Going Bright Ltd v. Zhu Huayue
Read the full judgment text of HCA 1603/2019 on BabelCite. This High Court CFI judgment was delivered on 12 January 2026.
1. At all material times, Going Bright Limited (the Plaintiff by the original action in HCA 1603/2019, “GB”) is and was a private company incorporated in Hong Kong and Mr. LI Kin Chung (李建中, the Defendant in HCA 1721/2019, “LI”) is and was its director and shareholder. Ms ZHU Huayue (朱華越, the Defendant by the original action in HCA 1603/2019, “ZHU”) was formerly a Chinese national residing in Mainland China and she was married to a Mr. WANG Yue Sheng (汪月生, the 2 nd Defendant by the counterclaim
Cites 7 cases
|
HCA 1603/2019 & HCA 1721/2019 HCA 1603/2019 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1603 OF 2019 _______________________
(By Original Action)
(By Counterclaim) _______________________ AND HCA 1721/2019 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1721 OF 2019 _______________________
_______________________ (Heard together)
_____________________ J U D G M E N T _____________________ Introduction 1.At all material times, Going Bright Limited (the Plaintiff by the original action in HCA 1603/2019, “GB”) is and was a private company incorporated in Hong Kong and Mr. LI Kin Chung (李建中, the Defendant in HCA 1721/2019, “LI”) is and was its director and shareholder. Ms ZHU Huayue (朱華越, the Defendant by the original action in HCA 1603/2019, “ZHU”) was formerly a Chinese national residing in Mainland China and she was married to a Mr. WANG Yue Sheng (汪月生, the 2nd Defendant by the counterclaim in HCA 1603/2019, “WANG”) in September 2004. WANG and LI were good friends. 2.In about 2004, WANG was the legal and beneficial owner of a flat, namely, Flat A, 10/F., Block 6, Whampoa Garden, Kowloon (“the Property”). On about 8 April 2004, WANG (as vendor) and GB (as purchaser) signed an agreement for the sale and purchase of the Property at the price of HK$3 million. That sale and purchase was completed on about 29 May 2004 when an Assignment was executed by the parties to assign the Property to GB. The purchase was financed by a 70% mortgage taken out by GB with the Bank of America (Asia) Limited (“BA Asia”) and thus after completion, the title deeds of the Property were kept by BA Asia until the mortgage was discharged in January 2006. There is no dispute between the parties that this sale and purchase of the Property in 2004 was a genuine transaction. 3.In around mid-2008, ZHU was exploring options to obtain permanent residence status for herself and her daughter in Hong Kong. In around October 2009, she applied for permanent residence with the Hong Kong Immigration Department via the Capital Investment Entrant Scheme (“the Entrant Scheme”). One requirement of the Entrant Scheme was that the applicant had to make an investment in Hong Kong of no less than HK$6.5 million. On 13 August 2010, the Immigration Department gave an approval in principle to ZHU’s application and as such, ZHU had to make the required investment within 6 months. 4.On 3 December 2010, GB (as vendor) and ZHU (as purchaser) signed an agreement for the sale and purchase of the Property at the price of HK$6.7 million (“the 2010 Agreement”). On 18 January 2011, GB and ZHU executed an Assignment by which the Property was assigned to ZHU (“the 2011 Assignment”). 5.The crux of contention in this action is whether the 2010 Agreement and the 2011 Assignment were part of a genuine transaction of sale and purchase between GB and ZHU. 6.According to the case of GB (and the evidence of LI), GB never in reality received from ZHU any of the purchase price of HK$6.7 million. All the funds for the sale and purchase in 2010/2011 were arranged between GB and WANG. The sale and purchase and the assignment of the Property were not genuine transactions but were carried out solely to facilitate ZHU in satisfying the investment requirement under the Entrant Scheme. Therefore, GB alleges that those transactions were bogus and ZHU was throughout (and still is) a bare legal trustee holding the bare legal title of the Property on trust for and on behalf of GB which was throughout (and still is) the real and sole beneficial owner of the Property. 7.According to the case of ZHU, however, she alleges that she had fully paid for the purchase price of the Property, with her own funds which were the proceeds of sale of a property in Beijing in 2009 for RMB 6.25 million. ZHU asserts that those funds had already been transferred to WANG in the Mainland more than a year ago, to be used to pay for the intended property investment in Hong Kong. ZHU thus alleges that the sale and purchase and the assignment of the Property in 2010/2011 were genuine transactions which she herself had fully paid for, and she was the rightful owner (both legal and beneficial) of the Property. 8.There is no dispute between the parties that in about November 2011 (according to LI) or April 2012 (according to ZHU) a letter of undertaking (“the ZHU’s LOU”) was signed by LI (for and on behalf of GB) and ZHU, and by WANG as a witness. It was stated in the ZHU’s LOU that whilst for immigration investment purposes, ZHU had purchased from GB the Property at the price of HK$6.7 million, ZHU had not paid for any of the purchase price. In the ZHU’s LOU, ZHU further undertook and declared that (1) the title of the Property remained with GB and ZHU had no interest in the Property; (2) the Property was to be used by ZHU for immigration purposes only, and after 7 years (the period of investment requirement) ZHU would unconditionally transfer the Property back to GB; and (3) the Property was to be used by GB and its title deeds to be kept by GB. 9.According to GB’s case (and the evidence of LI), in about October 2011, WANG told LI that ZHU had successfully obtained her Hong Kong identity card (although not yet permanent residence status). Taking that as an opportunity, LI asked WANG to provide a written confirmation of the agreed arrangements concerning the Property and WANG agreed. So, LI drafted the ZHU’s LOU and on 18 November 2011, he gave the ZHU’s LOU (in triplicate) to WANG to pass to ZHU (who was in Beijing) for her to sign and to confirm the understanding between the parties. On about 30 November 2011, WANG returned a copy of the ZHU’s LOU to LI, duly signed by ZHU and WANG (as a witness). It is GB’s case that the ZHU’s LOU is good admission evidence to show the real position of the matters as agreed by the parties concerning the Property. 10.According to her case, ZHU does not dispute that she had signed the ZHU’s LOU. However, ZHU claims that the aforementioned terms of the ZHU’s LOU were simply not true as she had fully paid for the Property. ZHU further alleges that WANG had misrepresented to her as to the nature and purpose of the ZHU’s LOU and had exerted undue influence on her to get her to sign the ZHU’s LOU; and as she had come home late on an evening after work and was tired, she did not read the terms of the ZHU’s LOU properly. Therefore, ZHU urges the Court to find that in such circumstances, notwithstanding that she had signed the ZHU’s LOU, it has no evidential value whatsoever and it should be given no weight at all. 11.Some seven years after the completion of the Property, LI started to take steps to have the Property transferred back to GB. From 3 August 2018 onwards, LI exchanged a series of phone messages with ZHU in which LI repeatedly requested ZHU to re-vest the Property to GB. There is no dispute that these messages were exchanged and they were placed before the Court to show what was in the minds of LI and ZHU at the relevant time. Some phone messages exchanged between WANG and ZHU at around that time were also produced before the Court. I shall come back to these messages later. 12.It is not in dispute that a lunch was eventually arranged at Full Moon Restaurant in Hong Kong on 6 July 2019 for LI, ZHU and WANG to meet to settle the matter. It is also not in dispute that a settlement was reached which led to ZHU (as vendor) and LI (as purchaser) signing an agreement for the sale and purchase of the Property on 2 August 2019 (at the price of HK$13 million, “the 2019 Agreement”) and executing an assignment of the Property on the same day (“the 2019 Assignment”). However, as two of the cheques presented as part of the purchase price (issued by WANG in the total sum of HK$3.25 million) were dishonoured, on 9 August 2019, ZHU’s lawyers demanded for the return of the 2019 Agreement and the 2019 Assignment. 13.It is GB’s case (supported by LI’s evidence) that there was a settlement between the parties such that the 2019 Agreement and the 2019 Assignment were executed to re-vest the Property back to GB (or more precisely, to LI in its place). Although the purchase price was stated to be HK$13 million in the 2019 Agreement, the actual settlement sum was only a total sum of HK$3.25 million which was to be paid by WANG: HK$1 million to ZHU and HK$2.25 million to a friend of ZHU (Ms Wang Jun, “Ms Wang”) respectively; and LI did not have to pay ZHU a cent to have the Property transferred to his name. 14.On the other hand, according to ZHU’s case, even though the market value of the Property had risen to at least HK$11.3 million by June 2017, because ZHU had been subjected to threats, pressure and inducement by LI and WANG, she agreed to accept a total settlement sum of HK$6.5 million to be paid by GB (or LI) (HK$3.25 million to WANG, HK$1 million to ZHU and HK$2.25 million to Ms Wang respectively) and to transfer the Property to LI’s name. On 2 August 2019, at the law office, ZHU was only given two cheques issued by WANG drawn in her favour in the sum of HK$1 million and in favour of Ms Wang in the sum of HK$2.25 million respectively. The two cheques were later found to be dishonoured upon presentation at the bank. 15.Even though on the face of the matter, it was LI (as purchaser) who had defaulted in paying any of the purported purchase price at all, within the same month, on 30 August 2019, GB commenced these proceedings in HCA 1603/2019 by filing a Writ of Summons, seeking, inter alia, (1) a declaration that notwithstanding the 2010 Agreement and the 2011 Assignment, ZHU has throughout been and still is holding the Property on trust for GB; and (2) an order that ZHU do transfer, assign or vest the Property to or unto GB. In her Re-amended Defence and Counterclaim dated 12 September 2024, ZHU sought, inter alia, a declaration against GB that she is and was at all material times the sole legal and beneficial owner of the Property and that GB has no beneficial interest over the Property; and an order for vacant possession of the Property. In HCA 1721/2019, ZHU (as the Plaintiff) sought against LI (as the Defendant), inter alia, a declaration that the 2010 Agreement and the 2011 Assignment be rescinded or set aside; a declaration that she is and was at all material times the sole legal and equitable owner of the Property; and an order that LI do deliver vacant possession of the Property to ZHU. 16.The above is the background to these actions. A trial was held before this Court over 7 days during which LI and two of his staff were called to testify as witnesses for GB and LI, and ZHU also gave evidence. On 21 February 2025, the Court heard the closing submissions by the parties and reserved its Judgment to be handed down. This is now the Court’s Judgment. The key factual issues 17.In this case, the key factual issues include: Whether the sale and purchase and the assignment of the Property in 2010/2011 were genuine transactions, or were they bogus transactions merely dressed up as an investment by ZHU to assist her in satisfying the investment requirement of the Entrant Scheme? Whose funds were actually used to pay for the sale and purchase of the Property in 2010/2011? Whether ZHU had purchased the Property from GB with her own funds as a bona fide purchaser for value and without notice? 18.In particular, the Court is presented with only two factual versions: (1) ZHU’s case is that she had used her own funds to pay the full purchase price of HK$6.7 million for the Property in 2010/2011; and (2) GB’s case is that ZHU had in reality paid no monetary consideration at all when the full purchase price was partly paid by funds arranged by GB (HK$4.5 million) and partly by way of an advancement from WANG (HK$2.2 million) which GB subsequently caused to be repaid in full. This Court is invited by the parties to consider whose pleaded case is more likely to be true, and it is suggested that there is no midway for the Court to find that ZHU had made partial payment. 19.The parties suggest that the determination of these key factual issues or versions should bring about consistent results in the two actions either in favour of GB (and LI) or ZHU. Discussions 20.In light of all the evidence presented by the parties, in particular, the testimony of LI and that of ZHU, and having carefully considered all the submissions by the parties, I find in favour of GB’s case that the sale and purchase and the assignment of the Property in 2010/2011 were not intended by the parties to be genuine transactions but were entered into and dressed up solely to assist ZHU in satisfying the investment requirement of the Entrant Scheme. I also find in favour of GB (and LI) that GB had in reality not received any monetary consideration from ZHU for the sale and purchase of the Property in 2010/2011. In coming to these findings, I observed that the parties’ conducts were much more consistent with GB’s case than ZHU’s case at various stages of the case: (1) the sale and purchase in 2010/2011; (2) the signing of the ZHU’s LOU in November 2011 or April 2012; (3) the divorce agreement between ZHU and WANG in January 2014; (4) the exchange of phone messages in 2018 and 2019; (5) the settlement between the parties in 2019; and (6) the parties’ conduct of these proceedings. I shall set out below my observations and/or findings as regards various matters at these different stages in turn. The possession of the title deeds 21.Had ZHU been a bona fide purchaser of the Property in 2010/2011, following completion of the transaction, the vendor (GB) should have delivered the title deeds of the Property to ZHU for her safe keeping. However, the evidence called by GB shows that the title deeds were not so delivered to nor kept by ZHU (or WANG) following completion in January 2011. 22.To support the case for GB, LI produced an acknowledgement of receipt of the title deeds dated June 2011 and signed by LI to prove that GB (the purported vendor) had got back the title deeds (including the 2010 Agreement and the 2011 Assignment) in June 2011 after the completion in January 2011. There were a total of 55 title deeds and documents included in the acknowledgement of receipt (“the Title Deeds and Documents”). This evidence was not cross-examined upon nor seriously challenged by ZHU. LI’s evidence went further to show that as the 7 years of investment requirement passed, LI had personally delivered the title deeds to the law clerk (Mr. Leung Kwong Ming, “LEUNG”) on 24 July 2018 to prepare for the re‑vesting of the Property. Ms Mable HO (“HO”) gave evidence for GB that in around April 2019, LEUNG came to LI’s office and returned the title deeds to LI. HO confirmed that she then passed the title deeds back to LI for safe‑keeping. Ms Kitty KO (“KO”) also gave evidence for GB that on 27 June 2019, LI had asked her to deliver the title deeds to LEUNG at the law office to prepare for the re-vesting of the Property and she did as told. All of LI, HO and KO were not cross-examined nor seriously challenged on these matters. 23.On the other hand, ZHU in her evidence confirmed that following completion, she herself had never obtained or kept the keys to the Property and the title deeds and she thought her husband (WANG) would have them. In any event, she asserted that in the Mainland, title instruments were not significant as they could be applied for and replaced if they were lost; what was important was that her name was registered as the owner. She asserted that WANG had shown her a land search conducted in Hong Kong which showed her ownership of the Property and thus she felt assured. It appears to me, however, rather unbelievable that she did not even ask WANG for the title deeds or the keys after their divorce at the end of 2013 and not even when LI started to chase her for the re-vesting of the Property in 2018. For a business woman astute and experienced in the real estate industry in the Mainland, who travelled to Hong Kong from time to time on business, I find ZHU’s evidence in these regards not credible. 24.In light of the aforesaid evidence from GB’s side, it cannot be seriously disputed that even following the completion in January 2011, GB (and LI) still kept the title deeds for years until they were delivered to the law office in June 2019 to prepare for the re-vesting of the Property. Had the sale and purchase and the assignment in 2010/2011 been genuine transactions, it begs the question why the vendor was still able to keep the title deeds for more than 8 years. The obvious answer as contended by GB is that the parties never intended the sale and purchase transaction in 2010/2011 to be genuine and thus GB was permitted to retain the title deeds for its safe-keeping. I find GB’s possession of the title deeds to be one of the matters supporting GB’s case. Possession of the Property 25.Not only were the title deeds not handed over by GB to ZHU (or WANG) following completion in 2011, it also does not appear to be seriously challenged that LI had from 2007 and up to the trial of these actions continued to live in the Property, either on his own or with his daughter. Under cross-examination, LI was only asked if he had to leave Hong Kong on short trips to the United States from time to time to maintain his residence status there, but it was never put to LI that he had never occupied the Property in the way as he testified in court. Indeed, LI went further to assert that GB had also all along paid for all outgoings of the Property including water, electricity and gas charges, the management fees and rates. That again was not seriously challenged by ZHU. I find LI’s evidence in these regards to be truthful. 26.I also observed that ZHU admitted in her own evidence that as the purported purchaser, she did not even inspect the Property once in 2010 or 2011 before signing the 2010 Agreement or the 2011 Assignment. ZHU further admitted that after the completion in January 2011, she had never visited her “own” Property, not even once, despite her various business trips to Hong Kong over the years. However, she claimed that following completion, it was WANG who managed the Property and kept the keys and the title deeds for her; and WANG had told her that he had allowed LI and his daughter to live in the Property from time to time and ZHU had not objected. There was however no suggestion on the part of ZHU that LI had paid any rent at all for so living in the Property all these years. ZHU also produced no evidence that she had paid for any of the outgoings of the Property. On the issue of possession of the Property, I find LI’s aforesaid evidence to be truthful. GB’s continued possession of the Property is another matter supporting its case. The funds paid by GB to WANG to finance the purchase of the Property 27.GB was supposed to be the vendor receiving payments from ZHU the purported purchaser; however, on two separate occasions very shortly before the dates when payments were due to the vendor, GB caused substantial sums to be paid to WANG (the husband of ZHU), who on the following days transferred such funds to ZHU in order to make the purchase payments due to GB (the purported vendor). It begs the question why GB being the vendor would cause substantial funds to be paid to WANG which were apparently used by ZHU the purchaser to pay for the purchase price of the Property. GB’s case is that such circular fund flows demonstrate that the sale and purchase was only a sham. 28.In particular, I am satisfied that the following facts can be established by the evidence before the Court:-
29.In view of the above fund flows and the time proximity, it cries out for an explanation as to why the vendor side would be paying such huge sums (HK$4.5 million in total) to ZHU via WANG which were plainly used to fund the sale and purchase. Whilst ZHU claims that she was not aware of these arrangements between LI and WANG, given the time proximity of the aforesaid payments caused by GB, I find such payments and fund flows as supporting GB’s version that the so-called sale and purchase of the Property was substantially financed by funds from GB or its related company Gladstrong. 30.Whilst there is no explanation from ZHU for such fund flows, LI has provided one. LI’s evidence is that in the period from October to December 2010, WANG told him that ZHU was applying for residence status under the Entrant Scheme but ZHU did not have sufficient funds to purchase a property to meet its investment requirement. WANG thus asked LI to assist by freely transferring the Property to ZHU and dressing the transaction up as a sale and purchase at a price of not less than HK$6.5 million to meet the minimum investment requirement under the Entrant Scheme. WANG undertook that after the 7 years of required investment, ZHU would transfer the Property back to GB and that in the meantime, GB could continue to possess the Property and LI to live there. LI agreed to assist as he had known WANG for years; WANG was his business associate and had helped him develop his business in the Mainland by introducing important officials to him; and GB had already accrued a huge profit from the purchase of the Property from WANG back in 2004. LI thus caused the aforesaid fund flows which were part of LI’s assistance to ZHU to help her satisfy the investment requirement under the Entrant Scheme. 31.To support GB’s case, LI produced a loan receipt (“借款收據”, “Loan Receipt”) signed by WANG and dated 17 January 2011, confirming the receipt from LI of a loan of the two sums totalling HK$4.5 million on 1 December 2010 and 13 January 2011 respectively. It was expressly stated in the Loan Receipt that the loan was to provide funds for the transfer of the Property (“單位物業轉讓資金”) and that after its re-vesting, the Loan Receipt would become void (“如物業轉回後，此借據則取消”). At the trial, ZHU did not seriously challenge this Loan Receipt; her position was that she was not aware of these arrangements between LI and WANG. I find that the two sums were indeed funds arranged by GB (or LI) to pay WANG so that ZHU could complete the sale and purchase. The terms of the Loan Receipt, and in particular, the words “轉回” (“re-vesting” in English), also support GB’s case that the sale and purchase in 2010/2011 was (and was intended to be) a bogus transaction. 32.According to LI’s evidence, the total sum of HK$4.5 million that GB had caused to be paid to WANG still left a shortfall of HK$2.2 million from the purchase price of HK$6.7 million. As LI did not have sufficient funds to cover that shortfall, he requested WANG to advance (“墊支”) a sum of HK$2.2 million on behalf of GB to ZHU to enable her to “complete” the sale and purchase[1]. WANG agreed to that. (I shall hereinafter refer to these arrangements about the total loan of HK$4.5 million by GB and the advancement of HK$2.2 million by WANG as “the Agreed Arrangements”.) 33.Subsequently, WANG told LI that he had already paid the HK$4.5 million from Gladstrong and his advancement of HK$2.2 million to ZHU for her to pay for the purchase price of the Property. To prove this advancement, LI produced a letter of undertaking (“承諾書” in Chinese) dated 18 January 2011 signed by LI (for GB) and WANG (“the WANG’s LOU”). It was stated in this document that at the request of WANG, GB had transferred (“轉讓”) the Property to a person designated by WANG to hold it (“持有”), and GB had received a deposit of HK$2.2 million; WANG undertook that GB could freely use the Property (“無償使用”) and when the Property was no longer required by WANG, it would be re-vested (“轉回”) to GB; and GB needed to repay to WANG the sum of HK$2.2 million upon return (“交回”) of the Property. In reliance of the WANG’s LOU as supporting evidence, LI asserted that the shortfall of HK$2.2 million was thus agreed to be arranged as an advancement by WANG on behalf of GB to ZHU to make up the total purchase price of HK$6.7 million. 34.Again, ZHU does not appear to seriously challenge the contents of the WANG’s LOU; her position is that she was simply not aware of the WANG’s LOU nor the Agreed Arrangements between LI and WANG. It was however put to LI under cross-examination that WANG had agreed to advance the sum of HK$2.2 million in his own and personal capacity and LI agreed. 35.On the evidence presented by GB, I find that WANG did agree with LI (and GB) to advance a sum of HK$2.2 million to make up the shortfall so that ZHU could complete the sale and purchase of the Property at the price of HK$6.7 million. 36.GB produced further evidence to show that the advancement of HK$2.2 million was later paid back to WANG or his nominee by four sums[2]. Again, there was no serious challenge by ZHU to this evidence and I accept it to be true. Therefore, according to GB’s case as supported by LI’s evidence which I accept, none of the monetary consideration was in reality paid by ZHU: the funds for the total purchase price came partly from GB or its related company Gladstrong (HK$4.5 million), and partly advanced or arranged by WANG (HK$2.2 million) which was subsequently repaid by GB in full. There is a sum of HK$970,000 which ZHU asserts to be funds of her own (“the Shortfall”). I shall deal with this sum when I discuss the issue of ZHU’s knowledge of the Agreed Arrangements below (§53). 37.On the other hand, it is ZHU’s case that she had fully paid for the purchase price of HK$6.7 million with her own funds. According to ZHU’s evidence, in order to prepare for funds to meet the investment requirement in Hong Kong, she had sold a property in Beijing (in joint names with WANG) in about August 2009 for the price of RMB 6.25 million. As WANG was a Hong Kong permanent resident, he could lawfully remit the funds out of the Mainland without limits. Thus, between 5 August 2009 and 2 November 2009, ZHU had allegedly transferred the sale proceeds of RMB 6.25 million by six separate payments into WANG’s bank account in the Mainland so that WANG would remit such funds to his own bank account in Hong Kong and then to ZHU’s bank account in Hong Kong. ZHU claimed, therefore, that she had sufficient funds herself to purchase the Property in order to satisfy the investment requirement. ZHU asserted that there was simply no need to enter into any bogus transaction to cheat the immigration authorities, thereby subjecting herself and her daughter (also an applicant under the Entrant Scheme) to any risk, including that of a criminal prosecution. 38.When ZHU was cross-examined, however, she accepted that according to the agreement for the sale and purchase of the Beijing property dated 26 October 2009, the price of the property was only RMB 2.06 million and not RMB 6.25 million. Nonetheless, ZHU insisted that as the property was very beautifully decorated and high-class with many electric appliances and nice furniture, the purchaser also paid the sum of RMB 4.19 million for the decorations, furniture and fittings. I find it difficult to believe that the price for such items could be more than twice the price of the property itself. I also observed that nowhere in the agreement was this extra sum of RMB 4.19 million ever mentioned; nor did ZHU ever state in her witness statement that she had received RMB 4.19 million for those items. I therefore have some doubt over ZHU’s assertion that she had obtained proceeds of RMB 6.25 million from the sale of her Beijing property. 39.ZHU was further cross-examined as to why she was able to transfer four sums of the purported sale proceeds to WANG between 5 August 2009 and 12 October 2009 totalling RMB 5.5 million even before the date of the agreement for the sale and purchase of the Beijing property, namely 26 October 2009. I also find that to be rather odd but ZHU sought to explain in her evidence that in the Mainland, the transactions were entered into in a way different from Hong Kong; that she had already entered into a prior agreement with the purchaser in August 2009 and after the purchase price was paid, the parties then registered the agreement online with the “Real Property Trading Centre” (“房地產交易中心”) and that was why the date of the agreement was 26 October 2009 and was stated to be the “date of signing on the internet” (“網簽日期”). I am not in a position to dispute her evidence about the registration practice in the Mainland but I certainly note that apart from her own assertion, ZHU did not produce any documentary evidence showing that a prior agreement had already been entered into in August 2009, and that the sums which she transferred to WANG had indeed derived from the sale of the Beijing property pursuant to the alleged prior agreement. 40.There is a further and more significant problem in ZHU’s case: even assuming that ZHU had sold her Beijing property for RMB 6.25 million and she had transferred such proceeds to WANG’s bank account in the Mainland, there is simply no evidence before the Court to show that such funds were indeed remitted by WANG from the Mainland into his bank account in Hong Kong. In other words, there is a disconnect between ZHU’s purported funds in the Mainland and the funds which were transferred from WANG’s Hong Kong bank account into ZHU’s Hong Kong bank account for her to make the purchase payments for the Property in 2010/2011 (see para. 28 above). I therefore do not accept ZHU’s case that she had fully paid for the purchase price of the Property in 2010/2011 with her own funds. 41.By contrast, given the time proximity of the two payments caused by GB to be made into WANG’s Hong Kong bank account and that shortly thereafter funds were paid from WANG’s Hong Kong bank account into ZHU’s Hong Kong bank account, it is much more probable that the funds arranged by GB and WANG were indeed used to fully pay for the purchase of the Property in 2010/2011. That conclusion is also supported to some extent by the Loan Receipt and the WANG’s LOU. I also do not believe that at the time of the sale and purchase in 2010/2011, ZHU was not aware of the Agreed Arrangements between LI and WANG and that the purchase of the Property was to be carried out as per the Agreed Arrangements. I shall deal with this later (§53). The Letter of Undertaking signed by ZHU 42.GB’s case is also supported by ZHU’s LOU dated 18 November 2011. It is a written document which sets out in clear terms that for immigration investment purposes, ZHU had purchased from GB the Property at the price of HK$6.7 million, and ZHU had not paid for any of the purchase price; that ZHU undertook and declared that (1) the title of the Property remained with GB, and ZHU had no interest in the Property; (2) the Property was to be used by ZHU for immigration purposes only, and after 7 years (the period of investment requirement) ZHU would unconditionally transfer the Property back to GB; and (3) the Property was to be used by GB with its title deeds to be kept by GB. It is GB’s case that the document was duly signed by ZHU and is evidence showing ZHU’s awareness and indeed confirmation of the terms of the ZHU’s LOU. 43.There is no dispute that WANG had given the ZHU’s LOU to ZHU and even according to ZHU’s own evidence, she had signed at least two or three copies of the document. However, ZHU claimed that it was because of WANG’s misrepresentations and undue influence that she had signed the document. Allegedly, WANG had falsely represented to her that under Hong Kong law, she as the owner was required to file a tax return and pay tax in respect of the Property if it was left vacant; that by giving a revocable licence to LI and permitting LI to stay in the Property free of charge, the tax could be lawfully avoided (“the Misrepresentations”). WANG then allegedly presented a tax assessment form and other documents to ZHU for her to sign. ZHU further claimed that because she had just returned home from over-time work in the office and was tired, and she thoroughly relied on WANG in their relationship, and acting on the Misrepresentations, she signed all the documents without reading them; and the ZHU’s LOU was probably one of the documents that she had signed on that evening. 44.Having carefully considered this evidence by ZHU, I do not find it to be credible. 45.First, according to her own evidence, ZHU is a well-educated person with a tertiary degree. From 1992 and up to 2021, she was in the real estate business and that included working for the subsidiary companies of three Hong Kong listed companies to handle development of real estate and investment projects; and in her last job, she was the General Manager of a real estate company, having handled property sales in 25 cities in the Mainland in the accumulated value of some RMB 30 billion. Evidently, ZHU is an astute business woman with a highly successful career. Indeed, when giving evidence in court, she appeared to me to be very careful about questions asked of her and about her own answers. 46.In my assessment, it is all too convenient for ZHU to claim that she was very tired on that evening, that she trusted her husband and she did not properly read the ZHU’s LOU when she signed it. 47.Secondly, according to ZHU’s evidence, WANG on the one hand misrepresented the nature and contents of the ZHU’s LOU to her, and yet on the other hand gave at least two or three copies of the document to her to sign. The Chinese words “承諾書” (“Letter of Undertaking” in English) are printed at the very top of this one-page document. Any one being handed the document would be readily able to see that it is not a “revocable tenancy or licence” but an undertaking. I do not believe that ZHU being an astute business woman would have failed to immediately notice the difference and would not have gone on to read its contents and readily discover the true meaning and purpose of the document. Under cross-examination, ZHU confirmed that she had signed at least two or three copies of the ZHU’s LOU. In my mind, it is also difficult to believe that WANG would take the risk of lying to ZHU about the contents of the document when even a cursory look at it would readily reveal the lies. 48.Thirdly, I also find it improbable that WANG not only sought to conceal the Agreed Arrangements from his wife but he went to such an extent that he actively misrepresented to ZHU about the nature and purpose of the ZHU’s LOU to get her to sign it. Being the husband of ZHU, why was it necessary for WANG to conceal such matters from ZHU and to make it worse, to tell her lies to have her sign a false document? 49.Significantly, when cross-examined on that question, ZHU gave a long and convoluted reply which did not answer the question: that her daughter had run away from home in Beijing in March 2012; that a report was made to the police; that the daughter was found to have been lured by friends on the internet and taken to the north-east part of the Mainland; that she was eventually brought back to Beijing; that the incident caused ZHU to realise that the daughter had not been in good terms with WANG (her step-father) for a few years already; that because ZHU had to do business travel often, the daughter and WANG had a lot of conflicts at home; that ZHU had asked WANG to stay away from the daughter for a while and to go to Hong Kong so that the grandparents would spend time with the daughter; that WANG was not happy about that and he felt like being an outsider. 50.As ZHU went on for some time without answering the question, the Court had to intervene and asked her again why WANG had to lie to her about the ZHU’s LOU. Eventually, ZHU answered that she believed from 2011, WANG was already considering to divorce her and starting to move their assets and that was why he lied to get her to sign the document. When further cross-examined as to what relevance WANG’s consideration of having a divorce would have to his telling lies about the ZHU’s LOU, ZHU answered that WANG lied about the document so that she would sign it. That again, in my mind, was not answering the question. In my assessment, ZHU was initially evading the question on WANG’s possible reason to lie and when pressed again by the Court, she eventually made up these answers on the spot. 51.These answers also do not appear to me to sit well with the rest of the evidence. The Agreed Arrangements were apparently already made between LI and WANG in the period from October to December 2010, thus before WANG even considered any divorce with ZHU (as ZHU suggested in her answer). The sale and purchase of the Property was already completed by 10 January 2011. There is nothing in the evidence to suggest that in that period of time WANG and ZHU were not happily married. Indeed, according to her own witness statement dated 27 August 2021, ZHU had from 2008 transferred funds to WANG from time to time to provide for his living expenses and she would give her support to WANG without reservations (§53); that in 2011, she had complete trust in WANG and thus she allowed WANG to manage the Property after the completion (§70); that the couple even bought a Property in England together in 2012 to make plans for their daughter (§73); that it was only starting from about April 2012 that the couple had differences in their management of finance and about how to look after the daughter (§75); that from about June 2012, they started to have a lot of conflicts and WANG suggested a divorce (§§76-77). According to the evidence before the Court, their divorce only took place in about December 2013 with a divorce agreement signed in January 2014. Having considered the evidence about their relationship in the round, I fail to see why WANG had to lie to ZHU about the ZHU’s LOU even if a divorce was in the mind of WANG in April 2012. 52.I therefore do not believe ZHU’s evidence that WANG had in any way misrepresented to her in April 2012 about the nature and contents of the ZHU’s LOU. I find that ZHU had signed the document knowing full well and agreeing to its contents. I also reject any suggestion of undue influence by WANG and given my finding of ZHU’s full awareness of the contents of the document, the issue of undue influence also falls away. 53.Indeed, I would go further and find it more likely than not that at the time of the sale and purchase in 2010/2011, ZHU was already aware of the Agreed Arrangements between LI and WANG and that the purchase price of the Property was to be paid in accordance with the Agreed Arrangements. Given their then relationship as husband and wife, the huge sums of the purchase price involved and that the clear intention of the parties that the transaction was merely a bogus transaction to satisfy the investment requirement under the Entrant Scheme, I find it more likely than not that WANG had already made ZHU aware of the Agreed Arrangements in 2010/2011. I also took into account all the evidence including ZHU’s oral testimony in court that she was aware that despite the lapse of time, the proceeds from the sale of the Beijing property had not been remitted to her bank account in Hong Kong and she had asked WANG about it; and that she knew that WANG had sold her securities in her bank account (valued at some HK$963,200 in December 2010) although she claimed that she only knew afterwards. Looking at the bank records, the sale of those securities was clearly arranged by WANG to provide the advancement of HK$2.2 million to GB and to make up the Shortfall to complete the sale and purchase in January 2011. In all the circumstances, I find it more likely than not that ZHU was aware of that at the time and agreed to that arrangement. That also explains why ZHU admitted in the ZHU’s LOU that she had not paid for any of the purchase price; and also why in due course when the Property was to be “sold” to LI in 2019, it was WANG (and not LI or GB) who had to pay HK$1 million back to ZHU. I shall have more to say in this regard below (§78). 54.I therefore find the ZHU’s LOU to be admission evidence that supports GB’s case. The divorce agreement dated 8 January 2014 55.On 8 January 2014, WANG and ZHU signed a divorce agreement in which they set out how their assets were to be divided or distributed. The agreement covered land properties (“房产”) in the Mainland and in England. It even covered motor vehicles and furniture. Yet remarkably, the Property was not even mentioned in the agreement. GB’s case is that it was not mentioned because both WANG and ZHU knew that the Property was not really owned by ZHU and therefore there was no need to deal with it in the agreement. On the other hand, ZHU explained that as the Property was under her own name, even though it was not specifically mentioned in the agreement, WANG told her that the Property was already covered by article 7 which provided: “其它各自名下的资产、证券、现金、债务归各自拥有和承担。” (“Each party is to possess and bear the assets, securities, cash and liabilities under his or her name” in English). In her witness statement (§85), ZHU also asserted that to save time, they did not spell out every asset, including the Property. 56.I have doubts about ZHU’s explanation. First, it can be seen from the agreement that the term “房产” (“real property”) was repeatedly used to describe the land properties that the couple were to divide or distribute, whereas article 7 used a different term “资产” (“assets”), apparently to cover other types of properties than land properties. Further, when the agreement even covered the land property (or properties) in England as well as vehicles and furniture, I am not impressed by ZHU’s explanation that the lack of reference to the Property was to save time. In my mind, it is all too coincidental that the Property was not mentioned in the divorce agreement. I find that to be another matter tending to support GB’s case. The phone messages in 2018 and 2019 57.According to LI’s evidence, as he had the ZHU’s LOU by about November 2011, he felt assured that ZHU would not breach her undertaking to transfer the Property back to GB. When the period of 7 years passed by, from 3 August 2018 onwards, LI contacted ZHU by phone messages repeatedly to ask her to re-vest the Property. LI even sent a formal letter in the name of GB to ZHU dated 8 August 2018, referring to the ZHU’s LOU and requesting her to attend GB’s office to sign documents to effect the procedure of change of name (“轉名手續”) regarding the Property. These were clearly actions not consistent with the scenario of a vendor who had been fully paid for the sale of the Property. 58.There is no dispute that the phone messages were exchanged with ZHU and the formal letter was received by ZHU. In particular, in the very first phone message dated 3 August 2018, LI requested ZHU to “re-vest” (“簽回”) the Property to him as soon as possible; and LI also told ZHU that he had already made an appointment with the lawyers and he had the title deeds and papers ready for ZHU. How did ZHU react to that? It is remarkable to see from her reply message on the same day that when first taxed with such a request, she did not question why there was the need of “re-vesting”, or why LI would have the title deeds of the Property. ZHU replied, inter alia, that due to work, she did not have time to go to Hong Kong and she asked LI to communicate with WANG when convenient. LI then replied on the same day that ZHU should know well that the Property was on loan to her to apply for the residence status; and LI demanded ZHU to go to Hong Kong soon to re‑vest the Property to him. In another message sent on the same day, LI accused ZHU of not acting in accordance with her signed agreement and cheating a friend who had trusted her (“你簽名的協議都不執行，欺騙信你的朋友”). Eventually, ZHU replied to LI on 14 August 2018 but again, ZHU did not deny her liability to re-vest the Property. ZHU said in that message, inter alia, that she was afraid she could not go to Hong Kong to deal with “the arrangement of the transfer of property” (“房屋过户的安排”); and ZHU mentioned that at the time of divorce, she had some agreement with WANG about assets under each of their names and therefore she had to consult WANG before handling the matter. 59.There were further phone messages exchanged in June and July 2019. Even by that time when pressed again by LI to re-vest the Property, ZHU wrote in her messages, inter alia, that:
60.In these messages, ZHU did not speak of re-selling the Property back to GB, but transferring the Property back to GB. The way LI and ZHU spoke of a transfer or re-vesting to be carried out supports GB’s case that the sale and purchase back in 2010/2011 was not a genuine transaction in the first place and that ZHU was aware of that all along. 61.I have noted that during that period in June or July 2019, ZHU had also mentioned in some of her messages that she had sold her Beijing property in 2009 for RMB 6 million for the purpose of applying for immigration and had given the sum to WANG to make the investment. ZHU also asked LI to check it clearly, that it was she who had purchased the Property (“请您也搞清楚，买您物业的是我”). Whilst these messages may tend to support ZHU’s case, they were messages sent out some 10 months after LI had demanded her to re-vest the Property. It could be said that by that time she had had time to consider how to respond to LI’s demand. 62.There is also evidence before the Court that soon after LI first raised the demand with ZHU, she contacted WANG and it appears that without any hesitation, WANG sent her a copy of the ZHU’s LOU on 10 August 2018. Thus, there was apparently no attempt at all by WANG to conceal the document from ZHU. This tends to undermine ZHU’s case that WANG had cheated her into signing the ZHU’s LOU. 63.In her oral evidence before the Court, ZHU claimed that having received a copy of the ZHU’s LOU from WANG, she immediately had a telephone conversation with WANG which lasted for about an hour. According to ZHU’s evidence, she told WANG what was written in the ZHU’s LOU about her not having paid any of the purchase money was nonsense. Then WANG explained to her that LI had given a loan of HK$4.5 million to him and ZHU replied that it had nothing to do with her as she had already transferred the purchase money to him. Then ZHU said to WANG: if he had only borrowed HK$4.5 million, that meant ZHU had paid HK$2.2 million; in that case why was it stated in the ZHU’s LOU that ZHU had not paid for any of the purchase price? Then WANG explained to ZHU that the ZHU’s LOU was drafted by LI; that LI was a little confused and had got it wrong. WANG further explained that the situation had changed as LI wanted to buy back the Property so that he could continue to live in the Property as his long-term residence. 64.What is remarkable is that ZHU gave all these details in her evidence before the Court about the purported explanations given to her by WANG on 10 August 2018; but under cross-examination, she accepted that such explanations did not appear in her witness statement at all (see §117). It was also put to her that according to the phone messages exchanged with WANG, she had not spoken to WANG on 10 August 2018 as she was tired and had fallen asleep that evening. Then ZHU corrected herself and claimed that the conversation had taken place on 12 August 2018. 65.In my assessment, I do not accept ZHU’s evidence about the purported explanations given by WANG. Had they indeed been given to her, given their significance, she could not have failed to mention them in her witness statement. I find that it was another instance of ZHU making up her evidence as she went along. 66.Further, if WANG had told ZHU that LI had got it wrong in the ZHU’s LOU, then why had WANG given a false undertaking to ZHU and asked her to sign it? Why was there the need to borrow HK$4.5 million from LI? What had happened to the purported sale proceeds of RMB 6.25 million? As an astute business woman, no doubt ZHU would have asked WANG about these matters in that conversation. But ZHU mentioned none of that in her oral testimony nor in her witness statement. In my mind, ZHU would not have simply let the matter lie but would have dug to the bottom of the matter to find out the true position. I therefore find this part of ZHU’s evidence not credible. 67.In any event, I am not sure that evidence assists ZHU. If WANG had indeed told ZHU that it was LI who had got it wrong, that it was all a misunderstanding on the part of LI, that the ZHU’s LOU was a complete nonsense, then no doubt ZHU would have said so in her messages to LI immediately in August 2018. But ZHU certainly did not do that. 68.I also observed, inter alia, the following messages exchanged between WANG and ZHU on 30 June 2019 which again tend to support GB’s case:
69.As I mentioned above, there were some phone messages sent out by ZHU in 2018 or 2019 which may be said to support her case. However, having considered all the messages as a whole and in context, I find that they tend to better support GB’s case than ZHU’s case. The settlement in 2019 70.After LI had repeatedly demanded ZHU for the re‑vesting of the Property in 2018 and 2019, ZHU and LI eventually met (with WANG being present) at the Full Moon Restaurant on 6 July 2019 and ZHU and LI arrived at an oral settlement. 71.According to ZHU’s case and her witness statement (§148), pursuant to that oral settlement, to “purchase” the Property, LI was to pay a total sum of HK$6.5 million in the following manner: (1) HK$3.25 million to WANG; (2) HK$2.25 million (RMB 2 million equivalent) to Ms Wang; and (3) HK$1 million to ZHU (“the Agreed Settlement Terms”). It was not in dispute that the sum of HK$2.25 million to be paid to Ms Wang was to repay a debt owed by WANG to Ms Wang previously. ZHU claimed that even though the value of the Property had appreciated to at least HK11.3 million by 2017 and she herself was only to be paid HK$1 million, she was content to enter into such a settlement because she had been subjected to threats, pressure and inducement by LI and WANG. 72.Further to the settlement, ZHU (as vendor) and LI (as purchaser) executed the 2019 Agreement and the 2019 Assignment in respect of the Property (at the price of HK$13 million) on the same day (2 August 2019). According to ZHU’s own witness statement (§152) and her evidence in court, in the law office, ZHU was presented with a copy of the following four cheques and she was asked to sign next to each of them which she did to acknowledge receipt of the cheques (in the total sum of HK$13 million) as follows:
73.According to the express terms of the 2019 Agreement and the 2019 Assignment, the sale and purchase of the Property was for the price of HK$13 million. ZHU gave evidence that she was aware of that even when, according to her own case, the agreed settlement sum was only HK$6.5 million. Nonetheless, ZHU knowingly signed and executed both of those instruments. It is not disputed by the parties that having executed those instruments, ZHU was only given the two cheques drawn by WANG (Cheque 3 and Cheque 4) and they were soon found to be dishonoured upon presentation. 74.Pursuant to the Agreed Settlement Terms, it was LI who was to pay her HK$1 million and to pay Ms Wang HK$2.25 million. Yet, in her evidence in court, she confirmed that she had accepted the two cheques which were issued by WANG, instead of LI, for the two sums (Cheque 3 and Cheque 4). ZHU explained in her witness statement (§150) that WANG had told her in mid-July 2019 that LI and WANG had discussed and agreed so that LI would pay WANG the total settlement sum of HK$6.25 million and then he would pay her and Ms Wang the two sums due to them on LI’s behalf. ZHU claimed that because all she wanted was to resolve the whole matter quickly, she accepted what WANG proposed to her. 75.I have serious doubts about that explanation. It is her own case and evidence that by the time of their divorce, ZHU was already aware of WANG having incurred a lot of debts due to gambling; that she knew WANG had failed to repay a loan of RMB 2 million to Ms Wang previously; that both LI and WANG had already subjected her to improper threats and pressure to force her to compromise; and that in the meeting at the Full Moon Restaurant on 6 July 2019, LI had even told ZHU (before WANG’s arrival) that WANG had previously been sent to prison for frauds. In all the circumstances, I find it difficult to accept that ZHU would be willing to trust her divorced husband to be paid first by LI the total settlement sum of HK$6.5 million and then for WANG to pay the two sums due to her and Ms Wang. I also find it difficult to accept that ZHU would believe LI to be willing to trust WANG with the total settlement sum. After all, LI was trying to get ZHU (not WANG) to re‑vest the Property. Should LI not speak to ZHU directly about the change of the payment methods? Should ZHU not find out from LI directly what was going on? 76.Further, there are in my mind unusual features about the sums to be paid. According to ZHU’s case, she had fully paid for the Property with her own funds back in 2010/2011; and even at the stage of the divorce, WANG had accepted that the Property was solely owned by ZHU. If it was all along regarded to be her own property, is it likely that ZHU would accept the Agreed Settlement Terms so that WANG would be paid huge sums as part of the settlement? According to ZHU’s version of the settlement, LI would have to pay WANG HK$3.25 million and to Ms Wang HK$2.25 million (to cover WANG’s previous debt to Ms Wang); whereas ZHU was only to be paid HK$1 million by LI. Why would LI be willing to pay such huge sums to WANG, or to Ms Wang to cover the debt that WANG had owed to her, bearing in mind that LI was trying to get ZHU (and not WANG) to re-vest the Property? 77.On the other hand, I find GB’s version on this matter of settlement more likely to be true as it is more consistent with what happened at the law office. According to GB’s case, as the transaction was simply to re-vest the Property back to GB (or LI in its place), LI did not have to pay a cent to ZHU and therefore ZHU did not take any of the two cheques drawn by LI (Cheque 1 and Cheque 2); and as the parties had agreed to settle by a total sum of HK$3.25 million which was to be paid by WANG, ZHU only took away the two cheques drawn by WANG for HK$1 million payable to ZHU (Cheque 3) and for HK$2.25 million payable to Ms Wang (Cheque 4) respectively. 78.Further, on the evidence before the Court, there appears to be good reasons for ZHU to require WANG (and not LI) to pay the two sums. When ZHU was cross-examined about the signing of the divorce agreement, she gave evidence that WANG had suggested to her to include article 7 to cover such assets in the sole name of each, and at that time she had asked WANG about the securities that WANG had owed to her and whether they should be mentioned in the agreement. As I understand that evidence, ZHU had regarded the sale of her securities in December 2010 (valued at some HK$963,200 then) to be a debt which WANG had owed to her. That in my mind explains why in 2019, ZHU would require WANG (and not LI or GB) to repay her the sum of HK$1 million: this sum was probably one of the final matters between ZHU and WANG (and not regarded to be between ZHU and GB) which had not been resolved by the divorce agreement (see §68) and I make that finding accordingly. On the other hand, ZHU also gave evidence that as WANG had owed Ms Wang a sum of RMB 2 million (or HK$2.25 million equivalent) previously, and because Ms Wang was her neighbour and friend, ZHU wanted to help her get the money back from WANG. In those circumstances, it makes sense for ZHU to require WANG (and not LI) to pay Ms Wang. 79.I should also mention that when ZHU was being cross-examined, she was asked why other than the two cheques drawn by WANG (Cheque 3 for HK$1 million and Cheque 4 for HK$2.25 million), she did not take the two cheques drawn by LI (Cheque 1 and Cheque 2, in the total sum of HK$9.75 million) when she had signed to acknowledge receipt of all four of them. ZHU answered that she had also wanted to take the two cheques issued by LI but they were not given to her at the law office. I find that answer to be rather odd (that her own lawyer would refuse to give her those cheques on completion) and also inconsistent with her own case that according to the Agreed Settlement Terms, she was only to be paid no more than HK$3.25 million (HK$1 million for herself and HK$2.25 million for Ms Wang). 80.In view of the above, I have reservations about the veracity of ZHU’s evidence on this topic of settlement in 2019. That includes reservations about ZHU’s claim that it was all due to threats, pressure and inducement that she agreed to settle and transfer the Property to LI. Having considered the contents of all the messages exchanged between the parties in context and in all the circumstances, I find it more likely than not that ZHU had agreed to settle not because of any alleged threats, pressure or inducement, but because she was well aware that the sale and purchase in 2010/2011 was a sham transaction and she had not paid any monetary consideration for the transaction. 81.I therefore find GB’s case on this topic of settlement to be more likely to be true and that the evidence about the settlement in 2019 also tends to support GB’s case. LI and ZHU waiving their privilege against self-incrimination 82.It was abundantly clear to the parties at the trial that LI’s version of events could make him liable to a criminal offence of conspiracy to defraud the immigration authority. Given the contents of his witness statements filed with the court, before LI gave his oral testimony at the trial, I reminded him of his privilege against self-incrimination. Notwithstanding that reminder, LI chose to adopt the contents of his witness statements and gave further oral evidence to support GB’s case, some of which evidence could be regarded as implicating him in a criminal offence or offences. 83.Had GB indeed been paid in full by ZHU for the sale and purchase of the Property in 2010/2011, it would appear to be rather usual, to say the least, that LI would make all these things up and go to such an extent as to incriminate himself in court to pursue an action the basis of which is completely false. According to the evidence, LI appears to be a well‑off businessman who had a number of companies, land properties and other available resources. What is the reason for LI to lie and subject himself to the risk of a criminal prosecution? On the other hand, I am mindful of the evidence that LI had resorted to sending to ZHU a false invoice and a false demand for interest both dated 15 August 2018 to put pressure on ZHU to re‑vest the Property. In other words, LI is a person who is willing to use dishonest means to achieve his desired outcome. 84.I should also mention that before ZHU gave evidence, she was also reminded of her privilege against self-incrimination. Whilst she denied the conspiracy to defraud the immigration authority, her evidence may also expose her to the risk of a criminal prosecution, for she admitted in her testimony knowing that the purchase price of the Property was stated to be HK$13 million in the 2019 Agreement and the 2019 Assignment, but even on her own version, she only settled for the sum of HK$6.5 million. 85.I also observed that when the sale and purchase of the Property in August 2019 fell through, it was GB which first commenced proceedings and it did so within the very same month. In my mind, the way in which GB initiated and conducted these proceedings and LI pursued the action (by giving potentially self-incriminating evidence in court) is another matter that may tend to support GB’s case. Conclusion on the key factual issues 86.I have set out above my observations and findings of various matters at the various stages of the case that tend to support GB’s case. In my assessment, whilst each of such matters on its own may not be conclusive, when considered together, they certainly show that GB’s case is more consistent and probable than ZHU’s case. 87.Having observed ZHU give evidence in court, I also do not find her to be a reliable witness and I have only given some examples of the inconsistencies or contradictions in her evidence or case above. On the other hand, I also observed that some of the evidence given by LI may appear to have some misgivings (as advocated by ZHU’s counsel, Mr. Frederick Chan): for instance, it appears odd that the law clerk LEUNG, knowing the transaction to be bogus, would sign on the ZHU’s LOU as a witness; and that LI gave evidence in court that WANG had told him that the Agreed Arrangements were ZHU’s idea, but that was not stated in any of his witness statements or in GB’s pleadings. Nonetheless, as set out above, compared to ZHU’s evidence, LI’s evidence is by and large more consistent with the undisputed facts of the case and it also better explains the conducts of the parties at different stages of the case as a whole. 88.Having carefully considered all the evidence, I therefore find in favour of GB’s case. In particular, I find that the sale and purchase and the assignment of the Property in 2010/2011 were, and were intended by LI and ZHU (and WANG) to be, bogus transactions; that ZHU had not in reality paid any monetary consideration for the sale and purchase of the Property in 2010/2011; and that ZHU was not a bona fide purchaser for value and without notice. Given such findings, it is trite (and not suggested otherwise by Mr. Chan) that ZHU must have been holding the Property as a bare legal trustee on trust for and on behalf of GB. Other issues raised by ZHU 89.Apart from the key factual issues discussed above, ZHU’s counsel, Mr. Chan, also asked the Court to consider a number of other issues which were said to support or favour ZHU’s case. Given the above findings on the key factual issues, I find that these other issues raised by Mr. Chan to be immaterial or in any event would not assist ZHU’s case. I shall briefly deal with only some of them in turn. “Capacity Pleading Objection” 90.In gist, Mr. Chan submitted that GB had failed to properly plead the basis on which ZHU could be alleged to have joined and participated in the conspiracy to defraud the Director of Immigration; and Mr. Chan cited an authority on the criminal offence of conspiracy to defraud to show what matters have to be proved to establish such an offence. 91.I find that submission to be without merits as this Court is not dealing with a criminal offence but a civil dispute to be determined on the balance of probabilities. As I have found above, ZHU had not provided any monetary consideration for the purchase of the Property in 2010/2011; ZHU was aware of the Agreed Arrangements to pay for the purchase price at that time; and ZHU was not a bona fide purchaser for value and without notice. In my view, such factual findings are sufficient for the Court to find in favour of GB’s case, and GB has sufficiently pleaded such matters in its pleadings. “Pleadings Objection on Conflicts of Interest re solicitors” 92.It was part of GB’s submissions that it was unusual and irregular for the law clerk LEUNG to act for ZHU in the sale and purchase in 2010/2011 when LEUNG had acted for GB when the Property was purchased from WANG back in 2004 and in many other property transactions. It was LI’s evidence that LEUNG was arranged to act for ZHU so that he would act as the “goalkeeper” (“守尾門”) for GB to ensure that the bogus transaction would proceed smoothly. Mr. Chan complained in gist that as this allegation of conflict of interests on the part of LEUNG was not pleaded by GB in its pleadings, and there was no expert evidence before the Court to support it, the Court should not determine the allegation or rely on it to find any issue against ZHU. 93.Whilst it did appear to me somewhat unusual that LEUNG would switch to act for ZHU in the sale and purchase in 2010/2011, as can be seen above, that is not a matter that I relied on in arriving at my conclusion on the key factual issues. Therefore, this submission by Mr. Chan may be regarded as irrelevant and can be put aside. Whether the “standard receipt clauses” in the 2010 Agreement and 2011 Assignment could assist ZHU? 94.Mr. Chan contended that the receipt clause or terms in the 2010 Agreement and in the 2011 Assignment estopped GB from denying that it had received the deposit of HK$670,000 and the balance of the purchase price from ZHU. This contention can be swiftly disposed of. As set out above, it is my finding that the sale and purchase and the assignment of the Property in 2010/2011 were, and were intended to be, bogus transactions by the parties. I also found that ZHU had in reality paid no monetary consideration for the transaction. In those circumstances, in equity, the receipt clause does not effect an estoppel if there is evidence to show that the purchase money was not in fact paid: Chung Pui Tong v Qian Zhen [2024] HKCA 593 (at §§117-128). The terms of instruments known and intended to be bogus would not assist ZHU’s case. “Going Bright’s monies – the money trail cannot be proved” 95.Whilst Mr. Chan did not seriously challenge that Gladstrong’s two cheques (in the total sum of HK$4.5 million) were paid into WANG’s bank account in Hong Kong, he contested whether they were the same funds that were paid out from WANG’s bank account and transferred into ZHU’s bank account. In particular, Mr. Chan submitted that the funds paid into ZHU’s bank account could have come from an overdraft facility or surplus funds in WANG’s bank account. Mr. Chan relied on the case of CY Foundation Group v Cheng Chee Tock [2012] 1 HKLRD 532 for the proposition that where funds are paid into an overdrawn account, the right to trace such funds is lost. And in the possible event of surplus funds already in existence in WANG’s account, Mr. Chan relied on the case of Equity Trust (Jersey) LTD v Halabi [2023] AC 877 for the Clayton’s rule that payments into an account were taken to be applied to payments out of the account in the order in which the payments in had been made: first in, first out. Mr. Chan thus contended that if there were already surplus funds in WANG’s account to start with, they were, according to the Clayton’s rule, the funds that were used to pay ZHU. 96.I find this submission to be misguided as it is being made without reference to the evidence before the Court. As supported by the Loan Receipt, it is clear that both LI and WANG had intended that the funds provided by Gladstrong be used to pay ZHU so that ZHU would use them to pay for the purported sale and purchase of the Property in 2010/2011. In other words, there was an agreement between LI and WANG that Gladstrong’s funds paid into WANG’s bank account would be used to pay ZHU; and WANG was subject to an obligation to make use of such funds for that sole purpose. Further, there is simply no evidence before the Court of any surplus or overdraft in WANG’s bank account and the Court will not speculate in that regard. “Illegality” 97.Mr. Chan also contended, in gist, that the sale and purchase in 2010/2011 was tainted with a conspiracy to defraud the Director of Immigration and therefore such illegality prevented GB from asserting its equitable interest in the Property. 98.In Tinsley v Milligan [1994] 1 AC 340, the majority of the House of Lord held (at 376E) that a claimant to an interest in a property which had been acquired in the course of an illegal transaction may recover it if he was not forced to plead or rely on the illegality: “the reliance approach”. The general rule is that a person should not be granted a remedy where he has to rely directly on unlawful conduct to succeed. 99.Tinsley v Milligan was applied in Best Sheen Development Ltd v Official Receiver and Trustee [2001] 1 HKLRD 866 where the Court of First Instance held that a declaration that the plaintiff developer was the beneficial owner of the land would not amount to enforcement of the illegal contract. That decision was cited with approval by the Court of Final Appeal in HKSAR v Lau Kam Ying (2013) 16 HKCFAR 595 (at §§20-21). 100.However, in Patel v Mirza [2017] AC 467, the UK Supreme Court (by a majority of six to three) laid down a new approach, namely “the range of factors approach”, to determine the issue of illegality. This new approach was applied by the Court of Appeal in Monat Investment Ltd v All Persons in Occupation of Part of No. 16 Ma Po Tsuen [2023] 2 HKLRD 1311 and Kwan Hung Shing v Fong Kwok Shan & Ors, CACV 358/2019 [2023] HKCA 1020. 101.Under this approach, the primary question is whether it would be harmful to the integrity of the legal system to allow a claim involving an illegal act, and that question is to be answered with regard to the trio of necessary considerations: (i) the underlying purpose of the prohibition which has been transgressed; (ii) any other relevant public policies which may be rendered ineffective or less effective by denial of the claim; and (iii) the possibility of overkill unless the law is applied with a due sense of proportionality. 102.In my view, irrespective of whether the reliance approach or the range of factors approach is to be applied, I find that the illegality in the instant case does not prevent GB from obtaining a remedy. 103.Applying the reliance approach, GB is, in my view, not forced to plead or rely on the Agreed Arrangements or the ZHU’s LOU for the declaration being sought as to its property interests, even though they explain why it came about that ZHU was registered as the owner of the Property: see §49 of Best Sheen development Ltd. 104.Applying the range of factors approach, in the circumstances of the present case, having regard to the policy factors involved and the public interest underlying the criminal law or the offence of conspiracy to defraud (that an offender should be duly convicted and punished, and should not benefit from his or her own offending), the nature and circumstances of the Agreed Arrangements and the ZHU’s LOU, and the role and conduct of the parties (LI, ZHU and WANG) as well as the parity of culpability between LI and ZHU, it would in my view be a disproportionate response to disallow GB to recover its interest in the Property. To refuse GB a remedy would have the effect of enabling ZHU to unjustly benefit from her own wrongdoings and that would also be contrary to public policy consideration that the law should not be inconsistent and self‑defeating: see §67 of Kwan Hung Shing. In my view, the matter of illegality could also be duly addressed by the law enforcement authorities and by way of a criminal prosecution. Overall conclusion 105.Given my findings above, I conclude that notwithstanding the 2010 Agreement and the 2011 Assignment, ZHU has throughout been, and still is, holding the Property on trust for GB. I therefore give judgment in favour of GB in HCA 1603/2019 and in favour of LI in HCA 1721/2019. Reliefs 106.I therefore grant the following reliefs to the Plaintiff (GB) against the Defendant (ZHU) in HCA 1603/2019:
107.I also grant the following reliefs to the Defendant (LI) against the Plaintiff (ZHU) in HCA 1721/2019:
Mr. Lee Yee Hung, Ms Christine Yip and Mr. Eric Chim, instructed by Messrs. Cheung & Liu, for the Plaintiff (By Original Action) in HCA 1603/2019, the 1st Defendant (By Counterclaim) in HCA 1603/2019 and the Defendant in HCA 1721/2019 Mr. Frederick Chan, instructed by Messrs. Nixon Peabody CWL Solicitors, for the Defendant (By Original Action) in HCA 1603/2019, the Plaintiff (By Counterclaim) in HCA 1603/2019 and the Plaintiff in HCA 1721/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCA 1603/2019