Lo Kai Bun v. Pong Man Yi and Others

HCA 4700/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4700 OF 2002

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BETWEEN

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Before: Deputy High Court Judge Carlson in Court

Dates of Hearing:  22, 23, 24 and 25 November 2004, 4, 5, 6 and 7 July 2005, 9, 10, 11, 14, 15, 16, 17 and 21 November 2005

Date of Judgment (Handed Down): 20 February 2006

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J U D G M E N T

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Introduction

1.The Plaintiff, Mr Lo Kai Bun (“Mr Lo”) and the 1^st Defendant, Miss Pong Man Yi (“Miss Pong”) were married on 2 August 1975.  They have a son, Mr Lo Tin Wai, who was born on 8 March 1976.  He will therefore shortly turn 30.  He is the 2^nd Defendant.  Their marriage had not been a happy one for many years.  Mr Lo was in the habit of going to karaoke bars and having sexual relationships with hostesses who operated from these establishments.  He refused to stop after Miss Pong had found out. He told her that he would continue doing so as and when he liked.  As a result, their marriage broke down irretrievably and she petitioned for divorce on 15 April 2002.  A decree of divorce has now been pronounced.

2.During the course of their marriage, they had become rich.  Together they had built up a very successful business manufacturing, sourcing and selling internationally all sorts of lighting.  This business was conducted through a number of companies who are the corporate defendants in this action.  Both of them were directors and shareholders in these companies.  Mr Lo says that Miss Pong has, by trick, caused him to sign over to her his shareholding in these companies as well as making him give up his directorships.  She has “stolen” everything that he had built up.  He has sued her, their son and the relevant companies.  He wants his shares and directorships back.  She denies this.  Her case is that he agreed to do so as part of their agreement under which she hoped to salvage their businesses which he had seriously jeopardised by his profligate lifestyle and spending.  For his part, he was to be paid a salary to continue working and be at liberty to continue with his social life.

3.Whether such an agreement was concluded between them lies at the heart of this lengthy, and given the demands of listing in the High Court, disjointed litigation which has had to be tried in three instalments, each separated by a number of months.  In order to effect the transfer of ownership of his shareholdings and of his directorships, Mr Lo was required to and did sign no less than 20 documents comprising 56 pages in all including a 36-page Deed of Settlement which established a Jersey-based trust. This was between January 1999 and September 2000.  For ease of reference the documents have been extracted and placed into a separate bundle, being Box E, of the very substantial bundles of documents that comprise the documentary evidence in the trial.

4.Mr Lo has said, and I will need to attend to some of the detail of his evidence in this regard, that he did not know what he was signing. The general thrust of his evidence being that these documents were placed in front of him by Miss Pong in such a way that she was able to cover them up so that he could not really see what it was that he was signing or, on occasions she would call him out of meetings when his mind was occupied on other things and made him sign documents whose contents and nature he was not aware of, on the basis that she told him that they were just routine documents that required his signature.

5.This evidence will need to be tested against the general background of what was going on between the parties as husband and wife, the general level of Mr Lo’s spending habits at the time and perhaps, most importantly, the documents themselves, in the sense of their layout and the position or positions of Mr Lo’s signatures on the documents themselves.  It is also important to attach proper weight to Mr Lo’s primary contention that there was simply no prospect that he would have knowingly signed away his life’s work in return for a relatively modest salary and his freedom to “play around” with karaoke girls.  He says that the marriage had been a dead letter for many years by then and that she knew of his extra-marital social life which he had no intention of giving up.

6.By way of further introduction to the factual disputes, which I will need to resolve, Miss Selina Lau, who appears for the Defendants, has obtained leave from me after the end of the first part of the trial at the end of 2004 and further at the beginning of the second part in the middle of 2005 to adduce a body of evidence which is said to support a case that Mr Lo knew, well before he says he first realised what he had done at the end of January 2002, the effect of his signature of these documents.  It also shows that shortly before this he had decided to establish a rival business based on the Mainland which is precisely what has happened.  Having regard to his connections with the Defendant companies’ customers in Europe and the sources of manufacture, both here and on the Mainland, which he had established, he had little difficulty in setting up a rival business.  In doing so, he poached two important employees from the Defendant companies and has established companies, through which he now trades, by using relatives to act as his nominee shareholders and directors.  These new businesses have in fact induced most of the Defendant companies’ clients to now trade with them, with the result that Miss Pong’s business is very much smaller than it used to be and very much less profitable and successful.

History of the family business and of the careers and marriage of Mr Lo and Miss Pong

7.It is important to understand this aspect of the evidence because this will assist in providing answers to the crucial questions as to whether it is likely, one way or the other, that these two individuals came to the agreement contended for by Miss Pong and so firmly rejected by Mr Lo.

8.Both are well-educated people.  In 1973, Mr Lo graduated from the Chinese University of Hong Kong with a B.A. in Business Administration.  Miss Pong is a certificated primary school teacher which was her occupation from 1972 until 1985 when she became involved, on a full time basis, in the family business.  Mr Lo’s employments started with Hongkong Bank and then Overseas Enterprises Limited, Sonca Industries and finally, a company called Gold Peak Industrial Company Limited where he, in particular, gained much experience and knowledge of the lighting and battery production business.  It was there that he dealt with overseas clients, international sales and production.  As a result of this experience, he grew in confidence and considered that he was capable of branching out on his own.

9.In 1981, Gaylite Enterprises Company was established in Miss Pong’s name.  At that stage, this was work on the side, as it were, for both of them because Miss Pong was still teaching and Mr Lo was still working for Gold Peak.  Both worked in the evenings and at the weekends in a small way establishing a lighting related business trading in plastic products and torches.  In fact in 1978, a similar sounding company had been registered called Gaylite Trading Company with a Mr Wu as a partner. What I have just referred to sufficiently demonstrates that in one form or another, the husband and wife team had their own, albeit at that stage modest, business going back over 20 years prior to the alleged agreement resulting in Mr Lo handing over control of the family business to Miss Pong.

10.In 1985, Mr Lo resigned from Gold Peak and was able to dedicate himself full-time to the business of Gaylite Enterprises Company.

11.On 9 November 1989, Topsca Limited (the third Defendant “D3”) was bought off the shelf in the names of both of them.  There were 10,000 issued shares and each was allocated 5,000.  In about that year, or the following year, the family formally emigrated to Australia to preserve their options if things did not go well after 1997.  Mr Lo returned to Hong Kong the following year leaving Miss Pong and their son in Australia.  She returned to Hong Kong in 1992 leaving the son there.

12.Between July 1991 and 30 September 1993, three office units at the Peninsula Centre in Tsim Sha Tsui were purchased in the name of D3.  On 3 January 1995, the matrimonial home at 37, Repulse Bay Road was also purchased in D3’s name, with the purchase of two car parking spaces being added there in April 1994 also in D3’s name.

13.On 8 September 1995, Topsca Lighting Limited (the fourth Defendant “D4”) was purchased off the shelf.  Its issued shares were increased to 2 million and distributed as to 800,000 to Miss Pong and 600,000 each to Mr Lo and the son.  All three were appointed directors.  On 4 October that year, Mr Lo also became registered as a partner in the firm of Gaylite Enterprises Lighting Company.  On 6 March 1996, the son transferred 400,000 of his 600,000 shares in D4 to Mr Lo who thereby held 1 million of the shares.  On 18March 1996, Feeble Industries Limited (the fifth Defendant “D5”) was purchased off the shelf.  The shareholders were Mr Lo as to 5,000 shares and a Mr Hong Tai Kwong as to the other 5,000.  Both were appointed directors.

14.Whilst the business side of things was undoubtedly prospering and in fact, 7 properties in all were purchased in the name of D3, the matrimonial side of things was distinctly weak.  Mr Lo has said that by the end of 1991, or so, the parties were sleeping in separate bedrooms and that the marriage was more formal than real, in the sense that the affection and warmth of the relationship had all but disappeared.

15.On 23 August, Mr Lo withdrew from the matrimonial home and went to live at the Royal Garden Hotel in Tsim Sha Tsui East which is close to the company offices.  He says that this was largely due to the fact that it was convenient for him for the purpose of entertaining business clients from aboard who were in Hong Kong at the time.  Miss Pong says that this was to enable him to have a freer rein with his karaoke girlfriends.  The motive does not really matter, but, I suspect, it was a bit of both and certainly symptomatic of the shaky marital relationship.

16.In mid-1997, Mr Lo fell ill with postural vertigo and returned to the matrimonial home at Repulse Bay Road where he was cared for by Miss Pong. 

17.In July and August 1998, there were changes in the management and shareholding of D5 which had been established in 1996.  Mr Hong transferred his 5,000 shares to Miss Pong and she replaced him as a director.  The result was that Mr Lo and Miss Pong each held 5,000 shares.  The products which D5 sold to its customers were sourced and manufactured by its related Feeble Factory on the Mainland.

18.By late 1998, Miss Pong discovered that Mr Lo had formed a relationship with a woman called Yeung Hung who was a karaoke hostess.  The difference in her case was that he appeared to Miss Pong to have formed a much closer emotional attachment towards this woman.  Miss Pong therefore feared that he might be led by his emotions to somehow provide this person with an interest in the companies that he and she had set up together, and in that way prejudice Miss Pong’s position as well as that of their son.

19.Taking stock of this chronology, one comes to the position that by late 1998 and early 1999, Mr Lo and Miss Pong had between them been highly successful in making the family business a very profitable and worthwhile venture.  The turnover was high, the reputation was very good and they had also, largely through the business, acquired a number of valuable properties including a luxurious home overlooking Repulse Bay.  Both had contributed to this success in different ways.  He by going out and getting the business and by his technical expertise, and she by providing the accounting and administrative support, without which any successful business could not flourish.  In the course of a busy working life, they had brought up and educated their son, both here and in Australia, and it was hoped and expected that he would join the family business and in due course, inherit it.  Unfortunately, the price of commercial success was a by now unhappy and loveless marriage.

The turning point

20.Although this may be putting matters the wrong way round, it is more helpful to consider the evidence of Miss Pong first, as to how she says Mr Lo signed over to her the control of the business and why he agreed to do so.

21.She has told me that because of his relationship with Yeung Hung, they had a row.  He had told her to stop nagging him and that she by now knew that he was this sort of person.  It was nothing new.  She said that if he carried on in this way he might end up spending all of their hard earned money.  He told her to stop nagging and he said that if he transferred all his Topsca shares to her that she would not need to be concerned.  According to her, therefore, this was a suggestion coming from him.  She then suggested that they set up a trust for their son and that both of them transferred their shares to the trust.  He said that they should do this and as a result, she took steps to have a trust document prepared.

22.Her evidence is that she went to a solicitor, Wendy Wong, for the purpose of having this done.  She told Wendy Wong what was required; to the effect that they both wanted to establish a trust and inject the shares of Topsca into the trust so that if anything happened to both of them, their son would not have to pay any tax.  It seems a very long time ago now, but I should observe that Wendy Wong was called to give evidence on behalf of Mr Lo in November 2004 when the trial first started.  She had made some notes at the time as to what was required of her by Miss Pong, which accord with what Miss Pong has told me.  Miss Pong had three meetings with Wendy Wong.  An outline instruction was obtained as to who would be transferring the Topsca shares and to whom and who was to hold the shares under the trust.  The identity of the beneficiary, their son, was established and who would be the protector under the trust.  Having established the objectives, it was up to the solicitor to produce a suitable draft Deed of Settlement which she appears to have done; and she agreed with this; from a fairly standard form of Jersey trust deed suitably adapted to meet the requirements of Miss Pong.

23.By their second meeting, Wendy had prepared the first draft which she went through and explained to Miss Pong.  She explained to her that the most suitable trust for them would be one based on the laws of Jersey, without elaborating on why that should be so.  She explained some of the terms to her, such as trustee, protector and settlor.  The form of the trust appeared to be suitable and Miss Pong asked whether she could take it to Mr Lo for his signature.  Wendy Wong said that she could and also gave her the related documents that needed their signatures in order to give effect to the trust.  These included the share transfers by the two of them to the offshore companies, Twilight International Holdings Corporation and Golden Miles Overseas Limited (D6).  She took with her Exhibit P1, the Settlement Deed [pages 1-36 Box E], Exhibit P11, 12, 15 and 16 [pages 37, 38 and 39 Box E] and Exhibit D9 and the director’s resignation letters. [Exhibit D3 and D10].  With these documents signed, the trust would become effective.

24.Her evidence is that she returned to the office with the documents, took them to him telling him that the trust had been set up and that these were the necessary documents to have the shares transferred to the trust.  He should look at them and then sign them.  They were placed on his desk by her.  He turned them over.  According to her, he wanted to know to whom would everything ultimately go and he also asked her what ‘settlor’ and ‘protector’ meant and who the trustee was.  She explained to him that the son was the beneficiary and that eventually it would all go to him and that the protector was the person who would look after the terms of the trust, whilst the son was still young.  She also explained to him that the two of them were the settlors as they were transferring out their shares and that the two offshore companies (BVI) were the trustees.  She then left him in his room with the documents for him to read as he wished and to sign.  She was not present when he signed them, but he subsequently returned them to her with his signatures on them, after which she took them back to Wendy.

25.Her own signature is on page 36 of the Deed [Box E36].  She could not tell me whether her signatures came before or after Mr Lo had signed, but she was sure that she signed before going back to see Wendy for the third occasion.  She also signed Exhibit D9 and D10 before going to see Wendy.  On seeing Wendy on this third occasion, she also signed at page 36 as director of Golden Miles and of Twilight, as well as initialling a correction on page 3 of the Deed.  Subsequently, she had all these documents returned to her by Wendy under cover of a letter dated 26 February 1999 [Exhibit P9 Box D/45].

26.So much for Miss Pong’s account which perhaps, unsurprisingly, is perfectly matter of fact, straightforward and uncomplicated.  Mr Lo says that this evidence is untruthful, to put it at its kindest.  Ultimately, I am going to have to decide which of these two people is telling me the truth.  As a matter of good sense, I must warn myself to approach the evidence of both of them with great care and of the two I should perhaps, be especially careful about the evidence of Miss Pong.  She after all would have considered herself a loyal wife who, over many years, has been continually betrayed by an adulterous husband who has humiliated her by his sexual encounters with paid karaoke hostesses.  The final insult being the relationship with Yeung Hung, a woman from the same stable as the others, except that on this occasion he appeared to have developed feelings for.  This had been confirmed by the private investigators who she had retained to follow him.  Everything that she had built up, after years of hard work, was perhaps being threatened by this woman.  All of this would have provided incentive for her to extract her revenge on him by stripping him of what was dearest to him which was his substantial business which gave him wealth and all that goes with it.  For these reasons, I should be especially careful in my assessment of Miss Pong’s evidence.

27.Having given myself that warning, I must turn to Mr Lo’s evidence as to how he came to sign these crucial documents.  As plaintiff, he, of course, bears the burden of proof of showing, on a balance of probabilities, that what he says is true.  That he was deceived into doing all of this.  The starting point must be that Mr Lo is a very experienced businessman, well used to signing all sorts of commercial and legal documents.  As I have already observed, he has signed all the documents which have been extracted and put into Box E, as well as a number of other documents of great and decisive importance in transferring his business to the trust and thereby to Miss Pong’s control.  If this was a case being tried by a jury, one can easily imagine Miss Pong’s advocate saying; “Do you really think … that such a man as Mr Lo would have signed all of these documents without knowing what they were!”  This, of course, would be perfectly fair comment, but I must approach the evidence in a neutral way, eschewing cynicism without being in any sense naïve about the realities of life.

28.I will now examine his evidence on the signing of these documents.  As to the Trust Deed, it needs to be said that it would have given the appearance of something quite out of the ordinary.  The texture and colour of the paper differs from the usual paper in commercial documents such as invoices or purchase orders or correspondence.  The other distinctive feature is that it comprises 36 pages and that the final page has red seals attached to it.  Mr Lo has agreed that his signature appears as the first signature on page 36 and that the texture of the paper and that its greeny/grey colour indicated that, as a document, it was out of the ordinary.  His evidence was that he could not remember if all 36 pages were put in front of him [see transcript 2/138M-139H].  He has also said that Miss Pong may not have put page 36 on the desk for him to read and sign, but that she may have just held up the paper for him to sign [139Q-140R].  His evidence is that he did not read this document before signing it and that he did not see the large typed words “SIGNED SEALED and DELIVERED” near where he signed, nor could he remember if the red seals were present on the page.  This evidence will need to be judged against the whole background which I have related, but particularly so with reference to the document itself.

29.The next documents of importance relate to Exhibit P15 and P16 [Box E/39-40] which concern the transfer of his shares in D3 to D6 (Golden Miles).  The document is entitled in bold letters “Instrument of Transfer” and he signed just above the word “transferor”.  He says that he did not see this latter word nor the title of the document.  He would not have signed had he known what it was.  Much of his explanation for having signed these documents is that Miss Pong often covered up the pages that he signed, only leaving exposed a small space for him to sign.  Similarly, with the “Bought and Sold” note [Box E/40], he did not see the titles “Bought Note” and “Sold Note” nor did he see the word transferor where he signed.

30.Exhibit P11 and Exhibit P12 [Box E/37 and 38] are the share certificates for D3, one showing that Golden Miles is the holder of 5,000 shares and that the other 5,000 are held by Twilight.  He agrees that he signed these as director.  He agrees that he signed, but did not see the bold title “TOPSCA LIMITED” at the head of the document. Nevertheless, he knew from the patterned border that these were share certificates.  He thought he signed to receive the shares.

31.Miss Lau has observed that when D3 had been incorporated in November 1989, Mr Lo had agreed that Miss Pong had asked him to sign a share certificate to confirm receipt of his 5,000 shares.  Since then, there had been no change in shareholding.  If he is right, then there would have been no reason for him to sign again in order to receive the shares. Nevertheless, he did not ask why, nor did he care to look at these two pieces of paper more carefully to see what was going on.  He said that he was content to accept whatever Miss Pong had told him.

32.His letter of resignation from his directorship, Exhibit D3 [Box E/41 and Box E/42] is another document which he agreed that he signed but did not read.

33.I must have regard to all of the evidence and come to a conclusion as to whether what Mr Lo has said is the truth.  This I will leave over until I have considered all of the evidence including a series of other documents signed by him in August 2000 to which I must now turn.

34.The background to this is that after the Trust had been executed, Mr Lo was continuing to see Yeung Hung.  Miss Pong was having them followed.  She went to a coffee shop close to the office where they both were and had a confrontation with Miss Yeung.  She also had another, more unpleasant, confrontation in a nearby multi-storey car park when Yeung Hung and two of her friends were abusive towards Miss Pong.  Mr Lo was then back living at the Royal Garden Hotel, but subsequently moved to a flat at Laguna Verde.  In about July 2000, the two of them had a very serious discussion about the future.  He told her that he had no intention of changing his ways.  She was concerned that all they had worked for would go on women.  She was anxious that the family business that they had built up should be preserved for their son.  According to her evidence, he then said that if that was her concern, he was willing to transfer his shares to her and to the son so that they would then be beyond the reach of anyone else, provided what he owed the companies on his director’s account which was about $9 million would be waived.  He had accumulated most of this on his extravagant social life. This proposal met her concerns and as a result, she approached a secretarial company, Sun & Co. to prepare the necessary documents.  These are D4 [Box E/42 and 43], P30 [Box E/45], P31 [Box E/44], P13 [Box E/53], P14 [Box E/51], P17 [Box E/50], P18 [Box E/52], P32 [Box E/54-55], P34 [Box E/48], P35 [Box E/49], [Box E/47] and [Box E/56].  All of these documents had the effect of transferring his shares to her and effecting his resignation of his directorship of the companies.  Her evidence is that she took all of these documents to him in his office and put them on his desk for him to read and then sign.  She left them there and she was not present when he signed them.

35.All of these crucial documents were put to him by Miss Lau in cross-examination.  It is helpful to briefly record what he had to say about each.  As to P30 [E/45], he says that he did not see the words in bold type “SOLD NOTE” and had he done so, he would not have signed.  Neither did he see the figure $1,040,000.00 immediately above his signature.  Nor did he see the printed word “Transferor” under the line where he had to and did sign.  This despite the fact that his signature was written over part of this word.  He says that he would not have signed had he seen that word.

36.It is fair to say that this is the general line taken by him in respect of these documents.  She had either taken him out of meetings and when distracted by other things, she asked him to hurriedly sign documents which he could not read or she lent over him at his desk with papers masked by other papers on top and asked him to sign.  He did not know what it was that he was signing.  He trusted her when she told him that these were just routine papers, when in fact she was tricking him into signing away his life’s work.

37.Exhibit D4 [E/42], he says he signed not knowing that it was his letter of resignation from D4 although he signed this document twice.  As to the Notification of Resignation as a Director [E/43], he signed but did not see the form properly and could not tell what he signed.  As to Exhibit P33 [Box E/46] being the minutes of his resignation as a director of D4, he accepts having signed these which also record his transfer of his 1 million shares to Miss Pong.  He has told me that he did not know the contents of the document when he signed notwithstanding that his name Lo Tin Wai was typed immediately above his signature when he signed.  He has also denied noticing the words “Transferor”, Mr Lo Kai Bun, “Transferee”, Madam Pong Man Yi and the reference to 1 million shares.

38.In relation to D5, he signed a number of crucial documents being the Instrument of Transfer, Exhibit P17 [Box E/50] and the “Bought and Sold Note”, Exhibit P17 [Box E/51] for the transfer of his 4,000 shares to Miss Pong.  His evidence is that on P17, he did not see the printed word “Transferor” under his signature despite the fact that his signature was in part written over that word.  As to P14, he over-wrote over the sum of $250,000.00 when he signed this document, but says that he did not see the $250,000.00.

39.Then comes Exhibit P18 [Box E/52] and Exhibit P13 [Box E/53] being the Instrument of Transfer and Bought and Sold Note respectively which transferred 1,000 of his shares to his son.  As to P13, he signed over part of “$62,000.00”, but did not see this figure.  As to P18, he signed over the word “Transferor” but did not see the word.

40.I can take Exhibits P34. 35, 33 and a Notification of Resignation of Director [Box E/46-49 inclusive] compendiously.  He signed twice on two of these documents and in respect of all of them, he claims not knowing what they were, these being letters of resignation as secretary and director, the notification of his resignation and the Board Minutes recording his resignations and his share transfers.

41.Lastly, there is another form referring to “Change of Partners” for Gaylite Enterprises Company which he signed.  His signature is in the “Outgoing Partner” box but, notwithstanding the fact that he wrote over those printed words, they escaped his attention.

42.In respect of his signature of these many and highly significant documents of which he says he was unaware of what he was signing, Miss Lau submits that such evidence simply defies belief.  One needs only to examine, as I have, each of these documents individually to see that it is inherently unlikely that he, of all people, would have allowed such a thing to happen.

43.A further dimension to the evidence which Miss Lau draws attention to is the background to the state of their relationship at the time and to which I have already referred.  She has also drawn attention to the fact that he was in the habit of making risky investments in shares and foreign exchange and would use a margin account to do so.  The companies would then cover any margin calls, as they would pay for his credit card bills much of which related to social spending.  He has also accepted that Miss Pong had control of the accounts and that she would authorise and make these payments.  Under the alleged transfer arrangements, whereby it is said that he agreed to transfer his interests to Miss Pong, the reality of life would not really change.  He would draw a salary and the company would cover his spending.  This, submits Miss Lau, makes it likely that he would have been quite prepared to fall in with her suggestion, and so give himself a quiet life, with her not troubling him over his life style, and he would be able to continue as he had done over the previous years.  And so, the impact of these changes, which were of course fundamentally important in terms of the legal relationship and control of the companies, would hardly be noticed on a day to day basis because there would be no change on a practical footing.

44.Mr Lo of course says that, on the contrary, he would never have contemplated ceding control of his “empire”, as he described it in his final submission.

45.This concludes the first part of the relevant evidence and it is where the evidence would have stopped, but for my having given leave to the Defendants to call the additional evidence and documents concerning Mr Lo’s alleged new business enterprise doing the work that he had done before he is said to have signed over control of the companies to the trust and to Miss Pong.

The alleged new business venture by Mr Lo

46.The matter comes about in this way.  It is important to understand why I have allowed this body of evidence in.  Mr Lo has said that it was not until after his then solicitors T.S. Tong had sent him a letter dated 28 January 2002 [Bundle C/172-174] that he discovered for the first time that he was no longer a partner of Gaylite nor a shareholder of D3, 4 or 5.

47.The contrary case is that since late 2001, Mr Lo had decided that the time had come for him to set up his own business, basically in competition with what had been the family companies.  The way the matter is argued by Miss Lau is to say that if Mr Lo was really unaware of the fact that he no longer was in control of the family companies, there would have been no reason for him to start planning to set up his own new and separate business.  The fact is that he, of course, knew the position as he had agreed to it from the start and what really motivated the new enterprise was that by late 2001, he realised that Miss Pong was serious in her intention to finally leave him, which she formally put into train in April 2002 when she issued her divorce petition.  Previously, although having rows with him over his womanising, she had been prepared to take him back and, as late as early 2001 or late 2000 she had him back at the home in Repulse Bay Road and nursed him following his ill health due to Bell’s palsy which partly paralysed his face.

48.In support of the case that Mr Lo knew precisely what he had done in handing over the business to Miss Pong, and that there is no truth in the assertion that he first learnt these things following the letter of the 28 January 2002 and more particularly, that he was planning a new business venture before that date in January 2002, Miss Lau has pointed to the following features of the evidence.  I am content to adopt her summary of this evidence from the note to her final submission which identifies the evidence relied on and the references to where that evidence comes from.

“(1) In October 2001, Lo made a drawdown of HK$145,000 on a revolving credit made available by the bank to him and Pong under their account with the bank [Pong in chief on 15.11.05 shortly before 12 noon; C/152-157]

(2) In November 2001, Lo used his Citibank Visa credit card to obtain cash advances of $3,000, $10,000 and $180,000 [C/158]

(3) In late 2001, one of the then staff of the defendant companies, Raymond Wong Ming Kin, told Pong that since about November 2001, Lo had asked the staff to give him the Order Confirmation file of the companies and had himself started copying the documents in the file

(4) In late 2001, another staff of the companies, Maria Leung told Pong that Lo has asked the staff to write down their addresses and contact numbers for him so that when he set up his own business he could contact them and get them to move to work for him.”

Pausing here, although these pieces of hearsay evidence are admissible, I am not prepared to attach any weight to them because in such a sharply contested dispute, the risk of concoction by Miss Pong is obvious.  It would have been open to her to call either Maria Leung and/or Raymond Wong to give a first hand account had she wished to.  As to what follows, I am prepared to and will attach weight to this evidence and draw such inferences as appear to be proper in the circumstances.

“(5) In about mid-January 2002, Lo had asked Jenny Lo for the cheque books and company chops [para 7 of WS of Jenny Lo at A/109; Pong’s chief on 15.11.04 shortly before 12 noon].  Subsequently on 15 and 18 February 2002, making use of new company chops he had himself caused to be made and using counter cheques at the bank, Lo had withdrawn an aggregate sum of HK$2.4 million from Topsca Lighting and Gaylite

Following on the heels of the plans hatched in late 2001, there is also overwhelming evidence that Lo had in fact since early 2002 started his own business in competition with the defendant companies.  Such evidence includes,

(1) Sometime in late February 2002, after the 20^th, Raymond Wong Ming Kin and Yan Lai Hing left the employment of the defendant companies.  Before they left, they had gone to Pong and told her that Lo had asked them to work for him.  Pong had asked them not to leave, but they asked Pong what employment terms she could counter offer.  Even on Lo’s admission, both Wong and Yan have subsequently gone to work for Bestar Manufacturing Limited [Lo in XXN on 10.11.05 after lunch].  It is not known if either or both had worked for BIIL.

(2) On 26 February 2002, a company called Bestar International Industries Ltd (BIIL) was acquired in the name of Lo’s brother (Lo Kai Yin) and sister (Lo Mei Yee).  Neither have any experience in the lighting business.  Before 2002 and in 2002, Lo Kai Yin was working as an independent qualified accountant.  Before 2002 and until about 2003, Lo Mei Yee was working as an assistant manager in a computer company.  Moreoever, Pong has found and produce a name card which shows Lo to be a consultant of BIIL [C/219, original is Exh D6].

(3) Since March/April 2002, Value Pool/Pollywin had stopped supplying products made from the moulds of Feeble Factory to the Defendants’ group [Pong in chief on 15.11.05 shortly before lunch].

(4) On 10 September 2003, Bestar Manufacturing Ltd was incorporated with 2 shareholders who were Lo’s brother-in-law, Mak Ka Nun (MKN), and MKN’s sister, Mak Wai Fun (MWF).  Whereasw Mak Ka Nun was and is still still an electrical engineer working for a large Electricla Engineering company called Meco Engineering, MWF was in 2003 a primary school principal, and she has now retired [Lo in XXN on 10.11.05 after morning break].  Against Pong has found and produced a name card which shows Lo to be a representative of BML and also shows that BML shares the same business address, phone and fax numbers as BIIL [C/218, original is Exh D6].  Again, Lo claims he has nothing to do with BML.  He admits, however, that he knows BML is involved in sourcing for and supplying emergency lights including battery rechargeable flashlights, that RWMK and YLH is assisting MKN in running BML [Lo in XXN on 10.11.05 after lunch], and that BML sources from a PRC factory called Jing Zhong Tian (JZT) which is in name owned by one Wong Chi Kin (WCK), who was the foreman of the Feeble factory before that shut down.

(5) Former major customers of the Defendant Group prior to the Plaintiff’s departure from the Defendant Group appear to be the major customers of the Plaintiff’s Group including in particular the following:

(i) OHM Electric Inc. (“OHM”)

(ii) Pavexim

(iii) Tecnid S.P.A (“Tecnid”)

(iv) Gillette Group (“Eveready”)

(v) Varta Batterie AG (“Varta”)

(6) Copies of the Complete Inventory List and Complete Order Lists of Jin Zhong Tian spanning the period from 2003 to 2005 show that many of the models of goods made by this factory uses the model numbers that the defendant companies had used and also supply those very model numbers to the same customers that the defendant companies use to supply [C/220-237].  For example the model no. 3810 is shown on C/231 to be made by JZT for the customers, Pavexim, Tecnid and Emos.  These used to be customers for the defendants’ company and 3810 was one of the models that the defendants’ company used to supply to these very same customers.

(7) Since the Plaintiff left the Defendant Group in 2002, the defendants companies had lost the custom altogether of OHM, Pavexim, Technid and Eveready.  The volume of orders it has been receiving from Varta has been substantially reduced.  Copies of the tables prepared by Jenny Lo are at Box 11/60-63.

(8) Documents of JZT obtained by Pong from an employee there called Ms. Yeung Chun Ling show instructions given by someone going by the name of Mr. Chan in charge to the staff regarding how to handle or carry out the business operations of the factory.  Pong has identified the writing of this Mr. Chan as that of Lo.  Lo has denied it. Pong has also found and produced a JZT name card of Mr. Chan [C/260-(a)] which she says she found in the corridor at home outside the bedrooms.  She found this card at the same time she found the 2 name cards of Lo respectively for BIIL and BML.

(9) Lo has taken a trip with Raymond Wong Ming Kin to Europe (HK-Frankfurt-London-Paris-Milan-Frankfurt-HK) from 22^nd to 29^th January 2004.  Pong has found and produced the itineraries from this trip [C/275/6].  The itinerary is suggestive of a very fully packed hectic business trip with meetings lined up with customers in Frankfurt, Paris and Milan.  There were 2 meetings in Milan with Tecnid.  Lo accepts that Raymond Wong went for a business trip.  But he says, he only tagged along without participating in any of the business meetings, and went around sight seeing whilst Wong had the meetings.

(10)   Mobile phone bills of the Plaintiff showing that he has been making calls to JZT, Raymond Wong, Mr. Pattarini of Technid, and the offices of Bestar International Industries Ltd and Bestar Manufacturing Ltd.  Copies of two mobile phone bills, one for November-December 2003 and the other for February-April 2004, for mobile phone no. 90355268, which is the Plaintiff’s mobile number, have been found and produced by Pong.  They show a good number of calls to:-

(a) 86-755-81616361 which is the phone number of Raymond Wong

(b) 86-755-28648933 which is the phone number of JZT

(c) 39-348-3104836 which is the mobile number of Mr. Pattarini of Technid

(d) 852-277226001 which is the phone number of Bestar International Industries Ltd and of Bestar Manufacturing Ltd.

(11)   In mid-2002, the Plaintiff had the use of a Mercedes Benz with registration no. KP7839 of which the registered owner was Bestar International Industries Ltd.  Later, he swapped the use of the said car for another a Mercedes Benz with registration no. HN5222 of which Mr. Mak Ka Nun, a shareholder of Bestar Manufacturing Ltd and former shareholder of BSI International Ltd, is the registered owner [C/261/262].  Lo says he has been renting the cars from Mak at $3,000 per month.

(12)   Lo’s travel records show that since after he left the defendants companies, he has been travelling to the PRC with the same frequency if not more frequently than he had before when he was still working at the defendants companies.  Lo says he has been unemployed since leaving the defendants’ companies and had since been travelling to the PRC merely for pleasure.”

49.For his part, Mr Lo has strongly refuted all the suggestions put to him by Miss Lau in her cross-examination on the documents that go to support this case, and I must therefore decide whether the evidence that Miss Lau has assembled on this aspect of the case is sufficiently cogent to carry her over the evidential threshold, beyond conjecture and coincidence, to proof on a preponderance of probability.

The burden that Mr Lo  carries

50.These remarks relate to the first part of the case only, concerning the documents that he has undoubtedly signed.  This being the case, he is required to demonstrate, on the civil standard, that he did not know what he was signing for the reasons that he has given and which I have already elaborated on.

51.In deciding whether he knew what he was signing and indeed that he was a party to two agreements between himself and Miss Pong that firstly, the terms of the Deed of Settlement should be carried into effect and secondly, the July/August 2000 arrangements whereunder he transferred control of the business to her, it is pertinent to also have regard to the further documentation and evidence that I have allowed to be called because, if I accept Miss Pong’s case on this, it would demonstrate that he was aware of these arrangements before the 28 January 2002 letter which in turn would tend to show that he was well aware of the arrangements that he had entered into with Miss Pong and that he had agreed to sign the many documents that carried these arrangements into effect.

Conclusion on the facts

52.I have listened with care to all of the witnesses, in particular, of course, the couple themselves.  I am left in no doubt whatsoever that Miss Pong has been completely truthful and that Mr Lo has not.  Whereas she has come over as completely straightforward and honest, he has simply failed to face up to obvious truths. As a result, he was forced, at times, to adopt absurd positions in trying to refute suggestions put to him in cross-examination which were plainly correct.  It is simply inconceivable that this lady could, in the circumstances, have tricked him into signing all of these documents without realising what he was doing.  I have already drawn attention to these documents individually and it is perfectly plain that at each instance he knew what he was signing and why he was signing the particular documents.  To suggest otherwise, as he does, is frankly, offensive to his oath to tell the truth.  I reject his evidence and in doing so, I am perfectly satisfied that he had entered into the agreements that Miss Pong has told me of in the course of her evidence.  I accept everything that she has told me.

53.This would be sufficient to dispose of the Plaintiff’s case but, in the interests of dealing with this matter comprehensively, I am also left in absolutely no doubt that by the end of 2001, Mr Lo had decided to start up another business in precisely the way that Miss Lau has sought to demonstrate through the later round of discovery which I allowed.  All of this evidence holds together with a most compelling logic in the way that Miss Lau has put forward in that part of her skeleton submission, which I have reproduced at paragraph 48.  Apart from establishing the fact that he is now operating a rival business, this evidence also shows that he was fully aware of everything that he had done at the time that he had done it and signed the many documents that put these agreements into effect.  It is perfectly clear that he realised it was time to move on and start afresh both in terms of his personal life as well as his commercial interests.

54.These being my conclusions, the action must stand dismissed.  There must be judgment to the Defendants with costs. I will leave it to the Defendants to decide whether they would wish to apply for a more generous basis of taxation of these costs where I have found the Plaintiff to have been a wholly untruthful witness on all the material aspects of the evidence.  The present order for costs, with a party and party taxation, will be an order nisi in the usual way.

Mr. Chan Chi-hung, instructed by Messrs Ho, Lo & Yeung, for the Plaintiff on 22 to 25 November 2004

Mr. Simon Yip, instructed by Messrs Ho, Lo & Yeung, for the Plaintiff on 4 to 7 July 2005

The Plaintiff in person from 9 to 21 November 2005

Ms. Selina Lau, instructed by Katherine Or & Company, for the Defendants