Wong See Lung v. Pang Kwong Ting
Read the full judgment text of HCA 716/2012 on BabelCite. This High Court CFI judgment was delivered on 30 July 2015.
1. This is a contract dispute. Central to the dispute between the parties is a property development in Wuzhou known as Sun Plaza. Sun Plaza is owned by Wuzhou Mingxiang Real Estate Development Ltd, (Wuzhou Mingxiang). A Hong Kong company, China Minerals and Natural Resources Holdings Ltd (China Minerals), held 50% of Wuzhou Mingxiang and consequently, a 50% interest in Sun Plaza.
Cites 3 cases
|
HCA 716/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 716 OF 2012 _______________
_______________
_______________ J U D G M E N T _______________ The proceedings 1.This is a contract dispute. Central to the dispute between the parties is a property development in Wuzhou known as Sun Plaza. Sun Plaza is owned by Wuzhou Mingxiang Real Estate Development Ltd, (Wuzhou Mingxiang). A Hong Kong company, China Minerals and Natural Resources Holdings Ltd (China Minerals), held 50% of Wuzhou Mingxiang and consequently, a 50% interest in Sun Plaza. 2.It was generally the practice of the parties involved in this litigation, when dealing with their various interests in China Minerals, to refer not to the number of shares they held in China Minerals, nor to a percentage interest in China Minerals, but to the percentage interest in Sun Plaza that was represented by those shares. That is illustrated particularly by the evidence of Mr Teng Kui Ming (Mr Teng), in the following exchange in cross-examination[1]:
3.The dispute revolves around a 30% interest in China Minerals which represented 15% of the interest in Sun Plaza. 4.There is an issue as to whether or not Mr Wong was aware of an increase in the number of shares in China Minerals, which had the effect of diluting his interest in both China Minerals and Sun Plaza. This, and the fact that the parties referred to interests in Sun Plaza and not China Minerals, has led to the likelihood that when the respective sides referred to an interest in Sun Plaza by way of a percentage, during the lead up to the making of the contract, confusion may well have arisen as to precisely what was being discussed. 5.The matter has not been assisted in the way in which the claim has been pleaded. Although a contract between Mr Wong and Mr Teng is at the centre of the dispute, Mr Wong has brought his proceedings against Mr Pang in respect of his alleged role as a middleman responsible to secure the transfer of shares in China Minerals from Mr Teng to Mr Wong. As best as I can I have distilled the claim in the following way. The contract and the dispute 6.Mr Wong says that in November 2007, Mr Pang, acting as a middleman, negotiated a contract whereby Mr Wong would, for a consideration of $5 million acquire from Mr Teng his shares China Minerals, representing a 15% interest in Sun Plaza. 7.Mr Wong says that it was agreed with Mr Pang that Mr Pang was to be paid a commission of $500,000 for his services as a middleman. 8.There is no dispute that a sum of $5 million was paid by Mr Wong to Mr Pang on or about 27 November 2007, (the date when Mr Pang presented the cheque to his bank account). Mr Pang’s bank statement shows that he later paid that sum out. There is no clear evidence as to the recipient of that sum. I find that it was more likely than not paid to Mr Teng. 9.There is also no dispute that a further sum of $500,000 was paid to Mr Pang by Mr Wong on 25 March 2008. Mr Pang’s bank account shows a sum of $500,000 being withdrawn on 27 March 2008. Mr Pang says that was paid to Mr Teng. The cheque was not produced. Mr Teng’s bank statement showing the sum being credited to him was not produced. There is accordingly a paucity of evidence as to whom that $500,000 was paid by Mr Pang. The only evidence is Mr Pang’s oral evidence and Mr Teng’s oral evidence that the sum was paid to Mr Teng. 10.Mr Pang says that the contract price was $6 million and that $5,500,000 has been paid to him by Mr Wong. Mr Pang says that he paid those sums to Mr Teng. As will be seen, Mr Pang says that he paid the balance of $500,000 to Mr Teng on behalf of Mr Wong. Mr Pang counterclaims for the sum of $500,000. 11.Mr Pang relies primarily on a brief, undated written document recording the transaction at $6 million, acknowledging that $5 million has been received by Mr Teng, and signed by both Mr Wong and Mr Teng. 12.Mr Pang says that following a meeting between Mr Wong, himself and Mr Teng, on around 9 May 2008, it was agreed that Mr Pang would pay Mr Teng the outstanding $500,000, to enable Mr Teng to “cash out” of the transaction. Mr Pang says that Mr Wong agreed that he, Mr Wong, would later refund the sum of $500,000 to Mr Pang. Mr Pang says that Mr Wong has not paid that sum. Mr Wong denies the meeting and the subsequent payments after the meeting. 13.By counterclaim, Mr Pang demands from Mr Wong payment of the balance of $500,000. 14.Mr Wong says that Mr Pang has failed to deliver the shares in China Minerals, and that accordingly the contract to buy and sell the shares has been repudiated. Alternatively he says there has been a complete failure of the consideration of the contract. 15.In the alternative, Mr Wong says that Mr Pang holds a sum of $5 million, which was paid to him by Mr Wong to acquire 15% of the shares in Sun Plaza, that those shares were not delivered to Mr Wong, and that accordingly Mr Pang holds the sum on trust for Mr Wong. Mr Wong demands the return of a sum of $5 million. 16.Mr Wong says further that as Mr Pang failed to achieve the delivery of the shares to Mr Wong he is not entitled to his commission of $500,000. Mr Wong demands repayment of the $500,000. The background 17.The documentation in respect of China Minerals in the bundles is incomplete, but the following information can be ascertained. 18.China Minerals is a Hong Kong company incorporated on 25 April 2006, with a share capital of $100 million in $1.00 shares. Of that 100 million shares, 1 million were subscribed for, 510,000 by Prospect Plan International Ltd, a BVI company, and 490,000 shares by Huang Hua Jiang. I understand that Prospect Plan was owned by Mr Huang, and that he incorporated China Minerals as an investment vehicle to be used in China. 19.An Annual Return, dated 25 April 2007, confirms that of the $100 million share capital, 1 million had been issued as fully paid up shares. The return shows that on 13 December 2006, Prospect Claim transferred its 510,000 shares to Mr Huang, and on the same day, Mr Huang transferred 300,000 shares to Mr Wong[2]. Mr Huang then had 700,000 shares. 20.On 2 May 2006, Mr Wong was appointed as a director of China Minerals. On 21 June 2007, a document, unsigned, but presented by Mr Huang, notified the Companies Office that Mr Wong had ceased to be a director on 19 April 2007. No explanation was given for the cessation. 21.On 21 July 2007, a Return of Allotments was presented by Mr Huang purporting to show that the share capital of China Minerals had been increased by 1,500,000 $1.00 shares. The Return of Allotments shows that the shares were allocated, as to 750,000, to Mr Pang, and 750,000 to Mr Teng. The reasons why I say “purporting” will appear later. 22.With the allotment of the new shares, Mr Wong’s shareholding was diluted. Previously, his 300,000 shares represented 30% of China Minerals, and consequently, 15% of Sun Plaza. Now, Mr Pang and Mr Teng, each with 750,000 shares, each held 30% of China Minerals, and consequently, each held 15% of Sun Plaza. Mr Wong’s interest in China Minerals was reduced to 12% of that company, and consequently 6% of Sun Plaza. 23.An annual return was filed on 25 April 2008. This shows Mr Huang holding 700,000 shares, Mr Wong holding 300,000 shares, Mr Pang holding 750,000 shares, and Mr Teng holding 750,000 shares. 24.An annual return dated 25 April 2009, presented by Mr Pang, shows that on 17 June 2008, Mr Huang transferred 700,000 shares to Mr Pang, that on the same day, Mr Teng transferred 700,000 shares to Mr Pang and that Mr Pang’s current holding in the company stood at 2,200,000 shares. Mr Wong still retained 300,000 shares. Now, Mr Pang owned 88% of the shares, and Mr Wong 30% shares. Mr Pang was the secretary of the company and the sole director. 25.The next annual return is produced dated 25 April 2014. The recorded share capital, paid up, is $2,500,000. It records that Mr Pang owns 2,200,000 shares, and Mr Wong still owns 300,000 shares. 26.A duly stamped bought and sold note in respect of the transfer of 750,000 shares from Mr Teng to Mr Pang, dated 17 June 2008, was produced. The contract 27.Mr Wong’s evidence was that in about November 2007, Mr Pang represented to him that he, Mr Pang, and Mr Teng had each acquired 30% of the shares in China Minerals from Mr Huang. Each 30% block of China Minerals shares represented 15% of Sun Plaza. Mr Huang’s interest in China Minerals was thereby reduced to 10%. 28.Mr Wong said that Mr Teng was not interested in the Sun Plaza project and wished to sell his 15% interest in Sun Plaza. Mr Wong said that he first checked with Mr Huang, who confirmed that Mr Pang and Mr Teng had acquired the shares as stated. 29.Mr Wong said that when the matter was first discussed, Mr Pang said that the acquisition of the additional 15% in Sun Plaza would be at a purchase price of $6 million. His evidence was that he initially signed a brief written document for the purchase of a 15% interest in Sun Plaza. 30.Mr Wong said that he had not read the document properly before signing it, because he was only interested to see that it referred to 15% of Sun Plaza. He said that he did not notice the reference in the document to 750,000 shares. He was cross-examined as to why he did not notice the reference to 750,000 shares, particularly as that sum was not expressed in Chinese characters. Mr Wong was unable to offer a satisfactory explanation other than to say that he was only interested to see the reference to 15% of Sun Plaza. 31.The “contract”, the document signed by Mr Wong and Mr Teng, is undated and is in Chinese, and, translated, is in the following terms:
32.Mr Wong said that he did not pay the deposit at the time the contract was signed, notwithstanding the terms showing that $5 million had been received by the vendor. He said that he later read the contract more carefully and realised that, to use his words, “the product he was purchasing” was not correctly described in the contract. 33.Because of the passage of time Mr Wong could not remember the precise nature of his concern, other than to say that the “product he was purchasing” was not correctly described the contract. 34.I am satisfied that it is more likely than not that Mr Wong was confused by the number “750,000 shares” representing 15% of Sun Plaza. For reasons which will later appear, I accept Mr Wong’s evidence that he was quite unaware of the dilution of his share capital. At that time he would have believed that 15% of Sun Plaza was represented by 30% of the shares in China Minerals which, he believed amounted to 300,000 shares in China Minerals. In those circumstances, it is entirely understandable that he would have been confused by the reference to 750,000 shares of China Minerals representing a 15% interest in Sun Plaza. 35.Mr Wong said that he went back to Mr Pang and said that he did not want to proceed with the transaction. Again, he was unable to remember precisely how he expressed himself. It is more likely than not that he would have sought reassurance that he was purchasing 15% of Sun Plaza. That was always at the centre of his concern. 36.Mr Wong said that later, Mr Pang contacted him and said that the transaction could go ahead at $5 million, but that he, Mr Pang, would charge a commission of $500,000. Mr Wong said that he agreed to that proposal on being reassured that he would acquire 15% of Sun Plaza. 37.Mr Wong said that on 23 November 2007, he went to Mr Pang’s office and drew a cheque in the sum of $5 million in payment of the amount due. Mr Pang wrote on the back of the cheque:
Note: Again the sum of money, including the number 5, was written in Chinese characters. 38.A photocopy of the contract was produced, which had a date, 3 December 2007, at the bottom right-hand corner. The evidence as to that being the date of the making of the contract was entirely unsatisfactory. It was inconsistent with the day to the issue of the cheque. The way in which was written, on an ankle at the bottom right-hand corner, was inconsistent with it being the date on which the contract was made. I do not accept the submission that the contract was made on that date. Payment of a further $500,000 39.Mr Wong said that on 25 March 2008, Mr Pang asked him to go to Mr Pang’s office. Mr Wong said that Mr Pang assured him that the transfer of the shares in China Minerals owned by Mr Teng, and representing 15% of Sun Plaza, to Mr Wong had been completed. Mr Wong then paid Mr Pang the further $500,000, which Mr Wong said was payment of the commission. Mr Pang accepted that that sum was paid, but said it was not commission, and that he paid the sum to Mr Teng. The April 2008 meeting 40.Mr Pang said that in around April 2008, he, Mr Teng and Mr Wong met. Mr Pang said that at that meeting an agreement was made that a further $500,000, which Mr Pang said was the balance owing of the $6 million consideration, would be paid, first by Mr Pang paying Mr Teng $500,000 in order that Mr Teng may “cash out” of the transaction. Mr Pang said that later, Mr Wong would, when he was able, pay $500,000 to Mr Pang in recompense for the payment made by Mr Pang to Mr Teng. Mr Pang said that it was agreed that pending Mr Wong’s repayment of the outstanding consideration, Mr Teng’s shares would be transferred to Mr Pang to be held by him on Mr Wong’s behalf. 41.Mr Pang pleaded the meeting in his Defence. Mr Wong denied the meeting in his Reply. Mr Wong then placed the matter squarely in issue in his second witness statement in the following terms:
42.Mr Wong said it was only in around June 2008, that he learned that Mr Huang had been indicted in the mainland. He said that he believed that Mr Pang was acting for Mr Huang’s interests in Sun Plaza thereafter. The certificate as to Mr Wong’s interest in China Minerals 43.On 30 December 2008, Mr Wong wished to attend a shareholders’ meeting in Wuzhou in respect of Sun Plaza. In order to attend the meeting, he would be required to establish his interest in the property. He went to Mr Pang and asked for an acknowledgement of his shareholding. Mr Pang provided a document in the following terms:
44.Mr Pang insisted, and Mr Wong agreed that Mr Wong should sign a further document acknowledging to Mr Pang and China Minerals that there would be no legal responsibility in respect of the certificate which could not be used for litigation evidence or for share transfers. Mr Pang offered no explanation as to why this rather unusual document would be required. 45.A second similar acknowledgement was given by Mr Pang on the same day to Mr Kevin Lee. I am quite unable to see the relevance of this document, or any of the evidence concerning the involvement of Mr Kevin Lee, to the dispute between Mr Wong and Mr Pang. All of these events occurred after the contract was made and are not relevant to the determination of its formation or interpretation. 46.Equally, I am quite unable to see the relevance of subsequent transactions involving litigation in respect of Sun Plaza, China Minerals and Kevin Lee in China. The evidence as to the involvement of Kevin Lee, all of which related to events well after the completion of the contract was entirely unclear. Neither party was able satisfactorily to explain the involvement of Kevin Lee, nor the relevance of the litigation that took place in China. It did not advance the case of either party, nor did it cast doubt on the case of either party. 47.In reaching my conclusions I have disregarded entirely all of the evidence concerning the transactions with Mr Kevin Lee. Commencement of proceedings 48.Sometime in 2009, Mr Wong commenced proceedings in respect of other matters against Mr Pang and others and it appears that there was no further direct personal contact between them, although plainly they were in communication with each other in respect of those other proceedings through solicitors. 49.Although Mr Pang had issued to Mr Wong the so-called certificate in respect of his shareholding in China Minerals, the actual share certificates in China Minerals had never been delivered to Mr Wong. There is no evidence as to any demands for the payment of $500,000, made to Mr Wong by Mr Pang, prior to 7 June 2011 the filing of the Defence and Counterclaim. That said, I recognise that there is an equal paucity of evidence as to any demands made by Mr Wong to Mr Pang for the transfer of the shares prior to 7 June 2011. 50.On 7 June 2011, Mr Wong’s solicitors wrote to Mr Pang, setting out Mr Wong’s version of the November 2007 share sale and purchase agreement. The letter said that the agreement was evidenced by cheques, copies of which were enclosed, whereby Mr Wong had purchased 15% of the shares of Sun Plaza for $5 million, with a $500,000 commission being charged by Mr Pang. 51.The letter pointed out that despite the payment by the two cheques, the shares had not been delivered pursuant to the contract which had thereby been repudiated and rescinded. Repayment of the two sums of $5 million and $500,000 were demanded and legal proceedings threatened. 52.Mr Pang responded on 21 June 2011 in the following terms:
53.Although Mr Pang said that there would be a reply in due course he did nothing at all. No further reply was ever given to the letter before action. 54.Eventually, on 3 May 2012, the writ, with the statement of claim attached, detailing Mr Wong’s assertions as to the failure to deliver the shares pursuant to a contract of $5 million was issued and the proceedings commenced. Discussion 55.Where ever there has been a difference between the parties I have preferred the evidence of Mr Wong. These are my reasons for that preference. 56.Mr Wong impressed me as a somewhat naive and unsophisticated man, although he was open and forthright. He frankly admited that he does not read documentation properly and that has been to his disadvantage. He made that admission without any embarrassment. There were times when Mr Wong’s evidence was confusing, as his memory of events was not particularly good, nor was he easily able to express himself. I have preferred his evidence as it is consistent with independent matters to be addressed below. On the other hand, Mr Pang’s evidence was inconsistent with other, independent evidence, in a number of areas. 57.That Mr Wong signed a document, the contents of which he did not fully understand, is entirely consistent with his conduct, as found by Mr Recorder Pow SC, in HCA 2067/2009, and produced in evidence. There the judge found that Mr Pang had put English language documents before Mr Wong, asked him to sign them without properly explaining them, and Mr Wong was happy to sign. In fact, the documents, without Mr Wong knowing it, effected an assignment of a $20 million property from Mr Wong to Mr Pang. 58.Mr Pang is an experienced businessman and for many years has been the director of a finance company. He is well versed in company affairs and the administration of limited liability companies. Notwithstanding his experience in business he consistently failed to answer questions directly, even after being warned that a failure to answer a question directly might result in him being found an evasive witness, a matter that would go against his credibility. I found Mr Pang to be evasive on simple plain matters. He sought at every opportunity to obfuscate or confuse the circumstances. Mr Pang’s personal use of the $5 million 59.On 23 November 2007, Mr Pang received $5 million from Mr Wong as a trustee, with an obligation to pay that sum to Mr Teng. He did not pay that sum immediately to Mr Teng. On 23 November 2007 and 26 November 2007 Mr Pang drew four cheques for total sums in excess of $5 million, which he acknowledged were for his own purposes. He sought to explain that by saying[3] that:
60.Mr Pang was correct that it was wrong. And he knew that it was wrong. It was a dishonest act. Dishonesty in relation to a trust fund is a matter which must go against the credibility of a witness. 61.for those reasons, and the reasons set out below, I did not find Mr Pang to be a believable witness. The increase in the share capital 62.The shareholders resolution and the minutes of the meeting increasing the share capital, by 1,500,000 $1.00 shares, which were allocated to Mr Pang and Mr Teng, would have to have been signed prior to 25 July 2007, and signed by both Mr Huang and Mr Wong. The original documents were not produced. 63.The point is significant for two reasons. First in his Defence and Counterclaim Mr Pang had pleaded the issue of the new shares, and the allotment of those new shares to himself and Mr Teng. The effect of the issue of those new shares was, as I have shown above[4], to dilute Mr Wong’s shareholding in China Minerals from 30% to 12%, and consequently his interest in Sun Plaza to 6%. 64.Mr Wong, by his Reply, denied any knowledge of the increase in the share capital. In his Rejoinder, Mr Pang denies that Mr Wong did not know of his shareholding in China Minerals, because he says it was:
65.In his first witness statement Mr Pang had this to say about the increase in the number of shares in China Minerals:
66.But neither the Rejoinder nor the assertion in the witness statement constitutes a proper or sufficient response to Mr Wong’s pleading. It was Mr Pang who was relying upon the increase in the share capital to justify his position and Mr Teng’s position as shareholders in China Minerals. The onus was plainly upon Mr Pang, in the face of Mr Wong’s pleading, to properly prove the increase of share capital. 67.In the absence of any evidence as to the proper documentation in respect of the issue of the additional 1,500,000 shares I cannot be satisfied, even on the balance of probabilities, that those shares were properly issued. That is particularly so, when the point has been placed directly in issue in the pleadings. It was important for Mr Wong to put the matter in issue in the pleadings because of the dilution consequence it had on his interest in China Minerals. 68.The mere fact that a record appears in the Companies Registry does not prove the proper increase in the share capital or the allotment of the shares when the matter has been put directly in issue in the pleadings. The only documentation that could properly have proved the increase in the share capital was the original minutes of the company meeting and the original shareholders resolution duly signed by both Mr Huang and Mr Wong. 69.A specific demand was made of Mr Pang’s solicitors to produce the minutes and resolutions approving the issue of new shares. No documentation has been produced in response to that request. A list of documents had been supplied to Mr Wong’s solicitors by Mr Pang’s solicitors in CACV 194/2014, an appeal from the decision of Mr Recorder Pow in HCA 2067/2009[5]. Included in that list were two documents, dated 25 July 2007, both described as originals, in the following terms:
70.A request was made for the production of the documents but Mr Pang’s solicitors merely responded saying that Mr Pang did not have those documents in his possession, custody or power. It was later explained that the documents had been included in the list in error. It is difficult to understand how that could be so if Mr Pang did not have those documents in his possession in custody or power. No explanation was offered for the presence of the documents on the list, or for absence of the documents when a request for production was made. 71.The absence of original resolution and minutes was particularly significant when Mr Wong pleaded in his Reply that in around 2008 to 2009, Mr Huang was detained and charged and subsequently sentenced to life imprisonment on a charge of fraud by a court in the Peoples Republic of China. Mr Pang, in his rejoinder did not respond to that plea and at trial did not deny that Mr Huang was in jail as a fraudster. It is entirely consistent with the actions of a fraudster that the share capital of the company might be increased improperly, without the knowledge of Mr Wong. 72.In cross-examination, when pressed as to the location of the original minutes and resolutions increasing the share capital, Mr Pang now asserted that he had received the company documents in respect of China Minerals in a green box from Mr Wong. The inference apparently to be drawn from the evidence was that Mr Wong had the original documents and had removed them from the green box and concealed them. 73.Nothing had been said in Mr Pang’s witness statement about the delivery of documents in a green box, and the issue of the increase in the share capital had been raised directly on the pleadings, and the need to produce original documents clearly raised in correspondence between solicitors. Neither the proposition that a green box containing company documents was given by Mr Wong to Mr Pang, nor that Mr Wong had removed the original documents, was put to Mr Wong. I placed no weight on the assertion. The receipt on the cheque of 27 November 2007 74.The receipt on the back of the cheque for $5 million[6], given by Mr Wong to Mr Pang on 27 November 2007, referred only to a payment of $5 million for “15% shares in Sun Plaza”. If the purchase price had been $6 million, as Mr Pang asserts, I have no doubt at all that the receipt would have shown that the sum of $5 million was only a part payment or a deposit. 75.The receipt is completely silent as to any further payment that might be due to Mr Teng. The terms of the receipt are entirely consistent with Mr Wong’s case that the purchase price of the shares was $5 million. Would Mr Teng accept $5 million: 76.It is understandable that Mr Teng would be content with a sale of his interest in Sun Plaza at $5 million. His evidence was that he had a form of guarantee by way of a buy back agreement from Mr Huang that, 4 months after he had made his investment in Sun Plaza, Mr Huang would, if Mr Teng wished, buy back Mr Teng’s interest in China Minerals at $5 million. 77.Counsel for Mr Wong, in cross-examination, sought to have Mr Teng explain why he should sell his interest in Sun Plaza with no profit. Mr Teng had difficulty understanding the question and then the following exchange took place[7]:
78.Mr Teng’s attitude to the buyback arrangement is consistent with Mr Wong’s case that Mr Teng would be content to receive $5 million should he decide to withdraw from the investment and that the contract was for the sale of the interest in Sun Plaza at $5 million. A commission or part payment of the contract price 79.The issue as to whether or not the payment of $500,000 constituted a commission to Mr Pang or a part payment of a contract price of $6 million was squarely raised in the pleadings by Mr Wong. 80.There is no doubt at all that that sum was paid by Mr Wong to Mr Pang. The only evidence as to the payment of that sum by Mr Pang to Mr Teng was the oral assertion of Mr Pang and Mr Teng, and production of Mr Pang’s bank statement showing the withdrawal being made. 81.With the matter squarely raised in the pleadings the only proper way to establish, even on the balance of probabilities, that Mr Pang had paid that sum to Mr Teng would be by way of the production of the cheque showing Mr Teng as the payee, and Mr Teng’s bank statement showing the credit of that sum to his account. Neither document was produced. Mr Pang had taken the trouble to produce his bank statements, Mr Wong’s cheque for $5 million, Mr Wong’s cheque for $500,000, and, as will be seen a further cheque drawn by Mr Pang. I have no doubt at all that the cheque for $500,000 drawn by Mr Pang was available and could have been produced, and that Mr Teng’s bank statement could have been produced. 82.Having found Mr Pang not to be a reliable witness, and with the matter squarely raised on the pleadings, I cannot rely on the evidence of Mr Pang or Mr Teng, in the absence of those documents, to be satisfied that the sum of $500,000 was paid to Mr Teng. 83.Mr Pang was in the habit of moving money around his various accounts, irrespective of whom that money might actually belong to. In the whole of the circumstances it is more likely than not that the payment was retained by Mr Pang as a commission on the transaction. The certificate given by Mr Pang 84.Mr Wong’s case was that he owned 300,000 shares in China Minerals, which was 30% of that company and which represented a 15% interest in Sun Plaza. He said that he had been told by Mr Pang that both Mr Pang and Mr Teng had each acquired 30% of the shares in China Minerals from Mr Huang, giving each of Mr Pang and Mr Teng an interest representing 15% of Sun Plaza. So when Mr Wong entered into the contract to acquire Mr Teng’s shares it is more likely than not that he believed that he was taking his interest in Sun Plaza from 15% to 30%. 85.The effect of the certificate, in simple terms is that the first paragraph records Mr Wong owns a 15% interest in Sun Plaza in his own right. The second paragraph records that Mr Pang owns 30% of the shares in China Minerals, representing a further 15% interest in Sun Plaza which he holds on trust for Mr Wong. The certificate effectively says that Mr Wong has a 30% interest in Sun Plaza. 86.It was far from the truth. 87.It is right that 750,000 shares, (the number of shares shown in the written contract document), in China Minerals represented, at that time, 30% of that company and a 15% interest in Sun Plaza. But Mr Wong’s 300,000 shares no longer represented 30% of China Minerals, but only 12% of China Minerals, and 6% of Sun Plaza. A truthful certificate would have reflected that, namely that the total of Mr Wong’s interest in Sun Plaza was 21%. 88.When pressed in cross-examination[8] on this issue Mr Pang was quite evasive, at first avoiding recognition of the fact that the increase in the share capital had diluted Mr Wong’s interest in China Minerals to 12%. Ultimately and reluctantly, Mr Pang accepted the calculation that on the acquisition of Mr Teng’s shares, Mr Wong had only a 42% interest in China Minerals representing a 21% interest in Sun Plaza. 89.Mr Pang then sought to assert that the two paragraphs in the certificate referred to the 15% interest Mr Wong had acquired from Mr Teng, and the 15% interest that he, Mr Pang held. 90.In re-examination[9] Mr Pang sought to explain the certificate in the following way:
91.But the certificate cannot be read either that way, or the way Mr Pang first sought to explain it. The first paragraph of the certificate is plainly intended to refer to the 15% interest in Sun Plaza Mr Wong believed he held by virtue of what he believed to be a 30% interest in China Minerals. The second paragraph plainly refers to the 15% interest in Sun Plaza which Mr Wong was acquiring, via Mr Pang, from Mr Teng. 92.Mr Pang must have known that he could not give a truthful certificate. To do so would alert Mr Wong to what had happened. That Mr Pang should give Mr Wong a certificate indicating that Mr Wong had in total a 30% interest in Sun Plaza is entirely consistent with Mr Wong’s case and completely puts the lie to Mr Pang’s case. The April 2008 meeting 93.Mr Teng, who was called as a witness to the April 2008 meeting, had no recollection at all of attending such a meeting. This was a meeting intended, Mr Pang said, to recover for Mr Teng, the very considerable sum of $500,000 which by that time had been outstanding for five months. I have no doubt at all that had such a meeting had taken place Mr Teng would have recalled the meeting. Instead he was quite confused about the suggestion of such a meeting and did not recall it at all. 94.It was also a meeting at which Mr Pang is supposed to have agreed to pay $500,000 to Mr Teng to allow Mr Teng to “cash out” of the transaction. Again, I have no doubt at all that had such a meeting taken place, and Mr Teng had received $500,000 as a result from Mr Pang, Mr Teng would have remembered the meeting. 95.I am satisfied that there was no such meeting. The mode of payment of the final $500,000 96.In his witness statement, made on 9 July 2013, after describing the conclusion allegedly reached in the April 2008 meeting, Mr Pang says:
97.Mr Teng, in his witness statement, made on 22 January 2014, after saying that he had met Mr Wong at Mr Pang’s office in April 2008, says of the final payment:
98.The cheque for $258,764.42 has no payee named on it. A photocopy of the cheque was produced and on the same page was a photocopy of two handwritten statements in Chinese which read as follows:
99.Mr Pang’s evidence in cross-examination[11] on the point was this:
100.The original of the cheque and the original of the handwritten acknowledgement were not produced in evidence. Although it is right that the cheque for $258,764.42 was presented (Mr Pang’s bank statement shows that), there is no evidence at all demonstrating to whom the cheque was paid. The acknowledgements were not dated. Mr Yau was not called to give evidence. No documentation was produced to demonstrate the so-called set‑off that was apparently relied upon. 101.When it was put to Mr Pang that the handwritten notes made no reference to the fact that the cheque for $258,764.42 was used to offset an amount owing, Mr Pang evaded the question. 102.Mr Teng was even more vague about the matter. In re-examination, when asked by counsel for Mr Pang about chasing Mr Pang for the payment of $500,000, there was this exchange:
103.If Mr Teng had genuinely been involved in a set‑off exercise under which he was effectively paid $500,000, it is more likely than not that he would have known precisely the nature of the exercise, or at least, would have reminded himself of it for the purpose of his evidence. 104.It is significant that in his original witness statement made on 9 July 2013, Mr Pang made no suggestion at all that the payment he made on Mr Wong’s behalf to Mr Teng in April 2008, was undertaken by way of a set-off. The clear inference to be drawn from his witness statement is that the sum of $500,000 was paid in full. 105.But by the time the matter came to trial the payment was by a set‑off involving third-party was not called to give evidence, with undated photocopy documents, that do not refer to a set‑off, and a cheque with no payee named, or proof as to where the cheque was banked. 106.In the absence appropriate documentation to establish the set‑off, or proper evidence to establish just how much was owed by whom and to whom, how the set‑off worked, and evidence from Mr Yau, I find that the evidence falls far short of establishing that on the balance of probabilities that Mr Pang paid $500,000 to Mr Teng in April or May 2008. 107.I am satisfied that it is more likely than not that the so-called set‑off arrangement is a fabrication put together by Mr Pang and Mr Teng in an attempt to support Mr Pang’s case. In this respect it needs to be remembered that Mr Pang personally acquired the shares sold by Mr Teng, and has made no effort at all to transfer them to Mr Wong, notwithstanding the case he now presents that he held the shares for Mr Wong on trust pending the payment of a further $500,000. 108.It was suggested that the acknowledgements by Mr Teng and Mr Yau constituted contemporaneous documents confirming that the purchase price was $6 million. Neither document was contemporaneous. Both documents were many months subsequent to the making of the contract. Both were entirely self serving and simply cannot be relied upon to establish the contract price. A subsequent, self-serving document, not signed by Mr Wong, could never constitute a confirmation of the purchase price, nor an acknowledgement which could be held against Mr Wong. The payment of $500,000 by Mr Pang on behalf Mr Wong 109.Next, it is simply unbelievable in the circumstances that Mr Pang should pay $500,000 to Mr Teng on behalf of Mr Wong. Mr Pang offered no sensible reason why he should do that and there is no sensible reason. The fundamental transaction was between Mr Wong and Mr Teng. In the absence of a satisfactory explanation from Mr Pang for giving cash assistance to Mr Wong, I reject the evidence that such a payment was made. 110.The last contact, for which there was evidence, between Mr Wong and Mr Pang was in late 2008. On Mr Pang’s evidence, Mr Wong still owed him $500,000, which Mr Pang had advanced on Mr Wong’s behalf to Mr Teng eight months earlier. There is no suggestion that Mr Pang made any demand for the $500,000 in late 2008. Further, between late 2008 and June 2011, some 2½ years, Mr Pang apparently did nothing at all about recovering that sum. 111.Mr Pang was out of pocket in the sum of $500,000, according to him, for the sole reason of wishing to assist Mr Teng in “cashing out” of the transaction. Yet Mr Pang took no steps to either record in a letter that the amount was due by Mr Wong or ask for or demand repayment of the sum. It is simply unbelievable that a director of finance company, a man who understands loans and interest, would not take some step to recover a genuinely due debt. 112.It is particularly surprising that Mr Pang would not make a demand for the sum of $500,000 when he was sued by Mr Wong in HCA 2067/2009. That was precisely the venue where one would have thought Mr Pang would have raised with Mr Wong the fact that Mr Wong still owed him $500,000. There is no reason at all why Mr Pang could not have claimed a set‑off in those proceedings for the very substantial amount of $500,000 which he said was due to him. 113.But there is not the slightest suggestion that that assertion was made in those proceedings. It is simply unbelievable that a man sued by someone who owes him $500,000 would not respond in those proceedings with a counterclaim or set‑off for the money allegedly due. Mr Pang’s response to the letter before action 114.When Mr Pang received a letter before action[12] which set out that the share sale and purchase transaction had been at $5 million, and that he, Mr Pang, had received a commission of $500,000, he answered with a simple denial and a promise of a reply in due course. 115.If, as Mr Pang now says, the circumstances were completely different, and the transaction was at $6 million, there was no commission payable to Mr Pang, and that Mr Pang had advanced $500,000 to Mr Wong to enable the completion of the transaction, I have no doubt at all that Mr Pang would have said so immediately. He would have said so, even if not in his own letter by reply, but by way of a solicitor’s reply. The circumstances described in Mr Wong’s solicitors’ letter are circumstances which would, if Mr Pang’s case is to be believed, have sent him immediately to solicitors to ensure that the true circumstances were placed immediately on record. 116.Instead, Mr Pang did nothing at all and waited another 11 months until served with a writ to which he finally responded in his Statement of Defence. 117.It is simply unbelievable that a man who was owed $500,000, when faced with circumstances in a solicitor’s letter setting up a completely different story, would make no response, other than a bare denial, until sued. No demand for transfer: 118.The argument was made for Mr Pang that the only ground of claim was that Mr Pang had failed to deliver the shares in question. Counsel for Mr Pang relied upon Mr Wong’s acknowledgement that he had not told Mr Pang of the name for the transferee of the shares and that consequently Mr Pang was not in default or breach. 119.The argument is without foundation. The contract was simple. Mr Wong was to acquire the shares. There was no term of the contract that he must inform Mr Pang of a name into which the shares were to be transferred. Mr Pang acknowledged that he held the shares on trust for Mr Wong. There was no requirement at all for Mr Wong to give a name to Mr Pang. The letter before action was a sufficient demand. Factual findings 120.I accordingly accept the evidence of Mr Wong in so far as it establishes that the contract negotiated by Mr Pang, for Mr Wong to buy Mr Teng’s shares in China Minerals, was at a contract price of $5 million with a $500,000 commission payable by Mr Wong to Mr Pang. 121.I am satisfied that it is more likely than not those events occurred in the following way. 122.Mr Huang did not obtain Mr Wong’s agreement to the increase in the share capital, and the share capital increase was undertaken without Mr Wong’s knowledge. I cannot say that Mr Pang was complicit with Mr Huang in the share capital increase, but Mr Pang knew that Mr Wong was unaware that his share capital had been diluted. That is shown from the certificate Mr Pang signed. Mr Wong believed throughout that he had a 30% interest in China Minerals, and consequently a 15% share in Sun Plaza, and that he was acquiring a further 30% share in China Minerals, which would give him a total 30% interest in Sun Plaza. 123.When Mr Teng decided to withdraw from the Sun Plaza investment he sought assistance from Mr Pang to find a buyer. Mr Pang offered the 15% share in Sun Plaza to Mr Wong for $6 million. Mr Wong agreed to buy the 15% share for $6 million, and Mr Wong, Mr Pang and Mr Teng met together and the contract document was signed. Mr Wong did not read the document properly at that time, paying attention only to the reference to a 15% share in Sun Plaza. 124.When Mr Wong later read the document more carefully he was confused by the reference to 750,000 shares in China Minerals. He went back to Mr Pang and told him that he would not proceed with the transaction. Mr Pang reassured him that the transaction was for 15% of Sun Plaza, and then suggested transaction could be done at $5 million, with a $500,000 commission to him. 125.Mr Teng was happy to accept $5 million without any profit, because that was equivalent to guarantee he had from Mr Huang. 126.Mr Wong orally agreed to pay $5 million for the 30% interest in China Minerals and a commission of $500,000 to Mr Pang. On 27 November 2007, Mr Wong drew a cheque for $5 million payable to Mr Pang, who endorsed a receipt on the back of the check recording of $5 million was paid for a 15% interest in Sun Plaza. Mr Pang later paid that sum to Mr Teng. 127.The contract expressed by the signed written document came to an end and did not proceed. 128.Three months later, at Mr Pang’s request, Mr Wong paid the commission of $500,000. The evidence does not establish that Mr Pang then paid a sum of $500,000 to Mr Teng. 129.There was no meeting in April 2008. Mr Pang arranged for Mr Teng’s shares to be transferred to him, Mr Pang. Mr Pang subsequently transferred the shares to another party, although that share transfer does not appear to have been recorded in the Companies Office. 130.It was only when Mr Wong, not having received the share transfer documents, sued Mr Pang, that Mr Pang, using the written document which the parties had agreed would not proceed, asserted that the contract price was $6 million and that Mr Wong was in breach of the contract. The offset arrangement is a subsequent fabrication to support Mr Pang’s case. Disposal 131.Mr Pang’s obligation under the middleman contract he had with Mr Wong, for which he was paid the commission of $500,000, was to secure the transfer the shares from Mr Teng to Mr Wong. There is no doubt that Mr Pang received the sum of $5 million and secured the transfer of the shares from Mr Teng to himself. But he has not transferred the shares to Mr Wong, despite Mr Teng having received the purchase price and Mr Pang the commission. 132.A middleman is in essence an agent. Mr Pang received the sum of $5 million from Mr Wong on trust to pay that sum to Mr Teng in return for the transfer of the shares to Mr Wong. He has disposed of the $5 million to Mr Teng without transferring shares to Mr Wong. In those circumstances his failure to arrange the transfer of the shares from Mr Teng to Mr Wong following payment of the sum of $5 million constitutes a breach of trust. 133.Further, having failed to achieve the purpose of the middleman or commission contract, Mr Pang is not entitled to the commission that he has been paid. Judgment 134.There must accordingly be judgment for Mr Wong against Mr Pang for the sum of $5,500,000. There will be an order nisi that Mr Pang must pay Mr Wong’s costs of a party‑and‑party basis.
Mr Kenneth CL Chan and Mr Victor KH Chiu, instructed by Ho & Partners, for the plaintiff Mr Tony Ko, instructed by Wong Poon Chan Law & Co. for the defendant [1] Day 4, 8 June 2015, 3.00-4.30 p.m. [2] The Annual Return also records that on the same day, 13 December 2006, Mr Huang transferred 100,000 shares to Kevin Lee, and those 100,000 shares were transferred back to Mr Huang on 19 April 2007. No point was made of this, and nothing appears to turn on it. [3] Day 3, 5 June 2015, 2.30–3.00 p.m. [4] §22 [5] See §57 above [6] See §37 above [7] Day 4, 8 June 2015, 3.00-4.30 p.m. [8] Day 4, 8 June 2015, 10.00-11.30 a.m. [9] Day 4, 8 June 2015, 3.00-4.30 p.m. [10] The description used in the witness statement for the remaining HK$500,000. [11] Day 4, 8 June 2015, 11.48 a.m.–1.00 p.m. [12] See §§50-51 above |
Cases cited in this judgment
Further hearings and rulings under HCA 716/2012