WEAR ME APPAREL LLC v. LAM NA AND ANOTHER

HCA 149/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 149 OF 2009

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BETWEEN

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J U D G M E N T

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Introduction

1.  The plaintiff is a company incorporated in the USA.  It is and was at all material times a leading designer, marketer and seller of young men’s and children’s apparel in the USA.  It manages a portfolio of licensed brands including Calvin Klein, Ecko, Timberland, Disney, Marvel with a distribution channel in the USA in department stores and mass merchants including Macy’s, Kohl’s and Wal-Mart.

2.  At all material times Arthur Rabin (“Rabin”) was and is the Chief Executive Officer of the plaintiff.

3.  The plaintiff’s claim in this action is for the repayment of the sum of US$800,000 being the balance of loans in the total sum of US$1,000,000 lent by the plaintiff to the defendant Lam Na known as Lin Na (“Lin Na”) in 2008 with interest thereon.

4.  Lin Na denies that the plaintiff lent the total sum of US$1,000,000 to her in 2008. Her pleaded case is that in or about April 2008 it was agreed between Rabin acting for the plaintiff and Lin Na acting for Regent Alliance Ltd (“Regent Alliance”) that the plaintiff would pay Regent Alliance “a deposit/advance payment” in the sum of US1,000,000 (paragraph 5) b) of the amended defence).

5.  There is no dispute that the total sum of US$1,000,000 was remitted on behalf of the plaintiff into the bank account of Chiavenna Holdings Ltd (“Chiavenna”) a BVI company which was a related company of Regent Alliance.  The total sum of US$1,000,000 was remitted into the bank account of Chiavenna being account no. 353-18-01239-3 at the Shanghai Commercial Bank in Hong Kong (“Chiavenna’s bank account”) on the dates and in the amounts as follows :

16 April 2008	$300,000
30 April 2008	$300,000
12 May 2008	$200,000
19 May 2008	$200,000

6.  There is also no dispute that the plaintiff has been repaid a total sum of US$200,000.

7.  Lin Na’s pleaded case is that Regent Alliance refunded the plaintiff the sum of U$$102,230.30 after deducting the sum of US$97,769.70 being the shipping costs in respect of the garments shipped to the plaintiff between March and September 2008 (paragraph 8) d) of the amended defence).  These amount to US$200,000.

8.  It is common ground that the total sum of US$200,000 has been repaid or refunded to the plaintiff.

9.  The plaintiff therefore claims the outstanding sum of US$800,000 with interest thereon against Lin Na.

The main issues

10.  The main issues are

(1)   whether the payments totalling US$1,000,000 into Chiavenna’s bank account in April and May 2008 were made as loans by the plaintiff to Lin Na or whether the payments were made as deposits paid by the plaintiff to Regent Alliance for the purchase of garments;

(2)   whether Lin Na is liable to repay the balance of US$800,000 with interest thereon to the plaintiff.

These are issues of fact.

The witnesses

11.  I heard evidence from Rabin as well as from Lin Na.

12.  I have no hesitation in accepting Rabin as a witness of truth.  I find that he was an honest, credible and reliable witness.

13.  I also have no hesitation in finding that Lin Na was an evasive, dishonest, untruthful and unreliable witness.  She was badly discredited in cross-examination.

14.  Where the evidence of Rabin and Lin Na are at variance, I have no hesitation in preferring the evidence of Rabin, whose evidence I accept, to that of Lin Na, whose evidence I reject.

The evidence and findings

15.  It is common ground that the plaintiff engaged Regent Alliance, a company incorporated with limited liability in Hong Kong, to source garments for the plaintiff to be shipped to the USA.  The garments were manufactured in the Mainland. 

16.  There is no dispute that the plaintiff and Regent Alliance entered into a trading relationship in or about 2006.  It is common ground that all the purchase orders placed by the plaintiff were placed with Regent Alliance. 

17.  Although Regent Alliance was the seller of the goods, it is plain on the evidence of Rabin that he mainly dealt with Lin Na.  Rabin said that he was told by Lin Na and her husband Cohen Moe Samuel (“Cohen”) that they were the bosses of Regent Alliance.  He also said that Cohen had told him that all decisions had to be made by Lin Na.  Lin Na denied this but I prefer the evidence of Rabin, which I accept, to that of Lin Na, which I reject.

18.  According to Rabin he did not see Cohen frequently as Cohen was not that much involved with what was going on in the business.  I believe him.

19.  It is also common ground that all the invoices issued to the plaintiff in respect of the purchase orders placed by the plaintiff with Regent Alliance were issued not by Regent Alliance but by Chiavenna who received payments for the goods purchased.  According to Lin Na’s 1^st affirmation affirmed on 4 March 2010 (“Lin Na’s 1^st affirmation”) Chiavenna was used to issue invoices and receive payments for an accounting reason.

20.  In her amended defence, witness statement and her affirmations in answer to interrogatories, Lin Na gave the impression that she was nothing more than an employee of Regent Alliance. 

21.  Lin Na denied that she was anything other than an employee of Regent Alliance.  She was adamant in evidence that her main duties were as the production manager of Regent Alliance.  This was contrary to her witness statement where she said that she was employed by Regent Alliance as the manager responsible for the sales and marketing aspect of Regent Alliance.

22.  I am satisfied, however, from the evidence that she was not merely an employee of Regent Alliance.

23.  According to the Annual Return of Regent Alliance dated 22 October 2006 Cohen was the sole shareholder and director of Regent Alliance.  According to the Annual Return of Regent Alliance dated 8 October 2008 the sole shareholder and director was Yuan Shu Zhen.

24.  In Lin Na’s 1^st affirmation she affirmed that Chiavenna was a related company of Regent Alliance and that the shareholder and director of Chiavenna was Yuan Shu Zhen.  Lin Na also said in her 1^st affirmation that she had no interest in Chiavenna although she could and did operate Chiavenna’s bank account. 

25.  According to the corporate documents of Regent Alliance, Lin Na was neither a shareholder nor a director of Regent Alliance at any time. 

26.  At all material times until 8 October 2008 when there was a change of address, the registered office of Regent Alliance was at Rooms 908–910, Wing On Plaza, 62, Mody Road, Tsimshatsui East, Kowloon (“the Wing On Plaza premises”).

27.  There were other companies mentioned in evidence.  Malan Garment Ltd (“Malan”) was also a company incorporated in Hong Kong.  Its registered office was also at the Wing On Plaza premises.  Lin Na said that Malan was used to obtain quota from the Mainland.  According to the Annual Return of Malan dated 6 September 2007 Cohen and Lin Chaoying were the shareholders of Malan.

28.  Limax Ltd (“Limax”) was another company incorporated in Hong Kong which also had its registered office at the Wing On Plaza premises.  According to the Annual Return of Limax dated 10 August 2007 there were three shareholders with the vast majority of the shares held by Perine International Inc (“Perine”) a BVI company.  The other shareholders were Lin Yumei and Lin Chaoying.  The directors of Limax were Lin Na and Cohen. 

29.  Lin Na’s 1^st affirmation was affirmed in response to the interrogatories dated 4 February 2010 served on Lin Na.  Although she was asked (by interrogatory 5.6) to specify her relationship with Cohen, Lin Yumei (the shareholder of Limax Ltd), Lin Chaoying (the shareholder of Limax Ltd) and Yuan Shu Zhen (the shareholder of Regent Alliance), Lin Na only specified her relationship with Cohen as being her husband.  Despite being asked to specify her relationship with the other persons mentioned in interrogatory 5.6 she failed to do so.  She emphasized in her answer at paragraph 5.6 of Lin Na’s 1^st affirmation that the relationship was one of employee of Regent Alliance and shareholder of Regent Alliance and Limax, respectively. 

30.  In evidence it was ascertained that in fact Lin Yumei is Lin Na’s younger sister, Lin Chaoying is Lin Na’s younger brother and Yuan Shu Zhen is Lin Na’s mother.  It seems to me that when answering the interrogatory 5.6 Lin Na was at that stage concealing her relationship with her brother, sister and mother from the plaintiff.

31.  Although in Lin Na’s 1^st affirmation she affirmed that she did not have any position in Limax, she subsequently filed a corrective affirmation affirmed on 3 October 2010 (“Lin Na’s 3^rd affirmation”) to disclose that she had been a director of Limax for the periods of time set out therein.

32.  Linna Textiles Manufacturing Ltd (“Linna Textiles”) was another company incorporated in Hong Kong.  Its registered office was also at the Wing On Plaza premises. According to the Annual Return dated 7 June 2009 signed by Lin Na as director, 90% of the shares of the company were held by Lin Na and 10% by Cohen.  Cohen and Lin Na were directors of Linna Textiles.

33.  Lin Na tried to bolster her case that she was just an employee of Regent Alliance by producing MPF records of Regent Alliance which were signed by Lin Na for the period from 3 January 2010 to 31 August 2011 (“the MPF records”).  The MPF records were produced to show that she was an employee and that she received a monthly salary of HK$8,000.  Lin Na said that she had been paid HK$6,000 per month but did not pay attention as to when it was changed to HK$8,000 per month.

34.  It is plain that the MPF records were prepared only after these proceedings had been instituted.  The plaintiff’s solicitors by letter dated 4 February 2010 requested specific discovery of the contract of employment, salary records and MPF records in respect of Lin Na’s employment by Regent Alliance.  By the order of Master Lung made on 24 February 2010 Lin Na was ordered to give discovery of the requested documents.  The MPF records of Regent Alliance signed by Lin Na were then disclosed.  The earliest MPF record was signed on 31 March 2010 which is after the order of Master Lung.  

35.  In evidence Lin Na said that in fact Regent Alliance was no longer carrying on business and that it ceased its operations in 2008.  She also said that apart from doing some promotion work it practically ceased its operations.  In that case it is, in my view, inconceivable that Regent Alliance would pay salaries to the persons mentioned in the MPF records including Lin Na right up to 31 August 2011.  I do not believe Lin Na that salaries were paid to her right up to the period shown in the MPF records.  She was evasive when asked to explain why salaries were paid to her and the others when operations had ceased. 

36.  It is clear that the MPF records came into existence only after the Master’s order made on 24 February 2010.  I do not place much weight on the MPF records which were prepared to try and bolster her case that she was just an employee of Regent Alliance.  I would observe that no employer’s returns to the Inland Revenue Department or salaries tax returns have been disclosed or adduced in evidence by Lin Na.  Apart from the MPF records no other documents have been adduced to show that salaries were paid to Lin Na by Regent Alliance.

37.  Lin Na was also cross-examined about a letter signed by her mother as President of Regent Alliance dated 22 June 2009 stating that Lin Na was an employee of Regent Alliance and not a shareholder.  In cross-examination Lin Na said that she had no recollection of this letter and also said that she had never read the said letter.  I do not believe her.  The said letter was only prepared at a time after the defence had been filed on 9 March 2009.  It was also prepared, in my view, to try and bolster her case that she was just an employee of Regent Alliance.

38.  Lin Na was evasive when asked whether Linna Textiles was named after her but did agree that it was possible that the company was named after her.  It seems to me to be highly likely that Linna Textiles was named after Lin Na who was the majority shareholder and director of Linna Textiles.  

39.  Lin Na also said that Linna Textiles was mainly a company used for obtaining quotas in the Mainland.  She said that she did not know whether it did any other business apart from obtaining quotas.  She also said that this was part of the family business although she was the majority shareholder.  

40.  When confronted with the webpage of Linna Textiles where Linna Textiles was advertised as a producer of goods for the European and USA markets, Lin Na denied that Linna Textiles was a subsidiary of Regent Alliance.  However, she was unable to satisfactorily explain why it was mentioned in the website that Linna Textiles was a subsidiary of Regent Alliance.  The website was also promoting Linna Textiles participation in shows to be held in Las Vegas in 2010 and it was specifically mentioned that Linna Textiles was a subsidiary of Regent Alliance.

41.  Lin Na said in evidence that in fact her mother was the owner of all the companies but I do not believe her.  

42.  Lin Na admitted in evidence that not only was she a director of Limax, she was also an authorized signatory to the bank accounts of Regent Alliance, Chiavenna, Limax, Malan and Perine.  She also accepted that she had signed the agreement for the purchase of the Wing On Plaza premises by Limax as well as the assignment and mortgage documents.

43.  It is clear on the evidence, and I so find, that the companies namely, Regent Alliance, Linna Textiles, Limax and Malan all operated from the Wing On Plaza premises. Apart from those companies, Chiavenna also operated from the Wing On Plaza premises according to Lin Na.

44.  In evidence Lin Na admitted that Regent Alliance, Limax, Malan, Linna Textiles and Chiavenna, were family companies.  She emphasized that her main role was related to production matters and that she was not involved with matters relating to money.  It is clear from the evidence that the family companies were used by Lin Na and her family for different purposes.  She said that they would use different companies to get quotas from the Mainland for production of goods.  She was evasive as to her role in the various companies.

45.  I would also observe that according to Lin Na the email address used by all the companies was her email address linna@netvigator.com.

46.  It is clear to me, and I so find, that the companies which operated from the Wing On Plaza premises were family companies.  

47.  The impression given by Lin Na in her pleadings, witness statements and affirmations that she was merely an employee of Regent Alliance was, in my view, misleading and untrue.  

48.  It seems to me that what Rabin was told by Lin Na and her husband Cohen as to Lin Na being the boss who would make decisions for Regent Alliance was in fact the true situation.  I so find.  At the time Rabin was told this there was no dispute between the parties.  I reject the evidence of Lin Na where her evidence is at variance with Rabin.

49.  Rabin had been assured by Lin Na’s assurances and representations that she was the owner in full control of her corporate vehicles including Regent Alliance and Chiavenna.  I believe him and accept his evidence.

50.  Rabin also said that Lin Na had told him that she would exercise her control over her corporate vehicles to ensure that all purchase orders placed by the plaintiff would be delivered on time and meet quality and safety standards of the plaintiff and its buyers.  

51.  Contrary to Lin Na’s assurances, Rabin said that defective goods were delivered to the plaintiff in 2007.

52.  Rabin said that around March and April 2007 the plaintiff placed purchase orders with Regent Alliance for about 2,705,772 pieces of children’s clothing to be manufactured at the total cost of US$10,689,141.80 for the Fall 2007 season for Wal-Mart as particularized in the amended reply.  

53.  The goods were delivered to Wal-Mart in around early October 2007.  Wal-Mart returned approximately 1,800,000 pieces of the goods because they were defective and were of unmerchantable quality.  Rabin said that there were also safety hazards inherent in the garments.  Wal-Mart refused to pay for the same and as a result the plaintiff suffered substantial loss and damage.  

54.  The Wal-Mart complaint is contained in the letter dated 5 October 2007 from Wal-Mart to Kids Headquarters, the plaintiff’s subsidiary.  There were then negotiations between the plaintiff and Regent Alliance and their legal representatives to try and resolve the problem.  Rabin was adamant that no compromise had been agreed and that the claims in relation to the Wal-Mart complaint were still outstanding with Regent Alliance. 

55.  Lin Na’s evidence, however, was the goods delivered to Wal-Mart were not defective. Her evidence was that the Wal-Mart complaint was fully resolved when Regent Alliance agreed to give discounts to the plaintiff for the purchase orders in 2008.  On this dispute of fact I also prefer the evidence of Rabin to that of Lin Na.  Although Rabin accepted that discounts were given to the plaintiff for goods delivered in 2008, Rabin was adamant that the claims in relation to the Wal-Mart complaint have not been settled.  I believe him and accept his evidence.  He said, and I accept, that the Wal-Mart complaint has badly damaged the reputation of the plaintiff.  He said that the plaintiff has suffered a loss of almost US$50,000,000 of revenue in the returns from Wal-Mart and the loss of future business with Wal-Mart.

56.  Lin Na’s pleaded case relies on an established course of business between the plaintiff and Regent Alliance to support her assertion that deposits were paid by the plaintiff to Regent Alliance.  Paragraph 4) of her amended defence pleads :

“ 4)      It was an established course of dealings between the Plaintiff and Regent Alliance (“the Established Course of Dealings”) that:

a)   whenever the Plaintiff placed a purchase order with Regent Alliance, the Plaintiff may be required by Regent Alliance to pay a deposit/advance payment;

b)   the Plaintiff would pay the deposit/advance payment into the Chiavenna’s Account;

c)   after the garments had been manufactured the Plaintiff and Regent Alliance would agree as to how the deposit/advance payment would be dealt with;

d)   in the event that it was agreed between the Plaintiff and Regent Alliance that the deposit/advance payment or a part thereof would be refunded to the Plaintiff, Regent Alliance would refund the deposit/advance payment or part thereof to the Plaintiff.” 

57.  Thus it was her pleaded case that as part of the established course of dealing the plaintiff may be required to pay Regent Alliance a deposit or advance payment whenever the plaintiff placed purchase orders with Regent Alliance. 

58.  In cross-examination she was asked whether it was her case that deposits had been paid by the plaintiff in 2006.  She said that having checked the records there were indeed deposits paid by the plaintiff to Regent Alliance in the year 2006. This was contrary to what she had affirmed in Lin Na’s 1^st affirmation.

59.  Paragraph 4 of Lin Na’s 1^st affirmation dealt with the specific request whether apart from the deposits referred to in paragraphs 5 and 7 respectively, of her witness statement (which referred to the deposits paid in 2007 and 2008 respectively) her answer was that there were no other deposits paid.  The effect of her answer was that there were no deposits paid in 2006.  Lin Na was evasive when cross-examined about this.  She was adamant that she had checked records confirming that deposits had been paid in 2006.  She said that when affirming her 1^st affirmation she did not know that deposits had been paid for 2006 but only learnt of this after the litigation had started.  When pressed in cross-examination as to when this was she was evasive and gave different versions as to when she told her lawyers about this.  She said that her lawyers told her that it was too late to mention about the payment of deposits in 2006.  I do not believe Lin Na.  She had clearly contradicted her 1^st affirmation and has failed to give a satisfactory explanation for the discrepancy between her affirmation and her evidence in cross-examination.  

60.  I would observe that as late as October 2011 a corrective 3^rd affirmation of Lin Na was filed on counsel’s advice.  However, no correction was made to Lin Na’s 1^st affirmation to disclose that deposits had been paid in 2006.    

61.  It is clear that there are no contemporaneous documents showing that deposits were paid in 2006.  Although she said that she had checked records showing that deposits were paid, no contemporaneous documents were ever disclosed or adduced showing the same.  I do not believe Lin Na. 

62.  There is no dispute that for the year 2007 payments were made by the plaintiff into Chiavenna’s bank account.  According to the plaintiff’s case these were loans to Lin Na.  According to Lin Na’s case, these were deposits to Regent Alliance.

63.  On the evidence of Rabin, which I accept, the total amount paid over in 2007 by the plaintiff or on behalf of the plaintiff was US$2,700,000 as follows:

(1)   US$500,000 remitted on 2 February 2007;

(2)   US$200,000 remitted around the 1^st quarter of 2007;

(3)   US$500,000 remitted on 10 May 2007;

(4)   US$500,000 remitted on 15 May 2007;

(5)   US$250,000 remitted on 27 June 2007;

(6)   US$250,000 remitted on 29 June 2007;

(7)   US$500,000 remitted on 2 July 2007.

This was undisputed by Lin Na.

64.  In evidence Lin Na said that she only understood simple English.  She said that she relied on her husband to translate for her during negotiations with Rabin over purchase orders and on matters of production and delivery of goods.  She said that over the years when she met Rabin her husband was present on nearly all the occasions to assist her.  And she also said that in respect of telephone calls with Rabin nearly 90% of the telephone calls were between her husband and Rabin and not her directly and that she did not converse with Rabin most of the time.  It was her evidence that that since 2006 it was her husband Cohen who did the translations for her when speaking to Rabin about the business.

65.  I would observe that it was never put or suggested to Rabin during his cross-examination that it was Cohen and not Lin Na who had most of the discussions with him.  It was also never put or suggested that Lin Na only understood simple English.

66.  Rabin said, and I accept, that Lin Na had no difficulty in communicating with him in English.  I believe Rabin and disbelieve Lin Na.  I find that Lin Na did speak to Rabin and negotiated with him over the years and that she had no difficulty communicating with him in English.  I reject Lin Na’s evidence that it was Cohen that had most of the discussions either in person or over the telephone over the years with Rabin and not her.

67.  In cross-examination Lin Na was adamant that the requests for deposits in the year 2007 were made by Cohen and not by her.  She tried to distance herself from the discussions with Rabin on these matters by saying that she was in charge of production and not money matters.

68.  Lin Na clearly contradicted her evidence in Lin Na’s 1^st affirmation which was affirmed by her after it had been translated to her by her solicitor. At paragraph 5 under the answer to 3.2.3 (a) and (b) Lin Na affirmed that the requests for deposits were made by her on behalf of Regent Alliance to Rabin and other staff of the plaintiff over the phone about the time when the deposits were paid.  She never mentioned that the requests were made by Cohen as she said in cross-examination.  She was unable to satisfactorily explain why she had failed to mention her husband’s involvement in the matter.   

69.  In my view Lin Na has been untruthful and has tried to involve her husband as the one who made the requests for the deposits to be paid by the plaintiff to Regent Alliance.  It is inconceivable, in my view, that Lin Na would have failed to mention this in her defence, 1^st affirmation or in her witness statement. It is also inconceivable, in my view, that she did not call her husband to give evidence on these matters if she were telling the truth.  I disbelieve Lin Na.

70.  Rabin said in evidence that as Lin Na was doing business through various corporate vehicles including Regent Alliance and Chiavenna which may not have conceivable assets he would only approve loans to Lin  Na personally and not to her corporate vehicles so that the plaintiff could go after her in the event of default.  I believe him and accept his evidence.

71.  I prefer the evidence of Rabin to that of Lin Na.  I find that the 2007 payments were loans to Lin Na and not deposits paid to Regent Alliance.

72.  I do not believe Lin Na’s evidence that deposits were made by the plaintiff to Regent Alliance for purchase orders placed in 2007.  Lin Na is unable to refer to any purchase order in respect of which a deposit was paid.  

73.  It is common ground that the total sum of US$2,700,000 was repaid to the plaintiff.  Rabin accepted that they were all paid back by Regent Alliance remitting monies to the plaintiff or by setting off against invoices issued by Chiavenna.  As Rabin said, although the loans were granted to Lin Na personally the plaintiff would not object when Lin Na suggested setting off the loans against monies due from the plaintiff to Regent Alliance or Chiavenna.  I believe him.

74.  As regards the 4 payments made by the plaintiff in 2008, Rabin gave evidence that in or around April 2008 Lin Na requested a loan in the total amount of US$1,000,000.  He said that she did pay back the plaintiff for the loans made in 2007 and that he trusted her to repay the amounts loaned to her.  She was producing a substantial amount of goods for the plaintiff and he trusted her.  

75.  The payment terms that had been agreed with Lin Na for the purchase of the goods by the plaintiff were mainly on LDP terms (Landed Duty Paid) which Rabin explained was that the plaintiff would wait for the goods to be shipped and delivered to its warehouse in California before the plaintiff would make payment for the purchase of the goods.  Rabin explained that Lin Na was shipping a lot of goods to him and assured him that she would pay him back for the loans.  He was told that the loans were required to purchase piece goods.  She had repaid the loans in 2007 and he trusted her to repay the loans in 2008 as well.  He agreed to lend her the money.  I believe him and accept his evidence.

76.  Rabin said in cross-examination that after the telephone conversation with Lin Na in April 2008 when she asked for a loan, he asked her to go up to his office to discuss the matter further and Lin Na did have a meeting with him.  Although this meeting was not mentioned in his witness statement I believe him.

77.  Lin Na denied ever asking for loans from the plaintiff in or about April 2008.

78.  Her pleaded case is that in or about April 2008 Rabin acting for the plaintiff and Lin Na acting for Regent Alliance agreed that Regent Alliance would manufacture or cause to be manufactured garments for the total sum US$13,636.908.91 as particularized in paragraph 5) a) of her amended defence.  I would observe that in the original defence the amount was US$13, 608,566.11 before it was amended by the amended defence.  By paragraph 5) b) of her amended defence she pleaded that at that meeting the plaintiff agreed that it would pay Regent Alliance as a deposit or advance payment the sum of US$1,00,000.

79.  In cross-examination Lin Na said that in early April 2008 she had a meeting with Rabin in Hong Kong.  She initially said that at that meeting Rabin said that the plaintiff was going to purchase goods from Regent Alliance in the precise total sum of US$13,608,566.11.  She first said that at the meeting Rabin only gave her the total sum but confirmed only part of the orders at that meeting and for some other purchase orders they were issued later on.  She also said that only the said precise total sum was mentioned at that meeting but not the details including colour, style, size and fabric to be used for the garments to be produced.  She said that the first purchase order was issued after the meeting.

80.  Later on in cross-examination Lin Na contradicted her witness statement and earlier evidence in cross-examination by saying that the sum of US$13,608,566 was in fact a figure that she worked out with the purchase orders placed at that meeting. 

81.  Lin Na also contradicted her earlier answers in cross-examination when she had said that there were no purchase orders placed at that meeting but only after the meeting.  She was evasive and changed her earlier evidence by saying that at the meeting Rabin had already given her all the information about the purchase orders, including the styles, the quantities and all the information in the purchase orders but that all this information had not been presented in purchase order format.

82.  She further said in cross-examination for the first time that at that meeting in April 2008 Rabin had also given her certain sheets of paper with the information including styles, quantities and amounts written on them.  These sheets of paper from Rabin were never disclosed or adduced in evidence.  It was also never suggested or put to Rabin that he had produced such sheets of paper at that meeting.  

83.  I do not believe Lin Na and reject her evidence.  She was quite prepared to make up what I find to be a false assertion that written records were produced by Rabin at that meeting detailing the purchases of goods either in the total amount originally pleaded or as amended in the amended defence.

84.  Lin Na also said in cross-examination that her husband Cohen was present at that meeting and that it was Cohen who was translating what was discussed with Rabin at that meeting.

85.  In cross-examination Lin Na also said that the dates for refunds of deposits were specified by Rabin at the meeting.

86.  I would observe that her pleaded case at paragraph 5) d) of her amended defence pleads

“d) conditional upon the Plaintiff settling Regent Alliance’s invoices in full Regent Alliance would refund the deposit/advance payment of US$1,000,000.00 to the Plaintiff in the following manner namely:

(1) September 2008 US$200,000.00

(2) October 2008 US$200,000.00

(3) November 2008 US$200,000.00

(4) December 2008 US$400,000.00”

87.  When asked whether at the meeting she had made notes of the dates of refund so that she would know when to repay, Lin Na shifted the responsibility to her husband by saying that it was her husband who did the negotiations and not her. This was contrary to her pleaded case, her witness statement and her 1^st affirmation.  It was also contrary to what was specifically put by experienced counsel Mr Chiu, on her behalf, to Rabin when he gave evidence.  It was put to him that Cohen was not present at the meeting in April 2008.

88.  I do not believe Lin Na and reject her evidence.  She was trying to involve her husband as to what transpired at the meeting when he was not even present.  I so find.  

89.  I would observe that Lin Na has failed to call her husband Cohen as a witness.  Cohen was in Court throughout the trial.  He would have been an important witness to call to support Lin Na’s case.  There is no satisfactory explanation for not calling him to give evidence in support of Lin Na’s case.  In my view, an adverse inference can and should be drawn that if Cohen had been called to give evidence, his evidence would not have supported Lin Na’s case (Li Sau Keung v Maxcredit Engineering Ltd & Another [2004] 1 HKC 434 at pages 443 to 444; Hoie Sook Fong v Another v Ismail Halima & Another [2009] 1 HKC 326 at page 336).

90.  There is no documentary evidence to support the payments as being payments for deposits for the purchase of goods by the plaintiff.  Lin Na said that it was left to Rabin to decide the amount of the deposits.  I do not believe her.  She was unable to relate any of the amounts paid by the plaintiff to any purchase order placed by the plaintiff.  She was unable to identify the purchase orders in respect of which the 4 payments were made as deposits. 

91.  Lin Na also said that in September 2008 the plaintiff refused to accept further deliveries of goods and refused to pay Regent Alliance the sum of US$7,003,790.34.  This is denied by the plaintiff.  Rabin gave evidence that the plaintiff had in fact rejected garments in 2008 because of inferior quality and manufacturing defects.  I prefer the evidence of Rabin, whose evidence I accept to the evidence of Lin Na, whose evidence I reject.

92.  Lin Na’s case that the payments made by the plaintiff in 2008 were deposits to Regent Alliance and not loans to her is also contradicted by the contemporaneous emails between the plaintiff and Lin Na.  An example of this is her email sent on 8 September 2008.  Lin Na wrote to Rabin stating

“ As per yr. Instructions, we’re returning $200,000 of the loan. [Emphasis added] We deducted $97,769.70 for shipment R067K. And, we’re wiring $102,230.30 to your account today.

Thanks again for all your help.

Please see the attached updated shipping information.

Regards,

Linna                                                                                                ”

93.  Although her name appeared as the sender of this email Lin Na denied that she had sent this email.  She was evasive and was unable to say who would have used her name in sending out this email.  I do not believe her.  In my view it is inconceivable that this email with her name inserted as the sender from her email address would have been sent without her knowledge.  The email contradicts Lin Na’s case that deposits were paid to Regent Alliance.

94.  I would observe that as set out above at paragraph 7 the sum of US$200,000 has been repaid to the plaintiff.  Of this amount US$102,230.30 was remitted by Regent Alliance and US$97,769.70 was deducted as shipping costs for garments shipped between March and September 2008.  Contrary to her pleaded case that Regent Alliance would refund deposits only conditional upon the plaintiff settling invoices in full, there is no satisfactory explanation for the refund of US$200,000 when, on Lin Na’s case, invoices to the plaintiff had not been settled in full by the plaintiff.

95.  I would also observe that if, as Lin Na said, deposits were paid by the plaintiff to Regent Alliance there is no plausible reason why any sum was repaid to the plaintiff in 2008.  According to her, US$7,003,790.34 was owing by the plaintiff to Regent Alliance.

96.  There were other emails where Rabin was pressing for repayment (e.g. Core Bundle pages 187 to 189).  There was no reply by Lin Na or anyone from Regent Alliance asserting that the payments by the plaintiff were deposits paid to Regent Alliance.  It was also never asserted by Lin Na or Regent Alliance that the plaintiff owed Regent Alliance in excess of US$7,000,000.

97.  I am satisfied that the plaintiff has made loans to Lin Na personally in the sum of US$1,000,000 in 2008.  

98.  I find that the plaintiff lent US$1,000,000 to Lin Na personally in 2008 and that the plaintiff did not pay any deposits to Regent Alliance as alleged by Lin Na.

99.  I am also satisfied that the plaintiff has received repayment in the sum of US$200,000 leaving a balance of US$800,000 to be repaid by Lin Na.

100.  Mr Chiu submitted that the Court was entitled to come to the view that the payments amounting to US$1,000,000 paid into Chiavenna’s bank account amounted to loans to Regent Alliance.  I disagree.  This was not the pleaded case of Lin Na.  I reject the submission by Mr Chiu that the Court was entitled to find as a fact that loans were made to Regent Alliance.  That is not an issue before the Court on the pleadings.  And in her evidence Lin Na was adamant that there were no loans made but that deposits were paid by the plaintiff to Regent Alliance.

Conclusion

101.  As regards the main issue (1), I am satisfied and find that the payment totalling US$1,000,000 into Chiavenna’s bank account in April and May 2008 were made as loans to Lin Na and not as deposits paid by the plaintiff to Regent Alliance for the purchase of garment.

102.  As regards the main issue (2), I am satisfied and find that Lin Na is liable to repay US$800,000 with interest thereon to the plaintiff.  In my view interest should be at 1% above the best lending rate of HSBC from 30 October 2008, being the date of the email at Core Bundle page 189 demanding repayment of the outstanding sum, to judgment and thereafter at judgment rate until payment.

103.  I give judgment to the plaintiff against Lin Na in the sum of US$800,000 with interest at 1% above the best lending rate of HSBC from 30 October 2008 until payment and thereafter at judgment rate until payment.

104.  There is no dispute that costs should follow the event.  I also make an order that Lin Na should pay the plaintiff its costs of the action such costs to be taxed if not agreed.