Ng Kin Nam v. Mak Shiu Tong
Read the full judgment text of HCA 2888/2018 on BabelCite. This High Court CFI judgment was delivered on 15 November 2024.
1. The Plaintiff (“ Mr Ng ”) claims against the Defendant (“ Mr Mak ”) for breach of an oral agreement to ( inter alia ) indemnify him for loss consequential on purchase of shares and to guarantee him a $60m profit; alternatively, for misrepresentation.
Cited by 1 case · Cites 7 cases
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HCA 2888/2018 [2024] HKCFI 3241 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2888 OF 2018 ____________
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_______________ J U D G M E N T _______________ A. INTRODUCTION 1.The Plaintiff (“Mr Ng”) claims against the Defendant (“Mr Mak”) for breach of an oral agreement to (inter alia) indemnify him for loss consequential on purchase of shares and to guarantee him a $60m profit; alternatively, for misrepresentation. B. THE FACTUAL BACKGROUND 2.Save as otherwise indicated, the following are not disputed or indisputable, and I find them as facts. I gratefully adopt some of these matters from the parties’ agreed statement of facts, chronology and dramatis personae. To enable the parties’ respective cases to be better understood, a number of matters on which the parties disagree will also be referred to in this section; I will leave the resolution of the factual disputes to a subsequent section. B1. The parties 3.Mr Ng is a businessman and factory owner. 4.CCT Land Holdings Limited, now known as GBA Holdings Limited (“the Company”) is listed on the Hong Kong Stock Exchange. 5.Mr Mak was the Chairman, Chief Executive Officer and an Executive Director of the Company during the relevant period. 6.Mr Mak was also the Chairman, Chief Executive Officer and an Executive Director of CCT Fortis Holdings Limited (“CCT Fortis”), also listed on the Hong Kong Stock Exchange. CCT Fortis held approximately 16.72% of the share in the Company as at 22nd December 2015. 7.Between January to March 2016, Mr Mak, through CCT Fortis, was interested in 79,567,100,000 shares in the Company. B2. The Possible Transaction 8.On 21st December 2015, the Company made a public announcement (“the Company’s 21.12.2015 Announcement”), which included the following information.
9.Page 3 of the Company’s 21.12.2015 Announcement contained the following statement of caution.
10.On 22nd December 2015, CCT Fortis made a public announcement (“CCT Fortis’ 22.12.2015 Announcement”), which included information and a statement of caution similar to that in the Company’s 21.12.2015 Announcement. 11.On 18th March 2016, each of the Company and CCT Fortis announced that a supplemental memorandum to the Memorandum had been entered into between the Company and Xinxing Pipes, pursuant to which the Long Stop Date had been extended by three months to 20th June 2016. 12.Mr Mak’s case is that in about mid-2015, Mr Sam Chan had cold-called Mr Mak through the latter’s personal assistant Ms Iris Woo, seeking to introduce Xinxing (which was interested in cooperating with listed companies in Hong Kong) to the Company and CCT Fortis. Mr Sam Chan had told Mr Mak that he was familiar with a Mr Yu from Xinxing.[1] There then followed further negotiations between Xinxing and the Company and CCT Fortis, including meetings arranged by Mr Sam Chan between Mr Mak and Mr Yu, culminating in the Company entering into the Memorandum with Xinxing Pipes. The parties had then engaged professionals, including lawyers and auditors, to carry out and facilitate the due diligence exercise. B3. Mr Mak’s sale of shares in the Company 13.Mr Mak owned shares in the Company through CCT Fortis. On 29th December 2015, a week after the Company’s 21.12.2015 Announcement, Mr Mak reduced his (indirect) shareholding in the Company from 85,993,100,000 to 79,567,100,000 shares, at the price of $0.030. He continued to reduce his shareholding in the Company until it stood at 63,567,100,000 shares, or 47.34% of the shareholding, by 24th May 2016. 14.In particular, on or about 27th April 2016, Mr Mak disposed of 10,000,000,000 shares in the Company at an average price of $0.035 per share. B4. The Placement 15.On 25th September 2015, CCT Fortis made a public announcement that it had entered into an agreement with Jade Assets (an indirectly wholly-owned subsidiary of CCT Fortis) and Glory Merit International Investment Ltd (“Glory Merit”), pursuant to which Glory Merit agreed to buy (1) from Jade Assets, a promissory note due by the Company to Jade Assets and (2) from CCT Fortis, eight promissory notes due by the Company to CCT Fortis, for a total consideration of $300m. 16.On 26th January 2016, CCT Fortis made a public announcement that consent had been given by CCT Fortis and Jade Assets to Glory Merit to place ten billion shares of the Company at $0.035 per share; that Glory Merit had appointed Kingsway Financial Services Group Limited (“Kingsway”) as the placing agent to place the aforesaid shares; and that Glory Merit had agreed that the net proceeds from the placing would be remitted to the Company in settlement of the $300m consideration payable under the agreement of 25th September 2015 (“CCT Fortis’ Placing Announcement”). I refer below to this placing exercise as “the Placement”. 17.Glory Merit was either owned by, or associated with, Mr Yu. (This was Mr Mak’s evidence at trial, not contradicted by any evidence adduced by Mr Ng.) B5. Mr Sam Chan’s approach to Mr Ng 18.In about January 2016, Mr Sam Chan, a business advisor, told Mr Lawrence Lok, an investment advisor and friend of Mr Ng, about Xinxing Pipes’ proposed acquisition of a controlling stake in the Company. 19.There is divergence as to what was said.
B6. The First Lunch 20.In January or February 2016, a lunch meeting took place at West Villa Restaurant in Causeway Bay (“the First Lunch”). The attendees included Mr Ng, Mr Mak, Mr Lawrence Lok and Mr Sam Chan. Mr Mak says that Ms Iris Woo also attended, but Mr Ng says that she did not. 21.Again, the parties differ as to what was said at the First Lunch. 22.Mr Ng’s case is that:
23.Mr Mak’s case is that:
B7. The Second Lunch 24.In about February 2016, a second lunch meeting took place at Fan Tang restaurant in Causeway Bay (“the Second Lunch”). The attendees were again Mr Ng, Mr Mak, Mr Lawrence Lok and Mr Sam Chan. Additionally, a Mr Yu, representative of Xinxing, joined the lunch. Mr Mak says that Ms Iris Woo also attended, but Mr Ng says that she did not. 25.Mr Ng’s case is that:
26.Mr Mak’s case is that:
B8. The Alleged Oral Agreement; Mr Ng’s acquisition of shares in the Company 27.It is Mr Ng’s case that at the end of February 2016, and after repeated urging by Mr Mak through Mr Sam Chan, he decided to trust Mr Mak’s statements and guarantees, and he therefore orally agreed, through Mr Lawrence Lok, with Mr Sam Chan to accept Mr Mak’s arrangement and the Five Terms. He says that he asked Mr Lawrence Lok to convey his decision to Mr Sam Chan and Mr Mak. He says that there was therefore an oral agreement between him and Mr Mak, as follows (“the Alleged Oral Agreement”):[3]
28.On 9th March 2016, Mr Ng bought two billion shares in the Company at $0.035 per share. 29.On 22nd March 2016, Mr Ng bought a further two billion shares in the Company at $0.035 per share. 30.On 12th April 2016, Mr Ng bought a further two billion shares in the Company at $0.035 per share. 31.Mr Ng has not sold his six billion shares in the Company (“the Shares”). B9. The “termination” of the Memorandum 32.On 20th June 2016, the Company announced that no definitive share subscription agreement had been entered into between the Company and Xinxing by the Long Stop Date, so that the Memorandum was “terminated” and ceased to have any effect (“the 20.06.2016 Termination Announcement”). 33.Xinxing Ductile made an announcement to similar effect on 22nd June 2016. B10. The Company’s share price 34.The closing price of the Company’s shares at various dates was as follows:
35.The share price never went above $0.035 from the time of the First and Second Lunches up to 12th October 2016 (six months after Mr Ng’s third purchase of shares in the Company). B11. Meetings between the parties after the First and Second Lunches 36.Mr Ng’s case is that after the 20.06.2016 Termination Announcement, there was a lunch at Pak Loh Chiu Chow Restaurant in Causeway Bay to discuss compensation for him (“the Disputed Pak Loh Lunch”). He says that Mr Mak asked for more time on the basis that the six-month period had not yet expired, and that there was a new plan to attract more investors. Mr Mak says that there was no such lunch. 37.The parties do agree that there was at some point a lunch at Lei Garden Restaurant in Wanchai (“the Lei Garden Lunch”). They do not agree on what took place at the lunch.
38.The parties also agree that there was then a further lunch at Pak Loh Chiu Chow Restaurant, which was attended by Mr Ng, Mr Mak, Mr Lawrence Lok and Ms Flora Cheng (“the Undisputed Pak Loh Lunch”). Again, they differ as to what took place at the lunch.
39.Mr Lawrence Lok further met with Mr Sam Chan several times in 2017 and 2018. B12. Mr Ng’s demand letter 40.On 12th November 2018, Messrs Cheung & Choy on behalf of Mr Ng issued a demand letter to Mr Mak alleging the making of the Alleged Oral Agreement, and complaining that although Mr Mak knew that there was no proof of funds for Xinxing’s takeover of the Company, he misrepresented to Mr Ng that the takeover was going to be implemented. The letter demanded an indemnity for Mr Ng’s loss of $162m based on the closing price of $0.08 as at 12th October 2016, together with $60m as guaranteed profit. 41.On 5th December 2018, Messrs Haldanes on behalf of Mr Mak replied to the demand letter, denying the Alleged Oral Agreement. C. THE ISSUES 42.The agreed issues for my determination are as follows.
42.4 Is Mr Ng entitled to the relief claimed in the Statement of Claim? D. PRINCIPLES APPLICABLE TO THE ASSESSMENT OF EVIDENCE D1. Assessment of credibility 43.As there is no documentary evidence of the Alleged Oral Agreement, the credibility of the witnesses’ evidence is important. Mr Ng gave evidence on his own behalf, and also called Mr Lawrence Lok to give evidence. Mr Mak gave evidence on his own behalf, and also called Mr Sam Chan, Ms Iris Woo and Ms Flora Cheng to give evidence. 44.In assessing the witnesses’ evidence, I have had regard to the principles summarised in Hui Cheung Fai v Daiwa Development Ltd, unreported, HCA 1734/2009, 8 April 2014 at [77] to [83] (DHCJ Eugene Fung SC). In particular:
45.I have also had regard to the summary of relevant principles made by HH Judge Simon Barker QC in Northampton Borough Council v Cardoza and others [2019] BCC 582:
46.I have further borne in mind the reminder of K Yeung J in Siao Miu Hua v Wu Ching Kuen [2024] HKCFI 232 at [84] that:
D2. Assessment of whether contract made 47.The parties cited various authorities on the question of how to assess whether a contract was made. I do not propose to rehearse them all here, but will simply identify the key points sought to be made by the parties from such authorities. 48.On behalf of Mr Ng, emphasis was placed on authorities saying that the witnesses’ evidence should be assessed by reference to contemporaneous documents, their subsequent actions, and events which are agreed or clearly demonstrated to have happened (for example, Mansion Place Ltd v Fox Industrial Services Ltd [2021] EWHC 2972 (TCC) at [55] (Eyre J)). 49.ID v LU [2021] 1 WLR 4992 at [57] (Judge Pelling QC) was cited to make the point that there is no general principle that the absence of a written record leads inevitably to the conclusion that no contract was concluded; the question of whether a contract was made should be determined after an assessment of the whole of the evidence. 50.On behalf of Mr Mak, reference was made to Leung Chin Sing, Rabo v Ko Chun Hay, Kelvin [2021] HKCFI 2242 at [42] where DHCJ Jin Pao SC said:
51.At the end of the day, the authorities show that the question of whether or not the Alleged Oral Agreement was made is simply a question of fact to be decided by reference to the particular circumstances of the present case, and after a consideration of all the evidence. 52.Mr Ng is the one who bears the burden of proving that the Alleged Oral Agreement was made, containing the terms relied on by him. It is not for Mr Mak to disprove it, or to prove that some other alternative events took place. E. WHETHER THE ALLEGED ORAL AGREEMENT WAS MADE 53.Mr Ng acquired the Shares in three tranches in March and April 2016. It was common ground that Mr Ng could not have acquired such a substantial amount of shares in the market without having caused a significant fluctuation in the share price. In his oral closing submissions, leading counsel for Mr Ng, Mr William Wong SC (leading Mr Look Chan Ho and Mr Billy Liu), submitted that on the evidence, there were two possible candidates as to the source of the shares acquired by Mr Ng: (1) the Placement (by Glory Merit of ten billion shares at $0.035 per share through its placing agent Kingsway), and (2) the ten billion shares disposed of by Mr Mak at $0.035.[6] 54.Mr Wong submitted that on the balance of probabilities, I should find that Mr Ng acquired the Shares from Mr Mak, given that there were matters which eliminated Glory Merit as the source of the Shares, and there were matters which positively pointed to Mr Mak as being the source. 55.The matters relied on by Mr Wong as eliminating Glory Merit were as follows.
56.The matters relied on by Mr Wong as positively pointing to Mr Mak were as follows.
57.Having considered all the evidence, I have concluded that the Alleged Oral Agreement was not made as alleged. I now set out the main matters which have gone into my consideration. For the purposes of organisation, they of course have to be set out point by point, but that is not to say that any of the points have been considered only in isolation; I have endeavoured to consider them against the entirety of the evidence as urged by Mr Wong. E1. The source of the Shares 58.Mr Ng fails to show, on a balance of probabilities, that the Shares came from Mr Mak. 59.The price of the Company’s shares under the Placement was $0.035, and the dates on which Mr Ng acquired the Shares (9th March, 22nd March and 12th April 2016) fell within the placing period of 26th January to 30th April 2016. 60.Furthermore, it is Mr Ng’s own pleaded case that he purchased the Shares from Kingsway, which was the placing agent for the Placement (albeit that he claimed that Kingsway was Mr Mak’s stockbroker). Indeed, when it was put to Mr Ng that he acquired the Shares pursuant to the Placement, Mr Ng did not deny it outright, but claimed that he bought the Shares based on Mr Mak’s arrangement.[7] Mr Ng further said that he would never have acquired shares from a person whom he had not seen or talked to (Glory Merit), and Mr Lawrence Lok said that that there was no reason for Mr Ng to have bought so many shares from an unknown third party. Their evidence was that they purchased through Kingsway because this was Mr Mak’s arrangement. However, there was no evidence that Kingsway was Mr Mak’s stockbroker; the point was not put to him. What was put was that Kingsway was the Company’s financial advisor in the negotiations with Xinxing, which Mr Mak acknowledged. 61.Mr Wong submitted that Mr Mak could have asked, but did not ask, Kingsway to produce any documents to show that there was an agreement between Mr Ng and Glory Merit or Mr Yu for the purchase of the Shares. However, the burden is not on Mr Mak to prove that Mr Ng bought the Shares from Glory Merit; the burden is for Mr Ng to prove the Alleged Oral Agreement, and insofar as he seeks to show that he acquired shares from Mr Mak rather than from Glory Merit in discharging this burden, it is for Mr Ng to show it. It is not said that Mr Ng tried but was unable to obtain documents from Kingsway to show the counterparty with which he transacted, or from Mr Mak to identify the buyers of the ten billion shares he disposed of at $0.035 per share. 62.Mr Sam Chan’s evidence was that after CCT Fortis announced that consent had been given to Glory Merit to proceed with the Placement, Mr Yu asked him to find investors who might be interested in investing in the Company by purchasing its shares from Glory Merit through the Placement, and Mr Sam Chan agreed to help. In cross-examination, Mr Sam Chan said that when he approached Mr Lawrence Lok to tell him about the opportunity to invest in the Company’s shares, he told Mr Lawrence Lok that the seller of the shares would be Glory Merit. I accept Mr Sam Chan’s evidence in this regard (and will address points made against his credibility below). 63.As mentioned above, Mr Wong submitted that Mr Mak had no idea that Mr Ng had entered into any contract with Mr Yu or Glory Merit. However, the fact that Mr Mak may not have had any such specific knowledge is not particularly probative as to whether or not Mr Ng acquired any shares under the Placement; whilst Mr Mak in his capacity as (inter alia) chairman of the Company and CCT Fortis may have had a general interest in following the progress of the Placement, it does not necessarily mean that Mr Mak would have been aware of all the transactions pursuant to the Placement. 64.Mr Wong also submitted that Mr Sam Chan had disowned knowledge of any contract between Glory Merit and Mr Ng. To be more precise, Mr Sam Chan’s evidence was that he was aware that Mr Ng purchased six billion shares in the Company, so he deduced that there had been a transaction between Mr Ng and Mr Yu or Glory Merit; he did not have direct knowledge of any contract between Mr Ng and Mr Yu or Glory Merit, but nor was he suggesting that there was no such contract. In my view, this evidence does not go towards eliminating Glory Merit as a possible source of the Shares, contrary to Mr Wong’s submission. It is evidence that is equally consistent with Glory Merit as being the source of the Shares. 65.Mr Wong submitted that the subsequent conduct of the parties showed that Mr Yu or Glory Merit was not the counterparty with whom Mr Ng had contracted, as Mr Ng chased after Mr Mak for compensation, Mr Ng did not chase after Mr Yu for compensation, Mr Ng issued proceedings against Mr Mak rather than Mr Yu or Glory Merit, and Mr Sam Chan did not express surprise when he was told about proceedings being commenced against Mr Mak rather than Mr Yu. Leaving aside for present purposes whether or not I accept the evidence as to Mr Ng’s chasers and Mr Sam Chan’s reaction, it seems to me that in any event, these matters do not particularly assist in ruling out Mr Yu or Glory Merit as the party from whom Mr Ng acquired the Shares, since on Mr Ng’s case, it was Mr Mak who made various promises to him and not Mr Yu or Glory Merit. (Of course, Mr Ng says that the chasers to Mr Mak followed on from a breach of the Alleged Oral Agreement, but the point is that the lack of chasers is equally consistent with Mr Ng having acquired the Shares pursuant to the Placement, which acquisition would not necessarily have involved Mr Yu making any promises about the performance of the Company’s shares to Mr Ng.) E2. The commerciality of the terms of the Alleged Oral Agreement 66.Counsel for Mr Mak, Mr Victor Dawes SC (leading Mr Thomas Wong), submitted that the Alleged Oral Agreement did not make commercial sense and was illogical. I agree.
67.Of course, the fact that an agreement does not make commercial sense, or is illogical, does not necessary mean that it was not made. However, it makes it less likely, as a matter of inherent probability, that it was made. This is particularly so in the present case where both parties were experienced businessmen. Furthermore, if, as Mr Ng says, he had wanted to find out more about the proposed deal at the First Lunch, then presumably he would have thought about how the terms of the Alleged Oral Agreement would have operated in practice at the time (and in cross-examination, he confirmed that he understood the terms). He would not be trying to make sense of the terms for the first time only in cross-examination, and be unable to explain the illogicality of the arrangement. 68.In my judgment, the lack of commerciality and illogicality of the Alleged Oral Agreement militates strongly against it having been made. E3. Mr Mak’s eagerness to sell his shares in the Company 69.As mentioned above, Mr Wong submitted that Mr Mak was eager to offload his shares in the Company, and would therefore have been looking for someone who could buy from him. 70.However, it could equally be said that Glory Merit was keen to find investors who would take up the shares on offer under the Placement; the payment for such shares would go towards satisfaction of the consideration due by Glory Merit to CCT Fortis and Jade Assets. Furthermore, it was Mr Sam Chan’s evidence that he approached Mr Lawrence Lok following on from Glory Merit’s request to him to assist in finding investors for the Placement. It was put to Mr Sam Chan that had he been concerned to arrange a deal between Glory Merit and Mr Ng, then it did not make sense that Mr Yu did not participate in the First Lunch. However, Mr Sam Chan explained that Mr Yu was not in Hong Kong at the time, that the First Lunch was arranged to enable Mr Mak and Mr Ng to socialise, and then the Second Lunch was arranged to enable Mr Yu to join. 71.It was put to Mr Mak that his eagerness to sell shares in the Company was demonstrated by the fact that shortly after the Company’s 21.12.2015 Announcement, CCT Fortis rapidly disposed of a large number of shares in the Company. It was said that the explanation of why there should be such a disposal, even though the Possible Transaction was supposed to be beneficial for the Company, must be that Mr Mak knew “from day one” that the Possible Transaction would not materialise – a classic “pump and dump” operation. This line of cross-examination was based on a number of Shareholding Disclosure forms produced on the first day of the trial. 72.Mr Mak made some attempts to explain that in fact, CCT Fortis had started to sell shares in the Company in September 2015, prior to any deal being finalised with Xinxing. To the extent that he could not give chapter and verse to refute the accusation that he engaged in a “pump and dump” operation, I agree with Mr Dawes’ submissions that this should not be held against him. The allegation that Mr Mak knew from the outset that the Possible Transaction was doomed to failure and that he carried out a “pump and dump” operation – essentially an allegation of dishonesty and fraud – was not pleaded. Indeed, even in the closing submissions for Mr Ng, it was said that his case was not one of fraud.[10] Mr Dawes submitted that had the allegation been properly pleaded, Mr Mak would have adduced evidence to show that it was not a case of “pumping”, for example by tendering other board members or professional advisers of the Company as witnesses, or by disclosing relevant contemporaneous documents; nor of “dumping”, for example by calling the Company’s or CCT Fortis’ company secretary to explain the entries in the Shareholding Disclosure forms and other witnesses to explain the reasons for CCT Fortis’ sale of shares in the Company, or by disclosing relevant contemporaneous documents to explain such reasons. 73.Mr Mak denied that the Possible Transaction was a “pump and dump” operation. He named the professional advisers engaged for the Possible Transaction for both sides, including lawyers, financial advisors, and auditors; and he said due diligence was carried out throughout the process, involving these professionals. Furthermore, Xinxing was a Fortune Global 500 company and there is no reason appearing from the evidence (or suggested by Mr Ng) for it to have participated in a fraudulent scheme in conjunction with the Company. 74.The more serious an allegation is, the less likely it is that the event in question occurred, and hence, the more cogent should be the evidence before the court concludes that the allegation is established on the balance of probability: Re H (Minors) [1996] AC 563 at 586C-H (Lord Nicholls). I do not see how, on the state of the evidence before the court, I can find that Mr Mak was eager to persuade Mr Ng to acquire his shares when the evidential underpinning sought to be relied on for this is the unpleaded allegation that he engaged in a “pump and dump” scheme.[11] 75.I therefore reject the submission that Alleged Oral Agreement has to be assessed against the background that Mr Mak was eager to offload his shares in the Company and was looking for someone to buy them from him.[12] E4. The First and Second Lunches 76.Mr Wong submitted that the purpose of the two lunches was to discuss the acquisition of shares in the Company by Mr Ng as a willing buyer and from Mr Mak as a welling seller. 77.Mr Wong relied on the following.[13]
78.My assessment of these points is as follows.
79.It is appropriate here to deal with the evidence of Ms Iris Woo. Mr Ng says that she was not present at the First and Second Lunches, but Mr Mak says that she was. Her evidence was that she did not hear any discussions about the sale of any shares in the Company, or any guarantee or indemnity as claimed by Mr Ng. I found Ms Iris Woo to be a straightforward and honest witness, and I accept her evidence that she was present at the First and Second Lunches. I also accept, at a general level, her evidence that the lunches were essentially social occasions at which Mr Ng and Mr Mak (and Mr Yu at the Second Lunch) got to know each other. However, I do not place much weight on her evidence as to the details of what was discussed, as her responsibility was for administrative matters such as arranging meetings, and whilst she would sit in during Mr Mak’s meetings at the office, she was not involved in commercial negotiations. Thus whilst she was able to say that there was some discussion about the Possible Transaction and the Company, she was unable to remember what was discussed, and she was unaware that the Possible Transaction fell through in June 2016. I therefore do not derive much from this evidence beyond what I consider to be her general impression that the lunches were essentially social occasions. 80.I am therefore not persuaded, on a balance of probabilities, that the purpose of the two lunches was to discuss the acquisition of shares in the Company by Mr Ng from Mr Mak. E5. The meetings after the First and Second Lunches 81.The parties differ starkly as to their accounts of the meetings which they had subsequent to the First and Second Lunches. Mr Ng says that they met on three occasions, all after the 20.06.2016 Termination Announcement, and they were about his demands for compensation. Mr Mak says that they met only on two occasions, both before the 20.06.2016 Termination Announcement, and that they were amicable social occasions at which they took respective turns to treat each other to good food and wine. 82.The parties do agree that on the second and third of these occasions (the Lei Garden Lunch and the Undisputed Pak Loh Lunch), Ms Flora Cheng was present. It will be recalled that Ms Flora Cheng was an executive director of the Company. Her evidence is that by the time of Lei Garden Lunch, Mr Ng had become a substantial shareholder of the Company, and that (as Mr Mak told her) he invited Mr Mak’s side to have lunch so that the parties could get to know each other. She said that it was a social occasion at which Mr Ng and Mr Mak talked about their respective backgrounds, their experience and their achievements, including their success in running factories. As she herself had experience of running factories, she participated in the conversation as well. As for the Undisputed Pak Loh Lunch, Ms Flora Cheng said that this was Mr Mak returning Mr Ng’s hospitality. She disagreed that at either of the lunches, she was tasked with dealing with matters of compensation for Mr Ng. 83.Mr Wong submitted that Ms Flora Cheng’s evidence was “unreliable if not untruthful”,[14] on the basis that the parties had already met and shared their respective background, experience and achievements (at the First and Second Lunches) so that it was improbable and unbelievable that they would have talked about the same matters again. 84.I do not agree that it was improbable or unbelievable for the parties to have arranged to meet socially again after Mr Ng had become a substantial shareholder in the Company and at a time when the Possible Transaction had not yet fallen through (so that any negative feelings about this would not yet have arisen). Ms Flora Cheng’s evidence was that the Lei Garden Lunch took place in April or May 2016, and that the Undisputed Pak Loh Lunch took place in May or June 2016. The cross-examination of Ms Flora Cheng proceeded on the basis of the dates she gave in her witness statement, and it was not suggested that the lunches took place after six months after Mr Ng had bought the Shares. On that basis, no issue of compensation for Mr Ng would have arisen. 85.I accept the evidence of Ms Flora Cheng. She gave evidence in a straightforward manner. Unlike Ms Iris Woo, who was responsible for administrative matters and therefore may or may not have fully understood the nature of the discussions between Mr Ng and Mr Mak, Ms Flora Cheng has been an executive director of the Company since August 2002 and would have understood what they were discussing. Whilst she was not involved in the negotiations over the Possible Transaction, or with Mr Yu, she clearly had a grasp of the parts played by Mr Yu and Xinxing, and was able to answer counsel’s questions about them. She said that she participated in Mr Ng’s and Mr Mak’s discussions about running factories as she herself had such experience. If she had been asked at the lunches to deal with compensation for Mr Ng, this is surely something she would have recalled. I bear in mind that given her position, she may have some inclination to assist Mr Mak’s side rather than Mr Ng’s, but I do not see any reason to find that she was being untruthful in her evidence. The mere fact that she did not mention in her witness statement that she participated in the discussion about running factories does not make her evidence unbelievable, when the focus of the witness statement was not about what she said at the lunches. The claim that the lunches were social occasions is not unbelievable, as I have earlier explained. Other than these two matters, no other reason has been identified as to why I should find that Ms Flora Cheng was untruthful or unreliable. 86.Other than Ms Flora Cheng’s evidence, Mr Wong submitted[15] that Mr Ng’s evidence as to what happened at the Disputed Pak Loh Lunch, the Lei Garden Lunch and the Undisputed Pak Loh Lunch should be accepted as it was unshaken, whereas Mr Mak’s evidence was incredible in saying that the parties remained cordial even after the Possible Transaction fell through.
E6. The period between June 2016 and November 2018 87.Mr Wong submitted that Mr Mak’s case that there was a lack of complaint from Mr Ng after the Possible Transaction fell through in June 2016, up until the letter from Messrs Cheung & Choy in November 2018, was incredible; and if there had not been any prior complaint, then Mr Mak’s claim not to have been surprised on receipt of the letter, out of the blue, was incredible. Furthermore, Mr Sam Chan’s evidence that Mr Lawrence Lok did not chase him for compensation on behalf of Mr Ng during that period, and only discussed other potential projects, was incredible, given that they did discuss the failed Possible Transaction. 88.It seems to me that one could equally question Mr Ng’s conduct during the period. On his case, Mr Mak was in breach of the Alleged Oral Agreement by October 2016 at the latest.[16] In fact, in his oral testimony, Mr Ng said that when he learned from a public announcement that the Possible Transaction had fallen through in June 2016, he realised that Mr Mak’s assurances would not come true and so he instructed Mr Lawrence Lok to go after Mr Mak for the money. Mr Ng says that he was concerned that Mr Mak would run off with his money or that he would not otherwise keep his promises. Yet no written demand was made either by Mr Ng or Mr Lawrence Lok in writing in this period of over two years. When asked about this, he said that it had occurred to him to put matters in writing, but that Mr Mak told him that the six-month period had not yet expired. Of course, this does not explain the silence during the period of over two years after such expiry. He acknowledged that whilst he had originally agreed to Mr Mak’s stance of not recording the Alleged Oral Agreement in writing, circumstances had changed after the Possible Transaction fell through. Yet he still did not make any complaint in writing. In cross-examination, Mr Ng sought to explain this by saying that although it had occurred to him to get something in writing from Mr Mak, Mr Mak then arranged for the Disputed Pak Loh Lunch, at which Mr Mak told him not to worry and that he would not suffer any loss, and that there would be further investors. 89.This is a case where Mr Ng alleges that that there was an oral agreement and that Mr Mak failed to provide any compensation for at least two years, and where Mr Mak alleges, on the contrary, that there was simply no agreement in the first place. Silence during the two years is consistent with Mr Mak’s case (as there would have been nothing to correspond about in terms of an agreement), and much less consistent with Mr Ng’s case, particularly given his concerns. 90.There is also a further point. As mentioned, Mr Ng said that although it had occurred to him to get something in writing from Mr Mak, Mr Mak then arranged for the Disputed Pak Loh Lunch, at which he was assuaged. On Mr Ng’s case, there then followed the Lei Garden Lunch and the Undisputed Pak Loh Lunch. However, in his witness statement, Mr Ng had said that the three lunches organised to discuss compensation for him resulted from a meeting between Mr Lawrence Lok and Mr Mak at the Company’s office in Wanchai, at which Mr Mak admitted that the Possible Transaction had fallen through because of Xinxing’s lack of proof of funds, and indeed the Company knew this at the time when the Possible Transaction was announced, misleading investors; Mr Ng had then demanded that Mr Mak find a solution, and the three lunches were then organised. The witness statement had dated this critical meeting at the Company’s office as having taken place in August 2016, and originally, Mr Lawrence Lok had said the same in his own witness statement. However, in Mr Lawrence Lok’s supplemental witness statement, he corrected the date of the meeting to August 2018. The implications of this are that the three lunches could not have resulted from any meeting in August 2016 at which Mr Mak made the alleged admission and Mr Ng’s consequent demand for a resolution, and that the lunches cannot be the explanation for Mr Ng’s silence between June 2016 and November 2018. They of course also call into question Mr Ng’s account of what transpired at the lunches, and whether the Disputed Pak Loh Lunch took place at all as alleged by Mr Ng. 91.The chronology further throws doubt on Mr Lawrence Lok’s account of his two meetings with Mr Sam Chan.
F. WHETHER THE ALLEGED ORAL AGREEMENT WAS BREACHED 92.In the light of my findings in the previous section, this issue does not arise for consideration. G. WHETHER THE ALLEGED ORAL AGREEMENT WAS PROCURED BY MISREPRESENTATION 93.Again, in the light of my earlier findings, this issue does not arise for consideration. 94.In any event, I agree with Mr Dawes that the complaint of misrepresentation has not been properly pleaded and is not open to Mr Ng. My reasons, in brief, are as follows.
H. WHETHER MR NG IS ENTITLED TO THE RELIEF CLAIMED IN THE STATEMENT OF CLAIM 95.In the circumstances, Mr Ng is not entitled to the relief claimed. I. DISPOSITION 96.I dismiss Mr Ng’s claim. I further make a costs order nisi that Mr Ng is to pay the costs of and occasioned by the action to Mr Mak, with certificate for two counsel, to be taxed if not agreed. Such costs are, however, not to include the costs incurred by Mr Mak in engaging transcription services for the trial, which services were not used by Mr Ng’s team.
Mr William Wong SC leading Mr Look Chan Ho and Mr Billy Liu, instructed by Yick & Chan, for the Plaintiff Mr Victor Dawes SC leading Mr Thomas Wong, instructed by Iu, Lai & Li, for the Defendant [1] References hereunder to “Xinxing” are to Xinxing Ductile and/or Xinxing Pipes, as the context may require. [2] However, when Mr Lawrence Lok came to give evidence, he clarified that that other client had simply sold his shares and did not call on any guarantee made by Mr Mak. [3] Terms as taken from Mr Ng’s witness statement paragraph 27. [4] Reply paragraph 12. [5] Leggatt J’s observations in Gestmin SGPS SA were cited with approval by Kwan VP in Galleria (Hong Kong) Ltd v DBS Bank Ltd, Hong Kong Branch [2021] HKCA 611 at [175]. [6] For completeness, I should record that it is not Mr Ng’s case that even if I were to find that he had purchased the Shares from the Placement, he could nevertheless also rely on the Alleged Oral Agreement as having guaranteed the performance of the Company’s Share price: this was not the case advanced at trial; furthermore, Mr Ng’s pleaded case is that under the Alleged Oral Agreement, he was to purchase the Shares from Mr Mak’s nominees – on the evidence, Glory Merit was not such a nominee. As Mr Wong pointed out, he was not saying that the ten billion shares sold by Mr Mak were the same as the ten billion shares sought to be placed by Glory Merit; such a case was impossible as it would equate Mr Mak with Glory Merit. The implication of this is that if I should find that Mr Ng fails to prove, on a balance of probabilities, that his six billion shares were acquired from Mr Mak, then that in itself suffices to dispose of his claim for breach of contract. I will however not proceed on this narrow basis alone and will nevertheless consider all of the other matters relied on by Mr Ng. [7] In fact, in the cross-examination of Mr Mak, Mr Wong put to him that he wanted to get Mr Ng to invest in the Company’s shares via the Placement, as the proceeds of the Placement were to be received by CCT Fortis. In oral closing submissions, however, Mr Wong clarified that he was not seeking to argue that Mr Ng was deceived by Mr Mak into buying the Shares from Mr Yu / Glory Merit as this would be inconsistent with his case that Mr Ng had purchased the Shares from Mr Mak. [8] In Mr Ng’s original witness statement in Chinese, the term used was “一旦” or “once” (the share price fell below $0.035). [9] Closing paragraphs 35.3(c)(ii), 68.3. [10] In the context of the claim for misrepresentation: see closing paragraph 93. [11] Cf. Closing for Mr Ng, paragraphs 63.4, 64.2(f). [12] Similarly, it would be unfair to accept other criticisms of Mr Mak’s credibility based on the same line of questioning, as set out in Mr Ng’s Closing, paragraphs 41.1 to 41.6, 42.1 to 42.2. [13] Closing paragraphs 64.2, 64.3, repeating in part the points already made in paragraphs 43.5 to 43.8, 46.3 to 46.6. [14] Closing paragraph 54. [15] Closing paragraph 79, 80.2. [16] Cf. prayer 1 in the Statement of Claim. | ||||||||||||||||||||||||
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