YIP CHI SAN v. CHUEN KONG DRIVING SCHOOL LTD AND OTHERS

DCCJ 792/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 792 OF 2013

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DECISION

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Introduction

1.  This is an application of Mr Yip Chi San (“Yip”) for summary judgment against Chuen Kong Driving School Limited (“CKDSL”), Chinese Vehicle License Limited (“CVLL”) and Mr Ng Wai Lun (“Ng”) by summons dated 26 August 2013 (“the Summons”). Leung On Ni (“Leung”), the 4^th defendant in these proceedings, is not involved in this application.

2.  This application is supported by an affirmation of Yip whereas the defence has filed no opposing affirmation despite the order of Registrar Lui dated 27 September 2013. Before this hearing, actually nothing was heard from the defence. Nor was any skeleton submission filed by the defence pursuant to the Practice Directions. The only input of the defence is their joint Defence filed on 31 May 2013, before the issuance of the Summons. It contains little more than bare denials.

3.  At the outset of this application, I thus made enquiries with Mr Cheng, counsel appearing for all the defendants, as to the position of the defence. Mr Cheng informed this court that those instructing him had made an effort to reach Ng, who was in control of CKDSL and CVLL for instructions but in vain. He said it was not until the end of October 2013 that those instructing him managed to contact Ng and Ng told them that he himself suspected he had psychiatric illness. Ng further told them that he decided to seek medical assistance from a psychiatrist in the near future. No more has been heard from him, however.

4.  Absent specific instructions about this application and opposing evidence, Mr Cheng, doing the best he could, intended to argue against the application. Mr Yuen, counsel for Yip, did not take objection to Mr Cheng’s making oral submission notwithstanding his failure to file any skeleton submission. In the circumstances, not without reluctance, I also heard Mr Cheng’s submission on the merits.

Background Facts

5.  The essential background facts upon which Yip’s claim is founded can be summarized as follows.

6.  On or about 23 April 2012, Yip commissioned CKDSL and CVLL to apply for a cross-boundary vehicle licence (Hong Kong to Shenzhen Bay) at the cost of RMB 450,000. Both CKDSL and CVLL are locally incorporated and Ng is their sole shareholder and director.

7.  On the same day, Yip paid Ng RMB100,000 in cash as deposit. Ng on behalf of CVLL issued to Yip a receipt (“the 1^st Receipt”). On the 1^st Receipt, it was expressly stated that within 4 months, it (the licence application) would be completed; otherwise full refund would be made.

8.  On or about 25 April 2012, Yip paid CKDSL and CVLL the balance of HK$432,000. This time the payment was paid by way of a cheque issued in favour of Ng personally. On the same day, Ng on behalf of CKDSL issued a receipt to Yip (“the 2^nd Receipt”). On the 2^nd Receipt, it was again expressly stated in the same wordings that within 4 months, it (the licence application) would be completed; otherwise full refund would be made.

9.  To win Yip’s trust and confidence, Ng delivered to Yip a cheque drawn by Leung in favour of Yip post-dated 25 August 2012 in the sum of HK$432,000 (“the 1^st Cheque”). The relationship among Ng, CKDSL and CVLL is unknown.

10.  Upon Yip’s request, CKDSL further issued to Yip a Chinese statement to acknowledge Yip’s commission of the service of CKDSL and Yip’s said two payments. It also mentioned the 1^st Cheque and expressly stated that it was for refund purpose should the application be unable to be completed as promised. There was no signature on the Chinese statement and only a chop of CKDSL was found.

11.  Some time later, the parties agreed to amend the licence application. Instead of a licence covering Hong Kong and Shenzhen Bay, a cross-boundary vehicle licence from Hong Kong to Huanggang Control Point (“the New Licence”) appeared to be more suitable for Yip. CKDSL (and CVLL) offered to amend and/or vary the licence application and instead the New Licence could be obtained at an extra cost of HK$220,000 on or before 31 July 2012.

12.  On or about 25 June 2012, Yip accepted the offer. He paid Ng a cheque in the sum of HK$220,000 drawn in favour of Ng personally. Ng on behalf of CKDSL issued a receipt to Yip dated 25 June 2012 (“the 3^rd Receipt”). In the 3^rd Receipt, it was expressly provided that it (the New Licence application) would be completed within 35 days; otherwise full refund would be made.  

13.  Again, to win Yip’s trust and confidence, Ng delivered to Yip a cheque drawn by Leung in favour of Yip post-dated 31 July 2012 in the sum of HK$220,000 (“the 2^nd Cheque”). The date was indeed 35 days after 25 June 2012.

14.  Ng further issued a handwritten Chinese undertaking dated 25 June 2012 (“the Undertaking”) to Yip in the following terms:

本人吳偉倫 ID No: K570xxx(x) 現向葉志申先生 借港幣弍拾弍萬元正用來代辦皇崗中港車牌一個

交收日期為 2012年7月31日前

如未能辦妥  全數還給葉志申先生

借款人        

全港駕駛學校有限公司

吳偉倫

全港駕駛學校

2012年6月25日

15.  In the end, no licence has ever been granted to Yip. Messrs ONC Lawyers, Yip’s former solicitors, sent a letter to CKDSL, CVLL and Ng dated 15 August 2012 (“the Letter”) whereby they were demanded to make immediate delivery of the New Licence within ten days. No reply to the said letter has ever been received.

16.  The 2^nd Cheque was dishonoured on 27 August 2012 and the 1^st Cheque was dishonoured on 28 August 2012. Yip reported the matter to the police on or about 5 September 2012.

17.  Yip commenced these proceedings on 7 March 2013.

General Principles

18.  The legal principles relating to an application for summary judgment are well-settled. Once the plaintiff has shown that his case iswithin Order 14 r.1, the burden is on the defendant to show that there are triable issues or that there ought for some other reasons to be a trial of the claim.

19.  To discharge the burden, the defendant has to put in credible evidence descending upon particulars to show his bona fide defence.

Discussion

20.  Stripped of legal niceties and detail, this is a simple and straightforward case and Yip’s entitlement to a refund of the whole sum he has paid is beyond question.

21.  To begin with, I cannot accept the bare assertion in the Defence that the time for the completion of the application for the New Licence was agreed to be at large. It is not substantiated by affidavit evidence. In any event, it does not make commercial sense and is at odds with all the contemporaneous documentary evidence adduced by Yip.

22.  Given the admission that both CKDSL and CVLL were the contracting parties with Yip in relation to the application of the New Licence in the Defence, the indisputable agreement that Yip would be refunded in case of non-completion of the said application on or before 31 July 2012 and the unchallenged fact that the said application was not completed before that date or at all, CKDSL and CVLL are certainly liable to refund Yip the deposit in the sum of RMB100,000, the payment of HK$432,000 and the further payment of HK$220,000 as a matter of contractual obligation and for money had and received.

23.  Now I come to the issue of Ng’s personal liability. Mr Yuen submits that Yip’s claim against Ng is for money had and received and/or based on the Undertaking.

24.  First, I deal with the Undertaking. The evidence of Yip is that the Undertaking was offered by Ng in his personal capacity so as to convince Yip to pay the extra sum of HK$220,000 for the New Licence. The Undertaking was issued to Yip before Yip agreed to engage CKDSL and CVLL to apply for the New Licence. Yip was aware that Ng stamped the company chop of CKDSL onto the Undertaking. He raised no objection as he thought it would only mean there would be an additional party involved in the Undertaking. He has been advised that it might be an attempt of Ng to avoid personal liability under the Undertaking. His evidence is not contradicted by any contrary evidence.

25.  Nevertheless, I am unable to accept his evidence in this regard. First, it is different from his pleaded case. The consideration of the Undertaking is not pleaded and on a fair reading of the Statement of Claim (§6), it is clear that the Undertaking was given only after the conclusion of the agreement relating to the New Licence and the issuance of the 2^nd Receipt.

26.  Secondly, Ng signed the Undertaking expressly for and on behalf of CKDSL regardless of the contents of the Undertaking. Mr Yuen asks me to compare the wordings of the Undertaking with those appearing in the Receipts. He submits that the differences suggest that Ng takes on personal liability in the Undertaking. I do not find this exercise worthwhile. The reference to Ng’s identification card numbers in the Undertaking is clearly for identification purpose and cannot, without more, amount to an acceptance of personal liability. It is not uncommon for a director to sign a commercial agreement on behalf of his company with his identification card numbers stated thereon.

27.  I cannot readily accept Mr Yuen’s fall-back position that Ng and CKDSL are jointly liable under the Undertaking too. I am unable to come to such a conclusion on a fair reading of the contents of the Undertaking. I also note that the sum of HK$220,000 was expressly stated to be a loan in the Undertaking but the pleaded case of Yip is not built on this basis.

28.  In my view, whether Ng is personally liable under the Undertaking is a triable issue. I, therefore, am not minded to enter judgment against Ng on account of the Undertaking.

29.  There is no dispute that Ng received all the three payments from Yip. Mr Yuen submits that Yip is entitled to claim against Ng for money had and received on this undisputed fact.

30.  First, I accept that the agreement relating to the application for the New Licence was repudiated by CKDSL and CVLL. They failed to comply with the demand in the Letter. By the issuance of the Writ herein, Yip accepted their repudiation. There is a total failure of consideration and Yip has a restitutionary claim against both CKDSL and CVLL for the payments he made for the purpose of the New Licence.

31.  There is no dispute that Ng received the payments from Yip on behalf of CKDSL and CVLL as their agent. As Ribeiro PJ noted in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Clearing Ltd (2004) 7 HKCFAR 79 at §73, a restitutionary claim generally does not lie against an intermediary who is no more than “a mere conduit-pipe” for payment to the ultimate recipient.

32.  For an agent facing a restitutionary claim, the general defence of “payment over” is available. As explained by Waung J in Kwai Hung Realty Co Ltd & Ors v Kung Mo Ng & Ors [1998] 1 HKC 145 atp.156E, the foundation of this defence is to be found firstly in Continental Caoutchouc v Kleinwort Sons (1904) 9 Com Case 240 and subsequently in Gowers v Lloyds and National Provincial Bank [1938] 1 All ER 766.  The essence of the defence is that if an agent has paid over the money to his principal, he is not unjustly enriched and hence no restitutionary claim can be made against him. He is a mere conduit-pipe in respect of the money received on behalf of his principal.

33.  This “payment over” defence can only be raised after an agent has accounted to his principal for the benefit in question: The Law of Restitution, Butterworths, §21.33 p.521. Also, as pointed out by Lord Ellenborough in Cox v Prentice (1815) 3 M & S 344, a case involving a restitutionary claim on account of a mistake, it should be taken to be clear that an agent who receives money for his principal is liable as a principal so long as he stands in his original situation; and until there has been a change of circumstances by his having paid over the money to his principal, or done something equivalent to it.

34.  In the present case, I take note of the fact that the Receipts were issued by CKDSL and CVLL to Yip. The 2^nd and 3^rd Receipts were issued soon after Yip paid the two cheques to Ng in his favour. The Receipts are in my view cannot be evidence of Ng’s paying over the sums stated therein to them.

35.  As can be seen in the above authorities, the “payment over” defence is to be raised by the agent. In the Defence filed, there is, however, no reliance of such a defence at all. Nor is there any mention about Ng’s paying over the payments received to CKDSL and/or CVLL. Lastly, the defence has not put forward such evidence or any evidence at all to oppose this application.

36.  The inescapable conclusion on the evidence is that Ng, as the actual recipient of the payments, remains liable as his principal. I thus find him liable to refund Yip all the three payments he received on behalf of CKDSL and CVLL.

37.  I am aware that no restitutionary claim against Ng is expressly pleaded in the Statement of Claim. However, all the material facts in support of such a claim are pleaded and I find them to be sufficient to support my conclusion. 

Conclusions and Orders

38.  For the reasons given above, I accede to Yip’s application and enter judgment against CKDSL, CVLL and Ng for the two sums of RMB100,000 and HK$652,000 ($432,000 + 220,000).  

39.  Costs should follow the event. Yip is entitled to costs of this action including this application, to be taxed if not agreed. I also grant him a certificate for counsel.