CHAN SAI KIM v. LAM KWAI CHEUNG

1996, No.A13803

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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Plaintiff's case

1. The Plaintiff is claiming the sum of $160,000 from the Defendant. The background of the claim is as follows. The Plaintiff has known the Defendant since 1991. In November 1993, the Plaintiff asked the Defendant to purchase Hong Kong Land shares for him through the Defendant's account. This was the first time the Plaintiff had purchased shares. The Defendant agreed that if there was profit arising from the transaction, it would be shared equally between them, whereas if there was a loss, the Defendant would bear the loss entirely. The Plaintiff duly paid for the purchase of the shares and later in December 1993 the shares were sold. The Defendant informed the Plaintiff that the proceeds of sale was $206,939.70 and he gave a post-dated cheque of $203,000 to the Plaintiff, the balance of $3,000 was paid in cash.

2. Later on, the Defendant asked the Plaintiff not to present the cheque because he was unable to repay the money. The Plaintiff continued to press the Defendant for repayment. The Defendant said he was unable to pay since he had made other investment. At first he did not tell the Plaintiff what investment he had made, later on he told the Plaintiff that he had bought shares in Orient Telecommunication & Technology Holdings Ltd. ("Orient").

3. In February or March 1994, the Defendant gave the Plaintiff some post-dated cheques. On 21st March 1994, a cheque of $5,656 was paid in by the Plaintiff as interest payment of the outstanding amount.

4. By May 1994, the Defendant still had not repaid the money to the Plaintiff. On 31st May 1994, the Defendant came to the Plaintiff's home and wrote and signed a note ("the first note") promising to repay $200,000 to the Plaintiff. The first note stated that :

"I Lam Kwai Cheung borrowed a loan of Hong Kong Dollars Two Hundred Thousand Only from Chan Sai Kim in December, 1993. I promise to repay the loan to Chan Sai Kim by 6 monthly (instalments) starting from June, 1994. If I fail to repay by instalments during the period of the loan, Chan Sai Kim is also entitled to claim for the aforesaid loan the property which I Lam Kwai Cheung owned at Flat C, 27th Floor, Block 15, Phase I, Laguna City shall be sold to settle the loan of HK$200,000.00 due to Mr Chan Sai Kim or the (my) creditor Mr Chan Sai Kim shall be given the priority to the (said property)."

The post-dated cheque of $203,000 was then returned to the Defendant.

5. Following that, the Defendant paid $30,000 to the Plaintiff : $15,000 in July 1994, $5,000 in August 1994, $5,000 in November 1995 and $5,000 in December 1995.

6. In April 1995, the Defendant also allowed the Plaintiff to pay in a cheque dated 10th November 1994 which was intended to be interest payment. Another cheque for interest at $5,400 was not presented at the request of the Defendant.

7. The first note was later amended so that the amount due to the Plaintiff was $170,000 and the provision for interest was deleted.

8. The Plaintiff continued to press for payment. Then on 23rd October 1996, the Plaintiff and his wife met the Defendant outside the 7-Eleven store in Hunghom. The Defendant gave two cheques to the Plaintiff, one for $160,000 and the other $2,500. It was agreed before the meeting that a further $7,500, in respect of decoration work carried out by the Defendant for the Plaintiff, would be deducted by way of set-off from the $170,000 due by the Defendant to the Plaintiff and the Defendant would pay the Plaintiff the balance by two cheques of $2,500 and $160,000 each.

9. When the Plaintiff saw the endorsement at the back of the cheque of $160,000 which stated that "The Cheque No.850573 cannot be honoured, will only serve as a record and may be cashed out only until the shares had reached a price", he refused to accept the cheque and asked the Defendant to write out another cheque. The Defendant say he did not have another cheque, the Plaintiff then asked the Defendant to write to confirm that he still owed the money to the Plaintiff. Then the Plaintiff's wife wrote on a piece of paper ("the second note") the following :

" I Lam Kwai Cheung have borrowed from Chan Sai Kim a loan of Hong Kong Dollars One Hundred And Sixty Thousand Only (A cheque no.850573 has been given and this cheque may not be cashed out and will only serve as proof). I will later try my best to repay the loan in full or I will use landed property as repayment."

The Defendant then signed the second note. He also wrote down his identity card number.

10. On 23rd November 1996, the Plaintiff's solicitors demanded the Defendant to repay the $160,000. On 2nd December 1996, the present action was commenced against the Defendant.

Defendant's case

11. The Defendant on the other hand claimed that the Plaintiff had asked him to use the proceeds of sale of the Hong Kong Land shares to buy 30,000 of the Orient shares. By mid 1994, the price of the shares had dropped to about one-half of its price from $6.75 to $3-4. In February 1995, and not on 31st May 1994, the Plaintiff came to the Defendant's home and wanted a proof in the form of acknowledgement of a debt so that he could claim the 30,000 Orient shares. The Plaintiff then threatened the Defendant about his personal safety and that of his girlfriend. The Defendant then wrote out the first note at the dictation of the Plaintiff.

12. He himself did not amend the first note although subsequently he did ask the Plaintiff to reduce the amount on the first note.

13. Between July 1994 and October 1996, the Defendant lent $32,500 to the Plaintiff who claimed that he had difficulties in mortgage payment. The particulars of the loan are as follows :

(a) July 1994	$15,000
(b) 22nd August 1994	$5,000
(c) 25th November 1995	$5,000
(d) 10th December 1995	$5,000
(e) 22nd October 1996	$2,500

14. Then the parties met on 22nd October 1996 outside the 7-Eleven store. The Plaintiff asked him to compensate his loss of the Orient shares, then the Plaintiff wrote a note ("the second note") and asked him to issue the cheque of $160,000. Again, threats were uttered, causing him to sign the second note and issue the cheque. The next day he reported the matter to the police, which, however, ignored him.

Credibility of Plaintiff and his wife

15. I accept the Plaintiff and his wife to be honest witnesses. I accept their evidence relating to their claim. The demand by the Plaintiff for the Defendant to acknowledge the debt by writing out the two notes and the demands for repayment were consistent with his case that the Defendant failed to repay the proceeds of sale of the Hong Kong Land shares.

16. The Plaintiff was extensively cross-examined but had remained unshaken. I accept he had never instructed the Defendant to buy any of the Orient shares. I accept the Plaintiff's evidence as to how the two notes came into being and no threats were uttered by the Plaintiff or his wife. I have observed the Plaintiff and his wife in giving evidence, they struck me as ordinary and simple people and I just cannot accept that they had made such threats.

17. I further accept the Plaintiff's evidence that the Defendant had repaid $30,000 by four payments. These were repayments and not loans by the Defendant. I accept that after the Defendant had not repaid the proceeds of the Hong Kong Land shares, the Plaintiff had continued to ask the Defendant to carry out three transactions of shares. They were of relatively small amount and I accept the Plaintiff and Defendant were still friendly at that time. Odd as it may sound, I accept that, at the beginning, the Defendant did offer to bear the loss when he agreed to conduct share transactions for the Plaintiff in respect of the Hong Kong Land shares. I further accept that the Defendant had agreed to pay interest to the Plaintiff. They were not commissions paid by the Defendant to the Plaintiff. Although the Plaintiff was uncertain of the actual time when the Defendant gave him the cheques on interest, and although he said in the witness statement that he was not certain of the purpose of the first cheque of $5,656 (he did clarify that he was not certain whether they were for repayment of principal or interest and that he confirmed that it was for interest), this did not affect my assessment of the Plaintiff as a credible witness. Likewise his evidence that he was not sure whether the Defendant had deducted $3,000 for the Hong Kong Land shares for remuneration which was different from his witness statement, does not cast doubt on his case relating to the main issues.

Defendant not credible

18. The Defendant is not a credible witness. If he had only followed the instructions of the Plaintiff and bought the Orient shares, there was no reason why he should sign, on two separate occasions, an acknowledgement of indebtedness to the Plaintiff. I just do not accept that he signed the two notes because of the so-called threats by the Plaintiff. The Plaintiff and his wife were just not the type of people capable of making the threats to make the Defendant sign the notes.

19. The Defendant is obviously a man conversant with worldly affairs. He maintained two accounts trading in securities. The transactions he had carried out could not be described as insignificant, in fact they were substantial transactions. When he was asked to give a cheque of $160,000 to the Plaintiff, he had gone so far as to issue him with a cheque from an account that he had not used for a long time. The position could be contrasted with the cheque of $2,500 which was drawn on an account he usually used. He was certainly not the gullible type. If he had learned from his friends that the Plaintiff was a tricky person, I just do not accept that he would repeatedly sign documents acknowledging money owing to the Plaintiff unless he was indeed indebted to the Plaintiff. If the Plaintiff had actually used threats to extract the first note from him, I just cannot see why he should agree to meet the Plaintiff again. He said that after the first note was signed, he immediately went to the police station to complain, which was turned down by the police. This is disclosed in his witness statement but not in his affirmation filed in opposition to the Plaintiff's O.14 application. On the contrary, it was stated at para.12 of the affirmation that :

"... However, I thought that the Plaintiff requested me to write the note because he was worried if anything happened to me and I had not at that time thought that the Plaintiff would be up to no good and used the note to distort what actually happened. At that time, I still considered him a friend."

If that was his state of mind, I just cannot see any reason why he should go to the police station. He said he had informed his lawyers about this reporting, I just do not accept this. The Defendant's endorsement at the back of the cheque was a last minute attempt to avoid liability.

20. The story of the Plaintiff threatening him in a busy street outside 7-Eleven is just not credible. If the Defendant in fact did not owe the Plaintiff anything, he need not meet the Plaintiff again outside the store. All the more, he need not issue the Plaintiff with the cheque of $160,000.

21. If the first note was really made in February 1995, I just do not see why the Plaintiff would insist to put down 31st May 1994. Although in his witness statement he said he had asked the Plaintiff why the date of 31st May 1994 should be used and that the Plaintiff told him that because the sale and purchase of the Orient shares took place in the end of 1993, the note should be stated earlier as on 31st May 1994, this was not what he said in evidence - he claimed that the Plaintiff did not tell him the reason for dating the document to 31st May 1994.

22. His evidence of the Plaintiff's request to purchase the Orient shares and the actual carrying out of the transaction were given in vague and uncertain terms. The only explanation for this is that he was making up a story.

Inconsistencies

23. The Defendant's case is riddled with inconsistencies. This can be seen from the way his case was put to the Plaintiff. It was initially suggested that outside the 7-Eleven store, the Plaintiff's wife wrote on a piece of paper : "I Lam Kwai Cheung had in December 1993 borrowed $160,000 ..." After the Defendant read the note, he refused to sign, threats were made to his girlfriend. The Defendant then asked for a copy and a witness. This was rejected by the Plaintiff who asked the Defendant if he wanted beating. After that the Defendant wrote the cheque of $160,000 and endorsed it at the back. After that, it was written on the note cheque could not be honoured with cash but for proof only, and he would use his flat for repayment.

24. Then it was put to the Plaintiff that outside 7-Eleven, the Plaintiff asked for $2,500 and the Defendant wrote the cheque. The Plaintiff then asked for $160,000, the Defendant wrote a further cheque and endorsed it at the back. The Plaintiff's wife then wrote on a piece of paper "I Lam Kwai Cheung borrowed from Chan Sai Kim a loan of Hong Kong Dollar One Hundred Thousand". The Defendant was then asked to sign, he refused and threats were uttered, the Defendant then requested to write down the following :

"Cheques had been given, can't be cashed and only serve as proof."

The wife then continued to write, and the last sentence was written by the wife. Because of the threats and the passage written by the wife, the Defendant agreed to sign.

25. Mr Chong, Counsel for the Defendant, said that this was due to a misunderstanding. I just cannot see how this could be due to any misunderstanding at all. What was put initially to the Plaintiff was apparently in accordance with the Defendant's witness statement of 28th August 1997. For such an important matter, if it was the Defendant's request that the matter relating to the cheque was to be written, I would expect this to be at the foremost of the Defendant's mind. The position can be contrasted with the Defendant's affirmation filed in opposition to the Plaintiff's O.14 application. Paragraphs 16 and 17 read as follows :

"16. In or about October 1996, the value of the 30,000 0188 shares were still low. The Plaintiff asked me to compensate him for his loss in the 30,000 0188 shares which I refused as I only held those shares for and on his behalf. He said that he would do something unpleasant to my previous girlfriend if I refused. I was frightened and in order to pacify him, I on 22/10/1996 wrote him the cheque exhibited as 'CSH-1(b)' in the Affirmation. The figure of HK$160,000 was put down as the original price of the 30,000 0188 shares held by me on the Plaintiff's behalf was about HK$200,000 and the Plaintiff owed me about HK$40,000. Therefore, the difference approximately of HK$160,000 was put down in the cheque. May I also take this opportunity to point out that as revealed at the back of the cheque, I had written down that the cheque was only for record and it was only to be presented when the shares reached the right price. The words were so written down at the back of the cheque to reflect the real situation.

17. After the said cheque was given to the Plaintiff, the Plaintiff wrote out the Chinese Note dated 23/10/1996 exhibited as 'CSK-1(c)'. Seeing that the Chinese Note was for acknowledgement of a debt, [and also because I did not trust the Plaintiff so much then,] I refused to sign it as it was not true. However, the Plaintiff threatened me that he would trouble my girlfriend. I requested that I be given a copy and that there should be a witness. The Plaintiff refused and asked me if I needed some beating before I would sign. Because of the aforesaid, I signed the Chinese Note."

There was no reference at all that the Defendant requested the Plaintiff's wife to write about the cheque.

26. In his evidence-in-chief, something new was added about the meeting outside the 7-Eleven store. The Defendant said that the Plaintiff told him everything that was signed was ineffective and that the Plaintiff wanted him to write again as a record. This was not stated in the witness statement nor was it put to the Plaintiff. Further, it is now said in his evidence that when he signed the second note, the last sentence was not there. This is totally contrary to paragraph 19(c) of his witness statement. No explanation was given of such inconsistencies.

27. The Defendant's case that was put to the Plaintiff was that the event took place on the 23rd and not the 22nd. Yet in his affirmation, he said the cheque was written on 22nd October, and in his own evidence, he maintained that the event took place on 22nd October. The impression one gets is that the Defendant was making up a story as he went along.

28. Further, in relation to the first note, he said that he initially wrote down that he had bought some shares, this was objected to by the Plaintiff who then dictated what he should write. He never disclosed in his witness statement that he initially wrote down something himself.

29. All these were attempts to get away from the clear terms of the notes in which he had acknowledged that he was indebted to the Plaintiff. The Defendant was fabricating a false story in order to avoid the debt. I think the likely scenario is that the Defendant was so heavily engaged in the stock market that he just used the proceeds of sale to carry on trading. When the Orient shares eventually fell drastically in price, the Defendant was just not able to repay or was not interested to repay the money to the Plaintiff.

30. In the circumstances, there shall be judgment to the Plaintiff and the Defendant's counterclaim is dismissed.

[Submissions on costs]

Judgment

31. There shall be judgment for the Plaintiff in the sum of $160,000 with interest at 8% per annum from 28th November 1996 to date and thereafter at judgment rate until payment. Counterclaim dismissed. Costs of action on common fund basis for the Plaintiff. Payment out of money in court to the Plaintiff.