Chan Yat Man v. Tung Po (H. K.) Technology Enterprise Ltd

CACV 414/2022, [2025] HKCA 423

On Appeal from [2022] HKCFI 2937

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 414 OF 2022

(ON APPEAL FROM HCA NO 2904 OF 2017)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon G Lam JA (giving the Reasons for Judgment of the Court):

Introduction

1.The plaintiff claimed that he made a loan of $5 million to the defendant company in 2013 while he was its director and shareholder, and that the defendant failed to repay it.  The defendant said that it was not a loan, but payment by the plaintiff of the accounts receivable due from a related company.  Further, the defendant counterclaimed that between 2016 and 2017, the plaintiff wrongfully and in breach of his duties caused the defendant to pay out 12 sums of money totalling $463,225.67, and was therefore liable to the defendant for those sums.

2.After an 8-day trial, K Yeung J gave judgment (“Judgment”)[1] dismissing the plaintiff’s action for recovery of the loan and entered judgment against him for $262,155.67 in respect of part of the defendant’s counterclaim.

3.The plaintiff appealed against the dismissal of his action and the judgment on the defendant’s counterclaim.  The principal issue that arose concerned the nature and purpose of the payment of the $5 million and the circumstances in which it was made.  At the conclusion of the hearing we dismissed the appeal with costs.  These are the reasons for our decision.

The facts

4.We set out below the uncontroversial facts and also explain the findings made by the judge on the disputed facts.

5.The defendant is a Hong Kong company whose business included the supply and installation of CCTV and public address systems. It was apparently founded by, among others, the plaintiff and his younger brother, Mr Chan Yat Fai, in around 1993.  In about 1999 or 2000, Mr Leung Kam Loi Kenny (“Leung”)  joined in and became a co-shareholder and co-director with the two Chan brothers and the plaintiff’s son, Chan Cheuk Wai.  As at 2013, the 3,700,000 issued shares of and in the defendant were held by the four of them as follows: Chan Yat Fai holding 1,110,000 shares (30%); the plaintiff holding 810,000 shares (21.89%); Chan Cheuk Wai holding 670,000 shares (18.11%); and Leung holding 1,110,000 shares (30%).

6.It was common ground that by his personal cheque dated 26 March 2013 (“Cheque”), the plaintiff paid $5 million to the defendant.  It was not in dispute that the plaintiff had raised this money in part by selling a flat in Jubilee Garden.  The agreement for the sale of the property was dated 13 December 2012, and it was completed on 14 January 2013, at the price of $3.82 million.

7.The plaintiff’s case as stated in his witness statements was that in early 2013, the defendant’s business was not good.  The plaintiff, Chan Yat Fai and Leung had a meeting in the afternoon of 25 March 2013 in which it was mentioned that it was necessary for the plaintiff to advance $3 million to $5 million to the defendant, and it was eventually decided that the plaintiff would lend $5 million to the defendant for liquidity purposes.  The Cheque was therefore prepared but, as it was late, it was dated the next day, 26 March.  In support of his case, the plaintiff produced in evidence a receipt dated 25 March 2013 and signed by Chan Yat Fai for and on behalf of the defendant (“25/3/2013 Receipt”), acknowledging that the plaintiff had personally lent $5 million to the defendant for liquidity purposes, that annual interest in the sum of $100,000 would be collected by Chan Yat Fai on behalf of the plaintiff, and that the shareholders had agreed to personally guarantee the loan in proportion to their shareholdings.[2]

8.The plaintiff also produced in evidence a document with the title “股東增資協議書” (“Shareholders Capital Increase Agreement”)  which purported to be an agreement between Chan Yat Fai (Party A)  and Leung (Party B)  signed by them on 25 March 2013 stating (in English translation):

“ Both Party A and Party B are shareholders of Tung Po (H. K.)  Technology Enterprise Ltd. (each holding 30% equity), and agree that Party A will increase the capital by providing HKD 5 million to Tung Po (H. K.)  Technology Enterprise Ltd. (hereinafter referred to as the Company)  for the purpose of reducing the Company’s receivables, without affecting Party B’s existing 30% equity in the Company. Party A will receive from the Company interest at 2% per annum as a return on the above capital increase (i.e., HKD 5,000,000 x 2% = HKD 100,000 per year). If Party B withdraws from the Company or transfers his equity in the Company, Party B shall repay to Party A the amount of capital increase proportionate to 30% of the shareholding within three months after the withdrawal or transfer of equity, i.e., HKD 5 million × 30% = HKD 1.5 million.” [3]

9.The defendant’s case, based mainly on Leung’s evidence, was very different.  Leung said that in mid-2012, there were substantial accounts receivable arising from the defendant’s Mainland business which was run by Chan Yat Fai.  If nothing was done, the accounts receivable might be required by the auditor to be treated as bad debts, affecting the audit of the defendant’s accounts.  He therefore requested the Chan brothers to deal with them before the financial year-end, or he felt he might have to withdraw from the defendant.  The plaintiff responded that he would provide $5 million to reduce the receivables.  Eventually, at a meeting on 26 March 2013, the plaintiff said that having sold a flat at Jubilee Garden he was in a position to provide the $5 million.  Unexpectedly, however, the plaintiff requested that in future, if the defendant had profits available for distribution or if the defendant was sold, the plaintiff should be given priority in being repaid the $5 million and that all the shareholders should in proportion to their shareholdings pay the plaintiff from the monies they were to receive.  To record this condition the Chan brothers produced a handwritten document for Leung to sign which he did (“Handwritten Agreement”)  but he was not given a copy and no such agreement was produced in evidence at trial.  The defendant disputed the authenticity of the 25/3/2013 Receipt and the Shareholders Capital Increase Agreement.  In particular, Leung denied that the signature on the latter was his.

10.There were two companies established in Mainland China in connection with the Mainland side of the defendant’s business, and both were controlled by the defendant. One of them was called 深圳市英廸高貿易有限公司 (Shenzhen Indigo Trading Co Ltd)  (“SZ Indigo”)  and the other 創東蒲 (Chuang Dongpu).  SZ Indigo’s business licence was revoked by a Shenzhen government authority on 7 December 2012.

11.It was common ground that on 26 March 2013 the defendant’s accountant, Ms Jeffy Wong, prepared a voucher (“26/3/2013 Voucher”)  recording the payment of the $5 million as “SZ INDIGO REPAYMENT TO HKTP” and crediting SZ Indigo’s current account in the defendant’s general ledger.

12.There was no dispute that as at March 2013, there were existing amounts due from the defendant to the plaintiff on his director’s current account, quite apart from the $5 million in dispute.  On 26 March 2013, the defendant paid a sum of $842,742.56 to the plaintiff in partial repayment of the amount due.  A week later, on 2 April 2013, the defendant paid another sum of $3 million to the plaintiff in repayment of the amount due to him on his director’s account.  This reduced the balance of the plaintiff’s current account to nil.

13.For the purpose of the audit of the defendant’s accounts, the plaintiff signed a confirmation to the auditors dated 25 June 2013, stating that the balance on his director’s account due to him was $3 million as at 31 March 2013 (“Audit Confirmation”).  On the same date, the defendant’s auditors issued a clear opinion on the defendant’s financial statements for the year ended 31 March 2013.  Those financial statements stated that as at the financial year-end, the amount due to a director was $3 million.  There is no dispute that this was the $3 million referred to in the audit confirmation which in fact had been repaid by the defendant on 2 April 2013.  In the defendant’s audited financial statements for the subsequent financial years ended 31 March 2014, 2015 and 2016, the amount due to related parties was stated at nil.

14.Homebridge Industrial Limited (“Homebridge”)  was a company controlled by the plaintiff.  On 1 December 2016, the plaintiff caused Homebridge to advance $3 million to the defendant.  The plaintiff and Leung both signed on a receipt (“Homebridge Loan Receipt”)  which read:

“ The above sum is lent by Homebridge to Tung Po (H.K.)  Technology Enterprise Limited for liquidity purposes. Interest will be charged at the current bank overdraft rate of 4.5% [per annum]. The shareholders of Tung Po give their personal guarantee in proportion to their shareholdings. This [receipt] is produced as proof.” [4]

15.Chan Yat Fai was diagnosed with cancer in about September 2016 and had to take leave from work.  Towards the end of 2016, the plaintiff began discussions with Leung for the latter to acquire the Chan brothers’ shares in the defendant. Eventually, on 5 January 2017, the plaintiff (on behalf of himself and Chan Yat Fai)  and Leung signed a simple agreement for the former to sell their 70% shareholding in the defendant to the latter for $3 million payable in three instalments of $1 million each.  On the same date, Leung paid the first instalment of the price.  The plaintiff and Leung both signed on a receipt for the $1 million (“5/1/2017 Receipt”)  which was handwritten by Leung and read as follows:

“ The above-mentioned cheque is for the first instalment payment for the transfer of 70% equity in Dongpu (the total being HKD 3 million). Upon full settlement by 28 February 2017, the personal guarantee liability in relation to the loan of HKD 5 million from Chan Yat Man to Dongpu company will terminate simultaneously. This receipt will be formally validated after the above-mentioned cheque is cleared.” [5]

16.After Leung paid the second and third instalments, on 6 March 2017, a slightly more detailed written agreement for the sale and purchase of the shares was entered into between the Chan brothers, Leung and an additional party, namely, Sit Man Ho, whereby the Chan brothers agreed to sell 1,480,000 shares (40%)  to the plaintiff and 1,110,000 shares (30%)  to Mr Sit.  Steps were taken for the transfer of the shares and the Chan brothers signed letters tendering their resignation as directors with effect from 13 March 2017.  Leung remained as the sole director of the defendant, though the plaintiff remained a bank account signatory and had access to the defendant’s cheque book for another few weeks.

17.The relationship between the plaintiff and Leung deteriorated rapidly thereafter.  Various sets of proceedings were brought by the plaintiff and his associates against the defendant from June 2017 onwards. In particular, on 21 September 2017, the plaintiff caused a solicitors’ letter to be issued to the defendant demanding repayment of the loan of $5 million.  The defendant denied liability.  On 15 December 2017, the plaintiff commenced the action below against the defendant claiming the sum of $5 million with interest.

18.The defendant opposed the action, and counterclaimed alleging that the plaintiff had wrongfully and in breach of duties caused the defendant to make a total of 12 payments (“Payments Nos. 1 – 12”)  between December 2016 and April 2017.  Only Payments Nos. 3, 4 and 5 are relevant in this appeal.  The relevant facts are as follows:

(1)  Payment No. 3: On about 28 February 2017, the plaintiff signed a cheque of the defendant in the sum of $178,266.67 payable to Chan Yat Fai.  The plaintiff’s case was that this payment was for Chan Yat Fai’s salary for February 2017, payment in lieu of notice, severance pay and long service pay.  The defendant said that as Chan Yat Fai had resigned from office he was not entitled to payment in lieu of notice, severance pay and long service pay, and that $155,366.67 had therefore been wrongfully paid out.

(2)  Payment No. 4: The plaintiff signed a cheque of the defendant dated 13 March 2017 to pay the sum of $6,789 to the HKSAR Government, for the stamp duty payable in relation to the sale of the plaintiff’s and Chan Yat Fai’s shares in the defendant to Leung and Sit in March 2017.

(3)  Payment No. 5: By signing a cheque of the defendant dated 13 March 2017, the plaintiff caused $100,000 to be paid to Chan Yat Fai.  The plaintiff said that this represented one year’s interest at 2% on the loan of the $5 million.

The judge’s judgment

19.The judge heard the evidence of five witnesses called on behalf of the plaintiff (including the plaintiff himself)  and two witnesses called by the defendant, namely, Leung and Jeffy Wong.  A statement signed by Chan Yat Fai dated 9 October 2017 (“CYF statement”)  was placed in evidence, Chan Yat Fai having died five days after that date. 

20.Having considered all the evidence in the round, the judge concluded that the plaintiff was neither an honest nor a reliable witness, and that his evidence was inherently improbable, inconsistent with contemporaneous documents and undisputed events, and full of inconsistencies. The judge found the other four witnesses called by the plaintiff to be truthful but, apart from Tai who spoke of the circumstances in which the CYF statement came to be signed, their evidence was peripheral.  The judge found Leung and Jeffy Wong to be honest and reliable witnesses and accepted their evidence.[6]

21.Of the documents produced by the plaintiff in evidence the authenticity of which was not admitted, the judge found the Homebridge Loan Receipt was authentic but held that the plaintiff had failed to establish the authenticity of the 25/3/2013 Receipt and the Shareholders Capital Increase Agreement.  The judge rejected the plaintiff’s case that the $5 million was a loan to the defendant and found that the money was provided by the plaintiff to the defendant in reduction of the accounts receivable due from SZ Indigo against the promise in the Handwritten Agreement.  His Lordship summarised his conclusion in these terms:[7]

“ I have stated various findings of this Court in the course of discussing the evidence. I recite and state the main ones as follows. For the reasons set out above, I reject P’s evidence that the Meeting took place on 25 March 2013. I reject his evidence the HK$5m was an interest-bearing loan to by him to D. I find that P has failed to established the authenticity of the 25/3 Receipt and the Shareholder Capital Increase Agreement. I accept Leung’s and Jeffy Wong’s evidence which I have summarized in §§39 and 40 above. Specifically, I accept their evidence and find that the Meeting took place on the morning of 26 March 2013. I accept Leung’s evidence that the HK$5m was money provided by P to D for reduction of account receivables due at the material time from SZ Indigo, and I so find. P was willing to do so in order to assist Chan Yat Fai. I accept Leung’s evidence that he used the term ‘東蒲公司’ in the 5/1/17 Receipt to denote SZ Indigo. I accept also Leung’s evidence as to the existence of the Handwritten Agreement and the Promise. The references in the various messages and Transcripts to any loan by P, ‘借據’, ‘擔保責任’ etc. should be understood in the context of the Handwritten Agreement and the Promise, and are referable to them.”

22.As regards the counterclaim, Payments Nos. 8, 9 and 10 were not pursued by the defendant at trial.  The judge found in favour of the defendant on Payments Nos. 3, 4 and 5, and dismissed the claim relating to Payments Nos. 1, 2, 6, 7, 11 and 12. 

23.As to Payment No. 3, the judge noted that the plaintiff did not dispute that Chan Yat Fai, having resigned, was not entitled in law to any payment in lieu of notice, severance pay or long service pay.  The judge rejected the plaintiff’s case that the payment was authorised by the directors at a meeting in February 2017.[8]

24.As to Payment No. 4, the judge did not accept the plaintiff’s evidence, denied by Leung, that Leung had agreed that stamp duty on the sale of the Chan brothers’ shares to him and Mr Sit would be paid by the defendant.[9]

25.The plaintiff’s defence to the counterclaim on Payment No. 5 fell with his own claim in the action.

The appeal

26.On this appeal, the plaintiff challenged the judge’s conclusions on credibility and findings of fact.  Mr Matthew Ho who appeared on behalf of the plaintiff summarised the grounds advanced in the notice of appeal into two main contentions.  The first contention is that the judge erred in his findings on the effect and meaning of the 5/1/2017 Receipt.  Had the judge considered that document properly and in the light of the Homebridge Loan Receipt, he should have found that the plaintiff was a credible witness, that Leung and Jeffy Wong were not credible witnesses, and that the 25/3/2013 Receipt and the Shareholders Capital Increase Agreement were authentic documents.  Secondly, the judge erred in assessing the weight to be given to the CYF statement and in eventually giving no weight to it at all.  The judge should have given proper weight to the CYF statement.  At the hearing Mr Ho abandoned an argument raised in the notice of appeal and skeleton argument that the judge had erred in his application of section 49(2)  of the Evidence Ordinance (Cap 8)  in relation to the CYF statement.

27.Based on principles well established by the authorities, these challenges against the judge’s findings of primary fact face a high hurdle since this court, conscious of the fact that it does not have the trial court’s advantage of receiving the evidence first-hand, does not lightly disturb findings of fact made below.  The appellate restraint necessitated by the intrinsic differences between the trial and appeal processes has been frequently emphasised.  In the recent case of Hung Wai Kuen & others v Cheng Shun Ping [2024] HKCA 799 at §26, Chu VP described the appellate approach as follows:

“ (1)  An appellate court will only intervene when it is satisfied that the trial judge’s findings are plainly wrong in that he has fallen into palpable error. (2)  The focal consideration is whether it is permissible for the trial judge to make the findings of fact which he did in the face of the evidence as a whole. (3)  An appellant is required to identify a mistake in the judge’s evaluation of the evidence that is sufficiently material to undermine his conclusions. (4)  Mere assertions that the finding of the trial judge is against the weight of the evidence or that he should have reached another conclusion because of points advanced in the submissions before him do not amount to palpable errors.”

The first contention

28.The principal if not the only piece of evidence focused upon by the plaintiff in this appeal is the 5/1/2017 Receipt.  It was prima facie indicative, the plaintiff submitted, of three matters: that the $5 million was advanced by the plaintiff as a loan; that the borrower was the defendant; and that there was a personal guarantee obligation which, upon full settlement of the price for the sale and purchase of shares, would be cancelled.  It was submitted that the judge was plainly wrong to accept Leung’s explanation of that document.

29.It is true that the phrase “the personal guarantee liability in relation to the loan of HKD 5 million from Chan Yat Man to Dongpu company will terminate simultaneously” (同時結束于陳日文借500万給東蒲公司的个人担保責任)  in the 5/1/2017 Receipt may on its face assist the plaintiff, but we profoundly disagree with the approach urged on us by Mr Ho, which seems to us tantamount to an examination of this document and Leung’s explanation of it in isolation rather than as part of the entire evidence in the case.  Instead of such a blinkered approach, it is necessary for this court to take a holistic view of the evidence, as the judge did, in assessing his findings in relation to this particular piece of the jigsaw.  Without trying to be exhaustive, there are at least the following matters seen as significant by the judge in leading him to accept the defendant’s case and reject the plaintiff’s evidence.

(1)  The plaintiff’s evidence on the provenance of the payment of the $5 million was seen as incredible by the judge.  The plaintiff said in his witness statements that in early 2013 the defendant’s operations were not good but did not specify when a loan from the plaintiff was first proposed.  In cross-examination the plaintiff initially said it was about a week or several days before the meeting in March 2013, but then said he was not sure.  Given that the $5 million was in large part derived from the sale of his flat in Jubilee Garden the agreement for which was entered into on 13 December 2012, the judge found it hard to believe that the plaintiff could not recall the time when the defendant’s need of money was first raised, and considered that the fact that the plaintiff took steps to realise the flat in December 2012 was more consistent with Leung’s evidence that the discussion about the plaintiff providing funds for the business took place in mid-2012.[10] In this appeal the plaintiff did not suggest there was any error in this reasoning.

(2)  Whilst the plaintiff tried to give the impression that the loan was made to the defendant because of its need for liquidity, in fact within a week of receiving the Cheque, $3,842,742.56 was paid back to the plaintiff, so that in reality the defendant only obtained additional funds of less than $1.2 million.  The judge considered that the plaintiff’s evidence that he provided $5 million to the defendant for liquidity purposes was at least not the whole truth if not actually misleading.[11] Before us there was no challenge against this conclusion.

(3)  Chan Yat Fai and Leung in a subsequent recorded conversation referred to the $5 million being used to reduce certain “AR” (i.e. accounts receivable)  and spoke in terms suggesting that the plaintiff had promised to provide the funds by 31 March 2013.  When cross-examined, whilst the plaintiff denied having promised to provide the money before 31 March 2013, he unwittingly hinted there was a deadline of “31^st”.  The judge found in effect that this was a Freudian slip on the plaintiff’s part which showed there was indeed an understanding that the money had to be paid to the defendant by 31 March 2013, which in turn supported the defendant’s case that the payment was intended to improve its financial position with regard to the accounts receivable by the financial year-end.[12] Mr Ho did not identify any mistake in the judge’s view in this regard.

(4)  The 26/3/2013 Voucher clearly recorded the payment of $5 million as a receipt on account of the receivables from SZ Indigo, whose current account with the defendant was credited with the amount.  It was inherently improbable that Jeffy Wong would have prepared the voucher and made ledger entries in the way she did without any instruction from her bosses.  The judge accepted her evidence that Chan Yat Fai gave her instructions to do so in the presence of the plaintiff and Leung, and rejected the plaintiff’s evidence that how the $5 million was deployed was never disclosed to him.[13]  Mr Ho was unable to specify any error in the judge’s reasoning.

(5)  The judge was wholly unimpressed with the plaintiff’s evidence that his title as “finance manager” (財務經理)  of the defendant was titular and that he was not involved in the defendant’s daily operation. The judge found that evidence to be inconsistent with the plaintiff’s own statement given in the Labour Tribunal in the proceedings he brought against the defendant there, where the plaintiff had stated that he would go to the office every week to deal with bank transfers and remittances, sign cheques, and deal with budgeting of salaries and MPF, rent, overdrafts and trade receivables.[14]

(6)  The judge considered that the plaintiff’s case of a loan of $5 million lent to the defendant was fundamentally contradicted by the Audit Confirmation.  That document, signed by the plaintiff, stated that the amount due to him as at 31 March 2013 was only $3 million which, as was common ground, referred to the pre-existing balance on his director’s current account which was repaid on 2 April 2013.  In other words, the Audit Confirmation did not record any part of the $5 million as a liability of the defendant to the plaintiff.  Further, the judge found the plaintiff’s explanations for signing that the Audit Confirmation to be self-contradictory and incredible.[15] Mr Ho made no complaint about the judge’s criticism in this regard.

(7)  The judge found aspects of the plaintiff’s evidence as to the provenance of the 25/3/2013 Receipt and the Shareholders Capital Increase Agreement inconsistent and inherently improbable.  There was no credible explanation why the plaintiff did not produce or even mention these documents until his witness statement of 11 October 2018.[16]

(8)  Separately, the judge was also critical of the plaintiff’s evidence regarding his involvement in the preparation of the CYF statement.  We will describe that further in the next section, but for present purposes we simply note that this was expressly taken into account by the judge as an additional substantial factor against the plaintiff’s credibility.[17]  Mr Ho did not even attempt to show why the judge was not entitled to take this view in light of the evidence he received.

30.It is also necessary to take account of Leung’s evidence of the meeting in March 2013.  According to him, it was agreed at the meeting of 26 March 2013, at the demand of the plaintiff, that if there should be profits in the defendant in future available for distribution or the defendant was sold by the shareholders, then the plaintiff should obtain repayment in that the shareholders should in proportion to their shareholdings pay the plaintiff from the monies they were to receive.  Leung said that the Handwritten Agreement was signed by him to this effect.

31.Mr Ho submitted that Leung’s evidence about the Handwritten Agreement was a subsequent invention since it was not mentioned in the defendant’s pre-action replies or its defence. However, the WhatsApp messages between the plaintiff and Leung in February 2017 show that they reached an understanding then that a “loan acknowledgment” (借據)  relating to the $5 million would be returned by the plaintiff for cancellation.  Mr Ho (in line with the plaintiff’s evidence in his third witness statement at §10)  submitted that what the messages referred to was the 25/3/2013 Receipt, but this clearly could not be correct since the messages referred to a loan acknowledgment signed by Leung whereas the 25/3/2013 Receipt was only signed by Chan Yat Fai.  This was something that the judge was entitled to take into account in accepting Leung’s evidence about the Handwritten Agreement.[18]

32.Leung’s evidence relating to the 5/1/2017 Receipt was summarised by the judge at §55(f)  of the Judgment.  Leung accepted that the words on that receipt were written by him.  He said that before paying the first instalment of $1 million, he and the plaintiff had agreed that upon completion of the sale and purchase of the shares, the $5 million that the plaintiff had made available for reduction of the accounts receivable would be cancelled (一筆勾銷). The plaintiff explained that the Handwritten Agreement was with Chan Yat Fai and he (the plaintiff)  would need to get it from him.  Leung said that the intention was for the plaintiff to produce the Handwritten Agreement at their meeting for cancellation.  Being surprised that the plaintiff had not brought along the Handwritten Agreement, and noting that both SZ Indigo and 創東蒲 (Chuang Dongpu)  were both affiliated companies of the defendant, he (Leung)  simply used the term “東蒲公司” (Dongpu company)  to denote SZ Indigo.  He accepted that his use of terms was not professional or precise.  But at that time, the relationship between him and the Chan Brothers was still good.  He also pointed to the defendant’s reply to one of the plaintiff’s letters of demand, where it was already pointed out that the term “東蒲公司” (Dongpu company)  did not denote the defendant.

33.Mr Ho submitted that the judge was plainly wrong to accept Leung’s explanation of the 5/1/2017 Receipt.  He said that the earlier part of the receipt referred to “Dongpu shareholding” (東蒲股權)  which was undoubtedly a reference to the shareholding in the defendant, and submitted that it was “ridiculous” to think that the same words “Dongpu” (東蒲)  found in the later part of the document denoted a different company.  Mr Ho submitted that Leung had previously referred to SZ Indigo as “Indigo” (英廸高)  but not as “Dongpu” (東蒲).  Mr Ho also referred us to Leung’s second witness statement which said that at the time when Leung wrote the 5/1/2017 Receipt he did not delve into (沒有深究)  which company he was trying to denote, and submitted that the explanation in Leung’s first witness statement that he had meant to refer to SZ Indigo was an afterthought.

34.The judge had carefully considered the wording of the 5/1/2017 Receipt.  He took the view that the receipt had to be considered together with all the other evidence, and in particular Leung’s evidence on the Handwritten Agreement and what was agreed at the meeting of 26 March 2013.  On that basis, the judge found that the “personal guarantee liability” referred to in the 5/1/2017 Receipt was a reference to the promise in the Handwritten Agreement that upon receiving dividends from the defendant or proceeds of sale of the defendant, the shareholders would in proportion to their respective shareholdings reimburse the plaintiff for the $5 million.  The fact that Leung did not delve into the precise legal relations arising from the payment, admittedly made to the defendant, in discharge of the accounts receivable due from SZ Indigo to the defendant, is not at all surprising.  The matter was referred to in the 5/1/2017 Receipt as something to be cancelled; it was not meant to be the creation or acknowledgment of a liability that would continue.  As Mr Wong and Mr Lau pointed out on behalf of the defendant, the defendant had already in the pre-action correspondence stated that the name “Dongpu company” (東蒲公司)  in the 5/1/2017 Receipt did not refer to the defendant, and that the $5 million was received by the defendant on account of the receivables from SZ Indigo; this was not an afterthought.  Further, the judge noted that there were other loose references in the contemporaneous communications to a “loan” from the plaintiff, such as “the 5M loan for big Chan will be settled by existing shareholders” in Leung’s WhatsApp message to Chan Yat Fai on 26 August 2015, which the judge found to be explicable with reference to the Handwritten Agreement.[19]

35.Given all these matters, we do not accept that the judge’s treatment of the 5/1/2017 Receipt could be said to be plainly wrong.  It was rationally open to the judge to accept Leung’s explanation of the wording of the receipt.  What weight ultimately to put on that document is a matter for the trial judge having regard to all the available evidence and inherent probabilities.

36.Mr Ho also relied on the Homebridge Loan Receipt.  It is true that the judge did not accept Leung’s evidence on that document.  But Leung did not dispute that Homebridge did lend $3 million to the defendant in December 2016.  The dispute was merely whether there was an agreement for interest at 4.5% per annum and whether that receipt was signed by Leung.  The judge was entitled to think that this was “of very limited value” as evidence of the plaintiff’s case of the loan of the $5 million.[20] Further, the judge was entitled to prefer Leung’s evidence on the matters material to the action even though he rejected Leung’s evidence on the Homebridge Loan Receipt.

37.As stated above, Mr Ho did not challenge the judge’s criticisms of the plaintiff’s evidence based on many other aspects of the case.  Nor did he challenge the judge’s reasoning in doubting the provenance and authenticity of the 25/3/2013 Receipt and the Shareholders Capital Increase Agreement.  In these circumstances, the plaintiff in our view fell far short of the requisite threshold for saying that the judge was plainly wrong in rejecting his evidence and accepting the evidence of Leung and Jeffy Wong.

The second contention

38.The CYF statement consisted of two pages of text and a one-page table setting out certain sums purporting to show that interest on the $5 million had been received by Chan Yat Fai from the defendant.  The judge examined its provenance and content carefully.  His Lordship noted that there was no evidence as to who prepared the table and gave it to Chan Yat Fai; that the CYF statement was not a contemporaneous record but a document created for the purpose of being used in legal proceedings to be brought by the plaintiff for recovery of the alleged loan; that Chan Yat Fai was of course the plaintiff’s brother and not an independent witness; that the CYF statement did not explain why, as was the plaintiff’s case, the plaintiff was not informed of how the $5 million was used; and that the CYF statement, like the plaintiff’s evidence, suggested that discussions on the plaintiff providing $5 million only started in March 2013 when in fact the plaintiff had already sold his Jubilee Garden flat in December 2012 to raise funds.  Furthermore, the judge was highly critical of the plaintiff’s evidence on his involvement in the preparation of the CYF statement.  The plaintiff claimed that he merely witnessed the process of the preparation of the CYF statement.  However, the evidence of Tai, who the judge found to be a truthful witness, was that the plaintiff told him that he (the plaintiff)  had discussed the contents of the statement in detail with Chan Yat Fai, and that Tai prepared a draft statement based on what the plaintiff relayed to him as Chan Yat Fai’s instructions.  The judge concluded that in an attempt to prevent proper evaluation of the weight to be placed on the CYF statement, the plaintiff had “sought to conceal and misrepresent about his involvement” in the preparation of the CYF statement and his collaboration with Chan Yat Fai.[21]

39.In these circumstances, it was with respect hopeless for the plaintiff to say, as a ground of appeal, that the judge should have placed more weight on the CYF statement.  The weight to be given to such a document is pre-eminently a matter for the trial judge and can hardly be a ground for complaint on appeal.

The counterclaim

40.The plaintiff raised no separate grounds in relation to his appeal against the judgment on the counterclaim.  As to Payments Nos. 3 and 4, there is no basis to impugn the judge’s determination that there was no agreement authorising the payments to be made. As to Payment No. 5, the appeal failed with the plaintiff’s appeal against the dismissal of his action.

Conclusion

41.As counsel for the defendant submitted, what Lewison LJ said in Volpi & another v Volpi [2022] EWCA Civ 464, [2022] 4 WLR 48, at §65 as follows aptly summed up the nature of the plaintiff’s appeal in the present case:

“ This appeal demonstrates many features of appeals against findings of fact:

(i)  It seeks to retry the case afresh.

(ii)  It rests on a selection of evidence rather than the whole of the evidence that the judge heard (what I have elsewhere called ‘island hopping’).

(iii)  It seeks to persuade an appeal court to form its own evaluation of the reliability of witness evidence when that is the quintessential function of the trial judge who has seen and heard the witnesses.

(iv)    It seeks to persuade the appeal court to reattribute weight to the different strands of evidence. …”

42.For the above reasons, we dismissed the appeal.

Certificate for two counsel

43.At the hearing upon dismissing the appeal we ordered the plaintiff to pay the defendant’s costs.  Mr Ho however objected to a certificate for two counsel.  It has been said that parties coming to this court are generally entitled to have leading counsel should they so choose, and that a certificate for two counsel is therefore strictly speaking unnecessary in order for those costs to be allowed on taxation: see the authorities cited in Chen Hongqing v Asia Cement Corporation [2024] HKCA 463 at §6.  It is we think open to the court to limit the costs in an appropriate case but in this instance we do not accede to Mr Ho’s objection.  The defendant is entitled to the costs of two counsel.  It is unnecessary expressly to certify it.

Mr Matthew Ho, instructed by Messrs. W. K. To & Co, for the Plaintiff (Appellant)

Mr Martin Wong & Mr Patrick Lau, instructed by Messrs. Eric Cheung & Lau, for the Defendant (Respondent)