores Fiduciary Services Pte Ltd (“Allshores”) is a corporate secretarial services company incorporated in Singapore providing corporate services for P’s operation in Singapore, including the handling and operation of P’s bank account (“JP Morgan Account”) maintained with JP Morgan Private Bank (Singapore Branch) (“JP Morgan”) under the instructions of Mr Manish Parwani being P’s beneficial owner (“Mr Parwani”) and Mr Sidhant Dua (“Mr Dua”) who is authorised by Mr Parwani to give instructions to Allshores relating to the JP Morgan Account.

3.The Allshores team was said to comprise Ms Lisa Lim being Allshores’ director (“Ms Lim”) and Ms Leow Hwee Lian being Allshores’ senior associate, (“Ms Leow”). According to P, the normal operation procedure of the JP Morgan Account by the Allshores team was as follows:

(1)  First, Ms Lim and Ms Leow would receive email instructions from Mr Dua with email address being “[email protected]”;

(2)  Second, Mr Parwani would confirm Mr Dua’s instructions by sending another email from email address “[email protected]”; and

(3)  Third, either Ms Lim or Ms Leow would by email send a signed written instruction to JP Morgan to make the transfer from the JP Morgan Account.

4.On 14 August 2018, at around 9:31 am, Ms Lim and Ms Leow received an email, purportedly from P, from the email address “[email protected]” (the “Fake Dua Email”) setting out the instructions to make a wire transfer of EUR850,000 from the JP Morgan Account to an account held by D1 with Hang Seng Bank Limited (“D1’s Account”). The purpose of the wire transfer was stated to be “Series A Capital Call funding pledge”.

5.On 14 August 2018, at around 10:06 am, Ms Lim and Ms Leow received another email from the fake email address of Mr Parwani, “[email protected]” (“Fake Parwani Email”, together with the Fake Dua Email, the “Fake Emails”), replying to the Fake Dua Email and confirming the instructions by stating “OK Please proceed ”.

6.Since Ms Lim and Ms Leow were not aware of the minor discrepancy in the senders’ email addresses of the Fake Emails, Ms Lim proceeded to sign a telegraphic transfer instruction on P’s behalf to transfer the sum of EUR850,000 from the JP Morgan Account to D1’s Account and the instruction was sent to JP Morgan by Ms Leow.

7.After several rounds of correspondence between JP Morgan and Allshores, on 14 August 2018, at around 5:28 pm, Ms Lim received a copy of the SWIFT payment message for the said transfer of EUR850,000 (“1^st Transfer”).

8.On 21 August 2018, Ms Lim and Ms Leow received two further emails respectively from the addresses of the Fake Emails seeking to facilitate another wire transfer of EUR935,000 from the JP Morgan Account to D1’s Account, which proceeded through and Ms Lim received a copy of the SWIFT payment message for this transfer (“2^nd Transfer”).

9.It was only upon Mr Dua’s checking of the statements of the JP Morgan Account that the perpetrated fraud was unveiled. On 28 August 2018, Ms Lim and Ms Leow were informed by Mr Dua of the two unauthorised transfers.

10.Immediately after discovery of the above, Allshores was instructed to report the same to the police. Ms Leow made a report to the Singapore Police Force in Singapore on 28 August 2018 whilst Ms Lim made a report to the Hong Kong Police Force in Hong Kong on 30 August 2018.

11.P also immediately sought to cancel the two transfers on 28 August 2018. However, JP Morgan only managed to cancel the 2^nd Transfer of EUR935,000, whilst the 1^st Transfer of EUR850,000 (“Funds”) was effected and credited to D1’s Account.

12.Subsequently, it transpires that (i) on 17 August 2018, D1 converted part of the Funds into US dollars in the sum of US$250,000, and (ii) on 18 August 2018, D1 transferred the Sum ie US$100,000 from D1’s Account to D2’s bank account held with Hang Seng Bank Limited (“D2’s Account”).

13.P issued the writ herein on 26 March 2019 against both D1 and D2 (“Writ”). Only D2 filed an acknowledgment of service indicating its intention to contest the proceedings. As said, P obtained default judgment against D1, on 24 April 2019. Its statement of claim with its pleadings against D2 only was filed on 23 April 2019 (“SOC”).

D2’S CASE

14.D2’s defence was filed on 19 June 2019 (“Defence”). It was pleaded by D2 that first, it had no previous dealings with P and had no knowledge of any alleged dealings between P and D1, and P was put to strict proof of its allegations, and second, D2 had received the Sum bona fide from D1 pursuant to the Agreement (defined below) and without notice of any interest of P therein.

15.According to D2’s pleaded case, by an agreement contained in and evidenced by a sales contract (No HHJ2180A26) (“D1 Sales Contract”) signed for and on behalf of D1 on 7 August 2018, D2 agreed to sell and D1 agreed to buy OLED monitors (“OLED Monitors”) from D2 (“Agreement ”), and it was in performance of the Agreement that D1 transferred the Sum to D2 on 18 August 2018, and further in performance of the Agreement, D2 delivered the OLED Monitors respectively on 18 August 2018 and 31 August 2018 (respectively “1^st Batch” and “2^nd Batch”). D2 denied any unjust enrichment.

16.D1 is a limited company incorporated in Hong Kong on 13 April 2018. At all material times, its sole director and shareholder was a Ms Zhou Jixa (周吉霞) (“Ms Zhou”).

17.D2 is also a limited company incorporated in Hong Kong on 12 June 2018. At all material times, its sole director and sole shareholder was a Mr Chen Chuping 陳楚平 (“Mr Chen”).

18.As revealed later in the witness statement of D2’s witness Mr Zheng Dansheng (鄭丹生) (“Mr Zheng”), it was D2’s case that the following individuals and entities had played roles in D2’s sale and delivery of the OLED Monitors to D1:-

(1)  Mr Jaydon Zhou Jian Peng 周建鵬 (“Mr Zhou”), the sales representative of D1;

(2)  Mr Liu Chao 劉超 (“Mr Liu”), the business manager of D2;

(3)  A Mainland company called Foshan Sennuo Trade Co., Ltd (佛 山森諾貿易有限公司) (“Sennuo”) of which Mr Chen was at all material times a 50% shareholder and/or its 監事 (supervisor).

19.It was D2’s case that at the material times Mr Chen was a common shareholder of Sennuo and D2.

20.It was not in dispute that the Sum transferred to D2’s Account came from and could be traced to the Funds, ie EUR850,000 transferred to D1 by P.

21.It was however pointed out on behalf of D2 that:-

(1)  after the deposit of US$100,000 on 18 August 2018 from D1, there were two more deposits US$60,040 and US$39,960 on the same day into D2’s Account;

(2)  two days later , 20 August 2018, there was a withdrawal of US$203,500, leaving D2’s Account standing at a credit balance of US$20,834.59 and HK$50,000 on that day[1]; and

(3)  as of 29 September 2018, the balance at D2’s Account was US$205,557.18 and HK$50,075.66[2].

22.Since then, there had been no change in the balance of D2’s Account other than interest paid from the bank, as the Hong Kong Police had issued a letter of no consent against D2’s Account.

23.It was further D2’s case that notwithstanding the delivery of the OLED Monitors, D1 had failed to pay D2 the balance of the purchase price under the D1 Sales Contract pursuant to the Agreement. On 22 July 2019, D2 commenced a legal action in DCCJ 3812 of 2019 against D1 for the balance of the purchase price in the sum of USD 52,628 under the D1 Sales Contract (“DCCJ Action”)[3]. P obtained interlocutory judgment against D1 on 18 November 2019 in the DCCJ Action[4].

D2’s VCF SUMMONS

24.P and D2 respectively issued a summons on 15 and 16 December 2021 for leave for their respective witness to give evidence by way of video conference facilities (“VCF”) at the trial. Although D2 agreed to P’s witness Ms Lim giving evidence in Singapore by VCF, P objected strongly to D2’s witness Mr Zheng giving evidence in Mainland China by VCF. D2’s VCF summons was supported by a 2^nd affirmation from D2’s solicitor Ching Shing Hoi filed on 16 December 2021.

25.Eventually on 16 December 2021, this Court granted leave to P for Ms Lim to give evidence by VCF.

26.As for D2’ VCF summons, although leave was granted for Mr Zheng to give evidence by VCF, this was subject to Mr Zheng being unable to arrive in Hong Kong on 2 January 2022 free of quarantine, in which case, D2 had to file an affirmation to explain the reasons thereof [5].

27.Thereafter, Mr Zheng’s 1^st (notarized) and 2^nd affirmation (un-notarized) were filed respectively on 24 and 31 December 2021 (respectively “1^st Affirmation” and “2^nd Affirmation”).

28.In his 1^st Affirmation, Mr Zheng produced a copy of his registration to enter Hong Kong on 2 January 2022 under the “ Come2HK Scheme” (來港易)[6]. However, in his 2^nd Affirmation, Mr Zheng then produced a screen shot of his Guangzhou Health QR code (粵康碼) as at 12:11;06 on 28 December 2021 which had turned red[7], and that he had to go into quarantine in a quarantine hotel for 14 days for observation and he had produced a copy of the notice from the hotel and a copy of the hotel receipt for his payment for 14 days of quarantine[8].

29.P’s solicitors had raised a number of queries upon receiving Mr Zheng’s 2^nd Affirmation and on 6 January 2022, this Court directed D2 to provide explanations to those queries. On the same day, D2’s solicitors wrote to inform the Court that D2 had no objection to Mr Zheng being cross examined on his affirmations. This was 4 days before the trial was due to commence. Rather than delaying the commencement of the trial, Mr Zheng was eventually allowed to give his evidence by VCF on the above basis.

AGREED LIST OF ISSUES

30.P and D2 had agreed to a list of issues and they were:

(1)  Whether the Funds, ie EUR 850,000 transferred from P to D1’s Account on about 15 August 2018 was procured by fraud (“Issue (1));

(2)  Whether there was a genuine sale and purchase of the relevant OLED Monitors pursuant to the D1 Sales Contract including:-

(a)  Whether the OLED Monitors were delivered to D1 in two batches on 18 August 2018 and 31 August 2018 respectively; and

(b)  Whether the transfer of the Sum, ie USD 100,000 by D1 to D2’s Account on about 18 August 2018 was part payment in performance of the Agreement. (“Issue (2)”)

(3)  Whether D2 received the Sum bona fide and without notice of any interest of P therein. (“Issue (3)”)

ISSUE (1)

31.D2 had queried whether the alleged Fake Emails were truly fraudulent and had raised various gaps/peculiarity in P’s evidence.

32.P is a limited company incorporated in the British Virgin Islands and is an investment holding company. Its corporate director is Zolick Continental Corp (“Zolick”).

33.As mentioned earlier, the Allshores team was said to comprise Ms Lim and Ms Leow. Ms Lim was a director of Allshores and on about 19 June 2018, Ms Lim became the authorised signatory of P’s Account. Ms Lim’s email address was [email protected]. Ms Leow was a senior assoicate of Allshores and her email address was [email protected].

34.Aside from Ms Lim, there were two more individuals being appointed by P as an authorised signatory of P’s Account, one of them being Mr. Dua but it would appear that even before him being an authorised signatory, he was already in a position to make payment instructions in respect of the JP Morgan Account.

35.Mr Dua also appeared to hold the position as the Chief Financial Officer of another Singaporean Company called BHIP Singapore Consulting Pte Limited (“BHIP”). He had an email account with address [email protected]. Then there was Mr Parwani whom Mr. Dua, Ms Lim and Ms Leow would defer to for confirmation of instructions from Mr Dua. Mr Parwani was pleaded to be P’s beneficial owner.

36.D2’s Counsel Mr Tasman Tam however pointed out that there was no documentary proof as to Mr Parwani’s identity vis-à-vis P or his alleged beneficial interest in P and that it was not clear on the documents disclosed by P, as to what interest or position Mr Parwani had in P and/or in BHIP, if any, although he seemed to be associated with BHIP in that he had an email account with address [email protected].

37.Mr Tam also pointed out that the origin leading to the discovery of the alleged fraud by Ms Lim was Mr Dua’s questioning of the 1^st and the 2^nd Transfers on 27 August 2018 and then on 28 August 2018, Mr Dua called Ms Lim to inform her that the transfers were not authorized by P. It was not Mr Parwani whose confirmation which was supposedly required when any activities had to be undertaken with P’s Account.

38.Further, Mr Tam submitted that as Ms Lim’s evidence was she was then instructed to make reports to the Singaporean and Hong Kong Police on 28 and 30 August 2018 respectively, her reports must have been based on hearsay evidence of what Mr Dua had said.

39.Ms Lim was the only witness who gave evidence on behalf of P. Although neither Mr Dua nor Mr Parwani gave evidence, it was Ms Lim’s evidence in her witness statement that in 2012, Allshores including her, assisted P’s beneficial owner Mr Parwani in establishing P and setting up the related nominee shareholding and directorship arrangements. It was further Ms Lim’s written evidence that Allshores controlled and utilised P’s sole nominee corporate director Zolick and that in 2012 P had also retained Allshores to provide corporate services for its operation in Singapore including handling and operation of P’s bank accounts. In her witness statement, Ms Lim had set out the respective email addresses of Mr Dua and Mr Parwani and the modus operandi for transfers out of P’s Account.

40.Ms Lim had confirmed her above written evidence during the trial. Ms Lim confirmed that Mr Parwani was at all material times the beneficial owner of P and that since 2012 she had been a signatory for P in relation to P’s Account. There was no evidence to contradict Ms Lim’s evidence that Mr Dua’s and Mr Parwani’s respective email address was at the domain of BHIP. As to their relationship with BHIP, I do not find this relevant.

41.The statement for the report to the Singapore Police was made by Ms Leow on 28 August 2018 at 22:03[9]. In this statement Ms Leow had said that on 27 August 2018, Allshores were contacted by Mr Dua who informed Allshores that there were two transactions of EUR850,000 and EUR 935.000 that he was not aware of and according to Ms Leow, Allshores then did an internal investigation and discovered that the senders of the Fake Emails were not Mr Dua and Mr Parwani. Thus, it was not all hearsay evidence from Mr Dua as Allshores did carry out its own internal investigations.

42.Mr Tam had referred to an email sent by Ms Leow to JP Morgan on 27 August 2018 at 10:25 am[10]and submitted that it was odd that all Ms Leow said in that email was that there were some issues with the beneficiary bank [the Heng Seng Bank] regarding the 2^nd Transfer and that the funds would be rejected and refunded into P’s Account and there was no mention of any fraud.

43.Ms Lim’s evidence in her witness statement was that the fraud was discovered on 28 August 2018[11]. During the trial, Ms Lim had further clarified that it was she who initially received a telephone call from Mr Dua that the Fake Emails on 14 August 2018 and 31 August 2018 were not sent by him or Mr Parwani. She had stated in her statement to the Hong Kong Police that the telephone call was at about 1600 hours on 28 August 2018[12].

44.Again, Ms Lim was not cross examined as to why Ms Leow sent her email of 27 August 2018 at 10:25 am to JP Morgan referring only to issues with the beneficiary bank and only the 2^nd Transfer. As seen in earlier emails, there had been queries raised by the Hang Seng Bank on 23 August 2018 even in relation to the 1^st Transfer.

45.In any event, I find Ms Lim a credible witness and accept her evidence that it was on 28 August 2018 that she discovered the fraud. There was no sufficient evidence that Allshores had discovered there was fraud when Ms Leow sent her email of 27 August 2018 at 10:25 am to JP Morgan.

46.Mr Tam had cross examined Ms Lim as to why P only chose to proceed against D2 out of all the 2^nd layer recipients. In Ms Lim’s witness statement, she had explained that P (through Allshores) only engaged their present solicitors Fangda Partners in November 2018 and that this was because she was told by the Hong Kong Police on 30 August 2018 that even if P had started engaging lawyers at that time, they would need to wait for the police to carry out their initial investigation and to provide the information necessary for them to commence legal proceedings.

47.Anyway, after engaging their present solicitors, on 21 December 2018, P applied for a Norwich Pharmacal Order against Hang Seng Bank, which they obtained on 21 February 2019. As a result of the order, P/Allshores obtained account opening documents, bank statements and relevant transaction details of various recipients of the funds from the 1^st Transfer including D2. Ms Lim had in her witness statement set out a table of a total of 13 entities including D1 and D2, with their respective names, account numbers. statement period and transaction details, including D2 (“Table”). It was Ms Lim’s evidence that after obtaining the bank documents, she uncovered that the Funds were deposited into D1’s bank account on 15 August 2018 and on 17 August 2018, part of the Funds were converted into USD in the sum of HSD 250,000 of which the Sum was transferred into D2’s Account on 18 August 2018 and she had also set out 7 recipients of the rest of the Funds[13] .

48.Out of those 7 2^nd layer recipients, 4 recipients’ accounts had already been closed by the time P obtained the Norwich Pharmacal Order but it appeared there were 3 of the recipients whose bank accounts were not closed (“3 Recipients”). When Ms Lim was asked why P/Allshores did not sue the others, she said this was based on legal advice and also because it was only D1’s Account and D2’s Account which were frozen by the police. When asked whether she had asked the police why the bank accounts of the 3 Recipients were not frozen, she replied that she had no direct contact with the Hong Kong police after her report and that the contact was only through her legal advisers.

49.Mr Tam pointed out that one of the 3 Recipients , namely HK Jin Shuo Import Export Trade Limited had in its bank account a balance of HKD 1,583,323.71. However, that amount was as at 31 August 2018[14].

50.Mr Tam submitted that although P was entitled to elect which recipients to sue for recovery, the fact that P only chose to proceed against D2 out of all the 2^nd level recipients did not sit comfortably with P being a victim of fraud.

51.P had through Allshores contacted solicitors by 8 November 2018[15]. Although it was not clear why P’s solicitors did not apply for injunction or Norwich Pharmacal Order immediately or why the other recipients were not sued, there was no sufficient evidence to contradict Ms Lim’s explanation that it was upon legal advice and that she was advised only D1’s Account and D2’s Account had been frozen by the Hong Kong Police who was investigating into the matter.

52.Ms Lim was copied in for all the emails relevant to the alleged email fraud, and she was the one who had signed the telegraphic instructions to JP Morgan for the transfers. She thus had personal knowledge of the matters. She was also the one who made a statement to the Hong Kong Police. Ms Lim provided the correct email addresses of Mr Dua and Mr Parwani at the domain of BHIP in her witness statement and looking at those Fake Emails, they were clearly sent from email addresses which were made up to appear to be the genuine email addresses. As mentioned earlier, I accept Ms Lim’s evidence that it was on 28 August 2018 that they discovered there was a fraud and Allshores had contacted JP Morgan to try to recover the funds. Ms Leow made a police report to the Singapore Police on 28 August 2018, and Ms Lim made a report to the Hong Kong Police on 30 August 2018. Allshores had taken immediate action on behalf of P. The statement made by Ms Lim was consistent with her evidence.

53.Having considered all the evidence, I am satisfied that the two transfers made by Ms Lim/Allshores were made as a result of person/s pretending to be Mr Dua and Mr Parwani and sending Fake Emails with instructions for the transfers. I am satified that the Funds transferred from P to D1’s Account pursuant to the 1^st Transfer were procured by fraud as pleaded by P.

ISSUE (2)

Relationship between D2 and Sennuo

54.D2’s case was that it was at material times running a legitimate business in trading electronic goods and components and metal hardware and that it entered into the Agreement with D1 for the sale of OLED Monitors for a total of USD 152,628. As set out in the D1 Sales Contract[16], D1 purchased from D2 2 types of OLED monitors, namely (i) 2,160 units of AMS60INV04 + monitors (“04+ Monitors”) at unit price of USD34.9 totalling USD 75,384 and (ii) 2,355 units of AMS60INV04 (“04 Monitors”) at unit price of USD 32.8 totalling USD 77,244.. Pursuant to clause 9 of the D1 Sales Contract, a deposit of USD 3,000 was required in advance and the OLED Monitors would be delivered in two batches and USD 10,000 was to be paid prior to taking delivery, and that any excess payment was to be used for the second deposit and the USD 3,000 would be refunded and would not be included as payment for the OLED Monitors. According to D2, D1 had duly paid the USD 3,000 deposit and the USD 100,000 part payment.

55.As set out earlier, D2’s Defence was simply that they received the Sum pursuant to the Agreement. It was only in Mr Zheng’s witness statements that it was mentioned that D2 was a subsidiary (子公司) of Sennuo.

56.It was the evidence of Mr Zheng that (i) on 17 August 2018, the 1^st Batch of 2,160 units of 04 + Monitors were shipped from the Mainland warehouse of Sennuo to D2’s warehouse in Hong Kong and then D1 went to collect them on 18 August 2018; and (ii) on 31 August 2018, the 2^nd Batch of 2,355 units of 04 Monitors were similarly shipped from the Mainland warehouse of Sennuo to D2’s warehouse in Hong Kong and then D1 went to collect them on the same day ie 31 August 2018.

57.D2 had produced two sales confirmations between Sennuo and D2 as evidence that the OLED Monitors were acquired by D2 through Sennuo (“Sennuo Sales Confirmations”).

58.D2’s above case was premised on (i) Sennuo was/is the de facto parent company of D2 and that at the material time in August 2018, Mr Chen was a common shareholder of both Sennuo and D2; (ii) the two Sennuo Sales Confirmations were created internally for cross border shipment purposes; (iii) The Sum was part payment made by D1 and the OLED Monitors had been delivered pursuant to the terms of the D1 Sales Contract.

59.I will first consider the relationship between D2 and Sennuo. D2 was incorporated on 12 June 2018[17] and commenced business on that day[18]. Its registered share capital was HKD 10,000 and the proposed number of shares to be issued was 10,000 of HKD 1 each. Its registered address was that of a company service provider in Hong Kong. As mentioned earlier, its sole founder member and sole director was Mr Chen who holds a Mainland China identity card and his address was one in Guangdong Province.

60.On the account opening form for D2’s Account with the Hang Seng Bank[19], it was stated that its D2’s principal business activity was 批發及貿易 in the category of 電子及電訊零件及器材貿易. Its expected first year revenue was stated to be HKD 10,000,000[20]. D2 was also stated to be “HK as a trading arm for company in mainland ”[21].

61.On its FATCA declaration form, D2’s principal business activity was stated to be “trading of electronic and telecommunications parts and equipment (eg alloy wire)”[22]. As “proof of wealth”, Mr Chen had provided the bank with copies of bank statements of his personal bank account held at China Minsheng Bank in Mainland China from 1 February 2018 to 31 May 2018[23].

62.Further, as “proof of business”, Mr Chen had provided the bank with (i) a sales contract dated 28 May 2018 between D2 (as seller) and Bereal Technology Co Limited of a Flat 3 1/F Block 4, 18 Tin Hau Raod, Nan Fung Industrial City, Tuen Mun (“Tuen Mun Address”) (as buyer) of alloy wires (合金線) and the loading port of shipment was stated to be Dapeng Port and the destination port of shipment was stated to be Dubai[24]; (“Bereal Sales Contract”) (ii) a purchase contract dated 28 May 2018 between Chongqing Runjin New Material Technology Co Ltd (重慶市潤金新材料科技有限公司) (as party A) and Guangzhou Yangfan Electric Wire Electric Cable Company Limited (廣州帆揚電線電纜有限公司) (“Guangzhou Fanyang”) (as party B)[25]; (iii) two Shenzhen value added tax invoices dated 21 May 2018 for taxes, stating that the purchaser was Guangzhou Fanyang and the seller was Shenzhen Four Seas You Xin Technology Company Limited/深圳市四海有信科技有限公司[26] (iv) copies of bank statements of the bank account of Guangzhou Fanyang from 1 March 2018 to 27 June 2018 held at the Chinese Agricultural Bank[27]; (v) the business licence of Guangzhou Fanyang with registered capital of RMB 1,000,000 and date of incorporation 10 February 2017 and the legal representative was stated to be Mr Chen[28]. D2’s Account with Hang Seng Bank was then opened on 6 July 2018.

63.As seen in the account opening form and supporting documents provided by Mr Chen to the Hang Seng Bank, there was no mention of Sennuo at all. In fact the information provided by Mr Chen was of the Mainland company Guangzhou Fanyang.

64.P had produced the public record of Guangzhou Fanyang obtained from the National Enterprise Credit Information Publicity System (“NECIPS”)[29]. As seen therein, Guangzhou Fanyang was incorporated on 10 February 2017 with a registered share capital of RMB 1,000,000. It was registered that on 12 July 2017 Mr Chen became a 70% shareholder but as seen in the 2017 ‘annual report’ (2017年度报告), no actual capital had been paid by Mr Chen. Mr Chen also became the legal representative of the company. The principal business activity of the company was reported to be “manufacturing of electrical machinery and materials” (電氣機械和器材製造業).

65.According to the 2018 ‘annual report’ (2018 年度报告). Mr Chen had become a 100% shareholder and the principal business activity had changed to “wholesale” (批發業)[30]. It was reported that there was no information on any foreign investment[31].

66.The date of verification of the public record obtained from NECIPS was 24 June 2019. As at that date, a series of changes between12 July 2017 to 24 June 2019 were registered which appeared to indicate that on 9 May 2019, Mr Chen had ceased to be a shareholder of Guangzhou Fanyang and ceased to be its legal representative. Further, a wide range of its business operations was registered.

67.P had also produced the public record of Sennuo obtained from NECIPS[32]. Sennuo was incorporated on 19 August 2015 with a registered capital of RMB 1,000,000 and its business operation was recorded to be domestic commerce, supply of materials (國內商業、物資供銷業). Its ‘annual reports’ indicated as follows:

(1)  The 2015 ‘annual report’ (2015年度报告)[33] indicated in the section headed “股东及出资信息”[34] that Mr Chen and a Madam Li Miu Ling were 50% shareholders , each was to make capital contribution of RMB 500,000 but none was actually paid on 24 June 2016[35];

(2)  The 2016 ‘annual report’(2016年度报告)[36] indicated no information and/or no change;

(3)  The 2017 ‘annual report’ (2017年度报告)[37] indicated in the section headed “股东及出资信息” that Mr Chen and Madam Li Miu Ling remained 50% shareholders and neither had actually paid their respective capital contribution of RMB 500,000 on 25 June 2018[38];

(4)  The 2018 ‘annual report’ (2018年度报告)[39] indicated in the section headed “股东及出资信息” that on 23 November 2018, there was a change in shareholders, in that Madam Li Miu Ling was changed to a new shareholder 苏锦池, but Mr Chen had remained a 50% shareholder, and again neither shareholder had actually paid their respective capital of RMB 500,000 on 31 December 2018;

(5)  The ‘annual report’ as at 28 November 2019[40] indicated in the section headed “股东及出资信息” that there were changes on 24 October 2019 in that Mr Chen was no longer a shareholder and that there was only a sole shareholder 张怡发. In the section headed “主要人员信息” it was recorded that (i) 张怡发 was the executive director and manager of the company and (ii) Mr Chen was the supervisor “監事”. Further 张怡发 became the legal representative in place of 苏锦池 on 24 October 2019, who took over from Madam Li Miu Ling on 23 November 2018.

68.What is clear is that at the time when D2 was incorporated in June 2018, Mr Chen was a 50% shareholder of Sennuo and a 70% shareholder of Guangzhou Fanyang[41], and Mr Chen was also at the material times the legal representative of Guangzhou Fanyang.

69.However, apart from having a common shareholder, there was no sufficient evidence that D2 was a subsidiary (子公司) of Sennuo, or that Sennuo was the company in Mainland China of which D2 was said to be the trading arm of at the time when D2’s Account was opened. In fact, firstly, the account opening form of Hang Seng Bank for D2’s Account contained no information whatsoever of Sennuo, and instead, all the supporting documents provided to the Hang Seng Bank for proof of business pointed towards that the Mainland company which Mr Chen told the bank for which the bank had sought information was Guangzhou Fanyang; secondly, as mentioned earlier, Mr Chen had provided 3 months bank statements of Guangzhou Fanyang to the bank , in addition to his personal bank statements which showed various transactions between Guangzhou Fanyang and Mr Chen between February to May 2018 and not between Sennuo and Mr Chen; thirdly, the business licence provided by Mr Chen to the bank was that of Guangzhou Fanyang, and not of Sennuo; and fourthly on the account opening form, Mr Chen stated D2’s address to be an address in Guangzhou City, Bai Yun District, Dong Ping Cun, Heng Gang Industrial Park Block B, 6^th floor (廣州巿白雲區東平村橫崗商工業園B棟六樓)[42], which was the address of D2 on the bank statements of D2’s Account[43] but this was also the registered operation business address of Guangzhou Fanyang prior to 17 December 2018 according to its registration record at NECIPS[44]. It was not the address of Sennuo in Foshan. Having considered all the relevant evidence, I find that there was no evidence that Sennuo was the parent company of D2 or D2 was the subsidiary (子公司) of Sennuo.

Mr Zheng’s role in D2 and/or Sennuo

70.The only witness who gave evidence on behalf of D2 was Mr Zheng who, as mentioned earlier gave evidence through VCF. Mr Zheng was said to be the Deputy General Manager of D2. He said during the trial he was hired by Mr Chen to work for Sennuo/D2 in May 2018 and that he took care of sales and management matters and he worked out of Mainland China. According to Mr Zheng, D2 employed about 10 staff and that most of them worked in the Mainland but one or two had to commute and that Sennuo/D2 had a warehouse in Tuen Mun. When asked whether the 10 staff were employed by Sennuo or D2, Mr Zheng’s evidence was they were employed by Sennuo in Mainland as both Sennuo and D2 had the same boss, they shared the staff and it was the same company and he had named about 9 or 10 staff. He had also said D2’s warehouse in Tuen Mun was looked after by Mr Liu. It was also Mr Zheng’s evidence that the registered office address was at the company secretary’s office address, but D2’s physical office in Hong Kong was D2’s warehouse. There were 2 writing desks in the warehouse and no fixed staff sat there – sometimes it was Mr Liu, sometimes it was him or others, and that whenever a staff went to Hong Kong, he/she would go there. According to Mr Zheng, the warehouse was at Block 4, Room 3, Nan Fung Industrial City (“Warehouse”).

71.After giving those 9 or 10 names of staff during cross-examination, suddenly during re-examination, Mr Zheng said he wanted to add 2 or 3 staff of D2 and Sennuo, namely Mr Chen, Ms Li Miao Ling (李妙玲) said to be a director and CFO or Ms Liu Wei Ling (劉偉玲) said to be an accounts officer. These 2 names which he omitted to mention in the first place in fact appeared on the VAT invoices (items (h) in Table A referred to later in this judgment).

72.There was in fact no supporting evidence of Mr Zheng’s own position or role in D2/Sennuo. Mr Chen’s personal bank statements at the China Minsheng Bank indicated there were various transactions with Mr Zheng personally, and some of not insubstantial amount during the 3 months between February and May 2018. Mr Zheng had not provided any salary statements or income tax returns to show he was employed by D2 and/or Sennuo.

73.Mr Zheng had provided two witness statements, one dated 20 December 2019 (“1^st Statement”) and one dated 11 October 2021(“2^nd Statement”). In his 1^st Statement, he had said he was a shareholder of Sennuo[45]. In his 2^nd Statement, he then corrected this and said in fact what he had meant to say in his 1^st Statement was that Mr Chen was a shareholder and supervisor of Sennuo. As seen earlier, Mr Chen had ceased to be a shareholder of Sennuo on 24 October 2019, almost 2 months before Mr Zheng made his 1^st Statement but there was no mention of this by Mr Zheng in his witness statements. Further, in his 1^st Statement, he gave his address to be an address at Nathan Road in Kowloon, which Mr Zheng said was D2’s company secretary’s address but by 12 June 2019, D2’s registered address had already been changed to an address in Sheung Wan due to change of the company secretary[46]. When asked why he gave the old address, Mr Zheng tried to explain that he made his 1^st Statement according to the time of commencement of these proceedings, which explanation did not really make sense especially when he had confirmed earlier that although Mr Chen being the director was responsible for changing the company secretary, Mr Zheng himself was aware of the change.

74.Having considered all said above, I find no sufficient evidence that Mr Zheng was employed by D2 and/or Sennuo as deputy general manager. Be that as it may, there appeared to be no real challenge by P that Mr Zheng was authorised by D2 to give evidence on its behalf.

Reasons for setting up D2

75.According to Mr Zheng, prior to the incorporation of D2, Sennuo would participate in the spring and autumn international electronic fairs in Hong Kong and would appoint some partners to exhibit Sennuo’s products at the fairs, and that Sennuo all along had dealings with companies in Africa, Middle East and South East Asia. It was the evidence of Mr Zheng that in order to expand the clientele of Sennuo, Sennuo decided to incorporate a subsidiary in Hong Kong and that D2 is the subsidiary of Sennuo. As said earlier, I find no evidence of this. In any event, as seen from the NECIPS record, the scope of Sennuo’s business operation was stated to be “domestic” and specifically in “operating and acting as representative in import/export business of different kinds of goods and technology” and thereafter, the scope of operations as at 24 October 2019 was still stated to be “domestic”[47]. Further, for any projects which required approval under the law, they could only be commenced by Sennuo upon approval having been obtained[48]. It was recorded that there was no information registered in relation to any foreign investment by the company[49], and further it would appear that up to 31 December 2018, no capital had been injected into Sennuo by the shareholders[50].

76.It was Mr Zheng’s evidence under cross examination that D2 only started business in June 2018, and when he was asked whether D2 would have entered into any sales contract before June 2018, his answer was “no”. When asked why, his response was as D2 had not yet been incorporated, how could it unless there was a wrong date on the contract.

77.Mr Zheng’s evidence was however not consistent with the account opening form which, as seen earlier, showed that D2 had provided the Bereal Sales Contract which was dated 28 May 2018 as “business proof” to the Hang Seng Bank. In fact, Bereal’s address on the Bereal Sales Contract was stated to be the Tuen Mun Address, which Mr Zheng had said was the address of the Warehouse.

78.As pointed out by Mr Chan on behalf of P, there was no documentary evidence of D2 having owned or rented the Warehouse from Bereal or from any one. There was no evidence as to Bereal’s connection with D2, save that it was stated to be the buyer in the Bereal Sales Contract with a company which was not yet incorporated. There was in any event no sufficient evidence to support the reasons given by Mr Zheng for setting up D2.

Circumstances of how D1 and D2 entered into the alleged Agreement and the D1 Sales Contract

79.D1 was incorporated on 13 April 2018[51] which was the date of its commencement of business[52]. On its incorporation form presented to the Companies Registry on 9 April 2018[53], its registered paid up capital was HKD 10,000 and total number of shares proposed to be issued was 10,000 of HKD 1 each. Its registered address was the address of a company secretarial services provider in Hong Kong. As mentioned, D1’s sole founder member and director was Ms Zhou who held a Mainland China Identity Card and her address was one in Ningxia in Mainland China.

80.On the account opening form for D1’s Account with the Hang Seng Bank[54], it was stated that D1’s principal business activity was 批發及貿易 in the category of 衣服及配飾貿易[55]. Its expected first year revenue was stated to be HKD 5,000,000[56]. In the FATCA Declaration, its business was stated to be “trading of clothing and accessories, such as shirt and dress”[57].

81.D1 had provided to the bank supporting documents of its business activities (i) a purchase agreement and an accompanying invoice for purchase of garments, both dated 16 April 2018, between D1 (as buyer) and a Sentao Trade Limited 森濤貿易有限公司 (as seller)[58]; and (ii) a purchase agreement and an invoice for garments, both dated 26 April 2018, between D1 (as seller) and a Qijun Trade Co Limited 齊駿貿易有限公司 (as buyer) (as buyer) and D1( as seller) for goods to be loaded in Hong Kong and shipped to Tianjin for delivery on 26 April 2018[59]. D1’s Account was opened on 2 May 2018.

82.Thus, on the face of its incorporation documents and account opening form and documents, D1’s business was in the garment trade, which had nothing to do with D2’s business.

83.Mr Zheng’s evidence in his 1^st Statement was that in early August 2018, the sales manager of D2, namely Mr Liu, met a sales representative of D1, namely Mr Zhou, and that D1 expressed interest in trading with D2. Discussions then followed on many occasions during which Mr Liu and Mr Zhou exchanged name cards (copies of which were produced by Mr Zheng).

84.According to Mr Zheng, D2 carried out investigation on the business background of D1 and found out that D1 was also a company incorporated in Hong Kong. After many discussions, Mr Zhou expressed that D1 was interested to purchase from D2 OLED monitors. On 7 August 2018 Mr Zhou brought his assistant to Sennuo to inspect the testing of the samples, and that upon completion of the testing, D1 and D2 entered into the Agreement and signed the D1 Sales Contract on 7 August 2018 for the OLED Monitors. After signing the D1 Sales Contract, Mr Liu and Mr Zhou started to communicate in relation to how the OLED Monitors were to be delivered to D1, and that Mr Zhou required the monitors to be delivered in Hong Kong, and Mr Liu then indicated that the monitors could be delivered directly from Sennuo to D1 but Mr Zhou said as this would involve complicated custom clearance procedures, Mr Zhou required D2 to help to deal with custom clearance procedures. Mr Liu then indicated that D2 could arrange for the OLED Monitors to be delivered to the Warehouse, and then D1 could take delivery directly from the Warehouse. Mr Zheng explained this was why in the D1 Sales Contract it was stated that the buyer would take delivery from the Warehouse.

85.Thus, according to Mr Zheng’s above written evidence, the Agreement and the D1 Sales Contract between D1 and D2 were only reached and the terms were finalized only on 7 August 2018 in Mainland China, including the quantity and the unit price, after Mr Zhou had seen the sample testing of the OLED Monitors at Sennuo. However, as mentioned earlier, Mr Zheng had also produced the Sennuo Sales Confirmations, namely (i) sales confirmation dated 6 August 2018 between Sennuo (as seller) and D2 (as purchaser) of the 1^st Batch (ie 2,160 of 04 Monitors)[60], which set out exactly the terms of the Agreement and/or the D1 Sales Contract as to quantity, total price and unit price of the 04+ Monitors and (ii) sales confirmation dated 21 August 2018 between Sennuo (as seller) and D2 (as purchaser) of the 2^nd Batch (ie 2,355 of 04 Monitors)[61]. Mr Zheng in his 2^nd Statement had said the Sennuo Sales Confirmations were created purely for custom clearance purposes and that they were “not a real sale” between Sennuo and D2[62].

86.When asked about the date of the first of the Sennuo Sales Confirmations, Mr Zheng’s answer at the trial appeared to be that it was in fact signed in the afternoon of 7 August 2018, but deliberately dated one day early to show that the 1^st Batch had been acquired by D2, before D2 could sell the 1^st Batch to D1. However, if this was the case, then the 2^nd Sennuo Sales Confirmation for the 2^nd Batch should also be dated 6 August 2018, as both batches were sold to D1 on the same day, ie 7 August 2018.

87.In any event, Mr Zheng’s above evidence was not in his 2^nd Statement. All Mr Zheng had said in his 2^nd Statement was that in order to arrange for the custom clearance, the sale was stated to be from Sennuo to D2, but there was no actual sale as D2 was Sennuo’s subsidiary.

88.Anyway, on D2’s own case, the Sennuo Sales Confirmations which D2 submitted to the Mainland customs were not genuine arms length transactions between Sennuo and D2.

89.Mr Zheng had also produced a purchase contract dated 3 August 2018 between Sennuo (as buyer) and Dongguan City Zhong Meng Rui Communications and Technology Company Limited (東莞市衆盟銳通訊科技有限公司) (as seller) for 2,160 units of 04 Monitors at a unit price of RMB 256, totalling RMB 552,960[63] (“Dongguan Purchase Contract”).

90.Mr Zheng had confirmed under cross examination that the 2,160 units of 04 Monitors Dongguan Purchase Contract were the ones sold to D1 under the D1 Sales Contract. However, 2,160 units sold was of 04+ Monitors and further, at that time, the exact quantity of 04 Monitors or 04+ Monitors had not yet been confirmed by D1. When cross-examined on this, Mr Zheng then said there were other Hong Kong and overseas companies which also wanted to buy from D2.

91.It did not seem inherently probable that all the other companies would have wanted to buy the exact quantity of 04 Monitors or 04+ Monitors as D1 all at about the same time. I do not find Mr Zheng’s evidence credible.

92.When asked whether it was he who was involved in the negotiations of the Dongguan Purchase Contract, Mr Zheng had at first it was Mr Liu and himself, and also a Mr Li Jian Chang, and then later he changed his evidence again and said it was a “Mr Wei”.

93.It was in fact stated on the Dongguan Purchase Contract that “Mr Wei” was the contact person, and it would thus appear that was the reason Mr Zheng changed his evidence.

94.Anyway, as pointed out by Mr Chan, the total price in the Dongguan Purchase Contract was RMB 552,960, which would come to about USD 81,000 at the then USD to RMB exchange rate. This would mean that the price at which D2 sold to D1 for the exact quantity of 04 Monitors or 04+ Monitors under the Agreement/D1 Sales Contract was less than what D2/Sennuo had acquired those monitors, not counting the transportation costs or custom declaration costs. This in my view did not make any commercial sense and I do not find this credible. All in all, Mr Zheng’s evidence of how D1 and D2 entered into the Agreement and the D1 Sales Contract was not convincing.

D1’s payment under the alleged Agreement and the D1 Sales Contract

95.As for the payment by D1 under the D1 Sales Contract, it was Mr Zheng’s evidence that the USD 3,000 deposit was paid in cash when D1 confirmed the order and USD 100,000 was paid on the date of D1 taking delivery of the 1^st Batch, and that USD 3,000 was returned to D1 at the time of the payment of USD 100,000. Mr Zheng had produced a receipt dated 7 August 2018 allegedly issued by D2 to D1 for the USD 3,000 (“Gathering Receipt”)[64]. During the trial, Mr Zheng’s evidence was that the USD 3,000 was paid in cash to Mr Liu who then handed it over to the finance officer 林笑卿. When pointed out that he did not mention this staff when asked to name the staff at D2 and/or Sennuo, Mr Zheng then tried to explain that there was some turnover of staff. Thereafter, on re-examination, Mr Zheng then suddenly said he wanted to clarify that the Gathering Receipt was signed by Ms Li Miao Ling. Again, it would appear that Mr Zheng changed his evidence as it was Ms Li Miao Ling who signed on the Gathering Receipt.

96.As regards the payment of USD 100,000, it seems rather odd that the payment procedure the parties allegedly agreed was for D1 to first pay a deposit of USD 3,000 and then instead of D1 simply deducting the USD 3,000 deposit from HKD 100,000, the deposit of USD 3,000 was to be refunded to D1 by D2 and not to be included in the payment for the OLED Monitors. Again this did not seem to make any commercial sense.

97.As for the payment of USD 100,000, according to D2’s case, this was to be paid prior to D1 taking delivery of the 1^st Batch. According to the terms of the D1 Sales Contract, any extra was to be used for the deposit for the 2^nd Batch. As the price for the 1^st Batch was only USD 75,384, this would mean there was extra payment of HKD 24,616 used for the deposit of the 2^nd Batch. There was no reasonable explanation as to why only USD 3,000 was required for the deposit of the 1^st Batch and then USD 24,616 was required for the deposit of the 2^nd Batch and there was also no provision that the balance of USD 52,628 to be payable prior to D1 taking delivery of the 2^nd Batch. All this again did not make commercial sense.

98.In any event, there was no proper receipt issued by D2 to D1 in respect of the USD 100,000 payment like the Gathering Receipt. There was no reasonable explanation why there would be the Gathering Receipt for a much smaller amount of USD 3,000 and yet none for the USD 100,000. Also, there was no receipt from D1 to D2 upon being refunded the said USD 3,000.

99.D2 had produced an invoice dated 7 August 2018 issued by D2 to D1 for the sum of USD 75,384 for the 1^st Batch of the 04+ Monitors (“Invoice”) signed by Mr Liu on behalf of D2 (seller) and Mr Zhou on behalf of D1 (buyer)[65]. It was stated thereon “10 days payment”, which meant it had to be paid on or before 17 August 2018. This was not linked to the delivery of the 1^st Batch, stated to be before 20 August 2019 on the D1 Sales Contract, nor as stated on the D1 Sales Contract, payment of a deposit of USD 100,000 before delivery. The Invoice did not seem to be consistent with the terms in the D1 Sales Contract.

100.As pointed out by Mr Chan, the Invoice looked almost identical to an invoice dated 18 August 2015 allegedly issued to D2 by another company Yueersen Trading Limited (悅爾森貿易有限公司) of a Hong Kong address (“Yueersen”)[66]. D2 had produced a purchase contract dated 7 August 2018 between D2 (as buyer) and Yueersen (as seller) of 102,551 units of “五金配件” at USD 1.96 per unit, totaling USD 201,000 and the goods were to be delivered on 15 August 2018 (“Yueersen Purchase Contract”), and a sales contract dated 13 August 2018 between D2 (as seller) and Beimingji (Hong Kong) Co Limited (貝銘基 (香港) 有限公司) (as buyer) (“Beimengji”) of 102,750 units of “五金配件” at USD 2.00 per unit, totaling USD 205,500 (“Beimengji Sales Contract”)[67].

101.The company chops of both D2 and Yueersen looked similar on the Yueersen Purchase Contract save for the names of the companies, and that the company signature chops of both D2 and Beimengji looked similar on the Beimengji Sales Contract save for the name of the companies. There was no specification of the “五金配件” nor any specified brand or specification, and “五金配件” did not appear to be electronic products, even though both the Yueersen Purchase Contract and the Beimengji Sales Contract bore identical words in English: “Both parties consultation, party a shall order specified brand electronic product related matters agreed as follow”. There was no deposit required, nor any location of delivery specified in Hong Kong.

102.The Beimengji Sales Contract looked rather different from the D1 Sales Contract. It would thus appear that D2 would use different format of sales contract for different buyers even when delivery of the goods was both said to be in Hong Kong and there was no requirement of payment of a deposit prior to taking delivery.

103.To summarise, the documents produced by D2 raised further queries on their genuineness and cast doubts also on the genuineness of the Agreement and the D1 Sales Contract and the Invoice rather than support D2’s case. I find no sufficient evidence that the Sum transferred from D1’s Account to D2’s Account on 18 August 2018 was payment under the D1 Sales Contract pursuant to the Agreement.

Delivery of the OLED Monitors under the D1 Sales Contract

104.As for delivery, as said, the OLED Monitors were to be delivered in 2 batches, the 1^st Batch must be delivered before 20 August 2018 and the 2^nd Batch must be delivered before 1 September 2018 (Warehouse self-lifting).

105.D2 relied on the following as evidence of the alleged delivery of the OLED Monitors to D1:

(1)  receipt confirmations dated 18 August and 31 August 2018 purportedly signed by both D1 and D2 (collectively “D1 Receipt Confirmations”)[68];

(2)  screenshots of wechat records purportedly between Mr Liu and Mr Zhou (“Screenshots”)[69];

106.According to Mr Zheng, Mr Zhou had resigned from D1 in December 2018 and that his telephone number was no longer valid thereafter. Further Mr Liu had resigned from D2/Sennuo during the latter part of 2019 and Mr Zheng’s evidence was he last had contact with Mr Liu in about May/June 2019, and thereafter, he was not able to contact Mr Liu as his phone number was not in service any more.

107.The originals of the D1 Sales Contract, the Invoice and the D1 Receipt Confirmations were only produced by Mr Zheng on the 3^rd day of the trial, ie 12 January 2022[70], notwithstanding P had been pressing for inspection since about June 2019. Mr Zheng said he was only found the original documents amongst D2’s documents in the Mainland in about mid December 2021. It was further his explanation that those original documents were amongst many documents which were moved to the Mainland office of Sennuo/D2 at about the end of 2018 after D2 stopped renting premises in Hong Kong.

108.Anyway, Mr Zheng’s explanation was that although he had found the original documents, he decided to wait until he would come to Hong Kong in early January 2022 for the trial and to personally bring the original documents with him, but because later he was not able to come due to compulsory quarantine, he then instructed his colleague to send the original documents by courier by SF Express to D2’s solicitors.

109.However, as mentioned earlier, there was no sufficient evidence that D2 had ever rented any premises in Hong Kong or when such lease ended. Further, it was Mr Zheng’s evidence that the D1 Sales Contract was signed in Sennuo’s office in the Mainland on 7 August 2018, and the Invoice issued on the same day, ie 7 August 2018. One would have thought the originals of those signed by D2 would have been kept in the Mainland office all along.

110.I do not find Mr Zheng to be a credible or reliable witness. Firstly I do not find his explanation as to why he could not find the original earlier credible and secondly his explanation as why he could not have sent them by courier to D2’s solicitors or at least told his solicitors as soon as they were located in mid December 2021 was not credible either, when he must be aware that P had been asking to inspect the originals for some time. In any event, all those 4 “original” documents appeared to be simply printouts from the computer, and the only difference between them and the copies was the colour of the signature chops. In fact, the signature chops for both D1 and D2 on those allegedly “original” documents looked almost identical in colour, size of the chop and size of the characters and fonts, save for the names of the two companies D1 and D2.

111.As for the D1 Receipt Confirmations, Mr Zheng himself was not present at the Warehouse when D1 allegedly took delivery of the OLED Monitors. There was no sufficient evidence that they were indeed signed by Mr Zhou on behalf of D1.

112.As for the Screenshots, D2 first disclosed these only in D2’s Supplemental List of Documents filed on 2 February 2021[71]. They were not disclosed in D2’s 1^st List of Documents filed on 26 August 2019[72].

113.Amongst the Screenshots, there was a screenshot of what was alleged to be the wechat communication between Mr Zhao of D1 and Mr Liu of D2 during which Mr Zhou asked Mr Liu to check whether D2 had received the USD 100,000 and Mr Zhou had acknowledged receipt (“Screenshot Acknowledgement”)[73]. On the copy first produced by D2 to P, there was no date on that document. Then , subsequently, Mr Zheng had produced the Screenshots which included the Screenshot Acknowledgment, but these all bore handwritten dates[74].

114.During cross examination, Mr Zheng’s explanation was that the Screenshots were sent to him by Mr Liu and there were no dates, and that it was only in around April 2019 he wrote the dates onto the printout of Screenshots and this was around the time when he had received the court documents in this action and that was when he started to collect evidence for these proceedings.

115.It was pointed out to Mr Zheng in fact he did not have the Screenshots in April 2019 as they were not disclosed in D2’s 1^st List of Documents of 26 August 2019. Mr Zheng then said he had given all the documents to his former solicitors who failed to file them. When this Court asked him to clarify whether he had any evidence that the dates were written by him in April 2022, he then said he had sent the Screenshots to his former solicitors by email and that the dates should have been thereon but he confirmed that he did not write the dates in the presence of his former solicitors, nor had he produced any confirmation from his former solicitors in support of what he said.

116.In short, there was no evidence produced by Mr Zheng as to when the Screenshots were first received by Mr Zheng allegedly from Mr Liu, or when Mr Zheng first sent the Screenshots to his former solicitors and/or when the dates were written thereon by Mr Zheng.

117.This Court had asked Mr Zheng why he was not able to produce his chat history with Mr Liu which would show the date of his receipt of the Screenshots from Mr Liu. Mr Zheng explained that as he had changed to a new mobile phone, all the chat history had disappeared and would not appear on his new phone. However, during re-examination, Mr Zheng had said that upon receiving the Screenshots from Mr Liu, he would save them in his “photo album” in his mobile phone and he confirmed that when he transferred screenshots in his “photo album” to his new mobile phone, the date of the transfer would be shown in his new phone. There was no reason as to why Mr Zheng could not at least produce the date of transfer of his “photo album” to his new mobile phone in support of his evidence. As Mr Zheng had confirmed that he could have transferred the chat history record with Mr Liu to his new mobile phone or to save it on his computer, and in light of his evidence during re-examination that Mr Liu would only send him screen shots of important messages between Mr Liu and Mr Zhou, there was no reasonable explanation by Mr Zheng as to why he had not saved the chat history between him and Mr Liu.

118.It was Mr Zheng’s evidence that he was present together with Mr Liu at the time of the loading of the 1^st Batch of the OLED Monitors onto the truck at Man Kam To in Shenzhen on 17 August 2018 and that next day Mr Liu then went to the Warehouse to wait for the arrival of the 1^st Batch, and that it was Mr Liu who took the photographs of the loading of the 1^st Batch in those Screenshots.

119.It was not quite clear as to why Mr Zheng needed to ask Mr Liu to send him the photographs of the loading scene if Mr Zheng was present at the loading of the 1^st Batch. When Mr Zheng was cross examined over this, he had said the Screenshots sent to him were of the wechat messages between Mr Liu and Mr Zhou and that Mr Zheng had requested Mr Liu to send to him, but there appeared to be no reasonable explanation as to why Mr Liu needed to send Mr Zhou photographs of the purported loading scene of the 1^st Batch. As Mr Liu had gone to Hong Kong to wait for the arrival of the 1^st Batch, the next day, one would have thought it would make more sense to send photographs of the OLED Monitors to Mr Zhou upon their arrival in the Warehouse when they would be ready for delivery/collection.

120.In any event, the photographs were illegible. There appeared to be 8 of them, 5 allegedly sent at 4:23 pm and 3 more at 4:27 pm, but the response from the recipient at 4:26 pm only indicated receipt. It was not clear what the photographs were trying to show since there were no photographs of the contents of the carton box which were allegedly loaded. In any event, apart from the name of Mr Zhou of D1 appearing in each of those 5 Screenshots, there was no sufficient evidence as to the identity of the sender and the identity of the recipient of those wechat messages. Also, it was not quite clear as to why there were only photographs of the loading of the 1^st Batch, and none of the loading of the 2^nd Batch. The Screenshot Acknowledgment at 12:00 afternoon on allegedly 18 August 2018 showed that there were two parts, and the 2^nd part was allegedly the bank transfer confirmation but it was illegible. The exchanges were brief and I find no sufficient evidence that the payment for goods (貨款) in the Screenshot Acknowledgment referred to the amount of USD 100,000.

121.As I have said I do not find Mr Zheng a credible or reliable witness. I find no sufficient evidence that he had received the Screenshots from Mr Liu on the dates written by him or that the Screenshots were in fact of wechat messages between Mr Liu and Mr Zhou.

122.Mr Tam had attached a table of documentary evidence produced by D2 on payment, shipment and delivery of the OLED Monitors (“Table A”) and relied on by D2 in support of its case.

123.The Sennuo Sales Confirmations showed that the contract number “2018A0801” was for 2,160 units of 04 + Monitors at a total price of USD 75,384 and contract number “2018A0802” was for 2,355 of 04 Monitors at a total price of USD 77,244[75]. So far as the customs declarations (item (d) in Table A)[76], the date of shipment in the one dated 17 August 2018 was left blank, and for the one dated 31 August 2018, it was only handwritten “2018.08.31”. More importantly, the “shipper” (境內發貨人) was Sennuo and the “recipient” (境外發貨人) was stated to be D2.

124.For the customs clearance notices (item (e) in Table A)[77], only Sennuo’s name appeared as 收發貨人. For the packing lists (item (f) in Table A)[78], only D2’s name and Sennuo’s name appeared. As for the VAT invoices (items (h) in Table A)[79], there were 6 invoices dated 27 August 2018 for a total of 2,160 units of 04 Monitors showing that Sennuo was the seller and D2 was the buyer and the contract reference number was “2018A0801”, and there were 6 invoices dated 30 August 2018 for a total of 2,355 units of 04 Monitors showing that Sennuo was the seller and D2 was the buyer and the contract reference number was “ 2018A0802”.

125.In short, all the above documents in Table A only showed transactions between Sennuo and D2 which according to D2 were not at arms length and created internally, and not between D2 and D1[80].

126.Having considered all the above, I do not find there was sufficient evidence that D2 had delivered the OLED Monitors to D1 or D1 had taken delivery of the OLED Monitors under the D1 Sales Contract pursuant to the Agreement. Further, there was also no evidence that D2 had taken any enforcement action against D1 under the DCCJ Action.

D2’s Account

127.It was pointed out on behalf of D2 that after the deposit of the Sum into D2’s Account on 18 August 2018 from D1, there were two more deposits US$60,040 and US$39,960 on the same day into D2’s Account, and although on 20 August 2018, there was a withdrawal of USD 203,500, there was still a credit balance of USD 20,834.59 and HKD 50,000 in D2’s Account that day. Further, there were various sums being credited into D2’s Account thereafter, and that on 4 September 2018 there was a sum of USD 205,472.20 being deposited and it appeared thereafter, there were no withdrawals save bank charges. Although there was no information as to the when the Hong Kong Police issued a letter of “no consent”, the bank statements showed that it would most likely be after 4 September 2018.

128.Although there were two further sums paid into D2’s Account the same day after the Sum was deposited, ie a total deposits of USD 200,000 on 18 August 2018, a Saturday, USD 203,500 was withdrawn on Monday 20 August 2018. In fact, D2’s Account was quite active in the month of August 2018 with various USD deposits and withdrawals of not insubstantial amounts, whereas D2 had only produced only the Yueerson Purchase Contract and the Beimengji Sales Contract which were round about the time of the D1 Sales Contract. Whether there had been further deposits into D2’s Account or transactions would not lend support to D2’s case that the Sum was paid under the Agreement/D1 Sales Contract.

Conclusion on Issue (2)

129.In light of all said above, I find the alleged sale and purchase of the OLED Monitors pursuant to the Agreement and the D1 Sales Contract was not a genuine transaction. I find no sufficient evidence of delivery of the OLED Monitors to D1 or that the Sum was part payment for the OLED Monitors. P has satisfied this Court that D2 was enriched and the Sum received by D2 was at P’s expenses and such enrichment was unjust.

ISSUE (3)

130.In light of my above finding on Issue (2), I am not satisfied that D2 had received the Sum of USD 100,000 bone fide without notice and for valuable consideration. In the circumstances, it is not necessary for me to deal with Mr Tam’s further submissions on whether such a defence applies to a restitution chaim based on unjust enrichment.

MR ZHENG’S CREDIBILITY

131.I have found earlier that I do not find Mr Zheng a credible or reliable witness. My finding can further be supported by the fact that his evidence as to why he was not able to come to Hong Kong to attend the trial was full of inconsistencies.

132.Mr Zheng signed his 1^st Affirmation in Guangzhou where he was said to reside but he claimed to be subject to compulsory quarantine in Shenzhen. His explanation was that he went to Shenzhen on Christmas eve to attend a Christmas party with his friends but he then said none of his friends were subject to compulsory quarantine.

133.Mr Zheng confirmed that he was tested for Covid on 25 December 2021, the results of which were released that evening, and his next test was on 27. December 2021. Yet, the bottom left of his 粤康码 revealed a date of 26 December 2021.

134.Anyway, it was Mr Zheng’s evidence that his 粤康码turned red on Christmas Day but the QR code on the 粤康码 produced by him revealed another person’s name. Mr Zheng then tried to explain that this was a technical error on the part of the authorities, and that he had informed D2’s solicitors about the same on around 28 or 29 December 2021. However, he never mentioned this or the purported technical error in his 2^nd Affirmation.

135.Mr Zheng claimed that he had paid the quarantine hotel RMB1,500 upon checking in on 25 December 2021 and the balance on 28 December 2021 but he was only able to produce one receipt dated 28 December 2021 for RMB 5,460[81]. When cross-examined, he claimed that the hotel would only issue the “fapiao” or receipt upon the total amount being paid. There was no sufficient evidence to support what he said. As pointed out by Mr Chan, one should get a receipt upon payment of RMB 1,500.

136.All in all, as said, Mr Zheng’s evidence was confusing and simply not credible. He is not a reliable witness.

CONCLUSION AND ORDER

137.Having regard to all said above, I reject and dismiss D2’s defence. I grant final judgment to P against D2 for USD 100,000 plus interests at judgment rate until payment.

138.As for costs, I order D2 to pay P’s costs of and incidental to this action, including D2’s VCF Summons, to be taxed if not agreed on party and party basis.

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Mr Howard Chan (solicitor advocate) of Fangda Partners, for the Plaintiff

Mr Tasman Tam, instructed by Chin & Associates, for the 2^nd Defendant