POON CHAN LIN v. LAW CHEE KONG AND OTHERS

HCA 1883/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1883 OF 2002

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J U D G M E N T

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1.  The plaintiff claims that she is the beneficial owner of ¹/₃ of a 3-storey small village house situated in Hin Tin Village in Shatin (“the Hin Tin Property”).  She also claims against the defendants for an account of the building costs for the Hin Tin Property and the rental received for letting out this Property.  The claims are based on a joint development agreement dated 22 March 1995 and made by the plaintiff, the 2^nd defendant and the 3^rd defendant (“the Hin Tin Agreement”).  The plaintiff appears to be a nominee of her husband Poon Tak Lun (“Poon”) as all important dealings with the 2^nd and 3^rd defendants were handled by Poon on her behalf.  However, this is not a point of significance as nothing arises from it.

2.  The 2^nd defendant, Chung Hing Chung (“Chung”) and the 3^rd defendant Sin Ka Yin (“Sin”) agreed that there was the Hin Tin Agreement.  They admitted that there was the project to construct the Hin Tin Property (“the Hin Tin Project”).  They said that the plaintiff had failed to pay her full share of the development costs and other expenses.  They said the plaintiff also had to pay interests on some loans borrowed for the purpose of this project.  They counterclaim these sums from the plaintiff. 

3.  On the plaintiff’s share of the rental received, they said that it was being kept by Chung as security and would only be released to her upon her full payment of the development costs, the other expenses and the interest on the loans. 

4.  The dispute is thus on how much money the plaintiff should pay and how much she had actually paid for this Project.  Chung has attempted to make the matter more complicated by dragging in other projects and dealings between him and the plaintiff.

5.  The plaintiff, Poon, Chung and one Lau Hon Ping have been engaged in another development of a small village house in Sheung Yeung Village in Clear Water Bay Peninsula (“the Sheung Yeung Project”).  Poon has on behalf of his younger daughter and subsequently on behalf of his son negotiated with and purchased from Chung a flat in another 3-storey small village house in Yau Yue Wan Village of Tseung Kwan O (“the Yau Yue Wan Purchase”).  Finally, Chung also alleges that the plaintiff has purchased half of his half interest in the G/F and 1/F of another 3-storey small village house in Tin Liu Village in Ho Chung of Sai Kung (“the alleged Tin Liu Purchase”).  The plaintiff and Poon denied this. 

6.  The plaintiff had made a number of payments to Chung for the Hin Tin Project, the Sheung Yeung Project and the purchase of the Yau Yue Wan flat.  There are, however, disputes on the sums that she had paid and on how much money she should have paid.  For the sums she had actually paid, the disputes are what were they paid for.  Chung and Sin also counterclaim for the alleged shortfall of development costs, other expenses and the interest on the alleged loans that were raised to fund the Hin Tin Project.

7.  The 1^st defendant is the registered owner of the Hin Tin Property and the Lot upon which it stands.  He is sued so that any judgment in relation to this Property will bind him.  He has not taken any part in this action.

THE PLAINTIFF’S CASE ON THE HIN TIN PROJECT 

8.  The plaintiff’s husband Poon is the only witness for the plaintiff.  Poon has made a witness statement and a supplemental witness statement.  He adopted them as his evidence in chief.  

9.  He said both he and Chung were taxi drivers and they came to know each other when they changed shift with other drivers at Po Lam Estate in Tseung Kwan O.  In about February 1995, he and Chung had a discussion on the Hin Tin Project.  Chung told him that Chung and Sin had already made an agreement (“the Hin Tin Head Agreement”) with an indigenous villager (the 1^st defendant) to carry out the Project.  In fact, this agreement was dated 10 May 1994 and made between the 1^st defendant and Sin.  Chung was not a party therein.  Under this agreement, Sin had to pay the 1^st defendant $1,000,000 by stages.  The payments were for the right to develop the Hin Tin Property by building a small house thereon.  Sin would be responsible for the development costs.  Chung said this agreement was made by Sin on behalf of both Chung and Sin and they had to share all the obligations therein.  The small house when built would of course be owned them.  They did not have enough money for the Project.  Therefore, they wanted to invite Poon to join the Project.  Chung also told Poon that the total development costs, excluding decoration and furniture, would be about $3.2 million.

10.  After some discussions, the three of them agreed that they would share equally all the development costs including the building costs, the money payable to the 1^st defendant and the land premium payable to the Government.  They also agreed that Chung would be responsible to supervise the development works.  If the house when built should be sold or let out, the three of them would likewise share equally the proceeds of sale or rental.  After making the oral agreement, the plaintiff, Poon, Chung and Sin went to the office of Messrs Alan Lam and Norris Yang together on 22 March 1995 to reduce their oral agreement into writing.  Poon was afraid that his taxi-driving job might not leave him with time to follow up the Project.  The plaintiff therefore took his place as a party to the Hin Tin Agreement.  The parties also agreed to use one Tuford Development Ltd. (“Tuford”) to carry out the Project and they would each own ¹/₃ of the allotted shares of Tuford.

11.  The Hin Tin Agreement was made in Chinese and the certified English translation of the relevant parts are as follows:

“WHEREAS

(1)         In the name of Sin, Sin and Chung signed an agreement with a New Territories indigenous resident namely Law Chee Kong (‘Law’) on 10^th May 1994 for the joint development of a piece of land, which would be granted to law by the Hong Kong Government by virtue of the New Territories Small House Policy (‘the Land’), situate at the village extension area of Hin Tin Village, Shatin.  The parties agreed that Sin and Chung would provide fund to erect a small house with 3 floors in compliance with the conditions of the Government Grant and they would sell it and share the proceeds of sale in accordance with the said agreement.  The said agreement and other relating documents signed by both parties are stored with Messrs Alan Lam and Norris Yang (‘the said Agreement and Documents’)

(2)         Poon would like to join the investment of Sin and Chung with Law to jointly develop the Land and Sin and Chung also agreed to let Poon to join according to the provisions of this Contract.

AND THE THREE PARTIES AGREE AS FOLLOWS: -

(1)     After signing of this Contract, Sin, Chung and Poon would be entitled to obtain and bear the interest and responsibilities of the investment in equal shares, including the rights and obligations contained in the said Agreement and Documents, the fees for obtaining the Government Grant in respect of the Land, the construction costs of small house erected on the Land, the amount of premium paid to the government before sale of the small house and the future proceeds of sale of the small house.  At the same time, Sin declares that the rights mentioned in the said Agreement and Documents are in fact owned by Sin, Chung and Poon in equal shares.  And Chung and Poon also undertake to Sin that they would be responsible to perform Sin’s obligations in the said Agreement and Documents to the promised extent of their responsibility, that is, on-third.

(2)     Sin and Chung shall as soon as possible procure Poon as one of the shareholders of the authorized sale company for the small house, Tuford Development Limited and three of them shall hold the same right of shares.  Sin and Chung undertake to Poon that Poon shall have nothing to do with the liabilities and debts incurred by the said company before the date hereof, the said liabilities and debts being borne solely by Sin and Chung.

(3)     Poon undertakes to pay Sin and Chung a sum of HK$460,000.00 being one-third of capital already made by Sin and Chung in the investment and to pay a sum of HK$100,000.00 to Messrs Alan Lam and Norris Yang being part of the one-third share of the capital that needs to be invested in future before the construction costs of the small house (including the balance to be paid to Law and the fee payable to the government for the Government Grant).  The payment method is as follows: -

(a)      To first pay Sin and Poon HK$100,000.00 today.

(b)      To pay the balance of HK$460,000.00 after the Government Grant is issued.”

12.  After making the Hin Tin Agreement, Poon paid $100,000 to Chung and Sin in accordance with it.  Poon confirmed in oral evidence that if the Government should refuse to grant the land for the Project, this sum would be irrecoverable.  He paid them a further sum of $100,000 on 1 April 1996.  He drafted a receipt for the $200,000 for Chung’s signature and Chung signed it on 1 April 1996.  The receipt recorded Chung’s acknowledgment of the plaintiff’s payment of $200,000 capital into Tuford.  In addition, Poon also paid $6,920 and $6,100 on 12 April 1995 and $5,675 on 6 October 1995 to the solicitors as legal costs of Tuford.

13.  Though Poon was only obliged to pay $460,000 to Chung and Sin after the Government has issued the land grant, Chung however told him a few days before 18 September 1996 that Chung and Sin had already injected $1.4 million into this project and Sin wished he could invest more money into it.  Chung then asked him to pay the $460,000 ahead of time.  As he trusted Chung at that time, he agreed to pay before the sum was due.  Chung further asked him to pay $20,000 for Tuford’s operation expenses, he therefore paid Chung $480,000 for this project by way of a cashier order on 18 September 1996.

14.  In addition to the five sums above, Poon said he had paid five more sums for the Hin Tin Project totaling $620,200.  The payments he had paid are listed in the table below and they totaled $1,318,895:

Plaintiff’s Payments for the Hin Tin Project

Item	Date	Amount	Recipient	Bundle Page Reference
1.	12/4/1995	$6,100	Alan Lam & Norris Yang	B69 & 72
2.	12/4/1995	$6,920	Alan Lam & Norris Yang	B70 – 71
3.	6/10/1995	$5,675	Alan Lam & Norris Yang	B78 – 80
4.	22/3/1995	$100,000	Chung Hing Chung	CB20
5.	1/4/1996	$100,000	Chung Hing Chung	CB20
6.	18/9/1996	$480,000	Chung Hing Chung	B94 – 95
				CB21
7.	20/3/1997	$60,000	Chung Hing Chung	B103
8.	20/3/1997	$110,000	Chung Hing Chung	B104
9.	4/3/1998	$350,000	Alan Lam & Norris Yang	B141
10.	20/5/1999	$100,000	Chung Hing Chung	B189
				CB42
11.	22/2/2001	$200	Alan Lam, Yam & Pe	B471 – 472
		__________
	Total	$1,318,895
		=========

15.  Poon said the construction of the Hin Tin Property commenced in late 1998 and was completed in late 1999 when he saw occupiers in it.  He also received Chung’s confirmation that the Property had been let to tenants.  He then asked Chung repeatedly to give him an account of the development’s costs and expenses and the details of the rental income.  But Chung procrastinated repeatedly.  In the end, Chung turned around and alleged that he had not fully paid his share of the development’s costs and expenses.  He then kept on pressing Chung for an account of the costs and expenses, but Chung failed to provide any.

THE PLAINTIFF’S CASE ON THE TIN LIU PURCHASE

16.  Chung alleged that the $480,000 paid by Poon to him on 18 September 1996 was not for the Hin Tin Project, but was for acquiring from him half of his half interest in the G/F and 1/F of as evidence of this alleged transaction.  The memorandum was signed by Chung and witnessed by Sin and one Madam Ng Lai Yung, a hawker in Po Lam Estate.  But there was no signature by Poon or the plaintiff. 

17.  Poon denied this transaction.  He said in his witness statement that in about the middle of 1996, Chung had invited him to develop a property in Tin Liu Village, but after discussing with his family, he declined the invitation.  He said he had never seen the memorandum until after Chung had disclosed it in the course of this action.  He further said that if he and the plaintiff should have invested in the Tin Liu House, they would have signed an agreement with Chung to protect the interests of both sides.  He also said that Chung had not reported to him the progress of this project.

THE 2^ND AND 3^RD DEFENDANTS’ CASE ON THE HIN TIN PROJECT

18.  Chung said Sin entered into the Hin Tin Head Agreement with the 1^st defendant on behalf of Sin himself and Chung.  After that, he and Sin acquired Tuford to carry out the Hin Tin Project.  However, it seems that Tuford has not been used for the Project yet.

19.  Chung also alleged that there were some payments that the plaintiff should pay but had not done so.  He alleged that on 22 March 1995, apart from entering into the Hin Tin Agreement, the parties and Poon also orally agreed to pay Chung and Sin $100,000 as land consultancy fee.  This fee was for them to supervise the 1^st defendant to ensure that the 1^st defendant would perform the Hin Tin Head Agreement.  Chung further alleged that because Sin had not done anything to supervise the 1^st defendant, it was agreed that this sum would go to Chung alone.  However, the plaintiff has failed to pay this $100,000.  I note that this alleged agreement by the plaintiff to pay this fee was not recorded in the Hin Tin Agreement.  The plaintiff also strenuously denied this.

20.  Chung further said that the $460,000 provided in clause 3 of the Hin Tin Agreement was not a reimbursement by the plaintiff to them of ¹/₃ of the money that they had actually invested in the Project.  He said this sum was in fact the price the plaintiff had to pay to acquire ¹/₃ of the Project as at 22 March 1995.  This sum was fixed without regard to the actual amount that he and Sin had already invested into the Project up to that date.  In addition to the $460,000, the plaintiff had to provide ¹/₃ of the costs to be incurred for the further development of the Project from 22 March 1995 onwards.  The plaintiff and Poon denied this.  Poon said that this $460,000 was a reimbursement of ¹/₃ of the actual costs and expenses incurred by Chung and Sin.

21.  After making the Hin Tin Agreement, there was not much activity save a demand made by the Government in early 1997 for premium for the land grant.  On 5 January 1998, the Government granted the Lot to the 1^st defendant.  The 1^st defendant then entered into a formal deed of development with Sin on 4 March 1998.

22.  Chung said the parties began discussing the construction in May 1998.  He in particular referred to an alleged meeting in June 1986 where he, Sin, the plaintiff and Poon were present and in which they agreed that the total construction cost was at about $1,375,000.  He further alleged that the plaintiff had told him that she could not then pay her ¹/₃ share of the costs and expenses and agreed to Chung raising loans from outsiders to pay her share and she would pay interest thereon at 3% per month.  The plaintiff again denied that there was any such meeting or agreement for loans to be raised for her.

23.  Chung further alleged that there was another meeting in July 1998 in which Chung himself, Sin, the plaintiff and Poon verbally agreed to appoint Chung to supervise the construction of the property.  In consideration of this, Chung, Sin and the plaintiff would together pay Chung a remuneration of $10,000 per month.  Since the construction took 12 months to complete, Chung was entitled to be paid $120,000 and the plaintiff should pay him $40,000.  This again was not evidenced in writing and denied by the plaintiff.

24.  Apart from the above disputes on what to pay, the parties also disputed on the nature or amount of some payments made by the plaintiff.  Of the three sums of $6,100, $6,920 and $5,675 paid by the plaintiff to the solicitors to settle legal fees on 12 April 1995 and 6 October 1995, Chung said that he and Sin had reimbursed the plaintiff ²/₃ of them. 

25.  Regarding the $100,000 paid by the plaintiff on 1 April 1996, Chung said that it was paid to him as the land consultancy fee referred to above and not for the development costs of the Project.

26.  For the $480,000 paid on 18 September 1996, I have already mentioned above that Chung denied that it was paid for the Project.  He alleged that the plaintiff had used this sum to purchase half of his half interest in the G/F and 1/F of a small house in Tin Liu Village.  He further linked up this alleged purchase of interest in the Tin Liu House with the Yau Yue Wan Purchase by the plaintiff’s son. 

27.  The last substantial payment by the plaintiff to Chung for this Project was $100,000 on 20 May 1999.  Chung admitted this payment, but said that he had lent it back to Poon in cash in an evening on about 10 September 1999.  He said Poon had humbly and earnestly requested him for this loan since the latter part of August 1999 as Poon needed it urgently to repay a friend.  Poon also told him that he needed the money as medical expenses to treat a suspected tumour in his belly.  Poon also offered him an attractive term of 3% interest per month.  Furthermore, pending the full repayment of all loans due to him and the interests thereon, he could keep the plaintiff’s share of rental from the Hin Tin Property without the need to pay her any interest thereon.  The Hin Tin Property was going to generate rental of around $20,000 per month from mid-September 1999 and her share would be around $7,000 per month.  He therefore lent Poon $100,000 cash on these terms.  When he gave Poon the $100,000 in cash, Poon did not give him any receipt to evidence the loan.  He said when the plaintiff paid him $100,000 on 20 May 1999; he gave her a receipt for the money.  When he lent $100,000 cash to Poon on about 10 September 1999, Poon just returned this receipt to him.

28.  Since Chung and Sin disputed in their defence ²/₃ of the three payments of legal expenses and the three sums of $100,000, $480,000 and $100,000, the net sum they admitted to have been paid by the plaintiff was only $626,431.67.  That was far short of the plaintiff’s share of the development costs for the Project.  Chung and Sin therefore claim from the plaintiff the shortfall as well as the interest payable by her for the loans raised to pay for her share of the development costs.

ANALYSES AND FINDINGS

29.  The Poons as represented by Poon had several transactions with Chung.  Sin was also a partner in the Hin Tin Project.  A number of payments had been made by the Poons to Chung and their solicitors.  However, neither side has produced any account to show which payment was for which project or transaction.  Both sides rely on their memories as aided by some contemporaneous documents.  Their versions of the payments and the purposes thereof differed greatly.  As pointed out by counsel for Chung and Sin, the primary issue is credibility. 

30.  Counsel’s first attack on Poon’s credibility was based on a letter dated 4 February 2002 from the then joint solicitors.  The letter repeated Poon’s verbal instruction to the solicitors that he had paid about $900,000 for the Hin Tin Project.  However, at that time, Poon had not located all the payment documents and was merely relying on his memory.

31.  Later, when the parties engaged their own solicitors to correspond on the dispute, Poon’s new solicitors did set forth in a letter dated 24 April 2002 the main payments asserted by Poon and they totalled $1,393,000.  This sum was more than the sum of $1,318,895 now claimed by the plaintiff and Poon.  The difference of $74,105 was caused by some payments allegedly made but not supported by documents and the payments to solicitors being rounded up into a lump sum that exceeded the actual sums paid.

32.  The relevant part of the letter reads:

“1.  By the Agreement dated 22^nd March 1995, our client together with your clients, Messrs Chung Hing Chung and Sin Ka Yin agreed to jointly develop the above land on which a 3 storeys building would be built.  It was further agreed that after development, the building would be sold and the sale proceeds would be distributed by the 3 parties in equal shares.  It was further agreed under the said Agreement that all 3 parties shall be entitled to the benefits of the said development and shall bear the responsibility in equal shares.  It was the mutual understanding between the parties that the development would cost about HK$2.70 to HK$3.0 million.

2.    It was further agreed under the said Agreement that our client would pay to your clients HK$460,000 being one-third of the investment capital that had been previously made by your clients in the said development and a further sum of HK$100,000 was to be paid to Messrs. Alan Lam & Norris Yang as advance payment of our client’s one-third share of the investment capital prior to the construction of the development.

3.    We are instructed that a total of HK$1,393,000 had been made by our client as her contribution towards the said development, particulars of which are as follows:

Date of Payment	Nature of Payment	Amount of Payment	Name of Payee
1995 & 4/1996	Initial capital payment	$200,000	Mr Chung Hing Chung
18/9/1996	Contractual price ($460,000) and further capital payment ($20,000)	$480,000	Mr Chung Hing Chung
20/3/1997	Land purchase price	$60,000	Mr Chung Hing Chung
20/3/1997	Land purchase price	$110,000	Mr Chung Hing Chung
1995 – 1997	Payment for BR certificates, annual filing fees and secretarial charges	$45,000	Mr Chung Hing Chung
4/3/1998	Development benefit Of the villager	$350,000	Alan Lam & Norris Yang
20/5/1999	Construction costs	$100,000	Mr Chung Hing Chung
1999	Land purchase price	$33,000	Mr Chung Hing Chung
End of 1999	Construction costs	$5,000	Mr Chung Hing Chung
1999	Last payment to the villager	$10,000	Mr Chung Hing Chung
		___________
	Total  :	$1,393,000
		==========

Copies of documentary proof for some of the above payments are attached herewith for your reference.

4.    In view of the aforesaid, it is strenuously denied by our client that she had failed and/or refused to pay towards or reimburse your clients with her share of the development expenses.  To the contrary, despite our client’s repeated requests, Mr Chung of your clients has failed and refused to give a full account of the expenses that have been incurred in the development, including those that were incurred before entering into the said Agreement.  Without prejudice to the aforesaid and without admission of liability whatsoever by our client to the alleged ¹/₃ share of the expenses set out in your letter, would you please let us have copies of all the documentary records in respect of the said expenses.  Our request also extends to the account for the sum of HK$1,380,000 (in respect of which our client agreed to pay the said sum of $460,000 to your clients as aforesaid) that had been allegedly incurred by your clients prior to entering into the said Agreement.”

Chung and Sin did not reply to this letter and the plaintiff issued her writ on 17 May 2002.  She set forth the same sums in her statement of claim.

33.  Matters transpired that there were only a few disputes on whether the payments referred to in the letter had indeed been paid.  The main disputes were on the purposes of some of the payments and whether some more payments should have been made by the plaintiff.  Hence, it is useful to consider who was telling the truth on the purposes of the payments already made and what were the plaintiff’s payment obligations.  In doing this, I bear in mind that it is for the plaintiff to prove her claim.  I now deal with the disputes.

Nature of the $460,000

34.  The plaintiff pleaded that the $460,000 was a reimbursement to Chung and Sin for ¹/₃ of the development costs incurred by them in the Hin Tin Project.  Chung and Sin said that it was the price for acquiring ¹/₃ of this project as it was on 22 March 1995.  In order to resolve this issue, it is necessary to consider the relevant provisions of the Hin Tin Agreement. 

35.  Clause 1 of the Hin Tin Agreement required the plaintiff to bear ¹/₃ of the obligations in the Hin Tin Head Agreement.  One of the obligations was for Sin to pay the 1^st defendant $1,000,000.  Of this sum, $600,000 had already been paid on 10 May 1994.  If the plaintiff was acquiring ¹/₃ of the worth of the Project as at 22 March 1995 by paying Chung and Sin $460,000, then she would not have to bear any part of the $600,000 already paid.  That sum would have been part of the investment by Chung and Sin before 22 March 1995.  However, clause 1 of the Hin Tin Agreement required her to bear ¹/₃ of the obligations in the Hin Tin Head Agreement without any time limit and without excluding the $600,000 that had already been paid.  In other words, she had to reimburse Chung and Sin $200,000 as ¹/₃ of $600,000 that had been paid by them to the 1^st defendant.  In the circumstances, the Hin Tin Agreement was not giving her ¹/₃ of the worth of the Project as at 22 March 1995.  She had to bear ¹/₃ of all the obligations of the Project in order to be entitled to ¹/₃ of its interest.  In fact, Chung and Sin now say that she also has to bear ¹/₃ of the $50,000 introduction money paid in respect of the introduction of Sin to the 1^st defendant. 

36.  Furthermore, clause 3 of the Hin Tin Agreement also provided that the $460,000 was to be ¹/₃ of the capital already paid by Chung and Sin.  It did not provide that the plaintiff was going to purchase ¹/₃ of the interest of the Project as at 22 March 1995 with her $460,000 or that Chung and Sin were deemed to have invested $1,380,000 into the Project and the plaintiff was going to purchase ¹/₃ of it at $460,000. 

37.  Counsel for Chung and Sin argued that it was the plaintiff’s case that she was not liable for the expenses incurred prior to the making of the Hin Tin Agreement.  However, the point was taken by the plaintiff only in relation to the expenses of Tuford.  These expenses of Tuford might or might not be the expenses of the Project.  Clause 2 of the Hin Tin Agreement had also expressly excluded from the plaintiff’s obligation the debts and liabilities of Tuford incurred before the Agreement. 

38.  Counsel also argued that Chung and Sin had assumed much greater risk in the Project as the plaintiff would not have to pay the $460,000 in the event of no grant from the Government.  Counsel also submitted that the plaintiff’s participation in this Project was because of the introduction by Chung and Sin.  Hence, it was reasonable to require the plaintiff to pay $460,000 to acquire ¹/₃ interest in the Project.  However, I cannot overlook the plaintiff’s case which says that Poon was invited to participate because Chung and Sin suffered from lack of funds.  It also transpired that Sin had, unbeknown to the plaintiff/Poon, pulled out from the Project on 28 March 1997 for financial reasons.  He surrendered all his rights in the Project to Chung (see page 108 of Core Bundle).  When the Project was on the way, Chung also had to raise loans repeatedly so as to pay the contractor Lee Chun Kee.  Hence, the fact that Chung and Sin had started with the Project earlier and assumed more risk did not necessarily mean that they had more bargaining power than Poon or the plaintiff.  If they needed Poon’s participation in order to proceed, then Poon might have been in a better bargaining position. 

39.  Counsel also argued that the $460,000 was provided to be paid to Chung and Sin and therefore it was more likely that this sum was for acquiring ¹/₃ of their interest in the Project as at 22 March 1995.  However, save the legal fees and the sum of $350,000 for the 1^st defendant which were paid to the solicitors, all other payments for the Hin Tin Project were made by the plaintiff to Chung and Sin.  No payment was made to Tuford.  Poon had also said that he was asked to pay $460,000 as the ¹/₃ reimbursement because Chung had told him that Chung and Sin had spent about $1.3 million on the Project.

40.  For these reasons and in particular by the construction of the Hin Tin Agreement, I find that the $460,000 agreed to be paid upon the issue of Government grant was the plaintiff’s reimbursement of the ¹/₃ of the costs and expenses incurred by Chung and Sin in the Project and not a purchase price for ¹/₃ of the deemed value of the Project as at 22 March 1995.  This payment was subject to an account of the expenses actually incurred by Chung and Sin.

The $100,000 Land Consultancy Fee

41.  Chung’s evidence was that the plaintiff and Poon had agreed on 20 March 1995 to pay this fee to him and Sin in a restaurant before they made the Hin Tin Agreement on 22 March 1995.  Nevertheless, the Hin Tin Agreement, which was prepared by solicitors, did not mention this fee at all.  Chung’s answer to this was that he thought this fee had been agreed and thus it was not written in the Hin Tin Agreement.  Then it begs the question of why should they go to the solicitors’ office to enter into the Hin Tin Agreement at all. 

42.  Furthermore, in the solicitors’ correspondence in early 2002, the solicitors for Chung and Sin did raise the plaintiff’s alleged ¹/₃ share of the construction consultancy fee at $40,000, but they never mentioned the land consultancy fee or the fact that it had been paid by the plaintiff in April 1996.  Their defence and counterclaim filed on 5 July 2002 admitted the receipt of $100,000 in 1996.  But it did not then say that this sum was paid for such fee.  They only say it now that it was payment for such fee (the plaintiff said that such payment was for the costs of the Hin Tin Project). 

43.  Chung and Sin had also filed on 25 October 2002 a lengthy set of answers to request for further and better particulars that included answers to enquiries on the plaintiff’s payment obligations.  They again said nothing about such fee.  They only mentioned in the draft amended answers annexed to a summons dated 30 September 2003. 

44.  The first time when they mentioned this fee was in an affirmation of Chung filed on 22 May 2003 for opposing the plaintiff’s application for interim payment.  Chung said in paragraph 9 of the affirmation:

“9.     According to the agreement dated March 22, 1995, the Plaintiff was to pay $460,000 as acquisition of ¹/₃ interest in Tuford.  The Plaintiff was also required to pay its one-third share in all other development costs incurred thereafter.  A sum of $100,000.00 had to be paid immediately to the 3^rd Defendant and I as consultancy fee up to issue of the Grant for the 1^st Defendant and another sum of $100,000 shall also be as advance payment for part of future development cost, and the sum was to be kept (by solicitors) carrying no interest.  However, since Poon said that they only had $100,000.00 at that time, with the agreement of all parties concerned, the sum of $100,000.00 was not paid to (the solicitors) but to the 3^rd Defendant and me to avoid nil interest.  In fact, Poon and the 1^st Defendant was(sic) never paid to (the solicitors).”

However, he did not say that this sum had already been paid by the plaintiff in April 1996 which is what he now says in paragraphs 11 to 14 of his witness statement filed on 4 January 2006.

45.  He referred to this fee again in his 2^nd affirmation filed on 22 September 2003.  He said in para. 6 that the verbal agreement on payment of this fee was made in a restaurant on 20 May 1995 before the parties went to the solicitors’ office to discuss other matters of this Project.  He further said in paragraph 7:

“7.     The Land Consultancy Fee in the sum of HK$100,000 was supposed to be paid on 22 March 1995 at the time the agreement was signed.  However, it was not paid then.”

However, he still did not say that such fee had been paid by the plaintiff in April 1996.

46.  I find it surprising that if there were such fee payable by the plaintiff, the Hin Tin Agreement as prepared by solicitors would make no mention of it.  It was a big sum.  I find it even more surprising when this was not mentioned in the correspondence while the alleged construction consultancy fee was mentioned.  The failure to include it in the defence and counterclaim and the initial set of answers to request for further and better particulars made this claim even more unbelievable.

47.  The evolvement of this claim and the treatment of the $100,000 paid by the plaintiff on 1 April 1996 as its payment show that this claim was fabricated by Chung gradually since about 22 May 2003.

48.  Counsel for Chung and Sin, however, submits that the $100,000 paid on 1 April 1996 was not payable under the Hin Tin Agreement.  Hence, it was not referable to this Agreement.  Therefore, it was a payment for the Land Consultancy Fee.  Counsel further submitted that because the 1^st defendant could choose not to co-operate.  It was necessary to have someone to monitor the Project.  Furthermore, it was alleged that the 1^st defendant had entered into another agreement with another developer and Chung had to procure its cancellation.  However, no cancellation document has been produced.  Even if the 1^st defendant’s behaviour had to be monitored, it does not mean that the plaintiff would have to pay Chung and Sin $100,000 for such work.  $100,000 is a substantial sum.  There is no evidence to suggest that a lot of effort would have to be spent for monitoring the 1^st defendant.

49.  After all, it is a matter of agreement on whether the plaintiff had to pay such a fee.  The analysis above shows that on a balance of probability, there was no such agreement.  I find that the plaintiff did not have to pay Chung or the 3^rd defendant any Land Consultancy Fee and the $100,000 paid on 1 April 1996 was part of her contribution for the Project costs.

Purpose of $480,000 Paid on 18 September 1996

50.  Poon said this sum was paid for the Hin Tin Project at the request of Chung because Chung said that Chung himself and Sin had together paid about $1.4 million already.  This sum was paid ahead of the time provided in the Hin Tin Agreement.  Under the Agreement, if the Government should have refused to grant the land, the plaintiff would not have to pay this sum and Chung and Sin would have received nothing from the plaintiff save the $100,000 as provided in clause 3 of the Agreement.  The early payment of this sum meant that the plaintiff would be assuming the full risk of loss in the event of no Government grant. 

51.  However, even on the case of Chung and Sin, the plaintiff had also made two payments on 20 March 1997 totalling $170,000.  These payments were also ahead of time.  They were obviously used by
Chung to pay the Government the premium of $199,540.  The deadline for the premium was 24 March 1997.  Strictly speaking, such payment was only from the plaintiff due after the issue of the grant on 5 January 1998.  However, Chung obviously needed the $170,000 from the plaintiff pre-maturely as he did not have the funds to pay the premium.  The parties also agree that they were on good terms at that time.  I do not think it unbelievable for the plaintiff to have paid the $480,000 and $170,000 ahead of time particularly when Poon had been told that Chung and Sin had invested $1.4 million into the Project and the reason for bringing in the plaintiff was their lack of funds. 

52.  On the other hand, Chung’s case for the payment of the $480,000 wholly relies on the alleged purchase by the plaintiff of half of Chung’s half interest in two floors of the Tin Liu Small House.  The only written evidence is a memorandum of the sale dated 18 September 1996 signed by Chung and witnessed by Sin and Madam Ng.  It was not signed by the plaintiff or witnessed by Poon.  It can be said to be a self-serving document. 

53.  Counsel for Chung submitted that if I should find against this document, I would in effect be finding that Sin and Madam Ng had conspired with Chung to forge this document.  I think this submission goes too far.  Neither Sin nor Madam Ng has made any witness statement on the circumstances and/or reason for their witnessing this document.  It is not known how or why either of them had witnessed this document.

54.  Furthermore, in the usual case of buying and selling of real property, the purchaser would sign the agreement.  I appreciate that there was a memorandum dated 8 July 1997 in respect of the Sheung Yeung Project and another memorandum dated 23 November 2000 for the purchase of the Yau Yue Wan flat which were only signed by Chung.  However, both transactions were subject to agreements made or witnessed by solicitors.  The Yau Yue Wan Purchase Memorandum was also registered at the Land Registry.  For this alleged Tin Liu Purchase, there was no reason why the plaintiff or Poon did not sign the alleged memorandum or to make an agreement as prepared and/or witnessed by solicitors.

55.  There was also never any completion of this sale because Chung alleged that it was cancelled and the $480,000 paid under it was treated as a part payment of $400,000 for the purchase of the Yau Yue Wan flat.  For the alleged cancellation, there was not even a self-serving document to evidence it.  Chung’s only explanation given in cross-examination was that there was an original provisional agreement for the Yau Yue Wan flat at the price of $2 million.  When the $480,000 was treated as a part-payment of $400,000, a new provisional agreement was made at the reduced price of $1.6 million thereby giving credit by Chung for the $400,000 (without mentioning it).  Poon then told him to keep the superseded original provisional agreement with purchase price at $2,000,000 as evidence of the cancellation of the Tin Liu Purchase. 

56.  I just cannot imagine how anyone can tell from the two versions of provisional agreement that the $400,000 difference in purchase price was because of the cancellation of the Tin Liu Purchase made in September 1996 at $480,000.  If there were the Tin Liu sale and purchase, Chung ran the risk of being sued by the plaintiff for half of his half interest in the two floors of the Tin Liu House unless he had a cancellation agreement.  If the plaintiff/Poon had indeed been willing to forego all the interests in the Tin Liu House, which counsel submitted was a bargain in September 1996, then the plaintiff/Poon would not have been unwilling to sign a simple cancellation agreement.  In any case, the plaintiff/Poon would have no reason not to do so.  I therefore see no reason for the alleged cancellation of the alleged Tin Liu Purchase not to be evidenced in writing.  The only reason that I can think of is that there was no cancellation.  There was neither cancellation nor completion because there was never such deal.  The alleged memorandum of purchase dated 18 September 1996 was also a fabrication by Chung. 

57.  In making this finding, I make it clear that I am not making any finding of conspiracy against Sin and Madam Ng. 

58.  I find Poon’s evidence that the $480,000 was paid for developing the Hin Tin Project believable.  I reject Chung’s evidence on the alleged purchase of interest in the Tin Liu House.  I hold on a balance of probability that this $480,000 was paid by the plaintiff for developing the Hin Tin Project.

Was the $100,000 Paid on 20 May 1999 Lent Back to Poon on 10 September 1999?

59.  The plaintiff referred to her payment of this sum both in the correspondence and in her statement of claim.  Chung and Sin denied the receipt of this sum in their defence and counterclaim filed on 5 July 2002.  Chung maintained his denial in his affirmation filed on 22 May 2003 for opposing interim payment.  His stance was the same in his 2^nd affirmation filed on 22 September 2003.  He said in para.13 of the affirmation:

“I wish to reiterate I have never received a cheque dated May 20, 1999 in the sum of $100,000 appeared to be drawn in my favour.  I also checked my bank account which carries no entry for such cheque in such an amount.”

Chung and Sin also maintained their denial of the receipt of this sum in their amended defence and counterclaim dated 26 September 2003.

60.  Poon then filed an affirmation on 25 November 2003 producing a copy of this cheque which was made payable in cash.  The back of the cheque showed Chung’s signature and the cashing of the cheque on 21 May 1999. 

61.  Chung then made his 3^rd affirmation on 29 March 2004 in which he gave an elaborate description on how a cheque for $100,000 was allegedly first given to him through his wife, the replacement of that and the reason thereof, the many steps leading to the cashing of the replacement cheque at one bank and the cash deposited at another.  He then gave another elaborate story of how Poon had requested for the return of this $100,000 as a loan to Poon.  It was a picturesque description.  These stories were contained in paragraphs 2 to 12 and 14 to 18 of his 3rd affirmation as follows:

“Payment and retaking of $100,000

2.    On or about 18 May 1999, Poon, the Plaintiff, the 3^rd Defendant and myself had morning tea in Hon Fook Restaurant in Tseung Kwan O discussing the costs of development of the Small House on Lot 666.  The discussion was amiable and all of us agreed that each party should contribute a sum of about $500,000 as the construction and decoration costs which would not include the costs of the installation of electrical appliances and furniture.

3. On or about 20 May 1999, at about nine o’clock in the morning, while my wife was in the vicinity of Poon’s residence sweeping the street as a cleaning worker of the Food and Environmental Hygiene Department, Poon handed a cheque to her and asked her to give it to me as his contribution to the building costs.  Without looking at the particulars, my wife put the cheque into her pocket.

4.    At noon on the same day, my wife gave me the cheque over lunch table in Tsui Lam Restaurant in Tseung Kwan O.  I then discovered it carried a mistake in my name: my middle name was written in simplified character.  Despite several calls made to Poon, I failed to get in touch with him.

5,    About half an hour later, Poon phoned me asking whether I got the cheque.  I then told him about the error in the cheque.  He apologized and asked me to collect a new cheque from his residence the following day as he did not have time on that day.

6.    At his invitation at about ten o’clock in the morning on or about 21 May 1999, I went to his residence.  I handed Poon the wrong cheque.  The Plaintiff then said, ‘Ah Chung, your wife should not have thought we didn’t have money to pay you simply because we opened a wrong cheque’.  Then she told Poon, ‘Ah Lung (i.e. Poon), we went (sic) to bank together to get $100,000 cash for Ah Chung, so as to let him account to his wife!’  I replied that my wife did not mistrust them.

7.    It was not me who suggested the payment be made in cash.  Neither was I in urgent need of cash at that time.  And indeed, I preferred accepting crossed cheque as it was safer and there were about ten days to go for making payment to the contractor, Lee Chun Kee.

8.    Poon then suggested three of us went to bank together.  At their request, I signed at their residence a receipt prepared by them acknowledging this payment of HK$100,000, which was then kept by Poon.

9.    On the way to the bank, I did not see the cash cheque (492172).  On arrival at the bank, Poon queued up at the counter while his wife was chatting with me at the other side of the bank lobby.  When it was his turn, Poon waved at me and told me to come over to the counter saying that it was my turn.  I went over to the counter and produced my ID card at the counter to the cashier and acknowledged receipt of that $100,000 in cash at the back of the cash cheque as so requested.

10.  Afterwards, Poon told me he got the burden to protect me from losing that sum of money.  So he accompanied me to the Hua Chiao Commercial Bank in Tsui Lam Estate, Tseung Kwan O, to deposit that sum into my current account.

11.  I intended to deposit $90,000 into my current account and the balance for other use.  But Poon said he had the responsibility and needed to ensure the whole sum be safely deposited into my current account.  So I followed his suggestion and deposited the $100,000 cash into my current account.

12.  On 24 May 1999, I withdrew $92,000 by way of cash cheque from my current account.

…

14.  Since August 1999, for several times, Poon either via telephone or during tea gatherings in restaurants had expressed that he was in urgent need of money.  He told me that $90,000 out of the $100,000 he gave me in May 1999 for his contribution of the construction costs was a loan from a friend.  He wished to have that loan repaid as soon as possible as that friend was then in need of money.

15.  For several occasions, Poon also told me he was sick.  He said he always felt painful.  He suspected in his body there was a tumor.  He asked me to feel his abdomen area.  He said he might not live long and was in need of money for medical treatment.  He incessantly described his predicament, repeatedly slapping himself on his face and saying he has done wrong on his younger brother (that is myself: at that time we were very close and treated each other as brothers) as he wished to take back that $100,000 which he had given me as his contribution of the building costs.  He said that he would repay me the $100,000 together with interests when his Japanese son-in-law returned from Japan to Hong Kong the following year.

16.  On top of the above episodes, I agreed to return the $100,000 to him for several other reasons.  He lured me by giving me an extra sum at 3% monthly of the amount he took back.  Moreover, the Small House would generate rental income from the middle of September 1999 onwards.  It followed that even if he failed to repay me and to contribute towards the construction costs later, I would be able to recoup his part from the rent.  This served as some kind of protection from my point of view.

17.  On 8 September 1999, I withdrew $201,000 from my current account by way of cash cheque.  Of the sum, $100,000 was given back to Poon two days later, and another $100,000 to a friend of mine, Vong Sio Hung.  The balance was for my other use.

18.  On or about 10 September 1999, at about 9 pm, Poon phoned me saying that he would drive his own taxi to the vicinity of my residence and asked me to bring along that sum of $100,000 in cash and meet him outside the Seven-Eleven Convenient Shop nearby.  I met him inside his taxi.  I still remember his words to the effect that, ‘Let’s make an exchange one hand to one hand.  I took back the $100,000 and you got back the receipt of $100,000 you signed at my residence.’  My rely was, in a light tone, ‘I gave you money and in return, you gave me a paper litter.’  I also remember him joking, ‘Here is ‘7-11’, we shall open a ‘7-12’ in Shatin in the future since I have given you a total of $720,000.’ From this statement, he clearly told me his contribution made to Lot 666 until September 1999 was $720,000.”

62.  Poon in his 2^nd affirmation filed on 6 April 2004 said that save Chung’s admission of having received the $100,000, Chung’s story was a pack of lies.  I just wonder why Chung could not have told this very elaborate story on the payment and the lending back of the $100,000 in the correspondence in April 2002, in the defence and counterclaim, in the amended defence and counterclaim and in his two affirmations in May and September 2003.  He has not given any explanation for this.

63.  Furthermore, there is no reason for him not to ask Poon for a receipt for the loan.  The alleged return to Poon of the receipt he had allegedly signed on 21 May 1995 when he took the $100,000, even if true, was not good enough as he had signed on the back of the cheque when he received that sum at the bank on 21 May 1999.  If there were indeed the lending back, one would expect to see a memorandum signed by Poon on 10 September 1999 acknowledging the loan of $100,000 and the term of 3% interest per month. 

64.  Chung failed to deal with this payment from 2002 to September 2003 when he filed his 2^nd affirmation.  After Poon had produced the copy cheque, he suddenly revealed a lengthy and elaborate story on the payment and lending back.  There is no documentary evidence to support the alleged lending back which was at a handsome interest rate of 3% per month.  All these go to show that this alleged lending back was Chung’s fabrication.

65.  From the unfolding of the story, it is clear that Chung did not see any deposit of a cheque for $100,000 on 20 May 1999 in his bank statements and he had also forgotten about having obtained cash on this cheque.  He therefore denied receipt of the cheque for this sum.  However, when Poon produced the cheque copy proving that he had cashed this cheque on 21 May 1999, he then created this lengthy and elaborate story of payment and lending back.  The purpose of this exercise was to maintain his denial this $100,000 credit to the plaintiff. 

66.  For the above reasons, I do not believe in Chung’s story.  I find that there was no lending back of $100,000 to Poon on about 10 September 1999.  Chung had just received this sum from the plaintiff as part of development costs for the Hin Tin Project.

Whether Chung and Sin had Reimbursed the Plaintiff ²/₃ of the Legal Expenses She Paid the Solicitors on 12 April 1995 and 6 October 1995

67.  The plaintiff’s payment of $6,100 and $6,920 on 12 April 1995 and $5,675 on 6 October 1995 are proved by the receipts issue by the solicitors.  She pleaded these payments for the first time in an amendment of her statement of claim on 17 October 2005.  Chung and Sin denied these payments in their two amendments to the defence and counterclaim on 22 February 2007 and 28 February 2007.  They only changed their stance on the 1^st day of the trial by admitting to ¹/₃ of these payments.  There is however no reliable evidence of their reimbursement of ²/₃ of these sums to the plaintiff.  I therefore hold that the plaintiff has indeed paid these three sums pursuant to the Hin Tin Agreement and Chung and Sin had not reimbursed her any part of them.

Any Agreement for Chung to Borrow Money for the Plaintiff’s Use in the Hin Tin Project

68.  From the above analysis and findings, it is clear that the plaintiff had paid $1,318,895 pursuant to the Hin Tin Agreement for building the Hin Tin Property.  That is more than enough to cover her ¹/₃ share of costs even on the pleaded case of Chung and Sin.  Their pleaded case is that she had to pay $604,780 development costs, $127,048.33 intermediate investment costs and $66,951.67 other expenses plus $200,000 being ¹/₃ of the initial payment to the 1^st defendant.  The total is $998,780.  (These sums were revised with some additions in the course of the trial.)  There was therefore neither need nor reason for any loan to be raised to pay her share of the costs.  The plaintiff would also not have agreed to it.

69.  Furthermore, the case of Chung and Sin on the raising of loans has not been consistent.  In their solicitors’ letter dated 11 April 2002, the demand for interest was framed as follows:

“Furthermore, we are instructed by our clients that as regards payment of the following sums, our clients had to resort to lending money at the rate of 36% per annum for 39 months upon your failure to contribute the same:

(a)	Building costs	$1,375,000.00
(b)	Outdoor brick paving works	$35,000.00
(c)	Internal decoration works	$101,800.00
(d)	Electrical appliance installation costs	$18,000.00
(e)	Setting out and architect fees	$35,000.00
		$1,564,800.00

$1,564,800.00 ÷ 3 = $521,600.00 x 3% x 39 months = $610,272.00

Despite our clients having informed you thereof, you still failed to contribute as requested.  Our clients therefore hold you liable for the interests thereby incurred in the sum of HK$610,272.00”

The claim for interest was on a reimbursement basis.  It stated that the loans were all raised at 3% per month interest.  There was no suggestion that the plaintiff had agreed to pay 3% per month interest for such loans regardless of Chung’s cost of lending.  There was also no revelation that Chung only raised some and not all of the loans at 3% per month interest. 

70.  The pleading of this claim in the original defence and counterclaim was no different.  Paragraph 6(2) stated:

“Upon the failure of the Plaintiff to contribute her share, the 2^nd and 3^rd Defendants had to resort to lending to meet up with the development costs and had to pay interests thereon, particulars of the interests paid by the 2^nd and 3^rd Defendants shall be rendered to the Plaintiff.”

There was again no mention of any agreement by the plaintiff for the loans to be raised for her use or for her to pay interest thereon.  The claim for interest was still framed on a reimbursement and not a contractual basis. 

71.  The alleged agreement by the plaintiff/Poon for the loans to be raised for her and for her to pay interest at 3% per month was only mentioned by Chung and Sin in their answer to request for further and better particulars filed on 25 October 2002.  The defence and counterclaim was amended subsequently to reflect this change. 

72.  There was also no memorandum recording the plaintiff’s agreement to this arrangement despite the high rate of interest of 3% per month.

73.  This alleged agreement also continued to evolve as the case proceeded to trial.  In paragraph 16 of Chung’s 3^rd affirmation filed on 29 March 2004, he referred to the lending back of the $100,000 with interest at 3% per month.  He also said that he could recoup this loan and the construction costs from the plaintiff’s share of rental to be generated from Hin Tin Property.  He said:

“16.   On top of the above episodes, I agreed to return the $100,000 to him for several other reasons.  He lured me by giving me an extra sum at 3% monthly of the amount he took back.  Moreover, the Small House would generate rental income from the middle of September 1999 onwards.  It followed that even if he failed to repay me and to contribute towards the construction costs later, I would be able to recoup his part from the rent.  This served as some kind of protection from my point of view.”

74.  In his witness statement filed on 4 January 2006, Chung modified this arrangement by adding one more condition to it.  He alleged that Poon had agreed that pending the full repayment by Poon of all debts and interests thereon, he would be entitled to collect the plaintiff’s ¹/₃ share of rental from Hin Tin Property.  The plaintiff’s ¹/₃ share of rental thus became part of the price that Poon had to pay in return for Chung’s loans.  That was a very handsome return on the loans and there was every reason for the agreement to be acknowledged by Poon in writing.  This is what he said:

「45.     潘除對本人苦苦哀求外，更開出本人認為頗可觀的條件去吸引本人再將港幣100,000元借給他。第一，他答應就本人借給他的金錢給予每月3%的利息；第二，他答應讓本人收取潘陳蓮就Lot 666應得的¹/₃租金，直至他將所有欠本人的金錢「連本帶利」歸還予本人為止。」

75.  This version in the witness statement was reflected and further modified in a re-re-amendment to paragraph 11A of the defence made on 6 February 2007.  The further modification was for the plaintiff to be the primary lender rather than Poon.  It reads:

“11A.  It is further averred that:

(1)     In or about late August 1999, the Plaintiff through her husband requested the 2^nd Defendant to lend (or return to) him a sum of HK$100,000 which was previously paid to the 2^nd Defendant in or about May 1999.

(2)     The Plaintiff through her husband offered to borrow such money on the condition that (a) interests at the rate of 3% per month is payable and (b) the 2^nd Defendant be entitled to the Plaintiff’s one-third share of the rental income in respect of the Property until all principal and interests owed to the 2^nd Defendant were repaid.

(3)     As the Plaintiff has been in default in contributing to and/or paying her share in full and/or in repaying the principal and interests of the loan owed to the 2^nd Defendant, the Plaintiff was not entitled to a share in the rental income of the Property.”  (Emphasis supplied)

76.  This stance persisted in the next amendment of the defence on 13 March 2007. 

77.  Since the plaintiff’s share of rental every month was a sizeable sum, the plaintiff amended her re-amended reply on 22 March 2007 pleading penalty as an alternative ground of defence.  Chung and Sin then amended on the same day Chung’s claim for entitlement to the rental to a claim for keeping the rental as a security for repayment.

78.  The amended paragraph 11A with the amendments underlined reads:

“11A.  It is further averred that:

(1)   In or about late August 1999, the Plaintiff through her husband requested the 2^nd Defendant to lend (or return to) him a sum of HK$100,000 which was previously paid to the 2^nd Defendant in or about May 1999.

(2)   The Plaintiff through her husband offered to borrow such money on the condition that (a) interests at the rate of 3% per month is payable and (b) the 2^nd Defendant be entitled to the Plaintiff’s one-third share of the rental income in respect of the Property as security without the need to repay the same until all outstanding contribution, principal and interests owed to the 2^nd Defendant (including the interests for the loans particularized in paragraph 7(3) above) were repaid whereupon the Plaintiff’s share of the rental income would be accounted to her.

(3)   As the Plaintiff has been in default in contributing to and/or paying her share in full and/or in repaying the principal and interests of the loan owed to the 2^nd Defendant, the Plaintiff was not entitled to a share in the rental income of the Property.  The Plaintiff would only be entitled to have such rental income accounted to her after she has made full contribution/repayment.

79.  If there were indeed an agreement by the plaintiff to pay interest as now pleaded, this claim should not have taken so many different formulations.  These different formulations put forward at different times only show an evolvement of a fabricated claim.  There was also a complete lack of documentary evidence of this arrangement despite the onerous obligation imposed on the plaintiff/Poon. 

80.  Furthermore, the loan of $800,000 that Chung had borrowed on 1 September 1999 from China Insurance Group Finance Limited could not be wholly for use in the Hin Tin Project.  Chung only paid the builder Lee Chun Kee $200,000 and $100,000 on 23 and 24 September 1999 respectively.  The final payment of $175,000 was only paid on 25 August 2000.  It was not necessary to borrow interest-bearing money on 1 September 1999 for payment to be made one year later.

81.  In addition to the above, I also note that Sin had already pulled out from the Project on 28 March 1997.  Chung alleged that this lending agreement was made in about June 1998 amongst the plaintiff, Chung and Sin.  If there were indeed such an agreement made at that time, I see no reason why Sin would want to be involved in it as he had already pulled out from the Project more than a year ago.

82.  For these reasons and the fact that the plaintiff had paid Chung more than her required share of contribution, I find that there was no agreement for Chung to raise any loan for the plaintiff or for the plaintiff to pay Chung any interest for such loan.

Money Lenders Ordinance

83.  Though I have held against Chung and Sin on the loan and interest issue, I would also deal with the question of whether Chung was carrying on a business of money lending because of the four alleged loans arranged by him and the charging by him of interest at 3% per month against the plaintiff/Poon.  If there were indeed such loan arrangements, they were incidental to the perpetration of the Hin Tin Project.  Chung was only lending part of the loans he raised for the use and benefit of the plaintiff, his joint venture partner.  It was not even a lending of money to his friends or relatives.  These loans were also raised for a specific purpose.  Their use was restricted to the Hin Tin Project save the alleged lending back of the $100,000 to Poon on about 10 September 1999.  That loan of $100,000 alone was not enough to make Chung a moneylender.  For these reasons, I would hold that Chung was not carrying on the business of money lending (see Newman v Pyke (1908) 25 TLR 127 and Harvester Stock Investment Co. v Kwan Siu May [1987] 1 HKC 271.

Penalty

84.  Since the defence has been amended to claim the rental merely as security for repayment of loan rather than as having been appropriated by Chung, there is no more question of penalty.

Was There an Agreement to Pay Construction Consultancy Fee at $120,000?

85.  This claim again is not supported by any document.  If there were such an agreement, I believe it would have been recorded in writing.  Furthermore, the agreement to pay this sum was alleged to have been made amongst the plaintiff, Chung and Sin in about July 1998.  I refer again to Sin’s pulling out from the Project on 28 March 1997.  I see no reason why Sin would want to be a party.  I therefore find that there was no such agreement.

THE COSTS FOR THE SPLIT AIR-CONDITIONERS

86.  I now deal with the costs of the Project.  Subject to my findings above, the only remaining dispute between the parties is the costs for acquiring and installing 11 split air-conditioners.  Chung all along claimed that he had incurred $100,300 for these air-conditioners.  However, at the trial he was only able to give a verbal breakdown of costs as follows:

	3 Horse Power  (“HP”)	2 HP	1 HP	3/4 HP	Total
Costs of air-conditioners and coolers	HK$12,000 x 1	HK$8,500 x 2	HK$5,500 x 4	HK$4,500 x 4	HK$69,000
Costs of installation	HK$3,800 x 1	HK$2,800 x 2	HK$2,200 x 4	HK$2,000 x 4	HK$26,200
					HK$95,200

He has not produced any invoice or receipt for these costs.  Even if he should have lost them, he should have been able to obtain from the supplier/contractor copies of them or to provide some evidence of market price to support his claim.  I think his failure to produce any such evidence is because he has exaggerated the claim.

87.  He has however produced one delivery note for a split air-conditioner of 1 horsepower that he had purchased on 20 March 2004.  The price was at $1,380 which was just 25% of the price that he claimed to have paid for a similar unit initially upon the completion of the Hin Tin Property.  There is also in the bundle a quotation for the costs of installing split air-conditioners.  The prices quoted are about half of that claimed by Chung.  In fact, Chung’s claim on its own already appears to be excessive.  The plaintiff is prepared to accept $50,000 as the costs for acquiring and installing these air-conditioners.  I think this is a fair and reasonable concession and I accept it.

CREDIBILITY OF THE WITNESSES

88.  Counsel for Chung and Sin has raised a number of points against the credibility of Poon.  I have already dealt with most of them above.  There are a few other points about inconsistency in evidence or the like.  I think these can all be explained by the fact that the events had taken place many years ago.  Poon had to rely on the contemporaneous documents which on the whole support his case.  However, because of the long lapse of time, there could be matters the memory of which had become blurred.  I would say on the whole that Poon impressed me as an honest witness.  His case since the exchange of correspondence in April 2002 has more or less remained intact.  But the case of Chung and Sin has taken many twists and turns.  There is also no dispute that Chung had failed to provide the plaintiff/Poon an account of the development costs.  I can see no reason why he should have failed to provide such account to Poon from time to time in the course of the development or upon its completion.  His failure is obviously because the plaintiff/Poon had overpaid him and he had not yet thought of how to deal with the overpayment as well as the need to account and pay to the plaintiff her share of the rental.  For these reasons and the reasons I have used in resolving all the disputed issues above, I prefer the evidence of Poon in case of conflict between him and Chung.

The Total Costs of the Project

89.  I now deal with all the costs incurred in the Hin Tin Development.  There was a sum of $22,426 paid by Chung to the solicitors on 27 May 1994 for Tuford.  That sum has been excluded by clause 2 of the Hin Tin Agreement and the plaintiff is not liable for any part of it.  Now that all differences are resolved, I hold that the actual costs incurred in the Hin Tin Development plus some payment of rates and Government rent as shown in the table below is $3,099,654.  The plaintiff’s ¹/₃ share is at $1,033,218 as follows:

THE SHEUNG YEUNG PROJECT AND THE YAU YUE WAN PURCHASE

90.  These two matters have not been referred to in the pleadings.  They were dragged into the trial because Chung made extensive reference to them.  Chung tried to explain away some of the plaintiff’s payments by saying that they were paid for these other projects.  He has failed in his attempt.  I also do not think the resolution of this action would require me to resolve all these other disputes.  To do so beyond the scope that I have done above would make the matter unnecessarily complicated.

ILLEGALITY

91.  The plaintiff’s counsel has also submitted on the legality or otherwise of the joint venture.  This point has not been raised in the pleadings.  There is also no evidence of any act of illegality.  I do not think I need to consider this question merely because a joint venture to apply for a building licence from the Government to build a small house may in certain situation involve illegal acts (see Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84, Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd [2001] 2 HKLRD 471).

JUDGMENT

92.  The Hin Tin Agreement provided that the plaintiff, Chung and Sin were to share the Hin Tin Property equally.  Despite Sin’s pulling out from the Project, which did not affect the plaintiff, I still declare that the plaintiff is entitled to ¹/₃ of the beneficial interest of this House and the Lot upon which it stands.  This is also despite she has paid more than ¹/₃ of the development costs because this is a case based on an express agreement and not on resulting or constructive trust.

93.  Since the plaintiff has paid Chung $1,318,895 when her share of the development costs was only $1,033,218, Chung has to repay the plaintiff $285,677 and I so order.  I further order Chung to pay the plaintiff interest on this sum at the judgment rate from the date of the writ.  I do not make the same order against Sin as he had only received some of the initial $200,000.  There is no evidence that he had taken any share of the excess payment.

94.  Regarding the rental generated from the Hin Tin Property, I declare that the plaintiff is entitled to ¹/₃ of it.  I further order Chung to account to the plaintiff all rental with the following directions:

(i) Chung do within 42 days lodge with this court an account of all rental generated from the Hin Tin Property from time to time together with copies of all supporting documents (including all banking and financial records evidencing the receipt of the rental) and together with a verifying affidavit by him and do serve a copy of the account and the affidavit on the plaintiff;

(ii) Chung shall permit the plaintiff to inspect the original documents in support of the aforesaid account;

(iii) Liberty to apply; and

(iv) All future hearings in this action (if any) be listed before me.

I also order Chung to pay the plaintiff all sums found due on the taking of the aforesaid account.

95.  I also continue the order of Master G Shaw made on 20 June 2003 in relation to Chung.  Chung should therefore continue to pay ¹/₃ of any rent received in respect of the Hin Tin Property within 7 days of receipt.  This order will continue until further order. 

96.  I dismiss the counterclaim of Chung and Sin. 

97.  Finally, I make an order nisi that Chung and Sin do pay the plaintiff the costs of this action and the counterclaim. 

98.  I make no order of costs against the 1^st defendant.  He was sued solely for the purpose of binding him to the orders herein.  He has not taken side with anyone.  He has also taken no part in this action and done nothing to hinder the plaintiff’s claim.  There is no evidence that he was aware of any of the dealings amongst the plaintiff/Poon, Chung and Sin.  He had only entered into the Hin Tin Head Agreement with Sin.  No issue has arisen from that.  Chung and Sin will have to bear the plaintiff’s costs incurred for suing the 1^st defendant as well because such costs are necessary for the proper conduct of this action and to protect the plaintiff’s interest in the Hin tin House.