Mak Tai Ngo v. Tan Yoe Hong

DCCJ 3703/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3703 OF 2006

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JUDGMENT

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Background

1.According to the Amended Statement of Claim, Palap Manufacturing Company Limited (“Palap”) was at all material times a limited company incorporated in Hong Kong carrying on the business of manufacturing and trading of packing bubbles and cartons.  Prior to December 1999, the Plaintiff was one of the shareholders of Palap holding 10% of the issued shares of Palap.  The Defendant and his daughter are the other shareholders of Palap and they hold the rest of the 90% shares in Palap, before December 1999.

2.At or around the second half of 1999, one Sealed Air (Hong Kong) Limited was desirous to acquire the business of Palap.  It is not disputed that in October 2000, Sealed Air (Hong Kong) Limited reached an agreement with Palap by which the goodwill, plant and machinery, and business of Palap were sold to Sealed Air (Hong Kong) Limited at the price of US$1,300,000. 

It is the case of the Plaintiff that Sealed Air (Hong Kong) Limited first approached him to sound out the possibility of acquiring the business of Palap.  And according to paragraph 5 of the Amended Statement of Claim, the Plaintiff claimed that it was orally agreed between the Plaintiff and the Defendant that the Plaintiff should be entitled to 10% of the selling price of the business of Palap if the said sale and purchase arrangement with Sealed Air (Hong Kong) Limited is successful.  This is referred to as the “First Oral Agreement” in the pleadings.

3.Pursuant to the terms of the First Oral Agreement, the Plaintiff claims that the Defendant is liable to pay him 10% of the selling price, namely, US$130,000.  And pursuant to the First Oral Agreement, the Defendant had on 3 November 2000 made one partial payment of HK$200,000 to the Plaintiff.  In breach of the First Oral Agreement, the Defendant has failed to make any further payment and the Plaintiff brought this action to recover the balance.

4.The Defendant denies having entered into the First Oral Agreement with the Plaintiff.  As for the payment of HK$200,000, the Defendant says it was a voluntary payment which he was not obliged to make.  Further or in the alternative, the Defendant claims that the Plaintiff did not provide any consideration for the First Oral Agreement.

5.Accordingly, the first issue in dispute is whether there is the First Oral Agreement and if there is such an agreement, whether it is supported by any consideration.

6.Paragraph 6 of the Amended Statement of Claim pleaded the incidence when the Plaintiff assigned and transferred his shares in Palap to the Defendant at the consideration of $1.  It is claimed by the Plaintiff that the Defendant represented to him that in order to facilitate and simplify the transaction with Sealed Air (Hong Kong) Limited, the Plaintiff should transfer his shares to the Defendant.  The Plaintiff agreed to the arrangement on the strength of the First Oral Agreement.  When the Defendant presented him the bought and sold notes and instrument of transfer, he noted that the consideration columns in both documents were left blank.  He was under the impression that an agreement was to be reached by the Plaintiff and the Defendant as to the true value of the shares and to be put down later in the documents. 

7.Initially, the Plaintiff also claimed that the transfer of shares from the Plaintiff to the Defendant was liable to be set aside and/or void for reason of section 4 of the Companies Ordinance.  Accordingly, he applied for a declaration that the said transfer of shares be set aside.  At the opening, I was confirmed by Mr. Szeto, counsel for the Plaintiff, that the Plaintiff would not pursue the claim that the transfer was void.  The application for declaration has been abandoned.  The fact of the transfer remains as a background to support the Plaintiff’s claim under the First and/or Second Oral Agreements.

8.According to paragraph 12 of the Amended Statement of Claim, in or around November 2000 when the Plaintiff was pressing the Defendant for payment under the First Oral Agreement, the Defendant had further agreed with the Plaintiff that should the Plaintiff successfully procure the recovery of the “accounts receivables” of Palap, valued at about HK$3,879,232.86, the Defendant shall pay to the Plaintiff a sum equal to 10% of the actual recovered accounts receivables. This is referred to as the “Second Oral Agreement” in the pleading.  The Plaintiff claims he successfully procured full recovery of all the said accounts receivables and the Defendant is liable to pay him a further sum of HK$387,923.  As the Defendant has failed and/or refused to pay the said sum, the Plaintiff claimed payment herein.

9.The Defendant denied the Second Oral Agreement.  Further and in the alternative, the Defendant contends that the Plaintiff did not provide any consideration for the Second Oral Agreement.

10.Accordingly, the second issue before me is whether there is the Second Oral Agreement and if there is such an agreement, whether the same is supported by consideration.

Plaintiff’s Evidence

11.I shall first deal with the evidence of the Plaintiff.  He adopted his witness statement dated 27 August 2009 as his evidence in chief.  As background, the Plaintiff explained that he had been doing business in the construction field. He came to know the Defendant at around 1978 and they had, with other investors, formed a metal electrolysis business which did not last long.  He also had a business with some other investors in real estate business.  The Plaintiff said the Defendant was a senior alumni to him and he always trusted him with respect and had reposed trusts on him. 

12.The Plaintiff dissolved his own building business in around 1984.  By then, he noticed that the electronic production field would need a huge and stable supply of packing bubbles.  With some friends, they established a company called “Welton Associates Limited” (“Welton”) to carry on the business of manufacturing and selling packing bubbles.  They had rented a factory at Kwun Tong and hired the required machinery.  As a result of technical difficulty that they could not resolve, the machines did not work properly.  The problem continued for about a year or so and his partners lost patience.  All of them decided to back out and the Plaintiff was the only one to stay behind. 

13.The Plaintiff claimed that they finally had a solution to the mechanical problem. However, since they could not start production for almost a year and had incurred many expenses, he needed to find capital injection to save Welton.  He approached the Defendant and invited him to take up shares in Welton.  It was decided between the Plaintiff and the Defendant that the Defendant would take up 90% of the shares and the Plaintiff would have the remaining 10%.  A new company, namely Palap, was acquired to take over the business from Welton. Palap had a total share capital of 500,000 at $1 per share.  50,000 shares were allotted to the Plaintiff and 450,000 shares were allotted to the Defendant and his nominee.

14.According to the Plaintiff’s evidence, the business of Palap developed well at the beginning.  By 1989, Palap had established its own new factory at Shenzhen.  He used to draw $30,000 from Palap as his monthly salary as he was responsible for the operation and sales aspects of the business.

15.However, the business of Palap turned bad since 1997.  The Plaintiff agreed to lower his monthly salary to $20,000.  There were a few months when business was really bad and he further agreed to lower his monthly salary to $10,000.

16.According to the Plaintiff, in 1999, new customs requirement was imposed by the PRC Government.  As the business of Palap was bad in 1999, the new measure created further difficulty for the cash flow of Palap.  The Plaintiff claimed that he had contributed on or around 25 March 1999 a sum of $89,626.65 as his capital injection.  He claimed that the Defendant had not contributed his shares for capital injection.

17.The Plaintiff said in the second half of 1999,  a company called Sealed Air (Hong Kong) Limited indicated that they would like to acquire the goodwill, the plant and the business of Palap.  The parent company of Sealed Air (Hong Kong) Limited is an US leading listed company in the Fortune 500.  By the time of 1999, there were very few suppliers of packing bubbles.  The parent company of Sealed Air (Hong Kong) Limited was desirous to enter this field and particularly the PRC market.  They planned to acquire a local business with sufficient client base and operation capacity as a stepping stone into China.

18.The Plaintiff stated in his witness statement that Sealed Air (Hong Kong) Limited approached him for initial discussion.  Sealed Air (Hong Kong) Limited approached him instead of the Defendant as he was always the one responsible for operational matters and was the one better known in this area.  The general manager and the director for the Far East region of the US parent company visited him in Hong Kong in around mid-1999 and he brought them to inspect the factory in Dongguan. 

19.On cross-examination by Mr. Lau, counsel for the Defendant, the Plaintiff agrees that an e-mail was sent by Mr. Eric Lau of Sealed Air (Hong Kong) Limited to him on 20 October 1999.  Mr. Lau only asked for technical assistance.  But he believes Sealed Air (Hong Kong) Limited was using this as an excuse to start the acquisition discussion with Palap.  He added that after the inspection, Mr. Lau hinted that they would be interested to acquire Palap. The Plaintiff related the development to the Defendant as he was the major shareholder of Palap.  He said the Defendant almost immediately agreed to this development. The Plaintiff claimed that he went back to Sealed Air (Hong Kong) Limited to conduct the negotiations and stressed in his witness statement that he was the one who did almost all of the negotiation between Sealed Air (Hong Kong) Limited and Palap.  Finally, the acquisition price was agreed at around US$1.3 million.  He then brought in the Defendant to wrap up matters as he was the majority shareholder.

20.At the cross examination, the Plaintiff also agreed that the negotiation started about a month after the visit.  The negotiation was between the Defendant with a manager/director from Singapore of the Sealed Air Group.

21.The Plaintiff also stated in his witness statement that after the acquisition, he was employed by the new management to be their sales manager for another three years.  He claims this is evidence that he was the one to line up and negotiate acquisition. 

22.The acquisition of Palap by Sealed Air (Hong Kong) Limited would bring in a good return to the Plaintiff and the Defendant.  As a matter of reflecting their respective shareholding ratio, the Plaintiff claims that it was agreed between him and the Defendant personally that he would get 10% from the acquisition price and the Defendant would get 90% of the acquisition price.  And this is the First Oral Agreement referred to in the Amended Statement of Claim.

23.Mr. Lau, counsel for the Defendant, asked the Plaintiff when the First Oral Agreement was made.  The Plaintiff said it was agreed long before the 1999 incidence and it was agreed in about 1983 to 1984 when they started building the factory.  On further examination by Mr. Lau, the Plaintiff confirmed that the First Oral Agreement referred to an agreement between him and the Defendant in 1983 to 1984 at the Kwun Tong factory. 

24.Indeed, on further examination by Mr. Lau, the Plaintiff has agreed that there was no other oral agreement for the sharing of the acquisition price.  It appears that his oral evidence conflicts with his own witness statement and the pleaded case.

25.On the financial position of Palap in 1999, the Plaintiff admitted to Mr. Lau that he had signed the audited account of Palap for the period ending 31 March 1999 which showed that the company was “in red” in that the net liability is higher than the net asset of the company.  However, he did not agree that the financial position of the company was so bad that it did not worth any money. He commented that if the company was so bad, he would not have injected the aforesaid capital of $89,625.25.  He suggested that the audited account was only for tax purpose.

26.When questioned if he owed Palap debt over $600,000 in 1999, the Plaintiff denied the indebtedness.  However, he admitted signing an acknowledgment to the auditor dated 31 March 1999 confirming that he owed a sum of $685,373.35 to Palap.  He said it was arranged by the Defendant so that the account would look better.  Mr. Lau put to him that when his salary was reduced to $10,000 per month, he asked for loan from the company.  He disagreed. 

27.He also claimed that it was untrue for the Defendant to say that he sold all his shareholding to him at the nominal value of $1.  He would do that when he knew Sealed Air would acquire Palap at a premium.  He stated that the Defendant lied to him that when signing those documents in blank, he could facilitate its smooth acquisition of Palap.  Bearing in mind their past relationship, he trusted the Defendant and did so accordingly.  He thought that the Defendant would in due course put down the value of his 10% shares from the acquisition price as the consideration.  As stated above, this is no longer an issue as the Plaintiff is not claiming for a declaration to annul the transaction.

28.The Plaintiff also stated in his witness statement that in around November 2000, when he chased the Defendant for payment under the First Oral Agreement, the Defendant raised further with him that if he could procure the recovery of the accounts receivables of Palap valued at around HK$3,879,232.86, the Defendant would pay him 10% of the recovered accounts.  Owing to his work, all of the said accounts were recovered.  However, he has not stated in his witness statement or in his oral evidence as to how he managed to procure the recovery of the said accounts receivables.  And there is no document in support of his effort, or the amount that was recovered.

29.The Plaintiff has also called Mr. Lau Kam Kwong Eric (“PW2”) to give evidence.

30.PW2 adopted his witness statement dated 18 August 2009 as his evidence in chief. He was the general manager of Sealed Air (Far East) Limited from 1995 to 2001. He confirmed that at around the second half of 1999, the parent company of Sealed Air (Far East) Limited (and Sealed Air (Hong Kong) Limited) was desirous to acquire a local packing bubble-making business.  He remembered they decided to use Sealed Air (Hong Kong) Limited as the vehicle for this exercise.  He located Palap and to his knowledge, the Plaintiff was the person responsible for operational and sales matters of Palap. 

31.PW2 said he was involved in the negotiation with the Plaintiff for the purpose of acquiring the business of Palap.  After the visit to the factory of Palap at Dongguan, he was impressed by and satisfied with the manufacturing facilities of Palap.  He also requested the Plaintiff to provide them with the books and accounts of Palap for the purpose of deal diligent study.  He remembered that at or around one week after the said visit to Dongguan, he personally related the offer to the Plaintiff orally.  He told the Plaintiff that Sealed Air (Hong Kong) Limited would offer to acquire Palap at the price of US$1.3 million.  The price was decided with reference to their internal policy.  Upon receiving the offer, the Plaintiff said he would discuss with his partner.

32.PW2 said the Plaintiff came back to him and told him that his partner would accept their offer at US$1.3 million.  By then, the Plaintiff said he would bring in his partner, i.e. the Defendant who was the majority shareholder of Palap to wrap up the negotiation.  He claimed that the Defendant was only involved in the negotiation process after the price of US$1.3 million was agreed with the Plaintiff. 

33.When cross-examined by Mr. Lau, he claimed that he had told the Plaintiff about the intention to buy the business of Palap.  But he also agreed that his job, as the general manager, was to look at the profits and loss of the business.  On further cross-examination by Mr. Lau, PW2 admitted that the actual acquisition offer was made between October 1999 and early 2000.  As to the actual figure offered, he did not know and he was not present.  When Mr. Lau put to him that the negotiation was carried out by Mr. James Ng of Sealed Air, PW2 agreed that the offer was not made through him.  But he insisted that they have to get his agreement before they made the offer.

34.When Mr. Lau put to PW2 that the Plaintiff was not involved in the negotiation for the acquisition, PW2 answered he could not say.

35.That was the case for the Plaintiff.  There is another witness statement by Mr. Lo Keng Kui.  Mr. Lo did not attend the trial and his witness statement would not be evidence for the Plaintiff.

The Defendant’s Evidence

36.The Defendant gave evidence and adopted his witness statement dated 6 October 2009 as his evidence in chief.

37.The Defendant confirmed that he knew about the business of Welton and that the Plaintiff was in charge of management.  The Plaintiff invited him to take over the business.  He saw good prospects with the business and agreed to invest. He acquired Palap to take over the business. As he had not carried out the business of packing bubbles, he employed the Plaintiff to be responsible for sales and marketing.  And later in 1986, the Plaintiff asked him to give him 5% of the shareholding.  He gave him 10%, which are 50,000 shares in Palap.  Palap has transferred $50,000 to the Plaintiff for his acquisition of the shares.

38.In the beginning, Palap has no business.  They have difficulty in obtaining overdraft facilities from the bank.  He made personal loan to Palap.  Starting from 1994, he used his company 聯邦五金塑料製品廠有限公司 (“聯邦”) to inject capital or purchase raw materials for Palap, by way of loan.  The arrangement continued until Palap’s business was sold. 

39.In 1989, half of the production line of Palap was transferred to Shenzhen.  He personally lent $1.5 million to Palap for building up the new PRC factory line.  The factory was later moved to Dougguan in 1996.

40.The Defendant had further on 29 September 1989 mortgaged his own property as security for a further overdraft facility to Palap by OTB Bank.  In about 1994, Palap obtained an overdraft facility line from the OTB Bank on his personal guarantee and the pledge of HK$3.5 million cash deposit. 

41.The Defendant said by 1994, Palap started trading at a loss.  As at 31 March 1996, the loss accumulated to $1,521,467.  The Defendant suggested all salary directors should reduce their monthly salary to $10,000.  The Plaintiff agreed but he requested Palap to give him a monthly loan of about $20,000.  The Defendant agreed on condition that such loan shall be repayable on demand.  And as at 31 March 2000, the Plaintiff owed Palap over $900,000. 

42.As Palap was trading at a loss, by 1999, Palap owed 聯邦 about HK$6 million.  By end of 1998 or the beginning of 1999, the Defendant discussed with the Plaintiff on how to resolve the financial difficulty.  The Plaintiff said the loss had nothing to do with him and the Defendant was very angry.  He requested the Plaintiff to return all the shares to him. 

43.By early 1999, the Defendant remembered receiving a letter from Sealed Air Corporation stating that it was interested to acquire Palap.  He had already lost the letter.  Since then, no one got in touch with him.  And in about mid-1999, the Plaintiff agreed to transfer his shares back to the Defendant at the nominal price of $1.  The date was left blank on the suggestion of their accountant.  In about December 1999, the Plaintiff provided him with the share certificates, and the bought and sold note and instrument of transfer for the shares was then dated.

44.The Defendant knew about the letter by PW2 to the Plaintiff.  And in early December 1999, Mr. James Ng visited Hong Kong and discussed with him about the acquisition of Palap.  He had also provided the audited accounts of Palap for 1997, 1998 and 1999 to Mr. Ng.  Initially, he asked for US$1.5 million.  And by 30 December 1999, both agreed the price at US$1.3 million.  The Defendant said he had never discussed with the Plaintiff about the selling price of the business as he was the shareholder and person in charge of Palap.  He accepted US$1.3 million as he considered that after the sale, they could pay off all the liability and could have some balance.

45.The Defendant denied that he ever promised the Plaintiff that he would pay 10% of the acquisition price to the Plaintiff.  He explained that from the selling price, he has to pay off the liability of Palap.  And he stated that after paying off the liability of Palap, including the debt due to 聯邦, the balance of realised cash is only HK$1,916,689.  It does not make sense for him to pay US$130,000 to the Plaintiff which takes up more than half of the realised cash.  Thereafter, he did make a gratuity gift to the Plaintiff for the sum of HK$200,000, which is about 10% of the balance.

46.It is the Defendant’s evidence that after sale of the business to Sealed Air, Sealed Air would collect all the account receivables of Palap.  And for the accounts receivables of Palap prior to acquisition, they would be refunded to Palap.  Palap did not have to take action to recover the bad debt. 

47.The Defendant also mentioned that the Plaintiff was responsible for sales.  As for service of account and collection of debt/account receivable, they are the responsibility of Madam Yue Lai Kuen (“DW3”).  In about 2001, Palap has received about 90% of the accounts receivables.  The Defendant denied that he had entered the Second Oral Agreement with the Plaintiff. 

48.On cross-examination, Mr Szeto, counsel for the Plaintiff, put to the Defendant that the Plaintiff agreed to sell the asset of Palap because of the First Oral Agreement.  It was denied by the Defendant.  The Defendant agreed that the sales and marketing of the company was handled by the Plaintiff.  But he denied that the payment for contract was handled by the Plaintiff.  Mr. Szeto also put to the Defendant that DW3 used to handle document only.  This was denied by the Defendant.

49.The Defendant told Mr. Szeto that he provided audited account to Sealed Air.  Mr. Szeto put to the Defendant that he had provided some other account documents or documents for Sealed Air to assess the value.  That was denied by the Defendant.

50.On the bought and sold note and instrument of transfer, the Defendant agreed that the date was left blank.  But he denied that the consideration had not been stated when the Plaintiff signed. 

51.The Defendant also called Mr. Ng Hua Hong (“DW2”) as his witness.  Mr. Ng adopted his witness statement dated 2 October 2009 as his evidence in chief. 

52.DW2 was at the material times the general manager and director of Sealed Air (Singapore) Pte Limited.  Within the structure of Sealed Air Corporation, he is the director of operations, packaging product division Asia.  PW2 had to report the performance of his company in Hong Kong and Southern China to him every month.  DW2 explained that in the late 1990s, Sealed Air Corporation wanted to expand into China.  Their strategy was to acquire existing factories with established clientele.  They would combine and shed as much as possible of the capacity of the players but retain their customers after the acquisition.  That way the productivity and profits would be boosted within a short time.  He was asked to head the expansion project and PW2 was included in his team.  His job was to make contact with the owners of the factories and set up meetings with them.

53.Although PW2 was to negotiate with the companies for acquisition, he did not have the authority to make any concrete offer to them. 

54.He came to know the Defendant after PW2 reported to him that he was the head of Palap.  In December 1999, he came to visit the Defendant in Hong Kong several times.  During these meetings, only the Defendant, as the representative of Palap, negotiated with him for the transaction.  PW2 did not have the authority to negotiate with Palap at all.  And to his best recollection, he had only seen the Plaintiff once.  He has the impression that the Plaintiff was a sales manager of Palap and the Plaintiff never took part in the actual process of the negotiation in that he never talked to him about the purchase price or what the company required for the transaction.

55.DW2 also recalled that in December 1999, the Defendant asked for the price of US$1.5 million.  He could not remember the full detail but he believed that he had refused the offer.  The Defendant reduced the price later to US$1.35 million.  He confirmed that it was the Defendant and he who haggled over the price.  The price was finally agreed in principle at US$1.3 million.  By a letter dated 3 January 2000 from Sealed Air (Singapore) Pte Limited to the Defendant, DW2 set out the conditions for the letter of intent.  There were further negotiations with the Defendant and subsequently it was agreed within the Sealed Air Group that Sealed Air (Hong Kong) Limited was used as the company vehicle to acquire the assets of Palap. 

56.On cross-examination, DW2 confirmed that he left Sealed Air Corporation completely in June or July 2000.  He was not involved in the final acquisition of Palap. And he agreed that when he was shown the account document, Palap was trading at a loss.  But he could not recall the exact figure.

57.The Defendant also called Madam Yue Lai Kuen (“DW3”).  She adopted her witness statement dated 7 October 2009 as her evidence in chief. 

58.DW3 joined Palap in 1994.  She was the clerk responsible for clients’ accounts including issue of invoice, collection of payment and general administrative work.  She said, most of the customers of Palap were long term clients and they would pay once every month.  If they failed to pay, she would call the customers to remind them to pay.

59.After the assets and goodwill of Palap was sold to Sealed Air (Hong Kong) Limited in October 2000, she and other staffs of Palap joined Sealed Air (Hong Kong) Limited.  Thereafter, she was still responsible for the current accounts of Palap’s customers.  If Sealed Air (Hong Kong) Limited received any payment made to Palap for contract or sale before the acquisition, she would transfer the whole amount to the Defendant by crediting into the account of Palap. 

60.On cross-examination, Mr. Szeto put to DW3 that if client failed to make payment, the Plaintiff would handle himself.  It was denied by DW3.

61.That is the Defendant’s case.

Discussion and Ruling

62.It is quite obvious that the Plaintiff’s case depends very much on credibility of his own evidence.  But on the First Oral Agreement, his own oral evidence does not support his case.  On cross-examination, he referred to an agreement made in 1983 or 1984 when the factory was first established. 

63.The pleaded case of the Plaintiff is an oral agreement for sharing of the price for the acquisition by Sealed Air of the business of Palap.  The Plaintiff’s own evidence does not support his pleaded case.  And in his cross-examination, he did confirm to Mr. Lau that there was no other oral agreement made between 1984 to the time when Palap disposed of its business.  The Plaintiff just cannot establish his First Oral Agreement.

64.Indeed, Mr. Szeto accepted that the Plaintiff’s oral evidence departed from his written evidence.  But he submitted that the evidence of the Plaintiff as a whole is nevertheless credible and should be preferred over those from the Defendant.  I cannot see how when the oral evidence of the Plaintiff clearly conflicts with his own written witness statement but could be considered as a credible witness.  As I have said, he cannot prove his case that there is an oral agreement for sharing of the price of the acquisition agreement.

65.Further, the Plaintiff claimed in his evidence that he was the person who did most of the negotiation between Sealed Air and Palap and the acquisition price was agreed at around US$1.3 million before he brought in the Defendant to wrap up the matters.  But it is clear from the evidence of DW2 that he only negotiated with the Defendant on the selling price for the business of Palap.  His evidence is supported by the various faxes and minutes now produced in the trial bundle which have not been challenged by the Plaintiff. 

66.And even PW2 admitted in cross examination that he did not have the authority to negotiate the selling price.  While he said in his witness statement that he related the price of $1.3 million to the Plaintiff, on cross-examination, he has to admit that he does not know the offered price.  I do not believe the evidence of PW2.  With all these information, it is clear that the Plaintiff has exaggerated his involvement in the negotiation to paint a picture that he is the key person leading to the acquisition of Palap by Sealed Air.  I cannot see how I could rely on his evidence.

67.With a limited involvement in the negotiation, it is inherently improbable that the Defendant would agree to let the Plaintiff have 10% of the selling price.  As rightly pointed out by Mr. Lau, at the end of the deal, after setting off the liability of Palap, there is only a net return of around HK$1.9 million.  There is no reason why the Defendant would be prepared to allow the Plaintiff to have US$130,000 which is more than half of the remaining balance.  The Plaintiff did dispute the truthfulness of the audited accounts.  But these are audited accounts signed by him.  And he does not explain what the mistakes are.  I see no reason to doubt the correctness of these accounts.

68.On the payment of $200,000 to the Plaintiff, I accept the evidence of the Defendant that this is a gratuitous payment.  It is not related to any agreement.

69.As for the transfer of shares at the consideration of $1, I believe it is not relevant to this finding one way or the other.  In any event, I believe the audited accounts showed that at the time of the transfer, Palap was trading at a loss. I believe the evidence of the Defendant that he was the one who had been keeping the company alive by giving loan and providing guarantee to Palap through his personal guarantee and his company 聯邦.  I would not be surprised that the Plaintiff may agree to dispose of his shareholding at a nominal value as it was at that moment valueless.  Anyway, it does not affect my assessment of the evidence of the Defendant.

70.Taking all the above matter into account, I found the Plaintiff fail to prove the First Oral Agreement and his claim for the alleged balance of the purchase price must fail.

71.That left with the Second Oral Agreement.  Again it depends heavily on the evidence of the Plaintiff.  Since I have found him an unreliable witness, I reject his claim that there was a Second Oral Agreement.

72.Further, DW3 had clearly explained to court that she used to be the person to follow up the accounts receivables.  And after the acquisition, she was authorized by Sealed Air to do the transfer.  I found her a credible witness.

73.In any event, the Plaintiff has never explained in court the effort he made to obtain the money from customers.  He has not explained the effort he made to recover the account receivables and there is no account produced for the money he had recovered for Palap.  Assuming for a moment there is the Second Oral Agreement, the Plaintiff yet fails to prove the amount of account receivables he recovered for Palap and he could not be entitled to any payment.

74.With that finding, I dismiss the Plaintiff’s claim in respect of both First and Second Oral Agreements.  I do not see any reason why the Defendant should not be entitled to their costs and I therefore grant an order nisi that the Plaintiff do pay the Defendant costs of the action with certificate for counsel to be taxed if not agreed, such order to become absolute within 14 days from today. 

Mr Szeto Park Patrick, instructed by Messrs. S. Y. Wong & Co., for the Plaintiff

Mr Raymond Lau, instructed by Messrs. Ng & Co., for the Defendant