Chan Yee Long v. Lam Heung Ming and Another
Read the full judgment text of HCA 1734/2021 on BabelCite. This High Court CFI judgment was delivered on 27 November 2025.
1. This dispute concerns the ownership of shares in a company known as Asean Coldchain Limited (“ACL”).
Cites 1 case
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HCA 1734/2021 [2025] HKCFI 5642 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1734 OF 2021 _____________ BETWEEN
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_____________ JUDGMENT _____________ A INTRODUCTION 1.This dispute concerns the ownership of shares in a company known as Asean Coldchain Limited (“ACL”). 2.In early September 2019, the Plaintiff (“Mr Chan”) and the 1st Defendant (“Mr Lam”) orally agreed a monetary loan (“the Loan”) from Mr Lam to Mr Chan (“the Loan Agreement”). 3.It is undisputed that, as part of the loan transaction, Mr Chan signed transfer documents for 1,250 shares (a 12.5% shareholding) in ACL (“the ACL Shares”). It is also undisputed that, while the Loan was fully repaid on 10 December 2019, the ACL Shares had been transferred to Mr Lam’s wife, the 2nd Defendant (“Ms Chen”) on 23 September 2019, where they remain. 4.The crux of the dispute is whether, as Mr Chan contends, the ACL Shares were only agreed as security for the Loan and should therefore be returned to him, or whether the outright transfer of the ACL Shares was, as Mr Lam puts it, “a part of consideration / condition precedent” for the Loan. 5.Mr Chan primarily seeks a declaration that the ACL Shares are held by Ms Chen on trust for Mr Chan and an order that the Defendants transfer forthwith the ACL Shares to Mr Chan. B BACKGROUND 6.The Loan Agreement arose within a broader span of commercial dealings between Mr Chan and Mr Lam. The following background matters have not been seriously disputed, and I find them as facts. 7.Mr Chan and Mr Lam are both businessmen. At the material times the relationship between them was, as Mr Lai’s counsel put it, “complex and multifaceted; on the one hand they were business partners; on the other hand they were also striving to secure the greatest possible benefits for their own businesses”. 8.Mr Chan was involved in property development in Fuzhou. He first came to know Mr Lam, who had a major fisheries products business in Fuzhou, in around 1998 when Mr Lam purchased a floor in a property developed by Mr Chan known as “Global Plaza”. 9.ACL was as at all material times controlled by Mr Lam and Ms Chen, having been incorporated by them in 2014 through another company they controlled and owned, United Light Group Holdings Limited (“ULG”). 10.From around 2018, the Defendants sought Mr Chan’s help in arranging a deal for ACL’s acquisition of 49% of all the shares of three Hong Kong companies (“the HK Companies”), which in turn were 100% shareholders in three PRC companies holding certain land use rights in Fuzhou (“the Acquisition Plan”). Mr Chan was a 10% shareholder of each of the HK Companies. 11.On 26 July 2018, Mr Chan received 12.5% shares in ACL from ULG as “consideration” for his role as regards the Acquisition Plan, pursuant to what Mr Lam described as a “facilitation agreement” between Mr Chan and the Defendants. C TERMS OF THE LOAN AGREEMENT 12.As noted, the Loan Agreement came about in September 2019. It is common ground that the agreement was entirely oral and was reached between Mr Chan and Mr Lam with no others present. 13.On Mr Chan’s case:
14.While Mr Chan says that the agreed loan amount was RMB 5 million, the Defendants say the agreed amount was HK$5 million. It is undisputed that HK$5 million was transferred from ACL’s bank account to Mr Chan’s bank account on 20 September 2019. At the same time, it is undisputed that on 10 December 2019 Mr Chan transferred RMB 5 million to Mr Lam, which was taken as repayment of the Loan. 15.Not long after the Loan Agreement was reached, Mr Chan signed a Sold Note and Instrument of Transfer in respect of the ACL Shares, both of which also bear Ms Chen’s signature as Transferee (on the Sold Note) and Witness (on the Instrument of Transfer) (together the “Share Transfer Documents”). On Mr Chan’s case, he signed the Share Transfer Documents sometime in “mid-Sept 2019”. On Mr Lam’s case, the Share Transfer Documents were signed by Mr Lam and Ms Chen on 23 September 2019. 16.On Mr Chan’s case, the Share Transfer Documents were simply to provide security for the Loan. As summarised in Mr Chan’s closing submissions, it was a term of the Loan Agreement that “repayment of the Loan would be secured by [the ACL Shares]”, and “for the purpose of providing the security” Mr Chan would sign the Share Transfer Documents. It was only if Mr Chan failed to repay within 6 months that Mr Lam could then take ownership of the ACL Shares. 17.Mr Lam’s closing however contends that the outright transfer of ownership of the ACL Shares was “part of the consideration / condition precedent” for the Loan. 18.The critical issue in this case is thus whether Mr Chan’s case on the Share Transfer Documents is made out. 19.Citing the judgment of DHCJ Jin Pao SC (as he then was) in Leung Chin Sing, Rabo v Ho Chun Hay Kelvin [2021] HKCFI 2242 at §44, counsel for the Defendants emphasised, and Mr Chan’s counsel accepts, that the burden of proof rests on Mr Chan to prove the material circumstances and terms of the oral Loan Agreement, on a balance of probabilities. 20.There is likewise no dispute as to the principles on assessing witness credibility. The authorities cited by the parties on this are well known, and I have taken the underlying principles into account. 21.In my judgment, Mr Chan has established his case that the Share Transfer Documents were meant only to enable the ACL Shares to stand as security. While this conclusion stems from a holistic assessment of the parties’ evidence and submissions at trial, several matters merit particular mention. 22.Foremost, Mr Chan’s account is strongly supported by the contemporaneous record of communications between him and Mr Lam. The following WeChat messages are key:
23.It is undisputed that Mr Lam received the Statement but never specifically responded to it, whether to deny or query its contents. 24.Mr Lam’s threadbare (4 page) witness statement makes no attempt to address the WeChat record. In particular, Mr Lam says nothing about Mr Chan’s request for the return of the “IOU” or the provision of the Statement, which clearly refers to Mr Chan’s shares in the Company being used as security in respect of the Loan. Mr Chan had made clear in his witness statement that he had all along understood and thus referred to the Share Transfer Documents as a kind of ‘IOU’, reflecting that the ACL Shares were pledged to Mr Lam as security for the Loan. Mr Chan’s witness statement dealt in detail with the WeChat record, which was flagged to support his case. At trial, Mr Chan further explained his understanding of the use of the Share Transfer Documents in this way: “I was the one who asked for the Loan, just like when I borrowed money from the bank I also have to give the bank my deed title”. 25.When questioned on the WeChat messages, Mr Lam’s responses ranged from incoherent to incredible. For instance, when Mr Lam was taken to his WeChat references to the “return” (“退回” and “還給”) of the “IOU”, and it was put to him that this “must be referring to something that you have been kept as a security which had to be returned to the owner”, Mr Lam’s cryptic reply was to say that “Well, we all used IOU in our representations”. And when it was put to Mr Lam that the references to “IOU” in the WeChat messages in that context clearly referred to the Share Transfer Documents, his baffling response was to say “One would not do business this way”. 26.Mr Lam suggested that the “IOU” in question was in fact a receipt issued by Mr Chan to Mr Lam upon receiving the Loan amount. But this claim is absent from the Defendants’ pleaded case and witness statement, incompatible with the actual language of the messages, and contrary to practical sense – why would a borrower repeatedly seek the return of a written receipt that he himself supposedly provided for money which he had subsequently repaid? 27.In my view, the references to “IOU” in the WeChat messages were clearly to the Share Transfer Documents, and I find that both Mr Chan and Mr Lam understood this at the time. These aspects of the WeChat record thus strongly support Mr Chan’s case on the true purpose of the Share Transfer Documents. 28.Mr Lam’s offer in his message to Mr Chan of 17 December 2019 to write Mr Chan a receipt (“收条”) pending return of the “IOU” indeed makes little sense on Mr Lam’s version of the Loan Agreement. There is no suggestion that the “收条” in question was to confirm Mr Chan’s repayment of the Loan; it was instead clearly linked to the “IOU” which, according to Mr Lam’s 17 December 2019 message, might be held in a safe in his home, which in turn supports the view that the Share Transfer Documents were meant to serve as security for the Loan. Fundamentally, if the ACL Shares were outright consideration for the Loan, there would by that time have been nothing ‘owed’ by Mr Lam to Mr Chan or to be ‘returned’ by Mr Lam to Mr Chan. 29.Overall, the WeChat records are weighty evidence in favour of Mr Chan’s case. 30.Further, taking into acount the evidence on the commercial relationship and dealings between Mr Chan and Mr Lam at and around the time of the Loan Agreement, it strikes me as inherently unlikely that Mr Chan would agree to completely part with the ACL Shares as consideration for RMB 5 million or a comparable amount for a mere loan. 31.The evidence before me indicates that the ACL Shares were of substantial value at the time of the Loan Agreement, and likely worth much more than RMB 5 million. This was not seriously disputed at trial. As earlier noted, the ACL Shares constituted 12.5% of the total shares in ACL, a company at the heart of the Acquisition Plan. The ACL Shares were originally transferred to Mr Chan as consideration for his role in that plan. According to Mr Chan’s evidence at trial, the total value of the HK Companies involved in the Acquisition Plan was over HK$1 billion. For his part, Mr Lam accepted at trial that a reasonable valuation of 40% of the shares in the Trans Strait Golf Club – just one of the assets involved in the Acquisition Plan – was RMB 48 million. As a further indicator of the ACL Shares’ value, actual or potential, Mr Chan’s 10% shares in the HK Companies were undisputedly sold for RMB 70 million. 32.Mr Chan also specifically contended that the ACL Shares were worth about RMB 20 million. While querying this figure in cross-examination, the Defendants have not seriously challenged or undermined the broader point that the ACL Shares had substantial value, such that it would have been commercially implausible for Mr Chan to agree to part with the ACL Shares outright for just a short term loan of RMB 5 million. Perhaps most significantly, Mr Lam agreed at trial that at least “the average value of the ACL Shares was…RMB 6 million”. Mr Lam’s attempt to downplay this by suggesting “this might not be the case when the ACL Shares come to market…since the shareholding was merely 12.5%” again fails to seriously detract from the basic reality that the ACL Shares had substantial value which could potentially be realised by an outright sale. 33.The available evidence is also far from sufficient to establish that Mr Chan was at the time so desperate for funds that he would have parted with the ACL Shares outright merely in exchange for the Loan. While Mr Chan clearly wanted quick access to funds, the evidence as to his then financial and commercial circumstances does not suggest the kind of desperation that might allow Mr Lam hold him over the proverbial barrel. The evidence shows that the RMB 5 million was just part of the total required for Mr Chan’s purchase of an “asset package” involving various Mainland properties from China Huarong Asset Management Company Limited. There is no evidence that access to the RMB 5 million (or similar) by way of the Loan was critical to Mr Chan’s financial position at the time, such that he might plausibly agree to a deal where Mr Lam would be entitled to both full repayment of the Loan and full ownership of the ACL Shares. It is in my view far more likely that, for outright ownership of the ACL Shares, Mr Chan would instead have correspondingly insisted on an outright payment to him of at least RMB 5 million. 34.On the Defendants’ case, Mr Lam essentially agreed to extend the Loan on an entirely unsecured basis – the ACL Shares not standing as security for the same but (as stated in the Defendants’ closing) “part of the consideration / condition precedent”. This is in my view implausible. Mr Lam has failed to explain why he would have proceeded in such a way, particularly since given his contention that his relationship with Mr Chan was “purely commercial” with no particular sense of trust between them. In contrast, there would have been nothing particularly unusual or strange in the circumstances of their ongoing and multiple commercial dealings for Mr Lam to have lent RMB 5 million to Mr Chan to be repaid within 6 months, and secured by the ACL Shares. 35.The Defendants have emphasised Mr Chan’s inaction in pressing Mr Lam on the return of the Share Transfer Documents after their WeChat exchanges in December 2019. Mr Chan accepts that he did not further pursue the matter until shortly before he commenced this action in 2021. I have taken into account this aspect of the timeline bearing in mind Mr Chan’s testimony, which I assess to be credible, that (1) Mr Chan’s focus between late 2019 and 2021 was on his ongoing wider commercial dealings with Mr Lam on matters such as the sale of shares in the HK Companies to ACL, which had a far greater potential upside than the value of the ACL Shares; (2) in this period, Mr Chan was never closely involved in or informed about ACL’s affairs; and (3) in these circumstances, it was only in July 2021 that Mr Chan discovered that Mr Lam had actually transferred the ACL Shares to Ms Chen. Mr Chan then commenced the present legal action on 16 November 2021. 36.Taking these matters in the round, along with the lack of any pleading by the Defendants that Mr Chan in fact knew or ought to have known about the transfer before July 2021, I do not consider that Mr Chan’s lack of action to recover the ACL Shares until 2021 suffices to defeat his case that the agreed purposes of the ACL Shares was as security for repayment of the Loan. 37.In sum, Mr Chan’s case on the terms of of Oral Agreement and the purpose of the Share Transfer Documents prevails. D OUTCOME 38.As the Defendants directly accepted in closing, if the Court finds in favour of Mr Chan’s primary case – as I now have – they “will have no defence”. 39.It is common ground that, on the basis of Mr Chan’s version of the Loan Agreement and the transfer of the ACL Shares to Ms Chen, a constructive trust has arisen which now requires her to convey the ACL Shares to Mr Chan as beneficial owner. 40.On the same basis, the Defendants do not contest the specific relief sought by Mr Chan in his pleadings. I consider that relief to be just and appropriate, and will grant (following the wording in the Amended Statement of Claim):
41.On costs, Mr Chan accepts that he should bear the costs of his abandoned alternative claim based on unconscionable bargain (“the Unconscionable Bargain Issue”). The Defendants should therefore have their costs in relation to the Unconscionable Bargain Issue, up to the time of its formal withdrawal by Mr Chan’s legal team. 42.Save for the costs in relation to the Unconscionable Bargain Issue, Mr Chan is in my judgment entitled to costs for the remainder of the action.
Mr Ernest KOO and Mr Philip S.Y. LI, instructed by C&Y Lawyers, for the Plaintiff Mr Cyndi HO instructed by M.C.A. Lai Solicitors LLP, for the 1st and 2nd Defendants | ||||||||||||||||||||||
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