Man Chin Chin Ivy and Another v. Blandus International Development Ltd and Another

HCA 1299/2020

[2025] HKCFI 490

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1299 OF 2020

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BETWEEN

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(by Original Action)

AND BETWEEN

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(by Counterclaim)

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J U D G M E N T

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Background

1.The following background is not in dispute:

(1)  The 2^nd plaintiff (“P2”)  is a company that engages in investments and/or reselling of commercial industrial properties.  The 1^st plaintiff (“P1”, together with P2, “Ps”)  is the sole director and shareholder of P2 since 2011.

(2)  The 1^st defendant (“D1”)  is a company that carries on business in selling health goods and products.  The 2^nd defendant (“D2”, together with D1, “Ds”)  is at all material times a director of D1.  D1 and/or D2 operate retail health products shop named 澳洲罡力＋.

(3)  P2 became the registered owner of Unit No.8, 14/F, No. 35 Tai Yau Street, Kowloon, Hong Kong (the “Property”)  on 16 February 2016.

(4)  About 3 months later on 19 May 2016, P2 signed an agreement with D2 for the sale and purchase of the Property (the “SPA”)  and the assignment was entered into on 8 September 2016 (the “Assignment”).

(5)  At the completion of the sale and purchase of the Property, D2 settled the then outstanding mortgage on the Property (the “Mortgage”)  at HK$2,729,832.33.

Ps’ Case

2.P’s case is premised upon 2 agreements:

(1)  An agreement titled “重要私人合約” dated 22 April 2016 (the “Important Private Agreement”)  which was allegedly prepared by P1 and D2 and signed at the offices of Messrs Li Chow & Co on 22 April 2016; and

(2)  An undated and unsigned agreement entitled “罡力＋產品買賣合約” (the “Products Agreement”).

3.It is Ps’ case that pursuant to the Important Private Agreement and the Products Agreement, in or about 2016, P1 agreed to transfer the Property to D2 in exchange for HK$7 million worth of health products of D1.  Despite the HK$4.5 million consideration stipulated in the SPA and the Assignment, P2 contended that the actual consideration for the sale and purchase of the Property was HK$7 million, to be satisfied by way of health products in the equivalent value to be supplied by D1.  The reason for understating the consideration was allegedly for the evasion of stamp duty payable for the transfer of the Property.

4.Ps contended that despite the transfer of the Property to D2, only HK$200,000 worth of products had been provided to P1. Taking into account D2’s settlement of the Mortgage, D2 allegedly still owes P2 HK$4,070,167.67 (HK$7,000,000 – HK$2,729,832.33 – HK$200,000).

5.Alternatively, even if the agreed consideration of the Property was HK$4.5 million, D2 would still owe P2 at least HK$1,570,167.67 (HK$4.5 million – HK$2,729,832.33 – HK$200,000).

D’s Case

6.Ds deny the existence of the Important Private Agreement and the Products Agreement.  Further, Ds contended that P1 actually owed Ds sums of money which were set off as the consideration for the transfer of the Property:

(1)  As evidenced by an IOU signed by P1 dated 1 September 2014 (the “IOU”), P1 borrowed a total sum of RMB 3,555,000 from D2 (the “Loan”)  which has not yet been repaid.

(2)  In early 2016, P1 requested D1 to supply health products to her as she had wanted to operate her own health product business.  As P1 did not have sufficient cash to settle the selling price of such products, she proposed to D2 that she would transfer the Property to D2 in exchange for D1’s health products (the “Proposal”).  Initially, D2 did not accept the Proposal as the Loan was not yet repaid by P1 and D2 did not believe that the Property had a market value of HK$7 million.

(3)  From February/March 2016, D1 began supplying products (the “Products”)  worth in the region of HK$1 million to P1 for her business.  However, P1 had not paid for the Products.

(4)  During closing submissions, Ms Choy, counsel for D1 and D2, submitted that as the document titled “萬芊芊拿貨總計” only recorded HK$ 452,398 worth of Products were supplied, Ds are prepared to concede that only HK$452,398 (instead of HK$1 million)  worth of Products were provided.

(5)  As the Loan remained outstanding and the Products were not paid for, D2 eventually agreed to the Proposal in June 2016. D2 engaged Savills Valuation and Professional Services Limited to value the Property and a valuation report indicated the market value of the Property as at 20 July 2016 was HK$4.5 million.

7.D2 then entered into an oral agreement with P1 (the “Oral Agreement”)  as follows:

(1)  P1 would procure P2 to transfer the Property to D2 at HK$4.5 million;

(2)  D2 would settle the amount of outstanding indebtedness under the Mortgage.

(3)  The consideration of the Property would be set off by D2’s settlement of the Mortgage, the Loan and the price of the Products.

(4)  No further Products would be provided to P1 until all indebtedness have been repaid to D2.

8.Other than the SPA and the Assignment, D2 contended that she never signed any written agreement with P1.

9.Since June 2017, D2 stopped supplying P1 with any Products as P1 had failed to repay the outstanding indebtedness to D2.

10.In 2019, P1 was convicted with criminal intimidation against D2.

Issues in Dispute

11.The agreed list of issues are:

(1)  What was the consideration for the transfer of the Property?

(a)  Did P1 and D2 enter into the Important Private Agreement on 22 April 2016?

(b)  Did P1, D1 and D2 reach the Products Agreement?

(c)  Did the Loan exist; is P1 liable to repay the same?

(d)  Between May and June 2015, did D1 supply HK$200,000 worth of health products to P1?

(e)  In February/March 2016, did D1 supply HK$1 million worth of health products to P1?  If so, did P1 pay for these health products?

(f)  Did P1 and D2 reach the Oral Agreement?

(2)  If P1’s case prevails, what is the amount of damages payable by D2?

(3)  Is D2 liable to pay P1 pursuant to the SPA?  If so, how much?

(4)  If Ps’ case was rejected and Ds’ counterclaim succeeds, what is the amount of damages payable by P1?

Credibility of Witnesses

12.As the versions of events put forward by P1 and D2 are diametrically different and with oral agreements involved, this case rests largely on the credibility of P1 and D2.  Parties agreed that the principles set out in Hui Cheung Fai and Another v Daiwa Development Limited and Others[1] by DHCJ Eugene Fung SC at §§76-82 are applicable in assessing the credibility of witnesses:

“76. In making my findings of fact in this case, I am guided by a number of general principles which judges apply as to fact finding and the assessment of credibility.

77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce)…

78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011)  §39 (Chu J).

79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80.  I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002)  5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics)  Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA))…”

13.In Star Glory Investment Limited v Kai Tuo (H.K.)  Technology Company Limited & Ors[2], Chung J adopted the following test:

“There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified: -

a)  Whether that part of his testimony is inherently plausible or implausible;

b)  Whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony.  For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest.”

14.I adopt the above principles in assessing the credibility of P1 and D2.

Preliminary – section 15(1)  of the Stamp Duty Ordinance (Cap. 117)  (“SDO”)

15.Section 15(1)  and (1A)  of the SDO provides:

“(1)  Subject to subsection (1A)  and section 15A, no instrument chargeable with stamp duty shall be received in evidence in any proceedings whatsoever except –

(a)  criminal proceedings;

(b)  civil proceedings by the Collector to recover stamp duty or any penalty payable under this Ordinance,

or be available for any other purpose whatsoever, unless such instrument is duly stamped.

(1A)  Notwithstanding anything in subsection (1), an instrument which is not duly stamped may be received in evidence in civil proceedings before a court if—

(a)  the court so orders upon the personal undertaking of a solicitor to cause:-

(i)  such instrument to be stamped in respect of the stamp duty chargeable thereon; and

(ii)  any penalty payable under section 9 in respect thereof to be paid; or

(b)  the instrument is endorsed by the Collector under section 14(1C).”

16.As Ps rely on the Important Private Agreement as the agreement between P1 and D2 pursuant to which P2 and D2 entered the SPA for the transfer of the Property from P2 to D2, on the first day of trial, I raised with Ms Tiffany Chan (counsel for Ps)  the issue of whether section 15(1)  of the SDO applies to the Important Private Agreement and whether it can be admissible as evidence:

(1)  Ps’ case is that the consideration for the sale and purchase of the Property was HK$7 million.

(2)  Only the SPA was stamped and stamp duty in the sum of HK$270,000 was paid based on the consideration of HK$4.5 million.

(3)  Therefore the SPA was not duly stamped in the sense that there is a shortfall in the stamp duty payable if the consideration was HK$7 million.

(4)  The Important Private Agreement was not stamped at all.

17.As parties needed time to research into the issue and in order not to disturb the trial dates, the trial went ahead without any submissions or final determination having been made on the issue and the Important Private Agreement was considered de bene esse.

18.During oral closing submissions, the court raised again the applicability of section 15 of the SDO and warned that without any submissions to the contrary, the court would not be able to take into account the Important Private Agreement as it is inadmissible.

19.By way of further written submissions, Ms Chan accepted that the Important Private Agreement is an agreement for sale under section 29(A)(1)  of the SDO and is an instrument chargeable with stamp duty.  Therefore, section 15(1)  applies.  As such, the Important Private Agreement cannot be received in evidence in any proceedings unless: i)  section 15(1A)  applies or ii)  it falls within one of the exceptions under section 15A.

20.Ms Chan accepted that as no personal undertaking has been or will be provided by any solicitor, section 15(1A)  of the SDO is inapplicable.  It was also fairly conceded that as section 15A of the SDO only applies to residential properties, it is inapplicable to the Important Private Agreement.

21.It is therefore accepted that the Important Private Agreement cannot be received as evidence.

22.Ms Chan thus invited the court to consider the totality of other evidence canvassed at trial to make a factual finding that the parties had agreed to the terms in the Important Private Agreement; those evidence being:

(1)  The parties having attended the offices of Messrs Li Chow & Co on 22 April 2016;

(2)  D2 agreed that the purpose for going to Messrs Li Chow & Co was for the purpose of entering into an agreement;

(3)  Other contemporaneous documents evidencing the parties having agreed to transfer the Property at an agreed consideration of HK$7 million worth of Products.

23.In effect therefore, the court will disregard the fact that there was a copy (not original)  of the Important Private Document.

Discussion

Did P1 and D2 enter into an agreement in the terms of the Important Private Agreement on 22 April 2016?

24.Ps’ case was that on 22 April 2016, P1 and D2 entered into a written and signed agreement, i.e. the Important Private Agreement.  D2’s oral evidence was that there was no agreement reached between her and P1 on 22 April 2016, as she had refused to agree to a consideration of HK$7 million for the transfer of the Property. D2’s evidence was that she had not signed it.

25.As the copy Important Private Agreement cannot be received as evidence, the court could only refer to the witness statement of P1, her oral evidence and other documents to determine if her case is proven on a balance of probabilities.

26.P1’s witness statement spans 5 pages in a relatively large font and was prepared by P1 herself.  It consisted of very brief and imprecise facts.  In relation to the Important Private Agreement:

(1)  P1 had made no mention to such a written and signed agreement in her witness statement.

(2)  The content that can be remotely considered to be related to the Important Private Agreement is:

(a)  P1 had proposed to use the Property (worth HK$7 million)  in exchange for Products to be provided by D2.

(b)  However, after the transfer of the Property, D2 only gave her HK$200,000 worth of products and swindled the Property.

(c)  After P1 purchased the Property at HK$4.52 million, she had spent HK$800,000 on renovation so that the Property was HK$5.32 million.  She had made many mortgage repayments and D2 agreed to purchase it for HK$7 million.  However, for defrauding the Inland Revenue Department, the consideration was written as HK$4.5 million to attract a lower stamp duty.

27.As can be seen, one of the most important matters allegedly having been agreed is the amount of consideration for the transfer of the Property: instead of HK$4.5 million, it is said to be actually HK$7 million worth of goods.  In assessing whether the parties had so agreed as alleged by Ps, one needs to first consider the issue of what is the consideration for the transfer of the Property agreed between the parties.

The Consideration for the sale and purchase of the Property

28.The starting point must be: the SPA and the Assignment both set out the consideration to be HK$4.5 million. The SPA also contained an entire agreement clause.  Insofar as Ps are contending that the consideration is in fact HK$7 million by reason of an agreement having been reached, the effect of such contention is to alter the amount of consideration as set out in the SPA and the Assignment.

29.To this end, the parol evidence rule applies: “parol testimony cannot be received to contradict, vary, add to or subtract from the terms of a written contract, or the terms in which the parties have deliberately agreed to record any part of their contract… it has been taken to exclude extrinsic matter in writing, such as drafts,preliminary agreements and letters of negotiation.”[3]

30.However, there are exceptions to the parol evidence rule: “… although when the parties arrive at a definite written contract the implication or presumption is very strong that such contract is intended to contain all the terms of their bargain, it is a presumption only, and it is open to either of the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreement.”[4]

31.“It follows that the scope of the parol evidence rule is much narrower than at first sight appears. It has no application until it is first determined that the terms of the parties’ agreement are wholly contained in the written document. The rule: ‘… only applies where the parties to an agreement reduce it to writing, and agree or intend that the writing shall be their agreement’.” [5]

32.“Whether the parties did so agree or intend is a matter to be decided by the court upon consideration of all the evidence relevant to this issue. It is therefore always open to a party to adduce extrinsic evidence to prove that the document is not a complete record of the contract. If, on that evidence, the court finds that terms additional to those in the document were agreed and intended by the parties to form part of the contract, then the court will have found that the contract consists partly of the terms contained in the document and partly of the terms agreed outside of it. The parol evidence rule will not apply. If, on the other hand, the court finds that the document is a complete record of the contract, then it will reject the evidence of additional terms. But it will do so, not because it is required to ignore the additional terms or the evidence said to prove them, but because such evidence is inconsistent with its finding that the document does contain the entire terms of the parties’ agreement. ¹²⁹ No doubt, in practice, where a document is produced which appears to be a complete contract, a party will experience considerable difficulty in proving, on the balance of probabilities, that further contractual terms were agreed outside the written terms of the document. But extrinsic evidence of such terms is not ipso facto excluded.”[6]

33.The court will therefore need to decide on whether the SPA and the Assignment contained the entire agreement as to the consideration of the transfer of the Property.  The answer to this question is necessarily “no”, as even on D2’s case, despite the provisions of the SPA and the Assignment having set out the consideration of HK$4.5 million was to be paid: i)  HK$300,000 as initial deposit, ii)  HK$300,000 as further deposit upon signing of the SPA and iii)  HK$3,900,000 at completion, the consideration was in fact not paid by cash, but allegedly by settlement of various debts owed by P1 to D2.

34.As such, the court will need to decide whether Ps’ case or Ds’ case prevails.

35.For the following reasons, I am of the view that the consideration for the transfer of the Property was agreed to be HK$4.5 million as reflected in the SPA and the Assignment, rather than HK$7 million worth of goods:

(1)  D2 had produced a valuation report by Savills Valuation and Professional Services Limited dated 20 July 2016 (the “Valuation Report”)  whereby the Property was valued at HK$4.5 million.  There is no suggestion that such report was fraudulent or post-dated.  As such, there is no logical reason why D2 would have been willing to enter into the Assignment (on 8 September 2016)  at a consideration of HK$7 million (more than 1.5 times of the market value).

(2)  Although the SPA was signed before the Valuation Report, D2’s oral evidence, which I accept, was that she had gathered oral estimates from banks and estate agents which were around HK$4.5 million before the SPA was signed.

(3)  This valuation is further supported by the single joint expert report which had opined that the Property was valued at around HK$3,840,000 as at April 2016.

(4)  It is noted that P2 herself had only acquired the Property on 16 February 2016 for HK$4.52 million and the SPA was entered into a mere 3 months later in May 2016. 

(5)  When P1 was asked on what basis could the Property fetch a price of HK$7 million a mere 3 months after she had acquired the Property at HK$4.52 million, P1 said that she had initially proposed a price of HK$8 million due to the plan for the MTR Tuen Ma Line to be built and the fact that she had renovated the Property. However, this was never mentioned in her witness statement and there is no evidence that the announcement of the Tuen Ma Line took place between February – September 2016. There is also no evidence to support P1’s bare assertion that she had renovated the Property to an extent which would lead to the 1.5 times appreciation in value. On the contrary, P1’s own evidence was that she had spent HK$800,000 on renovation only.

(6)  There is thus no evidence which supports an increase of more than 1.5 times in the value of the Property in a matter of 3 months.

(7)  I therefore reject any suggestion that D2 would have agreed to a consideration of HK$7 million as it is inherently implausible.

(8)  I find that it was P1’s own personal wishful thinking that she could reap a quick profit from a confirmor sale by selling the Property to D2 at the value of HK$7 million (or HK$8 million).

(9)  As can be gleaned from the oral evidence of P1, she was keen to transfer the Property to D2 at a consideration of HK$7 million.  However, as admitted by P1, D2 had refused to agree to HK$7 million being put down as the consideration for the sale of the Property on 22 April 2016 when they were in the solicitor’s office (“佢唔同意，唔係450萬就唔做”).  This is consistent with D2’s oral evidence that P1 had repeatedly asked for HK$7 million as consideration but she had repeatedly refused. That is a clear indication that D2 had refused to agree to a consideration of HK$7 million.  It is therefore inconceivable to suggest that D2 had on 22 April 2016 signed any agreement with P1.

(10)  P1 insisted that D2 had agreed to the figure of HK$7 million and mentioned for the first time in her oral evidence that despite of the fact that she knew D2’s insistence to put down HK$4.5 million rather than HK$7 million to be a tax avoidance tactic and that it would be illegal, she had no choice but to agree to putting the HK$4.5 million as consideration in the SPA.  However, P1 could not provide any logical reason as to why she was reluctantly forced into putting down HK$4.5 million as the consideration when in fact HK$7 million was agreed:

(a)  There is no dispute that D2 would be responsible for settling the stamp duty.  P1 would derive no benefit from defrauding the Inland Revenue Department.

(b)  As P1 said in her oral evidence, she could have easily sold the Property at HK$10 million at that time.  If she had wanted to fetch HK$7 million for the Property, she was free to sell the Property to other potential buyers and pay D2 with the sale proceeds.  There was no reason for her to take part in such illegal act as alleged.

(c)  If she had wanted D1 to provide the Products to her for her business, all she needed to do was to pay for them.  It is absurd to suggest that the only way to get financing for the Products would be to succumb to the alleged illegal request of D2 to put down a different consideration.  I reject such allegation.

(d)  As such, it defies common sense to suggest that P1 would “reluctantly” agree to the tax avoidance act allegedly suggested by D2.

(11)  P1 also gave evidence that D2 indicated that putting down a HK$4.5 million figure instead of HK$7 million would assist her in getting a loan to repay the Mortgage.  However, subsequently when pressed on the logic of such an allegation, P1 was unable to provide any and admitted that to have been guesswork on her part.

(12)  From the way that P1 gave evidence, it can be seen that P1 is dishonest and unreliable.  She simply gave evidence in the way that she thought would benefit her case, yet would discard it as soon as it was shown that it did not make sense.

36.I find it implausible to suggest that D2 would agree to a consideration of HK$7 million for the transfer of the Property (when she was informed the market value was only HK$4.5 million at the time).

37.As compared to P1, D2 gave evidence in a more straightforward manner.  On the allegation that she had agreed to the valuation of HK$7 million, D2’s evidence was that she had never signed any agreement to that effect.  She rejected any suggestion that she had agreed to a valuation of HK$7 million for the Property.  Her evidence was that she did go to the offices of Messrs Li Chow & Co on 22 April 2016. However, when P1 suggested the Property be valued at HK$ 7 million, she had refused to accede to P1’s request.  This is consistent with P1’s evidence (“佢唔同意，唔係450萬就唔做”)  and the fact that the SPA eventually set out the value of the consideration to be HK$4.5 million.

38.Taking into account the inherent improbability of D2 having agreed to a consideration of HK$7 million, I accept D2’s evidence that she had not signed or entered into any agreement to that effect.  I thus find that P1 has failed to show on a balance of probabilities that D2 had agreed to purchase the Property with HK$7 million worth of Products.

The Products Agreement

39.Ms Chan relied on the Products Agreement as a contemporaneous document in support of an agreement having been reached between P1 and D2 the following ways:

(1)  The Products Agreement had set out that:

(a)  Parties had agreed to the following products being provided to P2 at the following prices:

Products	Prices
Professional Formula For Bone	HK$119
Professional Formula For Liver	HK$156
Immunity Booster	HK$179

(b)  P1 would purchase the Products by transferring the Property to D2 as payment for the Products.

(c)  After having provided HK$7,000,000 worth of Products, the sale and purchase agreement will expire and terminate.

(2)  As D2 agreed that her daughter had helped typed up the Products Agreement; Ms Chan submitted that D2 must have agreed to its terms.

(3)  In D2’s list (“萬芊芊拿貨總計”), the goods supplied after 3 May 2016 were at the prices as set out in the Products Agreement.  It also contained D2’s own reference to “2016年5月3日簽訂正式合約前的取貨” and “2016年5月3日簽訂正式合約後的取貨”.

40.I reject the submission that the Products Agreement supports Ps’ case that D2 had agreed to purchase the Property with HK$7 million worth of Products:

(1)  First and foremost, Ps could only provide a copy of the Products Agreement, which is unsigned.  It was also not mentioned in P1’s witness statement.

(2)  P1’s oral evidence is that the Products Agreement was chopped and signed on the edges of the pages.  However, no signature can be seen on the copy produced at trial and only what seemed to be a partial chop (without any name of any company)  can be seen on the edge of the copy document.  P1, in an attempt to salvage her version of events, said (for the first time during her oral evidence)  she had taken a photograph of the first 2 pages of the Products Agreement, then went to the bathroom when D2 signed it on an execution page.  Somehow, she had failed to take a photograph of the signing page after she came out from the toilet.  There is no conceivable explanation why P1 would have only taken a photograph of the first 2 pages but had then left out the most important execution page.  I reject such evidence.

(3)  D2’s explanation on having charged Ps the price as set out in the Products Agreement was that despite her not having agreed to the value of HK$7 million for the Property, she had agreed to provide the Products at those prices.

(4)  I find that there is nothing inconsistent with D2 having on the one hand agreed to provide the Products at the prices as set out in the Products Agreement and her not having entered into the Products Agreement and her refusal to adopt HK$7 million as the value of the Property.  D2’s evidence that she never agreed to the Property being valued at HK$7 million remained consistent.

(5)  Even if D2 had instructed her daughter to type up a draft agreement in the form of the Products Agreement, as I find that it was not signed, it cannot be taken as evidence that D2 had agreed to the terms therein.

41.I find that the unsigned Products Agreement does nothing to support Ps’ case that the value of the Property was HK$7 million.

Ds’ counterclaim - The IOU

42.The IOU clearly set out that P1 had on 1 September 2014 borrowed from D2 a total of RMB 3,555,000.  On the face of it, it was signed and finger-printed by P1.

43.P1 sought to disown the IOU by first saying that she had not even met D2 as at the date of the Loan, on 1 September 2014.  It was P1’s case that she only came to know D2 in July 2015.

44.The IOU was signed and fingerprinted by P1. P1’s explanation in her witness statement (as well as her pleaded case)  was that a clerk (李周彭陳律師行馬錦雄師爺)  made her write an IOU stating that she owed D2 a few millions and faxed the IOU to the Inland Revenue Department to reduce tax liability.  This explanation in itself makes no sense, as there is no logic in why the tax liability would be reduced by reason of a debt owed by P1 to D2.

45.In any event, during P1’s oral evidence, she for the first time said that she had not previously seen the content of the IOU. Instead, it was alleged that D2 had provided her with a blank piece of paper and had asked her to sign it and finger print it without any content thereon.  This was because D2 told her that “做戲做全套”.  When asked what that meant, she said that because D2 said she could help P1 sell her villa to D2’s ex-boyfriend for HK$8 million. This so-called explanation again makes no sense.

46.As can be seen, P1 kept inventing new versions of events as she went along.  Her evidence were all contradictory and were thought up when she found that her original explanation did not make sense.  I have no hesitation to wholly disregard P1’s oral evidence in this regard and find that she had signed the IOU having full knowledge on its content.

47.Further, given that P1 is a self-proclaimed experienced property investor, it is inconceivable that she would have agreed to transfer the Property outright to D2, with no security whatsoever.  I find that her conduct in agreeing to transfer the Property to D2 outright is more consistent with D2’s version: that P1 already owed her RMB 3.555 million of Loan (approximately HK$3.8 million)  and certain amount of Products.

48.P1 had also acknowledged in the SPA and Assignment that the consideration for the transfer of the Property had been fully paid, and P1 had acknowledged receipt of them.  There is no conceivable reason for P1 to have so acknowledged if that were untrue.

49.In relation to the time when P1 met D2, I reject P1’s evidence and accept D2’s evidence:

(1)  It was D2’s evidence that she came to know P1 since about 2012 when P1 visited her hair salon.  Since then, their friendship grew and they kept in constant contact.

(2)  It is not disputed that P1 had stayed in D2’s flat for free in Yaumatei between July 2015 and February 2016.

(3)  It is inconceivable to suggest that as soon as P1 knew D2 (in July 2015), D2 would have agreed to let P1 stay in her home free of charge.

(4)  D2’s evidence in this regard is more believable: as she had known P1 since 2012, she had developed a good relationship with her and had agreed to let her stay in her home.

(5)  Overall, D2 gave evidence in a more straightforward manner.  Her version of events is more plausible and has a higher degree of credibility than that of P1, who had shown herself to be completely unreliable in all aspects of the evidence that she gave.

50.Accordingly I accept D2’s evidence that she had known P1 since about 2012.

51.I therefore find that on a balance of probabilities, the IOU has been proven and P1 has failed to displace it.  P1 therefore owed D2 RMB 3,555,000 as shown in the IOU.

Ds’ counterclaim - Amount of Products provided to P1

52.P1 contended that only HK$200,000 worth of Products had been provided to her.

53.Despite saying under cross-examination that both she and D2 had signed records for the amount of Products provided to Ps, Ps did not provide any such document to back up her version.

54.Ds’ case was that HK$452,398 worth of Products had been supplied, as evidenced by a table produced by Ds.

55.In paragraph 10(b)  of the Re-Amended Defence and Counterclaim, it was pleaded that “[D1] further avers that since around February or March 2016, [P1] demanded [D1] to supply the health products… [D1] did supply the said health products to [P1] in or around February or March 2016… the total value of which amounted to HK$1.0 million.”.  Ms Chan criticized that this was contradictory to the table of Products provided to P1, which showed that in March 2016, only HK$93,100 worth of Products was recorded to have been provided to P1.

56.I do not agree with Ms Chan that according to the pleading, the documentary evidence ought to support a case of HK$1 million worth of Products having been provided in just February and March 2016 only. The pleading clearly referred to the “total value” of Products provided.  I accept D2’s oral explanation that she had started providing the Products in February/March 2016, and the HK$1 million figure (the amount originally claimed)  related to the total amount of Products provided, rather than limiting just to the months in February or March 2016.

57.Taking into account D2’s concession during closing submissions, on a balance of probabilities, I accept D2’s evidence that HK$452,398 worth of Products had been provided to P1, as evidenced by the table of Products provided to P1.

The Oral Agreement

58.I have thus accepted that:

(1)  the IOU existed and was valid against P1;

(2)  the Mortgage was redeemed by D2;

(3)  there is an outstanding amount owed to D2 in HK$452,398 in Product costs.

59.Therefore, on a balance of probabilities, I accept D2’s version of events and I find that Ds have proven their case on the Oral Agreement.

Conclusion

60.Accordingly, I find that Ps have failed in their claim and Ds have succeeded in their counterclaim against P1 based on the Oral Agreement as follows:

	(1)	HK$	452,398	(Product costs)
	(2)	HK$	2,729,832	(Mortgage repayment)
+	(3)	HK$	3,727,250	(or RMB 3.555 million Loan)
=		HK$	6,908,480

61.Ds have specifically pleaded that pursuant to the Oral Agreement, the value of the Property would be deducted from the total amount of indebtedness owed by P1 to both D1 and D2.  Therefore, the net amount owed by P1 to Ds is HK$ 6,908,480 – HK$ 4,500,000 = HK$2,408,480.

Orders

62.The 1^st plaintiff do pay the 1^st defendant and the 2^nd defendant:

(1)  damages in HK$2,408,480.

(2)  Interest on HK$2,408,480 from 18 November 2020 to 28 January 2025 at prime rate +1%.

(3)  Interest thereafter at Judgment rate.

63.Costs of the action, including all costs reserved, be paid by the 1^st plaintiff and the 2^nd plaintiff (jointly and severally)  to the 1^st defendant and 2^nd defendant.

64.The above costs order is granted on a nisi basis and will become absolute 14 days after Judgment is handed down if there is no application to vary the costs order.

65.I thank counsel for their assistance.

Ms Tiffany Chan and Ms Regina Yip, instructed by Mok & Co, for the 1^st and 2^nd plaintiff (by Original Action)  and the defendant (by Counterclaim)

Ms Alison Choy, instructed by Alex To & Co, for the 1^st and 2^nd defendants (by Original Action)  and for the 1^st and 2^nd plaintiffs (for Counterclaim)