QUENTIN KEITH HILLS v. MARLENE RITA WITTMAN

HCA2149/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2149 OF 2006

---------------------

---------------------

-----------------------

J U D G M E N T

-----------------------

1. This is an appeal by the defendant against the decision of Master J. Wong given on 26 April 2007 wherein the Master gave summary judgment to the plaintiff on the plaintiff’s claim and accordingly dismissed the defendant’s application for security for costs against the plaintiff.

Background

2. The plaintiff and the defendant were, prior to their breakup, engaged to be married.

3. Their relationship took a turn for the worse some time between Thanksgiving in 2005 and February 2006 resulting in their breakup.

4. The present writ was taken out by the plaintiff on 28 September 2006.

5. The plaintiff’s claim is for the return of the sum of $135,000 being the outstanding balance of a loan made to the defendant while they were engaged.

6. It is the plaintiff’s case that he made an original loan of US$150,000 to the defendant on 13 November 2001.

7. Subsequently, a further or additional loan of US$10,000 was also made by him to the defendant on 9 March 2005.

8. On 4 November 2005, the defendant repaid US$10,000 to the plaintiff and on 9 December 2005, the defendant made a 2^nd repayment of US$15,000 to the plaintiff, leaving the claimed amount outstanding.

9. The defendant does not dispute that the sum of US$10,000 paid to her on 9 March 2005 was a loan and which she had repaid to the plaintiff on 4 November 2005.

10. The defendant, however, disputes that the US$150,000 was a loan by the plaintiff.  It is the defendant’s case that this amount was paid over to her by the plaintiff by way of a gift.

11. It is also the defendant’s case that the US$15,000 which she paid to the plaintiff (which the plaintiff says reduced the US$150,000 to the claimed amount of US$135,000) was made at the plaintiff’s request to enable him to pay his taxes in the United States when he was short of funds.

12. At the hearing before the Master, the plaintiff exhibited to his affirmation a number of emails from the defendant (Exh. QKH–1).  These emails were all dated between May and August 2006 in answer to the plaintiff chasing up for the repayment of the US$135,000.

13. The Master, in his written decision in this matter given on 26 April 2007, found that the allegation by the defendant that the US$150,000 to be a gift by the plaintiff to her to be wholly unbelievable in the light of these emails from the defendant because in all these emails from the defendant, the stance taken by the defendant was that she was prepared to repay the money to the plaintiff, but because of her financial situation, she required time to do so.  Moreover, there was no mention of that money being by way of a gift in any of the emails exhibited.

14. On that basis, the Master acceded to giving summary judgment to the plaintiff.

Further evidence from the defendant in this appeal

15. When this matter came before me by way of appeal by the defendant from the decision of the Master, the defendant had, with leave of Deputy Judge Carlson, filed a 2^nd affidavit exhibiting further emails between the parties which were not before the Master (Exhs. MRW–2, MRW–3 and MRW–4).

16. The other exhibit contained in the 2^nd affidavit of the defendant, being MRW–1, is a part of the Reports and Financial Statements of Aquitaine Investment Advisors Limited for the year ended 31 March 2002 which showed that by a special resolution passed on 5 November 2001, the authorised share capital was increased from HK$5,000,000 to HK$7,325,575 by the creation of 2,325,575 ordinary shares of HK$1 each, to rank pari passu with the existing shares.

17. Since an appeal from a master’s decision to a judge in chambers is by way of rehearing, I will need to consider not only the evidence which was before the Master, but also the further evidence now before me.

18. Exh. MRW–2 is an email dated 12 November 2001 from the defendant to the plaintiff.  The relevant part of that email gives details of the defendant’s bank account, no doubt for the plaintiff to remit the initial amount of US$150,000 to the defendant.

19. After giving the bank details, the email goes on to state :

“	If faxed your Sunday, will deal with tue/wed and then put in the proper paperwork with the corporate secretary before I get on the plane friday morning and will continue with my NY chap to close on our deal.”

20. This email was produced by the defendant to counter the plaintiff’s claim that he had no knowledge of the rights issue which the defendant says the US$150,000 was used for in purchasing the shares in the defendant’s name.

21. Exh. MRW–3 is an email dated 11 August 2004 from the plaintiff to the defendant.  It is produced by the defendant to show that the plaintiff “gave” her the money, the subject of his claim.  The relevant part of that email reads :

“	Ok, I can be stupid.
	But the last time I tried to help with money ($150,000) I just gave it to you — no questions asked.  I didn’t get an itemized invoice like the last email that looked like a demand payment!”

22. Exh. MRW–4 contain four emails all from the plaintiff to the defendant and respectively dated 10 March 2006, 19 April 2006, 9 June 2006, 18 June 2006 and 11 July 2006.

23. In paragraph 13 of the 2^nd affidavit of the defendant, the defendant says that prior to the end of February 2006, the plaintiff had never referred to the money being a loan.  Exh. MRW–4 was produced as being examples of the email exchanges between the parties and the defendant says that it can be inferred from these emails that the plaintiff decided to treat the money as a loan because he was in need of funds.

24. In so far as the issue in this case, whether the money claimed was a loan or gift, the relevant part of the email dated 10 March 2006 reads :

“

Unfortunately, I will need the balance of the loan back this year.  It is my college fund and I am simply not able to carry the mortgage any more.  I realize your cash flow starts about now and am happy for you to pay it back over time but I do need it.  We have not discussed the issue of interest — I have had to draw on my Australian mortgage to fund this.  I do not propose passing on the full cost but do think an element of interest is fair.  How does 4% sound?  Let me know and I will work out some numbers.  By my calculation the remaining balance is USD 135,000 (165–25K).”

25. The last part, the calculation in bracket “(165–25K)” is quite obviously a typo.  It should correctly read “(160–25K)” as can be seen from the calculation in the Statement of Claim.  Nothing however turns on this typo in the email.

26. Again on that same issue of loan or gift, the relevant part of the email dated 19 April 2006 reads :

“	PS I have a right to be upset about the money — I do not have the funds to pay school fees and will have to begin selling assets.  It is just not right.”

27. The relevant part of the email dated 9 June 2006 reads :

“	Finally, I know I keep asking but I need a repayment schedule for the loan please — I need to plan my cash flow over the next 6 – 18 months and receiving payment is crucial for me.  As I mentioned, $25,000 per quarter will work from side.”

28. The relevant part of the email dated 18^th June 2006 reads :

“	Have you told your friends about the $160,000 you borrowed from the kids’ college fund with no strings attached and now refuse to pay back, causing me significant liquidity problems?  Don’t even start to tell me how I should spend my own money — I don’t tell you how to spend yours as it is none of my business.  I am funding your loss making business and multimillion dollar properties.  Have you told them that?
	No of course not.
	…
	In terms of sorting things out here are my suggestions.
	…
	loan — instead of avoiding the issue you need to let me know how you plan to repay me.”

29. The email dated 11 July 2006 reads :

“	I’ll call after 9.00.
	It makes sense to resolve all the outstanding issues including your effects, the ring, the outstanding loan and money I owe you for items purchased for Tahoe and Wilkins Ct.  I have outlined my suggestions in an earlier email and suggest we use that as a starting point.
	I hope you are recovering from your procedure.”

Decision

30. The Master had come to the decision that he did on the basis that the defendant had never denied the claimed amount to be a loan in her emails, but had only asked for time to make the repayment.  In those circumstances the defence now raised that the claimed amount was a gift was quite unbelievable.

31. On the material placed before the Master, he could not be faulted for coming to the conclusion that he did.

32. Now that further evidence had been put before me, I would have to consider anew the application for summary judgment on all the material before me.

33. In so far as the plaintiff’s emails exhibited in MRW–4 are concerned, they would not appear to have made much difference to the view taken by the Master since in all those emails of the plaintiff, he consistently referred to the claimed money as being a loan.  There being no emails from the defendant, again there is nothing to show that the defendant had, in any email, disputed or challenged that the money now claimed was a loan and not a gift.

34. If only these emails were to be looked at together with those before the Master, I would have no hesitation in upholding the Master’s decision.

35. However, there is a further email from the plaintiff (Exh. MRW–3) which was not before the Master.  The defendant relies on the contents of this email to show that the money was “given” to her by the plaintiff.

36. The context in which the sentence “I just gave it to you — no questions asked” appears is not entirely clear looking at this one email alone.

37. While it might lend some support to the plaintiff’s case, it is also arguable that the word “gave” used in that email was used in a neutral sense referring to the handing over of the money, rather than referring to whether the money was in the nature of a gift or a loan.

38. As for MRW–2, it does not directly refer to the issue of gift or loan, but rather to the question whether the plaintiff knew of the rights issue or not at the time.  Looking at the relevant part of that email, it does not make mention of any rights issue, but rather seem to give a timetable of the defendant only.

39. Given the new material which was not before the Master, and together with all the evidence before the Master, I take the view that the defence now put forward is “shadowy”.  I was very nearly prepared to give summary judgment for the same reason as the Master, but for MRW–3, and even then it does not necessarily follow that the defence raised now is not a sham defence.

40. Accordingly, I shall give conditional leave to defend, the condition being that the defendant pays the claimed amount of US$135,000 into court within 21 days failing which judgment be entered on behalf of the plaintiff.

Security for costs

41. Security for costs is claimed in the amount of HK$500,000 on the grounds that the plaintiff is ordinarily resident out of the jurisdiction and pursuant to Order 23 of RHC.

42. That application is supported by a skeleton bill of costs from the defendant’s solicitors estimating the costs in this case (up to trial) to be just under HK$600,000 for both disbursements and profit costs.

43. The address given by the plaintiff in his affidavits is a California address which would tend to support the plaintiff being ordinarily resident out of jurisdiction.

44. However, having regard to the view that I have taken of the defendant’s defence, the corollary being that the plaintiff has a strong claim, I am only prepared to order security in the amount of HK$100,000 and that to be made only after 21 days upon the defendant paying into court the amount claimed of US$135,000.

The order

45. The order will be as follows :

(a)	leave to the defendant to defend the plaintiff’s claim upon the condition that the defendant pays into court the amount of US$135,000 claimed by the plaintiff within 21 days failing which the plaintiff be at liberty to enter judgment against the defendant;
(b)	upon the payment into court of the US$135,000 being met by the defendant, being the condition ordered above, the plaintiff do, within 21 days thereafter, pay into court by way of security for the defendant’s costs, the sum of HK$100,000; and
(c)	failure to comply with the security for costs ordered above would result in these proceedings be stayed until such security for costs as ordered have been met.

Costs

46. There will be a costs order nisi as follows :

(a)	the costs order made by the Master at the Order 14 hearing before him do stand;
(b)	the costs of the hearing in respect of this appeal from the Master for the Order 14 application to be —
	(i)	costs in the cause upon the condition for leave to defend being complied with by the defendant; and
	(ii)	to the plaintiff as being a part of the costs of this action should the defendant fail to comply with such condition and judgment is entered in favour of the plaintiff;
(c)	the costs of the application for security for costs be to the defendant but only upon the condition for leave to defend being met by the defendant; and
(d)	upon the defendant failing to comply with the condition for leave to defend and judgment being entered for the plaintiff, there be no order as to costs in respect of the application for security for costs.