Tai Tony Chak Leung v. Ke Junxiang
Read the full judgment text of HCA 2651/2018 on BabelCite. This High Court CFI judgment was delivered on 11 November 2022.
1. In the present trial, the Plaintiff, Mr Tai Tony Chak Leung’s (“Mr Tai”) case is a simple and straightforward one.
Cited by 1 case · Cites 7 cases
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HCA 2651/2018 [2022] HKCFI 3420 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2651 OF 2018 ________________________ BETWEEN
________________________ Before: Mr Recorder William Wong SC in Court Dates of Hearing: 24 October 2022, 25 October 2022, 27 October 2022 Date of Judgment: 11 November 2022 ________________________ J U D G M E N T ________________________ INTRODUCTION 1.In the present trial, the Plaintiff, Mr Tai Tony Chak Leung’s (“Mr Tai”) case is a simple and straightforward one. 2.On 19 April 2018, he entered into an investment agreement with the Defendant, Mr. Ke Junxiang (“Mr Ke”) as evidenced by, amongst others, a written declaration and undertaking (the “D&U”) under which Mr Tai invested HK$30 million into the initial public offering (“IPO”) of one Ping An Healthcare and Technology Company Limited (“Ping An Good Doctor”) for a period of 30 days. Mr Tai was promised a return of HK13,000,000 by Mr Ke. 3.Mr Ke further gave Mr Tai a post-dated cheque in the sum of HK$43,000,000 which was subsequently dishonoured. Mr Ke had made some partial payments to Mr Tai leaving an outstanding balance of HK$33,880,074. 4.Mr Ke’s defence is that although the D&U states the HK$30 million as an investment, in fact, to the knowledge of both Mr Tai and himself, the D&U is a sham document and the HK$30 million is in fact a loan advanced by Mr Tai to Mr Ke at a monthly interest of about 42% and as such the outstanding loan is unenforceable pursuant to the provisions of the Money Lenders Ordinance, Cap 163 (the “MLO”). 5.Hence, this case turns on the Court’s finding on an issue of fact, namely, whether the parties intended the advance of Mr Tai’s HK$30 million to Mr Ke to be an investment with a promised or guaranteed minimum profit of HK$13,000,000 or as a loan with HK$13,000,000 as interest. This will turn on the credibility of each parties’ case including what was discussed and agreed by the parties on 19 April 2018 at the Health Club of Island Shangri-La Hotel. THE PLAINTIFF’S CASE 6.Mr Tai’s case as set out in detail in his written closing submissions is that since late 2015, he has been visiting the Health Club on the 8th floor of Island Shangri-La regularly after work to do physical exercise. From time to time, he ran into Mr Ke at the Health Club and they exchanged greetings with each other. They initiated conversations and exchanged WeChat contacts since around January 2016. Once or twice a week at the men’s locker room of the Health Club, they would briefly chat about the current news, economy, politics of Hong Kong and China. Gradually, they became acquaintances. 7.In their exchange of conversations, Mr Ke told Mr Tai that he was the Chairman, CEO and majority shareholder of a Hong Kong listed company named CIL Holdings Limited (stock code 479). He also held himself out as a valued customer/VIP of JP Morgan Chase Bank (“JP Morgan”). 8.In the year of 2017, Mr Tai was the Vice-President of the Chinese Manufacturers’ Association promoting the development of the Hong Kong industrial community. Mr Tai invited Mr Ke to procure his listed company, namely, CIL Holdings, to become a member of the Association. Mr Ke promised almost instantly for CIL Holdings to join as a member and further introduced two more of his affiliated companies, namely AVT International Limited and Hong Wei (Asia) Holdings Company Limited to join as a member. 9.In early 2018, Dr Lo Tai Chin, Mr Tai’s wife (“Mrs Tai”) was in the course of forming the 39th term board of directors of Yan Oi Tong, a charitable organisation in Hong Kong. Mr Ke indicated that he wished for his younger son, Jacky Or (柯兆堅), to join the new board of Yan Oi Tong as a vice-chairperson. With Mrs Tai’s help, Jacky Or became a vice-chairperson of Yan Oi Tong through donating a sum of HK$2 million. 10.In the process, Mr Tai and Mr Ke grew closer. At that time, Mr Tai had high regard for Mr Ke, whom he considered to be a wealthy, resourceful, respectful and generous businessman. 11.In or around early or mid-April 2018, at the men’s locker room of the Health Club, Mr Ke introduced to Mr Tai an investment project in relation to the IPO of Ping An Good Doctor. 12.Mr Ke represented to Mr Tai that JP Morgan was the Joint Sponsor, Global Coordinator and Joint Bookrunner of the anticipated IPO, and was allocated a quota of US$50 million worth of shares to be purchased by three anchor investors including Mr Ke. Mr Ke further told Mr Tai that the investment was likely to result in a high return of 60% or more. 13.On 17 April 2018, Mr Ke sent to Mr Tai several pieces of news regarding the anticipated IPO of Ping An Good Doctor. Mr Ke also forwarded to Mr Tai two WeChat messages from Bailey Xu of JP Morgan to Mr Ke, which suggested that, inter alia:
14.According to the information forwarded by Mr Ke to Mr Tai at the time, Mr Ke was one of the anchor investors for the anticipated IPO of Ping An Good Doctor. Wang Tao (王濤), the then Chairman and CEO of Ping An Good Doctor, could allocate to Mr Ke up to US$20 million worth of shares in Ping An Good Doctor. The IPO only had a small quota for public offering (6.5%) and hence it was unlikely for a public investor to be offered a substantial amount of shares. 15.At this point in time, Mr Ke was persuading Mr Tai to invest in this IPO of Ping An Good Doctor. During cross-examination, Mr Tai explained his understanding at the time was that Mr Ke wanted to persuade Mr Tai to join the investment because, on one hand, Mr Ke wanted Mr Tai to have a share of the benefit and, on the other hand, Mr Ke would like to pool-up funds so as to maximize the investment by taking up the entire US$20 million quota. 16.In the morning of 19 April 2018, Mr Ke sent to Mr Tai via WeChat further information about Ping An Good Doctor indicating that 「預計利潤可高達60%或更高……利潤的中30%作分成之用……也就是說，最少1000萬可連本利收到不少於1420萬（收到股票後三天內沽清為限）」. 17.In the afternoon of 19 April 2018, Mr Tai asked Mr Ke via WeChat for the stock code of Ping An Good Doctor, trying to get a better understanding of the anticipated IPO. Mr Tai and Mr Ke also discussed via WeChat about the possibility of meeting at the Health Club that evening. 18.Up to this point in time (i.e. before the 19 April Meeting), there is no dispute that the discussion between Mr Tai and Mr Ke was in respect of a potential investment; neither party had said anything about a loan. 19.At about 9:10 pm on 19 April 2018, Mr Tai and Mr Ke met inside the men’s changing room at the Health Club to further discuss the potential investment in Ping An Good Doctor (i.e. the 19 April Meeting). At the meeting:
20.In the course of such discussions, at 9:21pm that night, Mr Ke further forwarded to Mr Tai via WeChat a long message in relation to Ping An Good Doctor, which mentioned, amongst others, 7 cornerstone investors for the anticipated IPO and the big demand for the shares among the public investors. To Mr Tai, the content of the message was consistent with what Mr Ke had been telling him about the great potential of Ping An Good Doctor, and Mr Tai believed in what Mr Ke told him. 21.Mr Tai did not confirm immediately at the 19 April Meeting that he would invest in the anticipated IPO. He did, however, give Mr Ke a promising indicative reply saying that he was interested but wanted to consider the matter over the night. 22.On the morning of 20 April 2018, at around 9:19am, Mr Tai informed Mr Ke via WeChat that Mr Tai was prepared to transfer RMB 24 million (equivalent to HK$30 million) into Mr Ke’s personal account in Shenzhen. Mr Tai also asked Mr Ke to call him. 23.Mr Ke then called Mr Tai over the telephone that morning. During their conversation, Mr Tai told Mr Ke that Mrs Tai asked for a signed document from Mr Ke to record the investment agreement. 24.Mr Ke agreed and, at 10:39am the same morning, sent to Mr Tai via WeChat a draft written declaration and undertaking in Chinese confirming the investment with him and his instruction that Mr Tai should transfer the investment fund to Mr Ke’s brother’s PRC bank account. This was the first draft of the D&U, drafted by Mr Ke. 25.At 11:06am the same day, Mr Tai sent to Mr Ke via WeChat his comments on the draft D&U, asking Mr Ke to add to the draft: (1) Mr Tai’s full name; (2) a statement that the payment back to Mr Tai would be made to either his Hong Kong account or his PRC account; (3) the date of D&U. 26.At 12:31pm on 22 April 2018, before he was about to meet Mr Tai and his family for lunch, Mr Ke sent to Mr Tai via WeChat a revised draft of the D&U in the form of a word file. The three changes proposed by Mr Tai were reflected in this draft. 27.At 12:40pm on 22 April 2018, Mr Ke sent to Mr Tai via WeChat a further revised draft of the D&U, also in word format. The only change in this version was that Mr Ke’s full name was added at the bottom next to the phrase「委託人」. This was the version that Mr Ke printed out and signed, which became the D&U. 28.At around 1:00pm that day, Mr Ke met with Mr Tai, Mrs Tai and their daughter at the Summer Palace at Island Shangri-La for lunch. At the lunch, Mr Ke delivered to Mr Tai the signed D&U and the Post-Dated Cheque (in the sum of HK$43 million dated 21 May 2018). Whilst 70% of an expected profit of 60% should give rise to a profit return of HK$12.6 million based on his capital of HK$30 million, Mr Tai said that the guaranteed minimum profit was rounded-up to HK$13 million, and Mr Ke agreed to the extra of HK$0.4 million with the view to convincing him to invest in Ping An Good Doctor. 29.Mr Tai had a habit of self-reflection and writing down his feelings and observation before going to sleep. On the night of 22 April 2018, he recorded his gratefulness for having made a considerable fortune for his family and his daughter and having befriended Mr Ke. He shared his note with Mrs Tai via WhatsApp. 30.The following day, i.e., 23 April 2018, at 9:02am, Mr Ke sent to Mr Tai via WeChat the Preliminary Offering Circular for Ping An Good Doctor’s anticipated IPO. 31.At 10:16am the same day, Mr Tai replied to Mr Ke via WeChat: 「謝謝消息及資料。我們今天會給你投資款項。」(Emphasis added). There was no denial by Mr Ke that the relevant sum was for investment purpose. 32.Shortly thereafter, Mr Tai arranged to be transferred RMB 24 million to Mr Ke’s brother’s bank account by 5 transfers. Mr Ke confirmed receipt of the funds via WeChat at around 10:42am. 33.Meanwhile, Mr Tai’s daughter (“the Daughter”) also expressed interest in the investment in the IPO of Ping An Good Doctor. Mr Ke offered to enter into a similar investment arrangement with the Daughter with a smaller investment capital of HK$4 million. This investment was agreed to yield a profit return of HK$1.75 million for the Daughter, such that the capital together with the profit return would be in the total amount of HK$5.75 million. 34.At 2:04pm on 20 April 2018, Mr Ke sent a message to Mr Tai via WeChat asking whether the HK$4 million for the Daughter could be transferred that day as Mr Ke had promised JP Morgan to have all the funds ready and in place by the coming Tuesday, i.e., 24 April 2018. 35.At 2:25pm that day, Mr Tai informed Mr Ke via WeChat that the Daughter could not transfer the fund in time and hence would cancel the investment (「取銷投資認購400萬港幣」). (Emphasis added.) 36.At 2:38pm that day, Mr Ke replied to Mr Tai via WeChat that he could help provide the fund first so as not to disappoint the Daughter (「那我墊出, 你下周方便轉回給我吧, 別讓女兒掃興」). 37.At 2:49pm that day, Mr Tai replied to Mr Ke via WeChat saying that the Daughter would try to arrange HK$4 million to be transferred to Mr Ke early the following week, but if she could not get the fund ready, then she would not be able to make the investment (「我女兒說她盡力下週初抽到400[萬]元港幣給你。萬一不抽回不成便請見諒，就不能夠投資了」) (Emphasis added). 38.On 23 April 2018, the Daughter arranged to be transferred to Mr Ke’s Hong Kong bank account HK$4 million. Mr Ke also prepared and signed a similar declaration and undertaking and issued a post-dated cheque in favour of the Daughter on the same day. 39.After the 19 April Meeting and in the days leading up to the listing of Ping An Good Doctor on 4 May 2018, Mr Ke continued to send information and news about Ping An Good Doctor to Mr Tai and Mr Tai continued to show keen interest in the prospect of the IPO:
40.Unbeknownst to Mr Tai at the time and indeed Mr Ke agreed that he deliberately concealed from Mr Tai:
41.On 4 May 2018, the shares of Ping An Good Doctor began trading on the Hong Kong Stock Exchange (stock code 1833). The stock price on the first trading day did not rocket as Mr Ke previously expected and suggested. Instead, it fluctuated around the issue price of HK$54.80, with the highest price being HK$58.70 and the closing price being the same as the issue price. 42.Mr Tai and Mr Ke communicated frequently on 4 May 2018 in relation to the performance of Ping An Good Doctor:
43.Contrary to Mr Ke’s reassurances, however, the stock price of Ping An Good Doctor remained close to or below the issue price throughout May 2018. Naturally, Mr Tai was getting more concerned about the investment as time went by. 44.Since around mid-May 2018, Mr Tai reminded Mr Ke from time to time when they met at the Health Club about the return of capital and profit by the end of the one-month period. He also requested Mr Ke to sell the shares immediately regardless of whether any profit had been made because the one-month period was due to expire soon. 45.On 20 May 2018, the day before the payment was due, Mr Tai sent a message to Mr Ke via WeChat asking to discuss about the payment of the HK$30 million invested in Ping An Good Doctor (「談談我和太太投入平安好醫生的三千萬港元付款事」)(Emphasis added). 46.When they met at the Health Club that night, Mr Tai told Mr Ke that Mr Tai was happy to make less money out of the investment, but it was important for him to get back the HK$30 million capital first because he needed the money pursuant to a contract. Mr Tai also prompted Mr Ke to sell the shares but Mr Ke insisted that they should remain confident and wait for the share price to go up (even though Mr Ke had already sold the shares at that stage). 47.That night at 11:46pm, Mr Tai sent two messages to Mr Ke via WeChat to reiterate his urgent need for the HK$30 million capital and that he was willing to make less profit (「我們賺少量錢（看你最終情況）沒有問題」). 48.On 21 May 2018, Mr Tai continued to chase Mr Ke for payment. Mr Ke indicated that he would make arrangement that day and would sell the shares of Ping An Good Doctor that day if necessary - 「… 我今天調配下 … 必要時我今天出平安股…」 49.Mr Tai’s case is that the message that Mr Ke would sell the shares “today” (i.e. 21 May 2018) “if necessary” (thereby conveying the message that he was still holding those shares) was blatantly false as Mr Ke had already sold all the shares by 9 May 2018. Mr Ke did not keep his promise to make any payment and avoided Mr Tai’s WeChat messages and calls for the rest of that day. 50.By this stage, Mr Tai was still under the mistaken impression that Mr Ke was still holding the shares of Ping An Good Doctor by 21 May 2018. 51.At trial, Mr Ke admitted that he deliberately concealed the fact that he had sold the shares from Mr Tai, because he wanted to buy more time from Mr Tai and did not want to alert Mr Tai. Mr Ke’s evidence is that 「我知道佢驚輸，我賣咗冇同佢講…諗住將D錢再做盤生意，賺咗錢再還畀佢」「我隱瞞咗，驚戴生驚我還唔到錢，所以隱瞞佢」；Mr Ke also agreed to the suggestion: 「雖然你畀咗戴生期票，5月21號到期，你希望唔好咁快要畀錢戴生，哩件事就一路都係隱瞞落去」. 52.After 21 May 2018, Mr Tai kept repeatedly requesting Mr Ke for payment of money. Mr Ke kept reassuring Mr Tai that he would make available the fund for depositing into Mr Tai's bank account soon. 53.Upon Mr Tai’s repeated demands, on about 31 May 2018, Mr Ke promised to pay Mr Tai a sum of HK$10 million, but claimed that he was still waiting for the proceeds from the sale of the shares of Ping An Good Doctor to be transmitted from his Samoa private company’s account with JP Morgan to his personal account with the Bank of Communications. 54.On 1 June 2018, Mr Tai kept chasing Mr Ke for payment. Mr Ke promised to transfer HK$30 million to Mr Tai once the fund was available. However, despite Mr Tai’s repeated requests, Mr Ke only transferred to Mr Tai a total sum of HK$6,819,926 between 1 June 2018 and 5 June 2018. 55.Thereafter, Mr Tai continued to chase Mr Ke but received no further payment in the rest of June 2018. 56.On or around 20 June 2018, Mr Ke proposed to Mr Tai to treat the investment as a loan and that Mr Ke would compensate Mr Tai with interest at the rate of 10% to 30%+ per annum on the capital of HK$30 million. Mr Ke had made similar suggestions thereafter, proposing different interest rate on different occasions. He never came up with any firm proposal and the parties never actually agreed on any loan arrangement. 57.Meanwhile, Mr Tai continued to chase Mr Ke for payment of the outstanding sums. Mr Ke kept stalling Mr Tai’s requests via various means including evading Mr Tai’s calls and making empty promises of payment (only to be broken shortly thereafter), occasionally making small payments when Mr Tai was clearly at the end of his patience:
58.When Mr Tai confronted Mr Ke about the dishonoured cheques, Mr Ke instead blamed Mr Tai for presenting the cheques for payment without waiting for Mr Ke’s confirmation. 59.Even at this stage, Mr Ke was still trying to give Mr Tai the wrong impression that Mr Ke was still holding the shares of Ping An Good Doctor, that he was suffering a loss of 10 odd dollars per share (which, as it transpired, was also false, as the extent of the loss was much less than “10 odd dollars per share”), and that he was in a passive position because he was unable to sell - 「…我平安好醫生每股虧十幾元，又出不了貨，所以造成被動…」 60.In response, Mr Tai reiterated that he only agreed to invest in Ping An Good Doctor in reliance on Mr Ke’s Minimum Profit Guarantee: 「平安好醫生是你的保證會股價比認股時大升及保證會上市一個月內賺42%我們才投資的。股價升降內幕我們不知。背後利益分配我們也不清楚也不過問。投資是基於你的保證及承諾。」 61.In the following days, Mr Tai continued to chase Mr Ke for payment. Mr Ke made yet another empty promise that, on 28 August 2018, he would transfer HK$2 million to Mr Tai. Even on the morning of 28 August 2018, Mr Ke still indicated to Mr Tai that the fund would be transferred to Mr Tai at 4:30pm. Again, Mr Ke broke his promise and avoided Mr Tai’s calls later that day. 62.Having lost faith in Mr Ke, Mr Tai presented the Post-Dated Cheque for payment on 29 August 2018. As expected, it was dishonoured. 63.Thereafter, Mr Tai instructed his former solicitors to issue a demand letter to D on 31 August 2018 demanding for payment of the outstanding sum of HK$33,980,074, followed up by a chaser letter on 3 October 2018. There was no formal reply from Mr Ke to these demand letters. 64.Meanwhile, Mr Tai continued to chase Mr Ke for payment. After relentless requests including threats to take legal action, Mr Ke eventually paid Mr Tai a sum of HK$100,000 on 6 November 2018. 65.Thereafter, however, Mr Ke again broke further promises of payment and the promise to provide a concrete schedule of payment. 66.By then, it was apparent that Mr Ke was simply stalling Mr Tai’s request and the matter could not be resolved amicably. Mr Tai therefore instructed his former solicitors to commence these proceedings on 12 November 2018. 67.Based on the above narrative of facts as supported by contemporaneous WeChat messages and the D&U, Mr Ma SC for Mr Tai submitted that Mr Tai’s case is overwhelming. There was no denial of the investment agreement reached between the parties. THE DEFENDANT’S CASE 68.Mr Wong for the Defendant largely agreed with the above detailed narrative of facts, but stressed that the critical divergence of facts is that the Defendant, Mr Ke’s case that although he did meet Mr Tai at around 9:00 p.m. on 19 April 2018, to discuss the potential investment into the IPO of Ping An Good Doctor, at the 19 April Meeting:-
69.Accordingly, the actual agreement between Mr Tai and Mr Ke was in substance a loan agreement made on 19 April 2018 (“the Loan Agreement”) with the following terms:-
70.On 22 April 2018, Mr Ke executed the D&U (聲明及承諾) to Mr Tai as follows:-
日期: 2018年4月20日 71.But the above D&U is a sham document and bother parties understood it to be case. 72.Mr Ke said that Between June to November 2018, he had on various occasions repaid a total sum of HK$9,119,926 to Mr Tai pursuant to the Loan Agreement:-
73.Mr Ke admits that he had also issued 2 cheques which were all dishonored. But the dishonoured cheques were issued for the repayment under the Loan Agreement. 74.In the circumstances, the Loan and the Loan Agreement has an effective interest rate of over 520% per annum (i.e. HK$13 million / HK$30 million x 365/30). As the interest rate exceeds 60% per annum, the Loan Agreement is illegal and unenforceable by virtue of section 24 of the MLO. 75.Any contravention of section 24 of MLO renders a loan outright unenforceable and the Court does not retain any discretion to re-open the matter: Wong Ming Wai v Tsui Kam Ming(unrep., CACV 179/1999, 14 October 1999), p.3; Yifung Properties Ltd v Manchester Securities Corp. (unrep., HCA 1341/2014, 17 November 2014) at §§26, 27. 76.Similarly, any cheques issue for repayment pursuant to an illegal loan contract is likewise unenforceable: Wong Wai Yin v Sung Siu Wai[2010] 4 HKLRD 556, at §8; Chan Ping Che v Gao Gunter (unrep., CACV 253/2014, 5 June 2017), at §6. 77.Mr Wong for Mr Ke also relied on certain WeChat messages, in particular, from Mrs Tai, to support Mr Ke’s case that the real nature of the HK$30 million advancement by Mr Tai is a loan. 78.Mr Wong also relies heavily on the failure of Mr Tai to call Mrs Tai as a factual witness and invites this Court to draw the necessary adverse inference. APPROACH TO EVALUATION OF EVIDENCE 79.Lord Bingham in his book The Business of Judging at pp 5 – 6 insightfully said:
80.In Lee Fu Wing v Yan Paul Po Ting [2009] 5 HKLRD 513, Deputy High Court Judge Au (as he then was) at 524 helpfully set out the well-established approach as to assessment of witnesses:
81.I find the above guidelines helpful and will apply the same in assessing the credibility of the parties’ diametrically different versions of events. EVALUATION OF EVIDENCE 82.This Court has considered all the evidence including the oral testimony of Mr Tai and Mr Ke carefully. I have no hesitation to come to the view that Mr Ke is not a credible and reliable witness. He changed his evidence as he went along. He also came up with new and important allegations which were not even communicated to his legal team. 83.Mr Wong for the Defendant, Mr Ke, fairly submitted that the demeanor of Mr Ke as witness leaves much to be desired. That I agree but it is an understatement to say that Mr Ke’s demeanor leaves much to be desired. His evidence, on any analysis, is far from credible. I am willing to accept Mr Wong’s submissions that demeanor itself is not a reliable indicator in assessing witness evidence (as opposed to inherent probabilities and consistency with contemporaneous documents). This Court takes into account the totality of the evidence adduced by the parties in coming to a view as to what evidence should be accepted. 84.This Court also bears in mind that some part of the evidence is unsatisfactory does not necessarily mean that all of the evidence given by a witness should automatically be considered unreliable, particularly when the unsatisfactory part does not affect the overall case of that party. MR KE’S EVIDENCE 85.Overall, Mr Ke’s oral testimony at trial is not credible at all. He made things up as he went along. 86.First, when confronted with the multiple references to investment in his WeChat messages with Mr Tai, Mr Ke for the first time gave evidence in court that there was an agreement between him and Mr Tai that in their private WeChat messages, any expression of the loan should be referred to as an investment. I found this startling because not only was this not mentioned in his witness statement, his evidence is that he did not even tell his solicitors about this agreement on expression. I have no hesitation to come to the view that Mr Ke made up this story to explain the multiple references to investment in his WeChat messages with Mr Tai. Had there been such an agreement on expression, it would not be mentioned for the first time in trial. 87.In fact, as both legal teams relied heavily on the WeChat messages, it defies belief that if there were indeed this agreement on expression, Mr Ke would not have told his solicitors. I also find it inherently unbelievable that Mr Tai and Mr Ke would have reached such an agreement on expression in their own private WeChat messages. It simply serves no useful purpose. 88.Further, Mr Ke also testified subsequently that both Mr Tai and him breached the agreement on expression by making reference to the sum of HK$30 million as a loan in their WeChat messages anyway. There is no credible explanation for this sudden breach except it sits well with Mr Tai’s case that there was a subsequent discussion to turn the investment agreement into a loan agreement which in the end did not materialize. This evidence of Mr Ke bears the hallmarks of an invented story to deal with the multiple references to investment in their WeChat messages. 89.Mr Wong’s reference to paragraph 2(5) of Mr Ke’s witness statement that generally “the transaction be called as an investment instead of a loan”; and it was stated in Mr Ke’s witness statement at §6 that “以利息表述一個月收1,300萬港元的利息可能過高，所以戴先生提出將有關借款稱為 ‘投資’ 而非 ‘借款’” were dealing with the D&U and in my view, bears no relation with the newly alleged agreement on expressions. 90.Secondly, when asked about his WeChat message to Mr Tai at 09:48am on 19 April 2018, he gave evidence that it was a record of a 50:50 distribution of profit between Mr Tai and himself. This is in direct contrast with the clear wording of the message that for each investment of HK$10 million, there would be a return of capital and profit of at least HK$14.2 million (「最少1000萬可連本利收到不少於1420萬」), which was clearly calculated based on a 70:30 split of an expected profit of at least 60%. 91.This 50:50 split agreement was again mentioned for the first time in Mr Ke’s oral testimony. What is surprisingly is not only that this 50:50 split was not mentioned in his witness statement and not how his counsel put his case to Mr Tai in cross-examination, his evidence is that he has never informed his legal team about this 50:50 split agreement. I find this simply unbelievable. This very issue directly relates to the 42% interest. It is inconceivable that if such a 50:50 split was agreed, he would not have informed his legal team. 92.When the Court asked Mr Ke how he came up with the figure of HK$4.2 million, which would have entailed an increase of stock price by 84% on his case of 50:50 distribution, he gave no coherent answer and simply stated that it was above 70%. This is flatly contradicted by his answer to the Court later that morning that he would not promise a profit of more than 70% to Mr Tai. 93.This new case of a 50:50 distribution also does not sit well with Mr Ke’s contention that it was Mr Tai who came up with the interest rate of 42%. Mr Ke cannot coherently explain how Mr Tai came up with the 42% if that was not his own proposal. 94.This is also contradictory to Mr Ke’s witness statement which claimed that the 42% rate was based on his own promise that for each investment of HK$10 million, the expected return would be at least HK$4.2 million. 95.Mr Wong for the Defendant, Mr Ke submitted that there is no reason for Mr Ke to deliberately lie about the sharing percentage that was initially offered by him. That may be correct. But the fact is that he did lie to this Court. 96.Thirdly, when asked whether he gave the signed D&U to Mr Tai on 22 April 2018, he claimed that the D&U was provided to him by Mr Tai and he simply signed on it without saving a copy. This is untrue. It was only after he was taken to the contemporaneous records that he accepted that he actually drafted the D&U and Mr Tai only proposed some minor amendments to the draft. 97.Fourthly, Ke’s oral testimony in relation to the 19 April Meeting is that after he and Mr Tai discussed about the investment, Mr Tai left the men’s changing room and met with his wife outside to discuss, and then he came back into the changing room to inform Mr Ke that he would not participate in the investment but would be prepared to advance a loan with extortionate interest instead. 98.When confronted with a different version which is set out in his witness statement, he changed his evidence to say that his oral evidence in court was in fact a wrong recollection. 99.Fifthly, Mr Ke at first denied having received funds from anyone other than Mr Tai for the investment in the IPO of Ping An Good Doctor. Mr Ma SC for Mr Tai is correct that this was untrue as he admitted later, he did receive HK$4 million from Mr Tai’s daughter. 100.Sixthly, Mr Ke admitted in cross-examination that he deliberately concealed the sale of the shares of Ping An Good Doctor from Mr Tai and gave Mr Tai the false impression that he was still holding the shares at the time, so as not to alert Mr Tai and to buy more time from Mr Tai. He claimed that he intended to use the sales proceeds to do another business and make money (presumably within a short period of time) to pay back Mr Tai. It is clear to this Court that to achieve his own purpose, Mr Ke had no problem at all in lying to Mr Tai. 101.Although Mr Ma SC for Mr Tai also relied on Mr Ke’s confusing and conflicting evidence about the message from Bailey Xu which he forwarded to Mr Tai on 17 April 2018. I am happy to accept that Mr Ke was only confused about this aspect of the evidence. He eventually corrected himself. 102.Overall and also taking into account of some other instances which will be addressed below, I find the evidence given by Mr Ke unbelievable and Mr Ke is not a credible witness. MR TAI’s EVIDENCE 103.In contrast, I find Mr Tai a very reliable and credible witness. He is straightforward and honest. Although there are minor discrepancies between his oral testimony and his witness statement, I do not think they are material. For example, Mr Wong for Mr Ke submitted that while in oral testimony, Mr Tai referred JP Morgan as an underwriter, but in his witness statement, he referred JP Morgan as the “Joint Sponsor, Global Coordinator, and Joint Bookrunner”. Mr Tai gave a very candid answer that when preparing his witness statement, he was more careful and did his research on the role of JP Morgan before putting it down in his witness statement. This sits well with his prudent and careful character as a former university professor. 104.Secondly, as a matter of fact, Mr Tai did in WeChat messages request Mr Ke to sell the subject shares in order to repay him. 105.Thirdly, the fact that Mr Tai did not initially plead his entitlement to a profit sharing if the share price were to increase over 60% is perfectly understandable. As Mr Ma SC rightly pointed out, Mr Tai’s Statement of Claim contains a very straightforward claim. It was only when Mr Ke put forward the illegal loan as a defence that Mr Tai condescended upon the particulars of the investment agreement. In any event, the share price never increased by more than 60%, so it was not considered necessary at the initial pleading stage to mention this. I find this understandable. This does not affect the credibility of Mr Tai at all. 106.Fourthly, in relation to the subsequent references to a loan, Mr Ke gave a credible explanation which sits well with paragraph 51 of his witness statement that on or around 20 June 2018, Mr Ke proposed to him that he would compensate Mr and Mrs Tai with interest at the rate of say 10% to 30%+ per annum on the capital amount of HK$30 million. He never agreed to the proposal. 107.Overall, I am of the view that other minor discrepancies do not affect the overall credibility of Mr Tai. I accept Mr Tai’s evidence as reliable and credible. CONTEMPORANEOUS DOCUMENTS AND INHERENT PROBABILITES 108.First and foremost, in view of the contemporaneous documents, I am of the view that it is inherently unlikely that the Loan Agreement has been entered into. It is Mr Ke’s evidence that he offered a guaranteed profit, namely, 60%, and in the round up figure of HK$13 million to Mr Tai. Further, he also offered to Mr Tai that if the share price increased by more than 60%, Mr Tai would be entitled to a further distribution. On the other hand, with a loan agreement, Mr Tai would only be entitled to a straight 60% interest. Commonsense dictates that no sensible commercial man would have opted for the Loan Agreement. 109.Secondly, both Mr Tai and Mr Ke are mature and seasoned businessmen. Mr Ke ran a money lending business. Mr Tai was also aware of the prohibitions under the MLO. Against the benefit of an investment agreement, it is, in my view, unthinkable and inherently improbable that both gentlemen, in particular, Mr Ke a chairman and CEO of a listed company could have knowingly entered into a loan agreement which both parties knew full well would be unenforceable as matter of law with potential criminal consequences. There is no conceivable reason that, from Mr Tai’s perspective, he would have opted to enter into such a loan agreement. There was no need for him to do so. The guaranteed profit is as good as if not even better than the return of the alleged Loan Agreement. 110.Thirdly and importantly, the D&U dated 20 April 2018 executed by Mr Ke and given to Mr Tai on 22 April 2018 used wording similar to Mr Ke’s WeChat message at 10:39 and confirmed unequivocally that it was an investment:
111.Mr Wong for the Defendant, Mr Ke, very fairly agrees that the Defendant carries a very high burden to prove that the D&U is a sham document. There is no legitimate reason as to why the two gentlemen had to execute a sham document. The D&U only binds Mr Tai and Mr Ke. It is not as if the D&U had to be submitted to a third party for approval and/or registration. Mr Ma SC reminded this Court that Mr Ke carries a higher burden of proof to satisfy this Court that the D&U is a sham document. I agree. On the evidence before this Court, I do not find any cogent evidence to rule that the D&U is a sham document. Indeed, it correctly reflects the parties’ agreement. 112.Fourthly, I agree with Mr Ma SC’s submission that Mr Tai’s case sits well and is supported by and consistent with contemporaneous documents and WeChat messages. The WeChat messages between the parties at the material time were only consistent with it being an investment (投資). Mr Ma SC relied on the following WeChat messages:
113.Mr Tai also consistently referred to the HK$30 million (RMB 24 million) as an “investment” in his WeChat messages at the material time:
114.Mr Ma SC for Mr Tai also submitted that Mr Tai’s own “diary” record of his reflection by way of a WhatsApp message, appreciating the opportunity to make money and the good personality of Mr Ke with the “right way” of making profit (「…更重要的是結交了柯先生, 他為人豪爽及有義氣, 更有比較正派生財之道的人. 這是又一次是上天給我的命和時運, 我真的要好好的感恩…」) (Emphasis added). I agree that such a “diary” entry would be incomprehensible if Mr Tai were at the time knowingly committing the crime of advancing a loan with extortionate interest as Mr Ke now alleges. 115.Overall, I agree with Mr Ma SC, for Mr Tai that the parties’ contemporaneous WeChat messages point strongly in favour of an investment rather than a loan. 116.Fifthly, I also agree with Mr Ma SC that the parties’ conduct after the conclusion of the agreement on 19 April 2018 sits well with an investment agreement rather than a loan. Mr Ma SC submitted that the Court should find the following conduct by the parties material in assessing whether the advancement of the sum of HK$30 million was an investment or a loan:
117.Sixthly, to supplement the first reason, it makes common and commercial sense for the parties to agree on an investment rather than an illegal and unenforceable loan. Mr Ma, SC for Mr Ke submitted that:
118.I agree with Mr Ma SC’s analysis. 119.Seventhly, I agree that the investment agreement was consistent with Mr Ke’s motives to benefit Mr Tai (and his family). On the contrary, to enter into an illegal and unenforceable loan would not serve the said purpose.
120.Eighthly, I agree with Mr Ma SC that the fact that Mr Ke offered to pay up for Mr Tai’s daughter’s investment first negates the possibility of a loan. This does not sit well with the notion of a loan. A borrower does not pay for the principal and interest at the same time. 121.The incontrovertible contemporaneous evidence is that the Daughter also put in HK$4 million investment with Mr Ke on Ping An Good Doctor, with a slightly higher expected minimum profit return of HK$1.75 million or 43.75% within 1 month. I agree that it could not have been a loan. 122.When the Daughter could not advance the monies on time and proposed to cancel the investment, Mr Ke offered to “put it up first” for her so that she could transfer the monies to Mr Ke later. I agree that this shows that Mr Ke had his own funds and did not need to borrow it from the Daughter at all. As such, it makes no sense at all for this to be a loan from the Daughter. 123.When being asked by the Court as to why would Mr Tai describe it as an investment in his message at 14:49 on 20 April 2018, Mr Ke’s evidence is that: 「佢意思話，佢想幫個女賺錢，如果畀唔到，等於放棄。所以我話，唔緊要，嗰400萬我畀住先…買股票…畀佢個女，畀佢投資。」(Emphasis added). I agree that this tends to show that it is an investment, not a loan. 124.Mr Ke similarly prepared a Declaration & Undertaking (D&U) for the Daughter. On 18 May 2018, Mr Tai asked Mr Ke for payment of the profit return of HK$1.75 million for the Daughter, and Mr Ke made payment. I agree that this shows that it could not have been a loan from the Daughter. It was an investment. This also affects the credibility of Mr Ke. 125.I also agree with Mr Ma SC that it is unthinkable that Mr Tai would procure his daughter to enter into the same arrangement with Mr Ke, knowing that it was unlawful and unenforceable. 126.Ninthly, I agree that if Mr Ke was looking for a loan, he could have obtained it elsewhere, at reasonable interest rate. Mr Ke said that he had the credit line from JP Morgan which could cover the entire US$20 million quota (subject to him putting up his own funds in the ratio of 1:5, i.e. he could get credit for 5 times of the funds he put in). The interest rate for the credit line was only less than 2% per annum. In other words, he could use up the US$20 million quota in full if he put in 1/6th thereof, i.e. US$3.33m, or approximately HK$26 million. In fact, Mr Ke had injected a total of about HK$68 million (i.e. HK$60 million and US$0.5 million) into Giant Master’s account with JP Morgan on 24 and 25 April 2018. Even if one were to deduct therefrom HK$30 million representing Mr Tai’s funds and another HK$4 million representing the Daughter’s funds, Mr Ke was able to and did inject HK$34 million from his own monies, which would (according to his testimony under cross-examination) have been sufficient for him to utilize the credit line granted by JP Morgan to the fullest extent at the rate of less than 2% p.a.. 127.Bailey Xu of JP Morgan also suggested that he could ask Michael Choi of Sunwah Kingsway to help Mr Ke raise funds. Bailey Xu was very confident that Michael Choi would be willing to do so because Michael Choi would not be able to get a quota without going through Mr Ke. When asked about this, Mr Ke denied that he could have obtained funding from Michael Choi and gave an answer that he had come to the view that Michael Choi would not be interested in giving him funds for this IPO as Michael Choi was interested in subscribing to the shares as well. I find Mr Ke’s evidence on this aspect unbelievable. It directly contradicted Bailey Xu’s message which he forwarded to Mr Tai without any amendments or qualification. 128.Tenthly, I agree that the promise of further return if stock price exceeded the expected profit of 60% points towards an investment. During cross-examination, Mr Ke gave unprompted evidence that he had offered to pay more “interest” to Mr Tai in the event that the stock price increased by more than 60%, as a gesture of goodwill (心意). 129.Finally, for the subsequent references to loan, I accept Mr Tai’s evidence as set out in paragraph 51 of his witness statement. 130.By reason of the matters as set out above, I reject Mr Ke’s case of an oral illegal and unenforceable loan agreement. ADVERSE INFERENCE 131.For the sake of completeness, I should also deal with the issue of adverse inference on the basis that Mr Tai did not call Mrs Tai to give evidence and explain the references to “loans” in her WeChat messages. Mr Wong for Mr Ke relied heavily on this point. It should be mentioned that even if I accept Mr Wong’s submissions on this point, it is but one of the factors that this Court have to take into consideration. Given this Court’s acceptance of Mr Tai’s evidence, I do not find this to be a weighty factor. 132.In any event, as a matter of law, I accept Mr Ma SC’s submissions that the relevant principles have been set out by Lord Justice Brooke in Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340:
133.In Tjang Siu Thu v Profield Construction Engineering Ltd [2015] 5 HKC 22, the Court of Appeal set out the following principles that can be derived from the case law (at §33):-
134.I agree that in the present case, there is no basis to draw adverse inference from Mrs Tai’s absence and not being called as a witness. First, Mr Ke has not made out a case to answer at all. Mr Wong for Mr Ke fairly accepted that Mrs Tai does not feature in the Defendant’s pleaded case. There is only one cursory reference to the WeChat messages between Mrs Tai and Mr Ke in his witness statement. 135.The Wisniewski principles cannot be used to transform an unbelievable witness making an unbelievable claim into a proven claim. Those principles were never intended to be used this way: see Tjang Siu Thu (supra), at §§34-36. 136.Further, I accept that Mr Tai has given credible explanation for his decision not to call Mrs Tai as a witness. In fact, given the pleaded case and the cursory reference to Mrs Tai, it is perfectly understandable that Mr Tai decided not to call his wife to testify. 137.I also bear in mind that Mrs Tai was not present at the 19 April Meeting, where Mr Tai and Mr Ke agreed on the substantial terms of the Agreement. Nor was she involved in the negotiation between Mr Tai and Mr Ke in relation to the Ping An Good Doctor project from early April 2018 to 20 April 2018. 138.In the circumstance, it would not be appropriate to draw any adverse inference against Mr Tai for not calling Mrs Tai to testify. DISPOSITION 139.For all the reasons stated above, I find that the agreement was one for investment with a profit guarantee, which Mr Ke breached by failing to make the promised payment on 21 May 2018. 140.Accordingly, I make an order that judgment be entered in Mr Tai’s favour, on the following terms:
141.Finally, it remains for this Court to thank Mr Ma SC, Miss Xu for the Plaintiff and Mr Wong for the Defendant for their very helpful assistance including their very detailed and comprehensive closing submissions to this Court.
Mr Johnny Ma SC and Ms Cherry Xu, instructed by Stevenson, Wong & Co., for the Plaintiff Mr Alexsander Wong, instructed by Chong & Partners LLP, for the Defendant |
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