Fong Chung Mau v. Wong Chung Tak Richard and Another

HCA 1096/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1096 OF 2005

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JUDGMENT

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1.This is the trial of the Plaintiff’s claim against the Defendants for the return of the sum of HK$4,400,000.

Procedural History

2.Until the trial commenced, the Plaintiff had been relying on three causes of action, namely, fraudulent misrepresentation, payment under mistake of fact and money had and received. When the trial started, the Plaintiff indicated that he would only rely on the cause of action of money had and received but not the other two causes of action. After the Plaintiff closed his case, the 1^st Defendant made a submission of no case to answer on the basis that the cause of action of money had and received was only pleaded against the 2^nd Defendant. This led to an application by the Plaintiff to re-amend his claim.

3.By the Decision handed down on 26 April 2007, leave was granted to the Plaintiff to re-amend his Amended Statement of Claim. Save that costs were awarded to the 1^st Defendant, no order was made in respect of his submission of no case to answer since it had been overtaken by this Court’s decision to allow the Plaintiff to re-amend his claim. On 30 April 2007, the Plaintiff filed his Re-Amended Statement of Claim. Thus, when this trial resumed in May 2007, the only cause of action relied on by the Plaintiff is money had and received, which is based on the total failure of consideration arising from the 1^st Defendant’s failure to perform an oral agreement allegedly made between the Plaintiff and the 1^st Defendant. Although the 1^st Defendant had made a submission of no case to answer, that submission was made in respect of the Amended Statement of Claim where no oral agreement was pleaded. Since the Plaintiff was allowed to re-amend his claim, the 1^st Defendant did proceed to call evidence and the Plaintiff made no objection in this regard.

The Parties

4.The Plaintiff is a native of Luk Fung (陸豐). He came to Hong Kong at the age of around 13. At the material time, viz., 2002, he was engaged in trading business involving excavators. In addition, the Plaintiff and Mr. Fang Pei Jiao (方培教) (“Mr. PJ Fang”) also set up a company known as Century Electronic Technology Company Limited (世紀電子科技有限公司) (“Century Electronic”), although its operation did not last long. The Plaintiff and Mr. PJ Fang respectively held 5% and 95% of the shares in Century Electronic. Both of them were also directors of Century Electronic. During the trial, the parties dealt with their dealings in respect of Century Electronic, especially the working capital injected by these two shareholders into the company. As will be apparent in the discussion below, it is not necessary to go into the background of Century Electronic in any detail.

5.The Plaintiff also knows Mr. PJ Fang’s younger brother, Mr. Fang Pei Xi (方培喜) (“Mr. PX Fang”), who was at the material time a stock broker in the Mainland working for a company known as 國泰君安証券. The Plaintiff was a friend and also a customer of Mr. PX Fang, as Mr. PX Fang was responsible for handling the sale and purchase of shares listed in the Shenzhen Stock Exchange for the Plaintiff. Besides, both PJ Fang and PX Fang are clansmen of the Plaintiff. As admitted by Mr. PJ Fang during cross-examination, the three of them, together with the Plaintiff’s father, were quite close to each other.

6.The 1^st Defendant was the managing director of Thing On Holdings Limited (“Thing On Holdings”). He was a shareholder but not a director of Thing On Securities Limited (“Thing On Securities”), which was a company carrying on the business of securities trading in Hong Kong. Since around 1997 or 1998, the 1^st Defendant has been licensed as a dealer representative by the Securities and Futures Commission of Hong Kong (“SFC”).

7.The 2^nd Defendant is a company incorporated in Hong Kong. Until around 2004, the 1^st Defendant was a shareholder and director of the 2^nd Defendant. According to the 1^st Defendant, the 2^nd Defendant was at the material time engaged in trading business in that it bought and sold a variety of goods such as electrical products and shipped them to its customers in the Philippines.

8.In addition to these protagonists, persons who are to a certain extent involved in this dispute include Mr. Fong For (方科) (“Mr. Fong For”), Mr. Larn Lap Cheung (冷立昌) (“Mr. Larn”), Mr. Li Jun (李軍) (“Mr. Li”), Mr. Ying Hiu Wah (also translated as Ying Hue Wah) (邢曉華) (“Mr. Ying”), Madam Zhu Xin Ai (also translated as Chu Sun Oi) (朱新愛) (“Madam Zhu”) and Mr. Suen Chung Sing (孫俊城) (“Mr. Suen”).Their involvement, insofar as material to the resolution of this dispute, will be dealt with below. Suffice it to point out that of all these other persons involved, only Mr. Larn testified at the trial.

The Plaintiff’s Case

9.As stated above, the Plaintiff claims against the Defendants for the return of HK$4,400,000. His case can be summarized as follows.

10.In 2002, the Plaintiff conducted trading in securities in both Shenzhen and Hong Kong. As stated above, the Plaintiff’s trading of securities in Shenzhen was handled by Mr. PX Fang. On the other hand, the Plaintiff traded in securities in Hong Kong through his securities account maintained with the Bank of China (Hong Kong) Limited (“BOC”). According to the Plaintiff, he mainly, if not exclusively, traded in the shares in First Dragoncom (stock code #875) (“#875 Shares”) and the shares in RNA Holdings Limited (慶豐金集團有限公司) (stock code 501) (“#501 Shares”), on the advice of Mr. PX Fang.

11.After PX Fang came to know the 1^st Defendant in around June 2002, he recommended the Plaintiff to open an account with the 1^st Defendant’s company, Thing On Securities. As a result, in July 2002, the Plaintiff attended the office of Thing On Securities at Room 1503-5, Worldwide House, 19 Des Voeux Road Central, Hong Kong (“15/F Address”) and met the 1^st Defendant. At this meeting with the 1^st Defendant in July 2002 (“July Meeting”), the 1^st Defendant invited the Plaintiff to open an account with Thing On Securities and gave him a set of account opening documents (“A/C Opening Documents”). The Plaintiff did not sign the A/C Opening Documents as he did not understand their implications. Nor did he complete the account opening procedure. Instead, he took the A/C Opening Documents away.

12.Although no securities trading account was opened during the July Meeting, the 1^st Defendant suggested the Plaintiff to deposit money into a bank account bearing the account number of 064-784-0-089983-6 maintained with BOC (“D2’s Account”). According to the Plaintiff, the 1^st Defendant suggested him to first deposit money into D2’s Account so as to avoid missing opportunities of profitable investment. On this basis, it is the Plaintiff’s case that there was an oral agreement between the Plaintiff and the 1^st Defendant made at the July Meeting whereby the 1^st Defendant “agreed or undertook to open or caused an account to be opened with Thing On Securities for the Plaintiff to invest in shares with money to be deposited by the Plaintiff” into D2’s Account (“Oral Agreement”).

13.In addition, it is the Plaintiff’s case that the 1^st Defendant made the following representation to the Plaintiff during this meeting:

14.Pursuant to the Oral Agreement, the Plaintiff transferred to D2’s Account the two sums of HK$3,700,000 and HK$700,000 respectively on 8 and 13 August 2002. This total sum of HK$4,400,000 forms the subject-matter of the Plaintiff’s claim in this action.

15.According to the Plaintiff, the 1^st Defendant acted in breach of the Oral Agreement in that the 1^st Defendant failed or refused to open, or to cause an account to be opened, with Thing On Securities for the Plaintiff. Further, despite repeated demands and notwithstanding that complaints were made to the SFC and the police, the 1^st Defendant refused to repay the total sum of HK$4,400,000. On this basis, the Plaintiff contends that there is a total failure of consideration and demands repayment of HK$4,400,000.

The Defendants’ Case

16.The Defendants do not dispute that the two sums of HK$3,700,000 and HK$700,000 were transferred into D2’s Account. However, they put forward a totally different explanation as to why the funds were paid into D2’s Account. Put shortly, the Defendants’ case is as follows.

17.According to the 1^st Defendant, Mr. Fong For was introduced to him by one of his friends, a Mr. Raymond Chan, in around 2001 as an experienced Mainland securities investor. In around April 2002, Mr. Fong For represented to the 1^st Defendant that investment in Mainland securities would be profitable and that he could looked after the investment for the 1^st Defendant. As a result, the 1^st Defendant procured the transfer of a sum equivalent to HK$7,400,000 (“Investment Fund”) to Mr. Fong For in around May 2002 so as to enable Mr. Fong For to conduct securities trading in the Mainland on his behalf.

18.Contrary to Mr. Fong For’s representation, it turned out that the investment return was not satisfactory. At a meeting in Shenzhen in around June or July 2002, the 1^st Defendant notified Mr. Fong For that he no longer wanted to continue the trading of Shenzhen securities and Mr. Fong For agreed to return the Investment Fund to the 1^st Defendant. Shortly thereafter, the 1^st Defendant demanded the return of his Investment Fund and another meeting was arranged. This further meeting was attended by the 1^st Defendant, Mr. Fong For and Mr. PJ Fang. According to the 1^st Defendant, Mr. PJ Fang was introduced to him by Mr. Fong For in early 2002 and he was given to understand that Mr. PJ Fang worked closely with Mr. Fong For in dealing with the Investment Fund. At this further meeting, it was agreed amongst the three of them that Mr. PJ Fang would, on behalf of Mr. Fong For, repay the Investment Fund to the 1^st Defendant and that, upon actual repayment of the Investment Fund, Mr. Fong For would be released from his obligation to repay the 1^st Defendant.

19.As a consequence of this arrangement and at the 1^st Defendant’s direction, Mr. PJ Fang procured the following sums (which amounted to a total of HK$7,400,000) to be transferred to D2’s Account:

Amount	Date of Transfer
HK$1,600,000	7 August 2002
HK$1,400,000	7 August 2002
HK$3,700,000	8 August 2002
HK$700,000	13 August 2002

According to the 1^st Defendant, he did not know that the last two transfers were made by the Plaintiff until some time in March 2003 when he first met the Plaintiff at Thing On Securities’ office.

20.At around the end of August 2002 or early September 2002, both Mr. Fong For and Mr. PJ Fang called up the 1^st Defendant. Each of them told the 1^st Defendant that the two of them (i.e. Mr. Fong For and Mr. PJ Fang) had some financial disputes. During one of these telephone conversations, Mr. Fong For requested the 1^st Defendant to lend him a sum of HK$3,000,000 (“Loan”) so that he could settle the financial disputes he had with Mr. PJ Fang. Mr. Fong For also suggested that the Loan could be paid out from the Investment Fund. The 1^st Defendant acceded to Mr. Fong For’s request. Pursuant to this arrangement and at the direction of Mr. PJ Fang, the 1^st Defendant transferred HK$3,000,000 into the account of Mr. Li on 4 September 2002.

21.On the basis of the above account, the Defendants deny the July Meeting and the Oral Agreement. According to the 1^st Defendant, he met the Plaintiff for the very first time in March 2003 when the Plaintiff attended the 1^st Defendant’s office with three unknown males and demanded the return of HK$4,400,000. As the Plaintiff and the other unknown males made a scene at his office despite the 1^st Defendant explained to them that the sum of HK$4,400,000 was part of his Investment Fund, the 1^st Defendant called the police.

22.Further, by way of alternative contentions, the Defendants contend that even if the Oral Agreement did exist (which the Defendants deny):

23.The Plaintiff disputes the Defendants’ case. Mr. PJ Fang denies the existence of the Repayment Agreement and any involvement with the Investment Fund. He also denies that he signed three of the key documents relied on by the Defendants (i.e. exhibits D1, D2 and D3, which will be dealt with in further detail below).

The Issues and Approach

24.The single most important question this Court has to decide is this: why was the total sum of HK$4,400,000 paid by the Plaintiff into D2’s Account? Was the total sum of HK$4,400,000 paid pursuant to the Oral Agreement as the Plaintiff alleges, or was it paid as part of the repayment of the Investment Fund as the Defendants contend? Needless to say, the Plaintiff has the burden of proving his claim on the balance of probabilities.

25.In deciding factual disputes such as the ones between the parties here, the crucial considerations include: (1) whether the parties’ respective assertions are consistent with the contemporaneous documents; (2) the inherent probability of the parties’ assertions; and (3) the credibility and demeanour of witnesses. How these considerations work in resolving factual disputes have been discussed in numerous cases. See, for instance, Non-No Fashion Wholesale Ltd. v Chung Kam Wing & Anr., CACV No. 168 of 2001 (8 August 2001), at para. 38; Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336, at para. 36 & 37; and Esquire (Electronics) Ltd. v The Hongkong & Shanghai Banking Corporation Ltd., CACV No. 312 of 2005 (12 October 2006), at para. 135. 

26.In a case of this nature, there are bound to be evidence and indicia pointing in different directions. Some may support the Plaintiff’s case; some may point to the other direction; while others may be neutral. When considering the parties’ assertions, I have taken into account all the evidence adduced at the trial and all the submissions made by the parties. Insofar as the discussion below does not address any specific point or any particular piece of evidence relied on by the parties, that does not mean I have omitted them from my assessment. Instead, I take the view that the discussion below is sufficient to dispose of the parties’ disputes and to illustrate my findings.

Documents Relied on by the Plaintiff

27.The only contemporaneous documents relied on by the Plaintiff in support of his case are the two pay-in slips and the A/C Opening Documents.

28.The two pay-in slips issued by the BOC only prove the transfer of the two sums of HK$3,700,000 and HK$700,000 on 8 and 13 August 2002 to D2’s Account. As stated above, the fact that these two transfers were made to D2’s Account is not in dispute. What matters is the reason for the transfers. The pay-in slips do not throw any light on the reason for the transfers, still less support the existence of the Oral Agreement.

29.The A/C Opening Documents stand on a slightly different footing. They show the 15/F Address. This is the address shown on the 1^st Defendant’s business card, which was said to have been given to the Plaintiff by the 1^st Defendant at the July Meeting. On the other hand, the documentary evidence shows that Thing On Securities had moved office to Unit 1, 24^th Floor, World-Wide House, 19 Des Voeux Road, Central, Hong Kong (“24/F Address”) at some point of time shortly before or around September 2002. For instance, the documents signed by Mr. Fong For when he opened a securities account with Thing On Securities on around 19 September 2002 show the 24/F Address.

30.On the basis that the A/C Opening Documents produced by the Plaintiff show the 15/F Address instead of the 24/F Address, it was contended that the A/C Opening Documents corroborated the Plaintiff’s case that he met the 1^st Defendant in July 2002. Whilst there is some force in this argument, the assistance the Plaintiff can derive from the A/C Opening Documents is limited. They are only standard form documents pre-printed by Thing On Securities. They do not contain any confidential information and there were no reasons for Thing On Securities or its employees to cautiously guard such account opening documents. Even if there was no July Meeting, it would not be impossible for the Plaintiff to obtain the A/C Opening Documents through other means.

31.In light of the overall picture emerged from the analysis set out below, I do not think it is necessary to make any specific findings as to how the Plaintiff obtained the A/C Opening Documents. Suffice it to say that the Plaintiff’s possession of the A/C Opening Documents, though relevant, is not sufficient in establishing either the July Meeting or the Oral Agreement.

Documents Relied on by the Defendants

32.The Defendants’ case, on the other hand, is much more well supported by contemporaneous documents. The relevant documents that support the Defendants’ case can be divided into the following categories.

(i) Receipts of HK$4,400,000

33.At the trial, the Defendants produced the 2^nd Defendant’s Account Ledger List for the month of August 2002 (exhibit D7). Three entries in the Account Ledger List are most relevant. The first one is the entry dated 7 August 2002. It shows a deposit of HK$3,000,000. The description is “代王聰德收方科還款” (receipt of repayment by Mr. Fong For on behalf of the 1^st Defendant). This first entry refers to the voucher no. BCR 84, which was produced as part of exhibit D4 and which shows that the sum of HK$3,000,000 comprised the sums of HK$1,600,000 and HK$1,400,000. The second relevant entry in the Account Ledger List is the one dated 8 August 2002, which shows a deposit of HK$3,700,000. The third relevant entry is the one dated 13 August 2002, which shows a deposit of HK$700,000. These two further entries respectively refer to vouchers nos. BCR 85 and BCR 90 (which were also produced as part of exhibit D4). These second and third entries in the Account Ledger List and the vouchers referred to in these entries similarly state that the sums were receipts of repayment by Mr. Fong For on behalf of the 1^st Defendant.

34.These entries in the Account Ledger List and the vouchers highlighted above clearly support the Defendants’ case on the repayment of the Investment Fund. They clearly show that the various sums in question were repayments by Mr. Fong For and were received by the 2^nd Defendant on behalf of the 1^st Defendant.

35.The authenticity of the Account Ledger List and the various vouchers are not challenged by the Plaintiff. There is neither suggestion nor evidence that these documents were created after the event to fortify the Defendants’ case. On the contrary, the 1^st Defendant testified during cross-examination that the entries on the vouchers were made by the accounting staff either on the same date of the receipt or the following day.

36.During cross-examination, the 1^st Defendant admitted that he was the one who gave instructions to the accounting staff who prepared the vouchers. However, I do not think this admission can be used by the Plaintiff to diminish the veracity or reliability of the Account Ledger List or the vouchers. On the evidence available, it cannot be suggested that the 1^st Defendant gave false instructions to the 2^nd Defendant’s accounting staff so as to defraud the Plaintiff or to create favourable evidence in anticipation of this litigation. On the contrary, the fact that the 1^st Defendant gave instructions to the 2^nd Defendant’s accounting staff to prepare the vouchers in such a way demonstrates the 1^st Defendant’s contemporaneous understanding of the nature of the various sums (including the sum of HK$4,400,000 claimed by the Plaintiff) transferred to D2’s Account.

(ii)    Documents signed by Mr. PJ Fang

37.The second category of contemporaneous documents that support the Defendants’ case is concerned with the Repayment Agreement. They are the documents exhibited as D1, D2 and D3 and were all dated 4 September 2002. The circumstances leading to the creation of these three documents are as follows.

38.On the morning of 4 September 2002, the 1^st Defendant had a telephone conversation with Mr. PJ Fang regarding the payment of the sum of HK$3,000,000 to him. As stated above, the 1^st Defendant agreed to advance this sum to Mr. Fong For by way of a loan for the purpose of assisting Mr. Fong For to settle his financial disputes with Mr. PJ Fang. In this conversation, Mr. PJ Fang instructed the 1^st Defendant to transfer the sum of HK$3,000,000 to Mr. Li’s bank account. The 1^st Defendant demanded Mr. PJ Fang to reduce into writing the matters relating to the repayment of the Investment Fund and the instructions for the payment of the sum of HK$3,000,000 to Mr. Li.

39.At around 11:00 am. on 4 September 2002, the 1^st Defendant received a fax document from Mr. PJ Fang entitled “Letter of Notification” (通知書) (“1^st Letter of Notification”) (exhibit D2). This 1^st Letter of Notification was signed by Mr. PJ Fang and contained some particulars in manuscript. Following discussion between the 1^st Defendant and Mr. PJ Fang, another version of notification was prepared. As a result, a revised version of the Letter of Notification (“2^nd Letter of Notification”) was signed by Mr. PJ Fang and faxed to the 1^st Defendant on the afternoon of 4 September 2002 (exhibit D1).

40.The 2^nd Letter of Notification refers to the various transfers to D2’s Account in August 2002 which amounted to HK$7,400,000. It then continued by stating that out of the HK$7,400,000, Mr. PJ Fang directed the 2^nd Defendant to transfer HK$3,000,000 to Mr. Li’s bank account. The balance of HK$4,400,000 would be treated as full repayment of the debt owed by Mr. PJ Fang to the 2^nd Defendant.

41.Also faxed together with the 2^nd Letter of Notification was a letter of confirmation (“Letter of Confirmation”) (確認書) (exhibit D3), which was signed by Mr. PJ Fang, Mr. Ying and Madam Chu. They confirmed that they had not deposited any #501 Shares with the 1^st Defendant or Thing On Securities.

42.The 1^st Letter of Notification was witnessed by Mr. Ying. On the other hand, both the 2^nd Letter of Notification and the Letter of Confirmation were witnessed by Mr. Larn and Mr. Suen.

43.Mr. Larn was the first witness called by the defence. He was a former customer of Thing On Securities and also a friend of the 1^st Defendant. In addition, it is not disputed that Mr. Larn also knew Mr. PJ Fang and Mr. Fong For in 2002. According to Mr. Larn, he was at the office of Mr. Fong For on 4 September 2002. After discussing certain matters with him, Mr. Fong For requested Mr. Larn to witness the signing of certain documents together with Mr. Suen (a staff of Mr. Fong For). As a result, Mr. Larn and Mr. Suen attended the office of Mr. PJ Fang in Shenzhen and witnessed the signing of the 2^nd Letter of Notification and the Letter of Confirmation. Although Mr. Suen was not called a as a defence witness, Mr. Larn confirmed that Mr. Suen was present as a witness when these two documents were signed on 4 September 2002.

44.The Plaintiff disputes the authenticity of the 1^st Letter of Notification, the 2^nd Letter of Notification and the Letter of Confirmation. In both his witness statement and oral testimony, Mr. PJ Fang denied having signed any of these three documents. As can be expected, both the 1^st Defendant and Mr. Larn were heavily cross-examined by the Counsel for the Plaintiff on these three documents.

45.Having considered the relevant evidence and submissions, I accept the evidence of Mr. Larn and the 1^st Defendant regarding these three documents. I reject the evidence of Mr. PJ Fang. As submitted by Mr. Jason Pow, S.C., Leading Counsel for the Defendants, Mr. Larn is an independent witness. Although he is a friend of the 1^st Defendant, Mr. Larn does not have any business dealings with the 1^st Defendant. There is no suggestion, let alone evidence, that the outcome of these proceedings will in any way affect Mr. Larn’s personal interests, whether financial or otherwise. There is no suggestion that Mr. Larn has any reason or motive to lie to this Court if he did not witness the signing of the 2^nd Letter of Notification and the Letter of Confirmation on 4 September 2002. Besides, having observed Mr. Larn giving evidence in Court and having considered his evidence, I find him a reliable and credible witness.

46.Although the 1^st Defendant’s evidence regarding these three documents may be subject to certain criticisms, it is supported to a considerable extent by Mr. Larn’s evidence. Once Mr. Larn’s evidence is accepted (as I do), there is no basis to suggest that the 1^st Defendant fabricated these documents for the purpose of supporting the Defendants’ case. Nor can there be any suggestion that these documents are not genuine documents signed by Mr. PJ Fang on 4 September 2002.

47.It is worth noting that the 1^st Defendant’s testimony concerning his telephone conversation with Mr. PJ Fang on 4 September 2002 is supported by the telephone bill of Thing On Securities. Amongst others, the telephone bill shows that a call was made to the number 13802589688 at around 4:34 p.m. on 4 September 2002. This telephone number is exactly the mobile phone number shown on the business card of Mr. PJ Fang. Indeed, the same telephone bill also shows that a call was made from Thing On Securities to the number of 13809861229 at around 5:03 p.m. on 4 September 2002, and that this coincides with the mobile phone number shown on the business card of Mr. Ying (i.e. the one who signed the 1^st Letter of Notification as witness and who also signed the Letter of Confirmation).

48.The 1^st Defendant has been cross-examined on the contents of these three documents. It is fair to say that the contents of the 1^st and 2^nd Letters of Notification may not be as accurate as they could be. For instance, the 2^nd Letter of Notification refers to the sum of HK$4,400,000 as repayment of the debt owed by Mr. PJ Fang to the 2^nd Defendant. Strictly speaking, it should have said that the sum was for repayment of the Investment Fund by Mr. PJ Fang on behalf of Mr. Fong For to the 1^st Defendant. However, one has to bear in mind that these documents were not drafted by lawyers. Instead, they were home-made documents prepared by laymen without legal training. Notwithstanding the minor inaccuracies or inconsistencies involved, the 2^nd Letter of Notification does provide considerable support to the Defendants’ case.

49.As regards Mr. PJ Fang, I do not think he can be regarded as an independent witness. Bearing in mind the Defendants’ case on the Repayment Agreement, Mr. PJ Fang has an interest to serve. In any event, as will be further dealt with below, I do not find Mr. PJ Fang a credible or reliable witness.

(iii)   Transfer of HK$3,00,000 to Mr. Li’s Account

50.The transfer of HK$3,000,000 from D2’s Account on 4 September 2002 to Mr. Li’s account is evidenced by the bank statement of the 2^nd Defendant (exhibit D6).

(iv)   Letter of 3 April 2003 to Mr. PJ Fang

51.As stated above, it is the Defendants’ case that the 1^st Defendant first met the Plaintiff in March 2003 (and not at the July Meeting) when the Plaintiff attended the 1^st Defendant’s office together with unknown males demanding repayment of the sum of HK$4,400,000. The Defendants’ case in this regard is evidenced by a letter dated 3 April 2003 sent in the name of the 2^nd Defendant to Mr. PJ Fang. Apart from referring to the 2^nd Letter of Notification, this letter complained about the nuisance caused by the Plaintiff. It also stated that the 2^nd Defendant had no knowledge of the Plaintiff, nor did the 2^nd Defendant had any business dealings with the Plaintiff.

52.Although it is the Plaintiff’s case that by then Mr. PJ Fang had already moved office, a letter dated 17 June 2003 from the Hong Kong Post Office, together with the supporting documents from the China Post Office, show that the letter was delivered on 10 April 2003.

53.Putting aside the question of whether the letter was received and read by Mr. PJ Fang, the fact that this letter was sent to Mr. PJ Fang and also its contents are clearly of importance. At that time, the Plaintiff had not even lodged any complaint with the SFC or the police. Nor had the Plaintiff commenced this action. Besides, even if one accepts the evidence that Mr. PJ Fang had already moved office, there is no evidence to show that the 1^st Defendant was aware of such a move. Unless the 1^st Defendant felt aggrieved with the Plaintiff’s conduct and took the view that the matter should be clarified with Mr. PJ Fang, he would not have procured this letter to be sent to Mr. PJ Fang.

Inherent Probability

54.There are problems with the inherent probability of the Plaintiff’s case on the Oral Agreement and the reasons for effecting transfers to D2’s Account.

55.In the normal course of events, one will open a securities account and thereafter deposit funds into the account so that securities trading can be conducted. Alternatively, one may also open a securities account and deposit funds into the account at the same time. It is highly unusual, as the Plaintiff did in the present case, for one to deposit funds with a company other than the securities company before opening a securities account. One naturally asks the question: why was it be necessary for the Plaintiff to transfer funds to D2’s Account before opening a securities account with Thing On Securities?

56.The Plaintiff sought to explain that he wanted to avoid missing any opportunities for profitable investment and thus deposited monies into D2’s Account as the 1^st Defendant suggested even though he had not opened a securities account with Thing On Securities. The evidence shows that this answer is improbable. First, by the time transfers were made to D2’s Account, the Plaintiff was not inexperienced in securities trading. He had conducted securities trading in Shenzhen and in Hong Kong. Hence, the Plaintiff is not a person who did not have a clue as to what to do if he wanted to conduct securities trading. Second, whilst the Plaintiff allegedly met the 1^st Defendant in July 2002, he did not effect the first transfer to D2’s Account until 8 and 13 August 2002. There was clearly time for the Plaintiff to complete the account opening procedure if he was minded to open a securities account with Thing On Securities. When cross-examined in this regard, the explanation given by the Plaintiff for not opening a securities account with Thing On Securities is less than satisfactory. Third and more importantly, the Plaintiff already had a securities account with BOC. This means the Plaintiff could have conducted securities trading through his BOC securities account if any profitable opportunity arose before he opened an account with Thing On Securities. Hence, there was no need to deposit monies with D2’s Account simply to avoid missing opportunities of profitable investment. Indeed, as can be seen from the statement of the Plaintiff’s BOC securities account (exhibit D2) and as admitted during cross-examination, the Plaintiff traded heavily in #875 Shares and #501 Shares during the period from July to October 2002.

57.Looking at the matter from a different perspective, it is also difficult to follow why the 1^st Defendant would have behaved in the way alleged by the Plaintiff if the version of events testified by the Plaintiff is true. The 1^st Defendant managed Thing On Securities. If the Plaintiff was introduced as a customer (especially by Mr. PX Fang, who was known to the 1^st Defendant) and the total sum of HK$4,400,000 was paid pursuant to the Oral Agreement as the Plaintiff alleges, it is improbable that the 1^st Defendant would have declined to take the 1^st Defendant as a customer. From the 1^st Defendant’s or Thing On Securities’ perspective and given the nature of their business, surely the more customers the better. In addition, if Mr. PJ Fang had never agreed to make repayment on behalf of Mr. Fong For, why would the 1^st Defendant choose to misappropriate the total sum of HK$4,400,000 from the Plaintiff, especially when (according to Mr. PX Fang, who testified for the Plaintiff) it was the 1^st Defendant who approached and asked Mr. PX Fang to refer customers to him?!

58.In light of the above and irrespective of whether one looks at the matter from the Plaintiff’s perspective or the Defendants’ angle, I find the Plaintiff’s case improbable.

Credibility & Reliability of Witnesses

59.Five witnesses were called at the trial, namely: the Plaintiff, Mr. PJ Fang, Mr. PX Fang, Mr. Larn and the 1^st Defendant. In assessing their credibility and reliability, I have observed their demeanour and have taken into account such factors as might have affected the way they testified in court. Having considered the matter in the round, I prefer the testimonies of the Defendants’ witnesses to those of the Plaintiff and his witnesses.

60.I have already dealt with Mr. Larn’s testimony when I considered the 2^nd Letter of Notification and the Letter of Confirmation. As stated above, I find Mr. Larn a credible and reliable witness and I accept his testimony.

61.This brings me to the testimony of Mr. PJ Fang, which I have partly dealt with above in respect of the documents signed on 4 September 2002. A natural consequence of my acceptance of Mr. Larn’s evidence is my rejection of Mr. PJ Fang’s evidence insofar as they conflict with each other. This also has an important impact on my assessment of Mr. PJ Fang’s evidence generally. In theory, a witness may be incredible on one issue but reliable on another issue. However, in the case of Mr. PJ Fang, I find him on the whole an unreliable witness. I accept the submission of Mr. Jason Pow S.C., Leading Counsel for the Defendants, that Mr. PJ Fang was evasive in various aspect when he gave his testimony. Hence, to the extent that Mr. PJ Fang’s testimony is in conflict with that of Mr. Larn and the 1^st Defendant, I prefer those of the latter and reject that of Mr. PJ Fang.

62.Mr. PX Fang is the other witness for the Plaintiff. His evidence is only peripheral. Save that he suggested the Plaintiff to open an account with Thing On Securities, Mr. PX Fang was not involved in the key events in dispute. Although Mr. PX Fang is not particularly forthcoming, there is no need to make any specific findings as to the credibility of Mr. PX Fang.

63.The last witness for the Plaintiff is the Plaintiff himself. Under the skillful cross-examination by the Defendants’ Leading Counsel, it is clear that the Plaintiff is not a reliable witness. Putting aside the analysis on the contemporaneous documents and the inherent improbability of the Plaintiff’s case, the Plaintiff’s testimony is full of inconsistencies with the statements he made to the SFC and the police.

64.Amongst others, the Plaintiff’s testimony is evasive and confusing when cross-examined on the source of the HK$4,400,000 and his dealings with Mr. PJ Fang concerning Century Electronic. It has been submitted on behalf of the Defendants that the total sum of HK$4,400,000 is likely to be the amount of the capital that the Plaintiff has to repay Mr. PJ Fang upon Century Electronic’s cessation of business. For the present purpose, I do not think it is necessary to make such a finding. Since the burden of proof rests with the Plaintiff, his claim fails once he fails to establish the total sum of HK$4,400,000 was transferred to D2’s Account pursuant to the Oral Agreement. However, the Plaintiff’s testimony on the source of fund and his dealings with Mr. PJ Fang regarding Century Electronic does throw doubt on the Plaintiff’s reliability and credibility.

65.The last witness I need to consider is the 1^st Defendant. His testimony is not free from inconsistencies. For instance, in his police statement dated 30 November 2003, he described the HK$7,400,000 as a debt arising from business dealings with Mr. Fong For, as opposed to money for the purpose of securities trading. As regards how the HK$7,400,000 was paid over to Mr. Fong For, the 1^st Defendant’s testimony is inconsistent with the particulars given in his solicitors’ letter dated 9 January 2006. Further, the account given by the 1^st Defendant as to how the sum of HK$3,000,000 agreed to be advanced by him to Mr. Fong For is also difficult to follow. However, when viewed in light of the contemporaneous documents discussed above, I find that the 1^st Defendant is on the whole a reliable witness. To the extent the 1^st Defendant’s evidence conflicts with that of the Plaintiff and Mr. PJ Fang, I accept the 1^st Defendant’s testimony.

Findings on the Plaintiff’s Case

66.During closing submissions, Counsel for the Plaintiff made the point that there “must be more than that which meets the eye”. I tend to agree to this observation. The circumstances relating to the Letter of Confirmation is perhaps just one aspect that illustrate this point. However, for the purpose of resolving this action, it is not necessary to go beyond the claim pleaded against the Defendants. For this reason, I will not deal with the evidence that goes beyond the Plaintiff’s pleaded claim, including those concerning Century Electronics and the dealings concerning #501 Shares.

67.For the present purpose and by reasons of the above analysis, I find that there was no Oral Agreement between the Plaintiff and the 1^st Defendant as alleged by the Plaintiff. I also find that the two sums of HK$3,700,000 and HK$700,000 were not transferred to D2’s Account pursuant to the Oral Agreement; instead, they were part of the Investment Fund returned to the 1^st Defendant. In the circumstances, I find that the Plaintiff does not have any valid claim against the Defendants for money had and received. I therefore dismiss the Plaintiff’s claim and I so order.

The Defendants’ Alternative Contentions

68.In light of my findings against the Plaintiff, it is strictly not necessary to deal with the Defendants’ alternative contentions. For the sake of completeness and just in case this matter goes further, my decision on the Defendants’ alternative contentions (had it been necessary to deal with them) would be as follows.

69.On the issue of consideration, I would rule in favour of the Plaintiff. Had there been the Oral Agreement, there would be consideration moving from the Plaintiff in the form of the agreement to deposit money into D2’s Account. It would be in consideration of the Plaintiff’s agreement to deposit money into D2’s Account that the 1^st Defendant agreed or undertook to open or caused an account to be opened with Thing On Securities for the Plaintiff to conduct securities trading.

70.In such a scenario and in the context of this case, an intention to create legal relationship with the Plaintiff could be readily inferred. However, the more difficult question is whether the intention was to create legal relationship between the Plaintiff and the 1^st Defendant as the Plaintiff alleges, or whether the intention was to create legal relationship between the Plaintiff and Thing On Securities.

71.In this regard, I note that the Defendants only plead that the 1^st Defendant has never intended to enter into any legal relationship with the Plaintiff. The Defendants have not put forward any positive or alternative case in this regard. Putting aside this possible pleading issue for the time being, it is clear that the 1^st Defendant was approached because of his position in Thing On Securities or the Thing On group of companies. There is no suggestion, let alone evidence, that the 1^st Defendant put forward himself as some sort of a middleman. If there were to be any securities trading, it would be conducted via an account to be opened with Thing On Securities. Hence, save that the money was to be deposited into D2’s Account and not Thing On Securities’ account, all the indicia point to the direction that the Oral Agreement, if existed, was made by the 1^st Defendant as agent for and on behalf of Thing On Securities and not by the 1^st Defendant in his personal capacity.

72.Where an agent makes a contract which is not reduced into writing, the question whether he contracted personally, together with his principal or solely in his capacity as an agent is a question of fact. See: Bowstead & Reynolds on Agency, 18^th edn., para. 9-043 (p. 532). On the whole, had it been necessary to do so, I would have found that the intention was to create legal relationship between the Plaintiff and Thing On Securities and not between the Plaintiff and the 1^st Defendant. The fact that D2’s Account was used is relevant, but not conclusive. In the circumstances of this case, if there was the Oral Agreement, it is more likely that D2’s Account, instead of Thing On Securities’ account, was used because an account was yet to be opened with Thing On Securities.

73.In light of the above, I would also have found that the obligation to perform the Oral Agreement rested with Thing On Securities and not the 1^st Defendant personally, had there been the Oral Agreement.

74.In the circumstances, had there been the Oral Agreement, the Plaintiff may have a claim against the 2^nd Defendant but not the 1^st Defendant. However, as I have rejected the Plaintiff’s claim and found that there was no Oral Agreement, it is not necessary to go into this aspect in any detail.

Costs

75.Since I have dismissed the Plaintiff’s claim in this action, I would also make an order nisi that the Plaintiff do pay to the Defendants the costs of and occasioned by this action to be taxed if not agreed.

76.Last but not least, may I express my gratitude to the parties’ Counsel for their assistance.

Mr. B.K. Ho and Mr. Kwan Tong Lee, instructed by Messrs. Christopher Li & Co., for the Plaintiff.

Mr. Jason Pow, S.C., leading Mr. Raymond Lo, instructed by Messrs. Louis K.Y. Pau & Co., for the 1^st and 2^nd Defendants.