YUEN CHUI KING v. SIT HIN KAU

HCA4038/2002
& HCA260/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4038 OF 2002

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AND

ACTION NO.260 OF 2004

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BETWEEN

(Consolidated pursuant to Order of Master Lung on 3 April 2004)

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J U D G M E N T

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Background

1. On 30 August 2000, the plaintiff purchased a unit of flat known as Flat D, 36/F, Tower 9, Park Avenue No.18 Hoi Ting Road, Kowloon (“the Property”) during thedevelopment of the Property from the MTR Corporation Limited and thus became the equitable owner thereof.  The purchase price was agreed at $4.452 million.  The plaintiff obtained a loan by way of mortgage from American Express Bank for $1.2 million.  According to the plaintiff, the balance of the purchase price was paid by her, partly from her savings to an extent of $1 million odd and the $2 million odd balance was paid by her father. 

2. After the aforesaid purchase by the plaintiff, the property market in Hong Kong fell and the market price of the Property in the year 2001 was between $3.9 to $4.1 million only.  The plaintiff became very worried and, according to the plaintiff she raised the matter with her friend one Mr Benson Ho Kar Lun (“Ho”).  According to the plaintiff, she was introduced to Ho in or about 1995 whilst she was still studying in Santa Clara University in the States but came back to Hong Kong during the summer holiday.  Ho was working for his cousin in an investment company called Winox Investment Limited.  He was the boyfriend of one of the best friends of the plaintiff.

3. In or about April 2001, the plaintiff raised the matter with Ho again and told him that she became more and more worried that her flat had fallen in value.  Ho then told her that she should not worry because he had already find one of his clients, the defendant, Mr Sit, who was willing to purchase the Property because the defendant was in urgent need of money and was willing to pay high interest.  He said that the defendant was only in temporary cash flow problem and in fact he was very rich and was doing catering services and operating many restaurants.  The modus operandi as suggested by Ho was that the defendant would purchase the plaintiff’s Property at $3.95 million and, after deduction of about $1.28 million for the repayment of the mortgage and other expenses, the balance of the purchase price to be paid would be $2.67 million.  The plaintiff would treat this $2.67 million as paid by the defendant and in fact it was intended to be a loan by the plaintiff to the defendant for one year, after which the defendant would repay the plaintiff this amount together with $500,000 interest.  In other words, the defendant would, after one year, pay the plaintiff $3.17 million.  In effect, Ho told the plaintiff that the selling price of the Property would be about $4.45 million which is more or less the amount she paid at $4.452 million to the developer. 

4. Ho further said that the defendant would be very grateful to Ho and the plaintiff if she could help the defendant.  The defendant and Ho would also maintain a good relationship and the defendant would give more business to him.  Eventually the plaintiff agreed to lend the sale proceeds to the defendant provided that, according to the plaintiff, all expenses of and incidental to the sale of the Property, such as legal expenses and agency fees if any or the like would be solely borne by the defendant.  After the plaintiff raised this to Ho, he subsequently replied that that should not be a problem. 

The plaintiff’s evidence

5. The plaintiff gave evidence and said that on or about 10 April 2001, while she was having a meeting in her place of work, Ho phoned her and said that the defendant would like to enter into a provisional agreement for sub-sale and sub-purchase with her so that it would be more convenient for the defendant to find a purchaser himself.  Ho arranged a car to pick the plaintiff up at her place of work in Causeway Bay and eventually the plaintiff attended the solicitors firm Messrs Chong, Leung & Co. in Central.  

6. The plaintiff in her examination-in-chief said that upon arrival at the solicitor’s office, she met Ho and the defendant there.  It was the first time she met the defendant.  She was then given a pile of documents by a solicitor to sign but she was in a hurry to get back to her meeting.  Thus she had no time to read through all the documents.  She understood the provisional agreement.  When she signed the provisional agreement in Chinese and acknowledged receipt of $2.67 million, she talked to Ho and asked in Cantonese : “You would repay me back the amount, is that right?” and at that time the defendant also nodded his head.  In fact, the plaintiff in her evidence had a slight different version when she was asked about this question raised by her.  At one time she said : “你哋會還返呢筆錢畀我嘅，係咪?” meaning “you two would repay this amount of money to me, is that right?”  But at another time she said that the question raised by her when she was talking to Ho was “你會還返D錢畀我嘅，係唔係?” meaning “you [singular in the Cantonese Language，meaning Ho when she was talking to Ho] would repay this amount of money to me, is that right?”  In any event, she agreed that even when she said you two (你哋) she was talking to Ho and the defendant just nodded his head. 

7. The aforesaid version put forward by the plaintiff in her oral evidence is at variance with her original witness statement.  In the statement she said that the oral agreement with Ho was in late May 2001.  The provisional agreement was passed on by Ho to her for her signature on or about 31 May 2001, and when she signed the same, she noted that the defendant had not signed yet.  In other words, in the statement she said that the provisional agreement was not signed at the solicitors’ office. 

8. She also said in the statement that the formal sub-sale and sub-purchase agreement was signed on or about 7 June 2001 at the solicitors’firm acting for her in the sale of the Property and she was accompanied by Ho to go to the solicitors’ firm to execute this agreement.  It was only there and then she met Mr Sit, the defendant, for the first time.

9. Further, in her statement she said that after she asked them to confirm the terms of the loan agreement and whether the loan would be repaid on time and whether there was any problem, Ho replied that there would be no problem and the defendant was trustworthy.  The defendant also assured her that there would not be a problem.  The plaintiff did not say so in her oral examination-in-chief.  The plaintiff, under cross-examination, agreed that in fact the defendant had just nodded his head and had not said a single word not to mention that he had assured her that there would not be any problem.  

10. The plaintiff there and then also executed an irrevocable power of attorney in favour of the defendant in the said sub-sale of the Property and she said that it was explained to her that that was necessary in case she was not available on the completion day.  

11. When it was pointed out to the plaintiff that it was seldom that the parties would execute a provisional sale and purchase agreement and the formal sale and purchase agreement at the same time since, when a formal sale and purchase agreement was available, then the provisional sale and purchase agreement would not be necessary.  The plaintiff then said she actually was not sure whether she signed the provisional sale and purchase agreement only on the first occasion at the solicitors’ office and it was later that she was asked by the solicitor to sign the formal sub-sale and sub-purchase agreement together with the power of attorney on or about 7 June 2001 without the attendance of the defendant at the solicitors’ office.  In other words, she might have attended the solicitors’ office twice and the defendant was only present on the first occasion.  The plaintiff was not sure when it was pointed out to her that in respect of the formal sub-sale and sub-purchase agreement, the plaintiff signed it before her solicitors at Chong, Leung & Co. whereas the defendant signed it in the presence of his own solicitors Messrs Mak, Wong, Chang.

12. Later on, on or about 12 July 2001, a clerk of Messrs Chong, Leung & Co. called the plaintiff to sign the assignment in order to complete the sale and purchase of the Property to the ultimate purchaser and, according to the plaintiff, it was signed in the vicinity of the plaintiff’s office in Causeway Bay since she was busy at that time.  There and then she noted that the defendant succeeded in sub-selling the Property at the consideration of $3.9 million.

13. The plaintiff said that it was her understanding that, according to the oral agreement, the defendant should repay the loan to her one year later, i.e. on or before 12 July 2002 together with interest of $500,000.  Thereafter, the plaintiff however became worried and repeatedly asked Ho whether the defendant would keep his promise and whether it was advisable to ask the defendant to execute a promissory note in her favour.  According to the plaintiff, Ho told her that it would be too embarrassing for him to ask the defendant, being such a rich person, to sign a promissory note.  Ho assured her that the defendant would repay the loan to her as agreed. 

14. According to the plaintiff, in or about July 2002 when the loan was due, she tried to contact Ho but all contacts were suddenly lost.  She therefore tried her best to find the telephone number of the defendant.  When she called the defendant and asked him when the loan would be repaid, the defendant said that “Ho told me that you owed him money, and Ho owed me money.  The Property was transferred to me in order to set off the debts due from Ho to me.”  The plaintiff was very shocked and angry and told the defendant that she did not owe Ho any money and Ho told her that the defendant had agreed to repay the loan to her.

The defendant’s case

15. The defendant, Mr Sit, gave a quite different version as to how he purchased the Property from the plaintiff.  He said that in the year 2000 he was introduced to Ho by Ho’s employee.  Later on they became friends and the defendant had invested in Ho’s company meaning I think he had made investment transactions in Ho’s company.

16. Since then, Ho had been borrowing money in the order of $100,000 odd from the defendant, and each time he had always repaid within a few days.  On or about 13 December 2000, Ho requested to borrow $1.5 million from the defendant.  Due to this large sum of money to be borrowed, the defendant requested Ho to sign a promissory note and Ho arranged to sign one at the solicitors’ office, Messrs Chong, Leung & Co., which was arranged by Ho himself. 

17. The defendant produced a promissory note signed by Ho on 13 December 2000 stated to be executed at the office of Messrs Chong, Leung & Co.  Ho promised to pay the defendant’s company, Colekar Limited, in three months’ time, on 15 February 2001, the sum of $1.65 million.  The defendant said that that was because Ho agreed to pay $150,000 interest on due date.  The defendant also produced two cheques issued by Ho’s company, Winox Investment Co. Ltd, in favour of Colekar Limited in the sum of $1.65 million and also a personal cheque of Ho to Colekar Limited for the same amount.  The defendant said that that was because he was afraid Ho would be bankrupt by the date of payment and therefore he wanted his company to issue the cheque for the same amount in order to be doubly sure that Ho’s company would repay when Ho could not repay himself.  There was a further document dated the same day, 13 December 2000, signed by Ho stating that he issued Winox Investment Co. Ltd’s cheque in the sum of $1.65 million as a security for the loan and its board of directors had also approved such an arrangement. 

18. The documentary evidence clearly supported the defendant’s evidence that Ho borrowed $1.5 million from the defendant.  He also said that by the end of December 2000 and early 2001, Ho was in grave financial difficulties.  He learnt that Ho had been gambling in Macau and had lost several million dollars. 

19. By February 2001, when the defendant pressed Ho to pay the loan, Ho said that he could not do so and the cheques issued by him could not be honoured.  By April 2001, under further pressure made by the defendant on Ho, Ho told the defendant that he got a lady friend who was owing him money.  She was willing to “sell” her Property to the defendant in order to repay her debt due and owing to Ho, but she could not sell the same for some time.  Ho suggested that the defendant could purchase the same from her so that his debt to the defendant might be set off by the debt which his friend owed to him by way of her sale of the Property.  This friend turned out to be the plaintiff.

20. The defendant agreed to such an arrangement and, according to him, he said that he would waive the interest portion of the debt and would only reckon $1.5 million as the money due and owing in the calculation of the value of the Property transfer.  At that time, Ho also requested for a further loan from the defendant and the repayment should be in the consideration of the Property to be transferred to the defendant.  This Property was valued at the consideration of $3.95 million, and at that time the market value was between $3.9 million to $4.1 million.  Ho told the defendant that there was about $1.28 million outstanding by way of mortgage and other expenses, including stamp duty and solicitors’ fees.  When this amount is deducted from the agreed purchase price, then the defendant would have obtained about $2.67 million upon further sale of the Property.  From $2.67 million, the defendant could deduct $1.5 million as the outstanding loan owed by Ho to the defendant.  Thus the defendant agreed to give a further loan of $1.17 million to Ho in order to make up for the balance of the consideration.

21. Further, the defendant agreed to advance an additional loan to Ho in the sum of $1.1 million.  In other words, the defendant would pay $1.17 million and $1.1 million (i.e. $2.27 million) to Ho when the plaintiff agreed to transfer the Property to the defendant.

22. On or about 10 April 2001, the defendant was told by Ho to attend the office of Messrs Chong, Leung & Co. in Central to sign a provisional sale and purchase agreement with the plaintiff.  That was the first time he met the plaintiff and she was introduced to him as one Ms Yuen.  According to the defendant, the plaintiff did not say much on that occasion.  He discussed with Ho on the details and arrangement for the sale including the manner of payment of the consideration.  At that time the plaintiff was present and should have heard what they were discussing. 

23. The defendant categorically said that when the plaintiff signed the acknowledgment of receipt of the deposit of $2.67 million, she did not say anything.  It was he who raised the question with the solicitor who was present when he signed the provisional sale and purchase agreement by asking whether it would be all right if the plaintiff just sign an acknowledgment and he in fact was not paying her this sum.  The solicitor said if she agreed that this was received it would be all right and it was a matter of arrangement between the parties themselves.  The defendant also said that the plaintiff appeared to be very happy and relaxed at that time.

24. Thereafter he made the following sums of payment to Ho as follows :

          Date                      Amount      Manner of payment

(1)     20 April 2001        $500,000      Bank transfer to one Paul Wan

(2)     24 April 2001        $562,500      Cash

(3)     24 April 2001        $700,000      Cash

(4)     25 April 2001        $500,000      Bank transfer to Paul Wan

                                   $2,262,500

25. The defendant explained that Paul Wan was the employee of Ho and it was at Ho’s direction that the money should be transferred to his account.  The total of $2.2625 million is $7,500 short of the aforesaid total amount of $2.27 million and the defendant explained that that probably was because there was another small sum of $7,500 which Ho owed to the defendant at that time.  The aforesaid four sums of payment was evidenced by the two bank transfer forms to Paul Wan and two cash withdrawal forms and the savings book accounts evidencing the withdrawal of the amount in item 2 above.

26. The defendant said the provisional agreement was finally post-dated by the solicitors as 31 May 2001.   

27. Thereafter the defendant succeeded in finding a sub-purchaser on 4 June 2001 through an estate agent at the consideration of $3.9 million which was at a slight loss and they signed the provisional sale and purchase agreement on or about 4 June 2001 and a formal sale and purchase agreement on or before 16 June 2001.

28. On or about 7 June 2001, he attended his own solicitors’ office, Messrs Mak, Wong & Chang to sign a formal sale and purchase agreement with the plaintiff.  At that time the plaintiff was not there and she had not yet signed on that agreement.  The defendant was later on told by his solicitors that the plaintiff’s solicitors had returned the formal sale and purchase agreement with the signature of the plaintiff.  The defendant’s version, as I have said before, in this respect tallied with the documentary evidence in that this formal sale and purchase agreement was executed by the defendant in front of his own solicitors, Messrs Mak, Wong & Chang, whereas the plaintiff executed the same in front of her own solicitors, Messrs Chong, Leung & Co.

29. In any event, in the formal sale and purchase agreement the plaintiff acknowledged once again that the deposit of $2.67 million had been paid.

30. In fact, the plaintiff also executed an irrevocable power of attorney as aforesaid and was dated 7 June 2001 in favour of the defendant in which the plaintiff again acknowledged receipt of the $2.67 million therein.  That was made, according to the defendant, at the request of his solicitors in order to enable him to execute the assignment of the Property to his sub-purchaser in case the plaintiff failed or refused to execute the assignment. 

31. On 12 July 2001, the sale and purchase of the Property was completed by way of undertakings by solicitors.  The defendant attended the office of his solicitors and signed the assignments on or about that day in the capacity of a second confirmor of the sale.  The plaintiff executed the assignment in her capacity as the first confirmor and acknowledged therein the receipt of the full consideration of $3.95 million.

32. In mid 2002, according to the defendant, Ho could not repay the loan of $1.1 million to him. In fact, before that, Ho had borrowed $120,000 from the defendant on the security of a Benz Mercedes car and also $150,000 on the security of a Ferrari.  Ho had repaid $120,000 and took back the Benz Mercedes car.  However, Ho told the defendant he could not repay the $150,000 but he wanted his Ferrari back as it had been sold to another person.  Eventually, Ho sent his employee to repay the defendant in the sum of $100,000 only and got back his Ferrari.  On that very day, the defendant was told by Ho that he owed people a lot of money and he would be on the run later on that day.  The defendant said on that very day, sometime after mid-night, the plaintiff phoned him and asked him whether he knew Ho had absconded and disappeared.  She also told him that she was very depressed as Ho owed her a lot of money.

Credibility

33. The defendant’s version of loan of $1.5 millionin December 2000 was supported by documents namely, that promissory note given by Ho and his statement that his company’s Board of Directors had approved the loan, and the two post-dated cheques of his company and he himself respectively.  

34. Further, the $2.27 million further payment was evidenced by the two withdrawal receipts and the two transfer forms albeit that the former obviously did not state the recipient of the cash and the recipient in the latter is not Ho but, according to the defendant, an employee of Ho’s company, Paul Wan. 

35. In assessing the credibility of the plaintiff and the defendant, I would, on a balance of probabilities, find the defendant Mr Sit much more reliable and credible than the plaintiff.  In the first place, the plaintiff emphatically said that Ho did not need to borrow from the defendant as he was very rich.  The only reason given by the plaintiff to support her statement was that Ho was living in Kau To Shan (九肚山) and was driving a Ferrari.  He also had other cars and a chauffeur.  She said Ho could not have borrowed money from the defendant.  However, as revealed in the documentary evidence, Ho signed a promissory note in December 2000 and issued two cheques in favour of the defendant as aforesaid.  This only shows that the plaintiff did not know Ho that thoroughly.  But then the plaintiff has to admit that she later learned that Ho had disappeared and in fact had absconded.

36. The plaintiff said that Ho told her that the defendant was in need of money because of cash flow problem.  However, the defendant produced a $9 million cheque dated 31 August 2000 which he had received from Swiss Air.  This was part payment for the purchase of his 70% shareholdings in his prosperous company, which was mainly involved with Government catering works.  That was why he was doing very well in 2000 and 2001 during the depression.  According to the defendant, which I believe to be true, he had a $14.5 million agreement with Swiss Air in the sale of his aforesaid shareholding and $9 million was just the deposit.  He revealed the same to his friends including Ho who then started to borrow large amount of money from him.  Accordingly, even if Ho had told the plaintiff that the defendant was in need of money because of cash flow problem, it was not true. 

37. According to the defendant, he knew that by the end of 2000 and early 2001, Ho had a habit of gambling in Macau and he told the defendant that he had lost several million dollars there and then.  My impression is that the plaintiff did not know Ho enough as she said that Ho was not her boyfriend, but was only introduced to her by Ho’s previous girlfriend who happened to be one of the best friends of the plaintiff. 

38. Accordingly, there was no loan agreement between the plaintiff and the defendant since the defendant was, in the first place, not in need of money.  In the second place, the evidence given by the plaintiff even if accepted in total, could not establish a loan agreement made by the defendant since the plaintiff had never asked the defendant directly whether he agreed that the acknowledgement of receipt of $2.67 million deposit was actually a loan from her to him.  On the contrary, even the plaintiff said in her statement that the moment she asked the defendant for payment over the phone, the defendant told her that the Property was transferred to him in order set-off the debts due from Ho to him.  The defendant has been consistent through out in his version. 

39. More importantly, what the plaintiff herself said in evidence is more telling of the actual situation.  Apart from not asking the defendant whether he acknowledged the loan when she was signing the acknowledgement of receipt of $2.67 million, the plaintiff actually was talking to Ho and asked him whether he would repay the money back to her.  As I have said before, the plaintiff at one time said that she was talking to Ho and the Cantonese she used was “你” which means “you” in singular.  Although she had also said that she meant “你哋” which means “you two” when she was talking to Ho with the defendant sitting beside him, that would not mean that she had a clear, direct and distinct loan agreement between her and the defendant.  Further, there was no mention of the $500,000 interest to be paid when the principal sum was to be repaid.

40. Further, the plaintiff is not an illiterate or uneducated person.  She graduated from the University of Santa Clara in California in 1997 and had worked in Hong Kong as a sales manageress in a computer company for a few years by the year 2001.  Given a person of her educational background, she could have asked and, in my opinion, should have asked in the solicitors’ office when a qualified solicitor was present as to how she would have the assurance to receive the loan back or any document to evidence such a loan agreement after she had signed an acknowledgement of receipt of the $2.67 million which she had not actually received.  It will be quite simple for the defendant to sign a similar promissory note in her favour, which Messrs Chong, Leung & Co. had done so for Ho in favour of the defendant.  In fact this firm of solicitors, though arranged by Ho, was acting for her.  There is simply no reason why she could not raise this directly with a total stranger who was allegedly borrowing a large sum of money from her.

41. If Ho was cheating both sides then, as submitted by counsel for the defendant, he would be running a risk of being revealed when either the plaintiff or the defendant raised the different version represented by Ho to each one of them differently when they were signing the provisional sale and purchase agreement at the solicitors’ office.  However, I do not consider that this case is a case whereby Ho was double-crossing the two parties, i.e. cheating both of them by two different versions.  Apart from the aforesaid risk Ho was running, it would be a stupid scheme to cheat a successful businessman on one hand and an educated senior executive on the other hand.

42. On a balance of probabilities I find that it is more probable that the plaintiff was looking to Ho for the repayment rather than the defendant.  That was why she asked Ho alone in her slip of tongue when she signed the acknowledgement as to whether he would repay the money to her.  The defendant said that the plaintiff looked very relaxed and happy when she came to sign the provisional sale and purchase agreement with him.  (The defendant thought that that was because she could help her friend but I do not consider that was the case.)  I consider that was probably because Ho had promised to repay her the deposit together with the $500,000 interest in order that she would more or less suffer no loss in the sale of the Property when the market value of the Property has fallen by about $500,000.  This tallied with the fact that she believed, and actually when she was giving evidence she still believed, that Ho was rich at that time.  It is also in line with the defendant’s evidence that when he discovered $40,000 odd was not taken into account and asked the plaintiff to pay that, she asked him to contact Ho and asked him to pay.  This also tallied with what the defendant said that she told him over that mid-night telephone call that Ho owed her a lot of money.

43. In sum, the plaintiff was not having a loan agreement with the defendant and by the totality of evidence before me, I believe that the plaintiff actually had certain arrangement with Ho in this transaction, in order to ensure that she would not have to lose any money in the falling property market.

44. Consequently, I find the plaintiff unreliable as a witness.  Her evidence-in-chief was not the same as her own statement which was made much earlier on.  Her statement tallies with the documentary evidence whereas her oral evidence does not.  When she was asked why the provisional agreement could be signed on the same date with the formal sale and purchase agreement, she was not sure whether she had attended the solicitors’ office once or twice.  She was further shown the formal sale and purchase agreement whereby she actually signed it before her own solicitors Messrs Chong, Leung & Co., whereas the defendant signed the same before his own solicitors Messrs Mak, Wong, Chang.  When confronted with this documentary evidence she became more unsure.  She could only recall that the assignment was not signed at the solicitors’ office but in the vicinity of her own company where she was working in Causeway Bay because she was busy at that time.  It is clear from the assignment that the plaintiff signed the assignment before a clerk to Messrs Chong, Leung & Co., one Cheung Tin Ying.  Apart from this, the documentary evidence did not tally with the plaintiff’s evidence.  To say the least, the plaintiff’s recollection of the event was quite blur and at times she could not state clearly what actually had happened. 

45. Further I find her incredible in that she could have so easily assigned and transferred the Property to the defendant (a total stranger to her) or the defendant’s purchaser without receiving a single cent of money and without having any document from the defendant to secure the alleged loan agreement from her to the defendant (amounting to $3.17 million) when at the same time, she was so worried about the diminishing value of the Property (by about $0.5 million).  All in all, it could only have happened when she trusted Ho to repay the money together with interest in order to ensure that she would not have to lose in the falling property market.

Resulting trust?

46. Having found there was no loan agreement between the plaintiff and the defendant, and theplaintiff was looking to Ho for the repayment of the money, the next issue raised by the plaintiff in her re-amended statement at the trial (i.e. in the event that there was no loan agreement between the plaintiff and the defendant, whether there was any resulting trust held by the defendant when he was selling the plaintiff’s Property to the final purchaser in the proceeds of the sub-sub-sale he received), would not even arise.  It is therefore unnecessary to consider the issue of resulting trust. 

The counterclaim

47. HCA4038/2002, i.e. the action herein, was commenced by the plaintiff on 25 October 2002.  In the original claim, the plaintiff’s only cause of action was that the $2.67 million deposit was not paid.  There was no allegation of any loan agreement between the plaintiff and the defendant.  The loan agreement was only raised in the first amendment on 16 January 2004.

48. After the plaintiff’s action herein the defendant started an action in the Small Claim Tribunal on 5 December 2003.  The claim of the defendant in the Small Claim Tribunal is for a sum of $62,412.63 on the ground that the defendant had paid on behalf of the plaintiff in the sale and purchase of the Property the following items of expenses which should be paid by the plaintiff as follows :

Balance of Purchase Price			$1,280,000.00
Less
(1)	Redemption Money		$1,198,837.63
(2)	Stamp Duty on Agreement		$   133,560.00
(3)	Costs and disbursements	$3,869.00
(4)	Capital Fund	$1,860.00
(5)	Debris Removal Expenses	$1,860.00
(6)	Security deposit for Government Rent and Rates	$1,000.00
(7)	Management fee for the period from 20/6/2001 to 12/7/2001	$1,426.00	$    10,015.00
	Due to the defendant		$    62,412.63

49. In the defence of the plaintiff in the Small Claims Tribunal the plaintiff raised the aforesaid alleged loan agreement made between her and the defendant through Ho.  She pleaded that the defendant had agreed to redeem the mortgage at his expenses and she denied that the defendant had ever paid on her behalf those expenses.  There and then she has not raised the point that in the alleged loan agreement the defendant agreed to bear “all expenses of and incidental to the sale of the Property, such as legal expenses and agency fees (if any) or the like.”  This was only raised in her witness statement (paragraph 5 thereof) and she alleged that she raised the same with Ho and Ho came back to her and said that that should not be any problem, i.e. indicating that the defendant also agreed to such an arrangement.

50. The defendant said in evidence and in his statement that after the provisional sale and purchase agreement was signed in April it then occurred to him that in the calculation of the $1.28 million in respect of the redemption of the mortgage and stamp duty and expenses thereof, there was a miscalculation of not including two further months of instalment interests.  Further, the redemption would be made within one year of the mortgage loan and therefore that would be subject to a penalty on early redemption at 7% of the original loan amount.  That would amount to about $40,000 odd which he called the “Surplus”.  He then phoned up the plaintiff and told her that a sum of about $40,000 should have been deducted from the deposit for some of the expenses which ought to be deducted but were not among the items in the calculation.  The defendant said the plaintiff replied to him that she would not care to pay back to him and asked him to seek redress from Ho.  He then telephoned Ho and confronted him with amount the surplus.  Ho intimated to him that the plaintiff was his girlfriend and Ho orally promised to pay him back the surplus but he had never honoured the same.  However, admittedly, the defendant did not say the plaintiff agreed to pay the defendant those expenses thus the question is under the written agreement between the plaintiff and the defendant, what should be paid by the plaintiff and what should be paid by the defendant.

51. The mortgage redemption in the first item i.e. the redemption money, was made up as follows according to the letter of American Express Bank dated 4 July 2001 :

“(1)	Outstanding principal as of today :	HK$1,147,616.99
(2)	Monthly instalment for the month of June 2001 :	HK$      10,973.00
(3)	Daily interest from 19/6/2001 to 3/72001 (inclusive) (details as per attached) :	HK$           734.14
(4)	Daily interest @ 4.47% p.a. for HK$140.54 from 4/7/2001 to 28/7/2001 (inclusive) :	HK$        3,513.50
(5)	Penalty on early redemption, 7% on original loan amount :	HK$      36,000.00
		HK$1,198,837.63
		=============”

52. The plaintiff purchased the Property from MTR at $4.452 million.  Her stamp duty at 2.75% would be $122,430.  If one adds to this original stamp duty without penalty to the first two items under the aforesaid AE letter, i.e. the outstanding principal sum as of 4 July 2001 and the monthly instalment for the month of June, the total amount would be $1,281,019.99 which is more or less the round figure $1.28 million calculated by the plaintiff’s solicitors, Messrs Chong, Leung & Co. there and then at the time of the provisional sale and purchase agreement.  This added weight to the defendant’s credibility.

53. The defendant is therefore correct to say that after that it then occurred to him that interests up to the date of completion together with penalty because of early redemption, i.e. items 3, 4 and 5 of the AE letter amounted to $40,000 odd.  This was not calculated in the $1.28 million used to repay the mortgage and the other expenses.   Further, due to the late stamping of the agreement which should be shouldered by the plaintiff, there was the sum of $11,130 more (i.e. $133,560 - $122,430).

54. Under the agreement between the plaintiff and the defendant, the defendant was responsible to pay items 3 to 7 of his claims and in fact the defendant also agreed with the ultimate purchaser Madam Lin under their agreement that the ultimate purchaser would have to pay the similar items.  From the solicitors letter of Madam Lin and those cheques enclosed therewith to Chong, Leung & Co., it is clear that Madam Lin had paid those items 3 to 7 inclusive herself and the defendant did not pay for the same.  When the defendant was confronted with such documentary evidence, the defendant fairly said that he would honour the spirit of black and white agreement and would not press for those items. 

55. In the end, I found the defendant’s version is more reliable and that is the original calculation as agreed in the balance of the purchase price of $1.28 million had only taken what was stated as the first two items of the American Express letter and also the original stamp duty of $122,430 without the penalty.  Thus the plaintiff would have to pay the other outstanding items i.e. 3, 4 and 5 (of further interests and early redemption penalty), amounting to $40,247.64 under the agreement because it is her responsibility to redeem the mortgage and to pay the stamp duty with the penalty.  Under the agreement the defendant was only liable to pay the balance of the purchase price at $1.28 million.  After such payments, there was a further payment by the defendant for the aforesaid items 3, 4 and 5 of the AE letter and the penalty of $11,130 penalty for stamp duty which should be borne by the plaintiff.  Thus, the defendant is entitled to repayment of the sum of $51,377.64, (being $40,247.64 plus $11,130).  I understand in the calculation of $1.28 million, about $1,000 odd was left out in order to take a round figure.  Thus, I think the defendant is entitled to the sum of $50,000 as matter of round figure in the counterclaim.

Final conclusion

56. By reasons of the aforesaid matters, the claim in HCA4038/2002 is dismissed with an order nisi of costs to the defendant.  In respect of the counterclaim of the defendant against the plaintiff there shall be judgment for the defendant in the sum of $50,000 together with interest at 8% from 5 December 2003 (i.e. the date of the claim) until the date of Judgment herein.  There shall also be an order nisi of costs to the defendant against the plaintiff on this counterclaim and both sets of costs shall be taxed, if not agreed.