Syloon Global Ltd v. Kung Sau Kwan and Others

HCA 1554/2022

[2024] HKCFI 1212

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1554 OF 2022

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BETWEEN

(By Original Action)

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AND BETWEEN

(By Counterclaim)

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DECISION

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1.Before me was the contested hearing of the application of the Plaintiff by Original Action (“P”) by summons dated 17 August 2023 (“P’s Summons”) for

a. summary judgment against respectively the 1^st, 2^nd and 3^rd Defendants by Original Action (respectively “Kung”, “D2” and “D3”, and together “Ds”) for, among others, a declaration, an order for payment and to trace and/or an account as against Kung in respect of US$65,000, as against D2 in respect of US$300,000 and as against D3 in respect of US$1,396,104.61, or alternatively for damages, equitable compensation and/or restitution for unjust enrichment as against Ds for a total sum of US$2,141,136.05; and

b. the striking-out of the Counterclaim by Kung against P and Mr Zhang Jilong (“Zhang”) filed herein on 22 May 2023 on the grounds that it is scandalous, frivolous, vexatious and/or may prejudice, embarrass or delay the fair trial of this action and/or is an abuse of process.

2.Though Hisen Holdings Limited, a BVI company, is being sued as the 4^th Defendant (“D4”) and it is alleged that Kung had misappropriated HK$2,000,000 by withdrawing the same from the Hong Kong Current Account (defined below) and paid it to D4 on 24 May 2022, P does not seek summary judgment in this application as against D4.

3.On behalf of P and Zhang were filed the 3^rd and 4^th affirmations of Zhang (respectively “Zhang 3^rd” and “Zhang 4^th”) and on behalf of Ds was filed the 2^nd affirmation of Kung (“Kung 2^nd”).

4.Mr John Hui (with Mr Kwan Ping Kan) appeared for P and Zhang. Mr Mike Lui SC leading Mr Jun Lee appeared for Ds.

The background

5.The below background matters are not seriously disputed, unless specified otherwise.

6.In 1998, Kung incorporated D2, of which Kung has been the sole director and shareholder, and started a business trading mainly in stationery. Kung also has been the sole shareholder and director of D1 and D3.

7.As business grew and in 2001, Kung incorporated PAX Deutschland Holdings Limited (“PAXCo”), a Hong Kong company, which since has been operating the business of manufacturing and exporting stationery under the brand name “PAX”. As the reputation of the brand name grew and as a result of the consistent participation of PAXCo in the Gift and Premium Exhibition hosted by Hong Kong Trade Development Council (“HKTDC”), PAXCo was given priority over the years and therefore was able to secure the use of exhibition booths situated at the more sought-after prime locations.

8.Since 2004 and 2006 respectively, Zhang and his wife have been operating Ningbo Syloon Import & Export Company Ltd and Ningbo Syloon Stationary Company Ltd (separately or together, “Ningbo Syloon”), both of which are Mainland companies, with the latter engaging in the businesses of manufacturing stationery and the former exporting them to over 60 countries worldwide.

9.Since 2013, Zhang and Kung got acquainted.

10.Between 2013 to 2016, PAXCo sub-letted the use of its exhibition booths to Ningbo Syloon. However, the sub-letted booths were only allowed to display PAXCo’s company name rather than any other. Zhang found such an arrangement not ideal for marketing and branding of Ningbo Syloon.

11.After discussion between Zhang and Kung, it was agreed that a company containing the word “Syloon” in its English name and the words “賽龍” in its Chinese name would be incorporated and owned by Kung, so that the exhibition booths could be applied by Kung in the name of that company which would enable the words “Syloon” and “賽龍” to be displayed at the booths to promote and market the business of Ningbo Syloon.

12.On 12 May 2016, P was accordingly incorporated with Kung as the sole shareholder and director.

13.Between 2017 to 2020, Kung successfully secured the exhibition booths from HKTDC in P’s name for the above-mentioned use by Ningbo Syloon, which has been paying various expenses, hiring and service fees and annual administrative and secretarial costs of P as invoiced by Kung. Initially (it is not clear until when), these expenses, fees and costs were paid to D2, because, according to Kung, P at the time was not able to open a bank account as it had no business track records.

14.It is common ground that in August 2018, Kung caused P to open the following bank accounts with Standard Chartered Bank (together “the SCB Bank Accounts”):

a. Account number 574-1-144171-7 (“HKD Savings Account”);

b. Account number 574-144180-06 (”RMB Savings Account”);

c. Account number 574-0-107205-0 (“HKD Current Account”);

d. Account number 574-0-107213-1 (“RMB Current Account”);

e. Account number 574-0-107209-3 (“USD Account”); and

f. Account number 574-1-144176-8 (“the 768 Account”).

15.It is also common ground that on 27 April 2019, Zhang had a meeting with Kung at P’s then office to discuss, inter alia, how to use the SCB Bank Accounts in connection with Ningbo Syloon’s business (“the April 2019 Meeting”).

16.It is also common ground that on 9 March 2020, Kung transferred her entire shareholding in P to Zhang for a nominal consideration of HK$1. Noteworthily, despite the change in ownership, it is common ground that thereafter until October 2022, which was about a month before this action was commenced:

a. Kung remained a director of P and Zhang was appointed as a second director;

b. Kung remained as the sole authorized signatory of the SCB Bank Accounts; and

c. Kung continued to keep in her possession the token to operate the internet banking of the SCB Bank Accounts.

17.It is also common ground that since about early June 2020 until August 2022, Ningbo Syloon has caused substantial amounts of money, what P said were payments by customers of Ningbo Syloon, to be paid into the 768 Account.

18.On 19 October 2022, Kung was removed as a director of P and the sole signatory of the SCB Bank Accounts. On 11 November 2022, the Writ herein was issued.

19.As will become evident when parties’ respective cases are set out, there are substantial disputes of fact between the parties concerning events spanning from around the time the SCB Bank Accounts were opened in August 2018 to the time shortly before this action was commenced - a period of over 4 years. And the disputes concern the reason for and the surrounding circumstances leading to the opening of the SCB Bank Accounts, the events and discussions between Zhang and Kung relating to the use of the SCB Bank Accounts to receive payments to Ningbo Syloon, what was actually discussed, represented, agreed or understood between Zhang and Kung (if any at all) and so on.

P’s case

20.According to P[1], on or around early 2020 Ningbo Syloon invented a pen which came with an alcohol spray (“the Product”) which had become very popular. However, the export of the Product from Mainland required an additional license which Ningbo Syloon did not have and thus the Product had to be exported through a third-party with the said license. However, Ningbo Syloon was wary that direct dealings between this third-party and Ningbo Syloon’s overseas customers might result in loss of custom to that third-party. Ningbo Syloon was minded to arrange the third-party to export to P, and P then would “re-export” the Product to Ningbo Syloon’s overseas customers.

21.It is P’s case that for the above-mentioned reason and with the agreement of Kung, Zhang acquired the entire share capital of P on 9 March 2020 for a nominal consideration, and that it was only a temporary measure that Kung remained a director of P and remained the sole signatory of the SCB Bank Accounts.

22.The role then played by Kung was said by Zhang to be three-fold[2] :

a. to check and confirm receipt of payments made by Ningbo Syloon’s customers to the SCB Bank Accounts;

b. to receive and execute payment instructions from Zhang directly prior to 9 August 2021; and after 9 August 2021, to receive and execute instructions either from Zhang directly, from his wife directly or by his assistant Ms Li (“Li’) uploading payment instructions with Zhang’s signature which would need to be confirmed by Zhang or his wife in the WeChat group set up by Zhang, and

c. Kung and Li would conduct regular, usually monthly, reconciliation exercises whereby Li would ask Kung to provide the latest monthly closing balance of the SCB Accounts.

23.P pleaded[3] that Kung had wrongfully and in breach of her fiduciary duties as a director of P, and from around April 2020 to August 2022, made various unauthorized withdrawals, deposits and inter-account transfers as set out in Annex A of the Amended Statement of Claim (respectively “Annex A” and “the ASoC”), and that there were 9 unauthorized withdrawals which “resulted in the misappropriation of USD2,141,136.05” as set out in a table in §30 of the ASoC, which I reproduce here:

Withdrawal	Date of the unauthorized withdrawal from the SCB Bak Accounts	Payee	Recipient’s relation with D1 (if any)	Amount of unauthorized withdrawals from the SCB Bank Accounts
1.	6 April 2020	unknown	HKD Clearing Cheque 305646	HK$294,120.00 (approx. US$37,707.70)
2.	20 July 2020	unknown	unknown	US$86,206.90
3.	28 Sep 2021	D2	Hong Kong company wholly owned by D1	US$300,000.00
4.	24 May 2022	Hisen D4	unknown	HK$2,000,000.00 (approx. US$256,116.84)
5.	29 Jul 2022	D1	-	US$20,000.00
6.	4 Aug 2022	D1	-	US$45,000.00
7.	11 Aug 2022	D3	BVI company wholly owned by D1	US$500,020.00
8.	31 Aug 2022	D3	BVI company wholly owned by D1	US$493,020.00
9.	31 Aug 2022	D3	BVI company wholly owned by D1	US$403,064.61
TOTAL				Approx. US$2,141,136.05

24.According to P’s pleaded case, and as set out in Annex A, there were within the same period 17 unauthorized deposits made by Kung into the SCB Bank Accounts, consisting of 4 deposits in HKD totalling HK$2,342,619.94 and 12 deposits in USD totalling US$1,554,793.25 and 1 deposit in RMB of RMB 0.86.

25.However, P’s pleaded claim in the ASoC[4] consists of merely referring to the 9 alleged unauthorized withdrawals (totalling to US$2,141,136.05) and claims against each of Kung, D2, D3 and D4, and seeks various reliefs, in respect of the amounts they each respectively received under the 9 alleged unauthorized withdrawals, which, according to P’s pleaded case, have been misappropriated. No credit whatsoever was given to the numerous “unauthorized deposits” which, according to P’s pleaded case and as stated above, are substantial in amounts. Compared with the alleged unauthorized withdrawals - in respect of USD, the total amount of unauthorized deposits was only US$292,518.27 less than the total amount of USD alleged to have been withdrawn without authority and in respect of HKD, the total amount of unauthorized deposits was in fact HK$48,499.94 more than the amount of HKD alleged to have been withdrawn without authority.

26.Then, in §§132 of Zhang 3^rd, Zhang said that he accepted that “proper quantum claimed in this application will be USD1,392,463 (the net position in Schedule 4 of DCC) + HKD294,120 (Unauthorized Withdrawal (1), which had not been accounted for in Schedule 4 of DCC as a withdrawal from P’s SCB Account)” (original emphasis).

27.This stance is reiterated in P’s written submissions :

“… giving the appropriate credit to the transfers-in from D1 and related entities, the proper quantum claimed in this O.14 application will be US$1,392,463 (the net payments from P’s SCB Bank Accounts to the Defendants, as set out in Schedule 4 of the Defence + HK$294,120 (ie. Unauthorized Withdrawal (1), which has not been account for in Schedule 4 of the Defence)… ” (§97).

28.In other words, in this summary judgment application, P is now essentially seeking judgment not based on its pleaded case on quantum, but instead is seeking summary judgment based on the matters pleaded in Schedule 4 of the Defence of Ds and Counterclaim of Kung filed on 25 May 2023 (“the D&C”) plus HK$294,120.

Ds’ case

29.Ds filed a detailed D&C consisting of 13 pages and attached thereto were 4 Schedules of detailed breakdowns or summaries regarding the deposits into and payments out of the SCB Bank Accounts.

30.Kung 2^nd consists of 30 pages and in it Kung deposed to various detailed matters. The following is a summary of Ds’ case.

31.Kung said that Zhang in around May or June 2018 brought up with her the subject of using a bank account in Hong Kong to collect payment from Ningbo Syloon’s overseas customers and suggested P to open a bank account for that purpose. Kung accordingly caused the SCB Bank Accounts to be opened in August 2018. Zhang and Kung agreed to discuss the matter in greater detail in person when Zhang next visited Hong Kong.

32.The April 2019 Meeting then took place. It is Ds’ case that Zhang and Kung discussed, among others, ways and proposals by which Ningbo Syloon could avoid substantial business taxes in Mainland in relation to payments from overseas customers. One proposal discussed was using the SCB Bank Accounts to collect such payments, which would then be transferred to payees designated by Zhang, while Kung would be handling the day-to-day work relating to the collecting of such payments and the paying-out of them according to Zhang’s instructions, as well as handling P’s administrative, financial accounting and tax matters; and in return, Kung would be entitled to retain 15% of all such payments as commission/remuneration (“the Proposal”). In Kung 2^nd, various matters relating to the taxes chargeable by the Mainland tax authorities were mentioned by Kung by way of context and justification for her request of 15%.

33.According to Kung, there were then a series of messages on WeChat exchanged between Zhang and her from May to October 2019 regarding the Proposal, its detail implementation and some difficulties the Proposal might encounter and the solutions to them.

34.Ds are now pleading[5] that Zhang made a series of representations in a number of WeChat messages sent by Zhang respectively on 9 May 2019, 19 June 2019 and 9 October 2019 (“the Representations”).

35.In late January or early February 2020, Zhang and Kung had a telephone discussion during which they, among others, reached an understanding (“the Understanding”) that the Proposal would be implemented, albeit without making P the consignor as had been discussed, but instead Zhang would be made the sole shareholder and a director of P, and the shareholding of P would be acquired by Zhang for a nominal consideration of HK$1, so as to show customers of Ningbo Syloon that P was under Zhang’s ownership and control to enable Zhang to instruct customers of Ningbo Syloon to make payments to P instead of to Ningbo Syloon, and Kung would continue to be a director of P and the sole signatory of the SCB Bank Accounts so as to enable her to handle all payments-in and payments-out of the SCB Bank Accounts per Zhang’s instructions.

36.Based and relying on the Representations and the Understanding, Kung acted to her detriment by shortly thereafter transferring the shares in P to Zhang for a nominal consideration, and thereafter for over 2 years until the present dispute, performing the afore-mentioned work for Zhang/P, including performing all the work to enable the receipts of all the payments into the SCB Bank Accounts and making various substantial payments-out to various recipients, some of which were situated overseas, under the instructions of Zhang.

37.Ds now claim that P and/or Zhang is/are estopped by promissory estoppel, proprietary estoppel, representation or conduct from denying that pursuant to the Representations and Understanding, Kung was entitled to receive 15% commission/remuneration. As such, Kung disputed that she had acted in breach of her director’s duties by making the withdrawals (which, as will be seen, are not disputed).

38.Ds plead that between 1 June 2020 and 31 August 2022, about 300 sets of invoices, packing lists and bills of lading/forwarder’s receipts issued by Ningbo Syloon (or its related companies) were copied and provided to Kung, pursuant to which customers purportedly made payments to the 768 Accounts (§9(1)(a) of the D&C). This is not seriously disputed by P or Zhang.

39.In the D&C, the following summaries/analyses were specifically averred to regarding the deposits into and payments out of the SCB Bank Accounts during the period between June 2020 to August 2022, and detail particulars were supplied in the form of Schedules 1 to 4 annexed to the D&C :

a. A total sum of US$9,815,916.21 were paid by Ningbo Syloon’s purported customers into the 768 Account (§9(1)(b) of the D&C). Detailed breakdowns of a total of 109 payments were set out in Schedule 1 annexed to the D&C, with the date of payment, the name of the payer and the amount in respect of each payment particularized.

b. A total of US$8,422,860.39 was caused to be paid out by Kung from the 768 Account pursuant to the requests of Zhang, his wife or Li on Zhang’s behalf (§9(1)(d) of the D&C). Detailed breakdowns of a total of 125 payments were set out in Schedule 3 annexed to the D&C, with the date of payment, the name of the payee, the place of receipt/nature of payment and the amount in respect of each payment particularized.

c. A total net sum of US$1,136,346.36 was paid out of one or more of the SCB Bank Accounts to Ds (§9(1)(d) of the D&C). Detailed breakdowns were set out in Schedule 4 annexed to the D&C in which the net position vis-à-vis each of Ds, the deposits in and the withdrawals out from the corresponding account of the SCB Bank Accounts, their dates and the “origin/destination” as to each transaction were particularized.

40.It is Ds’ case that Kung regularly reported to Li on the amounts of payments into and out of the 768 Account, which was the account for receiving payments from the customers. Kung said that Li maintained her own record of all such payments, and that on a total of 9 occasions (dates given in §73 of Kung 2^nd), Li and Kung have performed reconciliations as between the cumulative payments collected from overseas customers and the cumulative payments out of the 768 Account pursuant to Zhang’s instructions.

41.Concerning the withdrawals of HK$294,120 (“Withdrawal 1”), Ds’ pleaded case and Kung’s evidence is that Withdrawal 1 was reimbursement of exhibition expenses by P to D2, who previously paid for it (§13(4) of the D&C).

42.Concerning the withdrawal of US$86,206 (“Withdrawal 2”), Ds’ pleaded case and Kung’s evidence is that Withdrawal 2 was paid to D2 as exhibition booking fees paid on behalf of Ningbo Syloon, but the exhibition was cancelled and the same was refunded to D2 and the sum was returned by (a) D2 depositing US$79,998.05 into the 768 Account on 17 August 2020 and (b) by D3 depositing HK$48,000 into the HKD Saving Account, which was transferred as USD US6,208.85 into the 768 Account (§13(5) of the D&C).

43.The withdrawals of US$20,000 and US$45,000 paid to Kung (respectively “Withdrawal 5” and “Withdrawal 6”) were said by Kung (§83 of Kung 2^nd) to be partial repayment by P to her to reimburse her the US$69,298.05 deposited by her into the 768 Account on 18 January 2022, which was listed as an unauthorized deposit in Annex A, being item 18 thereof.

44.The withdrawals of US$300,000, HK$2,000,000, US$500,020, US$493,020 and US$403,064.91 (respectively “Withdrawal 3”, “Withdrawal 4”, “Withdrawal 7”, “Withdrawal 8” and “Withdrawal 9”) were averred in the D&C as payments of part of Kung’s 15% commission/remuneration (§9(1)(e) of the D&C). In respect of Withdrawals 8 and 9, Kung further explained (§80 of Kung 2^nd) that after Zhang accused her of misappropriation in late August 2022, “I believed that I had a valid justification to make further payments out of the SCB Accounts so as to ensure I would be paid the balance of the 15% Commission”.

45.Ds’ broad case is that Kung is entitled to commission/remuneration being 15% of the total sum of US$9,815,925 paid into the 768 Account, which would be US$1,472,388.75, and which is more that the net balance of US$1,392,463 thus far paid to Ds as set out in Schedule 4 of the D&C. Therefore, the balance is still owed by P/Zhang to Kung, who now sues for the difference by her Counterclaim.

Discussion

46.In section E3 of Kung’s written submissions, Mr Lui set out by reference to various cases the legal principles concerning estoppel by representation, proprietary estoppel and promissory estoppel. Mr Hui did not dispute these principles, nor disputed that given Ds’ factual case, they are applicable such as to afford Ds an arguable defence. It is therefore not necessary for me to go into these principles.

47.Mr Hui’s contention was that the factual case of the purported defence of 15% commission is unbelievable, so were Kung’s explanations in respect of Withdrawals 1, 2, 5 and 6.

48.Though the general principles relevant to summary judgment applications are trite, and thus need not be rehearsed here, the following 3 principles summarized by Wilson Chan J in Li Chuen Kwai v Po Lam Construction Development Ltd (HCA 2376/2013, unrep., 24 September 2014, at §12(2), (3) and (5)) were highlighted and emphasized by Mr Lui :

a. Complete defence need not be shown. Leave to defend ought to be given unless it is clear that there is no defence in law and no possibility of a real defence on the question of fact.

b. The Court will not embark on a mini-trial of the action on paper and leave to defend will be granted unless the defence raised is so incredible or so contradicted by the contemporaneous documents or circumstances that it becomes clear that the defence is a sham.

c. Whether the defendant’s assertions are believable is a question that should be answered not by taking those assertions in isolation but rather by taking them in the context of the undisputed/indisputable background.

49.In my judgment, and for the reasons that follow, there are clearly triable issues, this case clearly should proceed to trial, and this case is not suitable for adjudication summarily in the manner Mr Hui was contending. Therefore, unconditional leave should be given to Ds to defend.

50.To begin with, and it should be apparent from my above summary of Ds’ case, I am satisfied that Ds have condescended into particulars in setting out their factual averments and their defence. Mr Hui did not contend otherwise.

51.Next and as have briefly mentioned in paragraph 19 above, the disputed events and communications were extensive in terms of the length of the time period they covered and in terms of the subject matters involved.

52.Moreover, for the purpose of this summary judgment application, P exhibited about 370 pages of screenshots of WeChat messages spanning over the whole disputed period from late June 2018 to September 2022, and mostly exchanged between Zhang and Kung, but also some exchanged in a WeChat group consisting of Zhang, his wife and Li. They are produced in 11 exhibits, namely, “ZJL-5”, “ZJL-14”, “ZJL-15”, “ZJL-16”, “ZJL-19”, “ZJL-20”, “ZJL-21”, “ZJL-24”, “ZJL-25”, “ZJL-46” and “ZJL-49”.

53.Zhang in Zhang 3^rd and Zhang 4^th, and P at this hearing, among others, referred to different WeChat messages here and there and asked this court to find summarily on this occasion in favour of P/Zhang’s broad factual case of what happened over the 4 years as well as over the crucial factual disputes – that Zhang had categorically rejected the Proposal, that there was never any agreement or understanding reached between Zhang and Kung over her commission/remuneration and that Kung only so worked for Zhang on a voluntary basis without payment. It seems to me quite clear that none of these WeChat messages is nearly as clear and unequivocal as P now contended and that they must be understood in context and with the aid of viva voce evidence of the sender and the recipient. In this connection, I have no difficulty in accepting Mr Lui’s criticism that this O.14 application is classically an attempt to invite this Court to embark upon a mini-trial of the action on paper.

54.That is something that evidently this Court should and would not embark on. Rather, the following are matters that stand out and must be noted or are broad views that I arrive at for the accompanying reasons:

a. In relation to the rather key oral discussions alleged by Kung, Zhang accepted that the April 2019 Meeting did take place and Zhang also did not deny that there was a telephone call between him and Kung in late January or early February 2020 as Kung said (§7 Zhang 4^th). The parties are indeed disputing what were actually discussed (and/or agreed) on those occasions. Such factual disputes in connection with those oral conversations cannot be resolved without hearing oral evidence.

b. Regarding Mr Hui’s contention that there was no documentary evidence recording that Zhang and Kung had reached an agreement or understanding over the alleged 15 % commission/remuneration. First, it is not seriously disputed that Kung’s phone was confiscated by the police upon P’s report and Kung has no means to retrieve the WeChat messages to verify whether all the pertinent messages have been produced by P. Secondly and more importantly, it can be seen that there is a series of WeChat messages sent by Kung to Zhang on 9 May 2019 following up on the parties’ discussion in the April 2019 Meeting, which among others included this message :

“另一件事是用香賽龙公司收钱之事，按照我们之前所商议的 (实收多少按85%归你方，15%归我方) ，香港公司的所有事項由我負責承担 (包括财务会计交稅 …) 鉴于你认为香港找換店存在风险，而我对此方面较为熟悉，所以由香港到国內这段可以由我来承担责任，总之款項存入你指定的国內 (个人) 帐户收到为止，或者你也可以指示我直接帮你付款至你所需支付的帐户 …”[6].

c. There were then a number of messages from Zhang to the effect that he would consider trying this arrangement of receiving the payments.

d. Importantly, and as mentioned, there are clear documentary evidence and indeed it is also not disputed, that around 300 sets of various commercial documents were sent to Kung in connection with a large number of payments in substantial amounts into the 768 Account in the ensuing two years; and there are presently about 130 pages amongst the produced WeChat messages exchanged[7] from mid-March 2020 to August 2022 showing various and numerous instructions given by Zhang, Zhang’s wife or Li to Kung in relation to numerous payments-in and payments-out which Kung executed accordingly.

d. Thus, I find at the very least believable Kung’s allegation that in fact the Proposal was discussed, and that the Proposal was by and large implemented with some changes in detail.

e. Also importantly, considering

i. the undisputed background that the relationship between Kung and Ningbo Syloon/Zhang has always been commercial in nature;

ii. that there had been discussion between Zhang and Kung about remunerations to be paid to Kung;

iii. the arrangement concerning Kung receiving instructions from Zhang, executing them in a timely manner and having to report and make regular reconciliations with Li was consistently implemented for over 2 years (as shown by the voluminous WeChat messages); and

iv. the sheer volume of work that Kung performed between March 2020 to August 2022;

I take the view that :

vi. it is at least believable that Kung had been doing all these under an understanding, representation or promise made to her that she would be paid (as Kung now contended);

vii. indeed, Zhang’s rival version that Kung performed or undertook all these work on a without-payment voluntary basis seems to me on balance less believable; and I also find Zhang’s response that he had given Kung a “red-packet” of RMB 50,000 on 17 January 2022 “as a token of appreciation” (§66 of Zhang 3^rd) neither here nor there; and

viii. it is rather extraordinary P’s case that Kung transferred the entire shareholding of P to Zhang for a nominal consideration simply because Zhang so asked; while, on the contrary, it is at least believable Kung’s allegation that the transfer of P to Zhang was part of and pursuant to the Understanding.

55.The matters I allude to in paragraphs 50 to 54 above, in my view, clearly support that Ds’ case on Kung’s entitlement to 15% commission/remuneration is believable and the attendant factual disputes are triable.

56.Mr Hui advanced a number of forensic arguments, including:

a. The alleged agreement or understanding was vague in that there was no mention concerning the detail manner in which the 15% would be paid, namely, whether such commission was meant to be deducted immediately upon the payments-in, and if not then, when.

b. The amounts of the various alleged unauthorized withdrawals mathematically could not be matched with any of the payments-in as being 15% thereof.

c. There was no contemporaneous communication by Kung to Zhang whereby Kung informed Zhang that she would be withdrawing amounts from the SCB Bank Accounts as payment of her 15% commission.

d. As have mentioned, there was no documents recording that Zhang have agreed to pay 15% to Kung or that the Understanding was reached.

e. Despite having been issued with demands from P, Kung blatantly made Withdrawals 8 and 9 on 31 August 2022 by way of self-help.

57.Kung’s evidence given in Kung 2^nd was that she considered it more convenient to work out and withdraw the 15% commission/remuneration at a more appropriate time rather than immediately upon each payment-in. She also said that she had to wait until there were sufficient funds in the SCB Bank Accounts for her to do so.

58.I could not, and do not, preclude that those forensic arguments may have their validity in exposing the weakness of Ds’ case during trial. However, on a summary judgment application

a. and particularly in view of the matters I note and the broad views I take as set out in paragraph 54 above, which I consider are on more pertinent matters, I am of the clear view that I should not and could not come to any firm view on those forensic arguments, not in the least such as to say that they are sufficient to render Ds’ case unbelievable; and

b. I also do not think that I can conclude that Kung’s explanations above are completely unbelievable by themselves such as to make her case on the 15% commission/remuneration unbelievable.

59.I also do not accept Mr Hui’s contention that Ds’ case on Withdrawal 1 was unbelievable. Mr Hui so contended by reference to an invoice[8] issued by HKTDC therein saying that HK$294,120.00 has been refunded by HKTDC to P on 19 March 2020. However, Ds’ case of various payments-out as per Schedules 1 to 4 of the D&C does not record any payment by P to HKTDC of the HK$294,120.00, nor was it P’s case or borne out by clear evidence that the HK$294,120 paid to HKTDC was previously paid by Ningbo Syloon or P. While Ds’ case and Kung’s evidence was that it was paid to HKTDC by D2 on P’s behalf, and therefore upon refund by HKTDC to P, D2 was reimbursed by P through Withdrawal 1. Thus, I do not think HKTDC’s said invoice is determinative as Mr Hui contended. Matters pertaining to Withdrawal 1 should go to trial.

60.Mr Hui also contended that there is no defence to Withdrawals 5 and 6. As I understand him, his contention was that the US$69,298.05 deposited by Kung on 18 January 2022 (and allegedly Withdrawals 5 and 6 were partial reimbursement of that deposit) was necessitated because back on 28 September 2021, Kung had misappropriated US$300,000 (Withdrawal 3) thereby depleted the 768 Account with the result that there was insufficient funds to execute Zhang’s instruction for payment-out of US$80,000 and Kung thus deposited the US$69,298.05 to conceal the fact that there was insufficient funds. This contention clearly was premised upon Kung having no right to make Withdrawal 3 as commission/remuneration. As I hold that Kung’s entitlement to the alleged 15% commission/remuneration is triable, this contention falls away.

61.For completeness, P also made contentions along the line of the allegations pleaded in paragraph 34(a), (b), (c) and (e) of the ASoC that Kung lied on a number of occasions. P is now relying on them to say that Kung is not credible generally and therefore Ds’ defence is not believable.

62.For the following reasons, I do not think I need to further burden this Decision by repeating them here or analysing them in any detail. These allegations go to the general credibility of Kung and not in relation to specific assertions forming an essential part of Ds’ case. These allegations were either premised on what P allegedly communicated to Li during one or more of the reconciliation exercises, or on what P communicated to Li on 8 August 2022, or on what the “true balances” of certain bank accounts were on certain dates, which P said were much less than what Kung said. These are evidently (a) serious allegations of dishonesty on Kung’s part, (b) very involved allegations the factual contexts of which must first be established, (c) allegations based on what Kung allegedly told Li when I do not even have Li’s evidence before me, and (d) allegations made against the background that there were a lot of movements of funds in these accounts. Moreover, regarding P’s allegation that Kung lied by inflating the “true balances” of the USD Account and the 768 Account when the true balances were much less, I note that it is P’s case that Kung was able to, and did, withdraw a total of US$896,084.61 on 31 August 2022 (Withdrawals 8 and 9).

63.Evidently and with respect to Mr Hui, these allegations are clearly not suitable to be resolved summarily, not to mention to be resolved in P/Zhang’s favour such as to form a proper basis justifying summary judgment or striking-out.

P’s application to strike out the Counterclaim

64.P’s striking out application is premised upon this Court holding that there is no arguable defence or triable issue.

Disposal

65.In the premises, I give unconditional leave to Ds to defend. P’s striking out application is accordingly dismissed.

66.By reason of my above analyses and reasons, I readily accept Mr Lui’s submission that P must have known that Ds have an arguable defence and that P’s application for summary judgment therefore ought to be dismissed. I so order, with the usual costs order following the dismissal of a summary judgment application, but presently on nisi basis as provided in the next paragraph.

67.Thus, I dismiss P’s Summons in its entirety with the costs order nisi that P do pay Ds their costs to be taxed if not agreed, which will become absolute within 14 days unless any party applies by summons to vary. In the absence of such an application, such costs are to be summarily assessed on papers, with Ds lodging and serving their Statement of Costs 7 days after the costs order has become absolute, P to lodge and serve its List of Objections 7 days thereafter and Ds may lodge their Reply within 5 days next.

68.Ds in their written submissions asked that an unless order for the filing of the Reply and Defence to Counterclaim be given as P and Zhang have previously already obtained 2 extensions of time by orders dated 26 June 2023 and 27 July 2023. P and Zhang have not objected to the same in their written submissions or at the hearing. As such extensions have been given twice, I would order that unless P and Zhang file and serve the Reply and Defence to Counterclaim within 35 days, ie on or before 4pm on 10 June 2024, they be debarred from doing so.

69.Lastly, this Court thanks Mr Lui and Mr Lee, Mr Hui and Mr Kwan for their assistance.

Mr John HUI and Mr KWAN Ping Kan instructed by Messrs Wellington Legal for the Plaintiff (by Original Action) and the 1^st and 2^nd Defendants (by Counterclaim)

Mr Mike LUI, SC leading Mr Jun LEE instructed by Messrs Tan & Co for the 1^st to 3^rd Defendants (by Original Action) and the Plaintiff (by Counterclaim)