Mtl Corporation Ltd (in Liquidation) v. Excellent Asia Ltd

DCCJ 1884/2023

[2026] HKDC 1885

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1884 OF 2023

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BETWEEN

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JUDGMENT

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A. Introduction

1.This is the Plaintiff’s claim against the Defendant for repayment of loans or quasi-loans advanced by 9 payments by way of cheques set out below from 27 April 2016 to 23 December 2016, in the total sum of HK$711,000 (respectively, the “1st Alleged Payment” to “9^th Alleged Payment”, and together, the “Alleged Payments”).

	Date	Cheque No.	Amount (HK$)
(1)	27 April 2016	209493	80,000.00
(2)	24 May 2016	209522	80,000.00
(3)	23 June 2016	291532	78,000.00
(4)	25 July 2016	291646	79,000.00
(5)	24 August 2016	291744	79,000.00
(6)	19 September 2016	291780	78,000.00
(7)	24 October 2016	379001	79,000.00
(8)	25 November 2016	379110	80,000.00
(9)	23 December 2016	379148	78,000.00
		Total:	711,000.00

B. Background and Parties

2.The Plaintiff is a company incorporated in Hong Kong that previously engaged in the trading of toys. Its sole director and shareholder was the late Mr Chan Wing Fai Daniel (the “Deceased”), who passed away on 31 December 2016.

3.The Defendant is a property holding company in Hong Kong that owned House No 15, King’s Park Hill, Kowloon (the “Property”), which served as the residence for the Deceased and his wife, Madam Ha Wing Kee (“Madam Ha”). The Deceased and Madam Ha each held 50% of the Defendant’s issued shares and were directors of the Defendant.

4.The Plaintiff was ordered to be wound up by the High Court on 9 August 2017, with Mr Lau Siu Hung (“Mr Lau”) and Mr Liang Yang Keng initially appointed as Joint and Several Provisional Liquidators, and later Liquidators (the “Liquidators”). Following Mr Liang’s death in November 2024, Mr Lau continues as the sole liquidator.

5.Madam Ha is currently the sole director and shareholder of the Defendant. The Deceased passed away intestate following a rapid decline in health in late 2016. Madam Ha obtained letters of administration over his estate in December 2022 after extensive probate litigation and subsequently became the Defendant’s sole shareholder in June 2023.

C. The Parties’ Respective Cases

6.In its Statement of Claim, the Plaintiff alleges that it advanced 9 payments to the Defendant by cheques, totaling HK$711,000, between 27 April 2016 and 23 December 2016. The Plaintiff contends that these payments were loans or quasi-loans intended to cover the monthly mortgage repayments for the Property. During opening submissions, the Plaintiff confirms that the plea of quasi-loans adds nothing and its case is essentially one of loans.

7.In its Defence, the Defendant avers that Madam Ha had no knowledge of the Plaintiff’s affairs or the alleged loans, thereby putting the Plaintiff to strict proof regarding the existence of the loans and the payments themselves.

8.The Defendant suggests that the payments may have been made in consideration for the Defendant’s continued agreement to provide corporate guarantees and pledge properties to secure the Plaintiff’s bank financing.

9.The Defendant also raises a limitation defence concerning the first payment of HK$80,000, arguing that any debt would have matured one year after the cheque date, making it time-barred prior to the issuance of the Writ on 12 May 2023.

10.Furthermore, the Defendant pleads that the Plaintiff’s claim constitutes an abuse of process because the Plaintiff previously obtained a default judgment against the Defendant in HCA 674/2018 for earlier loans (the “High Court Action”), and the Alleged Payments should have been litigated in that action.

11.In its Amended Reply, the Plaintiff rejects the allegation that the payments were the consideration for the Defendant to secure the Plaintiff’s bank financing and denies the limitation defence, arguing that the loans were classified as non-current assets falling due over 12 months after the end of the relevant reporting period.

12.The Plaintiff also disputes the abuse of process claim, asserting that the Liquidators only discovered the Alleged Payments following the conclusion of the High Court Action.

D. Issues in Dispute

13.As agreed by the parties, the issues in dispute in this action are:

(1) Whether the Plaintiff’s claims for recovery of the Alleged Payments amount to an abuse of process;

(2) Whether the Alleged Payments were made to the Defendant;

(3) Whether the Alleged Payments amounted to loans; and

(4) If so, whether the recovery of the 1^st Alleged Payment is time-barred.

E. Applicable Legal Principles

E1. Abuse of process

14.The Defendant asserts that the Plaintiff’s action constitutes a Henderson v Henderson abuse of process as the subject matter of this action could and should have been raised in the High Court Action.

15.This doctrine of Henderson v Henderson abuse of process precludes a party from raising matters in subsequent proceedings that could and should have been raised in an earlier action, except under special circumstances.

16.In Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72, Ma CJ, at §83, set out the following principles in relation to the doctrine, which can be summarised as follows:

(1) The starting point is to recognise that the doctrine is founded on an abuse of process. It ought only to be applied when the facts are such as to amount to an abuse. Otherwise, there is a danger of a party being shut out from bringing forward a genuine subject of litigation.

(2) It must therefore be essential in preventing a litigation of that claim that an abuse is found to exist in seeking to raise in subsequent proceedings claims or issues which could and should have been raised in earlier proceedings. This abuse will usually take the form of the other party being “vexed” by the subsequent set of proceedings.

(3) The abuse can also take the form of the administration of justice being brought into disrepute.

(4) The principle is founded on the public interest of finality in litigation, preventing a party from being vexed twice over the same subject matter, and maintaining the efficient administration of justice. Applying this doctrine requires a broad, merits-based judicial discretion that balances public and private interests to determine if a party is genuinely misusing the court’s process, recognising that summarily shutting out a claim is a drastic step.

(5) The court is not looking at an absolute bar to litigation such as issue estoppel or cause of action estoppel. On the contrary, in considering this type of abuse, the court is required to assess a number of factors and balance competing interests. Such assessment can be said to be an exercise of a discretion.

E2. Pleading requirements

17.The Plaintiff’s action in loan is in essence an action founded on simple contract(s). As explained in Cheong Shing Ltd v Yu Kwan (2008) 11 HKCFAR 594, §44:

“A loan by A to B is, by its nature, a contract. The advance of money by A to B by way of loan is inseparable from the terms of the contract. If all that can be said at the end of the day is that A paid to B a sum of money but nothing else could be proved, then the contract was ineffective. To categorise the bare payment of money by A to B as a ‘loan’ is plainly wrong.”

18.The basic requirements for a contract are trite. Those requirements are that (1) the parties have reached an agreement, and that happens when one party makes an offer which the other accepts, which is (2) intended to be legally binding, (3) supported by consideration, and (4) sufficiently certain and complete to be enforceable. See: Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923, §§17, 22.

19.In Himark Martin Tailors Ltd v Singh Arvinder & ors [2022] HKCFI 3427, §15, the court held that:

“In general, the pleading should state the date of the alleged agreement, the names of all parties to it, and whether it was made orally or in writing, in the former case stating by whom it was made and in the latter case identifying the document, and in all case setting out the relevant terms relied on…”

20.Nowhere in the Statement of Claim does the Plaintiff aver anything on the provenance of the alleged contract(s) in respect of the Alleged Payments. In particular, there is no plea as to:

(1) What is/are the loan agreement(s);

(2) How many agreement(s) there is/are – is there one agreement covering all 9 Alleged Payments or are there 9 separate agreements;

(3) When any loan agreement(s) was made;

(4) How the loan agreement(s) were made – whether they are written, oral, or something else;

(5) Who represented the Plaintiff and the Defendant respectively in making the loan agreement(s); and

(6) What the terms of the loan agreement(s) are, eg in relation to interest and repayment.

21.Clearly, these matters have to be pleaded before the court can begin to find whether the alleged loans exist between the parties. It is not enough for the Plaintiff to simply plead that the 9 Alleged Payments were made on the alleged dates. Whilst the court notes that the Plaintiff’s pleadings are not prepared by counsel, this remains a serious and fatal pleading defect.

22.The case of Million Decade Ltd v Tung Fai (HCA 1062/2013, 20 April 2016) relied on by the Plaintiff does not assist it because in that case the contracting parties and subject matters of the agreements / understanding had been specifically raised (§§41-42, 46). The same cannot be said of the present case.

23.Because of the aforesaid pleading defect, the court cannot even begin to find any loan which the Defendant has to repay. I therefore find that the Plaintiff has failed to show even a prima facie case on the pleadings that there exists any loans between the Plaintiff and the Defendant in relation to the Alleged Payments.

24.This is sufficient to dispose of the Plaintiff’s claims in this action. If I am wrong about that, I set out below my view on the Plaintiff’s evidence.

E3. Relevant legal principles on contract

25.In the specific context of a claim based on an alleged loan, the existence of which is denied, the Court of Final Appeal held in Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 364 as follows:

“80. One matter, if no other, emerges with dazzling clarity from the chaotic confusion of the pleadings. It is that the respondents denied the making of the Loans Agreement and breach of the Loans Agreement. Indeed, that denial was the very core of the respondents’ case. The consequence was that the appellant carried the burden of proving the elements of its case on the pleadings i.e. the making of the Loans Agreement, the making of the alleged “Loans” payments and breach by the respondents, namely failure to repay. Nothing could be clearer.

…

85. … the main issue thrown up by the pleadings was whether the parties entered into the Loans Agreement as alleged by the appellant or only the Fund Exchange Agreements as alleged by the respondents. In this situation, there was no basis whatsoever for suggesting that the respondents bore the onus of establishing that there was no Loans Agreement.

…

106. …the presumption of an implied obligation to repay from the fact of payment to a stranger cannot be supported. Further, I am not persuaded that, as a matter of policy, recognition of such a presumption has anything to commend it. The making of a bare payment to another may in the nature of things be explicable by reference to a wide variety of possibilities. To my mind, the probability that there is an obligation to repay the amount is not so strong that it should become the subject of a presumption, even a presumption of fact… It is the making of the payment in the circumstances which surround it that will enable appropriate inferences to be drawn, in the light of any relevant traditional presumption. In such a situation it is preferable to avoid the making of a presumption and leave the character and effect of the payment to the drawing of inferences. Presumptions lend themselves to tactical ploys in litigation; it is better that parties be encouraged to present the totality of their case, particular in cases arising out of commercial transactions.”

26.As mentioned above, it was held in Cheong Shing Ltd v Yu Kwan (supra), §44, that “[i]f all that can be said at the end of the day is that A paid to B a sum of money but nothing else could be proved, then the contract was ineffective.”

27.In the premises, the onus of proving that a transaction involving the payment of money amounted to a loan is therefore on the plaintiff and is not satisfied by proof merely of the payment to the defendant of the amount claimed: see Chen Kam Nga v Lee Ho Yin [2021] HKCFI 1352, §61.

28.Whilst there is no legal requirement that a contract must be concluded in writing, or be evidenced in some form of written record, “it is obvious that the absence of a written record may make the existence and terms of a contract harder to prove. Anyone with business experience will understand the value of a written record. Therefore, the absence of any written record may – depending on the circumstances – tend to suggest that no contract was in fact, concluded”: see Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923, §§18-19.

29.The relevant principles in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §§36-46 for inferring a contract from the conduct of the parties are trite and were summarised by Kwan VP in Redland Precast Concrete Products (China) Limited v Permasteelisa Hong Kong Limited [2023] HKCA 1278, §11, as follows:

“(1) The burden of establishing such a contract is on the party asserting its existence.

(2) The court will not imply a contract from conduct lightly. There is an obvious difference between the situation where the court is asked to imply a term where there is already an existing agreement and where the court is asked to imply an agreement from scratch. The latter situation demands a stricter requirement for the implication to be made.

(3) It is not enough to show that the parties have done something more than or different from, what they were bound to do or intent on doing. It is necessary that the conduct relied upon is unequivocally referable to the contract contended for, in the sense that it is consistent only with there being the contract sought to be implied and inconsistent with there being no such contract. In other words, the party propounding the contract must be able to point to some conduct of the parties which is consistent with, and only with, the contract contended for. This is an objective test…”

30.The above principle (3) comes from Staughton LJ’s judgment in Mitsui & Co Ltd v Novorossiysk Shipping Co (The Gudermes) [1993] 1 Lloyd’s Rep 311, p 320, where his Lordship put the requirement of unequivocally in the following terms:

“… it is not enough to show that the parties have done something more than or something different from, what they were already bound to do under obligations owed to others. What they do must be consistent only with there being a new contract implied, and inconsistent with there being no such contract.”

31.Further, as observed by Harris J in Moorthy Selvaraj v Karupayee Ammal & ors [2024] HKCFI 403, §13:

“… although it is open to a party to pursue a claim based on an oral agreement, understanding or a recollection of an event, for which there is little, if any, corroborating documents the party should be informed that proving the claim may be very difficult because of the difficulties I have described in a court choosing between alternative narratives in the absence of contemporaneous records. The court does not have to choose who to believe; if it takes the view that the evidence is unreliable, it can decide the case on the burden of proof.”

32.As pointed out by the Defendant, the fact that the action was brought by the Liquidators does not per se exempt them from their burden of proof of the claims made, or lower their standard of proof: see Hing Yip Holdings (Hong Kong) Ltd v Cellmark China Ltd & anor [2021] HKCFI 1396, §46.

E4. Drawing of Adverse Inference

33.Whether an adverse inference should be drawn in a particular case is a matter of discretion for the trial judge based on all the relevant circumstances of the case including the quality of the other evidence: see Mohammad Rafiq v Kin Hong Transportation Company Limited [2023] HKCA 185, §21.

34.As held in Triunion (HK.) Cereal & Oil Co Ltd v APAC Investment Holdings Ltd v ors [2022] HKCFI 3326, at §60:

(1) After a prima facie case on the facts is raised with evidence of “sufficient cogency”, adverse inferences could be drawn from the failure to adduce contradictory evidence, particularly where a party could be expected to provide such evidence; in such situations silence would be fatal.

(2) The silence of one party in the face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence.

35.The court would take into account whether explanation has been given by the party (and the credibility of any such explanation): see Keiron Peter Arch Rochester v Glory Sky Precious Metals Ltd [2025] HKCFI 885, at §§32 & 176.

E5. Limitation Defence

36.Under section 4(1) of the Limitation Ordinance (Cap 347), the limitation period for an action founded on a simple contract is 6 years from the date on which the cause of action accrued.

37.For a loan, as held in Lim Ban Thoon v Chintung Securities Ltd [1991] 2 HKC 204, at 210H, in an action for money lent, if no time is specified for repayment, the cause of action accrues from the date of the loan.

38.Once the limitation defence is raised, the onus is on the plaintiff to prove that the cause of action accrued within the limitation period: see Kensland Realty Ltd v Tai, Tang & Chong (2008) 11 HKCFAR 237, §153.

E6. Liquidator as witness

39.The parties agree that a liquidator is allowed to testify in legal proceedings on the conduct and the result of his investigation insofar as those matters are relevant to the proceedings. That said, what a liquidator manages to discover is technically hearsay evidence and is subject to arguments on its weight: see Sunni International Ltd v Kao Wai Ho Francis [2021] HKCFI 2418, §§11-12.

40.In this regard, in Wing Hong Construction Ltd v Hui Chi Yung & ors [2020] HKCFI 2985, at §147, the court placed no weight on the liquidator’s evidence where it consisted of opinions or commentary based on his reading of the documents relating to matters of which he had no personal knowledge.

F. Witnesses

41.As explained in more details below, neither witness has personal knowledge of the Alleged Payments, the circumstances surrounding the alleged making of them, and the affairs of the Plaintiff and the Defendant. In the circumstances, their evidence is not controversial or critical to the outcome of this case.

42.I nonetheless set out their respective evidence below.

F1. The Plaintiff’s witness – Mr Lau

43.Following their appointment, the Liquidators took charge of the Plaintiff’s affairs and examined the Plaintiff’s financial records and company documents.

44.One of the Liquidators, Mr Lau testified in court on behalf of the Plaintiff. I find that Mr Lau has tried his best to assist the court. But his investigation was admittedly hindered by the fact that most company documents have been destroyed or lost, including the Plaintiff’s books and accounts.

45.He admits that he has no involvement in, or personal knowledge of, the Plaintiff’s affairs and can only learn about them from the Plaintiff’s financial records and documents. Insofar as the Plaintiff’s claims in this action are concerned, the only documents which he considers relevant, and therefore disclosed in these proceedings, are the crossed cheques in relation to the 1^st to 8^th Alleged Payments as set out in paragraph 1 above (the “Cheques”), the Plaintiff’s bank statement dated 31 December 2016 (the “Bank Statement”) (but only one out of 3 page is produced), and the Plaintiff’s audited financial statements for the years ended respectively 31 March 2014, 31 March 2015 and 31 March 2016 (respectively, the “Plaintiff’s 2014 financial statement”, “Plaintiff’s 2015 financial statement” and “Plaintiff’s 2016 financial statement”, and together, the “Plaintiff’s financial statements”).

46.He has also considered the Defendant’s financial statement for the year ended 31 March 2015 (the “Defendant’s 2015 financial statement”) and the Defendant’s management account for the year ended 31 March 2016 (the “Defendant’s 2016 account”), which are disclosed by the Defendant in these proceedings.

47.Given that he has no personal knowledge of the Plaintiff’s affairs, the Alleged Payments, and the circumstances surrounding the alleged making of them, Mr Lau’s evidence is essentially his opinions or commentary based on his reading of the documents relating to matters of which he had no personal knowledge. Insofar as his opinions or commentary is concerned, I place no weight on such part of his evidence.

48.Mr Lau testified that upon taking charge, the Liquidators discovered the Plaintiff had previously advanced funds to the Defendant for the purchase of the Defendant’s Property and charged business management fee against the Defendant, as the Defendant is an investment-holding company with no income. There was an outstanding balance of loans or quasi-loans due by the Defendant to the Plaintiff in the amount of HK$2,072,296.60 as of 31 March 2016 (the “Previous Loans”).

49.Although the Liquidators were unable to locate any loan documents in relation to the Previous Loans, the said sum was successfully recovered by a default judgment in the High Court Action.

50.Upon further investigation of bank records, the Liquidators uncovered the Alleged Payments. As the Liquidators were unable to find any documents which might indicate that the Alleged Payments were for purposes other than loans or quasi-loans, Mr Lau asserts these payments were also loans or quasi-loans intended to cover the Defendant’s monthly repayments of the mortgage loan(s) of the Property.

51.Further, relying on the fact that past related-company debts were stated to be “falling due after one year” in the Plaintiff’s financial statements and classified as non-current assets in the Plaintiff's 2015 and 2016 financial statements, Mr Lau suggests that the loans or quasi-loans, including the Previous Loans and the Alleged Payments, have a repayment term exceeding one year from the financial year end of the company, ie 31 March.

52.This is because according to Hong Kong Accounting Standard 1 (Revised) on Presentation of Financial Statements, an entity shall classify an asset as “current” when inter alia it expects to realise the asset within 12 months after the reporting period. All other assets should be classified as “non-current”.

53.He therefore believes that the loan of the 1^st Alleged Payment advanced by the Plaintiff to the Defendant on 27 April 2016 was not expected to be due before 31 March 2018.

F2. The Defendant’s witness – Madam Ha

54.The Defendant called Madam Ha as a witness. She completed up to around form 2 or 3 education in a secondary school in Hong Kong and then year 10 in Canada. She married the Deceased at 18 years of age and has been a housewife since then.

55.Whilst she can read English, it is obvious to the court that she has difficulties understanding the financial documents shown to her, including the Bank Statement. For example, when she was asked about the Bank Statement, she said it shows that the cheque relating to the 9^th Alleged Payment was received by the Defendant on 28 December. This is clearly incorrect. The Bank Statement does not show the recipient of the cheque or the date of payment.

56.She was and is a director of the Defendant. I accept the Plaintiff’s submission that she should be taken to know the contents of the Defendant’s financial documents which she has signed. In fact, Madam Ha has not tried to disavow the contents of any financial documents which she has signed, nor has she said that the financial documents are incorrect.

57.That said, I accept her evidence that the Deceased exclusively managed his companies, including the Plaintiff and the Defendant, and never informed her of their financial arrangements, any monthly loans or amount of mortgage repayments (save that they did discuss about the mortgage of the Property when it was purchased many years ago). She simply has no personal knowledge or involvement in the day-to-day dealings and affairs of the Defendant.

58.After the Deceased’s passing, she has not conducted any investigation about the Defendant’s affairs or finances. She did not speak to the Defendant’s auditor or staff, or ask for documents from the bank. She said it was because she did not know that she had to do so or how to do so.

59.The Plaintiff tried to discredit her by saying that she has failed to state in her witness statement that the Deceased was in half coma since he was admitted into the hospital on 5 December 2016 until he passed away on 31 December 2016, and therefore could not have written the cheque concerning the 9^th Alleged Payment.

60.However, Madam Ha was very honest and fair and explained to the court that whilst she is certain that the Deceased could not have signed the cheque in the aforesaid period when he was in the hospital, he could have pre-signed it in his office before he was admitted into the hospital, and someone could have cashed it later on.

61.The Plaintiff also tried to discredit Madam Ha by saying that her explanation for not challenging the outcome of the HCA Action is unbelievable. Madam Ha gave unchallenged evidence that the High Court Action was not defended because the probate action was ongoing at that time and she did not obtain letters of administration of the Deceased’s estate until November 2022.

62.Given that the default judgment of the High Court Action was entered back in July 2018, I find her various explanations given as to why she did not challenge it credible. In any event, given that the HCA Action covers only the Previous Loans, Madam Ha’s conduct in relation to the same has no bearing on the Alleged Payments.

63.In the circumstances, I find Madam Ha an honest and truthful witness and accept her evidence.

64.That said, a large part of her oral evidence relates to her reading of the financial documents. Given that she has no involvement in the Defendant’s day-to-day affairs and dealings, and has difficulties understanding the financial documents, I place no weight on her evidence in relation to her reading of the same.

G. Findings

G1. Issue 1: Henderson v Henderson abuse of process

65.Considering all circumstances, I find that the Plaintiff’s conduct does not amount to a Henderson v Henderson abuse which should preclude the Plaintiff from suing the Alleged Payments.

66.First, the previous proceedings in the High Court Action only dealt with the Previous Loans advanced from 2013 up to 31 March 2016 as pleaded. The reference in the Statement of Claim in the High Court Action to the amount due and owing by the Defendant to the Plaintiff “as at the date of [the] Writ” must be understood in that specific context. Such plea clearly refers only to the amount due and owing by the Defendant to the Plaintiff under the Previous Loans.

67.It is Mr Lau’s unchallenged evidence that the Alleged Payments were not included in the High Court Action because the Liquidators only subsequently discovered the Alleged Payments. In the premises, I find that the facts of this case do not amount to an abuse. It is simply not the case that the Liquidators could and should have raised the claims in relation to the Alleged Payments in the High Court Action.

68.It would be very unjust in these circumstances if the Plaintiff is to be denied the opportunity to litigate the Alleged Payments.

69.Secondly, the judgment obtained in the High Court Action is in the form of a default judgment. In the premises, there is no danger of the Defendant being vexed twice.

70.Finally, as the High Court Action only concerns the Previous Loans, and not the Alleged Payments, there is no risk of the court rendering inconsistent judgments.

71.I therefore find that the Plaintiff should be allowed to litigate the Alleged Payments.

G2. Issue 2: Whether the Alleged Payments were made?

72.The existence of the 1^st to 8^th Alleged Payments is supported by the Cheques, the back of each of which indicates that they have been cleared. I therefore find that the 1^st to 8^th Alleged Payments were made by the Plaintiff to the Defendant.

73.In contrast, no cheque has been produced in support of the 9^th Alleged Payment. Mr Lau explained that this is because the bank was unable to locate the relevant cheque or a copy thereof.

74.All that the Plaintiff has produced is one page (ie page 3) out of the 3-page Bank Statement dated 31 December 2016 with an account number which corresponds to the Plaintiff’s account number as stated on the Cheques.

75.The said page of the Bank Statement shows, amongst others, a payment of HK$78,000 by way of a cheque numbered 379146.

76.However, no payment date or recipient is shown on that page of the Bank Statement. In such circumstances, there is simply no evidence to show that the 9^th Alleged Payment was made by the Plaintiff to the Defendant or that the payment was made on 23 December 2016.

77.Mr Lau explains that he does possess pages 1 and 2 of the Bank Statement, from which he saw the date of 23 December 2016. But that remains his bare assertion unsupported by independent or contemporaneous evidence.

78.The whole Bank Statement, if existed and possessed by Mr Lau, is clearly the most important, and in fact only, evidence which the Plaintiff has to support its case of the existence of the 9^th Alleged Payment. The absence of the relevant page showing the date of payment is fatal to the Plaintiff’s claim in this regard.

79.Mr Lau invites the court to draw an inference, from the fact that the 1^st to 8^th Alleged Payments were made in similar amounts and frequency, that the 9^th Alleged Payment was also made to the Defendant.

80.However, in the absence of any independent evidence, no such inference can be drawn. Simply because there were 8 previous payments of similar amounts made in similar frequency, ie roughly monthly, to the Defendant does not mean that the 9^th Alleged Payment was also made to the Defendant.

81.Although Mr Lau said that there were other monthly payments from the Plaintiff to the Defendant before April 2016, he has failed to produce any documents or records in support of the same. There is also no evidence as to (a) the period in which such alleged earlier monthly payments were made, or (b) the amount of such alleged earlier monthly payments.

82.Further, the Bank Statement shows that there are other cheques paid by the Plaintiff to unknown recipients. There is no reason to believe that this particular cheque was paid to the Defendant.

83.Also, given that the complete Bank Statement is not produced, the court simply does not know whether that particular cheque is the only cheque of a similar amount paid by the Plaintiff in that month.

84.The Plaintiff invites the court to draw adverse inference against the Defendant for its failure to produce documents showing that it did not receive the 9^th Alleged Payment and Madam Ha’s silence on this payment.

85.However, adverse inference could only be drawn from the failure to adduce contradictory evidence after a prima facie case on the facts is raised with evidence of “sufficient cogency”.

86.Since the Plaintiff has not even raised a prima facie case on the facts that the 9^th Alleged Payment was made to the Defendant, the court cannot draw any adverse inference against the Defendant that the 9^th Alleged Payments was made to it.

87.For reasons above, the Plaintiff fails to prove that the 9^th Alleged Payment was made to the Defendant. The Plaintiff’s claim based on the 9^th Alleged Payment must therefore fail.

G3. Issue 3: Whether the Alleged Payments were loans?

88.As explained above, the burden of proving that the Alleged Payments (if existed) amounted to loans is on the Plaintiff and is not satisfied by proof merely of the Alleged Payments to the Defendant of the amount claimed.

89.In this regard, the Plaintiff submits that it is not merely relying on the Alleged Payments. It invites the court to follow the approach in Big Island (supra), §106, and look at all the circumstances and the totality of the case, including the previous dealings between the parties. The court accepts that this is the correct approach.

90.However, for the reasons explained below, the court is unable to infer any loans in the circumstances of this case.

91.First, in the absence of proper pleadings, the court does not even know what the alleged loans are and what the terms of the alleged loan agreement(s) are. The court therefore cannot even begin to infer any loans. For the same reason, the court is unable to find whether such alleged loans exist, and if so, what the terms of the alleged agreement(s) in relation to the alleged loans are.

92.A fortiori, the court is unable to find whether there was any breach of the alleged agreement(s) in relation to the loans when no terms of the agreement or breach of the agreement is pleaded. All that was pleaded is that “the amounts owed by the Defendant to the Plaintiff were due more than 12 months after the reporting period”. The Plaintiff’s counsel accepts in his opening submissions that it is not clear from the Statement of Claim when the repayment date is.

93.In the absence of any plea on the repayment term or date, the court does not even know if the alleged loans are due and whether any alleged agreement(s) has been breached.

94.Secondly, the Plaintiff relies on the default judgment which has been entered into against the Defendant in respect of the Previous Loans in the High Court Action.

95.However, the fact that the Plaintiff had made the Previous Loans to the Defendant in the period between 2013 up to 31 March 2016 does not mean that the subsequent Alleged Payments amounted to loans. As Mr Lau states in his witness statement, the Alleged Payments “do not form part of the Previous Loans”.

96.Putting all the evidence at its highest, it can at most show there were some loans and some repayments in the period between 2013 and March 2016 between the Plaintiff and the Defendant. However, the financial statements only state certain lump-sum figures showing respectively the amount of outstanding debt and maximum outstanding debt owed in that year. There remains no evidence as to what those loans were for, what amount they were in, or whether they were for the Defendant’s monthly mortgage repayments for the Property as suggested by Mr Lau.

97.In point of fact, in the Plaintiff’s Statement of Claim in both this action and the High Court Action, the Previous Loans were said to be made for the purpose of the purchase of the Defendant’s Property. The contention in Mr Lau’s witness statement that the loans in relation to the Alleged Payments are “similar to the Previous Loans” and were “intended to cover the monthly mortgage repayments for the Defendant’s Property” is not correct.

98.Even on the Plaintiff’s case, the purposes of the loans are different. The purpose of the Previous Loans is said to be for the purchase of the Defendant’s Property, and the loans in relation to the Alleged Payments are for the monthly repayments for the mortgage loan(s) of the Defendant’s Property.

99.In this regard, Mr Lau’s explanation that the Previous Loans were all-inclusive and included mortgage repayments is unsupported by evidence. There is no evidence on the purpose of the Previous Loans or the Alleged Payments at all.

100.Thirdly, whilst Mr Lau maintains that the Alleged Payments were made to allow the Defendant to pay its monthly mortgage repayments because it has no income (after the sale of the Grand Promenade property) or means of its own and the Plaintiff was the only company through which the Deceased conducted his business, there is no evidence of (a) the amount of monthly mortgage repayment by the Defendant, and (b) the Alleged Payments, or indeed any part of the Previous Loans, were used to make monthly mortgage repayments.

101.If Mr Lau does not even know what the amount of the Defendant’s monthly mortgage repayment is, it begs the question as to how he could say that the Alleged Payments are loans for the monthly mortgage repayments for the Defendant’s Property.

102.Even taking into account the fact that the Defendant has no income or means of its own and the Plaintiff was the only company of the Deceased which had funds, simply relying on the fact that the 9 Alleged Payments were of similar amounts and were made roughly monthly does not prove that they were made for the purpose of the Defendant’s mortgage repayments.

103.Had there been evidence that there were previous monthly loans in similar amounts from the Plaintiff to the Defendant pre-April 2016, which were used to pay the Defendant’s monthly mortgage repayments, then the court may be able to begin to infer that the 9 Alleged Payments also amounted to loans of the same nature. But this is not the case. There is simply no evidence of any monthly loans from the Plaintiff to the Defendant, whether pre-April 2016 or after.

104.Fourthly, Mr Lau relies on the Defendant’s 2015 financial statement which states that the Defendant had sold its other property at Grand Promenade on 15 April 2015, and the Plaintiff’s 2016 financial statement which shows that the balance due from the Defendant to the Plaintiff had dropped from around HK$8.5 million on 1 April 2015 to around HK$2 million on 31 March 2016. Mr Lau says this shows that all amounts due from the Defendant to the Plaintiff are loans which have to be repaid.

105.However:

(1) There is no evidence that the sales proceeds of the Grand Promenade property were used to repay the Plaintiff.

(2) Even if they constituted repayment, there is no evidence on the nature of the debts that were being repaid. What was being repaid could have been of a different nature from the Alleged Payments.

(3) The fact that other debts owed by the Defendant to the Plaintiff were or have to be repaid does not mean that the Alleged Payments have to be repaid as well.

106.Fifthly, other than the Cheques, there is not a single shred of contemporaneous records in support of the Plaintiff’s case of the alleged loans, be it written loan agreement, board resolution or shareholders’ resolution.

107.The Plaintiff invites the court to draw adverse inference against the Defendant for its failure to produce documents to provide evidence that the mortgage repayments were from elsewhere and Madam Ha’s silence. However, as explained above, adverse inference could only be drawn from the failure to adduce contradictory evidence after a prima facie case on the facts is raised with evidence of “sufficient cogency”.

108.Given that it is the Plaintiff’s positive assertion that the Alleged Payments are loans for the Defendant’s monthly mortgage repayments, this forms an essential part of the Plaintiff’s case, the proof of which rests squarely on it. Since the Plaintiff has not even raised a prima facie case on the facts that the Alleged Payments are loans made to the Defendant for the purpose of paying its monthly mortgage repayments, the court cannot draw any adverse inference against the Defendant that the Alleged Payments are loans or loans for such purpose.

109.As to any suggestion that the Defendant has failed to call the auditor, the same can be said about the Plaintiff. Both companies shared the same auditor, who has for some reasons not been called by either party to give evidence in these proceedings.

110.Sixthly, the making of the 1^st to 8^th Alleged Payments (and also the 9^th Alleged Payment if, contrary to my finding above, existed) is not unequivocally referable to any loan agreement(s). The bare payment by the Plaintiff to the Defendant may be explicable by reference to a wide variety of possibilities. In other words, it is not consistent only with there being any loan agreement(s), nor is it inconsistent with there being no loan agreement(s).

111.The wide variety of possibilities include inter alia the possibility suggested by the Defendant that the Alleged Payments were made to it in consideration of its continued agreement to pledge the Property for loan facilities granted to the Plaintiff and to execute a corporate guarantee for general credit facilities granted to the Plaintiff.

112.Although the Plaintiff relied on the financial statements and pointed out that there was no record of any consideration previously paid by the Plaintiff to the Defendant for the pledge and corporate guarantee it provided, again, only the Plaintiff’s financial statements, the Defendant’s 2015 financial statement and the Defendant’s 2016 account are disclosed in these proceedings. It remains unclear what dealings there were between the parties after 31 March 2016 or what the Alleged Payments are for.

113.Another possibility is that, since the Plaintiff owed debts to the Deceased, the Deceased could have directed or caused the Plaintiff to make the Alleged Payments to the Defendant, which payments could be treated as repayments made to the Deceased used to set off part of the debts owed by the Plaintiff to the Deceased. If that was the case, then the Alleged Payments would have been either a gift or a loan from the Deceased. The Defendant’s counsel submits this is consistent with the fact that the Plaintiff owed debts to the Deceased, as shown by the Plaintiff’s financial statements. Under this possibility, the Defendant would not be obliged to repay the Plaintiff.

114.Whilst Mr Lau said there is no record of such repayment or account treatment in the financial statements, it is also his case that the books and accounts of the Plaintiff are lost. In the premises, there is simply no evidence on the nature or treatment of the Alleged Payments. For the same reason explained above, the Plaintiff’s financial statements pre-April 2016 do not shed light on the nature of the Alleged Payments.

115.By reason of the above, the court cannot imply, in the circumstances of this case, any (unpleaded) loan agreement(s) from the Alleged Payments. It is clear that the Plaintiff has failed to discharge its burden of establishing the existence of any loans.

116.Finally, even if the alleged loans existed, there is no evidence on the outstanding amount due from the Defendant. It is Mr Lau’s evidence that he did not investigate into each and every transaction appearing on the Plaintiff’s bank statements. For transactions with smaller amounts such as several thousand dollars, he did not investigate them or ask for further records from the bank.

117.As such, there is no credible evidence in these proceedings as to whether the Defendant has repaid any part of the alleged loans. This has to be viewed against the background that there had been repayments made by the Defendant to the Plaintiff throughout the years from April 2013 to March 2016 as shown in the Plaintiff’s financial statements.

118.Although Madam Ha said during cross-examination that the Alleged Payments have not been repaid to the Plaintiff, she clarified during re-examination that she was confused by the question and did not actually know whether they have been repaid. I accept her explanation.

119.In light of the finding above that no loan existed, there is no need for the court to deal with the Plaintiff’s case in relation to the repayment terms of any loans (if existed) in relation to the Alleged Payments.

120.For the sake of completeness, I will now explain why the Plaintiff’s financial statements relied on by the Plaintiff simply does not assist the Plaintiff in this regard.

121.The Plaintiff did not plead any positive case as to what the repayment terms of the alleged loans are. The Plaintiff’s case in the Amended Reply in response to the Defendant’s limitation defence is that the Alleged Payments were not due one year from the respective dates on the cheques (§6). The debts owed by the Defendant to the Plaintiff were due more than 12 months after the reporting period and were classified as non-current assets in the Plaintiff’s financial statements (§§6.1, 6.2, 6.2.1-6.2.3). The recovery of alleged loan in relation to the 1^st Alleged Payment is therefore not time-barred (§6.2.4).

122.However, the debts referred to in the Plaintiff’s financial statements relied on by the Plaintiff plainly do not cover the Alleged Payments (even if they amount to any loan(s)) for reason that the Alleged Payments were only made after 31 March 2016.

123.The statement in the Plaintiff’s financial statements that past debts due by the Defendant “which are falling due after one year” and are classified as non-current assets is neither here nor there. As pleaded by the Plaintiff, the Previous Loans were advanced by the Plaintiff to the Defendant before 31 March 2016, whereas as loan(s) in relation to the Alleged Payments were “loans advanced by [the Plaintiff] to the Defendant between 27 April 2016 and 23 December 2016”. They therefore constitute different loans, and can well have completely different terms.

124.There is no reason to presume or infer that the repayment terms for the past debts owed by the Defendant to the Plaintiff applies equally to any later debts, including any loans which may exist in relation to the Alleged Payments. This is especially so when there is no evidence as to the nature of the past debts.

125.Further, the above interpretation of the financial statements contradicts the Plaintiff’s case in the High Court Action, which Mr Lau confirms is based on the Plaintiff’s 2016 financial statement, that the amount of outstanding balance due by the Defendant to the Plaintiff as at 31 March 2016 had been due to be repaid since at the latest by 31 March 2016.

126.If Mr Lau’s interpretation of “falling due after one year” in the Plaintiff’s financial statements is correct, the outstanding balance as at 31 March 2016 stated on the Plaintiff’s 2016 financial statement should not be due before 31 March 2017, instead of 31 March 2016 as pleaded in the High Court Action.

127.Mr Lau tried to explain this away by saying that the Statement of Claim of the High Court Action was drafted by lawyers and he did not read the date carefully. However, he was the person who verified the truth of that Statement of Claim.

128.Putting the High Court Action aside, in his witness statement, Mr Lau states that he believes that the alleged loan of the 1^st Alleged Payment “was not expected to be due before 31 March 2018”. However, during cross-examination:

(1) First, he said that the debts owed by the Defendant to the Plaintiff are repayable on demand because both companies are owned by the Deceased.

(2) When it was pointed out to him that the Plaintiff’s financial statements expressly state that the debts owed by the Defendant to the Plaintiff were not repayable on demand, but are “falling due after one year”, he changed his evidence.

(3) Mr Lau’s evidence became that all loans owed by the Defendant to the Plaintiff are due exactly on 31 March in the year following the end of the financial year. Hence, the debts appearing in the financial statement for the year ended 31 March 2014 were due on 31 March 2015. The debts appearing in the financial statement for the year ended 31 March 2015 were due on 31 March 2016.

(4) Thus, the Alleged Payments were all due to be repaid on 31 March 2018.

(5) But when he was being questioned on whether the amount outstanding as at 31 March 2013 was due to be repaid on 31 March 2014, he gave yet another different version of evidence and said that there was a practice by the Plaintiff of extending the due date of the loans due from the Defendant by one year at the end of each financial year end.

129.First, the above versions of Mr Lau’s evidence all contradict the Plaintiff’s pleaded case that the debts owed by the Defendant to the Plaintiff were due more than 12 months after the reporting period, not on any exact date.

130.Secondly, the above versions of Mr Lau’s evidence are not supported by the financial statements which states that the debts are “falling due after one year”, which could mean any time after the period of one year, instead of exactly one year after 31 March of the relevant year.

131.Later on, Mr Lau changed his evidence again and said there is no obligation for the Defendant to repay the Plaintiff within one year, the obligation only kicks in after one year.

132.Nonetheless, as accepted by Mr Lau, his evidence on the repayment date is merely his opinion based on his reading of the financial documents of which he has no personal knowledge. No weight should therefore be given to it.

133.Finally, and importantly, even if any weight should be given to his evidence and even if his opinion is correct, as mentioned above, the Plaintiff’s financial statements relied on by him do not cover the Alleged Payments, which were made after the last financial statement of the Plaintiff.

134.For all the reasons above, I find that any alleged loans (even if existed) do not contain the repayment term as contended for by the Plaintiff.

G4. Issue 4: Limitation Defence

135.By reason of my findings above, there is no need for the Defendant to rely on the limitation defence.

136.For the sake of completeness, even if I had found that the parties had entered into a loan agreement in respect of the 1^st Alleged Payment, the Plaintiff has failed to prove that any repayment term was specified.

137.Although the Defendant’s case is that if any loan in relation to the 1^st Alleged Payment existed, it would have fallen due latest by 27 April 2017, there is simply no evidence to support that.

138.In the circumstances, applying Lim Ban Thoon (supra), the cause of action would have accrued upon the making of the loan, and so the Plaintiff’s claim for repayment of the 1^st Alleged Payment is time-barred. In fact, the same applies equally to all the Alleged Payments.

H. Conclusion

139.In light of the findings above, I dismiss the Plaintiff’s claims in this action. I make a costs order nisi that the Plaintiff pays the Defendant’s costs of the action, with a certificate for counsel, to be taxed if not agreed.

Mr Kurt Ng, instructed by Messrs Tsang, Chan & Woo Solicitors & Notaries, for the plaintiff

Miss Joyce Lee, instructed by Messrs Alvin Cheng & Rosaline Choy, for defendant