A A

B HCA 832/2014 B
[2023] HKCFI 840
C C
IN THE HIGH COURT OF THE
D HONG KONG SPECIAL ADMINISTRATIVE REGION D

COURT OF FIRST INSTANCE

E E
ACTION NO 832 OF 2014
F ____________ F

G
BETWEEN G
CHAN SHU CHUN (陳書春) 1st Plaintiff
H H
KING BASE ENGINEERING LIMITED 2nd Plaintiff
(卓基工程有限公司)
I I

and
J J
DR KUNG YAN SUM (龔仁心) 1 Defendant
st

K K
HERO FORTUNE LIMITED (雄福有限公司) 2 Defendant
nd

L L
CHINACHEM CHARITABLE FOUNDATION 3rd Defendant
M
LIMITED (華懋慈善基金有限公司) M

MESSRS PHILIP KH WONG, KENNEDY YH 4th Defendant

N N
WONG & CO (黃乾亨黃英豪律師事務所)
O ____________ O

P P
Before: Hon Au-Yeung J in Chambers
Q Q
Dates of Trial: 5-9, 19 and 22 September 2022

R
Date of Judgment: 18 April 2023 R

S S

T T

U U

V V
 -2-
A A

B B
JUDGMENT
C C

Contents Paragraph
D D

A. Introduction..........................................................................................1
E E
B. Factual Background...........................................................................10
F C. Case Against Each Defendant............................................................39 F

D. General Factual Disputes (sub-issues 1-8).........................................55

G G
E. Claim in Deceit Against Dr Kung (sub-issues 9-10).......................105
H F. Conspiracy Claim Against All Defendants (sub-issues 11-13).......143 H

G. Conspiracy Claim Against Dr Kung and Hero Fortune...................158

I I
H. Conspiracy Claim Against the Solicitors.........................................182
J I. Amount of Damages for Conspiracy...............................................218 J

J. Conversion Claim Against D1-D3 (sub-issue 14)...........................225

K K
K. Conclusion and Costs.......................................................................234
L L

M M
A. INTRODUCTION
N N
1. The 1 st
Plaintiff (“Mr Chan”) was a director of the
O 2nd Plaintiff (“King Base”). King Base issued a cheque for HK$50 O

million (“Cheque”). The payee’s name was not filled in. Subsequently
P P
the name of the 2 Defendant (“Hero Fortune”) was filled in as payee
nd

Q and the Cheque was deposited into the bank account of Hero Fortune. Q

R
Hero Fortune transferred the money to the 4 th Defendant (“the R
Solicitors”), who then sent the money by 2 cheques of HK$25 million
S S
each to the 3rd Defendant (“the Foundation”) as donations from an

T
anonymous donor. T

U U

V V
 -3-
A A

B 2. The Plaintiffs’ case is that the Cheque was issued on the B

representation of the 1st Defendant (“Dr Kung”) for investment, with a

C C
corresponding investment of HK$50 million from one Song Hui Fong
D (“Madam Song”). The investment did not proceed. Madam Song D

signed a Cancellation Agreement on behalf of Hero Fortune, promising to

E E
return the HK$50 million in one year. It turned out that the HK$50
F million were used to fund the litigation in which the Foundation was F

involved in. Hero Fortune did not repay the Plaintiffs.

G G

H 3. The Plaintiffs thus seek: H

I (1) damages for deceit against Dr Kung; I

J (2) damages for conspiracy to injure the Plaintiffs by unlawful J

means against all Defendants; and

K K
(3) damages against D1-D3 for having converted the Cheque
L L
and the proceeds to their own use, alternatively, to the use of

M
the Foundation. M

N 4. Dr Kung acknowledges that Madam Song was his good N

friend, but he had not introduced her to Mr Chan. He admits that the
O O
Foundation received the HK$50 million. He admits having introduced
P Madam Song to the Solicitors. He denies the Plaintiffs’ case against him. P

Q Q
5. Hero Fortune has not filed an acknowledgement of service
R and has never appeared in the present proceedings. No default judgment R

has been entered against it.

S S

T T

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 -4-
A A

B 6. The Foundation admits that it was a recipient of B

HK$50 million from the Solicitors as genuine charitable donation but

C C
denies the claim against them. They no longer rely on the change of
D position defence as this is not a proprietary claim. D

E E
7. The Solicitors deny the claim in conspiracy. They say that
F there was no evidence of combination or agreement between the F

Solicitors and other alleged co-conspirators outside the mere introduction

G G
by Dr Kung of Madam Song as a client. There was also no evidence as to
H the intention to injure the Plaintiffs. Dr Kung never gave instructions of H

any kind to the Solicitors and that since the initial referral, Dr Kung had
I I
little contact with them. What the Solicitors did was to act in accordance
J with the instructions of their client, Madam Song / Hero Fortune. The J

limitation defence is not pursued.

K K

L
8. In terms of quantum of loss, the Solicitors challenge whether L
King Base has suffered any loss. However, there is no dispute among all
M M
the parties that in the event liability is established, any award of damages

N
should be to King Base only and the quantum would be HK$50 million. N

O 9. I have, at the stage of counsel’s opening submissions, raised O

various issues, in particular, as to the existence of a “common design”

P P
and knowledge of individual D2-D4 of the alleged deceit. These issues
Q have not been satisfactorily answered after trial. Q

R R

S S

T T

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 -5-
A A

B B

C
B. FACTUAL BACKGROUND C

D B1. The parties D

E 10. The facts in Section B are based on the parties’ agreement or E

are supported by indisputable documents, and which I find to be true.
F F

11. Mr Chan was one of 2 directors and 70% shareholder of

G G
King Base. The other shareholder was his employee who held 30%
H shareholding on Mr Chan’s behalf. Mr Chan has another name known to H

Dr Kung – Fang Chang Song (方長松) or Xiao Fang (小方).

I I

J 12. Mr Chan was and is also the sole shareholder of a BVI J

company known as Tian Liang Ltd (“Tian Liang”), which in turn was
K K
and is the sole shareholder and operator of a PRC company known as
L Tian Yao (Xiamen) Property Development Ltd (“Tian Yao”). Tian L

Yao’s business was and is real estate development of a residential project

M M
in Xiamen, PRC. Both companies entered into a Tripartite Agreement
N with Right Margin, a subsidiary of Chinachem Group, on 16 January N

2009.
O O

P 13. King Base is a Hong Kong company which maintained, at P

the material time, a bank account with the DBS (Hong Kong) Ltd (“P2’s
Q Q
Bank Account”). The Cheque was drawn on this account.
R R
14. The Foundation was and is a company limited by guarantee,
S established by the late Madam Nina Wang and her late husband, Mr S

Wang Teh Huei, in 1988. The main objects were charitable purposes. In
T T

U U

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 -6-
A A

B around 2009, the Board of Governors consisted of 5 persons, including B

Dr Kung and his siblings.

C C

D 15. Dr Kung, is the younger brother of the late Madam Nina D

Wang. He was a director and member of the Board of Governors of the
E E
Foundation since 1 April 2007. On 24 September 2010, he was appointed
F the Chairman of the Board of Governors of the Foundation. F

G 16. Since 1 February 2010, Dr Kung was also the Chairman of G

the Executive Committee of the Chinachem Group which comprised of

H H
Chinachem Group Corporation Ltd and Chinachem Group Co Ltd. The
I Chinachem Group consisted of hundreds of subsidiaries, which in turn I

are held under a parent company called Chime Corporation Ltd.

J J

K 17. Mr Hui Yip Wing David (“Mr Hui”) has been the General K

Manager and CEO of the Chinachem Group since 2009 until

L L
November 2012.
M M
18. Dr Kung has and had a good friend called Madam Song.
N N
They were classmates studying medicine in the same university. She

O
was, at the time of the transfers of money, the sole director and O
shareholder of Hero Fortune.
P P

19. Hero Fortune is a BVI company which maintained a bank

Q Q
account with DBS, Macao branch (“D2’s Bank Account”). The Cheque
R was deposited into this bank account. R

S S
20. The Solicitors were and are those of a firm of solicitors
T practising in Hong Kong. They had acted in various matters for the T

U U

V V
 -7-
A A

B Chinachem Group for a number of years but they did not have any B

business relationship with the Foundation. At the material time, Mr

C C
Wong Sui Wah, Michael (“Mr Michael Wong”) was a partner of the
D firm until he retired at about the end of December 2013. He was the D

partner in charge of the corporate and commercial department of the

E E
Solicitors. He acted for Madam Song in the establishment of Hero
F Fortune and for Hero Fortune in the subject transfer of funds to the F

Foundation. Michael Wong died in January 2014 from natural cause. At

G G
this hearing, Mr Kennedy Wong gave evidence on behalf of the
H Solicitors. H

I I

B2. The Estate Litigation

J J

21. The Foundation was the Plaintiff in HCAP 8/2007, a probate

K K
action concerning the estate of the late Madam Nina Wang against one
L Chan Chun Chung (“Estate Litigation”). The Foundation was in need of L

funds for the Estate Litigation. In February 2009, the Foundation had
M M
only about HK$10 million. The first instance trial was coming up in
N April/May 2009. The Foundation had to raise funds for unpaid legal N

fees of about HK$30 million and for the new legal team (comprising of
O O
3 senior counsel, 2 junior counsel and a new firm of solicitors).
P P
22. According to Dr Kung, this litigation was the most important
Q Q
matter to the Kung family. As a governor of the Foundation and brother
R of Madam Nina Wang, and as known to other governors, he was the R

person responsible for raising funds to meet the legal costs of Foundation.
S S
It was difficult for the Foundation to do so because of the lack of
T collaterals. T

U U

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 -8-
A A

B B3. The fund flow B

C 23. On 21 January 2009, Mr Chan drew the Cheque without the C

name of the payee.

D D

E 24. The name of Hero Fortune was later typed (by an E

unidentified person) onto the Cheque as payee on or before 6 February
F F
2009.
G G
25. On 18 February 2009, Mr Chan signed an Investment MOU
H (合作投資備忘錄) in duplicate on behalf of King Base. H

I I
26. In or about November or December 2010, Mr Chan signed
J (i) an undated cancellation of the Investment MOU agreement (撤銷「合‍ J

作 投 資 備 忘 錄 」 協 議 ) (“Cancellation Agreement”); and (ii) an

K K
Instruction to Refund (就撤銷「合作投資備忘錄」退款指示 ), on
L behalf of King Base. L

M M
27. Mr Chan later received the Cancellation Agreement
N purportedly signed by Madam Song, in which she promised to repay the N

HK$50 million to King Base with a year. Over a year had elapsed but no
O O
repayment had been made by Madam Song.
P P
28. By a letter dated 16 July 2012, Mr Chan requested Dr Kung
Q Q
to forward a letter to Madam Song seeking for return of the

R
HK$50 million by 31 July 2012. There was no reply from Dr Kung R
and/or Madam Song. Dr Kung confined in the witness box that he had
S S
never forwarded this letter.

T T

U U

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 -9-
A A

B 29. On 16 October 2012, King Base instructed its former B

solicitors, Gall, to write to Dr Kung to see if he had delivered the 16 July

C C
2012 letter to Madam Song and to provide King Base with the contact
D details of Hero Fortune. Again, there was no reply to this letter. D

E E

F F

G G

H H

I I

J J

K K

L L

M M

N N

O O

P P

Q Q

R R

S S

T T

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 - 10 -
A A

B B

C
B4. Discovery of the money trail C

D 30. In separate third party discovery proceedings, King Base, D

under HCMP 1949/2013, obtained an order from the Court for disclosure
E E
of D2’s Bank Account with DBS.
F F
31. It transpired that the HK$50 million was deposited into
G Hero Fortune’s Bank Account on 6 February 2009, which was then G

transferred to the Solicitors’ Bank Account on 9 February 2009 on the

H H
instructions of Hero Fortune.
I I

32. On 10 February 2009, Madam Song gave instruction (for

J J
and on behalf of Hero Fortune) that the HK$50 million be transferred to
K the Solicitor’ Bank Account. She also indicated that the HK$50 million K

should be donated to the Foundation unconditionally because there were

L L
no suitable investment projects.
M M
33. By two written instructions signed by Madam Song (for and
N N
on behalf of Hero Fortune) dated 10 and 13 February 2009 respectively,

O
Madam Song further confirmed that the HK$50 million would be donated O
to the Foundation unconditionally and that it was not necessary for the
P P
Foundation to repay any part to her or to give her any return.

Q Q
34. By 2 cheques dated 12 and 16 February 2009, respectively,
R drawn on the Solicitor’ Bank Account, two sums of HK$25 million each R

were paid to the Foundation. The cover letters from the Solicitors stated
S S
the sums were donations “in support of [the Foundation’s] defence in
T T

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 - 11 -
A A

B [HCAP 8 of 2007] without any condition or expected return on the said B

donation”.
C C

D 35. Almost immediately, the Foundation paid the sums over to D

Wilkinson & Grist to settle the outstanding fees of the Foundation and as
E E
costs on account for the Estate Litigation, as evidenced by 2 letters from
F the Foundation to Wilkinson & Grist dated 12 and 17 February 2009 F

enclosing 2 cheques, each for HK$25 million.

G G

36. There were 4 other transfers by cheques from the Solicitors’

H H
Account to the Foundation as donations in support of the defence to the
I appeal or the action in the Estate Litigation. The money had its source I

from Madam Song but those transfers were not related to the present
J J
case:
K K

30.03.2010 HK$15,000,000
L L
23.06.2010 HK$14,000,000
M 20.07.2010 HK$ 7,000,000 M

14.12.2010 HK$18,950,000
N N

O
37. The first instance judgment in the Estate Litigation was O
granted in favour of the Foundation on 2 February 2010 by Lam J (as he
P P
then was). The Cancellation Agreement and Instruction to Refund were

Q executed about 9-10 months after that judgment. Q

R 38. Having heard that Chinachem might be investigated for R

suspected money laundering, and that Mr Kennedy Wong and

S S
Mr Michael Wong were mentioned in connection with it, the Solicitors
T (through the two Mr Wongs) sent a report to the Joint Financial T

U U

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 - 12 -
A A

B Intelligence Unit dated 1 March 2011 (“JFIU Report”) asserting the B

Solicitors’ innocence.
C C

D D
C. CASE AGAINST EACH DEFENDANT

E E
39. The case against Dr Kung is under the tort of deceit,
F conspiracy and conversion. F

G 40. It is the Plaintiffs’ case that as a result of the real estate G

project in Xiamen, Mr Chan and Dr Kung became very friendly with each
H H
other and they shared common interests. To Mr Chan, Dr Kung was a
I well-known figure. I

J J
41. On around 20 January 2009, Dr Kung approached Mr Chan
K and presented to him an investment opportunity in real estate properties, K

land development and securities in Macao and Hong Kong with Madam
L L
Song. Dr Kung proposed that Mr Chan and Madam Song would each
M invest a sum of HK$50 million, making the aggregate amount of the M

investment HK$100 million (“Dr Kung’s Representation”).

N N

O
42. In reliance of Dr Kung’s Representation and high profile O
social status, Mr Chan agreed to invest with Madam Song. Mr Chan then
P P
drew the Cheque on the following day and had it delivered to Dr Kung,

Q through Mr Hui at the Chinachem Group Office. Q

R 43. The Investment MOU was produced by Dr Kung, on R

18 February 2009, to Mr Chan in duplicate, apparently executed by

S S
Madam Song on behalf of Hero Fortune. Mr Chan executed it on behalf
T of King Base in Dr Kung’s presence. T

U U

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 - 13 -
A A

B 44. Mr Chan had not heard from Dr Kung or King Base since B

signing of the Investment MOU. In about November or December 2010,

C C
upon enquiry from Mr Chan, Dr Kung informed Mr Chan that Madam
D Song was minded to cancel the investment and was minded to refund the D

HK$50 million to Mr Chan within a year. Mr Chan agreed. Dr Kung

E E
proposed to travel to Shanghai with Mr Chan to meet Madam Song so
F that the termination of the Investment MOU could be finalized. F

G G
45. Before travelling to Shanghai, Dr Kung produced the
H undated Cancellation Agreement and Instruction to Refund, which Mr H

Chan signed on behalf of King Base, in the presence of Dr Kung.

I I

46. On 12 January 2011, Dr. Kung travelled to Shanghai

J J
together with Mr Chan with intent to introduce Madam Song to Mr Chan
K and to ask Madam Song to sign the Cancellation Agreement (“Shanghai K

L
Trip”). However, Madam Song did not appear in that meeting. The L
Cancellation Agreement was left with Dr. Kung so that he could ask
M M
Madam Song to sign on the same later. After the Shanghai Trip, Dr Kung

N
handed to Mr Chan the Cancellation Agreement in Hong Kong with N
Madam Song’s signature on it.
O O

47. It is the Plaintiffs’ case that Dr. Kung’s Representation was

P P
false, fraudulent and a sham and the real intent and purpose was to use
Q Hero Fortune as a conduit of receiving the HK$50 million to enable Q

Dr Kung to fund the Estate Litigation.

R R

S 48. Further, there was a conspiracy among the 4 Defendants to S

defraud the Plaintiffs by unlawful means, ie by Dr Kung’s deceit.

T T

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A A

B 49. The case against Hero Fortune is in conspiracy and B

conversion. Madam Song never invested the HK$50 million and never
C C
had intention to do so. She was allegedly Dr Kung’s nominee.
D D
50. The case against the Foundation is in conspiracy and
E E
conversion. It is alleged that the Foundation had received the money and
F converted the Cheque to its own use. The claims for breach of statutory F

duty and breach of duty of care, premised on sections 25 and 25A of the
G G
Organized and Serious Crimes Ordinance, Cap 455 (“OSCO Claims”),
H were abandoned 2 weeks before trial. H

I 51. The case against the Solicitors is in conspiracy. The I

Plaintiffs allege that the Solicitors have knowingly and dishonestly

J J
assisted in the acquisition of Hero Fortune, the opening and maintenance
K of D2’s Bank Account, subsequent transfer of the HK$50 million from K

L
D2’s Bank Account to the Solicitors’ Bank Account and eventually to the L
Foundation.
M M

52. The parties have agreed upon 14 issues, which can be

N N
classified into 4 major ones:
O O
(1) General factual disputes surrounding the making of
P P
Dr Kung’s Representation, ie as to whether Dr Kung had

Q made Dr Kung’s Representation, prepared the Investment Q

MOU, Cancellation Agreement and Instruction to Refund for
R R
execution; whether Mr Chan had given the Cheque to
S Dr Kung in reliance of Dr Kung’s Representation; and S

whether Mr Chan and Dr Kung had travelled together to

T T

U U

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 - 15 -
A A

B Shanghai with intent to ask Madam Song to sign on the B

Cancellation Agreement;
C C
(2) Whether Dr Kung’s Representation was false;
D D
(3) Whether there was a conspiracy among the Defendants to
E injure the Plaintiffs; and E

F (4) Whether the Dr Kung, Hero Fortune and the Foundation had F

converted the Cheque and its proceeds to their or the

G G
Foundation’s own use.
H H
53. The parties have no dispute that (i) any judgment on liability
I should be entered in favour of King Base but not Mr Chan; and (ii) that I

the quantum of damages should be HK$50 million for each cause of

J J
action.
K K

54. The Plaintiffs accept that their claim against Dr Kung can
L L
stand on its own. However, if they cannot establish a case against Dr
M Kung, their case against the Foundation and the Solicitors must fail. M

N N
D. GENERAL FACTUAL DISPUTES (SUB-ISSUES 1-8)
O O
D1. General principles on assessing credibility of witnesses
P P
55. In assessing credibility, the general principles are that
Q Q
contemporaneous written documents and documents which came into

R existence before the problems in question emerged are of the greatest R

importance. The court should consider the inherent likelihood or

S S
unlikelihood of an event having happened, or the apparent logic of
T events. The court should consider the consistency of the witness T

U U

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 - 16 -
A A

B evidence with undisputed or indisputable evidence, and the internal B

consistency of the witness’ own oral testimony and his/her witness

C C
statement. In cases of fraud, the court should always test the veracity of
D witness’ evidence by reference to the objective facts proved D

independently of their testimony, in particular by reference to the

E E
documents in the case, and pay particular regard to their motives and to
F the overall probabilities. These principles are applicable to any case F

where a witness’ credibility features prominently in the court’s

G G
determination. See Hui Cheung Fai v Daiwa Development Ltd,
H HCA 1734/2009, 8 April 2014, at §§77-80, DHCJ Eugene Fung SC. H

I I
56. Adverse inferences could be drawn by the Court from the
J failure of a party to adduce contradictory evidence, which he can be J

expected to provide: Xie Li Xin v Law Ka Yan Thompson [2022] HKCFI

K K
1591, at §10, Wilson Chan J.
L L
57. The silence of one party in the face of the other party’s
M M
evidence may convert that evidence into proof in relation to matters

N
which are, or are likely to be, within the knowledge of the silent party and N
about which that party could be expected to give evidence. Thus,
O O
depending on the circumstances, a prima facie case may become a strong

P or even an overwhelming case. But, if the silent party’s failure to give P

evidence (or to give the necessary evidence) can be credibly explained,
Q Q
even if not entirely justified, the effect of his silence in favour of the other
R party may be either reduced or nullified. See Prest v Petrodel Resources R

Ltd & Others [2013] 2 AC 415 at §44, Lord Sumption JSC, quoting Lord
S S
Lowry in R v Inland Revenue Comrs, Ex P TC Coombs & Co [1991] 2
T AC 283 at 300. T

U U

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 - 17 -
A A

B D2. Overview of credibility B

C 58. The credibility of Mr Chan and Dr Kung is of great C

importance because the crucial conversations leading to the alleged deceit

D D
was between Mr Chan and Dr Kung alone. Evidence of other witnesses
E is relatively uncontroversial. E

F F
59. Mr Chan’s case is supported by some contemporaneous
G documents. However, his conduct at the material time, especially in G

issuing the Cheque without the name of the payee and entering into an
H H
Investment MOU without knowing the details of the investor or the
I proposed investment, was commercially non-sensical or illogical. As I

demonstrated below, I do not find his evidence credible.

J J

60. Dr Kung was aged 79 at the time of the trial and the relevant
K K
events happened 13 years ago. However, having received HK$50 million
L L
as donation for the Estate Litigation could not be regarded as a small

M
matter that would have escaped his memory despite the lapse of time. M
And yet his evidence was virtually a blank denial until he suddenly
N N
admitted in the witness box, for the first time, that he knew that Mr Chan

O
had donated HK$50 million to the Foundation (“the Admission”). He O
avoided answering many pertinent questions by saying he did not
P P
remember.

Q Q
61. As shall be demonstrated below, he contradicted himself on
R a number of occasions (either with his own pleading, witness statement or R

his earlier answers in the witness box). His answers were as vague as
S S
possible, eg he said he had read documents which his lawyers gave to him
T to read but he would not confirm what documents he had read. T

U U

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 - 18 -
A A

B 62. To minimize his association with Mr Chan, Dr Kung even B

denied being given a name card of Xiao Fang (the name by which Dr
C C
Kung initially knew Mr Chan) when they first met. He did not even
D remember if he had Xiao Fang’s mobile phone number during a period D

when they were friends in 2008 up to 2011.

E E

F 63. Dr Kung had not discussed these serious allegations of F

deceit and conspiracy with Madam Song or called her as a witness. Nor
G G
had he called Mr David Hui as a witness.
H H
64. I do not find Dr Kung to be credible or reliable. His
I claimed lack of memory was pretentious. He simply chose to forget I

important matters when answering them truthfully would be against his

J J
interest. The irresistible inference from his failure to call Madam Song or
K David Hui as witnesses is that he knew they may discredit him. K

L L
65. I now turn to the 8 sub-issues under the 1st issue.
M M

N
D3. Whether Dr Kung made the Dr Kung’s Representation (sub-issue N
1)
O O
Whether Mr Chan gave the Cheque to Dr Kung through Mr David
P P
Hui at the Chinachem Group Office (sub-issue 2)

Q Q
Whether Mr Chan gave the Cheque to Dr Kung relying upon the

R Dr Kung’s Representation and Dr Kung’s high-profile status R

(sub-issue 3)
S S

66. Mr Chan’s case is supported by some contemporaneous

T T
documents, ie the Investment MOU, Cancellation Agreement and
U U

V V
 - 19 -
A A

B Instruction to Refund. A copy of the Investment IOU was found in the B

Solicitors’ file handled by Mr Michael Wong. A copy of her two-way

C C
permit and identity documents show that Madam Song was a real person,
D whom Mr Michael Wong had met. Mr Chan’s case as set out in his D

demand letter dated 16 July 2012 to Hero Fortune is consistent with the
E E
case he now runs. Similarly, the JFIU Report also supports Mr Chan’s
F case that he had intended to invest with Madam Song and others and that F

the Cheque was King Base’s share of investment capital.

G G

H 67. Mr Chan claimed that he had heard people address Dr Kung H

as “Chairman”, although he was only appointed as such in 2010. That

I I
was not challenged in the evidence. In any case, whether Dr Kung was a
J Chairman or not, his high-profile status was already reflected in his role J

in the Chinachem Group and the Foundation and it was not surprising
K K
that Mr Chan relied on that status.
L L
68. However, the circumstances pertaining to the issue of the
M M
Cheque were illogical and lacked commercial sense.

N N
69. Firstly, Mr Chan and Dr Kung did not have a long-term
O business relationship. They had only met about 5-6 times and had only O

had one project, ie the Tripartite Agreement, before the alleged

P P
investment proposal was made by Dr Kung.
Q Q
70. Secondly, Mr Chan did not even know Madam Song, but he
R R
explained that there was a “pre-requisite or premise” to his agreement to
S the investment – that Dr Kung told him that Madam Song was his good S

friend. Dr Kung promised Mr Chan that if Mr Chan were to invest in the

T T
project with Dr Kung’s good friend, Dr Kung would give Mr Chan more
U U

V V
 - 20 -
A A

B chance of cooperation and investment in projects in Mainland China; then B

it would bring Mr Chan greater profit.

C C

D 71. Mr Chan claims to “have high regard” for the other parties to D
the project in which he would invest and yet he did not even know the
E E
full name of Madam Song. He did not even ask Dr Kung about her,
F notwithstanding that there was nothing to stop him from asking. There F

was no due diligence done as to her background and business.

G G

72. Till the date of the trial, Mr Chan has never met Madam
H H
Song. He only found out that Madam Song used Hero Fortune as her
I company when Dr Kung gave him the Investment MOU for signing. He I

only tried to find the means of contacting Madam Song by his letter on 16
J J
July 2012, 3½ years after the Cheque was issued, relying on Dr Kung to
K forward it to Madam Song. K

L L
73. Thirdly, at or before the time of the investment proposal,
M there was no discussion between Mr Chan and Dr Kung about details of M

the project such as the type of project, expected returns, risks, time frame,
N N
manager, background of other investors or the role of Dr Kung. There
O were no means for Mr Chan to contact Madam Song or other investors. O

The coarse nature of the Investment MOU was in stark contrast to the
P P
Tripartite Agreement entered into just 5 days before the Cheque was
Q issued. Q

R R
74. Fourthly, the Cheque was issued at lightning speed the day
S after Dr Kung’s Representation was allegedly made. It was issued on S

Mr Chan’s own volition, to express his good relationship with Dr Kung

T T
and to show that Mr Chan was a man of his words.
U U

V V
 - 21 -
A A

B 75. In my view, even if that was Mr Chan’s intention, it was B

incredible that he did so without being even shown the Investment MOU
C C
in draft form. No one had hurried him.
D D
76. Fifthly, Mr Chan delivered the Cheque personally to
E E
Chinachem’s office. As he did not see Dr Kung, he left the Cheque in a
F sealed envelope with Mr Hui, without telling the latter that there was a F

cheque in it. He did not know if Mr Hui knew about the investment
G G
proposal. Dr Kung was not even supposed to know that the Cheque was
H due to arrive. H

I 77. Two points arise from such evidence: I

J J
(1) Delivery to Mr Hui is disputed. Mr Chan said that he and
K Mr Hui were friends, had done many businesses together and K

had known each other for about 11 years up to 2009. That

L L
was why he left the Cheque with Mr Hui. Dr Kung was in
M the best position to call Mr Hui as witness to contradict M

Mr Chan, but he did not. The irresistible inference is that

N N
Mr Chan did deliver the Cheque to Mr Hui and I so find.
O O
(2) There is no dispute that the Cheque eventually found its way

P to Madam Song. Whether it was due to the investment P

proposal or was a donation to the Foundation, there was no
Q Q
receipt from anyone to Mr Chan and the latter never asked
R for one. There was thus a lot of undisclosed tacit R

understanding between Mr Chan and Dr Kung that met the

S S
eyes.
T T

U U

V V
 - 22 -
A A

B 78. Sixthly, there was simply no reason why the payee’s name B

should be left blank on the Cheque. Mr Chan admitted in the witness box
C C
that he could have asked Dr Kung for the name of the payee, and that
D would not in any way undermine his relationship with Dr Kung, or show D

that he was not a man who would live up to his word.

E E

F 79. Mr Chan clearly knew that the Cheque could have been F

presented to the bank for cash payment, or anyone could have filled in a
G G
name and got the money, thereby defeating his purpose of using the
H money in investment with Madam Song. H

I I
80. When asked by the Court as to why the name of payee was
J not on the Cheque, Mr Chan further claimed that it was the practice of his J

secretary to cross a cheque. Maybe on that occasion, the secretary

K K
thought she could cross the Cheque after the payee’s name was put in. I
L find that explanation to be most illogical. The Cheque would not come L

back to the secretary because Mr Chan was to deliver it personally to Dr

M M
Kung. Plainly, Mr Chan deliberately left the name of the payee blank for
N an untold purpose. N

O O
81. Seventhly, Mr Chan never asked for a receipt for the Cheque

P from anyone. The Investment MOU mentioning Hero Fortune as the P

investing partner having received the HK$50 million was only given to
Q Q
Mr Chan about 4 weeks after the Cheque was issued. It is hard to believe
R that a businessman like Mr Chan would be content to have such a huge R

sum leave his hands without knowing who the recipient was.
S S

T T

U U

V V
 - 23 -
A A

B 82. The circumstances in which the Cheque was issued were B

totally bizarre. I am not satisfied that Mr Chan had told the Court the
C C
whole truth. There must have been more material discussions between
D him and Dr Kung which led to the Cheque being issued. Whilst Dr Kung D

may have made Dr Kung’s Representation, the true context in which he

E E
made it is not before the Court.
F F

83. Dr Kung’s evidence on these sub-issues was equally evasive

G G
and full of inconsistencies. His oral evidence contradicted his pleaded
H case. H

I 84. Dr Kung’s pleaded case admitted that Madam Song was his I

close friend, that he had not introduced her to Mr Chan, that Hero Fortune
J J
was incorporated under BVI law and that the Foundation had received the
K HK$50 million from the Solicitor. His defence was a total denial – no K

L
knowledge of Mr Chan as Mr Chan, no investment proposal, never L
received the Cheque and no knowledge of the source of donation.
M M

85. His witness statement stated that during casual chats,

N N
Xiao Fang indicated that he was interested in making a donation in
O respect of the Estate Litigation, but Dr Kung had forgotten when it was O

and had not followed up. His witness statement gave the impression that
P P
in mid-February 2009, neither he nor the Foundation knew the donor of
Q the 2 sums. Mr David Hui told him that the HK$50 million came from Q

Mr Chan. At that time, Dr Kung did not know that Chan Shu Chun was
R R
the alias of Xiao Fang (Dr Kung-WS §§13-15). 1

S S

86. This version was, in itself, difficult to believe.

T T
1
To stand for the maker and witness statement

U U

V V
 - 24 -
A A

B (1) It was incredible that for no apparent reason and without B

solicitation from Dr Kung, Mr Chan had expressed interest

C C
in making a donation in respect of the Estate Litigation.
D D
(2) At a time when the Estate Litigation was in dire need of

E funding, it was incredible that Dr Kung did not try to seek E

donation or follow it up with Mr Chan. Dr Kung’s

F F
explanation that he was not close to Mr Chan contradicted
G his own evidence that he and Xiao Fang/Mr Chan were good G

friends.
H H
(3) The Cheque was not issued by Mr Chan and had no payee.
I The Solicitors did not tell the Foundation who the donors I

were. It was incredible that Mr Hui knew that Mr Chan was

J J
a donor unless, as I have found, Mr Hui was the person
K K
receiving the Cheque; and Mr Hui was told by either Mr

L
Chan and/or Dr Kung that Mr Chan wanted to make a L
donation.
M M
(4) If Mr Hui had known that Mr Chan was a donor, it was
N incredible that Mr Hui or Dr Kung did not know that the N

donor of the Cheque was Xiao Fang, as that was the name
O O
known to both of them and Mr Hui had seen Mr Chan in
P person when the Cheque was delivered. P

Q Q
87. Next, as regards Dr Kungs’ Admission, he asserted that it
R was “crystal clear” to him from the beginning that the HK$50 million R

given by King Base to Hero Fortune was a donation. The Admission has
S S
never been pleaded, despite his defence having gone through 2 rounds of
T amendment. T

U U

V V
 - 25 -
A A

B B

88. The Admission was full of contradictions:

C C

D (1) Under cross-examination, Dr Kung said that it was before D

mid-February 2009 that he realized that Mr Chan was going
E E
to make or had made the donation. He said he forgot how he
F knew it; but he also said that it was Mr Hui who told him F

that a Mr Chan Shu Chun had made a donation. Upon

G G
learning this, Dr Kung asked Mr David Hui who Mr Chan
H Shu Chun was, whereupon Mr David Hui told him that Chan H

Shu Chun was Fang Chang Xiong. That contradicted §15 of

I I
Dr Kung-WS. It also contradicted his pleaded case that he
J was only told by Mr Hui that Xiao Fang was in fact Chan J

Shu Chun in or after 2011 (Defence, §11(b));

K K
(2) The Admission contradicted his own plea that he did not
L L
know the source of Madam Song’s donation (Defence,

M
§27A(c)); M

(3) As he had only introduced Madam Song to the Solicitors and

N N
did not give instructions to the Solicitors, how did he know
O about King Base? O

P (4) The Admission contradicted the contents of the JFIU Report, P

which described the HK$50 million as King Base’s share of
Q Q
the investment capital;
R (5) The Admission contradicted Madam Song’s stated change of R

mind in diverting the HK$50 million from investment to

S S
donation;
T T

U U

V V
 - 26 -
A A

B (6) The Admission could not be true unless that was the tacit B

agreement or understanding between him and Mr Chan;

C C
(7) The HK$50 million was a huge sum of money by any
D D
standard. It was unlikely that Mr Chan would have donated

E that sum without solicitation. Further, if his intention was to E

make a donation, he could have stated the payee as the

F F
Foundation instead of leaving it blank. There was no
G conceivable reason why the money had to first go through G

Mr Hui / Dr Kung, then to Hero Fortune and then to the

H H
Solicitors before reaching the hands of the Foundation.
I I
89. The above contradictions concern crucial aspects of the
J factual dispute between the parties. There is no sensible explanation from J

Dr Kung as to why the Admission came only 4 years after his witness
K K
statement was prepared. The only logical inference is that he has not been
L L
telling the Court the whole truth. The unfortunate thing is that the late

M
Admission could not be put to Mr Chan in cross-examination. M

N 90. As neither Mr Chan nor Dr Kung were entirely reliable, the N

reasons for issuing the Cheque were not made out. My findings on
O O
sub-issues 1-3 are as follows:
P P
(1) Whether Dr Kung made the Dr Kung’s Representation – he
Q Q
may have done so but the true context is not before the
R Court. I find there must have been more material R

discussions between Mr Chan and Dr Kung that were not

S S
disclosed to the Court which led to the Cheque being issued.
T T

U U

V V
 - 27 -
A A

B (2) Whether Mr Chan gave the Cheque to Dr Kung through B

Mr David Hui at the Chinachem Group Office – yes.

C C
(3) Whether Mr Chan gave the Cheque to Dr Kung relying upon
D D
the Dr Kung’s Representation and Dr Kung’s high-profile

E status – Mr Chan did consider Dr Kung to have high profile E

status. Consequent upon my answer to sub-issue above, I

F F
am not satisfied that Dr Kung’s Representation and/or his
G high profile status was what Mr Chan relied on to give the G

Cheque to Dr Kung. There must have been more material

H H
representations not disclosed to the Court that he relied on as
I well. I

J J
D4. Whether Dr Kung prepared the Investment MOU, the undated
K Cancellation Agreement and the Instruction to Refund (“the K

L
3 Documents”) for Mr Chan to sign (sub-issues 4-6) L

M
91. I am unable to see why Mr Chan needed to lie on who the M
draftsman of the 3 Documents were, or that Madam Song had signed
N N
before he did when the Investment MOU was presented to him. There

O
was no dispute that Mr Chan did not have contact with Madam Song. O

P 92. Dr Kung’s evidence on those 3 Documents was most P

dubious. He said he did not remember ever perusing the Investment

Q Q
MOU. With no investment experience, I cannot see why Madam Song
R would have prepared those documents herself. R

S S
93. The 3 Documents were probably contemporaneous
T documents in existence well before 2011 because: T

U U

V V
 - 28 -
A A

B (1) Mr Kennedy Wong admitted in the witness box that the B

Investment MOU and Instruction to Refund were in the

C C
Solicitors’ file before commencement of this action and that
D Mr Michael Wong must have kept them there before he left D

the Solicitors’ employment.

E E

(2) Mr Kennedy Wong further agreed that the Investment MOU

F F
that the Solicitors had on its file (C1/3/121-122) was a
G different document from the Investment MOU produced by G

the Plaintiffs (C1/4/123-124) as one could tell from the

H H
differences in signatures. This supported Mr Chan’s
I evidence that the Investment MOU was signed in duplicate. I

(3) Mr Kennedy Wong also mentioned that he remembered

J J
reading the heading of the Investment MOU and that he
K K
vaguely remembered the unsigned Cancellation Agreement

L
when he was preparing the JFIU Report in 2011. L

M 94. I find that Dr Kung did prepare the 3 Documents for M

Mr Chan to sign. It was also Dr Kung who procured Madam Song’s

N N
signatures on those 3 Documents.
O O

P D5. Whether Mr Chan and Dr Kung travelled together to Shanghai on P

12 January 2011 with the intent to ask Madam Song to sign on the
Q Q
Cancellation Agreement (sub-issue 7)
R R
95. Mr Chan has produced some documentary proof relating to
S the Shanghai Trip – his own statement of travel records, invoice dated S

12 January 2011 of a restaurant in Shanghai, his credit card statement

T T
showing expenses in Shanghai (in particular at Duty Free) on 12 and
U U

V V
 - 29 -
A A

B 14 January 2011 and WhatsApp message from his assistant in proof of B

that trip. However, those documents could not prove that Dr Kung was in
C C
Shanghai at that time with him.
D D
96. Dr Kung pleaded that he “did not propose” to travel to
E E
Shanghai together with Mr Chan to meet Madam Song …”. In his
F witness statement, he said that he could not remember whether he met F

with Mr Chan in Shanghai on 12 January 2011. Even if he had, Mr Chan

G G
and he never discussed any investment plan. He kept saying in the
H witness box that they were not on same flight. Eventually in answer to H

Court’s question, he said he had met Mr Chan in Shanghai on a number

I I
of occasions, but could not remember if they had in January 2011. He
J was evasive. J

K 97. Dr Kung resisted the Plaintiffs’ application for discovery of K

L
his statement of travel records on a technical ground. According to §12 L
of the judgment of Mimmie Chan J in this action dated 4 March 2020,
M M
Dr Kung’s counsel made a distinction between document and data. The

N
summons was for discovery of documents (ie the statement of travel N
records) but not data as to Dr Kung’s travel history as kept by the
O O
Immigration Department. The statement did not exist at the date of the

P summons. P

Q 98. Mimmie Chan J held the view that the statement, if Q

produced, would only show Dr Kung’s departure from and arrival in

R R
Hong Kong on particular days in January 2011. It could not show
S whether he had visited Shanghai or that he had been there to meet with S

Madam Song. The statement was of little probative value.

T T

U U

V V
 - 30 -
A A

B 99. Whilst I agree with Her Ladyship, one should not forget that B

Mr Chan was very specific about the date he and Dr Kung travelled
C C
together for a specific purpose in his re-re-re-amended statement of claim
D (“RRRASOC”). And yet Dr Kung stated that he was aware of this D

allegation only when Mr Chan was testifying in court. That could not be
E E
further from the truth. Producing travel records to prove or disprove that
F he was in or out of Hong Kong on 12 January 2011 would have been F

simple and inexpensive, compared to engaging counsel to resist an

G G
interlocutory application.
H H

100. Taking all circumstances into account, especially the fact

I I
that Dr Kung has been evasive and incredible on sub-issues 1 to 6, I draw
J the inference against him that his resistance of the interlocutory J

application was to hide the fact that the Shanghai Trip had occurred as
K K
alleged.
L L
101. Timing-wise, there could not be any other reason for that
M M
Trip (and none has been suggested) but for Mr Chan to meet Madam

N
Song and have her sign the Cancellation Agreement and Instruction to N
Refund in his presence. I accept the Plaintiffs’ version.
O O

P D6. Whether Dr Kung handed to Mr Chan the Cancellation Agreement P

in Hong Kong on which Madam Song’s signature was apparently

Q Q
affixed (sub-issue 8)
R R
102. Mr Chan’s evidence was that Dr Kung presented an undated
S Cancellation Agreement and Instruction to Refund for Mr Chan to sign S

on behalf of King Base, which Mr Chan did, in the presence of Dr Kung.

T T

U U

V V
 - 31 -
A A

B Mr Chan and Dr Kung had been to Shanghai to try and meet Madam B

Song but were unable to do so after waiting for several hours. Her failure
C C
to come was for unknown reasons. When Dr Kung returned to Hong
D Kong, he gave the Cancellation Agreement duly signed by Madam Song, D

to Mr Chan.
E E

F 103. There was no evidence of any communication between F

Madam Song and Mr Chan. There was no evidence of any investment

G G
proposal, whether from Madam Song or Dr Kung/Chinachem since the
H Investment MOU was signed. By 12 January 2011, it was not surprising H

that Mr Chan would have wanted refund of his HK$50 million paid 2

I I
years ago. He had no contact with Madam Song and had to rely on Dr
J Kung to contact her. J

K 104. Mr Chan’s evidence was uncontradicted. I find that it was K

L
more probable than not that Dr Kung had handed to Mr Chan the L
Cancellation Agreement in Hong Kong on which Madam Song’s
M M
signature was apparently affixed.

N N

E. CLAIM IN DECEIT AGAINST DR KUNG (SUB-ISSUES 9-10)

O O

E1. Legal principles

P P

105. The legal principles on the tort of deceit are not in dispute
Q Q
and they have been set out in Haifa International Finance Co Limited v
R Concord Strategic Investments Limited [2009] 4 HKLRD 29 at §15, R

Cheung JA:
S S

T (1) there must be a representation of fact made by words or T

U U

V V
 - 32 -
A A

B conduct; B

C (2) the representation must be made with knowledge that it is or C

may be false. It must be wilfully false, or at least made in the

D D
absence of any genuine belief that it is true;
E (3) the representation must be made with the intention that it E

should be acted upon by the claimant, or by a class of

F F
persons which includes the claimant, in the manner which
G resulted in damage to him; G

H (4) it must be proved that the claimant has acted upon the false H

statement; and
I I
(5) it must be proved that the claimant suffered damage by so
J J
doing.

K K
106. A representation as to belief or intention can also be a
L statement of fact: Edgington v Fitzmaurice (1885) 29 Ch D 459 at 483. If L

the representor did not in fact harbour such a belief or intention, that
M M
statement would be false: Xie Li Xin at §185. Edgington concerned a
N prospectus which invited subscriptions for debentures stating that the N

object of the issue of the debentures was “to complete the alterations and
O O
additions to the buildings, to purchase horses and vans and to develop the
P supply of fish” (p 482). In fact, the directors intended to use the money P

raised to pay off pressing liabilities (p 484). The English Court of Appeal
Q Q
held that there was a misrepresentation of fact (as to the present intention
R to use the subscription monies) giving rise to the tort of deceit. R

S S
107. Cogent evidence is required to establish this serious tort.
T T

U U

V V
 - 33 -
A A

B E2. Representation of facts B

C 108. The Plaintiffs say that Dr Kung’s Representation that the C

sum of HK$50 million was to be used and applied in the investment

D D
under the Investment MOU was false, fraudulent and a sham. The real
E intent and purpose was to use Hero Fortune as a conduit to receive the E

HK$50 million to enable Dr Kung to fund the Estate Litigation.

F F

G 109. I repeat §§82 and 90 above. Despite the finding that Dr G

Kung’s Representation may have been made, it stretches anyone’s

H H
imagination to say that there was a genuine investment proposal. A
I donation from Mr Chan first with an understanding of being given I

unspecified investments in return may better explain why Mr Chan left it

J J
to Dr Kung to decide the payee and the Investment IOU came later. The
K truth is not certain because, as I said, the context in which Dr Kung’s K

Representation was made is not before the Court.

L L

M
110. The analyse in Section E below shall proceed on the basis M
that Dr Kung’s Representation was the only material representation made.
N N

O E3. Falsity of the representation O

P 111. It is firmly established on the evidence that the HK$50 P

million had not been used in investment but given to the Foundation and
Q Q
applied to fund the Estate Litigation. Dr Kung’s Representation was
R false. R

S S
112. The falsity was further proved by the following conduct of
T Madam Song. T

U U

V V
 - 34 -
A A

B 113. On 30 January 2009, when Mr Michael Wong attended B

Madam Song in Shanghai, Madam Song already indicated that she was
C C
considering donating “money from King Base” to the Foundation. That
D was a week before the HK$50 million was deposited into D2’s Bank D

Account on 6 February 2009. She could only have learnt about King
E E
Base from Dr Kung who received the Cheque.
F F

114. There was no evidence of any attempt ever made by

G G
Madam Song to contact Mr Chan, to look for any investments, or to inject
H her share of the HK$50 million. H

I 115. Dr Kung’s subsequent presentation to Mr Chan of the I

Cancellation Agreement signed by Madam Song showing that

J J
Madam Song would repay the HK$50 million within a year was false as
K well as she could not have afforded to repay with her financial condition. K

L L

E4. Knowledge of falsity of the representation

M M

116. Dr Kung’s knowledge of the falsity of Dr Kung’s

N N
Representation was established by (i) his silence as to how the Cheque
O ended up with Madam Song, (ii) his keeping Madam Song out of the O

reach of Mr Chan, (iii) his knowledge of Madam Song’s financial

P P
situation; (iv) his abnormal reaction to Madam Song’s donations; and (v)
Q his failure to forward Mr Chan and Galls’s letters to Madam Song in Q

2012.
R R

S 117. Firstly, Dr Kung was completely silent as to how the Cheque S

ended up with Madam Song. I have found that Mr Chan handed the
T T
Cheque in an envelope to Mr Hui, who was never a party to the relevant
U U

V V
 - 35 -
A A

B discussion between Mr Chan and Dr Kung. The Cheque could not have B

left Mr Hui’s hands without the instructions of Dr Kung. Dr Kung was

C C
the conduit between Mr Chan and Madam Song who had never met each
D other. The irresistible inference is that Mr Hui had passed the Cheque to D

Dr Kung or otherwise handled it in accordance with Dr Kung’s

E E
instructions.
F F

118. Secondly, Dr Kung kept Madam Song out of the reach of

G G
Mr Chan. He never intended the two to meet each other and hence never
H introduced them to each other. He had not given the means of contacting H

Madam Song to Mr Chan, such that the latter had to request Dr Kung to
I I
forward the pre-action letters to Madam Song/Hero Fortune. Dr Kung
J confirmed that Madam Song did not know Mr Chan. This could not have J

been the situation of Dr Kung pulling 2 genuine investors together.

K K

L
119. Mr Chan was supposed to meet Madam Song in the L
Shanghai Trip. I cannot conceive of a reason why she did not turn up,
M M
given that Madam Song had no job. The most likely reason was that Dr

N
Kung did not want her to meet Mr Chan. N

O 120. Thirdly, Dr Kung knew Madam Song’s financial situation O

and knew or would have known that she would not have HK$50 million
P P
to invest, donate or repay.
Q Q
121. According to his unchallenged evidence, Madam Song is
R R
10 years older than him. They were classmates studying at the same
S university. However, she had never practised as a doctor because of poor S

health. She did not have a career and had been jobless since leaving
T T
university. She never had any investment in Hong Kong, Macao or
U U

V V
 - 36 -
A A

B Mainland China and never had any business relationship with the B

Chinachem Group. She was not a wealthy individual.

C C

D 122. There was no logical reason why this lady would suddenly D
want to invest. She needed Dr Kung to introduce an investor, and a
E E
lawyer in Hong Kong, but opened a bank account in Macao. Dr Kung
F prepared the Investment MOU for her to sign. Dr Kung’s failure to make F

enquiries of her intentions to invest was not the normal reaction of a

G G
long-time friend.
H H
123. Dr Kung confirmed that Madam Song only came to Hong
I Kong on one occasion. As to the purpose of that visit, Dr Kung’s I

evidence shifted. In Dr Kung-WS, §8, he said Madam Song told him that
J J
she would like him to introduce a lawyer to her “to arrange
K documentation for investment”. In the witness box, he testified that she K

L
did not mention any particular items, but wanted to engage a lawyer “to L
find out what sort of investment was suitable”, a task which a lawyer was
M M
not usually asked to do.

N N
124. Dr Kung agreed with Michael Wong-WS that Madam Song
O went to the Solicitors on 14 January 2009. This took place before the O

Cheque was issued. Dr Kung accompanied her there. Dr Kung and

P P
Mr Kennedy Wong left after Madam Song was introduced to Mr Michael
Q Wong. Dr Kung said he never gave instructions to the Solicitors on that Q

matter.
R R

S 125. Dr Kung’s evidence on Madam Song’s change of mind S

shifted. He first stated that he did not remember seeing C2/423 wherein
T T
Madam Song stated that because there was no suitable investment project
U U

V V
 - 37 -
A A

B she had decided to unconditionally donate to the Foundation. Later he B

said he might not have come across this sort of document, but that did not
C C
mean he was not aware of that matter.
D D
126. No documentation for investment had ever been arranged by
E E
the Solicitors nor was any advice on suitable investment given by the
F Solicitors. What was done instead was that a BVI company (Hero F

Fortune) was acquired for her by the Solicitors. D2’s Bank Account was
G G
opened in Macao, with Mr Michael Wong accompanying Madam Song in
H Macao. H

I 127. There was no conceivable investment project or donation I

which would have required the use of a (i) BVI company or (ii) a bank
J J
account in Macao. The use of items (i) and (ii) bore the hallmarks of an
K intention to conceal the origin of funds. And that was completely borne K

L
out by subsequent events – that Madam Song received funds and L
channelled them to the Foundation in 2009 to 2010.
M M

128. It was not established in the evidence that Dr Kung knew

N N
about §§126 and 127, but he knew the rest about Madam Song’s financial
O situation under this third factor. O

P P
129. Fourthly, Dr Kung’s reaction to Madam Song’s donations

Q was abnormal. Between 2009 and 2010, Madam Song had, through Hero Q
Fortune, donated a total of HK$104.95 million (including the subject
R R
HK$50 million) to the Foundation. The documents concerning Madam
S Song’s donations of HK$50 million were shown to Dr Kung during S

cross-examination. Dr Kung confirmed that he was aware at the time that

T T
the donations came from her (despite the donors being anonymous). I am
U U

V V
 - 38 -
A A

B of the view that that must be the case as he was responsible for raising B

funds for the Estate Litigation. And yet he could not remember if he had
C C
ever called her up to say thank you. With his knowledge of her financial
D background, it was weird as he had not cared to ask how she could have D

afforded to make such substantial donations.

E E

F 130. Dr Kung perpetuated the falsity by: F

G (1) Producing the Investment MOU on 18 February 2019, 2 G

days after the HK$50 million had been donated to the

H H
Foundation;
I I
(2) Informing Mr Chan, in about October to December 2010,
J that Madam Song was minded to cancel the investment J

arrangement and to refund the HK$50 million to Mr Chan

K K
within 12 months, well knowing that the refund was not
L going to happen due to the donations and her lack of means; L

and
M M
(3) Taking the Shanghai Trip with Mr Chan on 12 January 2011,
N N
concealing the fact that the HK$50 million had already been

O
donated to the Foundation from Mr Chan. O

P 131. Fifthly, Dr Kung failed to pass on Mr Chan and Gall’s P

pre-action letters to Madam Song. He did not even ask Mr Chan to

Q Q
clarify what the matter was about.
R R

132. Dr Kung even testified that his “impression” was that there
S S
was no investment project at all; as Mr Chan simply made a donation, so
T why would Dr Kung go to make enquiries about the letters. If Mr Chan T

U U

V V
 - 39 -
A A

B and Madam Song had cooperated, Mr Chan perfectly had his own way to B

pass on his letters to Madam Song. With respect, such testimony

C C
completely contradicted Dr Kung’s earlier testimony that he had never
D introduced the two to each other. D

E E
133. This Court specifically asked Dr Kung why he did not
F comply with the request of his alleged good friend (Xiao Fang) to another F

good friend (Madam Song). Dr Kung’s answer was telling:

G G

“Because what is written on this letter actually did not exist and
H Madam Song had never had any knowledge of this matter. H
What's the good -- is there anything good for me to make an
I enquiry about this which actually did not exist? 2” (underline I
added)

J J
134. The rhetorical question is: how could Dr Kung be so certain

K about the words underlined? The only probable explanation is that he K

was the mastermind. Hence, there was no point for him to forward the
L L
letters or allow Mr Chan come into contact with Madam Song.
M M
135. In summary, Madam Song’s intention to invest was
N Dr Kung’s say-so. All the clouds in the evidence, the allegations that he N

was a deceiver and conspirator could have been cleared if she had been
O O
called a witness. Dr Kung admitted meeting her even after
P commencement of this action. He had been legally represented even in P

September 2018 when his witness statement was filed. The irresistible
Q Q
inference from not calling such an important witness is that Madam
R Song’s evidence would discredit Dr Kung and expose his “design” behind R

S
the fund-flow of the HK$50 million. S

T T
2
Day 4: Page 49: Line 21-24

U U

V V
 - 40 -
A A

B 136. I agree with Mr Vincent Chen, counsel for Mr Chan, that B

based on the entirety of the evidence, the irresistible inference was that
C C
only one person could have masterminded the fund-flow and that was
D Dr Kung. Madam Song was plainly his nominee. D

E E
137. It was abundantly clear that when Dr Kung’s Representation
F was made, the HK$50 million solicited from the Plaintiffs were never F

intended to be used for any investment purposes, whether with

G G
Madam Song or anybody else. Dr Kung’s Representation must be false
H to Dr Kung’s knowledge. H

I I
E5. Representation made with intention of being acted upon
J J
138. Dr Kung’s Representation was plainly made by Dr Kung
K with the intention of being acted upon by the Plaintiffs, so as to obtain K

L
funds for the Estate Litigation. L

M M
E6. Representation acted upon
N N
139. Mr Chan claimed that he would not have given the
O HK$50 million to Dr Kung but for Dr Kung’s Representation. I O

disbelieve him. There are strong doubts in my mind that but for other
P P
undisclosed representations, Mr Chan would not have issued the Cheque
Q in those bizarre circumstances. Q

R R

E7. Damage to claimant

S S

140. If Dr Kung’s Representation was only material

T T
representation made, it had caused damage to King Base. Having lost so
U U

V V
 - 41 -
A A

B much money and discovered the alleged conspiracy, Mr Chan had never B

reported to the police. Given my serious doubts in the Plaintiffs’

C C
evidence, I am not satisfied that King Base was a victim of deceit.
D D

E E8. Summary of findings on deceit E

F 141. I am not satisfied that Mr Chan was lured by Dr Kung to F

enter into a true investment deal with a stranger, Madam Song, which
G G
failed. There was no credible explanation for Mr Chan to issue a Cheque
H without the payee’s name if the purpose was to invest. The Plaintiffs’ H

evidence in itself lacked cogency. I am not satisfied that they have

I I
discharged the burden of proving deceit on the balance of probabilities.
J J
142. That should mark the end of the Plaintiffs’ case because the
K element of unlawful means would be lacking in the conspiracy claim. In K

L
case I am wrong, in deference to counsel, I deal with the claim in L
conspiracy on the assumption that deceit is established against Dr Kung.
M M

N F. CONSPIRACY CLAIM AGAINST ALL DEFENDANTS N

(SUB-ISSUES 11-13)
O O

F1. Legal principles on conspiracy

P P

143. The elements of the tort of conspiracy are carefully defined

Q Q
so as to avoid trespassing on legitimate business activities or imposing
R any wider liability than can be justified in principle. In Chan Wai Keung R

Lawrence v Au Chi Man Albert & Ors [2021] HKCFI 2096 at §25,
S S
Au-Yeung J held that four elements must be pleaded to sustain a case of
T conspiracy: T

U U

V V
 - 42 -
A A

B (1) The agreement between two or more persons. The means of B

carrying out the agreement, whether lawful or unlawful,

C C
must be set out.
D D
(2) The intention to injure the plaintiff, whether predominant (in

E the case of a lawful means conspiracy) or merely an E

intention to injure (in the case of an unlawful means

F F
conspiracy).
G (3) The acts that were carried out pursuant to the agreement and G

the stated intention.

H H

(4) The damage caused to the plaintiff.

I I

144. For conspiracy to injure by unlawful means:

J J

K (1) It is not necessary that every overt act is done by every K

conspirator, but the act must be done pursuant to the

L L
conspiracy or combination;
M M
(2) It is not necessary to show that there is anything in the nature

N
of an express agreement, whether formal or informal. It is N
sufficient if two or more persons combine with a common
O O
intention, or, in other words, that they deliberately combine,

P albeit tacitly, to achieve a common end; P

(3) The origins of all conspiracies are concealed and it is usually

Q Q
quite impossible to establish when or where the initial
R agreement was made, or when or where other concentrators R

were recruited. The very existence of the agreement can

S S
only be inferred from overt acts. Participation in a
T conspiracy is infinitely variable: it can be active or passive; T

U U

V V
 - 43 -
A A

B (4) Consent, that is agreement or adherence to the agreement, B

can be inferred if it is proved that the conspirator knew what

C C
was going on and the intention to participate in the
D furtherance of the criminal purpose is also established by his D

failure to stop the unlawful activity;

E E

(5) It is not necessary for the conspirators to join the conspiracy

F F
at the same time, but the parties to it must be sufficiently
G aware of the surrounding circumstances and share the same G

object for it properly to be said that they were acting in

H H
concert at the time of the acts complained of;
I (6) In most cases it will be necessary to scrutinise the acts relied I

upon in order to see what inferences can be drawn as to the

J J
existence or otherwise of the alleged conspiracy or
K K
combination. It will be the rare case in which there will be

L
evidence of the agreement itself; L

(7) In order to establish an unlawful means conspiracy, it is

M M
necessary to establish an intention to injure the claimant but
N not a predominant intention or purpose to do so; and N

O (8) In many contexts it will be necessary in order to prove O

intention to ask the court to infer the relevant intention from
P P
the primary facts. In the case of most conspiracies to injure

Q by tortious means it will be clear from the acts of the Q

conspirators that they must have intended to injure the

R R
claimant. In the case of a conspiracy to defraud by
S wholesale misappropriation it would be absurd to argue that S

the conspirators did not intend just that.

T T

U U

V V
 - 44 -
A A

B See Pak Win Investment Ltd (In Compulsory Liquidation) v Chung Yuet B

Sheung, Lorrain, unreported, HCA 419/2011, 9 February 2012 at §15,

C C
DHCJ Au-Yeung (as she then was), following Kuwait Oil Tanker Co
D SAK v Al Bader (No.3) [2000] 2 All ER (Comm) 271. D

E E
145. Conspiracy is actionable where there is absence of just-cause
F or excuse for the conduct: JSC BTA Bank v Ablyazov & Anor (No 14) F

[2020] AC 727 at §10, Lord Sumption and Lord Lloyd-Jones JJSC:

G G

“10. What is it that makes the conspiracy actionable as such?

H … [A] useful concept is the absence of just cause or excuse … H
A person has a right to advance his own interests by lawful
I means even if the foreseeable consequence is to damage the I
interests of others. The existence of that right affords a just
cause or excuse. Where, on the other hand, he seeks to advance
J his interests by unlawful means he has no such right. The J
position is the same where the means used are lawful but the
predominant intention of the defendant was to injure the
K K
claimant rather than to further some legitimate interest of his
own. This is because in that case it cannot be an answer to say
L that he was simply exercising a legal right. He had no interest L
recognised by the law in exercising his legal right for the
predominant purpose not of advancing his own interests but of
M injuring the claimant. In either case, there is no just cause or M
excuse for the combination.”
N N
146. An intention to injure another can only be inferred if it can
O be shown that the act is done deliberately and with knowledge of the O

consequences: Xie Li Xin, §191. This is to be contrasted with a situation

P P
in which the harm to the plaintiff was purely incidental because the
Q Q
unlawful means were not the means by which the defendant intended the

R
harm to the plaintiff: JSC BTA Bank, §14. R

S 147. Unlawful means could be criminal conduct, or even a S

separate actionable tort. This includes the tort of deceit: Xie Li Xin, §193.
T T

U U

V V
 - 45 -
A A

B 148. With regard to pleading: B

C C
(1) Fraud may only be pleaded when there is sufficient

D evidence. D

(2) A party should not be permitted to plead a vague and

E E
unparticularised case of fraud in the hope of making it good
F after discovery. F

G (3) Fraud must be distinctly alleged and as distinctly proved. It G

must be sufficiently particularised.

H H
(4) Fraud and dishonesty should not be inferred from pleaded
I facts that are consistent with honesty. I

J J
149. The pleader has to plead at least one overt act which is the
K act of all the alleged conspirators or, failing that, a number of overt acts K

which include at least one act on the part of each conspirator: Binchuang
L L
Resources Co., Limited v Lockwood Group Limited & Anor [2020]
M HKCFI 2941 by A Chan J at §§31-34. M

N N
150. There is no requirement to give particulars of the common

O
design or as to how the agreement was reached among the co- O
conspirators. The Court looks at the overt acts of the conspiracy and
P P
infers from those acts that there was agreement to further the common

Q object of the combination. It is sufficient that two or more persons Q

combine with the necessary intention or that they deliberately co-operate
R R
albeit tacitly to achieve a common end.” Bullen & Leake, supra, §59-03.
S S
151. This approach makes perfect sense as all conspiracies
T (especially conspiracy to defraud) are by their nature covert and T

U U

V V
 - 46 -
A A

B concealed. The victim would have no knowledge as to where, when and B

how the co-conspirators reached the agreement/common design among

C C
themselves to harm him (or what benefit they derive from the
D conspiracy). The law recognizes that the co-conspirators might not even D

join at the conspiracy at the same time. It will impose an insurmountable

E E
burden and difficulty on the plaintiff if he is required to give and plead
F particulars of something which is deliberately concealed from him by the F

co-conspirators.
G G

H 152. Averments of conspiracy may not be precise but the broad H

question for the court is whether the defendant sufficiently knows from
I I
the plaintiff’s pleaded case the conspiracy that they have to meet: Chan
J Wai Keung Lawrence v Au Chi Man Albert, at §33. J

K 153. On drawing of inferences, bearing in mind the seriousness K

L
and gravity of fraud alleged, recognition must be given to an inherent L
degree of improbability of its occurrence. Whilst an inference may be
M M
drawn on the basis of circumstantial evidence where direct proof is

N
unavailable, such an inference must be properly grounded in the primary N
facts found and the court must guard against indulging in conjecture
O O
under the guise of drawing an influence where the primary evidence does

P not logically and reasonably justify the particular inference in question. P

See Lee Yuk Shing v Dianoor International Limited (In Liquidation)
Q Q
unreported, CACV 185/2015, 23 May 2016, §37, CA.
R R

F2. Challenge to the Plaintiff’s pleading on conspiracy

S S

T T

U U

V V
 - 47 -
A A

B 154. Dr Kung, the Foundation and the Solicitors attack the B

Plaintiffs’ pleading for failing to plead the necessary particulars for

C C
conspiracy.
D D
155. The relevant pleading is in §27 of the RRRASOC which
E E
simply sets out the 4 elements to constitute conspiracy.
F F
“Furthermore, in or about January 2009, the 1st, 2nd, 3rd and 4th
Defendants (or any two or more together) wrongfully and with
G intent to injure the Plaintiffs by unlawful means conspired and G
combined together to defraud the Plaintiffs and to conceal such
H fraud and the proceeds of such fraud from the Plaintiffs.” H

I
156. §28 of the RRRASOC sets out the facts from which the I
conspiracy was to be inferred. §29 sets out the overt acts of each
J J
Defendant. §29A sets out the facts from which to infer Dr Kung’s

K knowledge that the real intent and purpose of the HK$50 million was to K
enable him to fund the Estate Litigation.
L L

157. §§27-29A of the RRRASOC meet the basic needs of

M M
pleading a conspiracy to inform the Defendants of the case they have to
N meet: Bullen and Leake, Jacob’s Precedents of Pleadings, 19th Edition, N

§59-02. Except in relation to Dr Kung, there is no plea as regards the

O O
Foundation/the Solicitors’ knowledge of the common design or
P agreement. Such failure to plead knowledge does give rise to difficulties P

as explained below.
Q Q

R R
G. CONSPIRACY CLAIM AGAINST DR KUNG AND HERO
S FORTUNE S

T T

U U

V V
 - 48 -
A A

B 158. If deceit were established, I would have no hesitation in B

finding the Dr Kung and Madam Song had conspired.

C C

D 159. The Agreement between them was to obtain donations for D

the Foundation to fund the Estate Litigation under the disguise of
E E
investment. Dr Kung lured Mr Chan to issue the Cheque under that
F Agreement. Pursuant to the combination between Dr Kung and Madam F

Sung, the 3 Documents were prepared by Dr Kung; Mr Chan and Madam

G G
Song signed on them.
H H
160. Madam Song provided Hero Fortune and D2’s Bank
I Account to receive funds. With no intent to invest at all, she had no just I

cause for receiving Mr Chan’s money. D2’s Bank Account never had
J J
any business income or expense. The purpose of setting up Hero Fortune
K was only to receive deposits of over HK$100 million (including money K

L
from Mr Chan) which, on her instructions to the the Solicitors, had no L
other destinations but the Foundation.
M M

161. The unanswered question is why those “donors” (including

N N
Mr Chan) so coincidentally wanted to donate money through Hero
O Fortune instead of sending money directly (even as an anonymous donor) O

to the Foundation? A possible answer is that the “donors” wanted to

P P
conceal the source or real purpose of the money.
Q Q
162. Madam Song then claimed to the Solicitors that there was no
R R
suitable investment project. That could not be true because there was no
S evidence of her finding investments. She already expressed her wish to S

Mr Michael Wong on about 30 January 2009 to donate the sum to the

T T

U U

V V
 - 49 -
A A

B Foundation, even before the Cheque was deposited into D2’s Bank B

Account.
C C

D 163. The investment proposal in the Investment MOU was just a D

sham. She had no intent to repay Mr Chan and could not have afforded to
E E
repay.
F F
164. Further, any person who donates to a charitable organization
G would not expect any returns. And yet Madam Song tried to prove in G

advance what nobody doubted by stating that she did not expect the
H H
Foundation to repay or to give any form of return.
I I

165. The irresistible inference is that Hero Fortune was acquired

J J
by Madam Song as nominee of Dr Kung for the purpose of carrying out
K their Agreement. The intent of Dr Kung and Madam Song was to cause K

loss to Mr Chan / King Base and their acts did cause actual loss to
L L
Mr Chan / King Base. The conspiracy between Dr Kung and Hero
M Fortune is established. M

N N

O O

P P

Q Q

R R

S S

T T

U U

V V
 - 50 -
A A

B B

C
G1. Conspiracy claim against the Foundation C

D 166. The only pleaded overt act is that the Foundation D

(indisputably) received the HK$50 million.
E E

167. However, mere receipt of money is not sufficient. As a

F F
matter of principle, a party cannot be part of a conspiracy if it acts in
G ignorance of the true facts: Clerk & Lindsell on Torts, 23rd ed, §23-104. G

Hence a mere receipt of funds remitted through an underground banking

H H
system is not sufficient to find guilt. It has to be proved that the recipient
I knew or had reason to believe that the money had an illicit source: Arrow I

ECS Norway AS v Xin Cheng Holdings (International) Co Ltd,

J J
HCA 239/2016, 12 May 2016, §30, Au-Yeung J.
K K

168. For 4 reasons, the conspiracy claim against the Foundation

L L
must fail.
M M
169. Firstly, the pleaded overt act and the evidence are consistent
N N
with innocence on the part of the Foundation. By nature, a charity’s

O
business is to receive and disburse money. A donor would not expect a O
claw back or reward. There was nothing unusual in the Foundation
P P
receiving the money and disbursing it for its sole “business” then – the

Q Estate Litigation. Q

R 170. Objectively, based on contemporaneous documents, the R

Foundation would only have known that the 2 donations making up the
S S
HK$50 million had come from the Solicitors and the donors were
T anonymous. There was nothing to suggest that the Foundation was aware T

U U

V V
 - 51 -
A A

B of the existence of Mr Chan or King Base, or that the Foundation had B

dealt with the Cheque itself.

C C

D 171. Secondly, as between the Foundation and Dr Kung, there D

was nothing that pointed to the Foundation’s knowledge of Dr Kung’s
E E
deceit.
F F
172. Thirdly, as between the Foundation and Hero Fortune, there
G was nothing that pointed to the Foundation’s knowledge of the existence G

of Hero Fortune and Madam Song, and Madam Song’s acts in furtherance
H H
of the Arrangement.
I I

173. Fourthly, as between the Foundation and the Solicitors, there

J J
was nothing to show that the Foundation had even a slight suspicion that
K the Solicitors had done anything unlawful, or that the Solicitors did not K

mean what they stated in their letters to the Foundation.

L L

M
174. It is not necessary for each co-conspirator to know what the M
others were doing. However, applying Lee Yuk Shing v Dianoor, the lack
N N
of correlation between the Foundation’s conduct to the Agreement and

O
with so many things unknown to the Foundation, it is impossible for the O
Court to infer that the Foundation had participated in a conspiracy.
P P

175. Mr Vincent Chen relies on the notion that Dr Kung’s

Q Q
knowledge and intent was “attributed to” the Foundation to show his
R conspiracy with the Foundation. The principles are as follows: R

S S
(1) A company, being a separate legal person, can conspire with
T its directors; and the knowledge of the company may be T

U U

V V
 - 52 -
A A

B found in a director who has management or control for the B

transaction or act in question: Apple Inc & Anor v. Proview

C C
International Holdings Limited, unreported, HCA739/2010
D 14 July 2011, Poon J (as he then was) at §32). D

E (2) The knowledge of one director of the payment of a bribe E

could be attributed to the company even in a case where

F F
such knowledge was not shared with the board of directors:
G Jafarini-Fini v Skillglass Ltd [2007] EWCA Civ 261, §98, G

Moore-Bick LJ:
H H
“The question in the present case is whether information
I which comes to the attention of one director, but which I
he has not shared with the rest of the board, is to be
treated as information in the possession of the company.
J In MAN v Freightliner I expressed the view that where J
the board of directors is properly to be regarded as the
directing mind and will of the company in relation to a
K K
particular transaction the knowledge of each is to be
attributed to the company. That case, however, was
L concerned with the liability of the company for a false L
statement made in a written contract which the board as
a whole had resolved that the company should enter
M into. The present case differs inasmuch as it is M
concerned with the acquisition by the company of
N information, but there are nonetheless certain N
similarities arising from the fact that the members of the
board can generally be regarded as collectively
O representing the company. In general, therefore, I think O
that information relevant to the company’s affairs that
P
comes into the possession of one director, however that P
may occur, can properly be regarded as information in
the possession of the company itself. In my view that
Q presumption informs the present contract and points to Q
the conclusion that information in the possession of Mr.
Webster relating to the bribe is to be regarded as
R R
information in the possession of PAL itself. That
remains the case even if Mr. Jafari-Fini can properly be
S regarded as representing the company in relation to S
other aspects of the transaction, as to which it is
unnecessary to express any view. (underline added)
T T

U U

V V
 - 53 -
A A

B B
176. A party does not need to plead the legal effects of acts and it
C is for the Court to apply the relevant law in order to determine how the C

acts, as they unfolded, affected the parties’ legal positions: Lo Yuk Sui v
D D
Fubon Bank (Hong Kong) Ltd [2020] 23 HKCFAR 138, §9, the Appeal
E Committee; Kyocera Corp v W Haking Enterprises Ltd & Anor [2021] 2 E

HKC 1, §44.4, CA.

F F

G 177. It is not necessary to plead attribution. However, as a matter G

of pleading, in the RRRASOC:

H H

I
(1) §9 expressly pleads that Dr Kung’s Representation was I
made “in his personal capacity but not otherwise”;
J J
(2) §29(1) pleads that Dr Kung’s Representation was made by
K Dr Kung dishonestly “whilst a director and Chairman of the K

Chinachem Group”. (Note that appointment as Chairman

L L
was done after the money had been transferred to the
M Foundation.) M

N N
178. Nowhere does the RRRASOC aver that Dr Kung’s
O Representation was made “on behalf of” the Foundation. How Dr Kung’s O

personal tort of deceit could be attributed to the Foundation was not made
P P
clear on the pleadings. For such a serious allegation as conspiracy, any
Q query over the interpretation of the pleading should be resolved in favour Q

of the Foundation.
R R

179. Just to complete the picture, the facts were that the
S S
Foundation had 5 persons on the Board of Governors, ie Dr Kung,
T T
Madam Gong and Madam Kung (the 2 sisters of Dr Kung), Mr Joseph

U U

V V
 - 54 -
A A

B Leung and Mr Chan Kam Por. It was not put to Dr Kung in B

cross-examination that he alone was the directing mind and will of the
C C
Foundation. In any case, there is no evidence that Dr Kung was
D authorized by the Foundation to make Dr Kung’s Representation or was D

aware of its being made.

E E

F 180. However, the evidence establishes that: F

G (1) Dr Kung did not require prior approval from other governors G

before he could arrange the Foundation to receive the

H H
money. If money was sourced by him, Dr Kung was the
I person who decided whether the Foundation should receive I

it or not.
J J

(2) When money came into the Foundation and the source of it
K K
was unclear, Mr Chan Kam Por would send an email to the
L governors including Dr Kung and Dr Kung would reply to it. L

Mr Chan Kam Por agreed that he had no way to verify the

M M
source except to trust Dr Kung.
N N
(3) There was no board resolution approving the payment out of

O
the Foundation’s Bank Account to Wilkinson & Grist. O
Mr Chan Kam Por’s recollection was that all governors had
P P
already agreed in advance that once the Foundation had got

Q the money, it had to be given to Wilkinson & Grist. Q

(4) Dr Kung’s own evidence under cross-examination was that

R R
he knew that Mr Chan was the one making the donation.
S S
(5) Mr Chan Kam Por’s oral evidence was that there were
T emails among the governors of the Foundation concerning T

U U

V V
 - 55 -
A A

B receipt of donations but none of those emails have been B

produced. There was no qualification in this piece of

C C
evidence. The inference was that the emails would have
D contained something about the HK$50 million from Mr D

Chan.
E E

F 181. If deceit were established and absent the inconsistency in F

pleading, it could be said that Dr Kung was the directing mind and will of
G G
the Foundation insofar as the sourcing of funds for the Estate Litigation
H was concerned. His knowledge could be attributed to the Foundation, for H

which the Foundation would be liable.

I I

J H. CONSPIRACY CLAIM AGAINST THE SOLICITORS J

K H1. The case against the Solicitors K

L L
182. In contrast to the Plaintiffs’ case against the Foundation, it is

M
pleaded that the Solicitors knowingly and dishonestly assisted in the M
furtherance of the conspiracy by performing 3 overt acts: (i) the
N N
incorporation of Hero Fortune, (ii) the opening and maintenance of D2’s

O
Bank Account and (iii) the subsequent transfer of the HK$50 million O
from D2’s Bank Account to the Solicitors’ Bank Account and eventually
P P
to the Foundation. The Court is invited to infer fraud from the pleaded

Q facts. Q

R 183. In respect of the first overt and second acts, the pleaded facts R

(RRRASCO, §28) are that Hero Fortune was acquired as a shelf company
S S
in Macao through the assistance of the Solicitors on or about 15 January
T 2009 and D2’s Bank Account was opened on the same date in Macao. T

U U

V V
 - 56 -
A A

B Hero Fortune used the office address of the Solicitors as its address in B

Hong Kong when opening D2’s Bank Account and provided the office
C C
number of the Solicitors and Mr Michael Wong’s personal mobile phone
D number as contacting phone numbers of Hero Fortune. Mr Michael D

Wong certified and provided all the required documents to DBS Bank
E E
which were required for the opening of D2’s Bank Account. D2’s Bank
F Account became effective on 21 January 2009. The Solicitors provided F

its office address to Hero Fortune on 15 January 2009 to convene 2

G G
meetings of the board of directors of Hero Fortune: (i) to approve the
H opening of D2’s Bank Account; and (ii) to deal with the operation of D2's H

Bank Account by an authorized representative. Mr Michael Wong

I I
eventually became such an authorized representative. The Solicitors also
J answered the Due Diligence Questionnaire in respect of Hero Fortune as J

K
to its history and background. K

L 184. Despite being aware that Hero Fortune had only been L

incorporated for a short time, that its sole shareholder and director was
M M
Madam Song and that Madam Song had not submitted any proof of her
N credentials to the alleged experience, the Solicitors reported to the DBS N

Bank that Hero Fortune “was engaged in the business of property

O O
investment in Hong Kong/Macao having 2 employees.” No such
P investment was in fact made or business actually engaged by Hero P

Fortune from 2009 to 2013.

Q Q

R 185. Rather, the records of Hero Fortune showed that the only R

movement of funds in that account was to act as conduit to transfer funds

S S
to the Foundation as donations. Two sums came from King Base. Four
T subsequent transfers came from unknown sources. T

U U

V V
 - 57 -
A A

B 186. In respect of the 3rd overt act, even before the Cheque was B

deposited into the D2’s Bank Account on 6 February 2009, Madam Song

C C
already expressed her wish to Mr Michael Wong on 30 January 2009 that
D she was considering donating the HK$50 million to the Foundation. The D

Plaintiffs rely on the facts as set out in §§32-34 above.

E E

F 187. Bank statements of D2’s Bank Account had been sent to the F

Solicitors and so they would have known the trail of the HK$50 million
G G
was handled by depositing the Cheque into D2’s Bank Account, the
H deception and false representation of Dr Kung as pleaded in §§17-19, H

28(j) and (k) of the RRRASOC.

I I

188. Further, as revealed from documents disclosed by DBS

J J
Bank, before the HK$50 million was finally transferred and donated to
K the Foundation, the Bank had called Mr Michael Wong and obtained K

L
confirmation from him to do so. L

M H2. The Solicitors’ defence M

N 189. The Solicitors say that no factual foundation was established N

that the Solicitors knew of Dr Kung’s Representation. They had acted at

O O
all times on the instructions of Madam Song. Their conduct was
P consistent with the lawful and innocent provision of professional services P

to a client. Without more, those overt acts did not reasonably support the
Q Q
inference of a conspiracy. The JFIU Report set out the circumstances in
R support of their solicitors’ inference. R

S S

H3. Legal principles

T T

U U

V V
 - 58 -
A A

B 190. A lawyer is normally entitled to proceed on the basis of his B

client’s instructions being correct. However, blind-eye knowledge,

C C
involving a deliberate decision of the Solicitors not to inquire into matters
D which are obvious and specific, approximates to knowledge for the D

purpose of conspiracy. The principles have been set out in De Krassel v

E E
Chu Vincent [2010] 2 HKLRD 937, Sakhrani J:
F F

(1) If a defendant believes that he has a lawful right to do what

G G
he is doing, he should not be liable for conspiracy to injure
H by unlawful means (§42). H

(2) The fraud or dishonesty is not sufficiently particularized if

I I
the facts pleaded are consistent with innocence or negligence
J (§44). J

K (3) An allegation of dishonesty must be established with cogent K

and compelling evidence. The standard of proof is on

L L
balance of probabilities. The more serious the allegation, the
M stronger and more compelling the evidence is required M

(§§45-48).
N N
(4) A lawyer acting on the basis of their client’s instructions is
O O
normally entitled to proceed on the basis of his client’s

P instructions being correct (§51). P

(5) For there to be blind-eye knowledge, the suspicion must be

Q Q
firmly grounded and targeted on specific facts and not mere
R suspicion which may be no more than a vague feeling of R

unease (§§55-58).
S S

T T

U U

V V
 - 59 -
A A

B 191. Dishonesty is tested by the ordinary standards of reasonable B

and honest people (objective test) and whether the defendant himself
C C
realized that by those standards that his conduct was dishonest
D (subjective): Twinsectra Ltd v Yardley [2002] 2 WLR 802, §§41-42; D

Royal Brunei Airlines v Tan [1995] 2 AC 378, §27.

E E

F 192. The principles for drawing inferences set out in §153 above F

equally apply.
G G

H H4. Analyses of the case against the Solicitor H

I 193. First and foremost, great weight should be given to the JFIU I

Report as it was made 2 years after the material events and 3 years before
J J
this action commenced. It represented the first-hand account Mr Michael
K Wong, the handler of Madam Song’s instructions. All along the K

L
Solicitors believed that the donations made by Hero Fortune to the L
Foundation were genuine. They did not have reasonable grounds to
M M
believe that the payments represented proceeds of an indictable offence.

N
The purpose of money laundering was to enable the criminal who caused N
the exercise to get the money back afterwards. However, as the ultimate
O O
beneficiary was a charitable foundation, there was nothing to make the

P Solicitors think that the donation would go back to the donor. P

Q 194. It was not until 22 February 2011, 2 years after the Q

donations, that Mr Kennedy Wong was told by Mainland acquaintances

R R
in Shenzhen that there was an investigation of suspected money
S laundering involving Dr Kung, which raised the Solicitors’ suspicions. S

Having taken senior counsel’s advice and out of abundance of caution,

T T

U U

V V
 - 60 -
A A

B the Solicitors, on their own volition, made the JFIU Report and expressed B

a willingness to cooperate with JFIU in the investigation of that matter. It

C C
was a full and frank Report despite potential criminal charges of money
D laundering. It refuted any suggestion of subjective dishonesty. D

E E
195. Secondly, it is inherently unlikely that a solicitor, having no
F interest in the client’s business and a professional reputation to uphold, F

would conspire with a client; all the more so when Madam Song was a
G G
new client.
H H
196. The Solicitors were not the ultimate recipient of any benefit
I beyond the fees billed to Madam Song/Hero Fortune, which were not I

suggested to be excessive.
J J

K 197. Mr Vincent Chen suggests that as Chinachem Group was K

one of the top 10 clients of the Solicitors, the latter would have the
L L
motive to please Dr Kung. In my view, this would not be surprising.
M However, it would mean that Mr Michael Wong had walked the extra M

mile to provide more personal service eg meeting Madam Song in

N N
Shanghai, accompanying her to Macao and letting her use his personal
O mobile phone number, but it is far-fetched to elevate it to a motive to O

conspire with Madam Song.

P P

Q 198. Thirdly, as between the Solicitors and Dr Kung, the pleaded Q

case and the evidence do not show the Solicitors to be aware of
R R
Dr Kung’s deceit, the existence of Mr Chan or the Agreement. The
S evidence established that Dr Kung left, a few minutes after introducing S

Madam Song to Mr Michael Wong and Mr Kennedy Wong. Both Dr

T T
Kung and Mr Kennedy Wong confirmed that Dr Kung never gave
U U

V V
 - 61 -
A A

B instructions of any kind to the Solicitors and that since the initial referral, B

Dr Kung had little contact with the Solicitors.

C C

D 199. It is not necessary for the conspirators to all join the D

conspiracy at the same time, but the parties to it must be sufficiently
E E
aware of the surrounding circumstances and share the same object for it
F properly to be said that they were acting in concert at the time of the acts F

complained of: China Metal Recycling (Holdings) Limited v Chun Chi

G G
Wai [2021] HKCFI 378 at §93, DHCJ MK Liu. This is not shown as
H regards the Solicitors. H

I 200. Fourthly, as between the Solicitors and the Foundation, the I

only dealings between the two was the Solicitors’ sending over of the
J J
donations and the Foundation’s acknowledgements of receipt. There was
K nothing to show that the Foundation might have been involved in illicit K

L
conduct. L

M 201. Fifthly, whilst the RRRASOC contains a general plea of M

intent to injure against all 4 Defendants, there is no specific plea and no

N N
evidence of the Solicitors’ intent to injure the Plaintiffs. Once again, it is
O inherently unlikely for the Solicitors to intend to harm the Plaintiffs O

whose existence was unknown to the Solicitors, beyond the name of King
P P
Base on the Cheque.
Q Q
202. A solicitor properly acting in accordance with a client’s
R R
instructions may prejudice another person’s interest, eg by applying for
S an injunction which was ultimately discharged for lack of full and frank S

disclosure. But, without more, that should not be elevated to a situation

T T
of the Solicitors having the intent to harm that person.
U U

V V
 - 62 -
A A

B 203. Even if Madam Song had intended to injure the Plaintiffs B

and acted contrary to the Investment MOU, she had given express written
C C
instructions to the Solicitors to dispose of the money and the reasons.
D Any illicit motive of hers could not be imputed to the Solicitor, who were D

entitled to act on those instructions.

E E

F 204. Even if the donations had depleted the HK$50 million from F

King Base, there was nothing to show that the Solicitors knew that
G G
Madam Song would not have other monies to repay King Base or had no
H intention to repay at the time the money was donated. H

I 205. Sixthly, the first and second overt acts (apart from the Due I

Diligence Questionnaire which I shall analyze separately) were the

J J
Solicitors’ ministerial acts in setting up Hero Fortune and D2’s Bank
K Account. The Solicitors might have provided more personal services K

L
beyond what was usual, but there was nothing that could have suggested L
dishonesty. It remained Madam Song’s choice to decide where to acquire
M M
a company and set up a bank account. As Mr Kennedy Wong testified,

N
banks would feel more comfortable as to the trustworthiness of the N
persons opening the bank account when Mr Michael Wong was the
O O
referee for a new offshore client. The acts did not go beyond the bounds

P of de Krassel, §51. P

Q 206. Seventhly, donations to the Foundation were on written Q

instructions of Madam Song/Hero Fortune. It was consistent with the

R R
lawful and innocent provision of professional services.
S S

207. The Solicitors’ belief that the donations were genuine would
T T
have been supported by 4 further donations, made about a year after the
U U

V V
 - 63 -
A A

B 2 subject ones. Madam Song gave written instructions to make those 4 B

further donations in the same manner save that the covering letters from
C C
the Solicitors were for the attention of Dr Kung specifically. The 4
D further donations were carried out without adverse claim by any person. D

E E
H5. Blind eye knowledge and the Due Diligence Questionnaire
F F

208. I now come to the more problematic part of the Solicitors’

G G
evidence, which may be relevant to Mr Vincent Chen’s submission of
H blind-eye knowledge. H

I 209. When dealing with a new client, back in 2009, a solicitor, I

under anti-money-laundering policy, had to make enquiries of a new

J J
client as to his/her background and the source of money. Mr Michael
K Wong did ask and Madam Song did answer the Due Diligence K

L
Questionnaire. However, there was no attempt by Mr Michael Wong to L
seek documentary verification of Madam Song’s bare assertions.
M M

210. Three questions and answers in Part II of the Due Diligence

N N
Questionnaire dated 14 January 2009 are relevant:
O O
(1) For the 1st question, Mr Michael Wong recorded that he was
P P
asked to incorporate a Hong Kong company for investment

Q in Macao. Then who had instructed him to acquire a BVI Q

company instead? Madam Song cared to state her change of
R R
mind from investing to donating but the Solicitors’ file did
S not record her change of mind over the type of company. S

There must have been undocumented communication on this

T T
aspect. What’s more, Hero Fortune was acquired on 13
U U

V V
 - 64 -
A A

B January 2009, the day prior to the alleged first meeting B

between Madam Song and the Solicitors. Neither the JFIU

C C
Report nor Mr Kennedy Wong’s evidence could explain
D why. Kennedy Wong-WS stated that “it appears that D

Madam Song instructed my firm to incorporate a BVI

E E
company prior to the meeting on 14 January 2009, as my
F firm acquired [Hero Fortune] on 13 January 2009.” His oral F

testimony that Hero Fortune was just routinely acquired by

G G
the Solicitors and not for a specific client simply
H contradicted his witness statement. H

I (2) The 2nd question was whether the Solicitors would be I

“instructed to handle money on behalf of the client”. The

J J
answer was “yes, to handle money for the transaction”. That
K must mean money for the “investment in Macao”. It turned K

out that the HK$50 million was not handled for investment.
L L
(3) The 3 question was, “Are you satisfied that there is no
rd

M M
suspicion on the source of fund?” Mr Michael Wong

N
answered “yes”. There was nothing to show how he N
satisfied himself. Mr Kennedy Wong could not suggest
O O
anything either, despite his testimony that partners would

P have to understand where the money came from. He was P

starkly contradicted by his own JFIU Report which stated
Q Q
that “On 21 January 2009, Madam Song’s investment
R partner, [King Base], a company incorporated in Hong Kong R

sent us a cheque of HK$50,000,000 being its share of

S S
investment capital. King Base asked us to deposit this in
T [D2’s Bank Account].” This contradicted Mr Chan’s T

U U

V V
 - 65 -
A A

B evidence that he delivered the Cheque to Mr Hui. Anyway, B

with the Investment MOU in their possession, the Solicitor

C C
knew or must have known that the HK$50 million had its
D source from King Base and that the money represented King D

Base’s share of the investment capital. A simple company

E E
search would reveal that Madam Song was not a director or
F shareholder of King Base. The bank statements that the F

Solicitors received would show that the Solicitors knew that,

G G
within about 2 weeks, Madam Song had used money not
H from herself to make donations and that she had never H

contributed her share of capital into D2's Bank Account.

I I

J 211. By a letter dated 16 January 2009, Mr Michael Wong J

represented to Offshore Incorporations Limited (“OIL”) that Madam

K K
Song had an urgent need to commence business. As borne out by the
L facts, Hero Fortune had no business. Once again, if Mr Michael Wong’s L

representation was correct, there had been undocumented

M M
communications between him and Madam Song or someone for that
N purpose. However, I would not hold against him because a conscientious N

solicitor, acting innocently, may also press OIL to act expeditiously for
O O
the benefit of the client.
P P
212. However, I have 3 observations arising from the answers to
Q Q
the Due Diligence Questionnaire:
R R
213. Firstly, the Solicitors did more than just ministerial work in
S acquiring a BVI company before meeting Madam Song and against her S

express instructions. However, it was not put to Dr Kung or other

T T

U U

V V
 - 66 -
A A

B Defendants that it was his/its wish to have a BVI company acquired for B

Madam Song.
C C

D 214. Secondly, Mr Vincent Chen submits that the Solicitors had D

simply turned a blind eye when answering “yes” to the 3 rd question. Any
E E
prudent and reasonable enquiries would have easily revealed that she
F never had a job; never had any investments in Hong Kong or Macau; F

never had employees and that she was not a wealthy individual. Given
G G
the limited means of Madam Song, when a substantial sum of HK$50
H million was arranged to be transferred by Madam Song from the recently H

acquired BVI company to the Solicitor’ bank account, reasonable

I I
questions must have occurred to Michael Wong, namely, where did she
J get the money from? Whether she had consent of King Base to use the J

money as donation? Mr Michael Wong simply allowed the Solicitors’

K K
Bank Account to be used to facilitate the transfer of substantial sums of
L money from Hero Fortune to the Foundation to fund the Estate Litigation. L

M M
215. I agree that Mr Vincent Chen’s submission pointed to a

N
prudent and sensible approach of a solicitor. Unfortunately, the N
law/policy requiring the Solicitors to do due diligence of a new client is
O O
not placed before the Court. It is not clear what the extent of enquiries a

P solicitor must undertake. In my view, at worst, P

Q (1) The Solicitors had been failed to understand and implement Q

the spirit behind the anti-money-laundering policy, but it is a

R R
quantum leap to say that they were dishonest or had the
S intention to conspire or to inure; S

T T

U U

V V
 - 67 -
A A

B (2) It was a conspiracy between the Solicitors and Madam Song B

to launder money for her but that would not implicate other
C C
Defendants.
D D
216. The Plaintiffs fail to satisfy both the subjective and objective
E E
tests of dishonesty and the tests for conspiracy against the Solicitors.
F F
217. In summary, even if Dr Kung’s deceit is proved, the
G conspiracy claim can only be established against Dr Kung and G

Hero Fortune but not the Foundation or the Solicitors.

H H

I I
I. AMOUNT OF DAMAGES FOR CONSPIRACY
J J
218. Damages for the tort of deceit or unlawful means conspiracy
K should put the innocent party back in the financial position he was in K

before he sustained the wrong: Xie Li Xin, at §203.

L L

M
219. The only party who has suffered loss was King Base. Mr M
Kat, counsel for the Solicitors, submits that King Base has failed to prove
N N
(eg by way of accounting documents) that it suffered an actual loss of

O
asset of HK$50 million by reason of the conspiracy. Mr Kat went further O
to say that King Base could be holding the money “as a trustee, or if the
P P
money just passed through its account like water through a tap”, then

Q there would be no loss. Q

R 220. Only Mr Kat took this point. With respect, this point needs R

only to be stated to be rejected. Whilst accusing the Plaintiffs of not

S S
advancing proper pleading for its case on conspiracy, the Solicitors
T committed the same error of relying on an unpleaded case. Apart from a T

U U

V V
 - 68 -
A A

B bare denial, there has been no assertion of trusteeship or that the money B

did not belong to King Base. How did Mr Kat expect the Plaintiffs to
C C
prepare proof on a non-issue?
D D
221. Further, beneficial ownership follows the legal ownership.
E E
The money from P2’s Bank Account, prima facie, belonged to King
F Base. It is for the Solicitors asserting the contrary to adduce evidence in F

proof. The Solicitors did not and did not even cross-examine Mr Chan on
G G
this.
H H
222. Even if King Base had, say, borrowed the HK$50 million
I from someone or held it on trust for someone, that was a matter between I

King Base and the lender/trustee. It could not be used as an excuse for
J J
the wrongdoer to deny King Base’s loss.
K K

223. Mr Kat relies on the case of In Madoff Securities

L L
International Limited (in liquidation) v Stephen Raven [2013] EWHC
M 3147 (Comm), §§303-304. Without disrespect, the facts of that case were M

far removed from the present one. It was a case on breach of fiduciary
N N
duties. The Court made a distinction between an entity VTB who
O obtained funding by way of a loan with a concomitant liability to repay, O

and another, MSIL, who received a donation but then made payments
P P
with that donation such that the overall result of the transaction was asset
Q neutral for MSIL. The challenge that MSIL suffered no loss was pleaded Q

(§16(3) of the judgment)

R R

S 224. I find that the damages for conspiracy (and deceit), if S

proved, to be HK$50 million.

T T

U U

V V
 - 69 -
A A

B J. CONVERSION CLAIM AGAINST D1-D3 (SUB-ISSUE 14) B

C 225. Given my findings that deceit was not established, C

conversion would also fall away. I only deal with it briefly.

D D

E 226. The Plaintiffs’ case is that D1-D3 had converted the Cheque E
and its proceeds to their own use, alternatively, to the use of the
F F
Foundation. Dr Kung and the Foundation say that the claim is
G unsustainable as there was nothing to show that Dr Kung or the G

Foundation had ever dealt with the Cheque in any way.

H H

227. Conversion consists of the dealing with a chattel in a way

I I
which is inconsistent with the rights of the true owner. A person may be
J liable for conversion even if he has not had actual or constructive J

possession of the chattel (Douglas Valley Finance v Hughes [1969] 1 QB

K K
738, 750.
L L

228. Specifically, a cheque which has passed into currency can

M M
form the subject of a claim in conversion. In China Everbright-IHD
N Pacific Ltd v Ch’ng Poh (2002) 5 HKCFAR 630, §§103-105, Lord N

Millett NPJ held that:-

O O

“103. … It is trite law that conversion must be conversion of

P P
corporeal personal property; choses in action cannot be
converted: see Clerk & Lindsell on Torts (18th ed.) p.744
Q para.14-41. A cheque can be converted because it is a piece of Q
paper. It is treated as the means of obtaining the money in the
account on which it is drawn and as having the value of the
R sum payable. As the payee of the cashier orders the Company R
could maintain an action for their conversion. But were they
S converted? S
104. In the present case the cashier orders were drawn in favour
T
of the Company and the proceeds were duly credited to its T
account. In the ordinary way that would not be a conversion of

U U

V V
 - 70 -
A A

B the orders. They then became paid orders and were of no B

further value. True, the moneys in the Company’s account were
immediately misapplied, but that was not itself a conversion of
C the orders which by then had fulfilled their purpose. C

105. Nevertheless, I agree with the Court of Appeal that in the

D unusual circumstances of this case the cashier cheques were D
converted. This is because the proceeds were paid into the
Company’s account with the specific purpose that they should
E E
be immediately withdrawn and misapplied. The payment to the
Company was “not in reality a payment for the Company to
F have at all”. The difficult question is whether the fact that the F
Company has affirmed the transaction by accepting the
payment as satisfaction of the indebtedness in respect of which
G G
it was paid precludes it from claiming that the payment
constituted a conversion. But I have come to the conclusion
H that it should not. The money was paid with the intention not H
only that the existing indebtedness to the Company should be
discharged but also to fund the appellant’s purchase of the
I shares. This is what has caused the Company loss, and it has in I
no sense been authorised by the Company.”
J J
229. As deceit is not established and with my serious doubts that
K Mr Chan’s act in issuing the Cheque was pursuant to other undisclosed K

representations, I am not satisfied that the Cheque was dealt with in a way
L L
inconsistent with the Plaintiffs’ rights.
M M

230. On the other hand, if deceit could be established, there is no

N N
evidence as to who filled in the name of the payee on the Cheque.
O However, I have found that the Cheque was delivered personally by Mr O

Chan to Mr Hui. The Cheque could not have left the hands of Mr Hui
P P
without the authority of Dr Kung. Nor could the name of Hero Fortune
Q be written as payee without the knowledge and authority of Dr Kung, as Q

he was the only one who knew Madam Song was involved. I find that Dr
R R
Kung had converted the Cheque as he dealt with it in a way inconsistent
S with the rights of King Base (who had intended the Cheque to be for S

investment).
T T

U U

V V
 - 71 -
A A

B 231. Given the conspiracy (if established) between Dr Kung and B

Hero Fortune, the latter had likewise converted the Cheque by its receipt
C C
of the HK$50 million as deposit into its account, payment out to the
D Solicitors and then to the Foundation, against the original purpose of D

investment.
E E

F 232. In respect of the Foundation, it was not the first or even F

second-tier recipient of the Cheque but had received the donations only
G G
from the Solicitors. Conversion is not established against it.
H H
233. Accordingly, the claim in conversion would be established
I against Dr Kung and Hero Fortune at most. I

J J

K. CONCLUSION AND COSTS

K K

234. I do not find Mr Chan to be credible. His evidence created

L L
serious doubts in my mind as to what other representations have been
M made to him to issue the Cheque in such a bizarre manner. There was no M

genuine agreement to invest.

N N

O
235. Costs should follow the event and be borne by the Plaintiffs. O

P 236. The Foundation seeks indemnity costs for the trial. The P

reasons are that this was a case being prosecuted maliciously and the
Q Q
proceedings were scandalous or vexatious. Where serious allegations of
R fraud had been made and was found by the Court after trial as unfounded R

and/or unsupported by evidence, that would be a special and unusual

S S
feature to justify indemnity costs.
T T

U U

V V
 - 72 -
A A

B 237. The Foundation submits that the Plaintiffs have insisted on B

launching accusations of fraud or dishonesty where they were

C C
unsupported by evidence or ought never to have been made in the first
D place. This was exacerbated by Mr Chan proffering testimony incapable D

of belief in open court.

E E

F 238. I do not consider the Plaintiffs to have acted in an utterly F

unreasonable manner. Even though I disbelieve Mr Chan, I have also

G G
found Dr Kung to be an unreliable witness. Dr Kung’s close connection
H with the Foundation and the undeniable fact that the Foundation had H

actually received the HK$50 million did give rise to cause for the
I I
Plaintiffs’ claims. The fact that the Plaintiffs have not been successful in
J establishing the claims is not a reason for penalizing them with an J

indemnity costs order in the present circumstances.

K K

L
239. However, the COSCO claims warrant separate treatment. L
Two weeks before the trial was due to commence, the Plaintiffs, for the
M M
first time, confirmed that they would no longer pursue the

N
COSCO Claims against the Foundation. I agree with the Foundation that N
costs on those claims should be on indemnity basis for the following
O O
reasons:

P P
(1) DHCJ M Ng (as she then was) had, 5 years before trial, dealt
Q with the Solicitors’ application to strike-out similar COSCO Q

Claims against the Solicitors as they were not reasonable

R R
causes of action. See the decision dated 18 May 2017
S (“2017 Judgment”), §81. A valid argument can be made S

T T

U U

V V
 - 73 -
A A

B that the COSCO Claims should also be struck out on similar B

grounds.
C C
(2) At the pre-trial review, this Court asked the Plaintiffs as to
D D
the viability of the COSCO Claims against the Foundation,

E whereupon the Foundation referred to the 2017 Judgment. E

(3) The abandonment of the COSCO Claims was unreasonably

F F
late by any standard.
G G

240. As for the overall costs, I have queried at the pre-trial review
H H
whether the parties needed the full 14 days for trial. The parties never
I came back to adjust the time needed. In the end, only 7 out of 14 days I

were taken to dispose of the trial.

J J

241. Accordingly, whilst costs should follow the event, I direct

K K
the taxing master to do taxation on the notional basis that the trial period
L L
had been reduced to 7 days.

M M
242. I make an order nisi, that:
N N
(1) Costs on the COSCO Claims as against the Foundation be
O O
borne by the Plaintiffs on indemnity basis from 19 May

P 2017; P

(2) Costs of this action be taxed as if the trial had been fixed
Q Q
for 7 days;
R R
(3) Subject to sub-paragraphs (1) and (2), the Defendants’
S costs of this action be borne by the Plaintiffs, to be taxed if S

not agreed; and

T T

U U

V V
 - 74 -
A A

B (4) There be certificates for 2 counsel as regards the B

4th Defendant.
C C

D 243. I thank counsel for their assistance. D

E E

F F

G (Queeny Au-Yeung) G

Judge of the Court of First Instance

H High Court H
Mr Vincent Chen, instructed by Lam & Co., for the 1st and 2nd Plaintiffs
I I
Mr Andrew Hart, Solicitor Advocate, instructed by Cheung & Choy, for
J
the 1st Defendant J

The 2nd Defendant was unrepresented and did not appear

K K

Mr Keith Tam, instructed by Cheung & Choy, for the 3rd Defendant
L L

Mr Nigel Kat SC and Mr Bernard Lam, instructed by Howse Williams for

M M
the 4th Defendant

N N

O O

P P

Q Q

R R

S S

T T

U U

V V