Sprite Mass Enterprises Ltd v. Loyal Profit Enterprise Ltd and Another

HCA 1841 / 2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1841 OF 2004

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HCA 1842 / 2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1842 OF 2004

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Before: Hon Au J. in Court

Dates of Trial: 26 to 30 July 2010 and 6 September 2010

Date of Judgment: 19 November 2010

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J U D G M E N T

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A. Introduction

1.This is the trial of the claims by Sprite Mass (the Plaintiff) against Loyal Profit (the 1^st Defendant) and Loyal Top (the 2^nd Defendant) for respectively $8,876,111.05 and $10,187,351.59 as the outstanding price for PVC and plastic raw materials said to have been sold and delivered to them by Sprite Mass in between 2000 and 2002.

2.The only defence raised by Defendants is that they had never purchased and received any goods from Sprite Mass. 

3.Thus, the principal issue is whether Sprite Mass had sold these goods to the Defendants.   

4.The defence so raised looks initially startling when Sprite Mass’ claim is apparently supported by various underlying invoices addressed to the Defendants and what its says to be part payments made by the Defendants in the total sum of some $17,000,000.00 of these goods.

5.However, it is part of the Defendants’ case that (a) they had never received these invoices and do not admit their authenticity, and (b) those substantial payments made by them were for reasons totally unrelated to any purchases of goods from Sprite Mass.

6.Given these allegations, in order to properly assess the claim and the defence, they must be put in proper context of the background, of which I would first set out below.

B.      Background

7.For reasons I will explain later in this judgment, I accept Sprite Mass’ evidence and find that the following are the relevant background facts leading to the dispute.

8.Ms Tsai Chuan Chuan (“Ms Tsai”) is the General Manager of a Taiwanese company called Wen Poo Company Limited (“Wen Poo”), which is the principal distributor of Nanya Plastics  Corporation (“Nanya”) in Taiwan.  Nanya is one of the largest suppliers of PVC products in the market.

9.In around 1996, one Mr Ronald Cheung Wai Cheong (“Ronald”) started to approach Ms Tsai to explore new business opportunities. At that time, Ronald was working in a Hong Kong company called Ricpota (Hong Kong) Company Limited (“Ricpota”), which was a distributor of Nanya in Hong Kong.  Ronald tried to convince Tsai to start a similar business in Hong Kong with him.

10.Although initially with some reluctance, eventually, Ms Tsai agreed to start a new business in Hong Kong with Ronald in April 1999 after her business friend, Mr. Rick Cheung Yuen Ching (“Rick”) agreed to join as well.  Ms Tsai wanted Rick to participate in the new business because Rick was based in Hong Kong and could speak Cantonese.

11.As a result, Ms Tsai, one Peter Cheung Wai Yung (“Peter”), Rick, Ronald and one Ms. Tsai Shu Fen used Sprite Mass (which was acquired by Peter and Ms Tsai in 1998 as a shelf company) to start the new business in Hong Kong.  Ronald was given 10% shareholding in Sprite Mass, although he was not required to pay for it.

12.Sprite Mass also became a distributor of Nanya in Hong Kong and carried out a similar business as Wen Poo, targeting factories in Hong Kong. 

13.Rick was formally appointed as Sprite Mass’ General Manager in December 1998, while Ronald joined as its Sales Manager in July 1999.  Ronald recruited all the sales staff of Sprite Mass.  They were Au Wing Keung (“Au”) and Chow Wai Ho as sales assistants, and Sophie Huang Hong Ye as his assistant.  At the same time, Rick recruited an accounting clerk.

14.After Ronald and Rick had formally been appointed to Sprite Mass, Ms Tsai had not actively taken part in its day-to-day business operation.  She would however from time to time receive reports in Taiwan from them.  Also whenever she came to Hong Kong a few times a year for business reasons, she might attend Sprite Mass’ office and discussed with Ronald and Rick its business.

15.Ms Connie Leung (“Connie”) is the wife of Ronald.  At the relevant times, Connie and one Mr Ho Chin Chung (“Mr Ho”) were the only shareholders and directors of Loyal Profit.   Connie is also the majority shareholder and one of the two directors of Loyal Top.  At the same time, although not holding any official positions, Ronald was an authorized signatory of both Loyal Top and Loyal Profit.

16.In August 2000, Ronald introduced Mr Ho to Rick.  Mr Ho was the person in charge of the Defendants’ business at that time. Not long after that, Ms Tsai was informed that the 2^nd Defendant (Loyal Top) started to place orders.  And later, she was also told that the 1^st Defendant (Loyal Profit) started to place orders in February 2001.

17.In mid to late 2001, through various sources and reports, it had come to Ms Tsai’s attention and concern that Sprite Mass was owed more and more outstanding sums form Loyal Profit and Loyal Top.  She started to look into the matter, and had been having various talks with Ronald and Rick. 

18.In September 2001, Ms Tsai received a call from a business friend in Nanya telling her that the Sprite Mass had been delaying payments to Nanya.  Ms Tsai then came to Hong Kong and discussed this with Ronald. She asked Ronald to collect the outstanding payments from the customers as a matter of urgency so that Sprite Mass could pay Nanya.  At the same time, Ms Tsai caused Wen Poo to pay Nanya US$600,000 as a guarantee for the outstanding debts that Sprite Mass owed to Nanya.

19.Eventually, Ronald resigned from the Sprite Mass in September 2002, and most of the staff had subsequently left the company.

20.According to Ms Tsai, after she had looked into the computer files and records of Sprite Mass thereafter, she had found records of all the invoices issued to Loyal Profit and Loyal Top, and the records of various payments made by them between 2000 and 2002. 

21.Sprite Mass then brought the present claims against Loyal Profit and Loyal Top in 2004.

C.      The trial

C1.    Sprite Mass’ case in general

22.As I mentioned above, Sprite Mass’ claim is a straightforward and simple one.   It says it has sold PVC raw materials to Loyal Profit and Loyal Top between 2000 and 2002.  These sales are on the face of them supported by copies of the underlying invoices, although not with any purchase orders or sales contracts.   There are also records of periodic payments (totaling some $17 millions) made by the Defendants to Sprite Mass over this period of time.   Sprite Mass says these payments were to settle part of the purchase price and thus support its case that it had sold goods to the Defendants.

23.Sprite Mass has called Ms Tsai and Peter to give evidence in support of the case. 

C2.    The Defendants’ case in general

24.The Defendants however say they had never ordered or purchased any goods from Sprite Mass. In fact, they had never had any business dealings with Sprite Mass, and they had never received those invoices now produced in the trial to support Sprite Mass’ claim. 

25.On the other hand, they accept that they had made those payments to Sprite Mass over that period of time.   But it is the Defendants’ case these payments were either:

(1) Monies collected and paid into the Defendants’ bank accounts by Ronald from buyers and customers of Sprite Mass in the Mainland, including one Mr Ma of a company in Jiangmen, and one Mr Lam Wah Shan, being the prices of goods sold and delivered by Sprite Mass to those buyers and customers.

(2) Monies directed by Mr Lam Wah Shan to be paid into the Defendants’ bank accounts in settlement of the price of goods sold by Sprite Mass to Mr Lam Wah Shan and his two factories (collectively “Lam’s Mainland Factories”) in the Mainland (with the Chinese names of these companies identical to those of the Defendants).

26.The Defendants have called Mr Ho and Ronald in principal[1] to give evidence in support of their case.

C3.    The issues

C3.1  General observation

27.Given the parties’ respective case as summarized above, the dispute in this case is entirely factual.

28.In this respect, The Defendants’ substantial past payments made to Sprite Mass (which is not disputed) represents strong prima facie evidence in support of an active business dealing between the parties, unless it can be demonstrated that these substantial payments were for purposes other than purchases of the goods from Sprite Mass.

29.This issue, once determined, would fundamentally affect the Defendants’ only defence that they had never purchased anything from Sprite Mass.

30.In light of this, I would deal with this issue first.

C3.2  What were the Defendants’ past payments for

31.Insofar as to why the Defendants had made those payments, both Mr Ho and Ronald have given evidence, seeking to confirm the reasons of the payments as set out at paragraph 25 above.  

32.Mr Ho’s evidence can be summarized as follows:

(1) He was the person who oversaw the Defendants’ business at the material time.

(2) In December 2000, the Defendants signed contracts for materials processing (來料加工合約) with their respective factories in the Mainland.

(3) Because of the contracts, the Defendants were entitled to be issued with customs approval papers (批文) by the Mainland authorities to enable them to import raw plastic materials into the Mainland without paying import tax.

(4) He knew a businessman in the Mainland called Mr Lam Wah Shan and Mr Lam had once placed order with the Defendants’ factories in the Mainland for material processing. The Defendants also “sold” their custom approval papers to Mr Lam (at market price) so that he could import raw materials into the Mainland tax-free.

(5) Mr Ho knew that Ronald was working for Sprite Mass at the material time.  Ronald requested him to help to exchange the money using underground bank in the Mainland received by him from Sprite Mass’ own customers there from RMB to HK dollars and pay over the equivalent sum of HK dollars to Sprite Mass at the exchange rate agreed with Ronald.   These Mainland customers of Sprite Mass included Lam’s Mainland Factories. 

(6) He agreed and used the Defendants’ as well as his personal account for such purpose.  The Defendants’ payments to Sprite Mass in the past represented these form of underground money exchanges to help Ronald.

(7) The Defendants had never purchased any goods from Sprite Mass.  Nor had the Defendants directed Sprite Mass to deliver any goods to any other person or company.

33.Ronald’s relevant evidence under this issue is in gist as follows:

(1) About half of Sprite Mass’ customers were factories in the Mainland with no Hong Kong connection.

(2) When a factory in the Mainland placed an order with Sprite Mass, it would usually need to pay import tax for the raw materials if the raw materials were to be delivered in the Mainland.

(3) In order to avoid import tax, it was a common practice that the factories in the Mainland would purchase custom approval papers from some Hong Kong companies which had contracts of material processing with factories in the Mainland.

(4) Since the Defendants had contracts for materials processing with their respective factories in the Mainland, they had those custom approval papers and were entitled to import raw materials into the Mainland tax-free.

(5) One of Sprite Mass’ customers was Mr Lam Wah Shan.  When Mr Lam needed to import raw materials into the Mainland, Ronald would arrange for Mr Lam to purchase custom approval papers from the Defendants.

(6) When Mr Lam purchased raw materials from Sprite Mass, he would use Lam’s Mainland Factories to place the order so as to mislead the Mainland authority into believing that it was the Defendants that imported the raw materials, so that Mr Lam could avoid import tax.  Mr Lam then “purchased” those customs approval papers from the Defendants to enable his factories to do so.

(7) Ms Tsai was fully aware of the arrangement and agreed to it.  Ms Tsai knew that the real buyer was Mr Lam and his factories, not the Defendants.

(8) Factories in the Mainland usually paid for the purchases in cash in RMB.  Ronald and Au would frequently travel to the Mainland to collect these payments.  Mr Ho would then cause the Defendants to exchange the money collected by Ronald or Au from RMB to HK dollars and pay over the equivalent sum of HK dollars at the exchange rate agreed with Ronald (after rounding-up or rounding-down) to Sprite Mass.  Sometimes, Ronald would use his own company, namely Cheung Sum Kee Trading Company for the exchange and payment over.

34.After hearing Mr Ho and Ronald on this issue, I have no hesitation in rejecting their evidence.  My reasons are as follows.

35.First, I find this version of the reasons why the Defendants had made substantial payments to Sprite Mass in the past incredible:

(1) The Defendants have pleaded three different versions of the reasons why these payments were made.  The first version was made in the original Defence dated 21 January 2006, which was amended on 7 March 2006.  The final version was made on 4 May 2009.   

(2) All these pleaded cases carry different factual allegations, which cannot all be true or consistent. 

(3) In my view, if any of these allegations are true and correct, it is difficult to see why the Defendants needed to amend the case three times.  Further, it is even more difficult to understand how the Defendants (through Ronald and Mr Ho) would have been able to recall the matters better or clearer in 2009 (when the last amendments were made) when compared with the time of the first pleaded defence made in January 2006, in relation to events happening in 2001 and 2002.

(4) After confirming that he was the one who had given instructions to plead the defence, Ronald, under cross-examination, has not been able to provide any reasonable explanations as to why there had been three different versions of events explaining why these payments were made.

(5) These unexplained changes in the Defendants’ case on this crucial issue show in my view that it is inherently unreliable and not worthy of belief.

36.Second, I similarly find the Defendants’ latest case as run inherently incredible and devoid of any commercial sense:

(1) There are simply no good reasons to satisfy me why, if Mr Lam had to make payments to Sprite Mass for goods purchased, he and his companies had to make them through the Defendants instead of directly with Sprite Mass. 

(2) Even in the purported second scenario^[2] as to why the Defendants would make payments to Sprite Mass on behalf of Mr Lam and his companies, Ronald simply could not explain why such Hong Kong entities (which said to have owed money to Mr Lam) could not have paid the money directly to Sprite Mass.  Although this part of the evidence is also contained at paragraph 16 of Ronald’s first witness statement, when pressed under cross-examination, he conceded that this might well be wrong.    Moreover, this version of the explanation is flatly and factually contradicted by Mr Ho’s evidence that there was no occasion where money in HK dollars was deposited in Hong Kong into the Defendants’ bank accounts and then be withdrawn for payment out to Sprite Mass (which would have to be the case if this second scenario did occur).

(3) Moreover, such arrangements of payments would result in a wholly complicated and cumbersome accounting record system and cross referencing (involving Sprite Mass, the Defendants and Lam’s factories), which I cannot see any good commercial reasons (and none have been advanced) that any reasonable commercial parties would engage in instead of making direct payments.  In any event, the Defendants have not disclosed any such accounting records, which further show to me the incredibility of the evidence^[3].

37.Thirdly, in relation to the material aspects of how the payment arrangements were carried out, Mr Ho’s and Ronald’s evidence is contradictory to or inconsistent with each other.  The evidence is clearly therefore unreliable.  The following are some of the more notable examples of such inconsistency:

(1) Mr Ho confirmed that it was only Ronald, and no others, who had left RMB with him at the Mainland factories for payout in Hong Kong.  In other words, the only source of funds was Ronald delivering RMB to these factories.  However, Ronald claimed that apart from leaving RMB with Mr Ho at the factories, he would also use underground exchange shops which took the RMB and deposited HK dollars into the bank accounts of Loyal Profit and Loyal Top^[4].

(2) Mr Ho claimed that he would refuse to help Ronald remit the RMB to Sprite Mass if there were insufficient funds in the bank accounts of Loyal Profit and Loyal Top.  But based on Ronald’s oral account of events, Loyal Profit and Loyal Top would never be out of funds, given that the RMB would first be converted at the underground exchange shops, and HK dollars would then be deposited into Loyal Profit and Loyal Top’s bank accounts.

(3) Mr Ho said that he was the one who personally checked the exchange rate at the bank and reported it to Ronald to finalize the exchange of RMB into HK dollars.  Ronald instead said it was the underground exchange shops which checked the daily exchange rate to decide how much HK dollars could be converted from the RMB deposited with them. He also said that there might be occasions that the staff at the Mainland factories receiving the money would check the exchange rate.

(4) Mr Ho also maintained that it was him who demanded rounded off sums of HK dollars to be converted from the RMB deposited by Ronald.   Ronald on the other hand testified that having the cheque payments in rounded off figures was for the purpose of ease of record keeping, but he could not recall who was the one deciding to have such arrangement.

(5) Ronald also testified that there was a running account arrangement when a part of the money received from Mr Lam Wah Shan (which Mr Lam decided not to release to Sprite Mass that month) would be kept with the Mainland factories or the Defendants’ accounts, and this was properly recorded.  Mr Ho, however, testified that the arrangement was that after a sum of RMB was deposited, a corresponding amount in HK dollars would then be paid out almost promptly.  In other words, there were no occasions where funds would be accumulated for some time at the Defendants’ bank accounts.

38.In my view, if there were indeed any such arrangements involving the transfer of funds, it is inconceivable that Mr Ho and Ronald (the two persons intimately involved in the operation) would be giving such inconsistent account of events. 

39.I further accept the observations of Mr Chang (counsel for Sprite Mass) that such alleged arrangements did not make any common or commercial sense for the following reasons:

(1) It involved bringing large sums of cash to underground exchange shops, and was thus dangerous, and was illegal.  There are no logical or reasonable explanations as to why Sprite Mass and in particular Ronald would be prepared and happy to risk all these simply for the convenience and benefit of Mr Lam and with no apparent benefits to Sprite Mass.  

(2) In this regard, Ronald sought to justify this in his oral evidence that having the money channeled via the Defendants could create turnover in their bank accounts which in turn would help the Defendants to obtain letters of credit from banks in the future.  This however is not supported by Mr Ho’s evidence that the money would be withdrawn from the Defendants’ accounts shortly after they were deposited.  This explanation is also unbelievable in light of (a) the fact that he has never mentioned this in his statement, and (b) his evidence in trying very hard to paint the picture that he has no beneficial interest in these two companies, and that, in order to avoid any perception of conflict of interest, he had ensured that Sprite Mass would not sell anything to the Defendants.  If this is correct, there was no reason why he would cause himself and Sprite Mass to take these risks to facilitate the Defendants’ interest. 

(3) There is no good business reason to explain why it is necessary to round off the sums after the exchange every time.  In so rounding off, one of the parties would have to lose out, and we are looking at payments totalling some $17,000,000.00.

(4) No explanation was offered as to why two cheques were issued by each of Loyal Profit and Loyal Top to Sprite Mass on the same day, which suggests that somehow funds were split and deposited into the two accounts separately and yet to be withdrawn on the same day.

(5) Further, if what Ronald said was indeed true, he would first have to deliver the RMB to the Mainland factories, and then sign the cheques of Loyal Profit and Loyal Top with Mr Ho (as most if not all these cheques were signed by him personally).  This tedious arrangement made no commercial sense at all.

40.For all these reasons, I reject the Defendants’ evidence that the past payments to Sprite Mass were for the purposes as alleged.

41.Without this only alternative basis proffered by the Defendants for making these payments:

(1) I further accept Ms Tsai’ evidence (for Sprite Mass) that:

(a) The underlying invoices in support of the sale of the goods to the Defendants by Sprite Mass are contemporaneous computer records of Sprite Mass these sales.   

(b) The payment records of the Defendants as recovered from Sprite Mass’ computer database are contemporaneous records of the Defendants’ part payments of settling the outstanding sums of the purchases by the Defendants.

(2) Given the close relationship of Ronald and the Defendants, and the fact (as I have accepted above) that Ronald was solely and intimately involved (with the staff recruited by him) in the sales activities and transactions of Sprite Mass, I do not find it surprising or suspicious that (a) there are no hard copies of these invoices kept by Sprite Mass, (b) these invoices do not bear the address of the Defendants other than their names, and (c) there were no underlying formal purchase contracts.

42.In the premises, I find that these past payments made Defendants to Sprite Mass were for partial settlement of the purchase price of the goods the Defendants had purchased from Sprite Mass.

C3.3  Whether the Defendants had purchased the goods from Sprite Mass as claimed

43.In relation to this, the Defendant has also called one Mr Hung to give evidence.   Mr Hung was the proprietor of a transportation company engaged by Sprite Mass to deliver goods to its customers in the Mainland.   He confirmed that he had delivered goods for Sprite Mass in the Mainland, but he could not recall delivering the same to the Defendants in Hong Kong.  

44.I accept Mr Hung’s evidence.  Sprite Mass’ counsel has not suggested that it should be otherwise.  But in my view Mr Hung’s evidence is at best neutral to the question as to whether the Defendants had received any raw materials from Sprite Mass.  The simple reason is that it is not even the Defendants’ own case that these goods, if purchased by them, had to be delivered in Hong Kong.  This must be right, given that part of the Defendants’ businesses required importing materials into the factories in the Mainland.  In the circumstances, the mere fact that Mr Hung had never delivered any of Sprite Mass’ raw materials directly to the Defendants in Hong Kong does not point one way or the other as to whether the Defendants had ever purchased these materials from Sprite Mass.

45.As such, and given my above finding and acceptance of Ms Tsai’s evidence in relation to the part payments, I similarly prefer Ms Tsai’s evidence to that of Mr Ho and Ronald, and find that the Defendants had purchased those goods from Sprite Mass as supported by the underlying invoices produced by Sprite Mass at trial.

46.I further accept Sprite Mass’ proof of the quantum of the outstanding sums of $8,876,111.05 and $10,187,351.59 respectively owed by Loyal Profit and Loyal Top, as supported by these invoices after deducting the part payments made by the Defendants. 

C3.4  General credibility of the witnesses

47.After dealing specifically with the evidence of the witnesses under the specific issues above, it is also necessary to give my view generally on the credibility of the witnesses.  I have taken this into account in making my finding above under the background and the specific issues, as well as the miscellaneous issues below.

48.Insofar as Mr Ho and Ronald are concerned, I generally do not find them to be a reliable and honest witness.   They gave evidence at trial in an evasive manner, and usually responded to simple questions with long and convoluted answers.   Some of their evidence is either inconsistent on their own or contradicts with each other.   Some for no good reasons are not even contained in their witness statements and only came out at trial for the first time.  Some notable examples are as follows:

(1) In relation to the setting up of the Defendants and their operation:

(a) Mr Ho said it was Connie who approached him in 2000 to set up the Defendants together, given that she knew Mr Ho had been in the business for a long time.  He further said that his sister (Ms Ho Yuen Mei) was nominated by him to be appointed as a director and shareholder of Loyal Top on his behalf because he was still working in his previous company at that time.

(b) However, Ronald’s evidence on this is entirely the opposite.   He instead said it was Mr Ho’s sister who set up Loyal Top and invited Connie to become a shareholder.  Later, Mr Ho also set up Loyal Profit himself and again invited Connie to become a shareholder.  Ronald emphasized that it was not Connie’s initiative to set out the Defendants, and it was Mr Ho who had persistently pursued him and Connie to be his business partners, although Ronald himself refused to join in order to avoid any conflict of interest with Sprite Mass.

(2) In relation to the alleged purchases of customs approval papers:

(a) Ronald gave evidence at trial that the Defendants had sold customs approval papers to Mr Lam’s factories in the Mainland to enable these factories to import across the border raw materials tax-free under the disguise that they were purchased by the Defendants for contract processing in the Mainland.    The materials so imported under the Defendants’ approval papers included those forming the subject matter of Sprite Mass’ present claims, and Mr Lam’s factories had paid some $800,000.00 to $900,000.00 to the Defendants or Mr Ho for these approval papers.

(b) However, this is inconsistent with what Ronald has said in his supplemental witness statement, where he put forward the case that it was Sprite Mass (not Mr Lam or his Mainland factories) which had purchased the approval papers from the Defendants.    This was also the case put to Ms Tsai under cross-examination.  There are no logical or reasonable explanations for the inconsistency.

(c) Moreover, this is also inconsistent with Mr Ho’s evidence that there was only one occasion (instead of numerous if Ronald was correct) when Mr Lam had engaged the Defendants’ Mainland factories to ship raw materials to the Mainland.  

(3) Mr Ho’s witness statement of only two pages is dated 8 June 2009.  Notwithstanding its recentness:

(a) He gave the wrong residential address in the statement (which was pointed out to him under cross-examination), but he could not recall who provided that address in the statement for him.

(b) He could not remember where and when he signed the statement, and gave various inconsistent accounts of how he came to do it.

(c) He could not recall who changed the month of the date of his witness statement, from January (which was typed out) to June.

(4) I agree with Sprite Mass’ submissions that all these show the hallmarks that the contents of Mr Ho’s witness statement were prepared and provided to him, and he just signed it without caring whether those contents were correct or not.

(5) Similarly, there are various material errors in Ronald’s witness statements (and when compared with the pleadings) which should not have been there if they are correct and true:

(a) The examples cited above concerning the purchase of customs approval papers from the Defendants by Mr Lam.

(b) The three different pleaded versions on the purpose of the Defendants’ payments made to Sprite Mass.

(c) Ronald said in the witness statement that he was sacked by Sprite Mass by the end of 2001.  This cannot be correct as the MPF records show that he only ceased employment on 30 September 2002.  This is also contradicted by his own case that he was still collecting payments from Sprite Mass’ Mainland customers in 2002. 

49.On the other hand, I find Ms Tsai and Peter general reliable and honest as witness.   They gave evidence in a straightforward manner.  Their evidence is consistent and generally unshaken under cross-examination.   

50.I have no difficulty in preferring their evidence to that of Mr Ho and Ronald insofar as if there is any conflict.   

C3.5  Miscellaneous issues

51.Other than the principal issues I have dealt with above, there are two more miscellaneous issues which I do not find them strictly necessary to be dealt with for finding in favour of Sprite Mass in its claims.  However, insofar as if necessary, I would determine them as follows.

52.In support of its case, Sprite Mass has sought to rely on an IOU dated 10 December 2001 said to have been signed by Mr Ho acknowledging the outstanding debts owed by Loyal Profit to Sprite Mass.  It is Ms Tsai’s evidence that this was given to her on the evening of 11 December 2001 by Au and Ronald in her hotel room, when she was in Hong Kong further chasing them up for collecting the payments from the Defendants.

53.Mr Ho denies signing and giving such an IOU. Ronald also denies handing this to Ms Tsai.

54.I have not relied on this evidence to come to my finding in favour of Sprite Mass above.

55.However, if necessary and insofar as relevant, given that I have found Ms Tsai a credible witness and the evidence of both Ronald and Mr Ho unreliable, I would have preferred and accepted Ms Tsai’s evidence and found that the IOU was signed by Mr Ho and given to Ms Tsai to hold off temporarily the pressure from Sprite Mass in chasing Loyal Profit for the payment of the outstanding sum.

56.Secondly, there is an issue as to whether subject matter raw materials forming the present claims had been delivered to the Defendants’ factories in the Mainland.

57.Again, I would have rejected Mr Ho and Ronald’s evidence as generally unreliable and accepted Ms Tsai’s evidence that the delivery notes, together the underlying invoices (which I have accepted as evidence) support Sprite Mass’ case that these raw materials had been delivered to the Defendants’ factories or their nominated factories in the Mainland.

D. Conclusion

58.Sprite Mass has successfully proved its case against the Defendants.  I therefore give judgment in favour of Sprite Mass for (a) the sum of $8,876,111.05 against Loyal Profit, and (b) $10,187,351.59 against Loyal Top.  Sprite Mass is also entitled to interest on these sums at 1% above the prime rate as from time to time quoted by HSBC from the date of the Writ to today, and thereafter at judgment rate until full payment.

59.There is no reason why costs should not follow the events.  I further make an order nisi that costs of the action be to Sprite Mass to be taxed if not agreed.  Unless any of the parties applies to vary it before then, the order nisi shall be become absolute 14 days from today.

Mr. Jonathan T.Y. CHANG, instructed by Messrs Barlow Lyde & Gilbert, for Plaintiff

Mr. Damian WONG & Mr. Andrew K.L. LIE, instructed by Messrs Chan, Lau & Wai, for 1^st and 2^nd Defendants