WONG WAI YIN v. SUNG SIU WAI

[English Translation - 英譯本]

DCCJ 5114/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5114 OF 2008

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BETWEEN

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JUDGMENT

Background

1.  According to the Statement of Claim of the plaintiff Mr. Wong (“Wong”) and Wong’s statements, Wong’s claim in the present case is quite simple.  He lent $10,000, $60,000 and $20,000 (a total of $90,000) to his friend Sung Siu Wai (“Sung”) in July/August 2005, November 2005 and January 2006 respectively.  Sung repaid $15,000 in total and $75,000 is still outstanding.  Sung gave him 3 post-dated cheques, namely cheques 000028, 000030 and 000035 of the Bank of Communications (“the cheques”) as security for the debts.  When repayment was due, Sung failed to repay to Wong the money she owed and the cheques were not honoured.  Wong therefore, in the capacity as the holder of the cheques, sues Sung for the outstanding debts.

2.  Sung’s defence is that she had never borrowed any money from Wong.  Sung claimed that her husband had borrowed money a number of times from a Auyeung Wai Fong [transliteration of 歐陽慧芳] (“Fong”). According to the evidence of Sung and her husband Chan Wai Man [transliteration of 陳偉民](“Chan”), at the end of 2005 / beginning of 2006 Chan borrowed $60,000 from Fong.  The condition was that if the debt was repaid within one month from the day of the borrowing, then one month’s interest, i.e. $10,000 should be paid in addition to repaying the $60,000; otherwise $10,000 was to be paid every month as interest.  Chan’s record and reputation of repaying debts on previous occasions had not been good, so Fong required Chan’s wife Sung to issue cheques to be used as security for the loan.  In order to help Chan, Sung agreed to issue cheques.  According to the evidence of Sung and Chan, Sung signed her name on a pile of cheques (she estimated that there were 10 odd cheques) and gave them to Chan to put down the amounts, dates, payees and other information.

3.  Chan and Sung claimed that Chan gave to Fong all the cheques signed by Sung, which were to be used as security for the $60,000 lent by Fong to Chan.  At the same time he signed an IOU and gave it to Fong.  Neither Chan nor Sung kept any duplicate copies of the cheques, but they claimed that the cheques relied on by Wong in this case were included in the cheques given by Chan to Fong.

4.  Chan said that starting from January 2006, he paid interest every month on the $60,000 which he borrowed from Fong.  The amounts ranged from $8,000 to $10,000 per month. Later, however, he could not afford to pay that any more.  Starting from September 2006, he could pay only $2,000 or $3,000 as interest.  Up to the end of 2006/beginning of 2007, Chan had repaid about $130,000 to Fong, but Wong still pressed Chan and Sung on behalf of Fong for payment of the outstanding amount.  Chan and Sung alleged that Wong assisted Fong in operating an illegal money lending business, and that Wong helped Fong to dun people for payment of debts.  He had telephoned Sung many times to press her for payment of the outstanding money and had sent letters demanding that Chan and Sung deal with the debt they owed Fong.

Relevant legal principles

5.  Wong sues in the capacity as the holder of the cheques, demanding that the drawer Sung pay the amounts specified on the cheques.

6.  The cheques are all cash cheques and they fit the definition of a “bill of exchange” contained in section 3 of the Bills of Exchange Ordinance.  According to section 30(2) of the Bills of Exchange Ordinance, every holder of a bill of exchange is prima facie deemed to be a holder in due course; but if, in an action on a bill of exchange, it is admitted or proved that the acceptance, issue, or subsequent negotiation of the bill of exchange is affected with fraud or illegality, the burden of proof is shifted unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill of exchange.

7.  In addition, under common haw, the Court will not enforce or grant specific performance in respect of an illegal contract, nor will it give any assistance to a party whose cause of action is based on any illegal conduct on his part or grant any relief to any person for any illegal act he did.

8.  If what Chan and Sung said is true, then the loan agreement and all transactions related to it between Chan / Sung and Fong were against section 24 of the Money Lenders Ordinance and an offence was committed, or they were extortionate transactions under section 25 of the Money Lenders Ordinance.  Section 24(2) of the Money Lenders Ordinance provides that no agreement for the repayment of any loan or for the payment of interest on any loan and no security given in respect of any such agreement or loan shall be enforceable in any case in which the effective rate of interest exceeds 60 per cent per annum.

9.  If I accept the evidence of Sung and Chan and believe that the cheques were security given in respect of a loan made by Fong to Chan at an excessive interest rate, then Sung has a defence and does not need to pay the money which Wong is now pressing her to pay unless Wong can prove that “value has in good faith been given for” the cheques by him, that means he had given value and did not know that the person who negotiated the cheques did not have a good title.

10.  The crucial issues in this case are: whether the evidence given by Chan and Sung about the transactions between they and Fong is credible; and whether the money which Wong is trying to recover debts lent by him as a friend to Sung, not including interest; or, as alleged by Sung and Chan, an illegal loan which they obtained from Fong at an interest rate exceeding 60 per cent per annum.

Analysis

11.  After considering all the evidence in this case, inducing the oral evidence given by Wong, Sung and Chan in Court, I am satisfied on a balance of probabilities that the evidence of Sung and Chan is more credible and that their case is more likely to be true.

12.  I accept that after Chan came to know Fong in 2000, he began to borrow money from her.  According to Chan’s evidence, these borrowings included the $30,000 he borrowed in 2000 and the $80,000 he borrowed in June 2002.  Each transaction involved the payment of monthly interest in the region of $10,000 to $15,000 and the use of cheques as security.  Between June 2002 and November 2005, Chan repaid about $500,000 to Fong.  In this connection, Chan has duplicate copies of the cheques he issued to Fong and the notices issued by the banks about receipt of money, which can prove that during this period of time he deposited loan repayments into Fong’s bank accounts.  This is consistent with the allegation made by Chan and Sung that Chan borrowed money from Fong at high interest rates.

13.  Chan and Sung insisted that Wong assisted Fong in lending money and dunning people for repayment.  Chan said that when Fong introduced Wong to him, she told him that Wong lent money at high interest rates.  Chan and Sung also said that they had, as instructed by Fong, gave the repayments to Wong or deposited the repayments into Wong’s bank accounts.  The evidence of Chan and Sung is that Wong had on many occasions pressed them for repaying the debts they owed to Fong.  He made telephone calls to Sung’s office and sent letters to their home.  Apart from that, he had harassed them many times.

14.  Wong did not deny that he knew Fong, but he maintained that the money outstanding was money he lent to Sung as a friend, without charging any interest.  Chan and Sung did receive a letter about pressing for repayment of a debt owed to Fong, in which a Mr. Wong was mentioned and the telephone number of this Mr. Wong was provided.  Wong admitted that this telephone number was his.  It is clear that Wong had a close connection with loans made by Fong.

15.  After Sung made allegations about the transactions and the borrowings made between Chan and Fong, Wong produced an IOU to prove that the money in question was lent by him to Sung.  The content of this document (“IOU”) signed by Sung on 15 November 2005 was as follows:

“I, Sung Siu Wai, owe a debt of $60,000 and shall, starting from 15 December 2005, repay $5,000 on every 15^th day, for a total of 12 instalments, including a cheque related to sister Fong. If there is no repayment at the due time, sister Fong can come to my home to take away things to make up for the money outstanding. [Their value] shall be reckoned as 10% of the market value.”

16.  It was stipulated in the IOU that if Sung failed to make repayment at the due time, Fong could go to Sung’s home to take away things to make up for the money outstanding.  This is consistent with the allegation made by Sung and Chan that the creditor was Fong and not Wong.  Wong explained that Fong’s name appeared on the IOU because Fong was a person respected by both Sung and Wong.  I consider that this is not credible.

17.  Furthermore, in 2007 Sung and Chan were subjected to police investigation and were interviewed by the police because some cheques issued by Sung were dishonoured. They had given statements on that occasion.  At that time the police investigation was about 6 cheques issued by Sung to Fong used for repayment.  The dates on these 6 cheques were dates between April and December 2006.  What Chan and Sung said in their statements are, by and large, the same as what they said in evidence in Court in this case.  On both occasions they said that the cheques were issued by Sung as security for the money which Chan borrowed from Fong, and they described the transactions between Chan and Fong.  Even though in the present case Chan has not been able to give a consistent or clear account of the exact dates on which the loans were made, the amounts of the loans and the amounts of the repayments, considering that the time frame involved in these transactions was from 2000 to 2006/2007, his difficulty in doing so is understandable. What is important is that the cheques involved in the present case and the 6 cheques which were the subject matter of the police investigation in 2007 all related to the same bank (Bank of Communications), and to the same numerical sequence (000037-000058).  Five cheques were cash cheques and the date of the cheque 000037 was 3 April 2006; the payee was Fong.  In my judgment, all these are consistent with the defence and the case presented by Sung and Chan in the present case.  The dates of the cheques involved in the present case are respectively 25 February 2006, 2 March 2006 and 16 March 2006; while the numbers of the cheques are 000028, 000030, 000035.

18.  In the present case Sung and Chan gave evidence that in 2007 the police did not lay any charge against Sung, but they told them that there was evidence which showed that some people were engaged in illegal money lending business.

19.  The exhibits produced by Wong included a sound recording of a telephone conversation between he and Sung.  Sung said that this recording was only a part of the telephone conversation between she and Wong.  Wong also admitted that the recording was not complete and that he did not produce the sound recording of the entire telephone conversation between he and Sung.  I do not consider that the partial recording produced by Wong is reliable evidence. But even if I accept this recording as evidence, I think that this recording of the conversation between Sung and Wong does not show that Sung and Wong were friends. Rather, it tallies with Sung’s allegations.  From their conversation, I do not get the impression that the caller was a person who had unconditionally lent money to a friend and is now trying to get the money back from his friend.

20.  All this evidence is sufficient for me to accept that the money which Wong seeks to recover is actually the money which Chan borrowed from Fong, that the cheques relied on by Wong actually represent the security provided by Sung and that the transaction in question most probably constitutes an offence under section 24 or an extortionate transaction under section 25 of the Money Lenders Ordinance.

21.  In this case there is no evidence which shows that “value has in good faith been given” by Wong for acquiring the cheques and that when the cheques were transferred to him, he did not know that the transferor of the cheques did not have a good title.

22.  For the above reasons, I find that Wong is not entitled to demand payment of $75,000 from Sung by relying on the cheques.  Because the cheques have to do with violations of provisions of the Money Lenders Ordinance and with illegality or extortion, the Court will not grant any relief to Wong.

Conclusion

23.  I dismiss Wong’s claim.  Wong shall pay Sung’s costs, to be taxed if not agreed.

24.  Since illegality may be involved in this case, I will refer this case to the Department of Justice for investigation.