YAU LOY CO LTD v. KU CHI AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. These proceedings were contested only between the plaintiff and the 1st defendant. The action against the 2nd defendant had been discontinued with leave. The former 2nd defendant was in fact, called as the first witness for the plaintiff.

2. Not inconsiderable allegations were made in these proceedings which I followed closely, and at the conclusion I delivered judgment ex tempore. I indicated that I would set out the reasons in full in my written judgment, which I now do.

3. The factual dispute between the lst defendant and the plaintiff was within a very narrow ambit, and it was simply whether or not a sum of $400,000 odd had been paid for goods sold and delivered. In the course of the proceedings, a number of side issues were introduced more for testing credibility than resolving the real bone of contention. These side issues are therefore merely peripheral.

4. The plaintiff's case is as strict forward as the 1st defendant's. Price for the goods in an order placed having been agreed between Madam Ku and Mrs.Chen, documentation was thereafter processed by the staff of the plaintiff company under Eliza Leung. According to Miss Leung, upon receiving information from the shipping company, she notified Madam Ku of the goods' arrival. Thereupon she gave instructions for preparing documents for the transaction.  Principally, they were, as itemized the Delivery Order, packing list, invoice and the official receipt. Reference to the packing list was omitted from time to time. There was no evidence for it, but it may very well be the case that the packing list formed part and parcel of documents constituting the Delivery Order. That is not a matter of any real significance. According to Stella Ng, the shipping clerk, these documents were typed, arranged and stapled together in a set in the order of receipt, Delivery Order and invoice.

5. The plaintiff claimed that on the 4th June 1983, a Saturday, Madam Ku presented herself at the office of the plaintiff early in the morning. By the time Eliza Leung returned to the plaintifft's office, she found Madam Ku in the waiting area. A whole set of document was allegedly given by Eliza Leung to Madam Ku. This was described by Eliza Leung as the normal practice of the plaintiff. Miss Leung told the Court that she was not acting under any specific instructions of Mrs.Chen who was, however, aware of her practice. Miss Leung was engaged as an experienced senior clerk. Judging from the tenor of Mrs. Chen's evidence, documentation was left very much in the hands of Eliza Leung. Moreover, the Court was told that Madam Ku had had a number of satisfactory transactions with the plaintiff, in which goods ordered and taken delivery of in the same manner were all paid.

6. Sometimes at eleven o'clock, the time Madam Ku had allegedly agreed to return with the cheque of the buyer, she came back to the plaintiff's office. She went immediately into the private office of Mrs. Chen, leaving two men who had entered the office of the plaintiff at the same time with her in the waiting area. One of these men was Mr. Mok and the other Mr. Chan Kin Fai. Mrs. Chen testified that under the pretext of her mother's proposed settlement in Shumchun and the imminent purchase of a television set for her use, Madam Ku requested Mrs. Chen to have her own commissions in the past transactions immediately calculated and instantly paid. The request was received by Mrs. Chen, allegedly with a fair degree of scepticism. However, it was acceded to. Instructions were allegedly given by Mrs. Chen to the accounts clerk, Winky Chan, for commissions to be calculated. Winky Chan did as she was told, at the rate of 1% and return the figure, $600/700 short of $5,000. Mrs. Chen instructed a cheque of a $5,000 round figure to be drawn up. She signed it and passed it out of her office to the general office for the same to be given to Madam Ku. By this time, it was said that upon being pressed for the buyer's cheque, Madam Ku gave the excuse of only seeing the buyer later in the morning. Eliza Leung claimed that she had on this occasion asked Madam Ku to sign on a copy Delivery Order to evidence her earlier receipt of a full set of documents.

7. The 4th of June was a Saturday. Soon after Madam Ku left after her second visit, upon being told that a full set of documents had been handed over to her, Mrs. Chen told the Court that she urged Eliza Leung to have the transaction concluded before the close of business of that day. At about l p.m., still without the buyer's cheque, on the instructions of Mrs.Chen, Eliza Leung allegedly contacted Madam Ku through her pager and pressed for settlement. According to Eliza Leung, Madam Ku's excuse was that the buyer had not turned up. Then at about 4 p.m., Eliza Leung said that she spoke to Madam Ku on the telephone again. In that telephone conversation, Madam Ku disclosed that she was talking to the buyer. Eliza Leung suggested sending a colleague to collect the cheque or at least having the copy Delivery Order signed. Thereupon, Madam Ku was said to be evasive explaining that it would not be convenient for her to wait and that the plaintiff company should have no anxiety as she would deliver the buyer's cheque personally on the following Monday.

8. According to Eliza Leung, Sunday was a rest day for the staff and nothing was done.

9. Came Monday, the 6th June. Shortly after ten, Madam Ku appeared with two men. They turned out to be Mr. Chan Kin Fad and Mr. Chan Kwok Wai. There had been some discrepancies in and between evidence of the plaintiff's witnesses, but in essence the plaintiff's case is that none of these men came up to the desk of Eliza Leung with Madam Ku. Eliza Leung explained that Madam Ku gave again a further excuse for not bringing up the cheque saying that the cheque of the buyer was of a different amount from that on the invoice, being ten cents short of the unit price and that she would bring the buyer up in the afternoon to discuss it with Mrs. Chen. Eliza Leung claimed that Madam Ku again declined to sign the copy Delivery Order. By this time, unknown to Eliza Leung, Mrs. Chen had left Hong Kong for Thailand.

10. Later on Monday, Eliza Leung was unable to contact Madam Ku. Eliza Leung made no specific reference to any long distance conversation with Mrs. Chen. She allegedly tried without success to contact Madam Ku at her Hong Kong office, home and the buyer's office. For the 1st time, so Eliza Leung claimed, she discovered Madam Ku's connection with the Alexander Trading Company. According to Eliza Leung, Madam Ku had left Hong Kong for Taiwan and together with Stella Ng she contacted one Mr. Chan of the shipping company with a view to stopping release of cargo which had been taken delivery of, although Mr. Chan assured the girls that the goods were still in the possession of the shipping company. On the following Wednesday or Thursday, Eliza Leung made a long distance call to the plaintiff's branch in Taiwan for assistance, and she told the Court that all this was to no avail.

11. On the 11th June, Eliza Leung herself left for a vacation in Taiwan which she had arranged for some time before, and she returned on the 15th June. When she was in Taiwan on the 14th of June, she was given to understand that a report had been made to the police and that Madam Ku had claimed to have paid the plaintiff company through her in cash.   According to Eliza Leung, and she was quite candid about it; she tried unsuccessfully even to tape the conversation with Madam Ku.  She also made no reference to a visit to Madam Ku in the company of Stella Ng after the 14th of June. One day after her return to Hong Kong, she went to the police and gave a statement. For the reasons I had given, the statement was admitted and marked in these proceedings as Exhibit "P1". In totality, that is the plaintiff's case: A go-between defaulting in her promise to deliver the cheque in settlement from a make-believe buyer and ultimately making a false accusation against a staff of the plaintiff company, for having pocketed over $400,000 in cash.

12. The plaintiff called a number of witnesses in support of its clam. I will return to them in a moment or two.

13. Tnrning to the case for the lst defendant, Madam Ku told the Court that she was given only the shipping documents but without the official receipt on the 4th June, not soon after 9.30 in the morning but at about eleven o'clock or so that day and that the official receipt was not in fact released to her until her cash payment to Eliza Leung on the 6th June. Madam Ku disclaimed commission in any form or shape in her association with the plaintiff, and she maintained that the alleged conversation with Mrs. Chen on commission and the plaintiff's book entries over were all fabrication: In fact, on the 6th June, she went to Mrs. Chen to demand compensation for defective goods. According to Madam Ku, having obtained $5,000 compensation from Mrs. Chen, on her way out, she even implored Eliza Leung to settle the claim of Mr. Mok, for goods water-stained. She testified that after her only morning visit on Saturday, the 4th June, to collect shipping documents, on the same afternoon she was paged and had only one conversation with Eliza Leung who requested cash payment the following Monday purportedly on instructions. Eliza Leung was said to have given the explanation, that the plaintiff would have certain imminent commitments to meet on the following Monday through two different banks. Madam Ku was allegedly willing to try to accommodate the plaintiff. About an hour later at 3 p.m., so claimed Madam Ku, she successfully arranged the same with Mr. Man Tor Lee.  Came Sunday, the 5th June. Eliza Leung allegedly communicated with her twice. On the first occasion at about 11 a.m., she was told that suitable arrangement had been made. For no apparent reason, Eliza Leung paged her again at 2 p.m. or 3 p.m. and received the same assurance from her.

14. Came early Monday morning, the 6th June. Cash was obtained from the bank, Wing Fang Bank in Central with the assistance of Mr. Man Tor Lee, an elderly gentleman, in the company of a staff member of the company of which Madam Ku was the Manageress. He was Mr. Chan Kin Fai. Instructions were later given to another staff member Chan Kwok Wai who was then in the office to wait downstairs. These two staff members had earlier been told to report for duty in time to assist. Having cashed his cheque, Mr. Man Tor Lee departed, leaving Madam Ku and Mr. Chan Kin Fai to collect Mr. Chan Kwok Wai in a taxi on their way to the plaintiff's office in Kowloon.  Madam Ku described vividly how cash payment was made: Upon arriving at the plaintiff's office after eleven, she and Mr. Chan Kwok Wai approached Eliza Leung at her desk, leaving Mr. Chan Kin Fai sitting in the waiting area. There and then, cash $411,277 was allegedly passed over to Eliza Leung in exchange for the official receipt which was then taken out and signed. Madam Ku was adamant that she had never been given the official receipt in advance and that in fact payment had never been promised earlier than the 6th.

15. The star witness for the lst defendant would appear to be Mr. Chan Kwok Wai, the man who was to witness the alleged passing over of a huge quantity of cash to Eliza Leung in the morning of the 6th June 1983. Quite steadily, he managed to oblige the 1st defendant by giving the desired supportive evidence. He had succeeded, before his further cross-examination, in going some way towards his corroboration of the allegations made by Madam Ku. Daring the lunch adjournment, unfortunate for the lst defendant and Mr.Chan Kwok Wai, he was caught by an articled clerk of those instructing counsel for the plaintiff, to be involved in an actual conversation with two men, one of whom was Mr. Chan Kin Fai. Chan Kwok Wai agreed that he had been specifically warned against speaking about this case before the conclusion of his evidence. He categorically denied that he had been a party to such conversation outside this Court, which was said to be abruptly stopped by solicitor for the 1st defendant. It is now common ground that such conversation did take place. The articled clerk's evidence before me was adduced without challenge. The conversation might well have been innocent. The star witness for the 1st defendant has clearly been, in my view, shown beyond all doubt by his denial that he is not a man to be trusted. I would not place any weight on what he has told this Court as no one would feel safe to rely on any of his evidence insofar as it is inconsistent with that told by the witnesses in support of the case of the plaintiff. It is not, therefore, necessary for me to try to analyse such discrepancies there are in his evidence, which, again in the case of verbal conflict and credibility, could essentially be only peripheral. The net result is that the lst defendant was left with no eye witness to the transaction except for that of Chan Yin Fai sitting some 30 feet away.

16. Chan Yin Fai gold the Court that he saw Madam Ku carry a brief case and a hand bag. As far as the plaintiff is concerned, Madam Ku kept her hand bag under her arm, had no other carrier and paid no cash. Chan Kin Fai observed, so he claimed, Madam Ku and Chan Kwok Wai approaching Eliza's desk and taking out four bundles of notes together with some loose ones for Miss Leung. He left for a telephone call. On his return, he saw Chan Kwok Wai leaving Eliza's desk and coming out. He did not specify the duration of his call. But his departure and return and making the call would not have likely taken less time than the very swift incident of cash changing hands as described by Madam Ku and the other Mr. Chan. Chan Kin Fai denied that Madam Ku was his boss, though she was the sole manageress in Balgowinie. He was only prepared to concede that Madam Ku was his senior colleague.   He was, I find, not a wholly frank witness.

17. I turn now to the evidence of Madam Ku. She agreed that it was unconventional, unusual, extraordinary for a request of that nature to be made. Upon being questioned further, she admitted that she was aware of other safer maneuvers, that she herself would not have made such a request and that she had suggested a cashier order to Eliza Leung who declined on account of delay in clearance and the plaintiff's need to credit two separate bank accounts on the following Monday. On being asked as to why she had not offered to deposit cash into the plaintiff's two accounts, Madam Ku explained that she was not willing to go beyond what she in fact did. That is an attitude I find difficult to understand. She had taken great pains in arranging for the escort duties of her staff, soliciting the assistance of Mr. Lee, taking every step to ensure that this elderly gentleman could obtain cash for meeting the morning commitment and running the risk of transporting a seizable amount of cash. Madam Ku was herself soon to take a planned trip for conference or official business, yet she found time within her schedule to make these special arrangements. In fact, she allegedly spared no effort in accommodating the plaintiff. Madam Ku offered a further excuse that deposit of cash in the plaintiff's bank accounts would require the help of the account operators, but there was no evidence that the plaintiff would have been unwilling to provide the facility.

18. The two male escorts should have had little more chores to perform after their arrival at the plaintiff's office, but it was said that Mr. Chan Kwok Wai obligingly approached the desk of Eliza Leung to witness the passing over of this not inconsiderable amount of cash. The manner in which Eliza Leung allegedly accepted and counted the cash in question is equally extraordinary.  It was claimed that Eliza Leung had the good sense to count the loose thousand dollars and other notes with some care but went quickly through the $40,000 in four bundles of aggregates of ten briefly and only half way out of the drawer.  Mr.Chan Kwok Wai even told the Court that Eliza Leung counted the $40,000 bank notes with the efficiency and competence of a bank clerk.

19. This is an incredible story, miserably told and flimsily, if I may say so, supported.

20. Mr. Chan Man Biu, the former Sub-General Manager of Balgowinie supplied the information that it was the normal general practice for payment to be made only a few days after the invoice. That was the normal general practice. He agreed that Madam Ku was an influential person in Balgowinie. Moreover, if indeed it had truly been intended to show that the plaintiff was never paid immediately in its dealings with Balgowinie, one would have expected the specific trading documents to be produced. None was submitted in this case, and their non-production was not accounted for. Mr. Chan Man Biu's evidence has not, in my view, established that the plaintiff did not receive immediate payments from Balgowinie, through Madam Ku of course, as Eliza Leung testified. Mr. Cheung Chi Wai's evidence of compensation paid to his firm in the sums of about $5,000 and $3,000 in April and May respectively was far from being a decisive factor in determining whether the $5,000 and $3,000 paid to Madam Ku by the plaintiff were or were not commissions.

21. Finally, I come back to the evidence of witnesses for the plaintiff. In substance, Stella Ng, the shipping clerk, corroborated Eliza Leung's evidence. In particular, at various times she heard Eliza Leung press for delivery of the cheque and signing of copy Delivery Order by Madam Ku. She was some 20 feet away. She saw no cash change hands on the 6th June. She rang up Madam Ku twice on 14th June on the instructions of her employer, Stella Ng recalled, in her evidence, the initial allegation of Madam Ku in the first call that a whole "case" of cash was handed over to Eliza the day before, i.e. or the 13th.   She expressed suprise at this allegation as Eliza Leung had left for Formosa. Eliza's absence from Hong Kong was then apparently unkown to Madam Ku. Stella Ng reported the matter to Mrs. Chen and was told to contact Madam Ku again for clarification. Thereupon, Madam Ku allegedly raised her present assertion that cash had been paid to Eliza Leung on Monday, the 6th June. The immediate reaction of Stella Ng was that she herself did not see the passing of any cash in the office. Stella Ng's reference to the joint visit of herself together with Eliza to Madam Ku after the 14th June was omitted by Miss Leung. I also accept her explanation for what seemed to be missing in her statement to the police, that is to say, the reference to the official receipt and mention of 2 distinct separate telephone calls made on the 14th June.

22. I need not go fully into the evidence of the other witnesses except to say that all testified that no cash passed in the office of the plaintiff on the 6th June 1983, Monday. In particular, Miss Winky Chan was only 4 feet away and Mr. John Chan was opposite. There are discrepancies in and between the evidence of the witnesses for the plaintiff. I have sought assistance from Mr. Corrigan, counsel for the plaintiff, and I am perfectly satisfied that some could be satisfactorily explained, some were the consequences of faulty recollection and some were discrepancies brought about by human inperfections. They are all peripheral.

23. Mr. John Chan was at that time a new man in the office. He was the accountant but only responsible for accounts of the plaintiff's associated companies. He arrived late on 6th June. He described seeing a Mr. Mok standing between the desks of Yuk and Wong. It was common ground that Mr. Mok came only on the 4th and not the 6th. He was probably confusing some events on these two days. He also did not recall seeing Madam Ku obtaining the set of documents. However, he heard clearly Madam Ku mentioning $1.70 - $1.80 in her explanation for not having collected the cheque when Eliza Leung asked her to sign the copy Delivery Order. He was "very sure" that no cash was given on the 6th June.

24. Mr. Donald Wen Tong was alleged to have had a grudge against Madam Ku who rejected his applications. Mr. Wen disagreed that Madam Ku was involved or instrumental in any of his attempted relocation in the commercial sector. According to Madam Ku, she interviewed him once in Formosa in July and on another occasion in August when she was personally approached by Mr. Wen. Mr. Wen Tung testified that on the instructions of Mrs. Chen, he spoke to Madam Ku about an early settlement. In the conversation, Madam Ku allegedly intimated to Mr. Wen that she was prepared to pay half provided that the plaintiff was prepared to give some form of a certificate to the effect that half the consignment was defective. The offer was conveyed to Mrs. Chen who was understandably indignant and refused it in disgust. It is inconceivable that even given the alleged rejection of his application or approach, which in the circumstances as related seemed to be fair and open and backed by reasons conveyed to Mr.Wen, there would have been, in all probability, sufficient cause or incentive for him to want to falsely testify against Madam Ku in these proceedings, in an issue going beyond a default in payment of a particular transaction but touching upon her integrity among members of the trade. Even if Madam Ku's version were to be accepted, that would not likely have supplied enough inducement to Mr.Wen Tung to make these allegations against her in this action, taking side with the plaintiff.

25. It is highly improbable that all the plaintiff's staff would form a ring of conspiracy against Madam Ku. It has not been suggested that anyone else but Eliza Leung stood to gain by the alleged passing of cash. What then was the incentive for Mrs. Chen or these other young people to lie? Madam Ku claimed that almost the entire plaintiff company were aware of her direct interest as a buyer herself. She would therefore have the Court reject Eliza's version of she, Madam Ku eras to collect a buyer's cheque from a third party and thereafter excusing herself on the pretext of the buyer's alleged lower offer of $1.70 to $1.80. The mentioning of the incorrect figure on the buyer's cheque was overheard by Miss Winky Chan, some 4 feet away. Miss Winky Chan also heard Madam Ku's excuses for her refusal to sign the copy Delivery Order.

26. Winky Chan calculated Madam Ku's 1% commission on the instructions of Mrs.Chen. There was no earthly reason why she should give false evidence. It is unbelievable that she would lie to deprive Madam Ku of money to the extent of some $400,000 just to help a friend. It was not suggested that Mrs. Chen had any axe to grind, and she also testified that Madam Ku was paid commissions.

27. In conclusion, bearing in mind the rest of the disputed evidence on which nothing really of significance turns, I accept and prefer the evidence of Mrs. Chen and her staff and Mr. Donald Wen Tung to that given by Madam Ku and witnesses called on her behalf or on the behalf of the lst defendant.

28. I find in favour of the plaintiff on the factual issue that the lst defendant has not paid the plaintiff for this particular transaction. Judgment, therefore, is given to the plaintiff against the 1st defendant in the sum as claimed with interest thereon from the 6th of June 1983 to today at, I propose, 10% per annum. The interest after judgment is secured by the Rules of Supreme Court. In view of the extraordinary allegations made by the 1st defendant through Mrs. Ku and her witnesses and in the light of the highly unsatisfactory evidence adduced in support of them, I propose to penalize the 1st defendant in costs on a common fund basis, subject of course to what Mr. Chan, counsel for the 1st defendant, has to say.