Again, I think I figured why my answer is wrong, but I'd like to have someone to check whether I'm on the right track.
C) is the right answer, because
- What Ms. Chan said was retiring from one company.
- Maybe Ms. Chan is now working for someone else or for herself (thus causing her colleague to say Ms. Chan is being busy, while staying true to Ms. Chan's comment)
D) isn't right, because
- both party sounds pretty agreeable, but D) just rejects one side flat
- In fact, the stem acknoledges this possibility by saying at least one of them is lying.