Marlon Ray Chen v. Gu Yan
Read the full judgment text of DCCJ 510/2021 on BabelCite. This District Court judgment was delivered on 17 February 2025.
1. This case concerns various financial dealings between the Plaintiff, Mr Marlon Ray Chan（陳瑞）, and the Defendant, Mr Gu Yan （顧岩）, during their short-lived cooperation in 2015 to 2016.
Cites 3 cases
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DCCJ 510/2021 [2025] HKDC 255 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 510 OF 2021 --------------------
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------------------- JUDGMENT ------------------- A. Introduction 1.This case concerns various financial dealings between the Plaintiff, Mr Marlon Ray Chan（陳瑞）, and the Defendant, Mr Gu Yan （顧岩）, during their short-lived cooperation in 2015 to 2016. 2.The Plaintiff claims repayments of various loans which he says that he has advanced to the Defendant for the latter’s personal expenses, tax liability and expenses for his affiliated companies. The Plaintiff further claims interest on the above loans pursuant to an alleged interest agreement between him and the Defendant. 3.On the other hand, the Defendant counterclaims against the Plaintiff for the consideration for shares in a company called Matrass Mining Inc（豐域礦業股份有限公司）(“MMI”) in reliance on a share transfer agreement entered into between MMI, Granary Group Ltd (“GGL”) and Reach Resources Limited (“RRL”). According to the Defendant, RRL was acting as an agent/nominee of the Plaintiff whereas GGL was acting as an agent/nominee of the Defendant in the share transfer agreement. B. Agreed Facts 4.The following facts are agreed between the parties, as stated in the Agreed Chronology[1] and the Agreed Statement of Facts both dated 16 August 2024. 5.The Plaintiff is a businessman. He is and was at all material times a Canadian citizen and has been a Hong Kong resident since October 2019. The Plaintiff is the beneficial owner and the sole director of RRL, a company incorporated in the Cayman Islands. 6.The Defendant is a businessman in the mining business. He is and was at all material times a Mainlander and resides in Beijing. 7.Since around September 2015, the Defendant caused the transfer of his 100% interest in MMI to GGL. After the transfer, GGL held the entire shareholding of MMI and owned the graphite mine project located in Urad Middle Banner, Inner Mongolia Autonomous Region, PRC (“the Mine Project”). 8.In May 2015, the Plaintiff and the Defendant became acquainted in Beijing, during which the Defendant made known to the Plaintiff that he was in the mining business and was looking for an opportunity to list his company on the Hong Kong Stock Exchange (“HKSE”). 9.Between 28 July 2015 and 31 July 2015, the Defendant stayed at the Four Seasons Hotel Hong Kong and incurred expense in the sum of HK$14,355. The reservation was made by the Plaintiff and the payment for the above expenses was settled by the Plaintiff’s personal credit card (“the July 2015 FS Payment”). 10.On 29 July 2015, MMI appointed the Plaintiff as its agent by a letter of authorisation（授權委託書）(“the Letter of Authorisation”), in which it was stated, inter alia, that:
11.On 30 July 2015, the Plaintiff used his personal credit card to pay for an iPhone for the Defendant at the Apple Store at the Hong Kong International Financial Centre (“the iPhone Payment”). 12.On 3 August 2015, the Defendant on behalf of MMI and the Plaintiff on behalf of Golden Ray Resources Limited (“GRR”) entered into a Consulting Service Agreement（顧問服務協議）(“the Consulting Agreement”). The Consulting Agreement contained, inter alia, the following terms:
13.On 8 August 2015, the Plaintiff sent a Defendant a draft <<諒解備忘錄 >> by an email. In the said email, the Plaintiff stated that：
14.On 25 November 2015, MMI, GGL and RRL entered into a share transfer agreement (股權轉讓協議書) (“the Share Transfer Agreement”), whereby GGL agreed to transfer 20,000 shares (2%) in MMI to RRL (“the 2% Share”). There were two version of the Share Transfer Agreement, one relied on by the Plaintiff, the other relied on by the Defendant:
15.On 25 November 2015, the Plaintiff and the Defendant entered into a Memorandum（備忘錄）, in which it was stated, inter alia, that:
16.Between 2 December 2015 and 3 December 2015, the Defendant stayed at the Mandarin Oriental Hotel Hong Kong and incurred expenses in the sum of HK$3,516, which was settled by the Plaintiff’s personal credit card (“the Dec 2015 MO Payment”). 17.On 3 December 2015, the Plaintiff lent HK$500,000 to the Defendant by way of a cashier order (with a surcharge of HK$25) to settle the latter’s tax liability to the Inland Revenue Department (“the Tax Payment”). 18.Between 3 December 2015 and 5 December 2015, under the Plaintiff’s booking, the Defendant stayed at the Four Seasons Hotel Hong Kong and incurred expenses of HK$10,098. The above expenses were settled by the Plaintiff’s personal credit card (“the Dec 2015 FS Payment”). 19.On 7 December 2015, RRL became the registered 2% shareholder of MMI and the Plaintiff was appointed a director of MMI. On 21 December 2015, the Plaintiff was appointed the CEO of MMI. On 27 January 2016, the P was appointed as the director of Kamalan Holdings Limited (“KHL”). On 3 February 2016, the Plaintiff resigned as director of MMI and KHL. 20.On 9 January 2020, a face-to-face meeting was held between the Plaintiff and the Defendant (“the 9 January 2020 Meeting”). B. The Parties’ Cases B1. The Plaintiff’s Case B1.2 The Plaintiff’s Claim 21.The Plaintiff’s case is that the July 2015 FS Payment, the iPhone Payment, the Dec 2015 MO Payment and the Dec 2015 FS Payment were all payments which he paid on the Defendant’s behalf. They were intended to be loans which the Defendant had to repay:
22.As for the Tax Payment, the Plaintiff says that it was a loan made by him to the Defendant pursuant to the following agreement (“the Tax Loan Agreement”):
23.Further or alternatively, it is an implied term of the Tax Loan Agreement that the Defendant shall repay the HK$500,025 within a reasonable time. 24.In addition, the Plaintiff contends that in August 2015, it was agreed between him and the Defendant that he would make advanced payment on behalf of the Defendant for fees and expenses in relation to the following companies which the Defendant had an interest in, and the Defendant shall repay these sums on the Pre-IPO Investment Date (“the Company Expenses Loan Agreement”):
25.Pursuant to the Company Expenses Loan Agreement, the Plaintiff paid the following expenses on the Defendant’s behalf in the total sum of HK$63,008 in the period from 10 December 2015 to 16 February 2016 (“the Company Expenses”):
26.In or about June 2016, the Plaintiff orally demanded the Defendant for repayment of all the above loans. However, the Defendant failed to make repayment of any of the loans. 27.Thereafter, in or about June 2016, upon the request of the Defendant for extension of time for repayment of the above loans and in consideration of the Plaintiff agreeing not to demand for immediate repayment of the loans, it was orally agreed between the Plaintiff and the Defendant that the Defendant shall pay interest on the above loans at the rate of 1% per calendar month (12% per annum), and such interest shall accrue from the date when the respective loans were lent to the Defendant until the date of repayment (“the Interest Agreement”). 28.Further or alternatively, the Plaintiff contends that it is an implied term of the Interest Agreement that the Defendant shall repay the above loans with interest at the rate of 1% per calendar month (12% per annum) within a reasonable time. The Plaintiff’s primary position is that the reasonable time has expired by 31 July 2017, or alternatively by 31 December 2018 or 31 January 2020. As a last alternative, the reasonable time should have expired by 1 February 2021 when the Plaintiff commenced this Action. 29.In around mid-2017, the Plaintiff demanded the Defendant to repay the above loans with interest according to the Interest Agreement. However, the Defendant failed to make any repayment. 30.In the 9 January 2020 Meeting, the Plaintiff demanded for repayment of the above loans with interest again. The Defendant confirmed to the Plaintiff that he would repay the loans together with interest on or before 31 January 2020. However, the Defendant failed to make any repayment. B1.2 The Plaintiff’s Defence to the Defendant’s Counterclaim 31.A summary of the Defendant’s counterclaim is set out in Section B2.2 below. 32.The Plaintiff denies the Defendant’s Counterclaim. The Plaintiff denies that he or the Defendant were intended to be the true parties to the Share Transfer Agreement. The Plaintiff denies that RRL entered into the Share Transfer Agreement as his agent/nominee. Similarly, the Plaintiff denies that GGL entered into the Share Transfer Agreement as the Defendant’s agent/nominee. B2. The Defendant’s Case B2.1 The Defendant’s Defence 33.The Defendant claims that the July 2015 FS Payment, the iPhone Payment, the Dec 2015 MO Payment and the Dec 2015 FS Payment were gifts by the Plaintiff to him. The Defendant says that the Plaintiff paid the hotel expenses for him and paid the mobile phone for him as a gift, as the Plaintiff wanted to please him so that the Plaintiff could be appointed as MMI’s agent in its listing exercise and acquire part of the Defendant’s business. 34.With respect to the Tax Payment, the Defendant admitted that in about December 2015, he was in need of HK$500,000 to settle his outstanding tax to the Inland Revenue Department and he borrowed HK$500,000 from the Plaintiff. However, he denied that there was any Tax Loan Agreement. 35.The Defendant denies the Company Expenses Loan Agreement. With respect to the expenses stated in §§25 (a) to (f), (j) and (k) above, the Defendant accepted that they were paid but contends that they were advanced pursuant to the Consulting Agreement made between MMI and GRR. As the Plaintiff and the Defendant are both not parties to the Consulting Agreement, the Plaintiff is not entitled to seek repayment of the above expenses from the Defendant. 36.As to the expenses stated in §§25 (g) and (i) above, the Defendant does not admit that they have been incurred. Insofar as those expensed had been incurred, they were advanced pursuant to the Consulting Agreement such that the Plaintiff is not entitled to claim against the Defendant for repayment. Further, it was agreed between the Plaintiff and the Defendant that the expenses stated in §25 (g) should be borne by the Plaintiff. 37.The Defendant accepts that the expenses stated in §25 (h) above have been incurred. However, the Defendant is not liable for the expenses as they were advanced pursuant to the Consulting Agreement. 38.The Defendant denies that there was any Interest Agreement, or any implied term of the Interest Agreement as alleged by the Plaintiff. 39.The Defendant denies that he has ever confirmed that he would repay the loans alleged by the Plaintiff with the interest on or before 31 January 2020. B2.2 The Defendant’s Counterclaim 40.The Defendant contends that even if he is held liable to any part of the Plaintiff’s , he has a Counterclaim based on the Share Transfer Agreement, and he is entitled to set-off any sum which he owes to the Plaintiff against the sum which the Plaintiff is liable under the Counterclaim. 41.According to the Defendant, while the Share Transfer Agreement was entered into between MMI, GGL and RRL on the face of the document, MMI, the Plaintiff and the Defendant were the true parties to the said Agreement. The Defendant further says GGL was controlled by the Defendant through his son, Mr Gu Chen Yang（顧晨陽）(“Mr Gu CY”) who followed the Defendant’s instruction regarding the affairs of GGL. 42.Under Clause 1 of the Share Transfer Agreement, the Plaintiff should pay the purchase price of the 2% Share in the amount of US$60,000 to the Defendant. The Plaintiff has failed to do so and the Defendant is entitled to claim for the amount against the Plaintiff. C. Applicable Legal Principles 43.The following legal principles are relevant to the present case. 44.The approach to fact-finding and assessment of credibility has been succinctly summarised by DHCJ Eugene Fung SC in Hui Cheung Fai & Anor v Daiwa Development Limited & Ors (unrep, HCA 1734/2009, 8.4.2014) [D#1] at §§77-83 as follows:
45.Whether the making of a bare payment to another carries with it an obligation to repay is a matter of inferences to be drawn from the totality of circumstances in which the payment is made: Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 364 at §106 per Sir Anthony Mason NPJ. D. Analysis D1. Overall credibility of the Plaintiff and the Defendant 46.The Plaintiff’s claims in the present case are primarily based on oral agreements allegedly made between the parties. As such, it is important for the Court to assess the overall credibility of the Plaintiff and the Defendant’s evidence, and consider the parties’ respective cases against the contemporaneous documents (where available) and the circumstances in which the alleged oral agreements were made. 47.The Plaintiff and the Defendant were the only two witnesses in the Trial. Having heard their oral evidence and observed their demeanour, and considering that against their pleaded case, the witness statements and the documents, I consider the Plaintiff’s evidence to be more credible than that of the Defendant. 48.The Plaintiff’s oral evidence is largely consistent with his pleaded case and his witness statement. During cross-examination, the Plaintiff responded to the questions by the Defendant’s Counsel in a generally straightforward manner. Overall, I find the Plaintiff to be a credible witness. 49.On the other hand, I consider the Defendant to be an incredible witness. The Defendant was evasive when he answered the Plaintiff Counsel’s questions during cross-examination, and he had a tendency to digress. He gave inconsistent answers to questions and his oral evidence was inconsistent with his witness statement on various matters. 50.For example, in the Defendant’s Witness Statement §5 and a Share Subscription Agreement（增資擴股協議）dated 29 April 2015, it was stated that a Mr 李瑋 had acquired 4% of MMI’s shares at US$20 million in April 2025. When being asked during cross-examination as to why Mr 李瑋 was not recorded in MMI’s Register of Members, the Defendant was unable to provide any valid explanation but came up with a new version of events that Mr 李瑋eventually only paid US$5 million and got 0.2% of the MMI shares because he was unable to put up the full amount of money and he changed the investment amount. 51.In the Defendant’s Witness Statement §13 (5), he stated that there was an agreement in principle between him and the Plaintiff that the Plaintiff would pay the fees for professional service and fees to the professional institutions first and the Plaintiff would enter into a loan agreement with the Defendant in this regard. Further, the above payments would have priority in reimbursement from the Pre-IPO Investment. When the Defendant was being referred to Clause 2 of the Consulting Agreement during cross-examination, he contradicted his evidence in §13 (5) of his Witness Statement and said that payments to professional institutions like Deloitte were not covered under Clause 2, as these professional institutions would be signing contracts directly with him. 52.As to the Defendant’s evidence on whether the issue of 1% monthly interest on the loans was discussed between him and the Plaintiff, see §93 below. 53.Therefore, insofar as there is any inconsistency between the Plaintiff and the Defendant’s accounts on a disputed event, I prefer the Plaintiff’s evidence over that of the Defendant. D. Analysis D1. The First Personal Expenses Loan Agreement 54.For the reasons explained below, I find that the First Personal Expenses Loan Agreement exists. The July 2015 FS Payment was made by the Plaintiff on behalf of the Defendant and subject to the latter’s agreement to repay the same when he returned to Beijing in early August 2015. As to whether the repayment date had been subsequently extended, this will be discussed below. 55.It is common ground between the parties that the Plaintiff and the Defendant were first acquainted in May 2015. As the Plaintiff said during cross-examination, he considered his relationship with the Defendant to be purely business in nature, even though the Defendant was introduced to him through his senior, Dr Sun Yong Lien (孫永聯). 56.In the Defendant’s pleaded case, he alleged that the Plaintiff arranged for his accommodation at the Four Seasons Hotel and made the Dec 2015 FS Payment as a gift as a gesture of sincerity as “the Plaintiff at the material time had a very good relationship with the Defendant and had all long been trying to please the Defendant so as to procure the Plaintiff’s appointment and maintaining himself as the MMI’s agent in listing and further acquisition of part of the Defendant’s business” (“the Appointment and Potential Acquisition”). 57.I reject the Defendant’s case in this regard. While the evidence shows that in July 2015 the Plaintiff and the Defendant were contemplating collaborations in relation to the potential IPO of MMI, they were dealing with each other at arm’s length. It was not the case that the Plaintiff one-sidedly sought to befriend the Defendant in order get himself involved in the potential IPO of MMI. 58.In July 2015, MMI only obtained the exploration permit but did not have a mining permit for the Mining Project. In years 2013 and 2014, MMI was suffering losses and had a negative equity. 59.As the Defendant admitted during cross-examination, MMI’s IPO and pre-IPO funding were important to him and he wanted the Plaintiff to support MMI’s above exercises. As stated in the preamble of the Consulting Agreement §B subsequently entered into on 3 August 2015 between MMI and GRR (the Plaintiff’s solely owned company), GRR was described as having ample experience and connections in relation to investment and financing concerning natural resources projects. 60.As early as on 25 July 2015, the Defendant had already sent a draft Share Subscription Agreement（增資擴股協議）to the Plaintiff, offering RRL (the Plaintiff’s solely owned company) the opportunity to acquire 2% shares in MMI at a consideration of US$10 million. As the Defendant accepted, the Plaintiff rejected the terms of the draft Share Subscription Agreement in July 2015. 61.Hence, from the Defendant’s perspective, securing the Plaintiff to assist MMI in its pre-IPO fundraising and listing exercise was beneficial to both MMI and himself. 62.On the other hand, the Plaintiff possessed experience in the mining industry. I accept the Plaintiff’s evidence that he was at the material times a director of a mining company in Canada. According to the public announcements on the HKSE, the Plaintiff was an executive director of King Stone Energy Group Limited（金山能源集團有限公司）, a listed company in Hong Kong, from December 2011 to March 2013. 63.As the Plaintiff stated in his Witness Statement, he was of the view that if MMI’s Pre-IPO fundraising and IPO are successful, it may be a profitable deal. 64.Therefore, while the Plaintiff may have some interest in participating in MMI and its listing exercise, it cannot be said that he was so keen about it such that he had to bear the Defendant’s personal hotel expenses in order to please the Defendant. 65.Therefore, I find that the July 2015 FS Payment was a loan made by the Plaintiff to the Defendant, which the Defendant initially promised to repay by August 2015 when he returned to Beijing. 66.While the First Personal Expenses Loan Agreement was not reduced into writing, this is not a definitive factor in the present case, bearing in mind that the Plaintiff and the Defendant did not reduce the Tax Loan in December 2015 (which was admitted by the Defendant and of a much larger amount of HK$500,000) into any written loan agreement either. This shows that in the dealings between the Plaintiff and the Defendant, it was not a prerequisite for loan agreements between them to be recorded in written documents. 67.I do not agree with the Defendant’s argument that the Plaintiff’s use of his own credit card for the deposit to secure the reservation of the Four Seasons Hotel for the Defendant (rather than asking the Defendant to provide his credit card details) shows that the Plaintiff was willing to bear the hotel expenses. As the Plaintiff explained in his Witness Statement, which I accept, he was only assisting the Defendant to make the hotel reservation and provided his credit card for such limited purposes. It was only on 28 July 2015 when the Plaintiff and the Defendant checked into the hotel, that the Defendant said he did not have Hong Kong dollars with him and asked the Plaintiff to settle the hotel expenses on his behalf. The Defendant then promised that he would make repayment when he returned to Beijing in August 2015. In reliance upon the Defendant’s above promise, the Plaintiff allowed Four Seasons Hotel to charge the deposit on his credit card to settle the hotel expenses. 68.As to the parties’ way of addressing each other as“elder brother（大哥）”and“little brother（老弟）”, this does not indicate one way or the other whether the July 2015 FS Payment was a loan. It is not uncommon for a person younger in age to address a more senior person as “elder brother” out of courtesy in Mainland business culture. 69.Similarly, the fact that the Plaintiff may have offered to treat the Defendant for dinner when the Defendant arrived in Hong Kong in July 2015 is no indication that the Plaintiff was also prepared to pay for the Defendant’s hotel expenses. D2. The Second Personal Expenses Loan Agreement 70.The iPhone was acquired by the Defendant and the iPhone Payment was made by the Plaintiff on 30 July 2025, during the period when the Defendant was staying at the Four Seasons Hotel in Hong Kong from 28 to 31 July 2015. 71.For the reasons explained in Section D1 above, I find that the Second Personal Expenses Loan Agreement exists. The iPhone Payment was a loan made by the Plaintiff to the Defendant, subject to the latter’s agreement to make repayment to the Plaintiff. 72.I accept the Plaintiff’s evidence that in the Apple Store in the International Financial Centre mall on 30 July 2015, the Defendant wanted to purchase an iPhone but he said that he did not have Hong Kong dollars or credit card with him. The Defendant asked the Plaintiff to make the payment for him and promised that he would repay it when he returned to Beijing in August 2015. 73.I reject the Defendant’s case that the Plaintiff agreed to give the iPhone to the Defendant as a gift in order to please the Defendant or to procure the Appointment and Potential Acquisition. D3. The Repayment Date Agreement 74.By August 2015, the Defendant had not repaid the July 2015 FS Payment or the iPhone Payment to the Plaintiff. 75.It is more likely than not, and I accept the Plaintiff’s evidence, that on 3 August 2015, an agreement was reached between the parties to extend the deadline for the Defendant to repay the July 2015 FS Payment and the iPhone Payment to the Pre-IPO Investment Date, i.e. June 2016. As for any future loan to be extended by the Plaintiff to the Defendant, they should also be repaid by June 2016. 76.I agree with the Plaintiff’s submission that the extended repayment date of “by June 2016” is in line with the provisions in the Consulting Agreement, which was also entered into on 3 August 2015. In Clause 2 of the Consulting Agreement, the parties agreed that any expenses which GRR had incurred for the purposes of MMI’s IPO and Pre-IPO Investment would be given priority to be reimbursed upon MMI’s receipt of the initial payment of the Pre-IPO Investment. As accepted by the Defendant during cross-examination, he was expecting the Pre-IPO Investment to come in by June 2016. The above corroborates the Plaintiff’s case that the new repayment date which the parties had agreed was “by June 2016”. D4. The Third and Fourth Personal Expenses Loan Agreements 77.I find that the Third and Fourth Personal Expenses Loan Agreements exist for the reasons explained below. The Dec 2015 MO Payment and the Dec 2015 FS Payment were not gifts but were loans extended by the Plaintiff to the Defendant, subject to his agreement that these payments would be repaid. Pursuant to the Repayment Date Agreement, the above loans should be repaid by the Defendant by the Pre-IPO Investment Date, i.e. by June 2016. 78.I repeat the reasons explained in Section D1 above. In addition, by the time of the Dec 2015 MO Payment and the Dec 2015 FS Payment, the Plaintiff had been acting as MMI’s agent for more than 4 months (the Letter of Authorisation being issued by MMI in late July 2015), and GRR had entered into the Consulting Agreement with MMI for more than 4 months (the Consulting Agreement entered into in early August 2015). Further, by this time, the Share Transfer Agreement dated 25 November 2015 had already been entered into for RRL to acquire the 2% Shares. There was little incentive for the Plaintiff to please the Defendant to procure the Appointment and Potential Acquisition as alleged by the Defendant. D6. The Tax Loan Agreement 79.As indicated in the Defendant’s Opening Submission Section C3 and the Defendant’s Closing Submissions §91, the Defendant is not seriously disputing that he had borrowed HK$500,000 from the Plaintiff to settle his tax liability and he is liable for the surcharge of HK$25 for the Plaintiff’s issuance of the cashier order for the HK$500,000. 80.I find that the Tax Loan Agreement exists. With respect to the repayment date of the HK$500,025, I accept the Plaintiff’s evidence that the Defendant agreed that he would make the repayment “as soon as possible”. As the learned author of Lewison on the Interpretation of Contracts (8th edn) said at §15.34, where an obligation is to be performed “as soon as possible”, it is to be done within the shortest practicable time having regard to the circumstances surrounding the making of the contract. D7. The Company Expenses Loan Agreement 81.I find that the Company Expenses Loan Agreement exists for the reasons below. According to the Company Expenses Loan Agreement, the Defendant should reimburse the Plaintiff the Company Expenses by June 2016. 82.I find that the Company Expenses listed in §25 above have all been incurred by the Plaintiff for the respective stated purposes, as they were set out in the email from the Defendant’s secretary, Ms Emmy Wang (“Ms Wang”), to the Plaintiff dated 27 June 2016 (“the June 2016 Email”). The said email was copied to the Defendant, who did not raise any objection to its content. The email has the subject“費用墊付及付款憑證，發票”. In the email, Ms Wang enclosed the supporting documents showing the payment of the expenses in a file entitled“陳總墊付費用付款憑證.rar”and stated that:
83.In describing the expenses in the June 2016 Email as“陳總墊付”and“墊付”, Ms Wang must have meant that the expenses stated therein were paid by the Plaintiff with the understanding that he would be reimbursed. 84.The Defendant argues that the Company Expenses should be covered under the Consulting Agreement. I do not agree. From the plain reading of Clause 2 of the Consulting Agreement, the reimbursement therein only concerns expenses incurred by GRR in relation to MMI’s IPO and Pre-IPO Investment matters, but no others. The Company Expenses do not fall within Clause 2. 85.Indeed, during cross-examination, the Defendant accepted that he has interests in the companies which incurred the Company Expenses, namely MMI, KHL, WCIL and WHIL. The Defendant further agreed that he would reimburse the Plaintiff for all the Company Expenses save for the fees arising from the Plaintiff’s resignation as director of MMI and KHL (i.e. §25 (g) for HK$5,000 and §25 (i) for HK$600 (“the Director Expenses”)), as he took the view that those expenses were not related to the above companies, but were the Plaintiff’s personal expenses. As for the other Company Expenses, the Defendant confirmed that they were related to the above companies, hence he has no objection to bearing them. 86.With respect to the Director Expenses, contrary to the Defendant’s assertion, they are plainly MMI and KHL’s company expenses. As with the other Company Expenses (which the Defendant accepted that he should bear), the Defendant is liable to reimburse the Plaintiff for them. 87.As to the timing for the repayment of the Company Expenses, I find that the parties have agreed that these expenses should be repaid by the Defendant by the Pre-IPO Investment Date, i.e. by June 2016. This repayment date is in line with the date which the parties agreed that the Defendant should repay the other loans, i.e. the Personal Expenses Loans and the Tax Loan. It is also inherently probable that the parties agreed repayment of the Company Expenses should be made by June 2016, as that was the date which the parties were expecting to receive the Pre-IPO Investment. 88.In the Plaintiff’s SOC §16, the Plaintiff pleaded that the Company Expenses Loan Agreement was made in or about August 2015. In the Plaintiff’s Witness Statement §§58 (d) and 60, he referred to the fact that agreement had been reached between him and the Defendant regarding the Company Expenses and the repayment date. While the Plaintiff did not mention the time when the Company Expenses Loan Agreement was made in his Witness Statement, and only stated that the agreement was made in August 2015 during cross-examination, I am prepared to accept the Plaintiff’s evidence in this regard, as I consider it more likely than not that the Company Expenses Loan Agreement was reached in or about August 2015 at a time when the Plaintiff and the Defendant reached other agreements relating to their personal dealings as well as the listing of MMI:
D8. The Interest Agreement 89.It is not in serious dispute that by June 2016, the Defendant did not repay any of the Personal Expenses Loans, the Tax Loans or the Company Expenses Loan. 90.On 3 February 2016, the Plaintiff resigned from MMI and KHL. According to the Plaintiff, he decided to cease cooperation with the Defendant as he was concerned with certain alleged misrepresentations made by MMI to Capex. I do not need to make any findings on the falsity or otherwise of these representations, suffice to note that by the time when the Plaintiff resigned from MMI and KHL, the Plaintiff and the Defendant were no longer in a business cooperation relationship. 91.On 16 March 2016, the Plaintiff sent an email to the Defendant with various draft agreements and memorandums, for the purposes of “winding-down”（收尾）the cooperation between the parties （“關於你我合作收尾事情…”）. 92.Therefore, it is inherently probable that by June 2016, when the Defendant failed to repay the above loans extended by the Plaintiff to the Defendant, the parties would have discussed how the loans should be dealt with. As the Defendant was unable to make repayment at that stage, and that the Plaintiff and the Defendant were terminating their cooperation, it is also inherently probable that the Plaintiff would have requested for interest to be paid on the unsettled loans if time were to be given to the Defendant to make repayment. 93.In deciding whether the Interest Agreement was reached, I have also taken into account the overall incredibility of the Defendant’s evidence (see Section D1 above) and the inconsistency in the Defendant’s evidence as to whether a 1% monthly interest was being discussed between the parties. In the Defendant’s Witness Statement, insofar as the Tax Loan is concerned, he claimed that there was no discussion at all about interest. During cross-examination, the Defendant said that the Plaintiff did request 1% monthly interest to be paid by the Defendant on all the above loans (i.e. including the Tax Loan), but this was rejected by the Defendant. However, the Defendant said that he could not recall when the 1% monthly interest was raised by the Plaintiff. 94.I accept the Plaintiff’s case that the Interest Agreement was reached on 20 June 2016. In return for the Plaintiff agreeing to allow more time for the Defendant to repay the outstanding loans, the Defendant agreed that he would pay interest on the Personal Expenses Loans, the Tax Loan and the Company Expenses Loan at the rate of 1% per calendar month (12% per annum), and such interest shall accrue from the date of when the respective sums were lent to the Defendant until the date of repayment. It is an implied term of the Interest Agreement that the Defendant should repay the Personal Expenses Loans, the Tax Loan and the Company Expenses Loan together with interest within a reasonable time. At that time, the Defendant promised the Plaintiff that he would repay all the outstanding loan plus interest no later than July 2017. 95.However, by July 2017, the Defendant failed to repay the Personal Expenses Loan, the Tax Loan or the Company Expenses Loan. There can be little dispute that the Defendant still failed to repay the above loans by 2020. 96.As recorded in the email from the Plaintiff to the Defendant dated 13 January 2020, entitled“<<還款確認協議書>>（草稿）”, the Plaintiff and the Defendant had a meeting on 9 January 2020 in which the parties agreed that Defendant would pay 1% monthly interest on the Tax Loan as well as another RMB 50,000 loan which the Plaintiff extended to the Defendant (“the 13 January 2020 Email”). As stated in the email, the Plaintiff had recorded the above agreement into the draft Repayment Confirmation（還款確認協議書） enclosed to the email for the Defendant’s confirmation. Notwithstanding the Defendant’s alleged strenuous opposition to any interest being charged on the loans, he did not make any response to the email or the draft Repayment Confirmation. I consider the above to be an additional piece of evidence to corroborate the Plaintiff’s case that the Defendant had agreed to bear interest on the above loans (including the Tax Loan) at 1% monthly (12% per annum) interest rate. 97.The Defendant heavily relied on a Judgment from the Beijing People’s Intermediate People’s Court dated 17 July 2020 (“the Beijing Judgment”) and said that the Plaintiff was mounting a “collateral attack” against the Beijing Judgment in claiming that the Interest Agreement was reached in relation to the Personal Expenses Loans, the Tax Loan and the Company Expenses Loan. I do not accept the Defendant’s argument:
98.Having found that the Interest Agreement exists, I am of the view that the reasonable time by which the Defendant should have made repayment of the Personal Expenses Loans, the Tax Loans and the Company Expenses Loan should be the date when the Plaintiff commenced the present action, i.e. by 1 February 2021, which is around 5 years after the Interest Agreement was made. 99.As for the amount of interest which had been incurred up to the date of the Writ (1 February 2021), I will adopt the calculation pleaded in §28B of the SOC, subject to the following revisions as accepted by the Plaintiff in §55 of his Written Closing Submissions:
100.The total amount of interest accrued up to and including 1 February 2021 would be HK$370,683.19. The total amount of principal plus interest as of 1 February 2021 would be HK$968,074.29. D9. The Defendant’s Counterclaim 101.The Defendant’s Counterclaim is based on the Share Transfer Agreement, which on the face of it, was entered into between MMI, RRL and GGL. I do not agree with the Defendant that RRL and GGL were the Plaintiff and his respective agents/nominees when they entered into the said Agreement. 102.There is nothing in the Share Transfer Agreement which suggests that RRL or GGL were not entering into the agreement in their own rights. There is no reference to “agency” or “nominee” in the said Agreement at all. 103.The fact that the Plaintiff was described as the “actual controller”（實際控制人）in §3 of the Preamble only shows that the Plaintiff can exercise control over RRL through the chain of companies (RHL and RCL), it does not go on to show that RRL was acting as the Plaintiff’s agent in entering in to the said Agreement. 104.As to GGL, it was described in §2 of the Preamble that Mr Gu CY was its sole shareholder and director. There was no mention that GGL or Mr Gu CY were acting as the Defendant’s agent/nominee, or that Mr Gu CY was acting pursuant to the Defendant’s instructions in the Agreement. 105.The Memorandum does not assist the Defendant:
106.As neither the Plaintiff nor the Defendant is a party to the Share Transfer Agreement, the Defendant is not entitled to enforce it against the Plaintiff. 107.I therefore reject the Defendant’s Counterclaim. D. Disposition and Costs 108.I find in favour of the Plaintiff’s claims and dismiss the Defendant’s Counterclaim. I order the Defendant to make the following payments to the Plaintiff:
109.Costs should follow the event. I make an order nisi that the Defendant do pay the Plaintiff’s the costs of this Action, including that of the Counterclaim and all costs reserved, to be taxed if not agreed, with Certificate for Counsel. Any party who wishes to vary the costs order nisi should take out an application within 14 days from the date of this Judgment. 110.Lastly, I thank Counsel for their able assistance.
Mr Cedric Yeung, instructed by DLA Piper Hong Kong, for the Plaintiff Mr Chau Hin Chung Eric, instructed by Wong & Tang, for the Defendant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment