SIT YIU KWONG v. NG FUNG CHA, KATHLEEN

DCCJ 1916/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1916 OF 2011

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JUDGMENT

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INTRODUCTION

1. The plaintiff and the defendant were primary school classmates and met again in or around 1991.  According to the defendant, they started a courtship relationship in or about 1997.  The plaintiff denies this and claims that the plaintiff and the defendant had only been “normal friends”.

2. It is not in dispute that a total sum of HK$350,000 (the “Sum”) was transferred by the plaintiff to the defendant’s Hang Seng Bank Account no 368-160537-668 on or about the following dates: -

(1)   6 June 2005 – HK$ 50,000;

(2)   22 August 2005 – HK$50,000;

(3)   27 September 2005 – HK$50,000;

(4)   12 October 2005 – HK$100,000; and

(5)   8 December 2005 – HK$100,000.

3. The defendant denies that the Sum was advanced as a loan.  It is not in dispute that the plaintiff bought a property situated at Room 9A, Moonlit Mansion, No 150 Boundary Street, Kowloon, Hong Kong (the “Property”) in or about January 1999.  Sometime in the second half of 2005, renovation was carried out at the Property.  It is the defendant’s case that the Sum was transferred by the plaintiff to the defendant: (1) to settle the renovation cost of the Property for and on behalf of the plaintiff, which amounted to around HK$350,000 in total; and (2) for the purchase of furniture and necessary electrical appliances as it was intended at that time that the plaintiff and the defendant would cohabitate in the Property.

4. On the other hand, the plaintiff says that the Sum was advanced to the defendant as an interest free loan to enable her to commence operating a fashion boutique known as “Boutique Ca Va” (the “Boutique”).  The plaintiff denies that the Sum was advanced to the defendant for the renovation works, purchase of furniture and electrical appliances at the Property.  The reason being that the renovation works carried out at the Property in 2005 only amounted to around HK$150,000 to HK$160,000 and such have been settled from the balance of his investment monies kept with the defendant.

5. In this regard, the plaintiff claims that he had deposited a total sum of about HK$200,000 into the defendant’s bank account during the period from 2001 to 2005 for investment purposes.  This fund later dwindled to less than HK$150,000, and the plaintiff instructed the defendant to use the balance of the fund to pay for the cost of the renovation works at the Property.

6. The plaintiff further claims that the defendant is liable to repay the sum of HK$54,376 to the plaintiff (the “Credit Card Sum”) as a “credit card debt”.  The plaintiff claims that the defendant obtained a Dah Sing Bank associate credit card (the “Associate Credit Card”) without his consent and incurred various expenditures using the Associate Credit Card.

7. The plaintiff claims that in order to avoid recovery action by the Dah Sing Bank, the plaintiff paid the Credit Card Sum to the bank to settle the debt incurred with the Associate Credit Card.  In the Amended Statement of Claim, this was simply defined as “the Credit Card Debt” and the plaintiff claims that the defendant is liable to “repay” the Credit Card Sum to the plaintiff.

8. The defendant’s defence to the plaintiff’s claim for the Credit Card Sum is straightforward: the Associate Credit Card was applied for with the full consent and approval of the plaintiff, and the expenditures on the card were incurred with the consent and authorisation of the plaintiff.

ISSUES AT TRIAL

9. The issues in this case are the following: --

(1)   Whether there was a courtship relationship between the plaintiff and the defendant;

(2)   Whether the Sum of HK$350,000 was transferred by the plaintiff to the defendant as a loan; and

(3)   Whether the Credit Card Sum was in the nature of a loan.

10. From the foregoing, it is clear that credibility is the major deciding factor in this case.

APPLICABLE LEGAL PRINCIPLES ON THE ASSESSMENT OF CREDIBILITY OF WITNESSES

11. As Chung J held in Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd, HCA 3523/2002 (Judgment dated 13/08/05), at paragraph 12: -

“12. The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-

‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(a) whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest’”.

ISSUE 1 – WHETHER THERE WAS A COURTSHIP RELATIONSHIP BETWEEN P AND D

12. This issue is relevant to both claims on the Sum and the Credit Card Sum because it goes to: (i) the general credibility of the plaintiff; and (ii) the inherent probability of whether the plaintiff’s 2 claims were truly in the nature of loans as alleged by the plaintiff.

The utility bills

13. On the defendant’s case, the plaintiff and the defendant were primary school classmates and met again in about 1991.  It is the defendant’s case that they started a courtship relationship in about 1997 which lasted until some time in 2006.  The plaintiff denies this, and claims that the plaintiff and defendant had only been normal friends.

14. However, the evidence adduced at trial shows that between 1999 and 2006, the defendant had assisted the plaintiff to deal with different aspects of his financial life, which, I accept, is telling of their courtship relationship.  Contrary to the plaintiff’s evidence, it is apparent that the defendant did not only help the plaintiff to pay his utility bills just on a “few occasions”.  Such utility bills included bills for Town Gas, electricity, Government Rent, as well as water and sewage charges in respect of the Property.

15. The pattern of arrangement in relation to the payment of the utility bills spanned over from 1999 to 2005.

16. It is clear that over the years, the defendant assisted the plaintiff to handle matters regarding the Property without any substantial financial benefit to her.  The plaintiff could have frankly admitted this. Instead, under cross-examination, the plaintiff made excuses by saying that he did reward the defendant by treating her to meals and that he had helped the defendant and her friends in arranging for blood tests and medical referrals.  Not only were these not mentioned in his Witness Statements, in my view, it shows up the plaintiff to be a disingenuous witness.

17. The plaintiff alleges that payments of the utility bills were only done for convenience and because he trusted the defendant as a friend.  Whilst the plaintiff attempts to paint this as an ordinary arrangement among ordinary friends, it is difficult to believe that the plaintiff would trust the defendant more than his own family members, if the defendantwere not the plaintiff’s girlfriend at the material time.  I agree with Ms Deanna Law, counsel acting for the defendant, that this arrangement of the plaintiff’s financial affairs - coupled with the arrangement regarding the plaintiff’s credit card bills and bank statements (which will be dealt with in the section below) - plainly contradicts the plaintiff’s allegation that the plaintiff and the defendant were merely ordinary friends.  The plaintiff has failed to proffer any credible reason why the defendant, who had no interest in the Property whatsoever, would have troubled herself to help him in such a way, over at least 6 years from 1999 to 2005, with no personal reward.  Indeed, as the defendant has explained in her evidence, the Property was in fact not close to her own apartment at the Kam Ming Court; if one travelled by bus, it was 3 stations away; and if on foot, it would have taken around 30 minutes.

The credit card bills and bank statements

18. Various bank statements, credit card bills and a “PIN” letter of the plaintiff were sent to the defendant’s Kam Ming Court address.

19. The plaintiff admittedly arranged for those produced bank statements and credit card bills to be sent to the defendant’s address.  The plaintiff claims that it was because: (i) he received complaints from the clerical staff of his department in the hospital that he should not have his statements sent to the hospital; (ii) he trusted the defendant as a friend that she would deal with the correspondence “professionally”; and (iii) he had instructed her not to open any of those letters.

20. I agree with Ms Deanna Law that these are no more than excuses from the plaintiff who had all along been seeking to conceal his true relationship with the defendant.  It is inherently implausible, given the sensitive and private nature of bank statements and credit card bills, that the plaintiff would have arranged for those to be sent to a “normal friend’s” address.  In particular, one of the credit card bills produced contains an Inland Revenue Department entry which, as admitted by the plaintiff under cross-examination, would reveal the amount of his income and is clearly information of a sensitive and private nature.

21. It can also be noted that this arrangement had lasted for a number of years, namely, from at least 2003 until the end of their relationship in 2006.

22. Furthermore, there were other important documents relating to the Property which were kept in the defendant’s possession.  This included the Home Loan Interest Subsidiary Scheme documents as well as the Hang Seng Insurance documents relating to the Property.

Conclusion on Issue 1

23. The evidence adduced at trial clearly shows that the plaintiff and the defendant were in a courtship relationship at the material time.  In this regard, on the balance of probabilities, I have no hesitation in accepting the evidence of the defendant and rejecting the evidence of the plaintiff.  Furthermore, this finding is in my view telling on the overall credibility, or lack of it, on the part of the plaintiff.  He was prepared to conceal his true relationship with the defendant in order to advance his claims against the defendant.  The fact that the plaintiff and the defendant were lovers at the material time also supports the veracity of the defendant’s defence in relation to the Sum and the Credit Card Sum.

ISSUE 2 – WHETHER THE SUM OF $350,000 WAS TRANSFERRED BY P TO D AS A LOAN

24. In this regard, the plaintiff’s case is that he lent the total sum of HK$350,000 to the defendant for the operation of the Boutique.  The defendant first asked for a loan of HK$150,000 (the “1^st Transfer”). According to the plaintiff, he was hesitant in lending the defendant money in the beginning but eventually did so and the 1^st Transfer was advanced in 3 installments but he made it clear to the defendant that she had to repay this.  The defendant further asked the plaintiff to lend her HK$100,000 for stocking up (the “2^nd Transfer”).  Subsequently, the defendant asked for another loan in the sum of HK$100,000 as business was not performing well (the “3^rd Transfer”).  The plaintiff was reluctant to lend the defendant the 3^rd Transfer but nonetheless did so in hopes that it would keep the Boutique afloat and not have the previous loans of HK$250,000 washed down the drain.  The plaintiff expressly indicated to the defendant that she had to repay the loans.

25. On the other hand, as stated above, the defendant’s case is that the Sum was transferred by the plaintiff to the defendant to settle the renovation cost of the Property for and on behalf of the plaintiff and for the purchase of furniture and necessary electrical appliances as it was intended at that time that the plaintiff and the defendant would cohabitate in the Property.

26. I agree with Ms Deanna Law that the plaintiff’s allegation that the Sum was transferred to the defendant as a loan is incredible for the reasons set out below.

The 1^st Transfer

27. Rather strangely (if the same were intended to be a loan for financing the opening of the Boutique), the 1^st Transfer were split into 3 tranches. The plaintiff explained in his oral evidence that the reason why it was split was because he wanted to be “careful about it” and wanted to “see how the business went”.  Notably, this important point regarding the reason why the 1^st Transfer was split into 3 tranches was not explained in his Witness Statements.

28. In his examination-in-chief, the plaintiff admitted that he did not try to find out how the business of the defendant’s Boutique went because he was “too busy” and “knew nothing about business”.  He was cross-examined as to why he would have been so confident that the defendant would be able to repay him.  The plaintiff said that he simply relied on the defendant’s words and it was impossible for him to get to her Boutique to observe.  This is quite incredible in light of the case run by the plaintiff that he and the defendant were merely ordinary friends.

The 2^nd Transfer

29. In paragraph 13 of the plaintiff’s 1^st Witness Statement, the plaintiff claimed that:

“In about October 2005, the Defendant told me that the boutique was running well and she expected to repay the First Loan to me very soon. However, she said that she needed to stock up winter clothing for the winter season and she needed money for this purpose. She then asked me to lend her a further loan of HK$100,000. The Defendant promised me that she would repay all the loans in total of HK$250,000 by end of January 2006. Relying on the promise of the Defendant, I lent the Defendant a further sum of HK$100,000... ” (emphasis added)

30. In my view, the plaintiff’s case on the 2^nd Transfer is inherently implausible.  The plaintiff admitted under cross-examination that he made no further enquiries as to the defendant’s business and simply relied on the defendant’s “promise” that she would repay him in January 2006.  This is unbelievable - a sum of HK$150,000 had, according to the plaintiff, already been lent to the defendant, who was, on the plaintiff’s case, allegedly only an ordinary friend of his, whom he only met infrequently.

The 3^rd Transfer

31. The plaintiff’s allegations in relation to the 3^rd Transfer are even more unbelievable.  In paragraph 14 of the plaintiff’s 1^st Witness Statement, the plaintiff stated as follows:

“In about December 2005, the Defendant informed me that her boutique was on the verge of closing down due to the fierce competition from other shops in Causeway Bay. She said that she was in urgent need of another HK$100,000 to keep the boutique running till Christmas and New Year when the sales environment would be better and she asked me to lend her an additional sum of HK$100,000. She said that if I did not lend her the money, she had no choice but to close the boutique and she would then apply for bankruptcy. Fearing the total loss of the previous loan of HK$250,000, I reluctantly agreed to lend the Defendant the additional loan of HK$100,000 (“the Third Loan”) on the promise made by the Defendant that she would repay all the loans (HK$350,000) by end of February 2006 regardless of [sic] the boutique was in business or not. The Third Loan was advanced ... on 8^th December 2005”. (emphasis added)

32. The plaintiff admitted under cross-examination that he in fact did nothing to check if the defendant’s business was truly as bad as she said, because the plaintiff was “very busy in late 2005 and had no time to travel from Tuen Mun to Causeway Bay”.  This excuse is, in my view, inherently improbable under the circumstances alleged by the plaintiff.

33. Further, the plaintiff admitted that he in fact did nothing to make sure that the defendant did have the means to repay him the “loans” previously advanced to the defendant (totaling HK$250,000).  Worse still, the plaintiff decided to lend the defendant another HK$100,000 (the plaintiff claimed in his cross-examination that he had only considered the matter for “a few hours” after the defendant had made the request) in the hope that the defendant would repay the entire HK$350,000 back to the plaintiff - according to the plaintiff, he made this decision only based on the defendant’s promise that she would repay him the entire Sum by the end of February 2006.  Although the defendant (according to the plaintiff) said to the plaintiff that she would repay the entire sum regardless of whether the boutique was in business or not; but if the defendant was on the verge of applying for bankruptcy, how could the plaintiff even begin to believe that the defendant would be able to repay him?

34. The plaintiff’s case in this regard is even more far-fetched and utterly unbelievable in the light of his allegation that only 2 months previously (i.e. in about October 2005), the defendant had obtained the 2^nd Transfer, representing to the plaintiff at the time that the Boutique was running well and needed stocking up (see: paragraph 29 above).  According to the plaintiff, he was not worried by this apparent lie.

35. In short, I find that no sense can be made out from the plaintiff’s version of facts in relation to the 3 Transfers being alleged loans.

The alleged investment money of HK$200,000 allegedly transferred to D

36. The gist of the plaintiff’s case in this regard has been set out in paragraph 5 above.

37. I reject the plaintiff’s allegation as being incredible for the following reasons:-

(1)   There is no bank record to prove that the plaintiff had transferred HK$200,000 to any of the defendant’s bank accounts.

(2)   Apart from lack of bank records, there was no written record of any kind made by the plaintiff (a well-educated medical doctor) to support his allegation.  The alleged sum amounted to his 3 months’ salary at the time.

(3)   It is inherently implausible that the plaintiff would have transferred a sum of HK$200,000 to the defendant, whom the plaintiff admitted was not a professional investor and, on his case, merely an ordinary friend.

(4)   The plaintiff admitted under cross-examination that, after allegedly transferring the money to the defendant for investment, he did not ask what investment the defendant had made in the market for him and she did not have to report to the plaintiff the market trend. Indeed, the defendant was not required to do regular reporting to the plaintiff.  When asked whether the plaintiff had thought of how long the alleged investment would last for, the plaintiff in his evidence said that as he did not require the money, he would probably have just left it there.

Conclusion on Issue 2

38. Ms Stephanie Yan, counsel for the plaintiff, has in her closing submissions made various criticisms of the defendant’s case.  This includes criticisms on the defendant’s evidence regarding the period during which renovation works were carried out at the Property, the extent of the works and the cost at which such works were carried out; as well as other points touching on the defendant’s credibility.  I have considered each of these points carefully. At the end of the day, I find that these criticisms of the defendant’s case pale into relative insignificance when compared with the inherent improbability of the plaintiff’s case.  On a balance of probabilities, I have no hesitation in accepting the evidence of the defendant and rejecting the evidence of the plaintiff.

ISSUE 3 - WHETHER THE CREDIT CARD SUM WAS IN THE NATURE OF A LOAN

No valid cause of action pleaded as a matter of law

39. The plaintiff claims that the defendant is liable to repay the Credit Card Sum as a “credit card debt”.  In my view, the case pleaded by the plaintiff against the defendant in this regard is wholly misconceived and fundamentally flawed.  The plaintiff’s pleaded case against the defendant is essentially that without the consent, approval or authority of the plaintiff, the defendant incurred expenditure with the Associate Credit Card, and in order to avoid recovery action by the bank, the plaintiff paid the Credit Card Sum to the bank and accordingly the defendant is “liable to repay the said sum of HK$54,376.00” to the plaintiff (see: paragraphs 5 to 7 of the Amended Statement of Claim).

40. Thus, the plaintiff’s pleaded case is based on a creditor-debtor relationship between the parties.  However, there is plainly no such relationship between the plaintiff and the defendant as regard the Credit Card Sum.

41. When questioned by the court during her Opening as to the cause of action relied upon by the plaintiff against the defendant in relation to the Credit Card Sum, Ms Yan argued that the cause of action was or was based on “fraud”. It should be noted that fraud has not been pleaded in the Amended Statement of Claim.

42. In her Written Closing Submissions, Ms Yan submitted that if the court takes the view that the defendant had obtained the Associate Credit Card without the plaintiff’s consent, the defendant would have committed a fraud on the bank.  Even so, I do not see how that can create a creditor-debtor relationship between the plaintiff and defendant.

43. I agree with Ms Deanna Law that the only potential cause of action by the plaintiff against the defendant in relation to the Credit Card Sum would be under the law of unjust enrichment, in particular, under the head of secondary liability/legal compulsion, for reimbursement from the defendant [see, e.g.: Goff & Jones, The Law of Unjust Enrichment (8^th ed), Chapter 20].

44. However, unjust enrichment and/or restitution were clearly not pleaded in the Amended Statement of Claim.  In the recent case of Kwok Chin Wing v 21 Holdings Ltd and another, FACV 9/2012 (Judgment of the CFA dated 30/09/13), the Court of Final Appeal has once again emphasized the importance of proper pleadings in a civil trial.  It is simply unacceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced.  For this reason alone, the plaintiff’s claim for the Credit Card Sum must be dismissed.

The evidence relating to the Credit Card Sum

45. The gist of the defendant’s defence has been set out in paragraph 8 above.  This again, is closely intertwined with the issue of whether there was a courtship relationship between the parties.  Having found that there was such a courtship relationship between the plaintiff and the defendant, it is in my view inherently plausible and reasonable for the plaintiff to have applied for and/or consented to the application of an associate credit card for his girlfriend.  Notably, in the defendant’s case, the courtship relationship started some time in 1997, and by the time the Associate Credit Card was applied for, it was already September 2005 and the plaintiff and the defendant would have been in a relationship for some years.

46. Apart from the inherent probabilities of the parties’ respective cases, I note that in the application form for the Associate Credit Card, the Dah Sing Bank required the provision of various documents in support of the application, including, inter alia, copy of the HKID Card of the applicant and of the supplementary card applicant, as well as salary proof of the applicant.

47. As the defendant has stressed in her Supplemental Witness Statement, it would not have been possible for her to have obtained the Associate Credit Card without the consent of the plaintiff and a confirmation of his income.  The defendant further stated that during the application process, the plaintiff informed her one day that the bank had called him earlier and requested for a copy of his salary proof, and the plaintiff told her that he had already faxed the salary proof from the hospital to the bank.

48. The plaintiff alleges that the defendant would have been able to provide Dah Sing Bank with the plaintiff’s salary proof since the defendant had access to his bank statements.  The defendant strongly denied this and she stressed that she had never had access to the plaintiff’s salary proof or tax returns.  The only piece of evidence that may come close to being a “salary proof” of the plaintiff is the HSBC credit card bill referred to in paragraph 20 above.  However, this credit card bill is dated 15 December 2005, whereas the Associate Credit Card was applied for in September 2005.

49. Moreover, while the plaintiff has stated in his Witness Statement that he was contacted by staff of the Dah Sing Bank in about middle to late March 2006 regarding unsettled credit card payment, and that he was totally unaware of the existence of the Associate Credit Card, yet he did not report to the police immediately but left the matter until middle to late April 2006.  Furthermore, if a fraud had been committed by the defendant as alleged by the plaintiff, it is inherently implausible that the plaintiff would refrain from reporting the incident to the police but choose to repay the bank instead.

50. Again, on the balance of probabilities, I would reject the evidence of the plaintiff and accept the evidence of the defendant.

CONCLUSION

51. In conclusion, for the reasons set out above, I make the following findings in this case: --

(1)   The plaintiff was not a credible witness.  He was not truthful about the true relationship between himself and the defendant.  I reject his evidence that the Sum was transferred by him as a loan to the defendant.

(2)   I accept the defendant’s evidence that the Sum was transferred by the plaintiff to the defendant to pay for the 2005 renovation of the Property and for the purchase of furniture and electrical appliances, as it was intended that the plaintiff and the defendant would cohabitate in the Property.

(3)   There is no legal or evidential basis to support the plaintiff’s claim for the Credit Card Sum.

ORDER

52. In the premises, the plaintiff’s claim against the defendant in this action is dismissed.

53. The defendant shall have the costs of this action against the plaintiff, including any costs reserved (if any).  Such costs shall be taxed, if not agreed, with certificate for counsel.

54. The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

55. Lastly, I thank counsel on both sides for their helpful assistance in this matter.