Chinachem Financial Services Ltd v. Century Venture Holdings Ltd
Read the full judgment text of HCA 410/2013 on BabelCite. This High Court CFI judgment was delivered on 28 February 2023.
1. This trial is about an agreement entitled “委托索償債權協議” entered into by the plaintiff and the defendant on 25 August 2009 (“the Agreement”).
Cited by 17 cases · Cites 6 cases
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HCA 410/2013 [2023] HKCFI 457 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 410 OF 2013 ________________________
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________________________ JUDGMENT ________________________ INTRODUCTION 1.This trial is about an agreement entitled “委托索償債權協議” entered into by the plaintiff and the defendant on 25 August 2009 (“the Agreement”). 2.The plaintiff claims a declaration that the Agreement expired by effluxion of time and was terminated on 25 February 2011 and, further, a declaration that the defendant is not entitled to any remuneration under the Agreement. 3.On the other hand, the defendant makes a counterclaim for the sum of RMB 949,343,827.55, which it says is the remuneration it is entitled to under the Agreement (or a new contract which subsequently replaced the Agreement). Alternatively, it seeks the same sum or such other sum as the court considers reasonable for the services it had rendered to the plaintiff on the basis of unjust enrichment or quantum meruit. 4.The plaintiff is a company in the Chinachem group. The group is a well-known property developer in Hong Kong. 5.The defendant is a BVI company incorporated in May 2009 for the purpose of the Agreement. 6.The subject-matter of the Agreement is the litigation between the plaintiff and a Mainland company called China Small and Medium Enterprise Investment Co Ltd (中國中小企業投資開發有限公司) (“China SME”) in Mainland China over a block of shares in China Minsheng Bank Corporation Ltd (“Minsheng Bank”). 7.Since 2001, the plaintiff was involved in the above litigation. The first instance judgment was handed down in July 2002. Dissatisfied with the result, the plaintiff lodged an appeal before the Supreme People’s Court (“the SPC”). The SPC heard the appeal in April 2003. The plaintiff had been waiting for the judgment in the SPC appeal for over 6 years by the time the Agreement was entered into in August 2009. 8.Under the Agreement, the defendant was engaged as a “claim recovery agent” and undertook to ensure that the plaintiff would obtain a more favourable result in the SPC appeal than in the first instance judgment within a specified timeframe. In return, the plaintiff undertook to pay the defendant remuneration which is calculated by reference to the sums recovered from China SME. 9.The SPC eventually handed down the judgment in the appeal in October 2012. According to the judgment, the plaintiff succeeded in obtaining a more favourable result than under the first instance judgment. 10.The plaintiff’s primary case, as revised and confirmed in its closing submissions, is that the Agreement had expired on 25 February 2011 according to its express terms and that the defendant had failed to deliver the more favourable result within the specified timeframe. Hence, the defendant is not entitled to any remuneration under the Agreement. 11.The plaintiff also has a fallback position. If, as alleged by the defendant, the terms of the Agreement were still in subsistence when the SPC handed down the judgment in October 2012, the court should still not enforce the Agreement or allow the claim on unjust enrichment on the ground of illegality. This is because (1) the defendant’s performance of the Agreement contravened PRC law and PRC public policy, and (2) the Agreement is contrary to Hong Kong public policy. 12.On the other hand, the defendant’s case, as revised and confirmed in the course of its closing submissions, has two limbs. 13.First, by reason of the parties’ conduct after the scheduled expiry date of 25 February 2011, they had agreed to substitute the Agreement with a fresh agreement of the same terms, save that there was no longer a definite time limit as previously expressly provided for. I shall refer to the alleged fresh agreement as “the alleged new contract” and this part of the defendant’s case as “the new contract ground” below. 14.Second, and as an alternative, on the same factual premise, the defendant contends that the plaintiff is estopped from relying on the express terms of the Agreement to allege that the Agreement had expired. Accordingly, the plaintiff is liable to pay the remuneration to the defendant. I shall refer to this below as “the estoppel ground”. 15.In gist, the conduct relied on by the defendant to make good the above two grounds primarily took the following forms, which happened after the scheduled expiry on 25 February 2011: (1) the defendant continued to provide services to the plaintiff under the Agreement, (2) the plaintiff freely accepted those services, (3) the plaintiff never requested the defendant to cease providing services, (4) the plaintiff never revoked the authority of the defendant to act as its representative in relation to the SPC appeal, (5) the plaintiff never told the defendant that the Agreement had terminated, and (6) the plaintiff on occasions requested the defendant to undertake specific tasks. 16.If both the new contract ground and the estoppel ground fail, the defendant’s fallback position is that it should be entitled to claim a reasonable fee, in the same sum as the remuneration, for the services rendered to the plaintiff in relation to the Minsheng dispute. 17.The material events took place from shortly before the signing of the Agreement in August 2009 up to around the time when and after the SPC handed down the appeal judgment in October 2012. It is useful to make a mental note of the date of 25 February 2011. It is the scheduled expiry date of the Agreement. Where in this judgment I refer to events which took place before or after the scheduled expiry, that should be taken to mean events which took place before or after 25 February 2011. 18.In addition to testimonies from witnesses, there are before me contemporaneous materials documenting the interactions between the parties. They include reports and updates submitted by the defendant to the plaintiff and emails exchanged between them at the time. These documents make up almost 6 bundles of documents. These are now relied on primarily by the defendant to show that work had been done by it in relation to the Minsheng dispute. As for the plaintiff, it accepts that these documents were submitted or sent to it at the time. However, it says that it has no means to verify the content of the documents compiled by the defendant. 19.There are a number of discrete factual disputes which need to be resolved. However, overall speaking, the factual disputes are not extensive. As will be clear from the recount of their cases below, the parties’ factual cases are not that far apart. The main difference, as I see it, lies in the focus or emphasis which each party attempts to place on different parts of the factual narrative. 20.In this trial, the task of the court is primarily to ascertain the objective conduct of the parties in relation to the Agreement and the Minsheng dispute both before and after the scheduled expiry and, based on the objective conduct as found, to rule on the extent of their substantive legal rights and obligations. 21.The plaintiff called four factual witnesses to testify. 22.First, Mr Leung Wing Kong Joseph. He was a director of the plaintiff at the relevant time. He is now a senior consultant of the Chinachem group. He joined the group in 1987. 23.Second, Mr Chan Kam Por (“KP Chan”). He is a director of the plaintiff. He joined the Chinachem group in 1992. 24.Third, Mr David Parker. He became the director of corporate governance of the Chinachem group in May 2009. He was the chief operating officer of the group between September 2011 to December 2013. He was responsible for the group’s legal affairs. 25.Fourth, Ms Chung Wai Yee (Winnie). She was manager of the legal department of the Chinachem group at the time. 26.The defendant had three factual witnesses. 27.First, Mr Lam Yee Hung. He is a director and shareholder of the defendant. 28.Second, Mr Lam Yee Kung. He is the elder brother of Lam Yee Hung. 29.Third, Mr Pang Chun Sing (Joseph). He is a director of the defendant. 30.On the issue of illegality, the parties have adduced expert evidence on the PRC law with leave of the master. A list of questions, elaborately drafted, is attached to the master’s order made on 3 September 2018. A joint expert report dated 26 July 2019, which runs to over 110 pages, was compiled by Prof Liu Li for the plaintiff and Mr Chen Zhuo for the defendant. The experts were tendered for cross-examination. However, the cross-examination was short and brief because during the opening submissions, the plaintiff confirmed that it would no longer be pursuing a sizable part of its pleaded case on illegality by reason of a judgment handed down in Beijing in another litigation between the plaintiff and the defendant. 31.Briefly, in February 2013, the defendant commenced litigation against the plaintiff to enforce the Agreement in the Beijing Higher People’s Court (“the Beijing proceedings”). The trial took place in September 2017. Judgment was given in April 2020 (“the Beijing judgment”). 32.In the Beijing judgment, the court dismissed the defendant’s claim against the plaintiff for RMB 949,343,827.55 (which is the same sum counterclaimed by the defendant in this action) under the Agreement on the ground that the Agreement is illegal and unenforceable as a matter of Hong Kong law. According to the plaintiff, the significance of the Beijing judgment is that the court concluded that the defendant’s actual performance of the Agreement involved acts which breached PRC laws and were contrary to PRC public policy. The defendant has lodged an appeal to the SPC against the Beijing judgment. The appeal has not yet been determined. 33.The Beijing judgment became available after the experts prepared their opinions on PRC law. In light of the above ruling, which the plaintiff says is the same view expressed by its expert, the plaintiff will simply rely only on those parts of its expert evidence which is reflected in the Beijing judgment. It is therefore no longer necessary for the court to marshal the entirety of the expert evidence or to resolve all the differences of opinion between the experts. 34.At the trial, the plaintiff was represented by Mr Eugene Fung, SC and Ms Elizabeth Cheung. The defendant was represented by Mr Jenkin Suen, SC and Ms Frances Lok. PROCEDURAL HISTORY 35.Shortly after the SPC handed down its judgment in October 2012, the parties were engaged in correspondence. 36.By letter dated 23 November 2012, the plaintiff, through its solicitors at the time, stated that the Agreement had expired on 25 February 2011 and was no longer valid as from that date and demanded that the defendant should desist from holding itself out as representing the plaintiff in relation to the Minsheng dispute. It was further stated that the plaintiff intended to make its own arrangements to deal with the enforcement of the SPC appeal judgment. 37.By letter dated 4 December 2012, the defendant, through its solicitors, replied that it would not accept that the Agreement had expired or had terminated and, further, that the defendant had performed its obligations under the Agreement and hence was entitled to payment under its terms. The defendant regarded the plaintiff’s letter as evincing an intention not to be bound by the Agreement and accepted its repudiation. 38.In February 2013, the defendant issued the Beijing proceedings against the plaintiff to enforce the Agreement. 39.The plaintiff commenced the present action in March 2013. Shortly afterwards, the defendant applied to stay all further proceedings on forum non conveniens grounds in light of the Beijing proceedings. 40.In March 2014, Deputy High Court Judge Ramanathan, SC granted an injunction to restrain the defendant from using the plaintiff’s legal advice on the Agreement which the defendant had obtained from Mr David Hui, the plaintiff’s former chief executive officer: see the judgment reported at [2014] 2 HKLRD 557. A number of the affirmations and some of the judge’s findings were relied on by the plaintiff in this trial. 41.In January 2015, the defendant’s application for stay of proceedings was dismissed. Its application for leave to appeal against that decision was dismissed in April of the same year. 42.In the next two sections, I shall recite the parties’ respective cases. In the course of Mr Suen’s oral closing submissions, he confirmed that the defendant would no longer pursue a number of the legal arguments as pleaded (while it would maintain the entirety of its factual case). In light of that, I consider that it is not necessary to give a detailed account of some aspects of the parties’ factual cases as they are no longer material to the determination of the issues in dispute. This is so notwithstanding that counsel had put in detailed written submissions. THE PLAINTIFF’S CASE 43.The plaintiff’s case is as follows. Background: the Minsheng dispute 44.I shall start with the Minsheng dispute. 45.According to Joseph Leung’s recollection, in 1995, the then chairman of Minsheng Bank, requested Mrs Nina Wang, the former chairperson of the Chinachem group, to make a capital investment in the bank. At that time, the bank was in need of US denominated funds, which were in short supply and the bank wished to obtain access to such funds from third parties, such as the Chinachem group. The plaintiff made the investment. The shares were registered in the name of China SME. It is a state-owned company controlled by a Mr Zhang Hongwei. 46.In 2001, China SME commenced an action against the plaintiff before the Beijing Municipal Higher People’s Court in relation to the Minsheng shares. It was the plaintiff’s stance in that case that it had acquired shares in Minsheng Bank as an investment back in 1995 and the investment was in the total sum of US$10,940,000. While the shares were registered in the name of China SME, the plaintiff’s case was that the shares and dividends subsequently declared in fact belonged to the plaintiff. On the other hand, it was China SME’s stance that the relationship between the two of them was one of debtor and lender and that China SME only needed to return the principal of the loan, ie US$10,940,000, to the plaintiff. 47.On 8 July 2002, the Beijing Municipal Higher People’s Court issued a judgment awarding the plaintiff the sum of US$10,940,000 and compensation in the sum of RMB 45,814,912. The court found that the relationship was one of principal and agent. However, it found that the arrangement put in place by the plaintiff and China SME offended the then prevailing regulations which imposed restrictions on foreign companies to invest in PRC financial institutions. On that basis, the court ordered China SME to return to the plaintiff the original sum of US$10,940,000, together with dividends. The court rejected the plaintiff’s claim for the shares in specie or compensation in the form of a portion of the shares. The end result was that China SME retained the full benefit of the Minsheng shares subject to the return of the principal sum and dividends. 48.Dissatisfied with the result, on 15 July 2002, the plaintiff instructed Jinma Law Firm to lodge an appeal before the SPC. 49.The SPC appeal was heard on 18 April 2003. Background: the management of the Chinachem group 50.When the Minsheng investment was made, Mrs Wang was the chairperson of the Chinachem group and its ultimate beneficial owner. She had the final say in all decisions relating to the affairs of the group. That remained to be the position until she passed away in April 2007. 51.Her death was followed by the probate action, HCAP 8/2007, between Chinachem Charitable Foundation Ltd and Mr Tony Chan. In that action, in December 2007, the court appointed two partners of Deloitte Touche Tohmatsu as joint and several administrators pendente lite of Mrs Wang’s estate (“the APLs”). The probate action and its appeals were eventually concluded in October 2011. The court found in favour of the Foundation. There was then followed the litigation between the Foundation and the Secretary for Justice which was commenced in May 2012. That action and its appeals were concluded in May 2015. It was held that the estate of Mrs Wang was bequeathed to the Foundation to be held on trust for charitable objects, and not for the Foundation beneficially. 52.With the conclusion of the litigation between the Foundation and Tony Chan, the office of the APLs of the estate ceased. In March 2012, the court confirmed that the Deloitte administrators continued to be vested with the estate. The court also appointed two partners of PricewaterhouseCoopers (“PwC”) as additional administrators of the estate with provisions for them to call upon the Deloitte administrators to resign at a subsequent stage and for another partner of PwC to be appointed as an additional administrator upon the removal of the Deloitte administrators. The upshot of all these is that as of August 2012, three PwC partners were the joint administrators of the estate of Mrs Wang. 53.The above history is extracted from the decision of G Lam J in Chinachem Charitable Foundation Ltd v Chan Wai Tong Christopher [2021] HKCFI 1347 at paras 2 to 4, 9 to 10. 54.The history forms part of the backdrop of the case. The point to highlight here is that at the time when the Agreement was entered into in August 2009, the APLs were already in place. And, shortly before the SPC handed down the appeal judgment, the Deloitte administrators had been replaced by the PwC administrators. (This is a matter which Mr Suen highlighted in his closing submissions. He suggested that there was a drastic change of stance on the plaintiff’s part in the course of 2012 and that might have been due to the change of the administrators.) 55.As for the management of the Chinachem group, including the plaintiff, after Mrs Wang passed away in April 2007, the plaintiff says the following. 56.Between April 2007 and about January 2010, the board of directors of Chime Corporation Ltd, a company within the Chinachem group (“the Chime Board”), took over primary responsibility for decisions relating to the management and business of the group, including the plaintiff. In about January 2010, following a reorganisation, the powers of the boards of directors of the companies within the Chinachem group were delegated to a newly formed executive committee (“the Exco”). The APLs and their representatives were also appointed to the Exco. Background: dramatis personae 57.Joseph Leung was appointed as a member of the Exco at about the time of its inception and remained a member throughout the time of the relevant events in this action. KP Chan was similarly appointed at the inception of the Exco. He has remained to be a member up to the present day. Parker was appointed as secretary to the Exco and was a non-voting member throughout the time of the relevant events. 58.In about October 2008, David Hui was employed as the group’s general manager and was re-designated as the group’s chief executive officer in November 2011. 59.David Hui was the person within the Chinachem group who played a central role in communicating and negotiating with the defendant in relation to the Agreement. In addition, Dr Kung Yan Sum, the brother of Mrs Wang, also played a role in the plaintiff’s dealings with the defendant. 60.Neither party called upon David Hui or Dr Kung to testify in this action. The decision-making process of the plaintiff 61.Against the above background, the plaintiff describes the plaintiff’s decision-making process which was in place during the time of the relevant events as follows. This process is a central theme running through the plaintiff’s case. 62.Prior to the establishment of the Exco, the Chime Board had primary responsibility for decisions relating to the management and business of the group, including the plaintiff. 63.Since its establishment, the Exco acted as the group’s de facto board. Anything that could bind the group or the plaintiff legally (eg contracts and documents of that type) would require Exco decision. 64.Where important matters arose for decision, the following procedures were to be followed which acted as internal controls. The matters were channelled through to the Exco which would make decisions following due deliberation. Once the Exco had made a decision, a formal resolution would be passed by the Exco and be accordingly minuted. Formal agreements would subsequently be entered into by individuals authorised by formal resolutions of the Exco for such purpose. 65.The important matters would include matters relating to the SPC appeal and the Agreement. 66.The implication of these internal controls is this. Notwithstanding that David Hui was the chief executive officer of the Chinachem group, he had no authority to make major decisions or commitments on behalf of the Exco or the plaintiff’s board. The same applied to Dr Kung and all other individual Exco members. The mandate to make major decisions lay with the Exco. David Hui could not sign any agreements or give any undertakings on the plaintiff’s behalf without the Exco’s discussion and approval. 67.In his witness statement, Joseph Leung explained the broad rationale for the internal controls:
68.In cross-examination, Joseph Leung elaborated on the role of David Hui in relation to the Agreement. David Hui had played a central role in communicating and negotiating with the defendant as he was the person who had introduced the defendant to the Chinachem group. However, his role was merely that of an intermediary: he was authorised to contact and negotiate with the defendant, but had no authority to make decisions as any decisions were subject to the Exco approval. If any proposal resulted from David Hui’s communications or negotiations with the defendant, then it was incumbent on him to report the proposal to the Exco and put the matter on the Exco agenda. The Exco would then discuss the matter and make a decision. 69.As recorded in the judgment of DHCJ Ramanathan, SC, David Hui was described as “the conduit for reports to the Chinachem Group”: see para 47. 70.The plaintiff’s case on the role of David Hui insofar as the Agreement was concerned was summed up in the following oral testimony of Joseph Leung:
Reasons for the lack of progress in the SPC appeal prior to the Agreement 71.After the hearing of the SPC appeal in 2003, there had been no further progress. The plaintiff says that it was attributable to a number of reasons. 72.First, from 2002 onwards, the SPC tried to facilitate mediation between the plaintiff and China SME. But the parties were unable to reach an agreement. The chasm between the plaintiff and China SME was too wide to bridge. Prior to her passing away, Mrs Wang had been adamantly opposed to any settlement with China SME, to the extent that she had indicated to the court that she would rather the Minsheng shares be expropriated by the PRC state than be retained by China SME. 73.Secondly, Mrs Wang’s health declined dramatically in 2005 and especially in 2006. She travelled to the US and Singapore to receive treatments. At the same time, she was also engaged in protracted legal battles in Hong Kong regarding her late husband’s estate. This meant that the SPC appeal was not her highest priority. She was the plaintiff’s sole authorised representative on record for the SPC appeal during her lifetime. Without her permission, no steps could be taken by the plaintiff in the appeal. 74.Thirdly, after Mrs Wang passed away and until mid-2009, the Chinachem group was undergoing a significant restructuring and was also the subject of the probate litigation. Once again, the Minsheng dispute was not its highest priority. Events leading to the signing of the Agreement 75.David Hui was the person within the Chinachem group who played a central role in dealing with the defendant. He was not called by either party to testify. In relation to the circumstances which led to the signing of the Agreement, the plaintiff does not have a lot to say. That is to be contrasted with the defendant’s case in which Lam Yee Hung, Lam Yee Kung and Joseph Pang had first-hand knowledge of the circumstances. 76.It is, however, KP Chan’s understanding that in meetings in late 2008 and 2009, Lam Yee Hung, Lam Yee Kung and Joseph Pang were introduced to David Hui and Dr Kung. Further, through the former’s connections in the PRC, in early 2009, David Hui and Dr Kung met with Judge Liu in Beijing to discuss the SPC appeal. Judge Liu was the presiding judge in the Fourth Civil Court of the SPC, which was the court assigned to adjudicate on the Minsheng appeal. 77.The contemporaneous documents also show that Phillip KH Wong, Kennedy YH Wong & Co (“Kennedy Wong”), solicitors then acting for the plaintiff, met with Prof Long Yifei of Dishi Law Firm, a PRC law firm, to discuss the Minsheng dispute. Prof Long is also the Vice-Dean of the Faculty of Law of Renmin University in the PRC. (On the defendant’s case, Prof Long is a reputable lawyer in the Mainland.) 78.On 8 May 2009, the defendant was incorporated in the BVI by Lam Yee Hung for the purpose of handling the Minsheng dispute. 79.The negotiation of the Agreement took place between around June and August 2009. The initial draft was provided by the defendant. The document went through a number of draft versions. 80.On 23 July 2009, the Chime Board met to discuss the terms of the Agreement. It was documented in the minutes of the meeting (“the minutes of the Chime Board meeting in July 2009”). Among the attendees were David Hui, Dr Kung, Joseph Leung, KP Chan and the APLs. The solicitors from Kennedy Wong were also present. It was decided that another law firm, Gallant YT Ho & Co, should be retained to review and advise on the draft agreement. 81.On 12 August 2009, the Chime Board formally approved the terms of the Agreement. 82.On 24 August 2009, the plaintiff passed a board resolution approving the Agreement and authorised Joseph Leung to execute it. 83.On 25 August 2009, the Agreement was executed in Macau by Joseph Leung on the plaintiff’s behalf and Lam Yee Hung on the defendant’s behalf. The Agreement 84.As noted at the outset, in this action, the plaintiff and the defendant tend to place focus on different aspects of the same set of factual events. This also applies to their approach to analysing the Agreement. 85.Below is a reproduction of the original text of the provisions of the Agreement, which the plaintiff highlights as material.
86.Under clause 5 of the Agreement, the defendant undertook to (1) make every effort within 6 months to achieve a result in the SPC appeal (whether by way of mediation or judgment), and (2) ensure that the plaintiff would prevail in the appeal and that the benefits obtained would be more favourable than the first instance judgment (“the desired second instance result”). 87.Clause 7 provided that both parties should strictly observe the time limit stated in any clauses of the Agreement. 88.Clause 9 provided that save in the event of early termination pursuant to clause 10, the term of the Agreement should be 18 months commencing from the signing of the Agreement. 89.Clause 10 provided that the plaintiff could terminate the Agreement by written notice to the defendant without prejudice to any of its rights upon the occurrence of any of the specified events, including the defendant’s failure to obtain the desired second instance result within 6 months of the date of the Agreement. 90.Clause 11.2 provided that the Agreement embodied the entire understanding between the parties on the subject matter of the Agreement, and replaced any previous understanding and/or agreement between the parties, and that there were no verbal or written declarations, agreements, arrangements or understandings relating to the subject matter of the Agreement between the parties which had not been fully recorded in the Agreement. 91.Clause 11.5 provided that the Agreement should not be varied or amended without the written consent of both parties. I shall refer to it as “the written only modification clause”. 92.Clause 15 provided that the Agreement should be governed by the laws of Hong Kong. 93.I should highlight here that according to clause 9, the date on which the Agreement would expire was 25 February 2011. 94.On 26 August 2009, Lam Yee Hung signed a Deed of Guarantee. In the deed, he guaranteed the due and timely performance of the defendant’s obligations under the Agreement, and to indemnify the plaintiff against any loss or damage suffered as a result of any breach of the Agreement by the defendant. 95.In addition to the Agreement and the Deed of Guarantee, there was also a written agreement entitled “法律服務委託協議” signed between the plaintiff and Dishi (“the Dishi Agreement”). The plaintiff’s case does not turn on the Dishi Agreement at all. In fact, its position is that at all relevant times, it did not have any direct communication with Dishi. By contrast, the Dishi Agreement is given more prominence in the defendant’s case. 96.It is common ground that the Agreement was subsequently amended. 97.Pursuant to a supplemental agreement (“the Supplemental Agreement”), the plaintiff and the defendant agreed to amend the Agreement by extending the original time limit of 6 months for the obtaining of the desired second instance result to 12 months. Again, in line with the group’s formal authorisation procedure, prior to its execution, the Supplemental Agreement had been approved by both the Chime Board and the plaintiff’s board which authorised any one of its directors to execute it. Although the printed date on the Supplemental Agreement was 12 January 2010, it was executed by Dr Kung shortly after the board meetings held on 20 January 2010. 98.The relevant provision read:
From 25 August 2009 to 25 February 2011: the defendant’s reports, opinions etc 99.During the scheduled contractual term, ie from 25 August 2009 to 25 February 2011, the defendant conducted a number of activities in relation to the SPC appeal, including:
100.I should pause here to state the plaintiff’s stance in relation to the documents compiled by the defendant. The plaintiff does not generally dispute that these documents had been prepared but it says that it has no means of verifying whether the content was true and whether the defendant had in fact done what it said it had done in the documents. From 25 August 2009 to 25 February 2011: mediation 101.Representatives of both the plaintiff and the defendant participated in four mediation hearings with China SME. These hearings were organised by the SPC. They were held in Beijing on 14 October 2009, 30 October 2009, 16 November 2009 and 29 June 2010. In his opening remarks at the first mediation hearing on 14 October 2009, Judge Liu stated that a draft judgment was already ready, but that he wanted to give the parties one last chance to mediate before handing down the judgment. 102.In addition to the above SPC-organised mediation hearings, on 15 July 2010, a private mediation session was held between the plaintiff and China SME in Shenzhen. Representatives of the plaintiff and the defendant attended the session. In the end, on 20 July 2010, which was the deadline imposed by the SPC, the Exco held a special meeting to approve the abandonment of mediation and to confirm that the plaintiff should proceed with the SPC appeal. 103.A settlement proposal had been put forward to the plaintiff in the process, which it rejected. The defendant pleaded that under the settlement proposal, the plaintiff would have received at least RMB 2 billion from China SME and the defendant would have fulfilled its obligations under the Agreement to ensure a receipt of not less than RMB 800 million. It further pleaded that by reason of the plaintiff’s rejection, the time limit in clause 9 would be extended and the Agreement should continue. 104.In the course of his oral closing submissions, Mr Suen confirmed that the defendant would no longer pursue the contention that by reason of the rejection, the Agreement was extended, although he maintained that the events would form part of the factual matrix in this case. In light of that, I shall not recite here the evidence led in relation to the settlement proposal and the detailed submissions made by counsel in relation to the legal argument, save to record that the plaintiff’s stance is that the rejection was not unreasonable. From 25 August 2009 to 25 February 2011: further drafts of supplemental agreements sent by the defendant but not signed by either party 105.By an email dated 2 August 2010, the defendant sent a draft 2nd supplemental agreement to all the members of the Exco, seeking to extend the time limit under clause 10(c) of the Agreement to 18 months. 106.By a further email dated 14 February 2011, the defendant sent a draft 3rd supplemental agreement to all the members of the Exco, seeking to extend the above time limit to 24 months. 107.The plaintiff highlights the oral evidence of Lam Yee Hung in relation to the draft 2nd supplemental agreement. In cross-examination, he accepted that the defendant knew in August 2010 that it was necessary for the plaintiff to sign the draft 2nd supplemental agreement in order to change the time limit because there was a provision in the Agreement that any change to its terms must be done in writing, ie the written only modification clause. 108.The plaintiff also highlights the oral evidence of Joseph Pang in relation to the draft supplemental agreements. He accepted under cross-examination that (1) the defendant all along knew that the Agreement required written evidence for extension and that was why the defendant had repeatedly sent the draft supplemental agreements to the plaintiff for signing, (2) the draft supplemental agreements had been sent by email to all the Exco members because the defendant had wanted the Exco members to approve their signing, and (3) even to the defendant, the extension of the Agreement through the signing of the draft supplemental agreements was not a mere formality. 109.On (3), the following exchange which took place at the trial is relevant:
110.It is common ground that neither the 2nd nor the 3rd draft supplemental agreement was ever signed by either party. 111.The 18-month term under clause 9 lapsed on 25 February 2011. The plaintiff says that the Agreement prima facie expired by the effluxion of time and came to an end. At all times the defendant knew of the requirement of Exco approval 112.It is convenient to set out another central theme of the plaintiff’s case here, which Mr Fung submitted is fatal to the defendant’s new contract ground and estoppel ground. The plaintiff contends that the defendant knew at the material times that all major decisions of the plaintiff were subject to the approval of the Exco and could not be made by any single individual. This is supported by the defendant’s objective conduct and also the evidence of the defendant’s own witnesses. 113.First, where the parties communicated by email, the plaintiff had specifically asked the defendant to send correspondence to all members of the Exco. 114.Following the execution of the Agreement, the defendant initially sent a number of status and update reports to the plaintiff via emails which were addressed to Joseph Leung and KP Chan. The plaintiff later specifically asked the defendant to send all future correspondence to all the Exco members: see the email sent by the personal assistant to Joseph Leung to the defendant on 13 July 2010. The email was entitled “Minsheng – All Future Correspondences/Communications to Chinachem Group”. It was also copied to the members of the Exco. It read:
115.Under cross-examination, Joseph Pang accepted that the reason for the above request was because all major decisions of the plaintiff had to be made by the Exco. 116.In a similar vein, the plaintiff refers to another email sent to the defendant dated 10 February 2011. In it, Joseph Leung’s assistant informed Joseph Pang’s secretary that Mr William Lee was an additional member of the Exco and requested that William Lee be included if the defendant was to send emails to the Exco. The email read:
117.Again, Joseph Pang accepted under cross-examination that (1) the reason why the defendant was informed about the additional Exco member was so that it could report to all the Exco members, and (2) when dealing with the plaintiff in relation to the Minsheng dispute, the defendant knew that the plaintiff’s major decisions had to be made by the Exco. 118.Secondly, the plaintiff points out that the defendant took care to send the draft supplemental agreements to all members of the Exco. Joseph Pang confirmed in cross-examination that the draft supplemental agreements had been sent by email to all Exco members because the defendant wanted them to approve the draft agreements. 119.Thirdly, even in the documents prepared by the defendant itself, what was written reflects that the defendant knew that any decision by the plaintiff in relation to the Minsheng dispute would need to be approved by the board, but not by any single individual. Below are four examples. 120.The first example is the defendant’s minutes of the first mediation hearing on 14 October 2009. According to the minutes, Prof Long had told the PRC court that “the Chinachem board” had not authorised KP Chan or the lawyers as to the scope for compromise, so it was necessary to contact Dr Kung and the other directors, and that no one could make a decision on the spot without board discussion. The relevant parts of the minutes read:
121.Under cross-examination, Lam Yee Kung confirmed that Prof Long had made those statements and agreed with them. When further asked whether the defendant had known at the time that in order for the plaintiff to make any decision, the matter would need to be considered and approved by the plaintiff’s board of directors. The following exchange took place at the trial:
122.The second example is a note of the hearing of the fourth SPC mediation hearing held on 29 June 2010 prepared by the defendant entitled “情況通報”. According to the note, Judge Liu had told the plaintiff’s representatives that the administrators and the Chinachem board of directors should bear in mind three points in deciding its stance in the mediation. In reply, Lam Yee Kung said that he would definitely pass on Judge Liu’s message to the “decision-making body” (“決策層”).
123.In cross-examination, Lam Yee Kung was asked what he had meant by the term “decision-making body”. Mr Fung submitted that he gave various answers and those answers were inconsistent. After further questioning, Lam Yee Kung eventually confirmed that he had meant the “Chinachem board of directors” by that phrase. 124.The third example is an email sent by the defendant to the members of the Exco dated 13 July 2010, i.e. two days before the Shenzhen mediation. It was said there that David Hui had been authorised by the Chinachem board of directors to negotiate with China SME, and that China SME had been informed of the same. In the email, the defendant made repeated references to the authorisation of the administrators and the Chinachem board. The relevant parts read:
125.The fourth example is the minutes of the Shenzhen mediation drafted by Lam Yee Kung. According to the minutes, he had noted in his opening remarks that Chinachem was under administration pending the conclusion of the litigation with Tony Chan, and that any important decisions had to be studied and decided jointly by the administrators and the board of directors. The minutes also recorded that at a side meeting between Lam Yee Kung and Zhang Hongwei, Lam had further stated to Zhang that “no single person could make decision for Chinachem”. 126.The original text in Chinese read:
127.Based on the above, the plaintiff contends that Lam Yee Kung’s own characterisation of Chinachem’s decision-making process corresponds fully to the actual position of the group at the time. The above documentary evidence fully shows that the defendant knew at all times that any decision of the plaintiff in relation to the Minsheng dispute needed to be approved by the Chinachem board. After the scheduled expiry of the Agreement on 25 February 2011 128.Following the prima facie expiry of the Agreement, little happened in terms of progress in the SPC appeal from April to July 2011. Lam Yee Hung accepted that to be the case in his cross-examination. 129.On 3 August 2011, the defendant sent a status report to the plaintiff covering its alleged activities over the past 4 months and stating that it had been conducting “personnel activities” (“人事活動”) surrounding the members of the SPC Judicial Committee which were inconvenient to set out in writing. 130.After that, the defendant continued to send status reports at irregular intervals which contained information relating to internal deliberations of the SPC which had allegedly taken place. 131.By email dated 4 August 2011, the defendant sent a draft 4th supplemental agreement to the members of the Exco seeking to extend the time limit under clause 10(c) of the Agreement to 30 months. The agreement was never signed by either party. The Exco meeting on 2 November 2011 132.On 2 November 2011, an Exco meeting was held. 133.During the meeting, Lam Yee Kung gave a presentation in relation to the SPC appeal: see the speaking notes entitled “解铃还须系铃人”. He stated that (1) the SPC appeal was highly likely to be determined with an 85% split in the plaintiff’s favour, and (2) a judgment should be handed down within the next 3 months. 134.During the presentation, Lam Yee Kung stated that the plaintiff’s decision to abandon mediation was reasonable, fair and lawful because the SPC had set a deadline ie 20 July 2010. Lam Yee Kung expected the case to be concluded within 3 months (which assessment turned out to be incorrect). 135.After the presentation, Mr FY Kan, a member of the Exco, questioned Lam Yee Kung on various matters relating to the defendant’s role in the SPC appeal. In particular, Lam Yee Kung accepted in cross-examination that FY Kan (1) asked him what purpose the defendant was actually serving in the SPC appeal, and (2) alleged that what the defendant was doing amounted to champerty. 136.The Exco then deferred the issue of extending and/or re-negotiating the Agreement until after a proper review of the matter. 137.On 8 November 2011, the defendant sent the draft 5th supplemental agreement to David Hui by email. On the following day, ie 9 November 2011, the defendant sent the draft again, but this time to all the members of the Exco. When asked in cross-examination whether the second email was sent because the defendant knew that David Hui did not have the authority to agree to the terms in the draft, Joseph Pang agreed that this was the case. The draft 5th supplemental agreement sought to extend the time limits under both clauses 5.1 and 9 of the Agreement to 36 months. 138.It is common ground that like the 2nd to 4th draft supplement agreements, the 5th draft supplemental agreement was never signed by either party. 139.In the same email, the defendant attached a document entitled “給華懋公司董事會的公開信” to the plaintiff. (I shall refer to it as “the open letter dated 9 November 2011”. Its content is reproduced in para 283 below). 140.As noted at the outset, the parties place emphasis on different aspects of the facts. In relation to the events in early November 2011, the plaintiff highlights the sending of the 5th draft supplemental agreement by the defendant and the fact that it was never signed. On the other hand, the defendant sets great store by the open letter dated 9 November 2011. Mr Suen describes the letter as “a most crucial objective evidence”. I shall come back to the content of the letter when I set out the defendant’s case below. The Exco resolved to seek legal advice on the Agreement 141.On 11 November 2011, another Exco meeting was held. 142.During the meeting, FY Kan raised a number of issues relating to the Agreement including its legality, and suggested that a Hong Kong law firm be retained to further opine on the issue. The Exco unanimously resolved to delegate David Hui and Parker to take the lead in the Minsheng dispute. 143.Norton Rose were subsequently engaged to advise on a wide range of issues identified by the Exco relating to the terms of the Agreement and any possible extension or replacement of the same. Mr William Stone QC was also engaged as a private consultant subsequently to advise the Exco on the commercial aspects of the defendant’s potential re-engagement. 144.I should pause here to record a new revelation made by Parker in relation to legal advice in the course of his cross-examination. He said that in fact prior to retaining Norton Rose to advise on the Agreement, he had been asked by David Hui earlier in June, July or August 2011 to speak to Zhong Lun Law Firm about the Agreement. Later on, when the expiry of the Agreement was discussed in the Exco meeting in November 2011, FY Kan said that he had not heard of Zhong Lun and wanted to get advice from a Hong Kong lawyer and that was why Norton Rose were eventually engaged. This piece of information was not mentioned in his witness statement. 145.On 22 May 2012, a special Exco meeting was held to allow its members to thoroughly review and consider whether the defendant should be re-engaged. At the conclusion of the meeting, the Exco passed a resolution to (1) re-engage with the defendant and Dishi on the basis of new agreements, (2) appoint Norton Rose to act as the intermediary, and (3) delegate to David Hui, Parker and William Lee the task of re-negotiating the new agreements, with the final draft to be submitted to the Exco for final approval. 146.According to Parker, shortly after the Exco meeting on 22 May 2012, a meeting was held amongst himself, David Hui and Joseph Pang where Parker explained that the Exco had, based on legal advice, come to the view that the Agreement had expired and was no longer in force. While Joseph Pang disputed the date of the meeting (his case being that he had met with them on two occasions in March 2012), he accepted that Parker had told him that “the supplemental agreement had expired”. The Beijing meeting on 21 June 2012 147.On 21 June 2012, a delegation from the Chinachem group on the plaintiff’s behalf met with the defendant’s representatives in Beijing to discuss the Agreement. At the meeting, Joseph Pang expressly acknowledged that “we have not been renewed for many months”. I pause here to note that the parties do not agree on what was said at the Beijing meeting. After the Beijing meeting 148.From around July 2012 onwards, the joint administrators took the following steps in relation to the issues surrounding the Agreement.
149.By an email dated 17 August 2012, the plaintiff circulated to the defendant a draft new agreement which specified (in Recital (E)) that the Agreement had expired by effluxion of time. 150.On 29 October 2012, the SPC handed down its judgment in the SPC Appeal. Summary of the plaintiff’s primary case 151.On the basis of the above factual case, the plaintiff contends that the Agreement had expired by effluxion of time on 25 February 2011. The desired second instance result had not been obtained before that. The defendant is therefore not entitled to any remuneration under the Agreement. That is the primary position of the plaintiff. I should record here that in the pleadings, the plaintiff maintained a fallback position, namely that the Agreement came to an end latest by 21 June 2012 when the Beijing meeting took place. In his written closing submissions, Mr Fung confirmed that this fallback position should be treated as part of the plaintiff’s primary case. The plaintiff’s alternative case: illegality 152.I now turn to set out the plaintiff’s alternative case, namely that even if the Agreement was not terminated on 25 February 2011, it is unenforceable in Hong Kong on the grounds of illegality and/or that it is contrary to the public policy of the PRC and/or Hong Kong. More specifically, the plaintiff contends that the performance of the Agreement involved breaches of the PRC law and regulations and such breaches were sufficiently serious, and that the defendant’s conduct in the performance of the Agreement was contrary to PRC public policy: see para 48X of the re-amended reply and defence to counterclaim. 153.As noted in the “Introduction” section, according to the Beijing judgment, it was held that the defendant’s actual performance of the Agreement involved acts which breached PRC laws and were contrary to PRC public policy. The plaintiff says it is in fact the same view expressed by its expert. 154.What the plaintiff now seeks to do is to prove its case on the PRC law by relying on the parts of the plaintiff’s expert evidence which is reflected in the Beijing judgment. The plaintiff confirmed to the court in opening that as a result, it would no longer be necessary for the court to (1) marshal the entirety of the parties’ expert evidence (which includes discussions of many provisions in different PRC legislation that did not form part of the Beijing judgment), and (2) resolve all the differences of opinion between the experts. Indeed, the plaintiff says that to do so would be contrary to the promotion of reasonable proportion and procedural economy in the conduct of proceedings, and would cause wastage of the court’s resources. 155.Accordingly, the plaintiff focuses only on (1) how the defendant’s actual performance of the Agreement involved acts which were contrary to the PRC law and public policy, and (2) how the Agreement is contrary to the public policy of Hong Kong. 156.I should put on record that the plaintiff expressly stated it would not be relying on the pleas in paras 48R to 48WB(1), 48Y and 48Z of its re-amended reply and defence to counterclaim. 157.It was pleaded in para 48Y that the real object and intention of the Agreement at the time of concluding the contract necessitated the breach of PRC law in its performance. 158.Para 49Z contained another limb of illegality. Relying on this plea, the defendant raises a “clean hand” argument. I therefore reproduce the plea here for further discussion below:
159.The plaintiff relies on three categories of conduct of the defendant to contend that the latter’s actual performance of the Agreement was in breach of PRC law and public policy. 160.First, the defendant offered and made a donation to Renmin University to fund the building of a law library in return for a successful outcome of the SPC appeal for the plaintiff. The plaintiff contends that such conduct contravened PRC public policy in that the defendant interfered with the PRC judicial and administrative procedure and perverted the course of justice. 161.Second, the defendant improperly influenced judges and members of the PRC judiciary by (1) procuring Renmin University to appoint Judge Wan E’Xiang, Vice President of the SPC and whose assistance was required to advance the SPC appeal, as a PhD supervisor, (2) offering certain assistance to Judge Wan’s daughter, and (3) influencing and/or interfering with the SPC’s view on the SPC appeal. The plaintiff contends that such conduct contravened PRC public policy as it constituted interference with the judicial process and perverting the course of justice. 162.Third, the defendant received confidential information about the SPC appeal. The plaintiff contends that this contravened PRC public policy, as the defendant caused members of the court staff to deliberately divulge confidential information relating to the SPC’s internal procedures and deliberation, interfered with the judicial process, and perverted the course of justice. The expert evidence 163.On the definition of public policy under PRC law, the two experts share substantially similar views. Both agree that the term “公共政策” (“public policy”) is rarely used in the PRC written laws and the terms “公共秩序” (“public order”), “社會公共利益”(“public interest”) and “公序良俗” (“fair procedure and good practice”) are used instead. The experts also share the view that the concepts of 社會公共利益and 公序良俗 can be used as a supplemental principle for determining whether certain civil act is null or invalid, when there is an absence of mandatory written laws or regulations to govern such an act. 164.According to Prof Liu, although the two jurisdictions use different wordings, the concept of public policy under Hong Kong law is essentially the same as the concept of 社會公共利益and 公序良俗 under the PRC law and hence they can be used interchangeably. One of the examples given by Prof Liu is Article 274 of Civil Procedure Law 《民事訴訟法》:
165.Like the concept of public policy in Hong Kong, PRC public policy, in Prof Liu’s view, is an abstract term whose contents may change over time to reflect the societal situation. Despite that, the concept should be stable and well-recognised in any particular period of time, so as to maintain stability and public order for the nation as a whole. While different jurisdictions place different emphases on various elements of public policy, some fundamental concepts (such as a fair judicial system) are common across nations. 166.Mr Chen does not seem to dispute any of these points. He cautions, however, that just because the concept of public policy is “supplemental” or a “catch-all”, it should not be abused in the sense that any civil act that is not expressly governed by any mandatory laws or regulations can be declared void arbitrarily on the basis of breach of public policy. In addition, Mr Chen further states that if it is unclear whether the acts mentioned in the assumed facts in the list of questions provided to the experts indeed took place, it would not be appropriate for the experts to determine the nature of such acts or their legal consequences. 167.According to Prof Liu, a fair and independent judiciary is an important aspect of PRC public policy. In this connection, she cited the following legislative provisions to support her opinion:
168.As the Constitution is the basic law of the PRC and all other laws are legislated based on the underlying principles of the Constitution, Prof Liu suggests that an independent judiciary observing the rule of law is an integral part of the PRC legal system and public policy:
169.Prof Liu has also referred to an important decision of the CPC Central Committee entitled 《中共中央關於全面推進依法治國若干重大問題的決定》(2014年10月23日中國共產黨第18屆中央委員會第四次全體會議通過):
170.Prof Liu’s conclusion that a fair and independent judiciary is an integral part of PRC public policy is well supported by the express provisions of the Constitution. Indeed, such a principle is prevalent and deep-rooted in many of the developed countries and one cannot sensibly suggest that it is not part of the public policy of the PRC. 171.The plaintiff argues that the concept of “public interest” is also clearly recognised in the Beijing judgment. The relevant part read:
172.Under cross-examination, Mr Chen agreed that (1) obtaining confidential information regarding court process with a view to profit, and (2) interfering with the fairness in the administration of justice, would be regarded as being contrary to PRC public policy. First conduct: donation to Renmin University 173.According to a memorandum dated 27 July 2012 signed by Lam Yee Hung on behalf of the defendant and Prof Han Dayuan signing on behalf of the Faculty of Law of Renmin University (“the Donation Memorandum”), (1) the Judicial Committee of the SPC had formed its opinion on the SPC appeal and had instructed its Collegial Panel to consult with the China Banking Regulatory Commission (“the CBRC”) before handing down its decision, (2) the CBRC intended to impose administrative penalties on the plaintiff in respect of its violation of PRC financial regulations in relation to the Minsheng shares, (3) Prof Long and Prof Han had visited the CBRC to solicit support for the plaintiff and obtained the CBRC’s agreement that it would not impose any administrative penalty on the plaintiff if the latter issued a formal undertaking to make a donation to Renmin University, (4) the defendant would make a donation of no more than RMB 1 million to Renmin University within 30 days from the date of the Donation Memorandum, and (5) the defendant would make a further donation of RMB 100 million if the SPC held in the plaintiff’s favour in the SPC appeal. 174.By signing the Donation Memorandum, the defendant made a binding promise to make donations to Renmin University in exchange for various matters to be done to procure a favourable result for the plaintiff. 175.In Lam Yee Hung’s witness statement, he devoted a few paragraphs to the works which the defendant undertook for the plaintiff after the scheduled expiry of the Agreement. One of the works done was that after the defendant learned that the Judicial Committee of the SPC would seek the CBRC’s views and that the CBRC might impose administrative penalties on the plaintiff, the defendant requested the Faculty of Law of Renmin University to coordinate with the CBRC to ask them not to impose the administrative penalties. This is what he said:
176.The defendant also pleaded the following in its amended defence and counterclaim filed in 2015. It was supported by a statement of truth from Joseph Pang. This admission was deleted in the subsequent (and latest) version.
177.After that, the Donation Memorandum was signed. The plaintiff says that pursuant to its terms, binding obligations arose on the part of the defendant to fulfil its promise to make donations to procure Renmin University to influence the CBRC so as to produce a favourable result for the plaintiff. 178.Furthermore, the plaintiff contends that the defendant had in fact made the donation of RMB 1 million. In this regard, the plaintiff relies on the defendant’s admission in its amended defence and counterclaim filed in July 2015 that it had donated RMB 1 million in or about July 2012. This admission was withdrawn when the defendant filed a subsequent (and final) version in May 2019. But at that time, the defendant did not file a statement of truth. The statement of truth was only filed (and signed by Joseph Pang) on the eighth day of the trial after this omission was pointed out to the defendant’s last factual witness in his cross-examination, and after the defendant had closed its factual case. Moreover, the plaintiff had by then already completed its cross-examination of Joseph Pang and had therefore been deprived of the opportunity to ascertain the defendant’s basis for withdrawing the admission regarding the RMB 1 million donation. 179.On the above factual premise, the plaintiff invites the court to accept Prof Liu’s expert evidence. She is of the clear opinion that the defendant’s conduct was in breach of PRC public policy. In her view, since the donations were pledged in exchange for the professors’ procurement of the CBRC’s support and the plaintiff’s success in the SPC Appeal, such wager arrangements were damaging to the public interest. Further, the current judicial practice in the PRC is that where contractual remunerations are paid contingent upon the result of litigation, such agreements will be considered as perverting the course of justice and disregarding the integrity and equality of the judicial system, and as such, the defendant’s conduct was in breach of PRC public policy. 180.On this issue, the defendant’s expert, Mr Chen, contends that the issue does not form part of the expert evidence directions. The plaintiff says that this is incorrect and that, in any event, Mr Chen’s opinion in this regard is inconclusive as he contends that he should not assume or speculate on the facts. Second conduct: improper influence on a judge 181.The plaintiff contends that the defendant sought to interfere with the fair administration of justice in the PRC by exercising improper influence on an SPC judge, namely Judge Wan E’Xiang, the then Vice President of the SPC. The plaintiff relies on the following contemporaneous documents and evidence of the defendant’s witnesses. 182.By an email dated 3 August 2011 to the plaintiff, the defendant stated that starting from late 2010 when the SPC appeal was submitted to the SPC Judicial Committee, the focus of the defendant’s work had revolved around the various members of the Judicial Committee, and that these were “personnel activities” (“人事活動”) which were inconvenient to set out in writing. 183.In his oral evidence, Lam Yee Kung stated that (1) one of the members of the Judicial Committee whom the defendant had “started working on” at the time was Judge Wan. Counsel asked him what work the defendant was doing on these individuals in August 2011. After some apparent misunderstanding of the question, this is what Lam Yee Kung said:
184.When cross-examined on whether the reason why he considered it inconvenient to describe the above activities in writing was because he knew such activities were improper, Lam Yee Kung denied this, saying that he had not mentioned the activities because he suspected that there was someone from Zhang Hongwei’s side within the Chinachem group and he therefore did not wish to disclose the identity of the entrusted persons. However, the plaintiff says that this purported explanation makes no sense and should be rejected: if the sensitivity stemmed from the identity of the entrusted persons, then the defendant could simply have described the activities without identifying the individuals who were conducting them. 185.In the same email dated 3 August 2011, the defendant also wrote that (1) Judge Wan was responsible for determining whether to extend the time limit for the adjudication of pending appeals before the SPC, and for submitting appeal cases to the Judicial Committee of the SPC for adjudication, (2) for that purpose, the Faculty of Law of Renmin University had appointed Judge Wan as a PhD supervisor, (3) it was imperative to enlist the assistance of Judge Wan for the purpose of progressing the SPC appeal, and (4) Prof Han told Judge Wan that a group of experts at Renmin University took the view that the relationship between the plaintiff and China SME in the SPC appeal was one of entrustment. Under cross-examination, Lam Yee Kung accepted that the defendant had believed at the time that Judge Wan’s assistance was required for the SPC appeal and because of that, Renmin University had appointed him as a PhD supervisor. 186.I reproduce below the original Chinese text of the relevant parts of that email:
187.By an email dated 8 November 2011 to the plaintiff, the defendant wrote that (1) Prof Han appointed Judge Wan as a PhD supervisor and offered certain assistance to Judge Wan’s daughter, (2) Prof Han suggested to Judge Wan that he should take decisive measures to end the situation and Judge Wan promised to conclude the SPC appeal within 2011. Below is the original text in Chinese:
188.Reading the two emails written by the defendant in conjunction with Lam Yee Kung’s evidence above, the plaintiff invites the court to infer that the defendant had taken improper steps (through the entrusted persons) since late 2010 to influence the senior management of the SPC, including Judge Wan, that it was involved in Judge Wan’s appointment as a PhD supervisor and his daughter’s enrolment as a PhD student at Renmin University, and that these were done for the purpose of (1) expediting the progress of the SPC appeal, and (2) procuring Judge Wan to accept the specialists’ view of the Faculty of Law of Renmin University that the relationship between the plaintiff and China SME was one of entrustment. 189.Prof Liu is of the view that the core of judges’ professional ethics is impartiality, honesty and serving the people, and the basic requirements are to be loyal to the judicial cause, justice, ensuring judicial integrity and adhering to the concept of justice for the people in order to maintain the judicial image. She opines that the defendant’s conduct in question clearly violated the social public interest of Mainland China. 190.Mr Chen contends that the issue is not part of the expert evidence directions. The plaintiff says this is incorrect. 191.The plaintiff’s expert’s view is also reflected in the Beijing judgment: see para 171 above. 192.The plaintiff therefore submits that the defendant’s conduct amounted to an interference with the fairness in the administration of justice in the PRC, and that the defendant has accordingly violated the public policy in the PRC. Third conduct: receipt and divulging of confidential information 193.In some of the documents provided to the plaintiff, the defendant made references to internal meetings of the SPC, internal procedures of the SPC in relation to the SPC appeal, and initial opinion of the members of the Judicial Committee on the SPC appeal. The plaintiff says that these are all confidential information. 194.The plaintiff cites 10 such instances:
195.Further, the defendant was fully aware that information relating to the SPC’s internal operation and deliberations were of a confidential nature. See the following contemporaneous documents:
196.In light of the above, the plaintiff invites the court to find that the defendant had obtained and divulged confidential information about the internal meetings and deliberations within the SPC in relation to the SPC appeal with a view to using such information for the purpose of obtaining a favourable outcome for the plaintiff. 197.Prof Liu considers that the defendant’s involvement as a “judicial broker” amounted to an interference with the outcome of the SPC appeal and would violate PRC public policy. On the other hand, Mr Chen repeats the same position as that in relation to the other issues. 198.Prof Liu’s opinion is reflected in the Beijing judgment. The court considered that the improper obtaining of confidential information of proceedings would constitute a violation of PRC public policy. 199.What the defendant did, the plaintiff contends, amounted to an interference with the SPC’s judicial process and its independent administration of justice. The defendant has accordingly violated the public policy in the PRC. The Agreement is contrary to public policy of Hong Kong 200.On the above factual premise, the plaintiff says that the Agreement was performed to interfere with the independent administration of justice and pervert the course of justice in Mainland China, and that such conduct is contrary to PRC public policy. The plaintiff further submits that such conduct is seriously incompatible with public policy in Hong Kong on the grounds that it abuses, prevents or impedes the due course of justice, or perverts the course of justice. It follows that the court should not enforce the Agreement. Reliefs 201.The plaintiff claims a declaration that the Agreement expired by effluxion of time and was terminated on 25 February 2011 and, further, a declaration that the defendant is not entitled to any remuneration under the Agreement. THE DEFENDANT’S CASE 202.As mentioned above, the factual disputes in this action are not extensive. The parties are not putting forward opposite accounts of every event. There are only a few discrete factual disputes which need to be resolved. What stands out from a comparison of the parties’ respective cases is that each of them places emphases on different parts of the evidence. I shall try to highlight these different emphases below. 203.The defendant’s case contains a number of main themes. First, the plaintiff had experienced great difficulties in progressing with the SPC appeal prior to the Agreement and there had been a long impasse. Second, the parties’ dealings with each other were informal in nature throughout the relevant time. Third, David Hui played a central role in the course of the plaintiff’s dealings with the defendant. Fourth, David Hui and Dr Kung made oral assurances to the defendant regarding extension of the Agreement, both before and after the signing of the Agreement. Fifth, the defendant continued to provide services to the plaintiff in relation to the Minsheng dispute after the scheduled expiry of the Agreement. Sixth, the plaintiff continued to accept the services. Seventh, the plaintiff did not request the defendant to cease providing services and did not indicate that the Agreement had expired. Personal background 204.I shall first briefly deal with the personal background of the three witnesses of the defendant. 205.Lam Yee Kung settled in Hong Kong in 1985. He lived here till 1995. After that, he moved back to Fuzhou in the Mainland and that is where he lives now. In the late 1980’s, he ran a business in Hong Kong dealing with computer products from Taiwan with a friend. In examination-in-chief, Lam Yee Kung confirmed that he was the author of all the reports and documents prepared by the defendant in relation to the Minsheng dispute. 206.Lam Yee Hung settled in Hong Kong in the late 1980’s. in about 2008, he was a businessman. He had a trading business in Mainland China. He had his factories and he also had some investments. He is presently a director of a Hong Kong company which invests in games. 207.Joseph Pang is an accountant by training. He previously held directorship in a number of companies in Hong Kong, including a listed company. Reasons for the lack of progress in the SPC appeal prior to the Agreement 208.As part of the factual background, the defendant highlights that prior to the Agreement, the SPC appeal had been in a state of impasse. Contrary to the plaintiff’s case, the defendant contends that a main reason for the delay was the interference by Zhang Hongwei, who controlled China SME. Zhang had powerful background. The plaintiff was not able to re-open or make progress with the SPC appeal without powerful assistance. 209.In support of this contention, the defendant relies on the following contemporaneous documents and evidence. 210.First, the reason was acknowledged by the plaintiff in the Agreement itself. Para (3) of the recital expressly referred to the influence and interference of various external factors. The original text read:
211.Second, the reason was further acknowledged by the plaintiff in the Supplemental Agreement. The second paragraph of the recital read:
212.Third, the reason was also apparent from what Judge Liu said to the plaintiff in the first mediation hearing on 14 October 2009. According to the minutes, he said:
213.The difficulties faced by the plaintiff are also demonstrated by the fact that it was not even sure as to the whereabouts of the Minsheng shares and to what extent they were encumbered. 214.The Minsheng shares had been subject to a freezing order by the SPC pending the appeal. Applications had been made on the plaintiff’s behalf to extend the order from time to time. However, the last freezing application made by the plaintiff’s former lawyers dated 19 March 2008 was so vague that the number of shares subject to the order was not even specified. According to the plaintiff’s own evidence, before the defendant’s involvement, the plaintiff did not even know the number of shares held by China SME. 215.In a meeting held on 5 August 2009 at Chinachem attended by David Hui and the APLs, David Hui reported that the group’s investment in Minsheng Bank had been written off. According to the minutes:
216.On this issue, Joseph Leung said in cross-examination that the plaintiff itself had many powerful connections and options but chose not to proceed with the SPC appeal. The defendant says that this evidence should be rejected because it is contradicted by the plaintiff’s own documentary evidence as set out above. In fact, Joseph Leung himself admitted that he was aware of the strong influence of Zhang. He accepted that he never put forth any other alternative candidates for consideration by the plaintiff and, in the end, it chose to sign a contract with the defendant and Dishi. 217.Whatever the cause might have been, the defendant stresses the fact that the Minsheng dispute was still in a state of impasse in April 2007 when Mrs Wang passed away, and continued to be so for the two years that followed. Background: circumstances leading to the Agreement 218.As regards the circumstances which led to the signing of the Agreement, the plaintiff does not have much to say. By contrast, the defendant has given a detailed account of how Joseph Pang and the Lam brothers (and eventually the defendant) came to be working for the plaintiff on the Minsheng dispute. In this narrative, the defendant highlights the informal nature of the parties’ dealings. It also says that the background forms an important factual backdrop against which the subsequent conduct of the parties is to be evaluated. 219.According to Joseph Pang, he knew David Hui since 1996 when they both worked for a Sun Hung Kai group company. They had kept in contact since then. In 2008, through David Hui, Joseph Pang was introduced to Dr Kung. Joseph Pang offered help to Chinachem Charitable Foundation in its probate litigation with Tony Chan. Since then, Dr Kung and David Hui had trust in Joseph Pang’s social networks. Later, the two told Joseph Pang about the Minsheng dispute. Dr Kung told him that before she passed away, Mrs Wang had tried every means to make progress in this action but all these efforts were in vain. Therefore Dr Kung and David Hui asked Joseph Pang to propose names of people who could give assistance on the Minsheng dispute. It was against this background that Joseph Pang introduced Lam Yee Hung to Dr Kung and David Hui. Lam Yee Hung was a business partner of Joseph Pang. 220.Lam Yee Hung brought in his brother Lam Yee Kung and, by his connection, Prof Long of Dishi. 221.In February 2009, Lam Yee Hung, through Prof Long, arranged a meeting between Judge Liu, Dr Kung and David Hui so as to find out why the SPC appeal was pending for 7 years without any progress. 222.In April 2009, Kennedy Wong on the plaintiff’s behalf approached Prof Long to procure an independent opinion on the merits of the SPC appeal by legal experts. The opinion was issued on 9 April 2009. The key view was that, although the agreements between the plaintiff and China SME were invalid, the Minsheng shares obtained pursuant to invalid contracts should be sold and the price returned to the plaintiff. However, mediation should be pursued given the difficulties in the plaintiff’s case. 223.None of the witnesses called by the plaintiff has any knowledge over these matters. 224.Having considered the above opinion, the plaintiff’s lawyers prepared drafts of the Agreement and they circulated the drafts to David Hui and Joseph Pang. The defendant never instructed any lawyers to review or draft the Agreement on its behalf. 225.In the course of the negotiations, Joseph Pang and Lam Yee Hung noted that the drafts stipulated time limits for obtaining the desired second instance result. They raised objections to such time limits. But David Hui, quoting Dr Kung, assured Lam Yee Hung that if Lam Yee Hung and Dishi could re-open the SPC appeal and the related procedures, time extension would be given if required. 226.The oral assurance was pleaded as follows. I shall adopt the defined term “Oral Promise” used there:
227.Lam Yee Hung’s written evidence on the Oral Promise is as follows:
228.The defendant emphasises that on these matters, the plaintiff has adduced no evidence to rebut the defendant’s case. An adverse inference should be drawn against the plaintiff by reason of its failure to call upon David Hui and Dr Kung to testify. 229.The defendant contends that the making of the Oral Promise by the plaintiff is consistent with the informal way in which it had been handling the Minsheng dispute. Informality in the plaintiff’s dealings with the defendant 230.That the plaintiff’s dealings with the defendant in relation to the Minsheng dispute was informal in nature is a central theme of the defendant’s case. In addition to the Oral Promise, the defendant highlights the following. 231.First, there is no evidence to show that any board meeting was ever held by the plaintiff to authorise the actions of the two law firms who acted on its behalf in relation to the Agreement (ie Kennedy Wong and Gallant YT Ho). It was Joseph Leung’s evidence that he was not even aware of Kennedy Wong’s engagement of Prof Long. The defendant suggests that the engagement of these two law firms by the plaintiff was plainly done by David Hui and Dr Kung, without even the knowledge, let alone approval, of at least one other director, Joseph Leung. 232.The key reason for this is that, according to the plaintiff’s own evidence, back in 2009 to 2012 the Chinachem group was occupied with other much more important matters such as the probate litigation with Tony Chan. In comparison, the Minsheng dispute was not of the top priority. It was left to David Hui, who played a central role in communicating or dealing with the defendant. It was up to David Hui to decide when and what to report to the Exco. 233.Second, in this action, the plaintiff has not produced minutes of its board of directors or the Exco in relation to the Agreement, save for three sets of minutes which all concerned the engagement of Dishi and the termination of the engagement of its former Mainland law firm. The defendant suggests that had there been relevant deliberation in relation to the Agreement by the Exco, it was the plaintiff’s obligation to disclose those minutes. However, none was produced. Hence, it can be concluded that there was no such deliberation. 234.Third, until mid-July 2010, the written reports and correspondence from the defendant to the plaintiff were only given to KP Chan and Joseph Leung. It was only at the request of Joseph Leung in July 2010 that those written materials were copied to all the Exco members. In cross-examination, Winnie Chung pointed out that the composition of the Exco was an internal matter of the plaintiff. 235.While the plaintiff singles out this incident to show that the defendant was well aware of the role of the Exco in the Minsheng dispute (see para 114 above), the defendant instead says that this incident shows that its role was passive. It simply included the recipients in its written correspondence as requested by the plaintiff. It is not to be forgotten that in the background, oral communications and dealings with the defendant were delegated to David Hui. 236.Fourth, up to November 2011, there was no record of the Exco discussing the Agreement or the Dishi Agreement, despite the fact that the Dishi Agreement would have expired in February 2010 on its face (see para 252(3) below). This is another remarkable feature of this case – the plaintiff was content not only to leave Dishi to be its legal representative on the court’s record, but also to allow Dishi to continue to represent the plaintiff in mediation hearings and work alongside the defendant, even though it never had any direct contact with Dishi, and the written contract had long expired. 237.The above shows the lack of formality on the plaintiff’s part in its dealings with the defendant and in its handling of the Minsheng dispute. This is, the defendant contends, an important feature to bear in mind when considering why the parties continued to do what they did after the scheduled expiry of the Agreement and without signed supplemental agreements. It is even more important when considered together with the Oral Promise. The Agreement and the Dishi Agreement 238.The key terms of the Agreement have been recited above. The defendant’s emphasis in this respect is (1) on its own obligations under the terms of the Agreement, and (2) the close relationship between the Agreement and the Dishi Agreement. 239.First, the defendant highlights para (6) of the recital. It recorded the fact that it was through the defendant’s procurement that Dishi became engaged in the SPC appeal. It shows that the engagement by the plaintiff of the defendant and Dishi was part and parcel of the same arrangement. 240.Second, the defendant points out that the express undertaking given in para 5.2 is substantial in value to the plaintiff because there was a risk that the plaintiff would recover even less than what was awarded in the first instance court, or even nothing, in the SPC appeal (for example, had the SPC ordered the Minsheng shares and dividends be confiscated). 241.Third, under the Agreement, the defendant obtained remuneration by the plaintiff under two alternative routes: litigation or mediation. 242.For litigation, the plaintiff’s payment obligation arose if the actual benefits obtained by the plaintiff in the SPC appeal after execution exceeded the first instance proceeds (that excess is defined as “the distributable benefits”). The distributable benefits would be split by the plaintiff and the defendant according to the ratio set out in the appendix to the Agreement. According to the ratio, the first RMB 800 million (inclusive of the first instance proceeds) shall first be paid to the plaintiff. After that, the remaining distributable benefits would be equally split between the plaintiff and the defendant. 243.For mediation, the plaintiff’s payment obligation arose if the amount payable to the plaintiff by China SME under the court approved mediation agreement exceeded the first instance proceeds and the overall realised proceeds was above RMB 800 million. The defendant got paid only after the plaintiff received the settlement sum. The same ratio applied in this event. The mediation agreement needed to be agreed by the plaintiff. Even if the settlement sum offered by China SME would result in the overall realised proceeds exceeding RMB 800 million, the plaintiff could still refuse to accept the settlement proposal, and the defendant could not compel it to settle. 244.The defendant says that the RMB 800 million benchmark came from the then valuation of the Minsheng shares. 245.Fourth, the defendant undertook obligations in relation to Dishi:
246.Fifth, the defendant highlights that there are two “exit routes” expressly provided for in the Agreement. The first route is by termination under clause 10. Sub-clause (c) was subsequently amended by the Supplemental Agreement. It is not disputed that the plaintiff did not purport to exercise that right. The second route is by expiry on 25 February 2011 as provided for under clause 9. In other words, the Agreement expired by effluxion of time without the parties having to do anything. 247.The defendant says that it is conceptually important to distinguish the two routes. 248.Sixth (and last), the defendant highlights the tripartite nature of the Agreement and the Dishi Agreement (and their performance). This is a feature which the plaintiff has wholly ignored in this action. The contention here is that the two contracts were linked or bundled up together in that (1) it is a fundamental premise of the Agreement that the defendant procured the engagement of and performance by Dishi, and (2) the defendant had obligations to pay Dishi’s fees under the Agreement. As a matter of fact, the plaintiff did not have any direct communication with Dishi. Everything was routed through the defendant. This made the engagement of the defendant and Dishi effectively a packaged deal. Hence, when considering whether the Agreement had expired on 25 February 2011, as alleged by the plaintiff, the defendant says that one must evaluate the issue also taking into account the tripartite arrangement. 249.In the negotiation process, initially, there was indeed a suggestion by Gallant YT Ho, the plaintiff’s lawyers, that a tripartite agreement should be signed by the plaintiff, the defendant and Dishi. In the end, two separate contracts were signed. This was because Kennedy Wong took the view that the scope of work of the defendant and that of Dishi were different. This was recorded in the minutes of the Chime Board meeting in July 2009 minutes:
250.A little later in the meeting, the following was said:
251.The suggestion of a tripartite agreement at the negotiation stage itself highlights the close proximity of the two agreements. 252.To prove the point, the defendant draws the court’s attention to the provisions in the Dishi Agreement:
253.The Supplemental Agreement also expressly reaffirmed the bundled up relationship of the defendant and Dishi alongside each other:
254.After the SPC judgment was handed down in October 2012, the plaintiff refused to pay pursuant to the Dishi Agreement and argued (as in the present case) that (1) the Dishi Agreement expired on its terms on 27 February 2010, and (2) Dishi performed the contract by illegal conduct. 255.Litigation then followed between the plaintiff and Dishi in Beijing. In the end, the plaintiff’s argument was rejected both at first instance and on appeal. It was found by the first instance court that the plaintiff by conduct extended the Dishi Agreement after 27 February 2010. The appeal court held that the Dishi Agreement expired, but the parties formed a new contract by conduct. 256.By letter dated 12 January 2018, P acknowledged its liability to pay Dishi. From August 2009 to July 2010: mediation 257.The defendant contends that the works done by the defendant during the period from August 2009 to August 2010 are well documented and the documents have been disclosed in this action. 258.Shortly after the engagement of the defendant and Dishi, a mediation hearing was speedily arranged on 14 October 2009. With the assistance of the defendant, 4 court-facilitated mediation hearings were held. By the fourth mediation hearing, the negotiation was premised on the plaintiff’s proposal of a 70:30 split of the proceeds in favour of the plaintiff (as a starting point). 259.Shortly before the court-imposed deadline of 20 July 2010, a private mediation was held in Shenzhen on 15 July. It was suggested and attended by Zhang himself. 260.After the mediation, on the night of 17 July 2010, Zhang called and suggested a further meeting with Lam Yee Kung to discuss settlement, which took place on 18 July 2010. In this meeting, Zhang made the proposal of a 50:50 split between the plaintiff and China SME. This was all duly reported by the defendant to the plaintiff in a written report. In the end, the plaintiff decided to abandon mediation. The Supplemental Agreement 261.It is common ground that the Supplemental Agreement was signed in January 2010, extending the time limit in clause 10(c) from 6 months to 12 months. The plaintiff’s factual case does not focus much on the circumstances surrounding the signing of the agreement. By contrast, the defendant seeks to highlight a number of matters which it says demonstrate the informal nature of the dealings between the parties. 262.On 4 January 2010, by email, the defendant sent a draft of the Supplemental Agreement to Joseph Leung and KP Chan, together with some petitioning letters. Joseph Leung emailed back and said that the plaintiff could not retrieve the Agreement due to office removal and asked for a signed copy. The defendant did so by email. Shortly afterwards, Joseph Leung’s personal assistant emailed an executed copy of the Supplemental Agreement to the personal assistant of Joseph Pang on 27 January 2020. The other Exco members were not copied in the email loop and there was no reference to any passing of resolutions by the plaintiff. 263.The defendant points out, first, that even though Parker became the Exco secretary and was responsible for the Chinachem group’s legal affairs since January 2010, he was not kept in the loop of the communication between the plaintiff and the defendant, including the emails in relation to the Supplemental Agreement. 264.Secondly, and importantly, the Supplemental Agreement extended clause 10(c) without any corresponding extension of clause 9 or 5.1. Under the mechanism in the Agreement, a period of at least 12 months was provided for the execution of the SPC judgment. (This was consistent with the many difficulties in execution envisaged in the pre-Agreement meetings). It is illogical to suggest that, by the time of the Supplemental Agreement, the parties suddenly intended only 6 months to effect execution. It would appear that the parties had not given careful thought to the proper mechanics of the time extension. 265.Thirdly, the parties were content to contract on a “homemade” document prepared by the defendant, without instructing any lawyers in the process. This resulted in a very rough “homemade” document signed by the parties. 266.Fourthly, the plaintiff had not even been able to locate their own copy of the Agreement at that time and needed to ask the defendant for a copy. They also signed the Supplemental Agreement without any question asked. 267.All the above matters, the defendant contends, demonstrate the informal manner in which the plaintiff treated the Agreement and how the defendant was not concerned with the internal management of the plaintiff. They also reinforced the defendant’s belief in the Oral Promise made by the plaintiff that the signing of written contract was mere formality, and once the SPC appeal was reopened, time extension would be given when required. From about August 2010 to 2 November 2011 268.Unlike the plaintiff who invites the court to look at the events by drawing a notional line by reference to the date of 25 February 2011, the defendant presents its factual case by reference to differently crafted time periods. Having looked at what happened during the one year from August 2009, the defendant says that the next relevant period should be from August 2010 to 2 November 2011. 269.It is common ground that the following happened during this period:
270.The defendant points out that consistent with the Supplemental Agreement, the drafts of the three further supplemental agreements proposed to extend clause 10(c) without any corresponding extension of clause 9 or clause 5.1. This once again shows that the parties did not treat the written contract for time extension with care. Furthermore, similar to when the Supplemental Agreement was signed, Parker, the person who was supposed to be in charge of the plaintiff’s legal affairs, was still not in the email loop. 271.As regards the draft supplemental agreements, it is the defendant’s case that it was told by David Hui that the 2nd and 3rd supplemental agreements were signed. The defendant only found out that they were not signed in November 2011. 272.This is what Lam Yee Hung said in his witness statement:
273.Joseph Pang’s written evidence is as follows:
274.The cross-examination of KP Chan also reveals that the Exco did not hold any meeting during this period to consider any of the draft supplemental agreements. It is not the case that the Exco considered the drafts and rejected the proposed time extension. The state of affairs was that there was no formal resolution approving any time extension, but the Exco knew that the defendant’s and Dishi’s works were going on under the handling by David Hui, but none of them ever told the defendant or Dishi that there was no contract. 275.Despite the scheduled expiry dates and the lack of any signed supplemental agreements, the defendant continued to perform alongside Dishi throughout this period without any issue from the plaintiff, who accepted the services without any indication that it considered there to be no subsisting contract. At the very least, there was no communication by the plaintiff to the defendant that there was no subsisting contract. 276.There were many examples of such continued performance which was all documented. The defendant relies on, eg:
277.On 10 February 2011, Joseph Leung’s personal assistant still wrote to the defendant requesting the inclusion of William Lee, a new Exco member, in email correspondence. The defendant argues that it would be the oddest thing to do had the Agreement was to “expire” in two weeks’ time. Rather, this objective communication gave a clear message to the defendant that “the work must go on”. The Exco meeting on 2 November 2011 and the open letter dated 9 November 2011 278.The next milestone event in the defendant’s case is the Exco meeting which was held on 2 November 2011. This in turn led to the defendant sending to the Exco the open letter dated 9 November 2011. Mr Suen described the letter as “a most crucial objective evidence”. 279.It is common ground that in the Exco meeting, Lam Yee Kung made a presentation on the progress of the SPC appeal. According to KP Chan’s written evidence, the Exco convened a meeting to discuss “a wide range of issues”. Had the Agreement already expired some 9 months ago, the defendant says that such presentation and report by the defendant would be most odd. 280.During the presentation, FY Kan raised the query whether the Agreement involved champerty. Afterwards, the defendant was told that the plaintiff decided to engage a law firm to look into this matter. 281.The defendant’s case is that in the Exco meeting, no one said that there was no longer any contract between the plaintiff and the defendant because the Agreement had already expired on 25 February 2011. 282.The Exco meeting prompted the defendant to send the open letter dated 9 November 2011, together with a draft 5th supplemental agreement to the Exco. 283.I reproduce below the text of the open letter:
284.By the open letter, the defendant was addressing the query raised by FY Kan on champerty. The defendant stated that it had been performing the Agreement properly. Furthermore, it made its position very clear that (1) it considered the signing of supplemental agreements to be a mere formality, and (2) it did not consider there to be any more time limit to the Agreement. 285.The important point here, the defendant contends, is that it made its position unequivocal: it considered the contract to be subsisting and continuing, it was continuing to perform under the contract and invited the plaintiff to respond in writing if the latter held any different view. 286.There was no denial by the plaintiff. Nor was there any denial by any Exco member. 287.Mr Suen submitted that this is a most crucial objective evidence because whatever might be in the subjective mind of the parties, the outward utterance is unequivocal that all the performances by the defendant were done on the basis of a subsisting contract, and they were accepted by the plaintiff as such, without disagreement or protest. 288.Following from what was discussed in the Exco meeting, the plaintiff engaged Norton Rose who issued their opinion in around April or May 2012. It is apparent that Norton Rose considered there was no champerty (or other illegality) because after their advice was considered in a special Exco meeting on 22 May 2012, David Hui and Parker tried to negotiate a new ratio (which was lower than that in the Agreement) with the defendant. As the defendant refused a lower ratio, the Beijing meeting was arranged in June 2011. Continued performance from November 2011 289.The performance by the defendant and Dishi was consistent and continuous not only after 25 February 2011 but also after 2 November 2011. In its closing submissions, the defendant sets out a list of 20 items of works done from 4 November 2011 to 13 April 2012 as examples of the defendant’s continuing services in relation to the Minsheng dispute. The defendant refers to contemporaneous documents, mostly emails, in support. They covered, among other things, the sending of further update reports and the renewal of the freezing order over the Minsheng shares. There are 2 instances in which it was the plaintiff who took the initiative to approach the defendant. 290.On 4 November 2011, KP Chan emailed a draft memorandum prepared by Deloitte Beijing to the defendant, which set out the PRC tax analysis in relation to the Minsheng shares. This is relevant to the issue of execution. 291.On 13 December 2011, Parker’s personal assistant wrote to the defendant seeking various documents and records in the SPC appeal. 292.The defendant’s performance was freely accepted by the plaintiff. In light of the open letter dated 9 November 2011, it cannot be said by the plaintiff that the defendant was offering free service in the hope of a new contract. This would be commercially absurd and inherently improbable, because by “volunteering”, the defendant did not only risk not getting paid, but had to assume onerous financial obligations. This would be all the more so when Dishi's legal fees were involved – without any contract there was no reason for the defendant to shoulder half of Dishi’s remaining legal fees. Discussion between David Hui, Parker and Joseph Pang in mid-2012 293.There was a discussion between David Hui, Parker and Joseph Pang in mid-2002. The exact date and venue of the discussion is not material. Insofar as Deputy High Court Judge Ramanathan, SC made findings concerning the discussion relating to the Norton Rose advice, the defendant accepts that these findings are binding on the parties. 294.The defendant highlights here that upon consideration of the Norton Rose advice, the plaintiff decided to continue to engage the defendant’s and Dishi’s services and that David Hui and Parker tried to negotiate a lower ratio with Joseph Pang. The defendant says that it is not unlikely that the expiry of the Agreement was used as a leverage by the plaintiff to negotiate a lower ratio. 295.The relevance of the discussion is that (1) prior to it, the plaintiff would not have clearly communicated to the defendant that the Agreement had expired (as the plaintiff was still waiting for the legal advice), and (2) after this discussion, the plaintiff still wanted to continue with the service of the defendant and Dishi and did not want a break up. 296.The discussion then led to the Beijing meeting in June 2012. The Beijing meeting in June 2012 297.Ahead of the Beijing meeting, on 19 June 2012, the defendant sent another open letter to the plaintiff to recap the background of the parties’ cooperation. In the letter, the defendant referred to the Oral Promise:
298.Again, there was no denial by the plaintiff. Nor was there any denial by any Exco member. 299.What was said in the meeting held on 21 June 2012 is in dispute. The parties subsequently put forward their own minutes, purporting to record their respective versions of the conversations. The defendant says that whichever version is correct, it is clear that two matters are borne out from the records:
300.The following day, the delegates met again and were this time joined by Prof Long. In this meeting, the plaintiff was still requesting the advice and assistance of the defendant and Dishi. This is evidenced by the meeting note subsequently prepared by Norton Rose:
301.There are other factual disputes concerning what was said in the Beijing meeting. However, given that the plaintiff is no longer pursuing the fallback position that latest by the time of the Beijing meeting, the defendant knew that the Agreement had expired, I consider that it is unnecessary to resolve the disputes. Draft agreements sent in August 2012 302.In August 2012, the plaintiff sent a draft agreement with the defendant and another draft agreement with Dishi to the defendant. 303.Here, the defendant highlights a provision in the draft agreement to the effect that the defendant should facilitate and assist Dishi to continue to represent the plaintiff in the SPC appeal. The proposed provision reinforces one of the defendant’s key obligations under the Agreement, which was to procure the continuous representation by Dishi of the plaintiff in the SPC appeal, a service of value to the plaintiff. 304.In fact, Dishi continued to represent the plaintiff in the SPC appeal until December 2012. This was one key aspect of the defendant’s continuous performance of the Agreement. Delivery of the SPC judgment in October/November 2012 305.The SPC judgment was made on 29 October 2012 and collected by Dishi on 2 November 2012. The ruling was that the plaintiff succeeded in its legal argument regarding the treatment of the assets deriving from an invalid contract, and on that basis was awarded 40% of the Minsheng shares and dividends. 306.On 1 November 2012, the defendant sent an email to Parker. It said that it learnt from news report that David Hui’s position with the Chinachem group had not been renewed and requested that the defendant be told who would succeed David Hui to handle the Minsheng dispute if that was indeed the case. The email also referred to the anticipated difficulty with execution as one would not expect Zhang to readily comply with the judgment. 307.Evidently, the defendant was still acting on the basis that there was a subsisting and continuing contract such that they were concerned about the new contact person on the plaintiff’s side, as there would be a lot of work involved in the execution stage following the judgment. 308.On 3 November 2012, the defendant wrote a report to the plaintiff concerning the SPC judgment. It contained a careful analysis of, eg, the execution follow-up. It also included a calculation of the second instance proceeds by reference to the market price of the Minsheng shares. As of 31 August 2012, the number of shares derived from the plaintiff’s initial investment in Minsheng Bank increased to 737,101,904 shares, and the dividends derived from that amounted to RMB 594,910,597.40. 309.On 5 November 2012, the defendant coordinated with Dishi to deliver the SPC judgment to the plaintiff. The plaintiff acknowledged receipt without any indication of disagreement. 310.On 13 November 2012, the defendant and Dishi met China SME’s representatives to discuss the execution of the SPC judgment. China SME indicated that it would cooperate. This meeting was initiated by China SME. 311.On 16 November 2012, the defendant wrote to the plaintiff about the execution procedure and gave its analysis on the situation. 312.The defendant says that it is crucial to note that for more than half a month from the handing down of the SPC judgment to Dishi and the defendant’s kick-starting the execution procedure, the plaintiff never for once said to the defendant or Dishi that neither the defendant nor Dishi should act on the plaintiff’s behalf because the Agreement or the Dishi Agreement had already expired or had been terminated. During that time, the plaintiff never for once alerted China SME or the SPC that the defendant and Dishi had no authority to deal with China SME regarding the SPC appeal and execution. This is remarkable because of the significant practical consequence involved in the execution, without which the plaintiff would only have a paper judgment. 313.After having secured the SPC judgment through the defendant and Dishi, received their assistance as to execution, and secured the reassurance by China SME, again, through the defendant and Dishi that it would comply with the execution procedure, on 23 November 2012, Norton Rose wrote to the defendant to retrospectively “confirm” that the Agreement had expired some 1 year 9 months earlier, enclosing their version of the Beijing meeting notes as evidence of the alleged expiry. Furthermore, Norton Rose went on to retrospectively categorise the defendant’s performance since the SPC judgment as being without the plaintiff’s authority. 314.Also on 23 November 2012, two new Exco members, Ted Osborn and Victor Jong, wrote on behalf of the plaintiff to China SME for the first time alleging that the meeting between China SME, the defendant and Dishi on 13 November 2012 was not authorised by the plaintiff. 315.The plaintiff also started to communicate with the defendant through Ted Osborn and Victor Jong. The defendant had to seek clarification from Parker on whom it was dealing with, as it did not know these people nor their role within the plaintiff. 316.On 29 November 2012, Parker informed the defendant by email that that they were members of the Exco members and were members of the group’s audit committee and that they were authorised to represent the Chinachem group to deal with the Minsheng dispute. 317.The defendant suggests that the above drastic change of stance on the plaintiff’s part was caused by a change in its central management. All the Deloitte administrators were removed in July 2012. It would appear that Victor Jong, one of the PwC administrators, was against the engagement of the defendant and Dishi. When the audit committee (with Jong as a member) took over the matter after the delivery of SPC judgment, that led to the issue of the letter of 23 November 2012. 318.The plaintiff’s clear indication that it no longer considered itself bound by the Agreement amounted to a repudiation. It was accepted by the defendant through its solicitors’ letter dated 4 December 2012. Illegality 319.In relation to the plaintiff’s alternative case based on illegality, the defendant’s position is, in summary, this. 320.First, the plaintiff has failed to satisfy the onerous burden of proving the alleged illegal conduct on the part of the defendant. 321.Secondly, the defendant’s central obligations under the Agreement, in particular, the assumption of financial risks and obligations for the benefit of the plaintiff, has nothing to do with illegality. Even according to the plaintiff’s own case, any illegal act by the defendant had no impact on the result of the SPC appeal. Hence, any illegality was incidental rather than material to the Agreement, and it follows that the plaintiff’s case on illegality must fail: Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544 at para 39 (under the fourth type). First conduct: alleged donation to Renmin University 322.The defendant’s case is that the donation to Renmin University was promised by David Hui back in late 2009 or early 2010. This is evidenced by the Donation Memorandum itself. The defendant says that the document made clear that the donating subject (捐贈主體) was the Chinachem group. The defendant also relies on the following passage:
323.What the defendant did was to assist the plaintiff or the Chinachem group to honour such promise first, pending confirmation by the group’s board of directors or the Exco later on. In any event, the defendant’s case is that it did not make the donation. 324.This is what Lam Yee Kung said in his written evidence:
Second conduct: alleged improper influence on a judge 325.The defendant points out that the plaintiff’s pleaded case is that the defendant “procured or instructed” Prof Han to appoint Judge Wan as a PhD supervisor at the Faculty of Law of Renmin University and offer assistance to Judge Wan’s daughter. However, it was not put to any of the defendant’s witnesses that they “procured or instructed” Prof Han to do such acts. There is in fact no evidence to prove that the defendant took part in the alleged conduct. 326.Lam Yee Kung’s evidence is that he only learned of Judge Wan’s appointment and the communications between Judge Wan and Prof Han through Prof Long after they had already occurred, and that the defendant had not participated in the same. 327.In any event, there is no primary evidence before the court as to (1) whether Judge Wan was in fact appointed and whether his daughter was in fact enrolled into Renmin University and, if so (2) whether such appointment or enrolment were in fact well qualified. Given the stature of Judge Wan, the defendant says that it would indeed be to Renmin University’s favour to have Judge Wan on board as a PhD supervisor. Third conduct: alleged receipt and divulging of confidential information 328.The defendant points out that the plaintiff’s pleaded case is that that the defendant has “obtained confidential information about the SPC Appeal … on the basis that the Defendant caused member(s) of the court staff to deliberately divulge confidential information relating to the SPC’s internal procedures, deliberation and discussions on the SPC Appeal”. 329.The defendant says that the plaintiff simply cannot prove that the information relied on were as a matter of fact confidential information about the SPC appeal. Instead, the information could have been the defendant’s guesses, hearsay or bluff. Indeed, many of them could be gathered or deduced by the defendant based on available information. As for the rest, Lam Yee Kung explained that he may have heard it from entrusted persons but the defendant was simply not in a position to verify the truth of the same. 330.Furthermore, the plaintiff simply cannot prove that the defendant actively took steps to cause members of the court staff to deliberately divulge confidential information to it. There is no evidence to suggest that the defendant had any direct contact with the judges dealing with the SPC appeal. Putting the plaintiff’s case at its highest, all that the defendant did was to (1) deduce or infer (or, at worst, speculate) based on available information and experience, and (2) report to the plaintiff the hearsay overheard by the defendant from entrusted persons. Indeed, it was not even put to any of the defendant’s witnesses that they caused members of the court staff to deliberately divulge confidential information to the defendant. 331.Lastly, a lot of the information could be deduced or inferred by the defendant. In his written evidence, Lam Yee Kung explained the situation as follows:
332.The plaintiff cites 10 instances where it says the defendant made references to confidential information in relation to the SPC appeal: see para 194 above. The defendant’s responses are as follows. The 10 sub-headings below correspond to the respective sub-paragraphs in para 194. (1) The defendant’s update report dated 20 October 2009 333.Lam Yee Kung explained in his written evidence that the defendant had deduced that China SME should have obtained comments from leaders (高層領導批示) adverse to Chinachem. He was not cross-examined on his explanation. 334.The deduction can be supported by the following:
335.In fact, it was Lam Yee Kung’s analysis at that time: see the document circulated on 5 November 2009:
(2) The defendant’s report dated 12 January 2010 336.This was an inference drawn by Lam Yee Kung. 337.The inference can be supported by the following: 338.In the mediation hearing on 14 October 2009, Judge Liu mentioned that the Judicial Committee had already considered the matter, and further disclosed that, even if mediation was unsuccessful, the court could not grant the Minsheng shares to the plaintiff. 339.Such adverse view was elaborated by Judge Chen on 30 October 2009. (3) The defendant’s status report dated 18 March 2010 340.The statement that the court had no legal basis to give full judgment in favour of the plaintiff was based on what the PRC court had said during various meetings. 341.At the meeting attended by Judge Liu and Dr Kung in February 2009, the judge said that what the plaintiff had done was in breach of the PRC Law. This was revealed in the Chinachem meeting held on 23 July 2009. 342.As explained above, the PRC court also mentioned repeatedly its adverse views against Chinachem during the mediation hearings. 343.As regards the suggestion that the Judicial Committee will schedule to consider and review the matter after the close of the National People’s Congress sessions, this was a deduction arrived at by the defendant. The deduction is not surprising given that the PRC Court repeatedly said during all mediation hearings that the PRC Court had internal deadline to determine the case. (4) The defendant’s update report dated 21 May 2010 344.It is plain from the content that the defendant was simply relating to the plaintiff the rumours it overheard, and making analysis on the same. (5) The defendant’s email dated 27 May 2010 345.This was at best Lam Yee Kung’s analysis, and at worst it was mere speculation. 346.The analysis was based on the following: 347.Judge Liu published 6 articles in the People’s Daily from November to December 2009. Based on that, Lam Yee Kung inferred that the case has gone into preparation for judgment and speculated the outcome. He also speculated that judgment might be out before lunar new year or afterwards, earliest in April 2020. 348.The clerk to the Fourth Civil Court of the SPC told Lawyer Jiang that all mediation must be completed before 30 June 2010. (6) The defendant’s email dated 19 August 2010 349.This could be an educated guess by Lam Yee Kung. 350.Given that mediation had ended in July 2010, and the court was very strict by imposing a final deadline of 20 July 2010, it was to be expected that the hearing of the case would take place right after the deadline (ie in August 2010). Hence, it is on any count an estimate open to Lam Yee Kung. (7) The defendant’s report dated 12 October 2010 351.The SPC’s request to China SME to submit the subject-matter of the case in written form was nothing secretive. Insofar as the Judicial Committee requested the Fourth Civil Court to make inquiries regarding the historical facts of the case, the defendant says that the explanation of the case as a “historical problem” had previously been mentioned and envisaged by Judge Liu. (8) The draft 3rd supplemental agreement sent by the defendant to the plaintiff on 14 February 2011 352.This was an estimate open to Lam Yee Kung. By February 2011, mediation had ended. (9) The defendant’s email dated 25 October 2011 353.In respect of expropriation, this had been the position of Mrs Wang, and this was also referred to in the mediation hearing on 14 October 2009 and repeated in subsequent mediation hearings. 354.With regard to the Judicial Committee’s request to seek opinions of legal experts, the defendant says that the fact that experts were engaged was mentioned by Judge Liu during the mediation hearing on 14 October 2009. After that, on 28 June 2010, Judge Liu explained that before the case reached him, experts were engaged. Thereafter, he instructed experts once more and they again reached the inclination to expropriate, such that they decided to add an expropriation clause in the draft judicial opinion. 355.As regards the suggestion that the Collegial Panel led by presiding judge Wang Yun persisted in their views which resulted in a prolonged delay of this case without decision, this is consistent with what Judge Liu said. In fact Judge Wang Yun also expressed her adverse views on 29 June 2010. (10) The defendant’s email dated 8 November 2011 356.This can be based on the defendant’s inference (or, at worst, speculation). After all, even the first instance court in the PRC accepted that the parties’ relationship was entrustment rather than loan. The real issue rather had been whether the entrustment could be given effect due to non-compliance with PRC law and regulations and, if not, whether the plaintiff should nevertheless be entitled to compensation linked to certain percentage of the Minsheng shares. Expert evidence on illegality 357.The relevant expert evidence of Mr Chen, the defendant’s expert, has been set out in the plaintiff’s case above. The counterclaim 358.Based on the above factual premises, the defendant contends that by reason of the parties’ conduct, the Agreement subsisted after 25 February 2011 because it was substituted by a new agreement in the same terms save without a definite time limit. It is therefore entitled to the remuneration in the sum of RMB 949,343,827.55 in accordance with the new contract. That is “the new contract” ground. I reproduce below the defendant’s plea on this:
359.In his oral submissions, contrary to what was pleaded, Mr Suen said that he no longer relied on (1) any rescission of the Agreement, and (2) any words (“orally”) in support of the new contract. 360.Alternatively, on the same factual premise, the defendant contends that the plaintiff is estopped from relying on the express terms of the Agreement to allege that the Agreement had expired. Accordingly, the plaintiff is liable to pay the remuneration in the same sum under the Agreement to the defendant. This is “the estoppel ground”. I reproduce below the defendant’s plea on this:
361.Alternatively, the defendant seeks the same sum or such other sum as the court considers reasonable for the services it had rendered to the plaintiff on the basis of unjust enrichment or quantum meruit. 362.This plea is contained in three short paragraphs. It is necessary to reproduce them below:
363.The reference to “Sections C to H” is a reference to the same facts as supporting the new contract ground and the estoppel ground. The grounds no longer pursued by the defendant 364.As noted at the outset, the defendant’s pleaded case contains many alternative cases or many strands or planks based on which it mounts both its defence and its counterclaim. At closing, Mr Suen confirmed that the defendant would rely on the following only: (1) the new contract ground, (2) the estoppel ground, and (3) unjust enrichment. As for the other strands or planks, the defendant would still maintain the factual allegations underlying them but it would no longer pursue them as separate alternative cases. 365.I think it is proper for me set out these “no longer pursued” grounds for the record:
ISSUES IN DISPUTE 366.The parties have jointly lodged an agreed list of issues. Although they have put forward different formulations in respect of some of the issues, I do not think that there is any material difference between them. I would adopt the list of issues as set out in the plaintiff’s closing submissions. The issues are further narrowed down to cut out those grounds which are no longer pursued, as confirmed by counsel at closing.
THE EVIDENCE 367.There are a number of discrete factual disputes which need to be resolved. 368.In assessing credibility of the evidence, the court should take into consideration the following factors:
369.See, eg, Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513 at para 53; Ageas Insurance Company (Asia) Limited v Lam Hau Wah Inneo CACV 65/2014, 9 January 2015 at para 38. 370.Applying the above principles, to the extent that there is conflict between the evidence of the plaintiff and that of the defendant, in my judgment, the plaintiff’s evidence is to be preferred. The plaintiff’s witnesses are generally credible. Their evidence is consistent with documentary evidence and is inherently probable. The plaintiff’s factual case is on the whole coherent, inherently plausible and internally consistent. By contrast, the defendant’s evidence contains some notable internal inconsistencies. A number of new revelations were made in the course of the cross-examination of its witnesses when there is no apparent reason why these matters were not disclosed before the trial. All these cast doubt on the general credibility and reliability of the defendant’s evidence. Joseph Leung 371.Joseph Leung was cross-examined for over one full day. His oral evidence was on the whole consistent with his own written evidence and the evidence of the other witnesses of the plaintiff. 372.He was cross-examined on the reasons for the delay in the SPC appeal before the Agreement. He said that the matter had been stalled for some time because Mrs Wang was not willing to compromise. He explained that Mrs Wang’s stature and connections were not lower or less than that of Zhang and Mrs Wang had built powerful connections during her lifetime, which were left to the plaintiff so if she had been minded to handle the Minsheng dispute, and if the plaintiff had not been handling other matters of concern (eg the litigation with Tony Chan), the plaintiff certainly had options open to it, and not only in the form of the defendant. In my view, the explanation is logical and inherently plausible. 373.Joseph Leung was also cross-examined on the Oral Promise and the other oral assurances allegedly made by David Hui. It was pointed out to him that despite knowing the defendant’s case in this regard, he did not deny in his witness statement that these oral assurances were made. To that, Joseph Leung admitted that he could not deny it because he did “not know if what Century Venture said was true or not”. But he reiterated that Dr Kung or David Hui did not have the authority to represent the Exco and that this was a fact known to the defendant. What is notable from the answer is that Joseph Leung appeared to try to frankly tell the court what is within his own knowledge and, equally importantly, what is not. 374.All the above helps to bolster his credibility as a witness. KP Chan 375.KP Chan was cross-examined for over one day. His oral evidence was consistent with that contained in his written statement as well as the contemporaneous documents. 376.He was cross-examined at length about the unsigned draft supplemental agreements. He was asked if clause 10(c) were changed, the period under clause 9 must either go away or must at least be extended. KP Chan explained that he was not in a position to say because he “didn’t know what the person who drafted this supplemental agreement thought”. Although he agreed in cross-examination to the logic of the proposition put to him, he reasserted that since he was not the drafter, he could not say what was in the drafter’s mind. He came across as a fair witness. 377.He said that he was not in a position to speculate about things which were not within his knowledge. It was pointed out to him that some of the matters stated in the drafts would be incorrect according to the plaintiff’s case. His answer was that he did not think it necessary to write back to the defendant to say that certain things were wrongly stated because, quite simply, the plaintiff did not sign on these drafts. 378.KP Chan’s evidence is generally consistent and coherent. He appears to be a credible witness. Winnie Chung 379.Winnie Chung was the personal assistant of Parker at the time. Her role was an administrative one. Her oral evidence was short and brief. She came across as a reasonable witness. She informed the court that given the passage of time, she simply could not remember many details. It is inherently plausible. There is no reason why her evidence should be doubted. Parker 380.Parker was subject to lengthy cross-examination. His oral testimony was consistent with his written evidence and the contemporaneous documents. He testified in a coherent manner. He did not try to embellish his evidence. For instance, like Joseph Leung, Parker admitted that he was not in a position to confirm or deny what David Hui had said to others, as he simply did not know. He said:
381.The defendant also cross-examined Parker on his evidence that the plaintiff had sought advice from Zhong Lun regarding the Agreement in around June, July or August of 2011. It was put to him that he had not stated this in his witness statement. Nor did he say in the witness statement that he had reported the legal advice to the Exco. Parker did not appear to shy away from the fact. He maintained that he was simply telling the truth in court. Mr Fung asked the court to bear in mind that the subject-matter here was legal advice and it is understandable that such legal advice has not been disclosed by the plaintiff in these proceedings on grounds of legal professional privilege. 382.It is relevant that in the earlier hearing in this case, Deputy High Court Judge Ramanathan, SC, having heard and observed Parker giving evidence, found his “account of events and actions to be clear, consistent and credible”. I share the same observation after hearing live evidence from him. 383.On the whole, I find that the plaintiff’s witnesses are generally credible witnesses. 384.As for the defendant’s witnesses, there are a number of notable inconsistencies within their evidence, especially when viewed against the contemporaneous documents. There were also new revelations made for the first time in the course of their oral evidence. All these cast doubt on their credibility as witnesses. Lam Yee Kung 385.First, Lam Yee Kung. 386.Lam Yee Kung has come across as a business savvy person. In fact, the observation applies equally to Lam Yee Hung and Joseph Pang. I have gained this impression not only from having seen them giving live testimony in court. It is also evident from their own evidence as to their personal background and the contemporaneous documents. 387.Lam Yee Kung ran a business dealing with computer products shortly after he settled in Hong Kong. Lam Yee Hung is also a businessman. Joseph Pang has extensive corporate experiences in Hong Kong. According to the defendant’s own case, the Lam brothers and Joseph Pang enjoyed strong social connections and networks in Hong Kong and Mainland China. That was in fact why the three of them were introduced to Dr Kung (and, later, the plaintiff) to assist in the Minsheng dispute in the first place. The Agreement itself involved huge sums of money to the tune of hundreds of millions of dollars. The three individuals were primarily responsible for delivering the result on behalf of the defendant. All these reinforce the conclusion that all three of them are business savvy people and have practical experiences in the commercial world. 388.In addition, Lam Yee Kung’s evidence is that he prepared all the reports and documents in relation to the Minsheng dispute for the defendant. Many of the documents were lengthy and contained a lot of details. They not only contained a recitation of factual matters but also set out the opinions and analyses of the defendant. I am not in a position to assess whether the facts were accurately stated or whether the opinions were sound or reasonable. But the content of the documents demonstrate that Lam Yee Kung is a person who is able to articulate his thoughts and ideas. 389.In view of this, the three of them, especially Lam Yee Kung, should have no difficulty in understanding counsel’s questions, which were put in a straightforward and easy-to-understand manner. Nevertheless, in his cross-examination, Lam Yee Kung often displayed an inability to answer simple questions directly. Questions had to be repeated to him more than once. Instead of answering the questions directly, he often started his replies by stating irrelevant matters. In view of his background, I do not think that all these were due to an inability to express himself clearly. Instead he gave the impression that he was not being forthcoming in his answers. 390.It will be recalled that one of the central themes running through the plaintiff’s case is that the defendant at all times knew that any major decision of the plaintiff required approval from the Exco and no single individual could make such a decision on the plaintiff’s behalf. The plaintiff says that it is evidenced by what the defendant itself wrote in its reports at the relevant times. See paras 119 to 126 above. 391.Naturally, Lam Yee Kung, the author of these reports, was cross-examined on this topic by reference to those documents one by one. His answers however were inconsistent and incoherent. 392.It is necessary to set out his answers verbatim to illustrate the manner in which he gave answers. The extracts below are lengthy. This is because Lam Yee Kung often failed to answer the questions straightaway which prompted counsel to follow up. In the end, the various answers he gave on the same topic were inconsistent and incoherent. 393.First, he was asked questions relating to the note of the fourth mediation hearing held on 29 June 2010: see para 122 above. The question was what he meant by the phrase “the decision-making body”. The following exchange took place:
394.After the lengthy exchange, he finally gave the answer that by the phrase “the decision-making body”, he meant the board of directors of Chinachem. 395.On the next day, Lam Yee Kung was asked questions relating to the minutes of the Shenzhen mediation held on 15 July 2010: see the first extract in para 126 above. The question was whether the defendant knew at that time that any major decision of the plaintiff had to be made by the Chinachem board of directors. The following exchange took place:
396.At the end of this exchange, unlike the answer above, Lam Yee Kung’s answer was a little equivocal. 397.A little later that day, he was asked questions on the same document but in relation to a different paragraph, that is the second extract in para 126 above. This time the question was whether the defendant knew at that time that no one single person could make decisions for Chinachem. The following exchange took place:
398.Contrary to the previous two answers, this time Lam Yee Kung disagreed with the plaintiff’s proposition. Instead he suggested that what he said were merely things uttered as “negotiation tactics”. 399.It is clear from the above exchanges that Lam Yee Kung’s answers on the central theme of the plaintiff’s case were inconsistent and incoherent. The suggestion of “negotiation tactics” was a revelation made for the first time in this action. Lam Yee Kung did not say anything about it in his witness statements. I have grave doubt about the veracity of this last-minute revelation. 400.In addition to the “negotiation tactics” suggestion, Lam Yee Kung mentioned a number of other things for the first time in his oral testimony, these being matters that had never previously been raised in his statements or in the defendant’s documents. Mr Fung submitted that if these matters were true, there is no reason why they were not previously disclosed. This casts doubt on the truth of such late revelations. I agree. They include the following:
401.For the above reasons, there is grave doubt over the credibility and reliability of Lam Yee Kung’s evidence. Joseph Pang 402.I turn now to Joseph Pang’s evidence. 403.What is remarkable of his evidence is that during cross-examination, Joseph Pang accepted the plaintiff’s proposition that the defendant had knowledge at the material times that all major decisions of the plaintiff had to be made by the Exco. See para 117 above. 404.When it was put to him that the defendant did not treat the extension of the Agreement as a mere formality as otherwise it would not have asked the plaintiff to sign the various draft supplemental agreements, he again agreed with the plaintiff’s position: see para 108 above. 405.Joseph Pang also conceded in cross-examination that a conversation that he had claimed to have occurred in his witness statement in fact had not taken place. In his witness statement, he said that David Hui had stated that the Exco had consented to the extension of time limit and had signed the draft 2nd and 3rd supplemental agreements: see para 273 above. In direct contradiction to his statement, he confirmed under cross-examination that David Hui had never said that the Exco would agree to extend time. 406.In his witness statement, he said that a consensus had been reached between the parties at the Beijing meeting. Under cross-examination, he however accepted the plaintiff’s position that no consensus had in fact been reached and that all that had happened was each party had heard the other’s position. 407.Mr Fung submitted that Joseph Pang’s various factual concessions and admissions in cross-examination in respect of important aspects of the defendant’s case undermine (1) his written statement, and thus the court should not accept what is stated there at face value, and (2) the defendant’s case generally because one of the defendant’s witnesses admitted that he could not maintain an admittedly false version of events. 408.I agree with the submission. Given the inconsistencies between his written evidence and oral evidence, the reliability of Joseph Pang’s testimony on the whole is in doubt. Lam Yee Hung 409.The defendant’s last witness was Lam Yee Hung. 410.During cross-examination, Lam Yee Hung made a number of new revelations, which go to a material part of the defendant’s case. If these matters were true, they ought to have been set out earlier in the written statement and not revealed for the first time only in court. 411.For example, he was asked in cross-examination about the Oral Promise made by Dr Kung, through David Hui: see paras 226 to 227 above. He was asked why the Agreement did not include what Dr Kung had said. Lam Yee Hung said, for the first time in this action, that it was because (1) Dr Kung and David Hui had said these were just matter of formality, (2) these agreements were immaterial, and (3) these were just words of lawyers. Lam Yee Hung was then asked to explain why these matters, if true, had never been set out in his witness statement. He replied that due to his education level, he did not fully understand this thing, this thing being the Agreement. 412.Mr Fung submitted that his answer does not provide any cogent explanation for why if such words had really been said by Dr Kung and David Hui, they could not be included into the Agreement. 413.Furthermore, Lam Yee Hung’s oral evidence was at times incoherent. He gave the impression that he had not seriously considered the truthfulness of what he said. 414.For example, he had first said that he thought it was unimportant for the supplemental agreements to be signed. He then deliberately asked to add something to his answer, namely that “for all the written documents and all the legal things” he did not understand them at all and they were dealt with by Lam Yee Kung and Joseph Pang. Counsel pointed out to him that it was inconsistent for him to first say that signing was unimportant and then to say that he did not understand these things. Lam Yee Hung then said, incoherently, “I cannot tell whether it was important or not. This is the first point. Every time when I telephone Dr Kung and David Hui, they firmly said that “Already signed, already signed, no problem, not a problem.” It was the answer that they gave me.” 415.Similarly, when asked about the allegation made in his witness statement that Joseph Pang had asked Dr Kung and David Hui about the draft 4th supplemental agreement whereupon Dr Kung had allegedly said there was no need to have any further meetings, Lam Yee Hung alleged for the first time that “[s]uch things were not just said once” and that “when it was said, I was present.” Again, these allegations did not feature in his witness statement at all and were only advanced for the first time in the box. 416.In addition to the above, when testifying, Lam Yee Hung at times appeared evasive and seemed to try to deflect some of the questions by claiming that he did not handle the documents and others were responsible for them (even ones that he had signed) or that he was not well educated. These responses were unsatisfactory and did not properly answer the questions put to him. 417.For the above reasons, I am sceptical of accepting Lam Yee Hung’s evidence at face value. The truthfulness of his testimony is in doubt. FACTUAL FINDINGS 418.Based on my assessment of the evidence, I proceed to make the factual findings which are necessary for the resolution of Issues (1), (2) and (4). 419.First, I find that there was in place the decision-making process as alleged by the plaintiff. All major decisions, including those relating to the Agreement and the SPC appeal, were subject to the approval of the Exco. No single individual could make decisions on behalf of the plaintiff. 420.This fact is supported by the testimony of Joseph Leung. There is no reason for the court to doubt what he said on oath on this issue. Furthermore, the indisputable facts are that a huge sum of money was at stake in the Minsheng dispute and the Agreement was in operation at a time when the APLs were appointed to oversee the management of the Chinachem group. It is inherently plausible that decisions in relation to the Minsheng dispute, the SPC appeal and the Agreement would be subject to the scrutiny and approval of the Exco. 421.Secondly, I find that the defendant knew at all material times that the plaintiff was subject to the above decision-making process. 422.The fact is fully supported by the contemporaneous documents, including most notably the reports and documents written by the defendant itself: see paras 120 to 126 above. I reject the suggestion of “negotiation tactics” made by Lam Yee Kung for the first time in the witness box. I also draw support from the various admissions made by Joseph Pang concerning the defendant’s knowledge in his cross-examination: see paras 108, 115, 117 and 118 above. Furthermore, the objective facts are that the defendant’s emails were sent to members of the Exco and that the various draft supplemental agreements were also sent by the defendant to members of the Exco for approval. 423.On the whole, it is plain from the evidence that the defendant knew the vital role of the Exco and it acted accordingly in its dealings with the plaintiff at all material times. 424.Thirdly, I reject the defendant’s contention that the dealings between the plaintiff and the defendant were informal in nature. This follows from my second finding above. 425.Fourthly, I find that the Oral Promise was not made as alleged. In my view, its existence is not made out on the basis of the defendant’s own evidence. 426.On this issue, Mr Fung made the following submissions:
427.I accept these submissions. 428.Given the inconsistencies and the inherent implausibility in the defendant’s case on the Oral Promise, the defendant has failed to make out a prima facie case for it. As such, I reject its submission that I should draw an adverse inference against the plaintiff arising from its failure to call upon David Hui or Dr Kung to testify on this issue. This is because there is no prima facie for the plaintiff to rebut in the first place: see Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd CACV91/2012, 17 September 2013 at paras 106 to 107. 429.Fifthly, I find that the defendant knew that in order to extend the time limits under the Agreement, it was necessary for the plaintiff to agree to the extension in writing, because of the written modification only clause in the Agreement. This is supported by the oral evidence of the defendant’s own witnesses: see paras 107 and 108 above. 430.Sixthly, for the same reasons, I reject the defendant’s assertion that it had treated the extension of the Agreement as a mere formality. 431.Seventhly, I reject the defendant’s allegation that Lam Yee Hung and Joseph Pang had been told by David Hui that the 2nd and 3rd supplemental agreements had been signed. Lam Yee Hung’s oral evidence on this allegation was incoherent and thus unreliable: see para 414 above. 432.Eighthly, I find that during the period from 25 February 2011 to about December 2012, the defendant knew that the Agreement had expired and had not been renewed or extended, and that it continued to work on the Minsheng dispute in the hope that the plaintiff would renew the expired Agreement or enter into a new agreement with it. I make this finding for the following reasons. 433.There can be no dispute that the defendant knew that the Agreement had expired on 25 February 2011 in accordance with its terms. I have found above that it knew that it was necessary for the plaintiff to agree to an extension in writing due to the written only modification clause. It also knew that any extension would need the approval of the Exco. In my view, that was why the defendant kept sending the various draft supplemental agreements to the members of the Exco for approval. None of these further supplemental agreements were signed. 434.It is true that the plaintiff continued to deal with the defendant after the scheduled expiry. It is also true that it did not ask the defendant to cease providing services. Nor did it ever expressly indicate to the defendant that the Agreement had expired. However, it must be borne in mind that the parties were operating in a commercial context, with a high-value contract at stake. The parties had taken the trouble to document their arrangements in the Agreement and the Supplemental Agreement. The parties did not deal with each other in an informal manner. Lam Yee Kung, Lam Yee Hung and Joseph Pang are all business savvy individuals. In the circumstances, I accept Mr Fung’s submission that the court is entitled to infer that they carried on working on the Minsheng dispute after the scheduled expiry, not because they believed that the Agreement was still subsisting. Rather they did so because they were hoping for an extension of the Agreement or a new contract and that was why they took the risk that the defendant might not get paid for the things which they did after 25 February 2011. 435.As regards Issue (5) concerning illegality, I shall set out the relevant factual findings below without going into the details. This is because, as will be seen below, I shall rule in favour of the plaintiff on Issues (1), (2) and (4). Hence, it is not necessary for me to rule on Issue (5). I would simply record here that I generally accept the plaintiff’s submissions in this regard. The factual findings which the plaintiff invites the court to make are well supported by the contemporaneous documents. 436.First, I find that the defendant’s promise to make a donation to Renmin University as recorded in the Donation Memorandum was made with a view to procuring Prof Long and Prof Han to influence the opinion of the CBRC in favour of the plaintiff, as well as procuring a successful result for the plaintiff in the SPC appeal. I further find that in around July 2012, the defendant did make a donation of RMB 1 million to Renmin University pursuant to the Donation Memorandum. 437.Secondly, I find that the defendant had taken improper steps through the entrusted persons since late 2010 to influence the senior management of the SPC, including Judge Wan. The appointment of Judge Wan as a PhD supervisor and his daughter’s enrolment as a PhD student at Renmin University were made for the purpose of (1) expediting the progress of the SPC appeal and (2) procuring Judge Wan to accept the specialists’ view that the relationship between the plaintiff and China SME was one of entrustment so that the Minsheng shares would be awarded to the plaintiff. 438.Thirdly, I find that the defendant had obtained and divulged confidential information about the internal meetings and deliberations within the SPC in relation to the SPC appeal with a view to using such information for the purpose of obtaining a favourable outcome for the plaintiff in the SPC appeal. DISCUSSION 439.Based on the above factual findings, I now turn to address each of the issues set out in para 366 above. Issue (1) – whether the Agreement had prima facie expired on 25 February 2011 440.The answer to Issue (1) turns on a proper construction of the Agreement, as amended by the Supplemental Agreement. In my view, it is plain that the Agreement had prima facie expired on 25 February 2011. 441.The factual background to the Agreement is that at that time the plaintiff had been waiting for the SPC to hand down its judgment in the appeal for over 6 years. 442.The objective intention of the parties can be readily gathered from the express clauses of the Agreement. It is evident from clauses 5.1 and 10(c) that the parties contemplated that the defendant would have a short time frame of 6 months to obtain the desired second instance results. The time frame was later extended to 12 months pursuant to the Supplemental Agreement. In addition, as expressly provided for in clause 9, the Agreement would in any event terminate 18 months from the date of the Agreement. Clause 7 provided that that time was of the essence. 443.Under the express provisions, if the defendant was unable to achieve the desired second instance result within 6 months, then the plaintiff would have 2 options: it could serve a written notice to terminate under clause 10(c), or if it did not do that, it could just wait for the expiry of 18 months, at which point the parties would be able to walk away from the Agreement. That was the express contractual mechanism. 444.When the clauses are read as a whole and against the factual background, the date of 25 February 2011 was plainly intended as a longstop date for the arrangements under the Agreement. This date provided commercial certainty to the parties as to when the arrangements under the Agreement would come to an end. 445.There is no dispute that as at 25 February 2011, the SPC had not delivered a judgment in respect of the SPC appeal and the dispute between the plaintiff and China SME had not been settled by means of mediation. Accordingly, the Agreement had prima facie expired on 25 February 2011. The answer to Issue (1) is “Yes”. 446.By way of footnote, I should just record here that Mr Suen in his submissions addressed Issues (1) and (3) together. As a result, I have not been able to deduce whether he indeed gave his answer to Issue (1), and if so, what that answer was. Issue (2) – whether the Agreement had been substituted with the alleged new contract 447.The general principles on implied contracts are not in dispute. The courts will not lightly imply such a contract. The test is an objective one. The conduct relied on must be unequivocally referable to the contract sought to be inferred. Moreover, it is not enough to show that the parties have done something more than, or something different from, what they were already bound to do under obligations owed to others. What they do must be consistent only with there being a new contract implied, and inconsistent with there being no such contract. It would be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract. See Shanghai Tongji Science & Technology Industrial Co v Casil Clearing Ltd (2004) 7 HKFCAR 79 at paras 38 to 39. 448.The defendant’s case is that by reason of the parties’ conduct, the terms of the Agreement subsisted after 25 February 2011 because it was substituted by a new agreement in the same terms save without a definite time limit. Mr Suen invited the court to look at what the parties did and, equally importantly, what they did not do both before and after 25 February 2011. 449.My first difficulty with the alleged new contract is that it is unclear when it came into existence. I do not think that the defendant has ever attempted to make it clear in this action the specific date or period of time at which it says the alleged new contract came into being. There is nothing in its pleadings, its witness statements or even the final submissions of counsel which addresses this point. The defendant’s pleaded case is that the Agreement was substituted by the alleged new contract. Was the former substituted (and therefore came to an end) prior to its scheduled expiry, upon its scheduled expiry or afterwards? I simply do not know. 450.In any event, when ascertaining the objective conduct of the parties, I would adopt the date of 25 February 2011 as a notional dividing line. The conduct of the parties before that date and after that date warrants different legal analyses. 451.In this regard, Mr Suen submitted that the conduct of the parties both before and after 25 February 2011 must be looked at as a whole. This is because performance is in a continuum, and works done before 25 February 2011 are the foundation for works done after that date. I do not take issue with this submission per se. However, the fundamental difference between the two periods is that during the former, the Agreement was still in effect according to its express terms whereas during the latter, the Agreement had already prima facie expired. 452.In respect of the period from 25 August 2009 to 25 February 2011, given that the Agreement was still in effect according to its express terms, it seems plain to me that the parties’ conduct must be accounted for by reference to the Agreement. For that simple reason, it is not referable to the alleged new contract. Applying the test in Shanghai Tongji, the alleged new contract could not have arisen during this period. 453.In respect of the period after 25 February 2011, in my view, the objective conduct of the parties does not point to the existence of the alleged new contract. It is in fact consistent with (1) there being no subsisting contract between the parties, and (2) the defendant attempting to persuade the plaintiff to renew its engagement and hoping to have the Agreement renewed or extended, or for a new agreement to be entered into in relation to the Minsheng dispute. 454.Applying the objective test as stipulated in Shanghai Tongji, I am of the view that reasonable people in the position of the parties would not conclude that the alleged new contract had come into place. 455.The starting point of the analysis must be the express terms of the Agreement. Reasonable people in the position of the parties must be taken to know that (1) the Agreement was scheduled to expire on 25 February 2011, and (2) any change to its provisions, including any extension or renewal of its terms, must be done in writing. That is the objective knowledge of the parties at the time. 456.Against this background, the defendant continued to send various drafts of the supplemental agreements to the plaintiff to extend the term of the Agreement. But, save for the Supplemental Agreement, none of these further agreements were signed by the plaintiff. In my view, objectively speaking, the parties cannot be taken to have entered into a new contract merely by reason of the fact that the defendant continued to work and the plaintiff continued to accept their services. It must be remembered that we are here talking about a contract which was worth hundreds of millions of dollars. Objectively speaking, the conduct of the parties was consistent with the defendant trying to secure an extension or renewal of the Agreement after its scheduled expiry. 457.The defendant places a lot of emphasis on the open letter dated 9 November 2011. The argument is that the content of the letter made the defendant’s position very clear, namely that (1) it considered the signing of supplemental agreements to be a mere formality, and (2) it did not consider there to be any more time limit to the Agreement. In the letter, the defendant explicitly invited the plaintiff to respond in writing if the latter held any different view. There was no denial by the plaintiff to what was written in the letter. Mr Suen’s submission was that in light of the letter, it was unequivocal to the parties that all the things done by the defendant were done on the basis of a subsisting contract, and they were accepted by the plaintiff as such, without any disagreement or protest. 458.In my view, the open letter dated 9 November 2011 does not have the effect of altering the overall objective conduct of the parties. It is noteworthy that attached to the letter was a copy of the draft 5th supplemental agreement. The sending of yet another draft supplemental agreement to the plaintiff when the previous ones had been left unsigned would suggest to a reasonable bystander that any contractual relationship between the parties must be premised upon a written agreement. And that was why the defendant had kept sending these further drafts to the plaintiff. I should add here that the defendant places reliance on what it calls the “bundled up” relationship of the Agreement and the Dishi Agreement. However, whether that is a fair description or not, the two agreements dealt with work of different scope. The fact that the plaintiff was held liable to pay Dishi for works done after the scheduled expiry does not shed much light on the present analysis. 459.To conclude, the conduct relied on by the defendant to support the alleged new contract is more consistent with there being no subsisting contract than there being one. Applying Shanghai Tongji, I decline to hold that the alleged new contract had come into existence. I reject the new contract ground. My answer to Issue (2) is “No”. 460.The combined effect of my answers to Issues (1) and (2) is that the Agreement had in fact expired on 25 February 2011. Issue (4) – whether the plaintiff is estopped from contending that the Agreement had expired on 25 February 2011 or from denying that the Agreement was varied or extended 461.Relying on the same factual premise, the defendant contends that the plaintiff is estopped from contending that the Agreement had expired on 25 February 2011, or from denying that it had been varied or extended. 462.The defendant’s pleaded case is that by reason of the conduct of the parties, the plaintiff had represented to the defendant that the Agreement remained in force, that the provisions under clauses 9 and 11.5 no longer applied and became spent, and/or that the defendant continued to be engaged as the agent of the plaintiff under the Agreement. Further, in reliance on the above representation, the defendant continued to provide services to the plaintiff under the rubric of the Agreement and suffered detriment as a result. The detriment included its making a promise to make donations to Renmin University. On the other hand, the plaintiff was enriched by the defendant’s continued services leading to the SPC appeal judgment. It would therefore be unjust and inequitable to allow the plaintiff to renege from the representation. 463.As to the applicable legal principles on estoppel, there is a dispute between the parties as to whether the principles discussed in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119 are relevant. 464.Mr Fung submitted that the defendant is using the doctrine of estoppel to vary or extend the Agreement which contained an express provision requiring specific formalities to be observed for its variation or extension. The defendant is effectively seeking to undermine the efficacy of the written only modification provision contained in clause 11.5. In this context, he submitted what Lord Sumption said in Rock Advertising at para 16 is pertinent:
465.Mr Fung submitted that the conduct relied upon by the defendant, whether individually or cumulatively, cannot amount to a representation that the plaintiff would not insist on the strict requirement of the written only modification clause. To satisfy Lord Sumption’s criterion (i) would require a recognition of the informality. This test clearly is not satisfied even on the defendant’s own evidence. In fact, the defendant’s witnesses accepted that it all along knew that any change to the Agreement must be done in writing. 466.On the other hand, Mr Suen argued that the plaintiff’s submission based on Rock Advertising “has not much practical consequences”. He said that clause 11.5 “has no effect on the renewed contract” or “the estoppel analysis”. I have to say I do not understand the defendant’s position on this. Mr Suen did not elaborate on this point in either his written or oral submissions. 467.In any event, it seems plain that where a contract contains a written only modification provision, Rock Advertising seems to impose a higher threshold on the party alleging estoppel than in the conventional analysis of estoppel. For the estoppel to arise, it requires the parties to acknowledge in some way the formality requirement but nonetheless choose to go ahead to vary the contract in an informal manner. In the present case, I do not find it necessary to decide whether the higher threshold contemplated in Rock Advertising applies and if so whether the threshold is met. This is because even applying the conventional analysis, the estoppel is not made out on the facts as found. 468.I have rejected that the dealings between the parties were informal in nature. I have found that the Oral Promise was not made as alleged. I have also rejected the defendant’s assertion that it had treated the extension of the Agreement as a mere formality. More fundamentally, I have found that the defendant was aware that any decision of the plaintiff relating to the Agreement and the Minsheng dispute would require approval of the Exco and that any extension or renewal of the Agreement would need to be done in writing. The undisputed facts are that (1) no Exco approval was ever given for the extension or renewal of the Agreement, and (2) except for the Supplemental Agreement, none of the subsequent draft supplemental agreements were ever signed by the plaintiff. 469.The above facts are fatal to the estoppel ground because they are directly contradictory to the alleged representation. The representation is simply not made out. The estoppel ground fails at the first hurdle. In any event, on the facts as found, there could be no reliance by the defendant on the representation. The estoppel ground would also fail for this reason. 470.My answer to Issue (4) is therefore “No”. Issue 5 – whether the Agreement is unenforceable on grounds of illegality and/or it is contrary to public policy of the PRC/Hong Kong 471.It follows from my answers to Issues (1), (2) and (4) above that the defendant is not entitled to the remuneration under the Agreement. Because of that, it is not necessary for me to rule on Issue (5), which concerns the issue of illegality. But as parties have made submissions on the issue, I shall deal with it very briefly. 472.In paras 436 to 438 above, I have made the factual findings relevant to the issue of illegality. 473.On PRC law evidence, I accept Prof Liu’s opinion, which is supported by the Beijing judgment. I therefore find that the defendant’s conduct amounted to an interference with the independent exercise of judicial power of the SPC and the administration of justice in the PRC, and the defendant has accordingly violated the public policy of the PRC. 474.Applying Ryder, the Agreement is unenforceable as the defendant’s actual performance of its obligations was in serious violation of the public policy of the PRC. This case comes within the fourth type of cases referred to in para 39 of Ryder. 475.Furthermore, the defendant’s conduct is seriously incompatible with public policy in Hong Kong on the ground that it abuses, prevents or impedes the due course of justice, or perverts the course of justice. For that reason too, the court should not enforce the Agreement. 476.The answer to Issue (5) is therefore “Yes”. There is no reason why the plaintiff is not permitted to allege that the Agreement is unenforceable. Issue (6) – whether the defendant is entitled to any sum under the Agreement or on the basis of unjust enrichment 477.In relation to the counterclaim based on unjust enrichment, the court should ask the following questions: (1) Was the plaintiff enriched? (2) Was the enrichment at the defendant’s expense? (3) Was the enrichment unjust? (4) Are any of the defences applicable? See Shanghai Tongji at para 67. 478.In my judgment, the defendant has failed to show that the plaintiff has been enriched by the work done by the defendant. Hence, the claim for unjust enrichment must fail. 479.I have recited the defendant’s plea in para 362 above. It asserts that “the Plaintiff was enriched by the services provided and works undertaken by the Defendant … as pleaded in Sections C to H above”. Such services included all the works that it did from August 2009 to November 2012. 480.Insofar as the works carried out from 25 August 2009 to 25 February 2011 are concerned, the defendant cannot rely on them to support its unjust enrichment claim, as the works were carried out pursuant to the Agreement which was subsisting during that period. 481.In Shanghai Tongji, Ribeiro PJ said, at para 92:
482.As regards the works carried out after 25 February 2011, as a matter of law, the court is concerned with the value of the benefit conferred by the works, but not the end product or profits arising from such works. 483.In Benedetti v Sawiris [2014] AC 938, Lord Clarke said, at para 24:
484.It is therefore necessary for the defendant to precisely identify what work is being relied upon in the counterclaim. Once the work is identified, the defendant then has to say what benefit has been conferred on the plaintiff by that piece of work, and the value of such benefit. 485.In the pleading, in the claim for unjust enrichment, the defendant has simply made a general reference to all the works which it had carried out in relation to the Minsheng dispute. It has failed to say what actual benefit those works had conferred on the plaintiff, let alone the value of the benefit. What the plea amounts to is simply that the defendant had done the works. But the provision of such works does not equate to conferring a benefit on the plaintiff. For instance, the defendant had written a number of update reports to the plaintiff. If the defendant’s case is that these reports had conferred a benefit on the plaintiff, the burden is on the defendant to plead to and adduce evidence of the objective value of such benefit. It is for the defendant to spell out the benefit. The defendant has not spelled out the benefit. Where there is no benefit, there is no enrichment. 486.On this point, I should just add that there is no plea to the effect that those works (such as providing update reports and attending presentations) had caused the SPC to hand down its judgment in October 2012. Nor is there any evidence to that effect. If there were such a plea and such evidence, it might be arguable that the benefit to the plaintiff was the SPC judgment. However, that is not the case run by the defendant in this action. 487.To conclude, the defendant has failed to show that the plaintiff had been enriched by its works. The claim for unjust enrichment must fail. 488.The answer to Issue (6) is therefore “No”. Reliefs 489.To conclude, the Agreement had expired on 25 February 2011. It was not substituted by the alleged new contract or any other contract. The plaintiff is not estopped from saying the above. In the circumstances, in accordance with the express terms of the Agreement, the defendant is not entitled to receive any remuneration. In addition, the unjust enrichment claim of the defendant is not made out. The defendant’s counterclaim therefore fails. The remaining issue is whether I should grant the two declarations sought by the plaintiff. 490.The defendant’s position is that the declarations should not be granted as the plaintiff has not come to the court with clean hands. The defendant refers to the plaintiff’s own plea that at the time when the Agreement was entered into, the plaintiff knew or intended that illegal means under the PRC law would be used: see para 158 above. 491.The parties have made extensive submissions on this point. I do not propose to go into them. 492.The short point here is that declaratory relief is discretionary in nature. I have already made substantive rulings on the rights and obligations of the parties in relation to the Agreement. The grant of the declarations would not serve any useful purpose. For that reason alone, I decline to grant the declarations. ORDERS 493.I order that the defendant’s counterclaim be dismissed. 494.I further make a costs order nisi that the plaintiff do have costs of the action and the counterclaim, including any reserved costs, to be taxed if not agreed, with a certificate for two counsel.
Mr Eugene Fung, SC and Ms Elizabeth Cheung, instructed by Linklaters, for the plaintiff Mr Jenkin Suen, SC and Ms Frances Lok, instructed by Haldanes, for the defendant | ||||||||||||||||||||
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