LAM SUI FAI v. CHAN KAI LUNG

1996, No.A12488

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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J U D G M E N T

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The claim

1. The Plaintiff is claiming against the Defendant for the sum of $280,000, being money lent to the Defendant and the sum of $20,000 being interest on the $280,000 as agreed between the parties.

The Plaintiff's case

2. The background to the Plaintiff's claim is as follows. The Plaintiff was a taxi-driver. In the course of his work, he came to know the Defendant and a person called Mr Leung Tak ("Leung") who were also taxi-drivers. In January 1995, the Defendant asked the Plaintiff to lend him $80,000 to be used by him as the capital in buying dolls. The dolls were to be sold in the street by him as a hawker. The Plaintiff refused this request.

3. The request was repeated a number of times by the Defendant. Leung, who was also present during the discussion also said that profits could be made in the selling of the dolls. Eventually on 11^th January 1995, the Plaintiff agreed to lend the Defendant $80,000. The Defendant asked for a cash cheque of $20,000 so that he could make some payments shortly. As to the remaining $60,000 a cross cheque was made out in the name of Leung. This was done at the Defendant's request and the Defendant informed the Plaintiff that Leung was his partner in the business and Leung was responsible for handling the money. The cheques were dated 13th January 1995. The Defendant agreed to repay the money within two months although the exact date of repayment was not specified between the parties.

4. On 14^th January 1995, the Defendant informed the Plaintiff that his goods had been seized and that he was in need of $200,000 so that he could purchase another container of goods for re-sale. The Defendant told the Plaintiff that it was the only way to make money and requested the Plaintiff to lend him the money. Leung was also present and some further discussions were made. The Defendant suggested repayment within one year and he would pay interest at 7% which was roughly equivalent to the bank's interest rate for fixed deposits. This was not accepted by the Plaintiff and the Defendant suggested repayment by ten instalments at 40-days interval. The instalment payment would start in February 1995 and the first nine instalments would be $15,000 each and the balance with interest would be paid on the tenth instalment. The interest of $20,000 for the total amount was agreed between the Plaintiff and the Defendant. The Plaintiff then issued a cheque of $200,000 payable to Leung.

5. After this event had taken place, the Plaintiff became worried and he asked the Defendant to write out and sign on a loan agreement setting out the terms that the parties had agreed. He also asked the Defendant to use his taxi as a security. The Defendant accepted this. He told the Plaintiff to ask Leung to write the agreement for him to sign.

6. On 18^th January 1995, the Defendant, Leung and the Plaintiff met and Leung showed the Plaintiff a draft loan agreement. The document was very short and was not complete so the Defendant wrote out an agreement for the Defendant to sign. The agreement which appeared in the Agreed Bundle of Documents stated that :

"I, Chan Kai Lung E873130(A) on 18th January 1995 borrow Hong Kong Dollars $300,000.00 from Lam Sui Fai and promise to repay Lam Sui Fai the loan amount by periodical instalments on the specified dates as set out below, so as to meet the liability for repayment :

1.	28-2-95	9-4-95	19-5-95	28-6-95	7-8-95
	$15,000	$15,000	$15,000	$15,000	$15,000
6.	16-9-95	26-10-95	5-12-95	14-1-96	23-2-96
	$15,000	$15,000	$15,000	$15,000	$165,000

last instalment

Chan Kai Lung will repay the above instalments punctually on their due dates as set out above. If Chan Kai Lung should fail to repay Lam Sui Fai the above loan by (the time of) the last instalment on 23-2-96, I, Chan Kai Lung shall immediately sell the taxi EM 9947 under my name and use the proceed of sale to repay the whole sum to Lam Sui Fai.

The above terms have been confirmed and agreed by both parties and (we) sign to confirm.

Lender: (sd) Lam Sui Fai	Witness: (sd) illegible Identity Card No. E548348(8)	To be repaid by: (sd.) Chan Kai Lung Identity Card No. E873130(A)
	address: Flat 10, 9/F., Wah Cheung House, Ching Wah Court.	address: Flat 9, 26/F., Wah Suen House, Ching Wah Court.
	Tel : 90178673	Tel : 24317016

made on 11-1-1995"

The agreement was dated 11^th January 1995. The Plaintiff said the agreement ("the promissory note") was dated 11^th January 1995 because the loan of $80,000 was given to the Defendant on that day.

7. About ten days later, the Defendant informed the Plaintiff that his goods were seized by the Chinese Authorities and he asked the Plaintiff for permission to pay the instalments later. This was refused by the Plaintiff.

8. Thereafter the Plaintiff demanded the Defendant to make payment. In May 1995, the parties met again. The Defendant said that he had no money to repay to the Plaintiff and it was meaningless for the Plaintiff to chase after him. He promised to pay some of the instalments when he was able to do so.

9. According to the Plaintiff, the Defendant said that, as a gesture of his sincerity, he would give the Plaintiff three undated cheques of $15,000 each representing three instalments. The cheques would be issued by Leung since the Defendant did not have any current account. When he had funds available, he would deposit them to Leung's account and he would inform the Plaintiff to present the cheques for payment. The Plaintiff agreed to his proposal since there were no alternative. But thereafter the Defendant did not tell him when to present the cheques for payment and the Defendant also refused to sell his taxi.

10. In December 1995, the Plaintiff demanded the Defendant to sell the taxi. This was refused by the Defendant and the Defendant promised to pay interest of $500 per month from January 1996 until the repayment of the loan. Again the Plaintiff agreed to this. Between January 1996 and September 1996, $500 each month was paid into the Plaintiff's account.

11. Between December 1995 and September 1996, the market price of the taxi increased from $2.1 million to $2.7 million. The Plaintiff demanded the Defendant to sell the taxi to repay him. The Defendant refused and asked for further time. When the Plaintiff asked for immediate payment, the Defendant simply ignored him and walked away. Thereafter, the Defendant did not pay any more money to the Plaintiff's account.

12. What I have just summarised are the evidence of the Plaintiff. According to p.26 to p.28 of the Agreed Bundle, there were three cheques drawn by Leung in favour of the Plaintiff. The endorsement on the cheques was "Account Closed".

The Defence

13. The Defendant disputed the Plaintiff's claim. He said that he and Leung had participated in an investment scheme in which each of them gave $100,000 to a person called Lam Chi Wai ("Lam") who would in turn pay to each of them interest at $15,000 per month. It should be noted that initially in the Defendant's witness statement, he said the interest was $7,500 to each of them. Lam however was unable to repay the Defendant any of the interest because of cashflow problems and he told the Defendant that he needed more money and that he could settle everything very soon.

14. According to the Defendant, Leung then suggested that he would introduce the Plaintiff to the scheme. The Defendant did not know the Plaintiff before. According to his witness statement, the Defendant said that he, Leung and the Plaintiff met and the Plaintiff agreed to inject $200,000 to the scheme, but he did not want to give the money to Lam directly. He also wanted a promissory note as security. The Plaintiff suggested that he would lend the money if the Defendant signed as debtor on the promissory note because he thought that the Defendant had a taxi. The Defendant said he was persuaded by Leung and the Plaintiff to sign and fearing that the investment scheme would fall through, he agreed to sign.

15. The Plaintiff lent $280,000 to Leung. $80,000 was a private loan while the remaining sum was an injection into the investment scheme. Leung was to receive $15,000 per month out of the scheme from Lam but it was agreed that he would only repay $15,000 to the Plaintiff at 40 days interval. Leung gave four cheques for four instalments and he repaid the first two instalments by cash to the Plaintiff. The Defendant said that he did not receive any money from the Plaintiff and therefore he was not liable to the Plaintiff.

Plaintiff's case established

16. There is a conflict of evidence between the Plaintiff and the Defendant about the loan. Having considered the evidence carefully, I am satisfied that the Plaintiff has established his case that he had lent the money to the Defendant. I do not find that the Plaintiff's case is so inherently incredible that I should reject it. True, he was only a taxi-driver but he owned his own taxi. He valued the taxi at the time to be well over $1 million. The Defendant was someone he had known for a number of years.

17. The Plaintiff was vigorously cross-examined. There may be some minor discrepancies on his evidence, but all in all he was unshaken in his evidence. I accept his evidence on the two loans. I accept that although on two of the cheques the payee was named as Leung, the borrower of the loan was the Defendant. Leung was written as the payee of the two cheques at the request of the Defendant. I accept the Plaintiff's evidence that he had not promised that he would not go after the Defendant for the debt.

Investment scheme

18. I do not accept the Defendant's allegation that the $200,000 was the Plaintiff's share in an investment scheme. The Defendant was legally represented throughout the proceedings. Allegations contained in his witness statement that the $200,000 was a sum advanced by the Plaintiff in participation of the investment scheme of Lam and the $80,000 was a loan to Leung for him to invest in the scheme were not pleaded in the Defence at all. His denial i.e. that he was not asked about this when the Defence was prepared, was not convincing. This, after all, was the defence to the Plaintiff's claim, namely that the $200,000 advanced by the Plaintiff was not in the nature of a loan at all.

19. Although the Defendant denied that there were two oral agreements by the parties, the Defence actually confirmed that there were two agreements. The defence raised was simply that the money was lent to Leung.

20. The Defendant had also filed an affirmation on 30th December 1996 in support of his application for leave to issue third party proceedings against Leung. Again, no reference was made to the investment scheme.

Agreement to repay

21. If the money was lent to Leung, the Defendant had really not explained why he should sign the promissory note and agreed to repay the money by instalments. All that he said was Leung and the Plaintiff convinced him to sign as a debtor and fearing that the scheme would fall through, he agreed to do so. I find this unconvincing at all. If his story of participating in the scheme was true, he had only advanced $100,000 and yet he was prepared to assume liability of $300,000 in the promissory note. This is inconsistent with someone who had received no benefit from the $280,000 from the Plaintiff.

22. The Defendant denied that he had any interest in a taxi but he was aware that the Plaintiff was mistaken about this. Whether the Plaintiff was mistaken or not, it does not make sense for the Defendant to assume the responsibility because at the end of the day he would be the one who would be liable on the debt.

23. Again, his subsequent payment of $500 per month as interest to the Plaintiff could only be explained on the basis that he had indeed borrowed the money from the Plaintiff. It should be pointed out that in the Defence he denied agreeing to make the monthly payment of $500 and he did not admit that he had made payment. It was only in the supplemental witness statement, which was lodged in court yesterday by agreement of the parties, that he conceded to the payment of the sums.

24. Although according to his witness statement, the Defendant said that the Plaintiff and Leung had met to discuss the investment scheme, in his cross-examination he said that it was a mistake; the matter was only discussed between the Plaintiff and Leung and he was told by Leung that the Plaintiff had agreed to participate on the day before he signed the promissory note.

25. Apart from the failure to explain why such a mistake was made, the evidence regarding Leung must be hearsay and not admissible and no cross-examination of the Plaintiff was made on this point. I think it was an attempt by the Defendant to dissociate himself from the discussion with the Plaintiff.

26. I have given due allowance to the Defendant who was a taxi-driver and who appeared not to be a sophisticated person. However I am not satisfied that he was a credible witness and I reject his evidence.

Debt collection

27. Another witness Mr Tsang said that on one occasion the Plaintiff, the Defendant and he had sought help to locate Lam. Although he said in his witness statement that the Plaintiff had participated in the scheme, he conceded in his evidence that the Plaintiff had not informed him that he had taken part in the scheme and such information only came from the Defendant.

28. The Plaintiff agreed that he was asked by the Defendant on one occasion to look for a debt-collector. The Defendant told him that he had not used up all the money that the Plaintiff had lent him. The Defendant said that "he had given $50,000 to $60,000 to one Lam Chi Wai with a view to earn high interest but Lam Chi Wai did not pay him the principal nor any interest. Therefore, he had asked “四眼輝” to introduce to him a debt-collector and “四眼輝” was going to take them to see the debt-collector. The Defendant then said I could go with them. As I was anxiously eager to get back my money from the Defendant I agreed to go with them. Then all four of us boarded the taxi of '四眼輝'”

29. The Plaintiff was not cross-examined on this at all. I accept what the Plaintiff said on this issue. The episode of seeking the help of a debt-collector does not cast doubt on the Plaintiff's case.

Other matters

30. Mr Tam seeks to show that since the loans were made in January 1995, and Lam was only liable to repay the interest some time later, the Defendant's story that Lam had told him and Leung that he was unable to pay the interest and required further sums could not be true. There is merit in this approach but it is not necessary to decide on this or rely on this in assessing the credibility of the witnesses.

31. In a belated amendment to the Defence, which was not objected to by the Plaintiff, it was alleged that the Plaintiff knew the $200,000 was for Leung to invest into a gambling operation and that the loan agreement was illegal and unenforceable against the Defendant. There is no evidence that the Plaintiff had such knowledge and this defence can easily be dismissed.

32. There was evidence that the Plaintiff had amended the promissory note but it is not clear about the relevance of this to the Defence. The Plaintiff explained that the amendment by him was to bring the dates in line with the 40 days interval for payment of instalments as agreed between the parties. The Defence has never pleaded that the agreement contained in the promissory note was vitiated by the amendment. In any event, the Plaintiff is relying on the oral agreements in respect of the two loans.

Conclusion

33. There shall be judgment to the Plaintiff for $300,000. Interest at 7% per annum from the date of service of the writ to judgment and thereafter at the judgment rate until payment.