Foelan Wong v. Wong Tze Kin

DCCJ 2650/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2650 OF 2011

--------------------

--------------------

JUDGMENT

--------------------

Background

1.In this case, the plaintiff paid HK$120,000 to the defendant in late September 2010.  The plaintiff said that it was for the fee to obtain credit facilities called Equity Line of Credit (the “ELC”) for the purpose of resuming trading of shares of a company called PAQ International Holdings Ltd (“PAQ”) at the Alternative Investment Market (the “AIM”) in London (the “Relisting Project”). PAQ was a company incorporated in Cayman Islands and listed at the AIM. Trading of PAQ’s shares was suspended in May 2010.  ELC was a type of credit facilities whereby the investor was committed to purchase shares to be issued by the borrower within a certain period of time up to certain limit at a discounted price. 

2.The plaintiff’s case was that he and the defendant had agreed to share equally the fee required to obtain the ELC for PAQ.  Each of them should have put up HK$60,000.  The plaintiff paid his share and advanced HK$60,000 for the defendant’s share.  The total amount of the fee for the ELC and the remittance charge was HK$116,750.  The plaintiff’s share was HK$58,375.  There was a balance of HK$1,625 out of the plaintiff’s share paid.  The plaintiff claimed against the defendant for repayment of the said advance of HK$60,000 and the said balance of payment for his share but the plaintiff confined his claim to HK$61,500.

3.The defendant agreed that the parties were to bear the fee for the ELC and the remittance charge in equal shares.  The defendant’s case was that HK$60,000 out of the said HK$120,000 was to pay the plaintiff’s share for the fee for the ELC.  For the remaining HK$60,000, the defendant said that HK$50,000 was for the plaintiff’s share of investment in a deal of gold bars (the “Gold Deal”) and HK$10,000 was for sundries expenses paid and to be paid by the defendant.  The defendant said that all outstanding accounts between the parties were settled in October 2010 when he paid HK$30,000 to the plaintiff by cheque together with some cash payment.  He said that he owed no further moneys to the plaintiff.

The parties’ pleaded cases

4.Both parties were not legally represented at the beginning of the proceedings.  The defendant was soon legally represented from 24 August 2011 onwards after the defendant filed his acknowledgement of service of the writ in person on 18 July 2011 but before he filed his defence.  The plaintiff remained unrepresented until 3 October 2012.

5.The plaintiff issued the writ on 14 July 2011 without legal representation claiming for the aforesaid sum of $120,000 which the plaintiff said was paid to the defendant on 27 September 2010.  The plaintiff pleaded that the money was to pay the fee of Prime Capital Fund LLC to arrange for Euro3,000,000 stand-by credit for share application (申請股票備用信貸額) but the defendant failed to arrange for signing of any contract documents.

6.The defendant filed his defence on 24 August 2011.  The defendant did not dispute that he received $120,000 from the plaintiff on or about 27 September 2010 but said that the money was “applied towards the payment of USD15,000.00 up-front fee to AFG International Inc as per their requirement for procuring Equity Purchase Agreement” for PAQ. (See para 3 of the defence)

7.The plaintiff filed his reply on 14 September 2011 (the “First Reply”).  In the First Reply, the plaintiff pleaded that the money should be paid to Prime Capital Fund LLC instead of AFG International Inc (“AFG”).  The plaintiff also claimed another sum of HK$150,000 which the plaintiff had previously paid for investing in PAQ.  The plaintiff claimed the total sum of HK$270,000 in the First Reply.

8.The plaintiff filed a document entitled “此信是回覆區域法院雷健文聆案官席前内庭審訊 ─ 命令，位 [sic] 於2012年1月5日發出” (the “Second Reply”).

9.Upon the application of the defendant, the court had on 12 June 2012 struck out the Second Reply as well as part of the statement of claim and part of the First Reply.

10.After the plaintiff was legally represented, the plaintiff amended his statement of claim on 25 October 2012 which was a redraft of the statement of claim.  On 13 December 2012, the defendant filed his amended defence which was also a redraft of the defence.  The plaintiff filed the amended reply on 30 January 2013 which was a complete redraft of the First Reply.  These became the pleaded cases of the parties at the trial.

The plaintiff’s latest pleaded case

11.In the amended statement of claim, the plaintiff pleaded that he had agreed with the defendant in about April 2010 to jointly promote the ELC as a financial product to listed companies.  They would share the expenses and the profits equally.

12.In August 2010, the plaintiff and the defendant agreed to participate in the Relisting Project.  They set up a company called Trend Concept Holdings Ltd (“TCH”) to hold shares of PAQ.  They held TCH in equal shares and shared the set up fee of TCH also in equal shares.  They also set up another company called GIGAS Capital International Ltd (“GIGAS”) for purchase of the shares of another potential company similar to PAQ.

13.On 30 September 2010, the plaintiff and the defendant signed a co-operation agreement (the “Co-operation Agreement”) with Mr Kelvin Yau (“Mr Yau”), who was the majority shareholder, Chairman and Chief Executive Officer of PAQ, for procuring the resumption in trading of PAQ’s shares at the AIM. (See pp 4-7 of bundle B)

14.Under the Co-operation Agreement, the parties agreed to share the expenditures required for the resumption in trading of PAQ’s shares in the sum of HK$600,000, of which Mr Yau would bear HK$300,000 and each of the plaintiff and the defendant would bear HK$150,000.  On about 30 September 2010, the plaintiff paid his aforesaid share of expenditures.  The defendant and Mr Yau also paid their respective shares.  It was agreed that Mr Yau would transfer all his shares and convertible bond in PAQ to TCH.  [It could be seen from an email dated 27 September 2010 from the defendant to Mr Nasir Mogul of AFG (“Mr Mogul”) (see p 233 of Bundle B1) that after exercising the convertible bond, TCH would hold about 90% of PAQ’s issued capital.]  Mr Yau would become a shareholder of TCH holding 50% of TCH’s shares with the plaintiff and the defendant each holding 25% of TCH’s shares.

15.Under the Co-operation Agreement, the plaintiff and the defendant should procure the ELC for US$5,000,000 for PAQ to meet its working capital requirement.  On about 27 September 2010, the defendant requested the plaintiff to pay HK$120,000 on behalf of the plaintiff and the defendant for application of the ELC for PAQ which the plaintiff did by issuing a cheque to the defendant. (See p 794 of Bundle C)

16.The plaintiff said that the fee for procuring the ELC was US$15,000 which was equivalent to HK$117,000 and the plaintiff’s share was $58,500.  The plaintiff claimed against the defendant for return of the balance of the aforesaid payment of HK$120,000 after deducting the plaintiff’s aforesaid share.  The plaintiff claimed that the defendant should return HK$61,500 (ie HK$120,000 – HK$58,500) to him.

17.The plaintiff denied that he had agreed to invest in the Gold Deal as alleged by the defendant.

18.The plaintiff claimed the sum of HK$61,500 herein against the defendant.

The defendant’s latest pleaded cases

19.The defendant pleaded that he had introduced Mr Mogul to the plaintiff in about April 2010.  Mr Mogul told them that AFG provided the ELC which could serve as a form of equity financing for listed companies.  After the meeting, the plaintiff told the defendant that the plaintiff could, through himself or other middleman, introduce potential applicants for the ELC to AFG.  The defendant denied that he had made an agreement with the plaintiff to jointly promote the ELC as alleged by the plaintiff.   

20.The defendant agreed that he had set up TCH and GIGAS with the plaintiff but said that GIGAS was set up for handling the business of introducing private companies to AFG for overseas listing and other financing business.

21.The defendant pleaded that in August 2010, he was requested by the plaintiff to participate in the Relisting Project.  The plan for the Relisting Project was formulated by the plaintiff and the defendant together with Mr Yau.

22.The defendant agreed that the co-operation between the plaintiff, the defendant and Mr Yau was governed by the Co-operation Agreement.

23.The defendant pleaded that in about September 2010 he was working on and had invested in a business project for the sale of gold bars (ie the Gold Deal).  The defendant said that after being told about the Gold Deal, the plaintiff expressed interest to participate.  The plaintiff and the defendant orally agreed that the plaintiff should pay HK$50,000 as the plaintiff’s share and would get a net twofold return if the transaction between the gold buyer and seller could be closed.

24.The defendant pleaded that in late September 2010, Mr Mogul informed the defendant that a potential investor would provide the ELC to PAQ.  Mr Mogul asked for a fee of US$15,000 to be paid to AFG (the “Fee”).

25.The defendant further pleaded that he met the plaintiff on about 28 September 2010.  They agreed to share the Fee equally and to have the defendant’s share of the Fee set off against the plaintiff’s share of investment in the Gold Deal.

26.The defendant pleaded that the plaintiff issued a cheque for the agreed rounded amount of HK$120,000 to cover the plaintiff’s share of the Fee (HK$60,000), the plaintiff’s investment in the Gold Deal (HK$50,000) and other sundries items which the defendant had paid and would pay (HK$10,000).

27.The defendant pleaded that he remitted US$15,000 (equivalent to HK$116,550) to AFG on 29 September 2010 for the Fee.  There was a remittance charge of $200.  Each of the plaintiff and the defendant should bear HK$58,375.

28.The defendant pleaded that he paid around HK$11,000 to the plaintiff in about October 2010 to settle all outstanding accounts between the parties.

The plaintiff’s evidence

29.The plaintiff testified at the trial and called no other witness.  The plaintiff had signed a witness statement dated 19 March 2013 and a supplemental witness statement dated 13 May 2013.  The plaintiff adopted his aforesaid witness statement and supplemental witness statement as his evidence-in-chief at the trial.

30.The plaintiff was an investment manager.  He was introduced to Mr Mogul in about April 2010 by the defendant.  The plaintiff said that after the meeting with Mr Mogul, both he and the defendant were interested in the ELC provided by AFG.  They agreed to have a joint business plan to promote the ELC to listed companies and to share the expenses and profits equally.  Both of them had introduced potential applicants for the ELC but without success.

31.In August 2010, the defendant and the plaintiff agreed to participate in the Relisting Project.  They agreed to share all the expenses, profits and losses equally.  They acquired TCH in September 2010 to hold the shares and the convertible bond of PAQ on behalf of the plaintiff and the defendant.

32.They met Mr Yau and formulated a plan and structure for the resumption of trading of PAQ’s shares.  The plaintiff, the defendant and Mr Yau signed the Co-operation Agreement on about 30 September 2010.  The main terms of the Co-operation Agreement were as set out in paras 14 and 15 above.

33.On about 27 September 2010, the defendant requested the plaintiff to provide HK$120,000 initially on behalf of the defendant and the plaintiff to procure the ELC for PAQ.  The plaintiff issued a cheque for HK$120,000 in favour of the defendant as requested.

34.The plaintiff said that in about October 2010, the defendant had talked about a project for the sale and purchase of gold bars in South East Asia during a lunch with him but he was not interested.

35.The plaintiff stated that he had never expressed interest in the Gold Deal or agreed orally to pay HK$50,000 to participate in the Gold Deal.  Prior to discovery in this action, he had never seen the documents produced by the defendant relating to the Gold Deal, ie a irrevocable master fee protection agreement and a sale and purchase agreement for gold bars.

36.The plaintiff denied that he had received HK$11,000 from the defendant in October 2010 as pleaded in the amended defence.

37.The plaintiff said that he and the defendant had set up GIGAS in about November 2010 for purchase of shares of another potential company similar to PAQ as well as for handling of business for introducing private companies to AFG for overseas listing and other financial business.  The parties shared the set up fee of GIGAS equally.

38.The Relisting Project failed and PAQ was delisted on 30 November 2010.

39.In around the beginning of 2011, the plaintiff had doubt whether the defendant had cheated him for the payment of the Fee.  He asked the defendant for the return of the sum of HK$120,000.  The defendant mentioned the Gold Deal again.  The plaintiff told the defendant that he had never agreed to participate in the Gold Deal.  The defendant then argued that there were some other minor expenses and said that he only had HK$110,000 at that time.  The plaintiff agreed to accept HK$110,000 as settlement if the defendant paid him back immediately.  The defendant did not pay the sum of HK$110,000 to the plaintiff but keep on referring to the Gold Deal.  The plaintiff stated that as he had never agreed to participate in the Gold Deal, he just ignored the defendant’s text messages on the Gold Deal and stuck to his request for the payment of HK$110,000.

40.The plaintiff said that he was later advised by his lawyers that he was not entitled to claim full refund of HK$120,000 or the sum of $110,000 from the defendant as he did not have enough evidence to prove that the defendant had cheated him but he could claim against the defendant for the return of the remaining balance.

41.The plaintiff stated that he did not know the actual equivalent of US$15,000 in term of Hong Kong dollar at the time of preparing the amended statement of claim and had only pleaded for a sum of HK$61,500 against the defendant.  He did not intend to further amend his claim and would stick to the amount pleaded in the amended statement of claim.

42.The plaintiff stated that on 2 September 2010 the defendant asked the plaintiff to lend him HK$8,000 which the plaintiff did.  On about 30 September 2010, the defendant called the plaintiff and asked the plaintiff to lend him another sum of HK$22,000 which the plaintiff did on 4 October 2010.  On 6 October 2010, the defendant repaid the aforesaid loans in the total sum of HK$30,000 to the plaintiff.

43.The plaintiff denied that he had agreed to receive HK$11,000 to round up the accounts between the parties.  He also denied that he had received the cash payment as alleged in the defendant’s supplemental witness statements.

The defendant’s evidence

44.The defendant testified at the trial and called Mr Yau as his witness.

45.The defendant had signed a witness statement dated 31 July 2012, a 1^st supplemental witness statement dated 19 March 2013, a 2^nd supplemental witness statement dated 24 May 2013 and a 3^rd supplemental witness statement dated 3 July 2013.  The defendant adopted his aforesaid witness statement and supplemental witness statements as his evidence-in-chief at the trial.

46.The defendant agreed that he introduced Mr Mogul to the plaintiff in early 2010.  Mr Mogul introduced the ELC to them.  The defendant stated that after their meeting with Mr Mogul, the plaintiff was very keen in introducing the ELC to potential applicants.

47.In August 2010, the plaintiff requested the defendant to participate in the Relisting Project.  The plaintiff, the defendant and Mr Yau struck up the plan and structure for the resumption of trading of PAQ’s shares which included appointing a new Chief Financial Officer for PAQ, designing a viable business plan for PAQ and sourcing new equity capital for PAQ after the resumption of trading of PAQ’s shares.

48.The defendant stated that the plaintiff introduced Mr Paul Chan (“Mr Chan”) to become the new Chief Financial Officer of PAQ.  Mr Yau provided the business plan prepared by his associates for PAQ.  New equity capital would be provided to PAQ by the ELC.

49.The defendant stated that in late August 2010, he liaised with Mr Mogul to find potential investors who would provide the ELC to PAQ.  In late September 2010, Mr Mogul informed the defendant that a potential investor would provide the ELC to PAQ.  On about 28 September 2010, Mr Mogul asked for the Fee to be paid to AFG.  The defendant called the plaintiff to notify him of the Fee requested by AFG.  The defendant stated that at that time a formal agreement with Mr Yau had yet to be signed but Mr Yau had made clear that he would not pay the fee for the ELC.  The defendant said that the plaintiff was eager to get something done and tie down the relationship.  The defendant accounted for the events after AFG’s request for the Fee in para 9 of his witness statement as follows:-

“…… After AFG’s request for USD$15,000, I met with the Plaintiff to discuss the whole issue. The Plaintiff agreed that the fee was the buy-in. He expressed his trust and confidence in AFG because he had met and talked with Mr Mogul before and also his familiarity of the product of Equity Line of Credit. It was agreed that the fund should not be given to Kelvin Yau or PAQ for issue of the Term Sheet because it would not be certain that AFG would get paid. Since I had been liasing [sic] with AFG and to save his effort, the Plaintiff asked me to make the remittance, to be reimbursed by his HKD cheque. He issued a cheque of HK$120,000 to me to make the remittance to AFG. I accordingly remitted US$15,000 to AFG on 29^th September 2010.”

50.The defendant stated that the potential investor was changed in November 2010 from Southbridge Advisors LLC to Prime Capital LLC.  Despite efforts of the parties, the Relisting Project failed.  PAQ was delisted on 30 November 2010.  The defendant stated his case in para 16 of his witness statement as follows:-

“…… If I may conclude my case – the Plaintiff gave me a sum of HK$120,000 to pay AFG fully aware of the need for the payment on a product well understood by him, and I did exactly the onward payment to AFG. The Plaintiff’s claim for its return is absolutely groundless.”

51.The defendant denied that he had agreed with the plaintiff on a joint business plan to promote the ELC to listed companies and to shares the expenses and profits equally.  He stated in his 1^st supplemental witness statement that he agreed to share the Fee with the plaintiff was on ad-hoc basis.  The defendant agreed that he set up GIGAS with the plaintiff in November 2010 for introducing private companies to AFG for overseas listing and other financing business.

52.The defendant stated in his 1^st supplemental witness statement that in around September 2010, he participated in a business project for the sale of gold bars, ie the Gold Deal.  He took the role as one of the middlemen linking up the relevant parties and helped facilitating the negotiation of the terms of sale.  The defendant said that he had paid HK$900,000 on 13 September 2010 to the seller’s intermediary to make the seller to come to the negotiation table.  The defendant stated that if the gold transaction could be closed, he would get a generous commission.  He would earn more commission if the parties executed further contracts.

53.The defendant stated that he had talked about the Gold Deal to the plaintiff and the plaintiff was interested to join.  The defendant described how the plaintiff joined the Gold Deal in para 11 of his 1^st supplemental witness statement as follows:-

“… We eventually agreed orally, on an evening several days before the decision for paying AFG to get PAQ into the resumption plan with us, that the Plaintiff shall share HKD50,000 of my investment in the Gold Deal. I would give him a net twofold return (ie HKD100,000) if the transaction could be closed. The agreement was reached by a handshake at the Café Gray Deluxe within The Upper House Hotel located in Queensway.”

54.In para 27 of his 3^rd supplemental witness statement, the defendant set out his recollection of his conversation with the plaintiff on the plaintiff’s participation in the Gold Deal as follows:- [P – the plaintiff, D – the defendant]

D: “呢件事唯一嘅風險係seller交唔到貨，或者buyer俾唔到錢，咁我哋嘅投資就輸晒。”

P: “冇問題，你係我偶像，你話點就點。有時輸股票都唔止啦，咁細數。”

D: “咁我就預你一份伍萬蚊啦。”

P: “好。咁幾時俾錢你呀？”

D: “唔駛急，幾時都得，橫掂我俾咗錢。”

P: “好。到時你話俾我聽啦。多謝晒。”

D: “多乜謝吖，我地賣殼俾大陸佬可以賺咁多，你都預我一半，我多謝你就真。”

P: “大家partner，冇所謂啦。最緊要你單金掂咗，你就發啦。我又執啲。大陸佬嗰度，等我搞啦。”

D: “靠你啦。”

P: “放心。”

55.The defendant said that he did not show the plaintiff any documents in relation to the Gold Deal as he had explained to the plaintiff at the meeting, and the plaintiff accepted, that there was a non-circumvention non-disclosure agreement which the defendant had signed with the related parties to the Gold Deal.  The plaintiff said that he understood and trusted the defendant completely.

56.The defendant said that from time to time he kept the plaintiff updated on the progress of the Gold Deal, including the intended time and manner of delivery of the gold bars, and the problems pertaining that delayed the transaction.  The plaintiff never had any problem or complaint about it.

57.The defendant said that the parties to the Gold Deal signed an “irrevocable master fee protection agreement” (the “Master Agreement”) and a “sale and purchase agreement for gold bars” on around 24 September 2010 (together the “Gold Deal Documents”).  According to the Master Agreement, the defendant’s commission would be 2% of the value of the gold bars purchased by the buyer and he would be entitled to commission on future contracts for gold bars between the parties for a period of two years from 24 September 2010.

58.The defendant said that the buyer eventually did not purchase any gold bars from the seller and was dissolved in 2012.  The defendant did not receive any commission on the Gold Deal.

59.In his 1^st supplemental witness statement, the defendant accounted for the plaintiff’s payment of HK$120,000 as follows:-

“16. As I pleaded in the Amended Defence, in late September 2010, AFG asked for a fee of USD15,000 for the procurement of the Equity Line of Credit. I met up with the Plaintiff on or about 28^th September 2010 to discuss the whole issue. We orally agreed to share AFG’s Fees in equal shares and that my half share of AFG’s Fees would be set off against the Plaintiff’s share in the Gold Deal. My rationale was to save paying him HKD60,000 and then he paying me HKD50,000. It also served the purpose that he would not or could not back out from the agreement on investing the said HKD50,000 for the gold transaction after I had paid HKD60,000 for the PAQ plan.

17. The Plaintiff then issued a cheque of HKD120,000, an agreed rounded amount, to include settlement of HKD110,000 (his share of HKD60,000 out of the remittance of the said fee of USD15,000 to AFG, plus HKD50,000) plus other sundries items such as the difference in actual exchange rate at the time of remittance and remittance charges on the Defendant’s bank account, and to save trouble in paying back and forth.”

60.In paras 16 and 17 of his 3^rd supplemental witness statement, the defendant set out details for the payment of HK$120,000 as follows:-

“16. In the afternoon of the same day [28 September 2010] (after the said phone calls and receiving the Term Sheet for the Equity Line of Credit from AFG), the Plaintiff and I met in person in Central to discuss the way going forward. At the same time, I requested the Plaintiff for payment of his half share of the Equity Line of Credit (ie US$7,500) plus his promised share for the Gold Deal at HK$50,000. He handed me a blank cheque for me to fill in the details such as my name for my bank account, the amount in figures and in words, and the date.

17. Since I was the one writing down all the details, before I started filling in the cheque I suggested to the Plaintiff that I would include in the cheque the Plaintiff’s payment for the Equity Line of Credit, the Gold Deal and the other sundries items such as the difference in the exchange rate and remittance charges, and round up the payable amount to HK$120,000 in order to save the trouble of writing too many words on the cheque.  The plaintiff agreed with the suggestion, signed the cheque and handed it over to me. ……”

61.The defendant confirmed that he had remitted US$15,000 (equivalent to HK$116,550) to AFG on 29 September 2010 and paid $200 as remittance charge. (See p 190 of Bundle B1)

62.On around 6 October 2010, the defendant issued a cheque for HK$30,000 to the plaintiff.  The defendant explained in his 1^st supplemental witness statement the breakdown for this sum of HK$30,000 as follows:-

“19. On or around 6^th October 2010, I issued a cheque of HKD30,000 as a rounded number which included:-

a) round HKD11,000 (outstanding for the AFG remittance and the Gold Deal) to the Plaintiff to round up the account.

b) Payment for CHAN Yue Yuen [Mr Chan], an ex-colleague of the Plaintiff who was introduced to me and Kelvin Yau (of PAQ) in early September by the Plaintiff for the role of Chief Financial Officer. CHAN agreed to start work on the accounting and financial position of PAQ right away although he had not been formally offered the position at the time. In early October, the Plaintiff told me that CHAN asked for a cash payment equal to HKD40,000 for his work done in September. It was intended as a cash payment through the Plaintiff because CHAN was then working for another company and his work had been done outside the day time job. We both agreed that it was fair to CHAN and that PAQ would object to paying so we just shared the burden equally. So I paid my share of HKD20,000 which was included in the said cheque. The Plaintiff was to settle with CHAN, and then I never attended to the matter due to CHAN was later officially employed by PAQ from October to December 2010.

The odd difference was paid in cash so as to save writing a long amount in words on the cheque.”

63.The defendant stated that the requirements for relisting of PAQ included appointing a Chief Financial Officer for PAQ and publishing PAQ’s audited accounts by November 2010.  The plaintiff introduced Mr Chan to the defendant in around early September 2010 for the position of PAQ’s Chief Financial Officer. Mr Yau had reservation in appointing Mr Chan but later agreed as they would not be able to find a replacement before the deadline for relisting of PAQ.  Mr Chan started working for PAQ since September 2010 although the employment contract for Mr Chan was not signed until early October 2010.

64.The defendant said that Mr Yau was unwilling to pay Mr Chan’s salary before relisting of PAQ.  The defendant said that if Mr Chan did not receive some payment at that time, PAQ might risk losing its much needed Chief Financial Officer at the critical moment while the plaintiff might lose Mr Chan’s friendship.  The defendant and the plaintiff agreed that they should make a payment of HK$40,000 to Mr Chan to be shared equally by them.  The defendant said that he issued the cheque for HK$30,000 to the plaintiff pursuant to his aforesaid agreement with the plaintiff to share payment to Mr Chan.  The defendant said that he did not know that the plaintiff had made no payment to Mr Chan until he read the draft witness statement of Mr Chan provided by the plaintiff in April/May 2013.

65.The defendant said that Mr Chan informed the plaintiff and the defendant on 1 December 2010 that he would resign from PAQ.  Mr Chan threatened to make a complaint to the Labour Department and the Mandatory Provident Fund Schemes Authority if PAQ would not pay him his outstanding salary.  In mid-December 2010, the defendant suggested to Mr Chan to accept 40% of the salary claimed to settle the matter which suggestion was accepted by Mr Chan but not accepted by Mr Yau.  

66.The defendant said that in around late August 2010, the plaintiff told him that a mainland investor was willing to offer HK$45 million to acquire a shell company listed overseas and the plaintiff was in active discussion with the investor.  The defendant said that the sale of PAQ to the mainland investor was such a potential for large profit that he was willing to pay money upfront for any expenses when deemed necessary including the Fee and Mr Chan’s salary in order to ensure that the requirements for relisting of PAQ were fulfilled. The defendant said that he was eager to maintain a “partnership” with the plaintiff by introducing the plaintiff to some profitable investments.

67.The defendant said that he offered the plaintiff a share of the Gold Deal as return to the favour the plaintiff had given him for arranging the sale of PAQ for HK$45 million to the mainland investor.

68.The defendant denied that he had borrowed $8,000 or any other sums from the plaintiff on 2 September 2010.  The defendant said that as at 2 September 2010, he maintained a ready cash balance of HK$655,958.79 in his account held with HSBC (see p 666 of Bundle B2) and he had no need to borrow from the plaintiff.  The defendant produced his mobile phone bill to show that he did not call the plaintiff’s mobile phone in the morning on 2 September 2010 (see pp 664 - 665 of Bundle B2).  The defendant said that he had no knowledge of the plaintiff’s office telephone number and that he did not use his office telephone when talking about sensitive business or personal issues.

69.The defendant also denied that he had borrowed HK$22,000 from the plaintiff on 4 October 2010.  The defendant produced his bank statement to show that he had a ready cash balance of about HK$300,000 in his accounts held with HSBC as at 30 September 2010 and a balance of about $155,000 as at 4 October 2010 (see pp 713 - 714 of Bundle B2) after contributing HK$150,000 to the expenditures for relisting of PAQ under the Co-operation Agreement.

70.The defendant said that after the delisting of PAQ, the plaintiff began to pointing fingers at everybody involved.  The plaintiff wrote to the AIM regulator asking for the reasons of the delisting of PAQ and requiring the regulator to reply within 24 hours. (See p 264 of Bundle B)  The plaintiff told the defendant that the nominated adviser and the ex-director of PAQ had conspired to commit financial crime. (See p 268 - 269 of Bundle B)  The plaintiff also suggested suing the nominated adviser and the plaintiff did lodge a complaint on 2 December 2010 against the nominated adviser to the London Stock Exchange.

71.The defendant said that in early January 2011, he was still working with the plaintiff on making money by continuing introduction of the ELC (in the name of Standby Equity Purchase Agreement) to potential companies but he was unable to contact the plaintiff after 8 January 2011 until 19 January 2011 when he received the following text message from the plaintiff:-

“I want to get back all my money. Totally hkd $110,000.”

72.The defendant stated that his understanding of the sum of HK$110,000 referred to by the plaintiff was for the HK$60,000 paid to AFG and the HK$50,000 for the Gold Deal.  The defendant said that he did not accept the plaintiff’s demand but had told the plaintiff that he would try to have the plaintiff’s share in the Gold Deal bought out.  The defendant said that the plaintiff never disputed the existence of the plaintiff’s agreed investment in the Gold Deal nor accepted his offer to assist but kept on insisting the defendant to pay HK$110,000 in subsequent text messages which the defendant ignored.

73.The defendant said that the plaintiff then called the defendant’s employer in February 2011 to accuse the defendant of cheating him.  The plaintiff also complained to the police in around March 2011 that the defendant had committed fraud against the plaintiff.  The plaintiff had claimed against the defendant on two other trivial matters in the Small Claims Tribunal. (See pp742 - 751 of Bundle B2)  The defendant stated that none of these complaints were successful.  The plaintiff then commenced these proceedings against the defendant first claiming HK$120,000 which was then changed to HK$61,500.

74.In his 3^rd supplemental witness statement the defendant stated that the plaintiff was familiar with the ELC and the possibility of the plaintiff being “cheated” as alleged was rather remote.  The defendant also produced his mobile phone bill to show that he had several telephone conversations with the plaintiff and Mr Mogul on 28 September 2010.

75.Mr Yau had signed a witness statement dated 1 August 2012 and a supplemental witness statement dated 24 May 2013.  Mr Yau adopted his aforesaid witness statement and supplemental witness statement as his evidence-in-chief at the trial.

76.Mr Yau was introduced through middlemen to the plaintiff and the defendant who expressed interest in the relisting of PAQ.  The parties agreed a plan in August 2010 for the resumption of trading of PAQ’s shares and signed the Co-operation Agreement on about 30 September 2010.

77.Mr Yau stated that in early September 2010, the plaintiff introduced Mr Chan to him as a candidate for the position of the Chief Financial Officer of PAQ.  He had reservation for appointing Mr Chan and preferred a candidate who was strong in English and could communicate effectively with the nominated adviser of PAQ and the AIM regulator in London.  As PAQ had to show to the nominated adviser the employment contract of PAQ’s Chief Financial Officer by November 2010 and he thought that Mr Chan being a good friend of the plaintiff would be willing to do some “charity work” or postpone his request for salary until the resumption of trading of PAQ’s shares, he agreed to the appointment of Mr Chan.  The employment contract for Mr Chan was signed on about 6 October 2010.  Mr Yau agreed that before signing the employment contract, Mr Chan was already involved in the preparation for the relisting of PAQ.

78.Mr Yau said that he had made it clear to the plaintiff and the defendant in one of their meetings that if Mr Chan insisted to be paid before the relisting of PAQ, the plaintiff and the defendant should settle the issue themselves.  In October and November 2010, Mr Chan demanded for his salary.  Mr Yau said that he was not bothered and trusted that the plaintiff and the defendant would be able to comfort Mr Chan by their own means.

79.After PAQ was delisted on 30 November 2010, Mr Chan resigned from PAQ. The defendant had proposed to pay HK$47,350 to Mr Chan to settle Mr Chan’s salary claim but Mr Yau did not approve.  Mr Yau said that he had made clear to the plaintiff and the defendant that they should be responsible to keep Mr Chan in the team before the successful relisting of PAQ.    

Discussion and ruling

80.There was no dispute that the plaintiff and the defendant had agreed to participate in the Relisting Project.  There was also no dispute that the plaintiff and the defendant had agreed that they would share the Fee and the remittance charge for the Fee.  The actual amounts of the Fee (HK$116,550) and the remittance charge (HK$200) were not in dispute.  Each of the plaintiff and the defendant should bear HK$58,375.  The defendant agreed that the plaintiff had paid HK$120,000 to him on 28 September 2010.  Accordingly, the sum of HK$61,625 was repayable to the plaintiff.  The defendant said that he had settled the accounts with the plaintiff.  The plaintiff said that the defendant had not.  The plaintiff’s claim herein was for the aforesaid sum repayable to him although the plaintiff agreed to confine his claim to HK$61,500 as claimed in the statement of claim.

81.The defendant’s case was that the sum of HK$61,625 had been settled with the plaintiff in the following matter:-

(1) HK$50,000 was applied to pay the plaintiff’s agreed investment in the Gold Deal;

(2) HK$10,000 was paid to the plaintiff on 6 October 2010 out of a cheque for HK$30,000; and

(3) HK$500 was for meeting expenses and the balance was settled by cash payment of HK$1,120 paid to the plaintiff on about 6 October 2010.

82.Of course, the defendant’s alleged settlement of accounts was denied by the plaintiff.  The plaintiff denied that he had agreed to participate in the Gold Deal.  The plaintiff agreed that he had received the cheque payment for HK$30,000 from the defendant on about 6 October 2010 but denied that the payment was for repayment of any part of his claim herein.  The plaintiff said that the HK$30,000 was to repay other loans made by the plaintiff to the defendant.  The plaintiff also denied any cash payment on about 6 October 2010 from the defendant.

83.At the pre-trial review held on 3 May 2013, I discussed with the parties and identified the following issues in dispute for the trial:-

(1) Whether the plaintiff had agreed with the defendant to invest HK$50,000 in the Gold Deal?

(2) What is the purpose of the HK$30,000 paid by the defendant to the plaintiff on about 6 October 2010?

(3) Whether there was any cash payment to the plaintiff on about 6 October 2010?

84.In this case, the various agreements alleged by the defendant, including the agreement for the plaintiff to participate in the Gold Deal and the agreement between the parties to pay HK$40,000 to Mr Chan for his salary, were not in writing.  This case concerned with a number of oral agreements alleged by the defendant.  Credibility of the parties is in issue.  However, to assess credibility of the witness is not by conducting a memory test.  The trial of this action took place more than two years after the occurrence of the material events.  It is understandable that the witnesses might not recall minor details of these events and might mix up dates and times.

85.When examining the existence of an alleged oral agreement, the court will look into various matters including inherent probabilities, contemporaneous documentation or records, circumstantial evidence tending to support one account rather than the other, and the overall impression of characters and motivation of the witnesses. (See Tai Ying Fat v Sun Fook Kong Construction Ltd (unrep, HCCT 48/2009, Saunders J, 12 July 2011)).

Whether the plaintiff had agreed to invest $50,000 in the Gold Deal?

86.This is the central issue to this dispute.  The defendant’s case was that the agreement between the plaintiff and the defendant for the plaintiff to participate in the Gold Deal was made orally.  The plaintiff denied such agreement.

87.The general rule of evidence is that the party who asserts must prove. The defendant alleged that there was such an agreement.  The burden was on the defendant to prove the alleged agreement.  The pleaded case of the defendant was that in about September 2010, he was working on the Gold Deal.  When he told the plaintiff about the Gold Deal, the plaintiff expressed interest to participate in the Gold Deal. (See para 9 of the amended defence)

88.The plaintiff’s case was that in about October 2010, the defendant had talked to him about a project for the sale and purchase of gold bars in South East Asia during a lunch but he did not express any interest in such business which he considered was dubious.

89.There was no dispute that the defendant had talked to the plaintiff about dealings in gold bars although the parties’ recollection on the date of the discussion was different.  Of course, this difference was of significance.  As the defendant’s case was that part of the HK$120,000 paid to him in late September 2010 was for the plaintiff’s agreed investment in the Gold Deal, the defendant would of course try to establish that the discussion took place before the payment.  For the same reason, the plaintiff would try to establish that the discussion took place after the payment so as to destroy the defendant’s case.

90.The parties had been working closely on the Relisting Project from August to November 2010.  There was no dispute that they communicated and met frequently during this period of time.  I am sure that they had met both in September and October 2010.  There was no point to merely prove that they had met in September and/or October 2010.  There were no records on the contents of their discussion in their meetings.  The evidence adduced before me only proved that the parties had talked about dealings in gold bars at a meeting in September or October 2010.

91.The defendant produced the Gold Deal Documents to prove the existence of the Gold Deal.  The plaintiff had sought to exclude the Gold Deal Documents from evidence in the trial as a preliminary issue.  I had refused the plaintiff’s application.  Mr Wong, counsel for the plaintiff, submitted in his closing submissions that it was doubtful whether there was any gold deal.  He criticized the defendant for failing to give evidence on details on preparation and execution of the Gold Deal Documents.

92.As the plaintiff’s case was not that the defendant had deceived him to invest in a non-existing project but that he had never agreed to invest in such project (whether real or fictitious), I need not go into details of the Gold Deal.  As the plaintiff agreed that the defendant had talked to him on dealings of gold bars in October 2010 and the defendant had produced the Gold Deal Documents, I accept that the defendant has proved on balance of probabilities that he had been involved in dealings of gold bars in September or October 2010 and that he had talked to the plaintiff about such dealings.  The issues were:-

(1) whether the plaintiff had orally agreed to participate in the Gold Deal; and

(2) whether part of the payment of HK$120,000 was for the plaintiff’s investment in the Gold Deal.

The alleged oral agreement

93.In the amended defence, the defendant pleaded in paras 9 and 10 that:-

“9. In or around September 2010, the Defendant was working on and invested in a business project for the sale of gold bars (the “Gold Deal”) which transaction if concluded and closed would yield generous commission.  After being told about the Gold Deal, the Plaintiff expressed interest to participate in a portion of a required payment to the selling party, so as to facilitate the transaction with the buying party,

10. The Plaintiff and the Defendant orally agreed that the Plaintiff shall pay the HK$50,000 as the Plaintiff’s share within the facilitation payment for the Gold Deal.  If the transaction between the gold buyer and seller could be closed, the Plaintiff would get a net twofold return. ”

94.In para 11 of his 1^st supplemental witness statement, the defendant stated that:-

“…… Incidentally, I talked about the Gold Deal and the Plaintiff was interested to join. We eventually agreed orally, on an evening several days before the decision for paying AFG to get PAQ into the resumption plan with us, that the Plaintiff shall share HKD50,000 of my investment in the Gold Deal. I would give him a net twofold return (ie HKD100,000) if the transaction could be closed. The agreement was reached by a handshake at the Café Gray Deluxe within The Upper House Hotel located in Queensway.”

95.In his 3^rd supplemental witness statement, the defendant stated that:-

“24. A few days after the aforesaid email [which was an email dated 22 September 2010], the Plaintiff and I met at Café Gray of Upper House Queensway. I told the Plaintiff about the sale of gold bars, which I had been working on. This made me not needing such a day time job of managing a gold brokerage firm. He was intrigued and showed interest in that kind of market activity which was not well known to the financial market professionals. He said that he wanted to make as much money as possible outside his day time job. He thought the management of the company that he was working in, which was a parent company to a number of subsidiary companies including those he worked as Responsible Officers as aforementioned, was not too good in terms of their reputation in the securities market.

25. I then told the Plaintiff that the extensive background check on both the Seller and the Buyer for the sale of gold bars had been done, and I had already put down money to start the transaction for making some return. This could be just as big as the sale of PAQ for HK$45 Million to his Mainland investor. It was no different in nature to our PAQ requiring upfront investment, which had been advancing to a critical moment for full involvement pending the signing of the contract by Mr Kelvin Yau.

26. I offered the Plaintiff a share of my investment for his payment of HK$50,000, which could potentially earn him a net two-fold gain, as a return to the favour he had given me for arranging the sale of PAQ for HK$45 Million to the Mainland investor. ……”

96.The defendant then set out in para 27 of his 3^rd supplemental witness statement his recollection of the conversation between the parties as set out in para 54 above.

97.The defendant’s case was that the oral agreement was made at a meeting a few days after 22 September 2010 but before payment of HK$120,000 to him (which the defendant said was paid on 28 September 2010).

98.The plaintiff’s case was that although he agreed that in October 2010 the defendant had talked to him about a project for sale and purchase of gold bars in South East Asia over a lunch, he was not interested as he felt that such kind of business was dubious. (See para 15 of the plaintiff’s witness statement)

99.At the trial, the defendant was unable to tell how the plaintiff’s amount of investment (ie HK$50,000) was decided.  He was also unable to tell how the return for the plaintiff’s investment (ie net twofold return) was calculated. He only said that they were decided by him and he thought that a net twofold return was appropriate.  I noted that this promised return was not included in the conversation recollected by the defendant as set out in para 54 above. Although the defendant had qualified his recollection that it might not be word-to-word, I do not expect that the defendant would miss out such important aspect of an investment discussion in his recollection if the same had been discussed.  If there was only discussion on the amount of the plaintiff’s investment but no discussion on return, it was unbelievable that the plaintiff as an investment manager by profession would agree to invest.  If there was discussion on return, it should not have escaped the defendant’s recollection of their conversation which as shown in the 3^rd supplemental witness statement of the defendant was brief. 

100.According to the defendant, the plaintiff agreed to participate in the Gold Deal without knowing details of the Gold Deal and without seeing documents relating to the Gold Deal.  The only question asked by the plaintiff was whether there were any risks.  The plaintiff did not even ask when the deal would be closed.  It was up to the defendant to tell the plaintiff whether the transaction was concluded.  Mr Wong, counsel for the plaintiff, pointed out that in such case it was entirely up to the defendant to say if the plaintiff was entitled to any return.  Such investment was unlikely to be acceptable to the plaintiff in view of the plaintiff being an investment manager by profession.

101.According to the defendant he had told the plaintiff that the return of the Gold Deal could be just as big as the sale of PAQ for HK$45 million to the mainland investor.  Under to the Co-operation Agreement, each of the plaintiff and the defendant would hold 25% of TCH.  If TCH sold its interest in PAQ for HK$45 million, each of the plaintiff and the defendant would receive about $11 million for an investment of about HK$210,000 (ie HK$150,000 paid under the Co-operation Agreement and HK$60,000 for the ELC).  The return for the Relisting Project was over 5,230%. If the Gold Deal would yield similar return to the defendant, I doubt whether the plaintiff would agree to accept a “net twofold” return for his investment in the Gold Deal.  According to the defendant, the plaintiff did know such level of return of the Gold Deal.  The defendant stated in his 3^rd supplemental witness statement that the plaintiff had said at the meeting that: “最緊要你單金掂咗，你就發啦。我又執啲。”  I am of the view that it was unlikely that the plaintiff would be interested in an investment which would make the defendant “rich” (“發”) and only with some gain (“執啲”) to the plaintiff when the parties at the material times were co-operating in equal shares in a project with a yield of over 5,000%. 

102.The defendant also stated in his 3^rd supplemental witness statement that when he told the plaintiff about the Gold Deal, the plaintiff “was intrigued and showed interest in that kind of market activity which was not well known to the financial market professionals.  He [the plaintiff] said that he wanted to make as much money as possible outside his day time job.”  At the material times, the parties were working on the Relisting Project which would yield a return of over 5,000 times.  Would the plaintiff interested in an investment which he did not know well and which would yield only a twofold return?  I doubt.

The payment of HK$120,000

103.There was no dispute that the plaintiff had paid HK$120,000 to the defendant in late September 2010.  However, the parties disagreed on the actual date of payment.  The plaintiff said that he issued the cheque to the defendant on 27 September 2010.  The defendant said that it was on 28 September 2010 although the cheque was dated 27 September 2010.

104.There was no dispute that the amount of HK$120,000 was requested by the defendant and the particulars on the cheque including the date were filled in by the defendant.  The plaintiff only signed the cheque.

105.The defendant explained that usually the fee for providing the ELC was UD$10,000 but he was informed by Mr Mogul on 28 September 2010 that because PAQ required the ELC urgently, there was an additional charge of US$5,000 making the Fee US$15,000.  The defendant said that he used to use the rate of US$1: HK$8 in converting Hong Kong dollar into US dollar.  At such exchange rate US$15,000 would be equivalent to HK$120,000.  The defendant said that he did not know that the amount of the Fee was US$15,000 until the morning of 28 September 2010.  Accordingly, he would not have asked the plaintiff to pay him HK$120,000 on 27 September 2010.  He said that he had mistakenly dated the cheque 27 September 2010.

106.I accept the defendant’s explanation and find that the cheque for HK$120,000 was issued by the plaintiff to the defendant on 28 September 2010. The plaintiff relied on the date written on the cheque to say that it was issued on 27 September 2010 as he did not know that the defendant had put the wrong date on the cheque.  The same happened to the defendant when he pleaded in para 2 of the defence filed on 24 August 2011 that:-

“…… The Defendant says that the Plaintiff on or about 27^th September 2010 delivered to him a cheque drawn by the Plaintiff on the Bank of East Asia, Limited and payable to the Defendant for a sum of HK$120,000.00.”

This is understandable and has nothing to do with credibility. 

107.The plaintiff’s case was that the payment of HK$120,000 to the defendant was for payment of the Fee to AFG which was to be shared equally by the plaintiff and the defendant.  The plaintiff said that HK$60,000 of the payment was for the plaintiff’s share and the remaining HK$60,000 was paid on behalf of the defendant, ie an advance by the plaintiff to the defendant.

108.The defendant’s case was that HK$60,000 of the payment was for the plaintiff’s share of the Fee; HK$50,000 was for the plaintiff’s investment in the Gold Deal; and HK$10,000 was for sundries items.

109.The defendant’s pleaded case in the defence in relation to the payment was that:-

“3. …… The Defendant says that the cheque was intended for and was indeed applied towards the payment of USD15,000.00 up-front fee to AFG International Inc as per their requirement for procuring Equity Purchase Agreement for one PAQ International Holdings Limited.”

110.In the amended defence, the pleaded case of the defendant changed to as follows:-

“12. On or about 28^th September 2010, the Plaintiff and the Defendant met up. The parties orally agreed that:-

(a) the fee to be paid to AFG for the application of the Equity Line of Credit (“AFG’s Fee”) shall be shared by them in equal shares;

(b) the Defendant’s half share of the AFG’s Fees shall be set off against the Plaintiff’s share in the Gold Deal.

13. The Plaintiff then issued a cheque of HK$120,000, an agreed rounded amount, to include settlement of HK$110,000 (his share of HK$60,000 out of the remittance of the said fee of USD15,000 to AFG, plus HK$50,000) plus other sundries items the Defendant had paid and would pay, and to save trouble in paying back and forth.”  

111.In his witness statement, the defendant stated in para 9 that:-

“…… Since I had been liasing [sic] with AFG and to save his effort, the Plaintiff asked me to make the remittance, to be reimbursed by his HKD cheque. He issued a cheque of HK$120,000 to me to make the remittance to AFG…….”

112.The defendant further stated in para 16 of his witness statement that:-

“…… If I may conclude my case – the Plaintiff gave me a sum of HK$120,000 to pay AFG fully aware of the need for the payment on a product well understood by him, and I did exactly the onward payment to AFG…….”

113.The defendant’s witness statement was dated 31 July 2012 and he was legally represented when he prepared his witness statement.  Yet the defendant did not mention part of the payment of HK$120,000 was for the plaintiff’s investment in the Gold Deal.  No satisfactory explanation had been given.  The defendant in his 1^st supplemental witness statement blamed the plaintiff for changing account of his case.  The defendant stated that the only reason why he had to make the supplemental witness statement was that the plaintiff had literally re-written his statement of claim and changed the basis of his claim completely. (See para 3 of the defendant’s 1^st supplemental witness statement)  The change of the basis of the plaintiff claim would not have changed the nature of the payment of the HK$120,000.  If part of the payment was for the plaintiff’s investment in the Gold Deal, it was so since 28 September 2010 when the sum was paid.  The defendant should have pleaded that in his defence filed on 24 August 2011 irrespective of the basis on which the plaintiff tried to claim back such sum.

114.In his 1^st supplemental witness statement, the defendant put his case differently as follows:-

“16. As I pleaded in the Amended Defence, in late September 2010, AFG asked for a fee of USD15,000 for the procurement of the Equity Line of Credit. I met up with the Plaintiff on or about 28^th September 2010 to discuss the whole issue. We orally agreed to share AFG’s Fees in equal shares and that my half share of AFG’s Fees would be set off against the Plaintiff’s share in the Gold Deal. My rationale was to save paying him HKD60,000 and then he paying me HKD50,000. It also served the purpose that he would not or could not back out from the agreement on investing the said HKD50,000 for the gold transaction after I had paid HKD60,000 for the PAQ plan.

17. The Plaintiff then issued a cheque of HKD120,000, an agreed rounded amount, to include settlement of HKD110,000 (his share of HKD60,000 out of the remittance of the said fee of USD15,000 to AFG, plus HKD50,000) plus other sundries items such as the difference in actual exchange rate at the time of remittance and remittance charges on the Defendant’s bank account, and to save trouble in paying back and forth.”

115.At the trial, when the defendant was asked about the sundries items to be covered by the HK$10,000 out of the said HK$120,000, the defendant referred to exchange rate difference, remittance charge, expenses for meetings and costs for acquiring TCH.  This was different from what he had stated in his 1^st supplemental witness statement and 3^rd supplemental witness statement when he only referred to exchange rate difference and remittance charge being the sundries items.

116.The aforesaid evidence of the defendant on sundries items to be covered by the said HK$10,000 was also contradicted by his evidence on how he settled the accounts with the plaintiff.  The defendant said that he settled the accounts with the plaintiff on about 6 October 2010 by paying the plaintiff HK$11,120 by cheque (HK$10,000 out of the cheque for HK$30,000) and by cash (HK$1,120).  The defendant said that the plaintiff’s share included costs for arranging the ELC for PAQ in the sum of HK$58,375 (ie HK$116,550 + HK$200 ÷ 2) and expenses for meetings (ie HK$200 x 5 ÷ 2).  The costs for acquiring TCH were not included.

117.The exchange rate from Hong Kong dollar to US dollar in Hong Kong has been fixed at HK$7.8 to US$1 for many years. This is commonly known as the peg system.  Although the actual exchange rate is not exactly 7.8, it will be within a narrow range under the peg system.  The defendant applied an exchange rate of HK$8 to US$1 in calculating the sum of HK$120,000.  It would leave enough margins to cover the remittance charge and expenses for meetings.  There was no need to require the plaintiff to put up another HK$10,000 for sundries items.  Bearing in mind that it was agreed that the plaintiff and the defendant would share the expenses equally, this would mean a provision of HK$20,000 for sundries items.

118.The defendant’s evidence on why the cheque was for HK$120,000 had also been changing.  In his 1^st supplemental witness statement, the defendant explained in para 17 that the reason was “to save trouble in paying back and forth.”  In para 17 of his 3^rd supplemental witness statement, the reason became “to save the trouble of writing too many words on the cheque.”

119.The defendant’s explanation of “to save trouble in paying back and forth” did not sit in well with his evidence of subsequent settling the accounts with the plaintiff by paying back HK$11,120 to the plaintiff partly by cheque and partly in cash.  It was not the defendant’s case that the plaintiff and the defendant had to settle the expenses for meetings after each meeting.  The evidence of the parties on payment of expenses for meetings differed.  The plaintiff said that sometimes he paid and sometimes the defendant paid.  The defendant said that they were paid by him. In any event, there had not been paying back and forth for previous meetings. It was also not the defendant’s case that the HK$10,000 was an agreed lump sum contribution to sundries items.  The parties had to settle their accounts later.  In such case, to round up the payment cheque did not save the trouble of paying back and forth. 

120.I find the defendant’s account for the breakdown for the sum of HK$120,000 shifting and self-contradicting.  I accept the plaintiff’s evidence and find that the sum of HK$120,000 paid to the defendant on 28 September 2010 was to pay the Fee and the remittance charge to be shared equally by the plaintiff and the defendant.

The conduct of the parties

121.The defendant did not plead the Gold Deal in his defence filed on 24 August 2011.  In his defence and his witness statement, the defendant’s case was that the sum of HK$120,000 was for payment of the Fee.  There was no mention that part of the payment was for the plaintiff’s investment in the Gold Deal until the defendant amended his defence on 12 December 2012.  The defendant was already legally represented when he filed his defence.  No satisfactory explanation was provided for not mentioning the Gold Deal in these proceedings until December 2012.  If the plaintiff had agreed to participate in the Gold Deal and HK$50,000 of the HK$120,000 was for the plaintiff’s agreed investment in the Gold Deal, one would expect the defendant to have mentioned that when he faced a claim from the plaintiff for return of the HK$120,000.

122.Other than emails dated 20 January 2011, the defendant produced no documents which had referred to the Gold Deal.  I shall discuss the email exchanges between the parties on 20 January 2011 in later part of this judgment. (See paras 131-147 below)  The defendant said that he had informed the plaintiff on progress of the Gold Deal but all communication was orally. 

123.When the defendant testified at the trial, the defendant said that the plaintiff had agreed to invest HK$50,000 and accept a return of HK$100,000 without asking to see documents on the Gold Deal and without knowing how much the defendant had invested in the Gold Deal.  This could hardly be the way of a professional investment manager handling investment.

124.According to the defendant’s evidence, when the plaintiff agreed orally to participate in the Gold Deal which was between 22 and 28 September 2010 (the defendant later said that it was 24 September 2010), the plaintiff had asked when he should pay the defendant and the defendant said that there was no hurry. (See para 54 above)  The defendant explained at the trial that this was because it was late on that day and the banks were closed.  As the payment would likely be by cheque (as the payment for HKS120,000 a few days later) instead of by cash, I find such explanation unconvincing.

125.The defendant explained why he had asked the plaintiff to pay his investment in the Gold Deal on 28 September 2010, ie a few days later, was because he wanted to ensure that the plaintiff would not back out from the deal.  His reason given was that he did not want the plaintiff to miss this good opportunity to make money.  When the defendant was cross-examined on why he had only offered for the plaintiff to invest HK$50,000 (which was less than 6% of his investment of HK$900,000) and why he only offered to the plaintiff a two-fold return (when the return for the Gold Deal suggested by the plaintiff’s counsel amounted to US$4.5 million which was not disputed by the defendant), the defendant’s answer was that he was greedy.

126.If the defendant considered that the Gold Deal was a deal too good to be missed, he would not have thought that the plaintiff would back out.  If the defendant worried that the plaintiff would back out, he would not have told the plaintiff “no hurry” when the plaintiff offered to pay on 24 September 2010. No satisfactory explanation was offered for this change of mind in a few days’ time.  I noted that according to the defendant’s evidence, he had already paid the investment for the Gold Deal in the sum of HK$900,000 on 13 September 2010. (See p 356 of Bundle B)  In such case, he did not need the plaintiff’s money to proceed with the Gold Deal.

127.If the defendant was greedy, the defendant would not have offered to share with the plaintiff such good investment opportunity especially when he did not require funding from the plaintiff to proceed with the investment as aforesaid.  The defendant said that he was to return the plaintiff’s favour for sharing with him the huge profit to be made from selling PAQ to the mainland investor.  If so, the defendant would not have offered to the plaintiff only a fraction of the profits in the Gold Deal as the plaintiff’s investment return.

128.It could be seen that the evidence of the defendant was full of self-contradiction. I do not accept the defendant’s evidence. 

129.The plaintiff claimed HK$110,000 in his emails dated 19 and 20 January 2011. (See p 302 of Bundle B)  When the plaintiff commenced this action, the plaintiff claimed HK$120,000.  When he filed his First Reply, the plaintiff claimed HK$270,000.

130.I noted that the plaintiff was not legally represented until October 2012.  Although the plaintiff referred to breach of contract in the statement of claim, the content of which was a claim for fraud.  This was consistent with the other actions taken by the plaintiff after the delisting of PAQ at the end of November 2010 including accusing conspiracy and financial crime against the nominated adviser and ex-director of PAQ, complaining to the regulator of the AIM in London and to the police in Hong Kong.  The plaintiff said that he realized that he did not have sufficient evidence to prove fraud only after he had obtained legal advice.  The plaintiff then amended his claim.  As the plaintiff believed that he had been defrauded, it would not be surprised to see the plaintiff claiming for all payments he had made on the Relisting Project. 

131.The plaintiff explained that he only claimed HK$110,000 in his emails of January 2011 was because the defendant argued that there were some minor expenses and told him that the defendant only had HK$110,000 at the time when he demanded the defendant for payment.  The plaintiff said that he did not want to argue with the defendant for those minor expenses and told the defendant to give him back HK$110,000.

132.Mr Tsoi, counsel for the defendant, commented that the plaintiff did not dispute that he had agreed to invest in the Gold Deal when the defendant referred to the Gold Deal in his emails dated 20 January 2011.

133.The plaintiff explained that the defendant had raised the issue of the Gold Deal previously when he demanded the defendant for payment and he had already told the defendant that he had nothing to do with the Gold Deal.  He did not bother to respond when the defendant raised the same again in his emails of 20 January 2011.

134.The emails referred to by Mr Tsoi were emails from the defendant to the plaintiff.  As these emails were the only documentary records produced to this court in respect of the communication between the parties on the alleged involvement of the plaintiff in the Gold Deal, I shall set out below the content of these emails in full. (See pp 302 - 303 of Bundle B) 

135.The 1^st email sent by the defendant on 20 January 2011 was in response to the plaintiff’s email received by the defendant on 19 January 2011 at 1732 hours.  In the plaintiff’s email, the plaintiff stated that:-

“I want to get back all my money. Totally hkd $110,000.”

136.In the 1^st email which was sent out at 1405 hours on 20 January 2011, the defendant gave the following reply:-

“I cannot do anything about that 60k to mogul, because we agreed to pursue further after the term sheet issued and paid for. Then we went all the way, regarding that money as spent. Surely you can recall that we agreed it was a rather cheap and affordable chance to lay hands on a listed co, so we put even more money down. The gold deal is still in progress and all money paid already. We agree on the high payout because of the risk. So we all are waiting either to get paid handsomely or i report to police for a scan by that guy. To get some money back, the quickest way is go to sign off the fund release agreement (only this one) at gordon s [sic] office today or tomorrow becausm [sic] I have got my money back today from the pool already by arguing against Barry s [sic] demand on signing for rights waiving. I will leave hk this weekend. If you don’t call me before I go, then we can touch base again after CNY. Cheers.” (Emphasis added)

137.I am of the view that only those words emphasized by me in the above email were related to the Gold Deal.  The parts after the emphasized sentence referred to “high payout”, “report to police for a scan by that guy” and “get some money back” by signing “fund release agreement” were not related to the Gold Deal but more likely related to the Relisting Project.

138.In view of the expected return from the Relisting Project, I do not think that the defendant would refer to the “net twofold return” to the plaintiff in the Gold Deal (according to the defendant, this was what the plaintiff would get from the Gold Deal) as “high payout.”  The defendant should be referring to the Relisting Project.

139.When the defendant had just referred to the Gold Deal as “still in progress”, I do not think that the reference to “report to police for a scan by that guy” was referring to the Gold Deal.  I noted that the plaintiff had been complaining against others of defrauding him since the delisting of PAQ.  It was more likely that the aforesaid reference of reporting to police was referring to the Relisting Project.

140.The email exchanges produced at p 498 of Bundle B2 suggested that Gordon and Barry were Barry Chin and Gordon Chin of Chin & Associates, Solicitors who had prepared the Co-operation Agreement.  The “fund release agreement” referred to in the defendant’s email should be relating to the fund pooled together by the plaintiff, the defendant and Mr Yau pursuant to the Co-operation Agreement.

141.After receiving the defendant’s 1^st email, the plaintiff sent the following instant reply which was received by the defendant at 1412 hours, ie seven minutes after the defendant’s 1^st email:-

“I have checked every party, enjoy your trip, see u in the court.”

142.The defendant sent out the 2^nd email after 12 minutes at 1424 hours which read as follows:-

“Why am i sued now? I acted in good faith have all docs to prove payments. On the gold deal if you really want out because you need money, then i will try to have you bought out. Just tell me and i accommodate. But I am very taken aback by your intention and allegation.”

143.The plaintiff’s response to the defendant’s 2^nd email was received by the defendant at 1427 hours (ie three minutes after the defendant’s 2^nd email).  The plaintiff’s response read as follows:-

“Said before “I want to get back all my money.  Totally hkd$110,000.””

144.There were further email exchanges between the parties on 20 January 2011.  At 1438 hours, the defendant wrote:-

“If you are insisting having the whole but no less, then you will get it back all money when it is made. Just let me know of your choice. Beware that any transfer of 50k can only be done before 4pm tomorrow or inconveniently after my trip and CNY holdings [sic]. So, think about it thoroughly. I will act and react accordingly. Cheers.”

145.The plaintiff’s responded by the following email received by the defendant at 1449 hours:-

“Said before “I want to get back all my money.  totally hkd$110,000.” on or before 1600 on 20/January/2011.”

146.The defendant sent out the following reply at 1508 hours:-

“If that s [sic] what you want then i am afraid it is not what can be done. We placed the bet and hands were off on money put down long ago on Kelvin s [sic] deal. We are all adults. Since you don’t appreciate my accommodation to help you through the CNY liquidity with that 50k, i cannot do anything unjust because I lost money too. Should I consider suing you on the ground that i was led to believe that was a buyer of the AIM shell so i put down money in the first place, and then still believing in you and to go with you because you had the ambition to be CEO of a listed co as your dream? I fell a victim of my good thoughts for you too. And now I am bothered too? Come on. Think how you live your life beyond money. My 2-cent worth advice. I learn from this whole thing right from wrong. That s [sic] it.”

147.It could be seen that the parties exchanged the above emails in about one hour’s time on 20 January 2011, ie from 1405 hours to 1508 hours.  In these emails, the plaintiff only repeated one thing, ie pay back HK$110,000 to him, and nothing else.  The plaintiff was not interested in other things mentioned in the defendant’s emails.  Bearing in mind that the various complaints made by the plaintiff after the delisting of PAQ, it could be seen that when he wrote the aforesaid emails, the plaintiff, being overwhelmed by his belief that he had been defrauded, had all his attention concentrated on clawing back his moneys and nothing else.

148.The plaintiff’s evidence was that before he sent the demand text for HK$110,000, he had asked the defendant to return HK$120,000 to him.  The defendant had mentioned the Gold Deal again but the plaintiff told the defendant that the plaintiff had nothing to do with the Gold Deal. (See para 27 of the plaintiff’s witness statement)  If there was such conversation between the parties before the aforesaid email exchanges, it was not surprised to see the plaintiff not responding further to the alleged Gold Deal mentioned again in the defendant’s emails so as not to be side-tracked by the defendant.

149.In para 25 of his supplemental witness statement, the defendant stated that:-

“…… Seeing that the Plaintiff may have some liquidity problems to get through the Chinese New Year, I told the Plaintiff that I would try to have his share in the Gold Deal bought out. He never disputed the existence of his agreed investment in this Gold Deal, nor accepted my offer to assist, but kept on insisting that I should pay him HKD110,000 in subsequent text messages. I went on my Chinese New Year trip and ignored him.”

150.The defendant’s case was that the plaintiff had not disputed his agreed investment in the Gold Deal and had not accepted the defendant’s offer to have the plaintiff’s share in the Gold Deal to be bought out.  The defendant’s evidence was that the Gold Deal did not fail until July/August 2011.  In such case, according to the defendant’s belief, the plaintiff was still a participant of the on-going Gold Deal until July/August 2011.  The defendant should have continued to keep the plaintiff informed of the progress of the Gold Deal and should have notified the plaintiff when the Gold Deal eventually failed.  However, the defendant’s evidence was that the last time he kept the plaintiff informed of the progress of the Gold Deal was in end of November or early December 2010.

151.If the defendant still considered the plaintiff as a participant of the Gold Deal, the defendant would not have failed to remind the plaintiff that part of the HK$120,000 was his investment in the Gold Deal when the plaintiff tried to claim the whole sum of HK$120,000 against him.  However, this was not the case.  The parties had the following email exchanges on 11 February 2011 (p 273 of Bundle B):-

(1) Email from the plaintiff:-

“According to my records, you owe me HKD $120,000, You said you will return back before chinese new year of 2011. But you haven’t.

What should i do next?”

(2) Reply from the defendant:-

“What record or document entitles you to allege that I owe you HKD 120,000?  What record or document supports your claim that I said I “will return back before chinese new year of 2011?” of HKD 120,000?

Show them here.

If not, then sorry, you have just made an ungrounded allegation.”

152.The defendant also did not mention part of the HK$120,000 was for the plaintiff’s investment in the Gold Deal when he filed his defence and witness statement herein.  This is of significance when one bears in mind that the defendant was legally represented at that time.  I find the defendant’s evidence on the plaintiff’s participation in the Gold Deal incredible and self-contradicting.  I find that the defendant has failed to prove on balance of probabilities that the plaintiff had agreed to invest HK$50,000 in the Gold Deal.

What was the purpose of $30,000 paid by the defendant to the plaintiff?

153.As I have found that the plaintiff had not agreed to participate in the Gold Deal, the defendant should repay the balance of the HK$120,000 to the plaintiff after deducting the plaintiff’s share for the Fee and agreed sundries items.  Had the defendant repaid HK$10,000 through his cheque for HK$30,000 paid to the plaintiff on about 6 October 2010?

154.There was no dispute that the defendant had paid HK$30,000 to the plaintiff on about 6 October 2010.  The plaintiff said that this was for repayment of two loans advanced by the plaintiff to the defendant on 2 September 2010 and 4 October 2010.  The defendant said that HK$20,000 of the HK$30,000 was to pay the salary of Mr Chan and the remaining HK$10,000 was to settle the accounts for the ELC with the plaintiff.

155.The defendant did not mention this cheque of HK$30,000 in his amended defence despite his pleaded case of paying around HK$11,000 in about October 2010.  It was noted that the defendant did not give any particulars in the amended defence on how this sum of HK$11,000 was paid.  The aforesaid cheque was first mentioned only in the defendant’s 1^st supplemental witness statement dated 19 March 2013.

156.The defendant’s case was that Mr Chan had started working for PAQ in September 2010 although his employment contract with PAQ was not signed until early October 2010.  However, PAQ did not pay Mr Chan’s salary and Mr Yau did not agree to pay Mr Chan’s salary until successful relisting of PAQ.  The defendant did not want to lose Mr Chan which would affect the relisting of PAQ and he did not want the plaintiff losing the friendship of Mr Chan.  He then agreed with the plaintiff to pay HK$40,000 to Mr Chan to be shared equally between them.  The defendant said that HK$20,000 out of the HK$30,000 paid to the plaintiff on about 6 October 2010 was his share for Mr Chan’s salary and the balance of HK$10,000 was to settle the ELC accounts.

157.The defendant had put forward different versions on how he came to the agreement with the plaintiff to pay HK$40,000 to Mr Chan.  In his 1^st supplemental witness statement, the defendant stated in para 19(b) that:-

“…… In early October, the Plaintiff told me that CHAN asked for a cash payment equal to HKD40,000 for his work done in September. It was intended as a cash payment through the Plaintiff because CHAN was then working for another company and his work had been done outside the day time job. We both agreed that it was fair to CHAN and that PAQ would object to paying so we just shared the burden equally. So I paid my share of HKD20,000 which was included in the said cheque…….”

158.According to his 1^st supplemental witness statement, the defendant came to the agreement with the plaintiff to pay HK$40,000 to Mr Chan because Mr Chan asked in early October 2010 for cash payment of HK$40,000 for his work done in September 2010.  However, in his 2^nd supplemental witness statement, the defendant put forward a different version as follows:-

“19. After Paul Chan had started working on the PAQ project from early September 2010, the Plaintiff did mention to me that Paul was worried that he would not be paid. At the same time, we were certain that Kelvin Yau would not easily approve immediate payment to Paul Chan out of the funds for the resumption of PAQ (although we knew we should somehow try our best to help Paul Chan to get paid on a monthly basis according to the employment contract afterwards when possible). It was such a situation that if Paul Chan did not receive some payment at that time, PAQ may risk losing it’s much needed CFO at the critical moment while the Plaintiff, who introduced Paul Chan into the project, may lose Paul Chan’s friendship. It was not what I want to see, and the Plaintiff and I would not risk such loss to PAQ. After all, Paul Chan was working since early September and we would need him in the project.

20. After some discussion by late September very close to the three parties signing the tri-parte agreement [the Co-operation Agreement], the Plaintiff suggested and I eventually agreed we should soon make a payment of HK$40,000 to Paul Chan.  The Plaintiff and I agreed to share equally. ……”

159.It could be seen that the defendant’s evidence on the time and circumstances leading to his agreement with the plaintiff to pay HK$40,000 to Mr Chan had been changing.

160.There was no dispute that Mr Chan had started working for PAQ in September 2010 until his resignation in December 2010.  Mr Yau confirmed that PAQ had not paid Mr Chan’s salary.  Documents produced by the parties showed that Mr Chan had claimed his outstanding salary at the Labour Tribunal and obtained award from the Labour Tribunal for his claim. (See pp 781 - 793 of Bundle C)

161.The plaintiff denied that there was any agreement between the plaintiff and the defendant that they would share a payment of HK$40,000 to Mr Chan for his salary.

162.On 14 October 2010 Mr Chan sent an email to Mr Yau with copy to the plaintiff and the defendant claiming for his 22 days salary for September 2010 in the sum of HK$29,333.33. (See p 709 of Bundle B2)  This email was sent eight days after the defendant had paid HK$20,000 to the plaintiff on 6 October 2010 to pay for Mr Chan’s salary.  The defendant stated in para 21 of his 2^nd supplemental witness statement that:-

“21. Pursuant to the aforementioned agreement between the Plaintiff and I to pay $40,000 to Paul Chan, I issued the HK$30,000 cheque to the Plaintiff as stated in my previous Supplemental Witness Statement. I expected that the Plaintiff would pass the money to Paul Chan and kept Paul on our side. ……”

163.If what the defendant said was true, the defendant would be surprised to see the aforesaid email of Mr Chan and would check with the plaintiff whether the plaintiff had paid HK$40,000 to Mr Chan as agreed between the plaintiff and the defendant.  The defendant did not check with the plaintiff.  Instead in his email of 16 October 2010, he urged Mr Yau to pay Mr Chan’s salary. (see pp 709 - 710 of Bundle B2)  In his said email, the defendant wrote:-

“So he [Mr Chan] is made indispensable to the whole thing. So he must be paid. If he walks, our investment so far can all go down the drain – as against the planning of us. This is the same principle as we pay whoever absolutely necessary for the resumption while the cupboard has little stocks.”

164.On 14 November 2010, Mr Chan sent another email to Mr Yau with copies to the plaintiff and the defendant claiming for his salary for September and October 2010. (See p 718 of Bundle B2)  This showed that Mr Chan had not received any payment for his salary as at 14 November 2010 which was more than one month after the defendant had paid his contribution for Mr Chan’s salary to the plaintiff.  If the defendant had agreed with the plaintiff to share the payment of Mr Chan’s salary for September/October 2010 and that he had entrusted HK$20,000 to the plaintiff on about 6 October 2010 to pay Mr Chan, he would be surprised to see Mr Chan still claiming for his outstanding salary for September and October 2010.  He would have checked with the plaintiff or Mr Chan as to whether Mr Chan had received the payment of HK$40,000 from the plaintiff.  The defendant did not do that.  His explanation was that he trusted the plaintiff.  Such explanation was far from convincing in view of the fact that Mr Chan claimed as at 14 November 2010 that he had received no payment since he worked for PAQ.  The defendant’s aforesaid explanation also did not sit in well with his following email sent to the plaintiff on 14 November 2010 (see p 719 of Bundle B2) after they received the aforesaid email from Mr Chan:-

“Have you had the small talk about postponing this with Paul at all? Well, with 2 weeks remaining ……”

165.The defendant’s evidence was that he agreed to share with the plaintiff payment for Mr Chan’s salary because he did not want to see Mr Chan leaving the employment of PAQ which would have adverse effects on the Relisting Project. In para 22 of his 3^rd supplemental witness statement, the defendant stated that:-

“The sale of PAQ to the Mainland investor was such a potential for large profit that I was willing to pay money upfront for any expenses when deemed necessary, including the payment to AFG for the Term Sheet and to Paul Chan the CFO over his salary, in order to ensure the requirements for the resumption are fulfilled. ……”

166.However, when Mr Chan claimed his outstanding salary in November 2010, the defendant did not make further contribution to pay Mr Chan’s salary but asked the plaintiff to talk to Mr Chan to postpone payment without mentioning their previous agreed payment for Mr Chan’s salary.

167.In para 19 of his 1^st supplemental witness statement, the defendant stated that after he paid HK$20,000 to the plaintiff on about 6 October 2010 for Mr Chan’s salary, he then “never attended to the matter due to CHAN was later officially employed by PAQ from October to December 2010.”  This was inconsistent with the defendant’s involvement in this subject as shown by his aforesaid emails.  The Relisting Project was at the most crucial stage in November 2010 as the deadline for PAQ to fulfill the requirements for its relisting was the end of November 2010.  If Mr Chan should leave PAQ before the end of November 2010, PAQ’s relisting would certainly be adversely affected. However, this time the defendant did nothing to pacify Mr Chan to ensure that Mr Chan would not leave PAQ.  The reason for his agreeing to pay HK$20,000 to Mr Chan in October 2010 did not sit in well with his attitude toward Mr Chan’s claim in November 2010.

168.On 15 December 2010, the defendant proposed to Mr Yau and the plaintiff to settle Mr Chan’s claim at 40%.  The defendant stated in his email dated 15 December 2010 that he had informed Mr Chan of his proposal. (See p 728 of Bundle B2)  On 16 December 2010, the defendant sent an email to the plaintiff with copy to Mr Yau informing them that Mr Chan had accepted his 40% settlement proposal. (See p 729 of Bundle B2)  As Mr Yau stated in his evidence, he did not agree to the proposal.  Mr Chan was not paid and had to claim his salary from 9 September to 7 December 2010 at the Labour Tribunal.

169.The aforesaid emails from the defendant showed that he was in direct communication with Mr Chan in December 2010 on Mr Chan’s salary claim.  He should know that Mr Chan had not received any salary payment if not from Mr Chan’s email dated 14 October 2010 then from his communication with Mr Chan in December 2010.  However, the defendant stated in his 2^nd supplemental witness statement dated 24 May 2013 that he did not know that the plaintiff had not paid Mr Chan until April/May 2013.  The following was the defendant’s evidence in his 2^nd supplemental witness statement:-

“25. After reading the Supplemental Witness Statement of the Plaintiff and the Witness Statement of Paul Chan, it now appears to me that the Defendant [sic] had never paid a dime to Paul Chan. I reserve all my rights in this matter.”

170.Furthermore, this alleged agreement between the parties to share Mr Chan’s salary was not pleaded in the amended defence.  It was first mentioned only in the defendant’s 1^st supplemental witness statement.  I find the defendant’s evidence incredible.  I find that the defendant has failed to prove on balance of probabilities that there was an agreement between the plaintiff and the defendant in early October 2010 to pay HK$40,000 to Mr Chan for his salary.  With my aforesaid finding, I of course also reject the defendant’s contention that the cheque for HK$30,000 paid to the plaintiff on 6 October 2010 was partly for paying Mr Chan’s salary.

171.Mr Tsoi criticized the plaintiff for failing to call Mr Chan to testify at the trial after obtaining leave from the court on 3 May 2013 to file and serve the witness statement of Mr Chan.  Mr Tsoi referred to Chan Sze Yuen v Tin Wo Engineering Co Ltd (unrep, CACV 71/2011, 25 July 2012) and urged me to draw adverse inferences against the plaintiff.

172.In the Chan Sze Yuen case, the issue in dispute was whether the applicant was employed by the 2^nd respondent to work at Macau.  The applicant’s evidence was that he was given to understand by a foreman of the 2^nd respondent that there was urgent work in Macau that required helping hands and that the applicant and three other workers were directed by another foreman of the 2^nd respondent to go to Macau on the next day to help with the work there.  The trial judge took into consideration the fact that the respondents had chosen not to call the two foremen of the 2^nd respondent to rebut the evidence given by the applicant in assessing the credibility and reliability of the applicant’s evidence.  Chu JA agreed that the respondents’ failure to call the two foremen as witnesses was a matter that the trial judge was entitled to take into account in deciding whether to accept the applicant’s evidence in these aspects and the trial judge might also draw adverse inferences against the respondents’ case. (See para 21 of the judgment)

173.As pointed out by Saunders J in the Tai Ying Fat case (supra) that it was right that a court might draw adverse inferences from the failure to call a witness but it did not follow that, because a witness was not called, the court had to find for the other side. (See paras 34 and 35 of the judgment)

174.In this case, it was the defendant who asserted that he had agreed with the plaintiff to pay HK$40,000 to Mr Chan for Mr Chan’s salary and that he had paid HK$20,000 to the plaintiff for such purpose.  The burden was on the defendant to prove his assertion.  The plaintiff had not filed the witness statement of Mr Chan.  The plaintiff was not entitled to rely on matters stated in Mr Chan’s witness statement which the plaintiff did not.  Documents produced at the trial showed that Mr Chan had sent emails to claim PAQ for his salary from September to December 2010 and had claimed against PAQ for the same in the Labour Tribunal.  The defendant’s emails showed that he had been in direct communication with Mr Chan on his salary claim.  All evidence adduced before me showed that Mr Chan all along alleged that he had not received any payment for his work for PAQ.  It was not the case of the defendant that Mr Chan had actually received HK$40,000 from the plaintiff for his salary but failed to disclose such payment in his claim.  It was also not the defendant’s case that Mr Chan had knowledge of the alleged agreement between the plaintiff and the defendant to share Mr Chan’s salary.  Mr Chan’s evidence, even if he attended the trial, would only be of peripheral and marginal relevancy.  I do not agree that in the circumstances of this case I shall draw adverse inferences against the plaintiff for not calling Mr Chan to testify at the trial.    

175.The plaintiff said that the HK$30,000 was repayment of loans.  The defendant denied that he had borrowed such loans from the plaintiff. 

176.The defendant said that as at 2 September and 4 October 2010, the dates of loan alleged by the plaintiff, the defendant had ready cash in his bank accounts exceeding the amounts of loan alleged by the plaintiff and he had no need for loan at these dates.

177.The defendant produced his bank statement dated 21 September 2010 to show that he had a credit balance of about HK$655,000 in his accounts held with HSBC as at 2 September 2010. (See pp 666 - 668 of Bundle B2)  However, I note that the defendant’s bank statements also showed an outstanding overdraft of about HK$5,000 as at 4 September 2010 which was increased to about HK$8,000 as at 21 September 2010 while his credit balance dropped to HK$220,000.  This showed that the defendant’s need for fund was substantial at the material times and he still needed to use his overdraft facilities when he had credit balances in his accounts.  There might be reasons for the defendant to keep credit balances in his accounts at the material times.

178.On 30 September 2010, Mr Yau sent an email to the plaintiff and the defendant to discuss their proposed co-operation.  Mr Yau raised the issue of pooling fund for estimated expenditures of HK$600,000 for the relisting of PAQ with the plaintiff and the defendant’s shares being HK$300,000. The defendant drafted a proposed reply to the Mr Yau for the plaintiff’s comment. (See pp 693 - 696 of Bundle B2)  In his draft reply, the defendant proposed the following reply to Mr Yau’s request for funding contribution:

“I was only asking for 200K plus 100K in 3 weeks time because of the liquidity on my side.” (p 695 of Bundle B2)

179.It was in the defendant’s own words that he had liquidity problem at the end of September 2010.  The credit balance as at 21 September 2010 in the defendant’s bank accounts as shown in the defendant’s aforesaid bank statement was about HK$220,000.  The defendant had issued a cheque dated 30 September 2010 for HK$150,000 for his share of contribution under the Co-operation Agreement to the expenditures for the relisting of PAQ’s shares in the AIM (see p 760 of Bundle C).  The defendant’s cash-flow would be tight by the end of September or early October 2010.

180.The same also repeated in October 2010.  The defendant produced his bank statement dated 21 October 2010 to show that he had a total credit balance of about HK$300,000 in his two accounts held with HSBC as at 30 September 2010 (ie the date when the plaintiff said that the defendant asked him for the loan of HK$22,000) and a total credit balance of about HK$155,000 as at 4 October 2010 (ie the date when the plaintiff said that he had advanced the loan of HK$22,000 to the defendant). (See pp 713 - 714 of Bundle B2)  The same bank statement also showed that the defendant had an outstanding overdraft of about HK$23,000 as at 21 October 2010 when his other accounts had credit balances of about HK$132,000 at that date.  It was noted that the amount of the defendant’s outstanding overdraft had increased from about HK$8,000 on 21 September 2010 to about HK$23,000 on 21 October 2010 despite credit balances in the defendant’s other accounts at the same dates.  Suffice it to say that credit balances in his accounts were not conclusive evidence to prove that the defendant would not borrow from others in early September and early October 2010.

181.The defendant also produced his mobile telephone bill to show that he had not called the plaintiff’s mobile phone on 2 September 2010 to ask for loan.  The plaintiff said at the trial that the defendant called his office number on 2 September 2010.  The defendant’s evidence was that he did not know the telephone number of the plaintiff’s office.  I noted that the plaintiff had not identified from the telephone bill produced by the defendant records of calling the plaintiff’s office. 

182.The defendant said that he did not use his office telephone when talking about sensitive business or personal issues to avoid the same being overheard by colleagues.  He might be using other telephone such as home phone or at that time his colleagues were not around.  Even if I accept that the plaintiff’s evidence of the defendant calling him in the morning of 2 September 2010 was wrong, it does not mean that the plaintiff’s evidence on loan to the defendant must be rejected.  The request for loan could have been made by the defendant at a telephone conversation called by the plaintiff instead of by the defendant and the plaintiff had remembered it wrongly.  I have to take into consideration all evidence of the parties to assess the effect of this piece of evidence on the respective cases advanced by the parties.

183.The defendant criticized the plaintiff of putting forward different stories on his funding of the alleged loan on 2 September 2010.  In his draft supplemental witness statement provided by the plaintiff’s solicitors to the defendant’s solicitors on 29 April 2013, the plaintiff stated that he withdrew HK$8,000 from his account on 2 September 2010 to fund the loan of HK$8,000 to the plaintiff on that day. (See pp 1051 - 1054 of Bundle D)  The plaintiff later changed his evidence in the draft supplemental witness statement of the plaintiff annexed to the consent summons dated 2 May 2013 to say that he had HK$4,000 cash at hand on that day and withdrew HK$4,000 from his bank account to make up the loan to the defendant. (See pp125 - 129 of Bundle A)

184.As pointed out above, assessment of credibility is not a test of memory.  I have to bear in mind that the plaintiff was recalling matters occurred more than two years ago.  Some mistakes in details of the recollection were understandable.  The plaintiff might have to check his bank statement to confirm his recollection.

185.The defendant’s evidence on the alleged agreement for the parties to share Mr Chan’s salary was so incredible that I reject the defendant’s explanation for the payment of HK$30,000 to the plaintiff on about 6 October 2010.  On balance of probabilities, I accept the plaintiff’s evidence that this sum of HK$30,000 was repayment of previous loans from the plaintiff to the defendant. I find that the defendant did not repay HK$10,000 of the HK$120,000 to the plaintiff by his cheque of HK$30,000 issued to the plaintiff on about 6 October 2010.

Whether there was cash payment paid by the defendant to the plaintiff?

186.In the amended defence, the defendant pleaded that he had paid around HK$11,000 to the plaintiff in about October 2011 to round up the accounts with the plaintiff.  However, there was no mention of any cash payment in the amended defence.

187.At the trial, the defendant said that on 28 September 2010 the plaintiff paid HK$120,000 to him as round up figure to cover expenses of sundries items. He said that sundries in the sum of HK$6,000 to HK$7,000 had already been incurred as at 28 September 2010 and a further sum of HK$5,000 for the acquisition costs of TCH would have to be paid.  The defendant tried to justify at the trial the provision of HK$20,000 for sundries items (ie HK$10,000 from each party).

188.According to receipt for the acquisition costs of TCH, such costs were not paid until 22 October 2010. (See p 759 of Bundle C)  In such case, there were no reasons for the defendant to finalize and settle the accounts with the plaintiff on about 6 October 2010.  If the defendant had to settle the accounts with the plaintiff on about 6 October 2010, the amount of sundries items (other than remittance charge) to be shared by the plaintiff would be HK$5,500 to HK$6,000 (ie [HK$6,000/HK$7,000 + HK$5,000] ÷ 2) instead of HK$500.  If so, according to the defendant’s case, he would not need to make any cash payment to the plaintiff at all to settle their accounts.

189.At the trial, the defendant said that he had paid HK$1,120 in cash to the plaintiff on about 6 October 2012.  He further said that he did not have coin for the balance HK$5 payable to the plaintiff (according to the defendant’s calculation he should return HK$1,125 in cash to the plaintiff) and the plaintiff agreed to accept HK$1,120 as settlement of the accounts between them.  The defendant in the amended defence and his 1^st supplemental witness statement only referred to round figure of HK$11,000.  If he could specifically recall the cash payment in such details, he should have set it out in one of his three supplemental witness statements served herein but he did not.

190.The defendant explained at the trial that he settled the accounts with the plaintiff on about 6 October 2010 because he did not want to carry a debt. If so, he would not have asked the plaintiff to put him in fund for HK$10,000 just a few days earlier “to save trouble in paying back and forth”.  It was not the defendant’s case that he expected substantial sundries items up to HK$20,000 to be incurred in the next few days.  Asking the plaintiff to put him in fund for HK$10,000 in this case would certainly mean that he would carry a debt to the plaintiff.

191.It was also noted that there was no mention of payment of the odd difference by cash in the amended defence.  This assertion only came up in the defendant’s 1^st supplemental witness statement.  Even then the amount of HK$1,120 and the disposal of the remaining HK$5 did not find their way into any of the three supplemental witness statements served by the defendant.  They only popped up at the trial.

192.In the premise, I do not accept the defendant’s evidence that he had paid HK$1,120 to the plaintiff in cash on about 6 October 2010.

193.I find that no cash payment was paid by the defendant to the plaintiff on about 6 October 2010.

Other issues

194.The defendant took issue on the plaintiff denying that he had arranged meetings in relation to promoting the ELC.  Mr Tsoi referred to various emails from the plaintiff to the defendant to show that the plaintiff was not telling the truth.  (See pp 1129 - 1130 and 1135 of Bundle D2 and p 322 of Bundle B1) Other than the email at p 322 of Bundle B1, the other emails did not expressly state that the meetings were related to the ELC.  They referred to “introduce our facilities models to them” or “fund investment mechanism” (pp 1129 and 1135 of Bundle D2).  The other email simply did not mention the subject of meeting (p 1130 of Bundle D2).

195.The plaintiff had pleaded in para 3 of the amended statement of claim that in about April 2010 he and the defendant had agreed to have a joint business plan to promote the ELC.  In his witness statement, the plaintiff also said that he had introduced potential applicants for the ELC.  Denying his involvement in promoting the ELC would not assist the plaintiff’s case.  The aforesaid emails, if there were related to promotion of the ELC, would affirm the plaintiff’s pleaded case.  The plaintiff only did not recall these meetings if they were related to promotion of the ELC.

196.The defendant also took issue on the plaintiff’s case that the plaintiff was still learning from the defendant about the ELC.  The defendant in his 3^rd supplemental witness statement said that the plaintiff was very familiar with the ELC.  However, it was the defendant’s pleaded case that when the plaintiff was promoting the ELC, the usual practice was the plaintiff arranged meetings with the interested parties, wherein the defendant introduced the product of the ELC. (See para 8(a) of the amended defence)  This showed the plaintiff’s reliance on the defendant’s knowledge in the ELC and also explained the plaintiff’s subsequent accusations against the defendant as stated in his abandoned statement of claim.

197.The defendant in the amended defence pleaded that it was agreed between the plaintiff and the defendant that the defendant’s half share of the Fee should be set off against the plaintiff’s share in the Gold Deal.  Mr Wong, counsel for the plaintiff, submitted in his closing submissions that:-

“26. For the set-off, it is so clearly pleaded that D’s share of the AFG fee (ie US$7,500) shall be set off against P’s share in the Gold Deal (ie HK$50,000). In other words, it is pleaded that the parties agreed that D’s share of US$7,500 (ie HK$58,275 + $100) be set off against P’s share in the Gold Deal in the sum of HK$50,000.

27. It was further explained in paragraph 11 of the Amended Defence [A18] the HK$120,000, an agreed rounded amount include settlement of HK$110,000 (P’s share of HK$60,000 in the AFG fee plus HK$50,000) plus other sundries items D had paid and would pay. It is clear from the calculations above, in particular “plus HK$50,000” as underlined hereinabove, that the D’s pleaded case was that D’s share of US$7,500 (HK$58,375) be set off against P’s share of HK$50,000.

28. D’s pleaded case in relation to the alleged 2^nd Oral Agreement [ie the agreement for the plaintiff’s investment in the Gold Deal to set off with the defendant’s share of the Fee] was repeated in his supplemental witness statement [§§ 16, 17 A62].

29. According to the D’s pleaded case, the set off means that D would only need to bear HK$50,000 whereas D [sic] to bear HK$66,750. In other words, P would be paying an additional sum of HK$8,375 for the AFG Fee.

30. However, D denied that was his interpretation of his pleaded case under cross-examination as he was aware of the difficulty in explaining the [sic] why P should pay an additional sum of HK$8,375.”

198.In making the above submissions, Mr Wong had overlooked that the defendant had also pleaded in para 16 of the amended defence that the defendant had paid around HK$11,000 to the plaintiff in about October 2010 to round up the accounts between them.  The defendant only claimed to set off the plaintiff’s alleged investment in the Gold Deal for part (but not whole) of the defendant’s share for the Fee.  I do not consider that the defendant had shifted his ground of defence.

Amount due from the defendant to the plaintiff

199.There was no dispute that the plaintiff and the defendant had agreed to share the Fee and the remittance charge for remitting the Fee to AFG.

200.The defendant in his evidence at the trial suggested that sundries items agreed to be shared by the parties and covered by the plaintiff’s payment of HK$120,000 also included expenses for meetings.  The defendant said that he calculated such expenses at $1,000 (ie $200 x 5) and the plaintiff’s share was $500.  The defendant had explained his breakdown for the sum of HK$120,000. When he talked about sundries items in his various supplemental witness statements, he only referred to exchange rate difference and remittance charges.  This was different from what he had said in the witness box when he tried to include the expenses for meetings and costs for acquiring TCH as sundries items.  However, the defendant had not produced any evidence to show how much had been paid by him as expenses for their meetings.

201.As discussed above (see paras 115 - 119 and 187 - 188 above), the defendant’s evidence on what were agreed sundries items to be shared by the parties had been changing and self-contradicting.  In his supplemental witness statements, only exchange rate difference and remittance charge were covered. In his evidence at the trial, they also covered drinks for meetings and costs of acquiring TCH.  However, in his evidence on settling of accounts, he only included remittance charge and $1,000 for meeting expenses.  If the parties had agreement to share the expenses for meetings, the defendant would no doubt have kept records and receipts for such expenses and would produce the same to the court in these proceedings to support his case.  No such evidence had been produced.

202.I do not accept the defendant’s evidence and find that the agreement of the parties was to share the Fee and the remittance charge only.  There was no agreement to share expenses for meetings.  I find that the parties had agreed to share the acquisition costs of TCH but it was not covered by the sum of HK$120,000 paid by the plaintiff to the defendant on about 28 September 2010.

Conclusion

203.In the premise, I find that the plaintiff had agreed to share the Fee and the remittance charge equally with the defendant.  The amount responsible by the plaintiff under such agreement was HK$58,375.  The amount repayable to the plaintiff is HK$61,625 (ie HK$120,000 – HK$58,375).  As the plaintiff only claims HK$61,500 in this action, I allow the plaintiff’s claim in the sum of HK$61,500.

Costs

204.Costs follow event.  I make an order nisi for the defendant to pay the plaintiff’s costs for this action (including costs previous reserved) to be taxed, if not agreed with certificate for counsel.

205.The aforesaid costs order nisi shall become absolute 14 days after the date of this judgment unless any party shall apply to vary the same within this 14 day period.

Mr Brian MW Wong, instructed by Chan & Tsu, for the plaintiff

Mr Eric Tsoi, instructed by Joseph SC Chan & Co, for the defendant